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, 1996
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 $251,454,000 based on the closing sale price per share for the
12,341,309 shares of Common Stock, $.50 par value, outstanding on May 31, 1996
and excluding the value of 2,074 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, 1996
incorporated by reference in Parts I and II
Portions of Proxy Statement dated June 27, 1996 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 two industry segments: Water Control
and Power Systems.
A decision to sell the Lynx Golf and Mechanical Power Transmission segments
was made in fiscal 1996.
Financial Information About Industry Segments
"Industry Segment Data" on page 25 of the Annual Report to Shareholders for
the year ended March 31, 1996 is incorporated herein by reference.
Narrative Description Of Business
"Notes to Consolidated Financial Statements - Business Description" on page 28
of the Annual Report to Shareholders for the year ended March 31, 1996,
excluding the last sentence of the first paragraph and the second and fourth
sentences of the third paragraph, is incorporated herein by reference.
Product Class Sales
Year Ended March 31
Segment And Products 1996 1995 1994
(Thousands)
Water Control
Plumbing products $140,925 $121,133 $ 99,496
Water resource and treatment systems 84,245 58,808 85,921
Other products 57,877 52,921 61,048
Power Systems
Power plants and steam generating systems 124,392 146,844 450,674
Other products 12,464 14,537 11,375
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 and mop sinks, ferrous
castings, flush valves, shower heads, faucets, and hand dryers for commercial,
industrial, and institutional applications; tubular brass and plastic plumbing
supplies, sink strainers, shower heads, and toilet tank accessories;
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
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systems; engineered concrete products including precast prestressed concrete
bridge components, box beam girders, pilings, panels, support systems, and
underground wastewater pipe.
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; centrifugal fans and mechanical dust collectors.
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 plastics 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
None of the industry segments is considered to have significant seasonal
business.
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. 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.
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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
1996 1995
(Thousands)
Water Control $ 98,000 $122,000
Power Systems 73,000 65,000
$171,000 $187,000
Approximately 5% of the Water Control and 9% of the Power Systems backlogs are
expected to be completed in fiscal years ending after March 31, 1997.
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.
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.
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Number Of Employees
The Company has approximately 2,625 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: 1996-$12,581,000; 1995-$10,681,000; 1994-$10,986,000.
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
Water Control 664,600 380,800
Power Systems 94,000 80,400
Corporate Headquarters and Others 233,300
991,900 461,200
ITEM 3 - LEGAL PROCEEDINGS
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.
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 58 Chairman Since 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
Donald F. Fessler 65 Executive Vice President Since 1985
Donald L. Butynski 52 Group Vice President Since 1995
President - National Energy
Production Corporation
(a subsidiary of the Company) Since 1986
Frank E. Sheeder 53 Group Vice President Since 1995
President and Chief Executive
Officer - Furmanite, Inc.
(engineering and maintenance
services), a subsidiary of
Kaneb Services, Inc. 1994 - 1995
Independent Consultant 1992 - 1994
John R. Mellett 46 Senior Vice President- Since 1995
Chief Financial Officer
Senior Vice President and
Chief Financial Officer and
Vice President-Finance (1992-1994)
- LeFebure (financial institution
capital equipment and services),
a subsidiary of De La Rue, PLC 1992 - 1995
Independent Consultant 1991 - 1992
James A. Zurn 54 Senior Vice President Since 1981
John E. Rutzler III 55 Vice President-Controller Since 1989
Dennis Haines 43 General Counsel and Secretary Since 1993
Associate General Counsel 1989 - 1993
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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 23 of
the Annual Report to Shareholders for the year ended March 31, 1996 is
incorporated herein by reference.
Holders
At March 31, 1996, there were 4,791 holders of record of the Company's Common
Stock.
Dividends
"Unaudited Quarterly Financial Data - Common Stock Cash Dividends Declared" on
page 23 of the Annual Report to Shareholders for the year ended March 31, 1996
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 footnotes thereto on page 22 of the
Annual Report to Shareholders for the year ended March 31, 1996 are
incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Financial Review" on pages 18 through 21 of the Annual Report to Shareholders
for the year ended March 31, 1996 is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and notes to consolidated financial
statements on pages 24 through 33 of the Annual Report to Shareholders for the
year ended March 31, 1996 are incorporated herein by reference.
"Unaudited Quarterly Financial Data" on page 23 of the Annual Report to
Shareholders for the year ended March 31, 1996 is incorporated herein by
reference.
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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, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
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 16, 1996, except for
the Subsequent Event note,
as to which the date is
June 27, 1996
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.
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PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
"Nominees For a Term of Three Years Each" on page 1 and "Directors Whose Terms
of Office Continue Until 1997", "Directors Whose Terms of Office Continue
Until 1998", and "Director Who is Retiring" on page 2 of the Proxy Statement
dated June 27, 1996 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 5, "Stock Option Grants" and "Stock
Option Exercises And Fiscal Year End Option Values" on page 6, "Pension Plans"
on page 7, "Directors' Compensation" on page 8, "Management Development and
Compensation Committee Report" on pages 9 and 10, and "Performance Graph" on
page 10 of the Proxy Statement dated June 27, 1996 are incorporated herein by
reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Security Ownership Of Common Stock" on page 4 of the Proxy Statement dated
June 27, 1996 is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
"Related-Party Transactions" on page 4 of the Proxy Statement dated June 27,
1996 is incorporated herein by reference.
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, 1996 are incorporated herein by
reference:
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Consolidated Financial Position - March 31, 1996 and 1995
Consolidated Operations - Years Ended March 31, 1996, 1995, and 1994
Industry Segment Data - Years ended March 31, 1996, 1995, and 1994
Consolidated Cash Flows - Years ended March 31, 1996, 1995, and 1994
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
January 15, 1996 incorporating a news release announcing an agreement for
collaboration on future power generation projects with CMS Generation Co.
which also resolves long-standing litigation with Imperial Resource Recovery
Associates, L.P.
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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, 1996
Allowance for doubtful accounts $ 4,238 $ 487 $ 24 -A
$ 694 -B
1,408 -C $ 2,647
$ 4,238 $ 487 $ 24 $2,102 $ 2,647
Reserves:
Plant closings $ 1,626 $ 581 -E
585 -F $ 460
Warranties 3,551 $(1,896) 200 -G
66 -C 1,389
$ 5,177 $(1,896) $1,432 $ 1,849
Year Ended March 31, 1995
Allowance for doubtful accounts $ 6,203 $ 1,062 $152 -D $3,179 -B $ 4,238
Reserves:
Plant closings $ 7,729 $ 283 -D
5,131 -E
689 -F $ 1,626
Warranties 4,382 $ 113 944 -G 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 -E
1,625 -F $ 7,729
Warranties 4,157 1,089 864 -G 4,382
$ 8,209 $ 8,016 $4,114 $12,111
<F1> <F4> <F7>
A-Purchase of business. D-Account transfers. G-Warranty claims allowed.
<F2> <F5>
B-Uncollectible accounts written off, net of recoveries. E-Costs incurred.
<F3> <F6>
C-Discontinued operations. F-Credit to costs and expenses.
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/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 3, 1996
/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 3, 1996
Robert R. Womack Chief Executive Officer
/s/ John R. Mellett Senior Vice President and June 3, 1996
John R. Mellett Chief Financial Officer
/s/ John E. Rutzler III Vice President-Controller June 3, 1996
John E. Rutzler III
/s/ Zoe Baird Director June 3, 1996
Zoe Baird
/s/ M. K. Brown Director June 3, 1996
Michael K. Brown
/s/ William E. Butler Director June 3, 1996
William E. Butler
/s/ Edward J. Campbell Director June 3, 1996
Edward J. Campbell
/s/ Robert D. Neary Director June 3, 1996
Robert D. Neary
/s/ David W. Wallace Director June 3, 1996
David W. Wallace
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EXHIBIT INDEX
3 Articles Of Incorporation And By-laws
3.1 Restated Articles of Incorporation with Amendments through
April 22, 1996
By-laws as of August 1995 filed as Exhibit 3.1 to Form Incorporated
10-Q for the quarter ended September 30, 1995 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 Included in
Articles of Incorporation with Amendments through Exhibit 3.1
April 22, 1996
Description of Preferred Share Purchase Rights contained Incorporated
in the Form 8-A Registration Statement dated May 17, 1996 by reference
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
* 1995 Directors Stock Option Plan filed as Exhibit 99 to Incorporated
Form S-8 Registration Statement No. 33-65219 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
* Agreements Relating to Employment dated June 5, 1989 with Incorporated
D.F. Fessler and J.A. Zurn filed as Exhibit 10H to Form by reference
10-Q for the quarter ended June 30, 1989; dated October
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17, 1994 with R.R. Womack filed as Exhibit 10.2 to Form
10-Q for the quarter ended December 31, 1994; dated May 1,
1995 with D.L. Butynski and July 1, 1995 with J.R. Mellett
filed as Exhibit 10.8 to Form 10-Q for the quarter ended
June 30, 1995; dated August 14, 1995 with F.E. Sheeder
filed as Exhibit 10.11 to Form 10-Q for the quarter ended
September 30, 1995
* Employment Agreement dated January 22, 1996 with R.R. Incorporated
Womack filed as Exhibit 10.13 to Form 10-Q for the by reference
quarter ended December 31, 1995
* 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, D.W. Wallace, and J.A. Zurn filed as Exhibit by reference
19J to Form 10-Q for the quarter ended September 30, 1986;
dated October 20, 1986 with D.F. Fessler 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; dated May 1, 1995 with D.L. Butynski, June 8,
1995 with R.D. Neary, and July 1, 1995 with J.R. Mellett
filed as Exhibit 10.9 to Form 10-Q for the quarter ended
June 30, 1995; dated August 14, 1995 with F.E. Sheeder
filed as Exhibit 10.12 to Form 10-Q for the quarter ended
September 30, 1995; dated October 30, 1995 with M.K. Brown
filed as Exhibit 10.14 to Form 10-Q for the quarter ended
December 31, 1995
* 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-
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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
10.15* 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, 1996
Incorporated by Reference
21 Subsidiaries Of The Registrant
Subsidiaries
23 Consents Of Experts And Counsel
Consent of Independent Auditors
27 Financial Data Schedule
27.1 Financial Data Schedule Year Ended March 31, 1996 SEC Edgar
Filing Only
27.2 Restated Financial Data Schedule Year Ended SEC Edgar
March 31, 1996 Interim Quarters Filing Only
27.3 Restated Financial Data Schedule Year Ended SEC Edgar
March 31, 1995 Filing Only
27.4 Restated Financial Data Schedule Year Ended SEC Edgar
March 31, 1994 Filing Only
99 Additional Exhibits
99.1 Annual Report on Form 11-K of the Zurn Retirement Savings
Plan for the year ended December 31, 1995
99.2 Annual Report on Form 11-K of the Zurn/NEPCO Retirement
Savings Plan for the year ended December 31, 1995
* - Management contracts and compensatory plan arrangements.
-15-
EXHIBIT 3.1 - RESTATED ARTICLES OF INCORPORATION
RESTATED
ARTICLES OF INCORPORATION-FOR PROFIT
OF
ZURN INDUSTRIES, INC.
A Stock Business Corporation
FIRST: The name of the Corporation is Zurn Industries, Inc.
SECOND: The address of this Corporation's current registered office
in this Commonwealth is One Zurn Place, Erie, Erie County, Pennsylvania 16512.
THIRD: The purpose or purposes of the Corporation are: to buy,
manufacture, sell, distribute, exchange, trade, and otherwise deal in,
articles of commerce, and further the Corporation shall have unlimited power
to engage in and to do any lawful act concerning any or all lawful business
for which corporations may be incorporated under the Pennsylvania Business
Corporation Law.
FOURTH: The term of its existence is perpetual.
FIFTH: The Corporation is incorporated under the provisions of the
Act of General Assembly of April 29, 1874.
SIXTH: The authorized capital of the Corporation is $55,000,000
divided into 5,000,000 shares of Preferred Stock having a par value of $1.00
per share, of which 150,000 shares were established as "$1.00 Cumulative
Convertible Preferred Stock" and 3,000,000 shares were established as "Second
Series Junior Participating Preferred Stock", and 100,000,000 shares of Common
Stock having a par value of $.50 per share.
I. Series of Preferred Stock, known as "$1.00 Cumulative
Convertible Preferred Stock," (consisting originally of 150,000 shares,
hereinafter referred to as "$1.00 Preferred Stock").
(A) The holders of the $1.00 Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of the
assets of the Corporation which by law are available for the payment of
dividends, cash dividends at, but not exceeding, the rate of $1.00 per share
per annum, payable quarter-annually on the first day of January, April, July,
and October in each year. Such cash dividends shall accrue from February 1,
1969, and shall be cumulative. No dividends shall be paid, or declared and
set apart for payment, with respect to shares of the Common Stock, and no
assets available for the payment of dividends shall be paid or set aside for
the purchase of shares of the Common Stock, until all current and accrued and
unpaid dividends on the $1.00 Preferred Stock have been fully paid or declared
and set apart for payment.
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(B) The $1.00 Preferred Stock may be redeemed in
whole or in part by the Corporation at any time on or after January 1, 1974.
The sums payable upon redemption (in addition to accrued and unpaid dividends
up to and including the date fixed for redemption) shall be $40.00 per share.
If less than all of the outstanding shares of the $1.00 Preferred Stock are to
be redeemed, the shares so redeemed shall be chosen by lot or pro rata in
share manner as the Board of Directors may determine; provided, however, that
if full cumulative dividends shall not have been paid, or declared and set
aside for payment, for all quarterly dividend periods preceding the current
dividend period, the Corporation shall not call for redemption less than all
of the then outstanding shares of the $1.00 Preferred Stock.
Not less than 45 nor more than 60 days prior to the date
fixed for redemption, a notice specifying the time and place thereof shall be
given by mail to the holders of record of the shares of the $1.00 Preferred
Stock to be redeemed at their respective addresses as the same shall appear on
the books of the Corporation, but no failure to mail such notice nor any
default therein or in the mailing thereof shall affect the validity of the
redemption except as to the holder to whom said Corporation has failed to mail
said notice or to whom the notice was defective.
From and after the date fixed in such notice as the date of
redemption, all dividends upon the shares of the $1.00 Preferred Stock thereby
called for redemption shall cease to accrue, and all rights of the holders
thereof as shareholders of the Corporation shall cease and terminate, except
the right to receive payment of the redemption price, but without interest.
(C) In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the Corporation,
there shall be paid to the holders of the $1.00 Preferred Stock the amount of
$40.00 per share before any distribution shall be made to the holders of the
Common Stock of the Corporation. In the event the amounts thus distributable
among the holders of the $1.00 Preferred Stock shall be insufficient to permit
the payment in full to the holders of the $1.00 Preferred Stock of such
preferential amounts, then the entire assets of the Corporation thus
distributable shall be distributed ratably among the holders of the $1.00
Preferred Stock according to the amounts which they respectively would be
entitled to receive if such assets were sufficient to permit the payment in
full of such amounts. After payment in full of said preferential amounts to
the holders of the $1.00 Preferred Stock, said holders shall not be entitled
to share in the distribution of the remaining assets of the Corporation.
(D) The $1.00 Preferred Stock shall be convertible
at the option of the respective holders thereof into shares of the Common
Stock of the Corporation at a conversion rate (subject to adjustment as
hereinafter provided) hereinafter provided) of one (1) share of Common Stock for
each share of the $1.00 Preferred Stock; provided, however, that as to any share
of the $1.00 Preferred Stock called for redemption, the right of conversion
shall terminate at the close of business on the fifth day preceding the date
fixed for redemption.
-17- -2-<PAGE>
Any holder of the $1.00 Preferred Stock electing to convert
shall deposit the certificates representing the shares to be converted
together with a written request for conversion, with the Corporation. The
conversion right shall be deemed to have been exercised at the date on which
certificates shall have been so deposited and such person shall be treated for
all purposes as the record holder of the Common Stock on said date. The
Corporation shall not be required in connection with any such conversion to
issue a fraction of a share of its Common Stock, but, in lieu of any faction
of a share of Common Stock to which the person exercising such conversion
right shall be entitled, the Corporation may make a cash payment equal to such
fraction multiplied by the market price of the Common Stock on the date such
shares of the $1.00 Preferred Stock are deposited for conversion. For the
purpose of computing such payment to be made in lieu of fractional shares, the
market price of the Common Stock on such date shall be the closing price on
the New York Stock Exchange.
As soon as practicable after the date of conversion of any
shares of the $1.00 Preferred Stock into Common Stock, the Corporation shall
deliver to the person entitled thereto certificates representing shares of the
Common Stock and the cash, if any, to which such person shall be entitled on
such conversion. The Corporation, as a condition to the exercise of any right
of conversion, may require the payment of a sum equal to any transfer tax or
other governmental charge (but not including any tax payable upon the issue of
shares of the Common Stock) that may be imposed or required by law upon such
conversion of shares of the $1.00 Preferred Stock into shares of the Common
Stock.
In the event that at any time while shares of the $1.00
Preferred Stock are outstanding the Corporation shall issue any additional
shares of the Common Stock as a result of any stock dividend, stock split, or
any subdivision or reclassification of shares of the outstanding Common Stock,
then, in any of such events, the conversion rate in effect hereunder shall be
adjusted to appropriately reflect such changes in capitalization. No
adjustment shall be made, however, upon conversion of the $1.00 Preferred
Stock for accrued and unpaid dividends thereon or for declared and unpaid
dividends upon the Common Stock issuable upon such conversion.
(E) So long as any shares of the $1.00 Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote of the
holders of at least a majority of the $1.00 Preferred Stock then outstanding,
in any manner:
(1) increase the number of shares comprising the
series of $1.00 Preferred Stock;
(2) issue any other series of Preferred Stock, or
create any other class of stock, ranking
prior to or equal to the $1.00 Preferred
Stock either as to dividends or distribution
of assets in liquidation; or
-18- -3-<PAGE>
(3) change the preferences, powers, rights or
limitations with respect to the $1.00
Preferred Stock in any manner prejudicial to
the holders thereof.
II. Series of Preferred Stock, known as "Second Series Junior
Participating Preferred Stock".
(A) Designation and Amount. The shares of such series
shall be designated as "Second Series Junior Participating Preferred Stock"
(the "Series Two Preferred Stock") and the number of shares constituting such
series shall be 3,000,000.
(B) Dividends and Distributions.
(1) Subject to the prior and superior rights of
the holders of any shares of any series of stock ranking prior and superior to
the shares of Series Two Preferred Stock with respect to dividends, the
holders of shares of Series Two Preferred Stock, in preference to the holders
of Common Stock, par value $.50 per share, of the Corporation (the "Common
Stock") and of any junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of January,
April, July and October in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series Two Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $.20 or (b) subject to the provision
for adjustment hereinafter set forth, twice the aggregate per share amount of
all cash dividends, and twice the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions, other than a dividend or
distribution payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series
Two Preferred Stock. In the event the Corporation shall at any time after May
29, 1986 (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amounts to which holders of shares of Series Two Preferred Stock were
entitled immediately prior to such event under clause (a) and clause (b) of
the preceding sentence shall be adjusted by multiplying each such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(2) The Corporation shall declare a dividend or
distribution on the Series Two Preferred Stock as provided in paragraph (1) of
this Subarticle II(B) immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend or distribution payable in shares
-19- -4-<PAGE>
of Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $.20 per share on the Series Two Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date; and provided further that nothing contained in this paragraph (2) shall
be construed so as to conflict with any provision relating to the declaration
of dividends contained in the Articles of the Corporation.
(3) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series Two Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such
shares of Series Two Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series Two Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series Two Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of Series Two
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon.
(C) Voting Rights. The holders of shares of Series Two
Preferred Stock shall have only such voting rights as are required by law or
as are provided in the Articles of the Corporation.
(D) Certain Restrictions.
(1) Whenever quarterly dividends or other
dividends or distributions payable on the Series Two Preferred Stock as
provided in Subarticle II are in arrears, thereafter and until all accrued and
unpaid dividends and distribution, whether or not declared, on shares of
Series Two Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(a) declare or pay dividends on, make any other
distributions on, or redeem or purchase or
otherwise acquire for consideration any
shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or
winding up) to the Series Two Preferred
Stock;
-20- -5-<PAGE>
(b) declare or pay dividends on or make any other
distributions on any shares of stock ranking
on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with
the Series Two Preferred Stock, except
dividends paid ratably on the Series Two
Preferred Stock and all such parity stock on
which dividends are payable or in arrears in
proportion to the total amounts to which the
holders of all such shares are then entitled;
(c) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking
junior (either as to dividends or upon
liquidation, dissolution or winding up) to
the Series Two Preferred Stock, provided that
the Corporation may at any time redeem,
purchase or otherwise acquire shares of any
such junior stock in exchange for shares of
any stock of the Corporation ranking junior
(either as to dividends or upon dissolution,
liquidation or winding up) to the Series Two
Preferred Stock; or
(d) purchase or otherwise acquire for
consideration any shares of Series Two
Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding
up) with the Series Two Preferred Stock,
except in accordance with a purchase offer
made in writing or by publication (as
determined by the Board of Directors) to all
holders of such shares upon such terms as the
Board of Directors, after consideration of
the respective annual dividend rates and
other relative rights and preferences of the
respective series and classes, shall
determine in good faith will result in fair
and equitable treatment among the respective
series or classes.
(2) The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
could, under paragraph (1) of this Subarticle (D), purchase or otherwise
acquire such shares at such time and in such manner.
(E) Redemption. The Corporation may, at the option of the
Board of Directors and in accordance with the Articles of the Corporation,
redeem the whole or any part of the Series Two Preferred Stock at any time or
from time to time at a redemption price equal to the greater of (a) $260 per
-21- -6-<PAGE>
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date set for payment, or (b) subject
to the provision for adjustment hereinafter set forth, twice the current
market price (as hereinafter defined) per share of Common stock on the date
notice of redemption is first mailed to the holders of the Series Two
Preferred Stock. In the event the Corporation shall at any time after May 29,
1986 (i) declare any dividend on Common stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amounts to which holders of shares of Series Two Preferred Stock were
entitled immediately prior to such event under clause (a) and clause (b) of
the preceding sentence shall be adjusted by multiplying each such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
For purposes of this Section, "current market price" per
share of Common Stock on any date shall be deemed to be the average of the
daily closing prices per share of the Common Stock for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Common Stock is determined during a period following the
announcement by the Corporation of (i) a dividend or distribution in Common
Stock payable in shares of Common Stock or securities convertible into shares
of Common Stock or (ii) any subdivision, combination or reclassification of
Common Stock, and prior to the expiration of the 30 Trading Day period after
the ex-divided dated for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, then, and in each such
case, the "current market price" shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asking prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such
other system then in use, or, if on any such date the shares of Common Stock
are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in
the Common Stock selected by the Board of Directors of the Corporation. If on
any such date no market maker is making a market in the Common Stock, the fair
value of such shares on such date as determined in good faith by the Board of
Directors of the Corporation shall be used. The term "Trading Day" shall mean
a day on which the principal national securities exchange on which the shares
-22- -7-<PAGE>
of Common Stock are listed or admitted to trading is open for the transaction
of business or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, a Business Day. If the Common
Stock is not publicly held or not so listed or traded, "current market price"
per share shall mean the fair value per share determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described
in a statement mailed to the holders of the Series Two Preferred Stock with
the notice of redemption.
(F) Reacquired Shares. Any shares of Series Two Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. Except as otherwise required by the Articles of the Corporation, all
such shares shall upon their cancellation become authorized but unissued
shares of preferred stock and may be reissued as part of a new series of
preferred stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
(G) Liquidation, Dissolution or Winding Up.
(1) Upon any liquidation, dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series Two Preferred Stock unless, prior
thereto, the holders of shares of Series Two Preferred Stock shall have
received $2 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such
payment (the "Series Two Liquidation Preference"). Following the payment of
the full amount of the Series Two Liquidation Preferences, no additional
distributions shall be made to the holders of shares of Series Two Preferred
Stock unless, prior thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Common Adjustment") equal to the quotient
obtained by dividing (i) the Series Two Liquidation Preference by (ii) two (as
appropriately adjusted as set forth in subparagraph (3) below to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock) (such number in clause (ii), the "Adjustment Number").
Following the payment of the full amount of the Series Two Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series Two Preferred Stock and Common Stock, respectively, holders of Series
Two Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in
the ratio of the Adjustment Number to 1 with respect to such Preferred Stock
and Common Stock, on a per share basis, respectively.
(2) In the event, however, that there are not
sufficient assets available to permit payment in full of the Series Two
Liquidation Preference and the liquidation preferences of all other series of
preferred stock, if any, which rank on a parity with the Series Two Preferred
Stock, then all such available assets shall be distributed ratably to the
holders of the Series Two Preferred Stock and the holders of such parity
shares in proportion to their respective liquidation preferences. In the
-23- -8-<PAGE>
event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then any such remaining assets shall
be distributed ratably to the holders of Common Stock.
(3) In the event the Corporation shall at any
time after May 29, 1986 (a) declare any dividend on Common Stock payable in
shares of Common Stock, (b) subdivide the outstanding Common Stock, or (c)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(H) Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case the
shares of Series Two Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to twice the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of shares of
Series Two Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(I) Fractional Shares. The Corporation may issue
fractions and certificates representing fractions of a share of Series Two
Preferred Stock in integral multiples of one-half of a share of Series Two
Preferred Stock, or in lieu thereof, at the election of the Board of Directors
of the Corporation at the time of the first issue of any shares of Series Two
Preferred Stock, evidence such fractions by depositary receipts, pursuant to
an appropriate agreement between the Corporation and a depositary selected by
it, provided that such agreement shall provide that the holders of such
depositary receipts shall have all the rights, privileges and preferences to
which they would be entitled as beneficial owners of shares of Series Two
Preferred Stock. In the event that fractional shares of Series Two Preferred
Stock are issued, the holders thereof shall have all the rights provided
herein for holders of full shares of Series Two Preferred Stock in the
proportion which such fraction bears to a full share.
-24- -9-<PAGE>
(J) Ranking. The Series Two Preferred Stock shall rank
junior to all other series of the Corporation's preferred stock outstanding at
any time as to the payment of dividends and the distribution of assets, unless
the terms of any such series shall provide otherwise.
(K) Amendment. The Articles, as amended, of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series Two Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of two-thirds of the outstanding shares of Series Two Preferred Stock,
voting together as a single class.
III. Preferred stock (for which no series has been established.
(A) The Board of Directors shall have authority, by
resolution, to divide Preferred Stock into series and whether or not so
divided, may, to the extent authorized by law, fix and determine the relative
rights and preferences of any series so established, and change redeemed or
reacquired shares of series thereof into shares of another series and to
otherwise fix and determine any or all of the following terms:
(1) the distinctive serial designation of such
series;
(2) the annual divided rate for such series, and
the date from which such dividends shall
commence to accrue;
(3) the redemption price or prices for such
series and the terms and conditions on which
shares of such series may be redeemed;
(4) the sinking fund provisions, if any, for the
redemption or purchase of shares of such
series;
(5) the amounts payable upon shares of such
series in the event of the voluntary or
involuntary liquidation of the Corporation;
(6) the terms and conditions, if any, upon which
shares of such series may be converted and
the class or classes or series of shares of
the Corporation into which such shares may be
converted; and
(7) such other terms, limitations and relative
rights and preferences, if any, of such
series as the Board of Directors may at the
time of such resolutions, lawfully fix and
determine under the laws of the Commonwealth
of Pennsylvania.
-25- -10-<PAGE>
The Board of Directors is hereby expressly authorized to fix the
number of shares which shall constitute any series of Preferred Stock, which
number may at any time or from time to time be increased or decreased, but not
below the number of shares thereof then outstanding.
IV. Common Stock
The holders of Common Stock shall be entitled to receive
dividends when and as declared by the Board of Directors out of surplus
legally available therefor, provided, however, that no dividends shall be
declared or paid nor any distribution made on the Common Stock so long as any
of the Preferred Stock remains outstanding unless all accumulated dividends on
the Preferred Stock and the dividends for the current quarter-annual dividend
period shall have been paid or declared and a sum sufficient for the payment
thereof set apart.
V. Voting Rights
(A) In all elections of directors and in respect to all
other matters as to which the vote or consent of shareholders of the
corporation shall be required to be taken, the holders of Preferred Stock and
Common Stock shall each be entitled to one vote for each share of such stock
held by them respectively, voting together with the Common Stock and not as a
separate class, provided that holders of Preferred Stock shall be entitled to
vote as a class as required by law.
(B) Unless otherwise provided in a resolution of the Board
of Directors establishing any particular series, the number of authorized
shares of Preferred stock or Common Stock may be increased solely by the
affirmative vote of the combined outstanding shares of both the Preferred and
Common stocks voting together, and not voting respectively as a class, or
solely by action of the Board of Directors if permitted by law at the time
such vote is taken.
(C) No holder of the series designated $1.00 Cumulative
Convertible Preferred Stock, Series Two Preferred Stock, Preferred Stock for
which no series has been established, or Common Stock of the Corporation shall
have the right in any election of Directors or otherwise to multiply the
number of votes to which he/she may be entitled by the total number of
directors to be elected in the same election, either by the holders of the
class or classes of shares of which his/her shares are a part or together with
all classes, and to cast the whole number of such shares for one candidate or
to distribute them among two or more candidates, it being the intent in this
Subarticle V that shareholders of the Corporation shall not have cumulative
voting rights upon any matters that may be submitted to their vote.
SEVENTH:
I. Except as set forth in Subarticle II of this Article
SEVENTH, the affirmative vote of the holders of eighty percent (80%) of the
outstanding stock of the Corporation entitled to vote shall be required for:
-26- -11-<PAGE>
(A) any merger or consolidation to which the Corporation
or any of its subsidiaries and an Interested Person (as hereinafter defined)
are parties;
(B) any sale or other disposition by the Corporation of
all or any substantial part of its assets to an Interested Person;
(C) any purchase or other acquisition by the Corporation,
or any of its subsidiaries, of all or any substantial part of the assets of an
Interested Person; and
(D) any other transaction with an Interested Person which
requires the approval of the shareholders of the Corporation under the
Pennsylvania Business Corporation Law, as in effect from time to time.
II. The provisions of Subarticle I shall not be applicable to
any transaction described therein if:
(A) the transaction has been approved by the Board of
Directors prior to the time that a person, firm, corporation or other entity
has become an Interested Person; or
(B) the transaction has been approved by the Board of
Directors after the time a person, firm, corporation or other entity has
become an Interested Person where both of the following conditions have been
fulfilled:
(1) only Directors voting on the approval of the
transaction were those who were Directors
prior to such person, firm, corporation or
other entity becoming an Interested Person;
and
(2) in such transaction the cash, or fair market
value of other consideration, as valued by
the Board of Directors as of the date of its
approval of the transaction, to be received
by the shareholders of the Corporation is not
less per share than the highest price per
share (including brokerage commissions and/or
soliciting dealers' fees) paid by the
Interested Person for any of its stock in the
Corporation from the time that the Interested
Person had obtained a beneficial ownership in
excess of five percent (5%) of the
Corporation's voting stock.
III. As used in this Article SEVENTH the term "Interested Person"
shall mean any person, firm, corporation or other entity, or any group thereof
acting or intending to act in concert, including any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person, firm, corporation or other entity or group, which
-27- -12-<PAGE>
owns of record or beneficially, directly or indirectly, thirty percent (30%)
or more of any class of voting securities of the Corporation.
IV. The Board of Directors of the Corporation shall have full
power and authority to interpret, construe and apply the provisions of this
Article SEVENTH.
V. The affirmative vote of the holders of eighty percent (80%)
of the outstanding stock of the Corporation entitled to vote shall be required
to amend, alter or repeal this Article SEVENTH.
VI. For purposes of any vote required by this Article SEVENTH,
and for purposes of defining an "Interested Person" in accordance with
Subarticle III above, all classes of voting stock of the Corporation shall be
considered as one class.
EIGHTH: To the fullest extent that the Laws of the Commonwealth of
Pennsylvania, as in effect on January 27, 1987, or as thereafter amended,
permit the elimination or limitation of liability of directors, no director of
the Corporation shall be personally liable for monetary damages as such for
any action taken or any failure to take any action as a director. The
provisions of this Article shall be deemed to be a contract with each director
of the Corporation who serves as such at any time while such provisions are in
effect, and each director shall be deemed to be serving as such in reliance on
such provisions. Any amendment to or repeal of this Article, or adoption of
any other Article or Bylaw of the Corporation, which has the effect of
increasing director liability shall require the affirmative vote of at least
80% of the voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote in any election of directors, voting together as
a single class. Any such Amendment or repeal, or other Article or Bylaw,
shall operate prospectively only and shall not have effect with respect to any
action taken, or any failure to act, by a director prior thereto.
-28- -13-
EXHIBIT 10.15 - 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.
-29-
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(Thousands Except Per Share Amounts)
Year Ended March 31
1996 1995 1994
Primary Earnings Per Share
Net income (loss) $16,670 $ 9,324 $(13,876)
Preferred stock dividends 2 3 3
$16,668 $ 9,321 $(13,879)
Shares outstanding
Weighted average common shares 12,341 12,354 12,438
Net common shares issuable on Anti-
exercise of stock options 37 1 dilutive
Average common shares outstanding
as adjusted 12,378 12,355 12,438
Primary earnings (loss) per share $ 1.35 $ .76 $ (1.12)
Fully Diluted Earnings Per Share
Net income $16,670 $ 9,324 A
Interest on convertible debentures, n
net of applicable income taxes 8 t
$16,670 $ 9,332 i
d
Shares outstanding i
Average common shares as adjusted l
for primary computation 12,378 12,355 u
Common shares issuable if the t
preferred stock and convertible i
debentures were converted at v
the beginning of the year 5 32 e
Additional common shares issuable
on exercise of stock options 13 1
Average common shares outstanding
as adjusted 12,396 12,388
Fully diluted earnings per share $ 1.35 $ .75
-30-
EXHIBIT 13
ELECTRONIC FORMAT OF PAGES OF ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED MARCH 31, 1996 INCORPORATED BY REFERENCE
ANNUAL REPORT PAGE 18
FINANCIAL REVIEW
Business Restructuring
The decision to sell the Lynx Golf and Mechanical Power Transmission segments
was made in the fourth quarter of fiscal 1996 and, accordingly, they are
reported in the consolidated financial statements as discontinued operations.
The segments' assets and liabilities at March 31, 1996 have been removed from
the consolidated accounts and are presented in the statement of financial
position as a single net asset resulting in significant decreases in accounts
receivable, inventories, property, plant, and equipment, and long-term
obligations compared to the fiscal 1995 amounts. The statements of
consolidated operations and cash flows, industry segment data, and quarterly
financial data have been restated to present separately for all periods the
continuing operations of the Water Control and Power Systems segments and the
discontinued operations.
SALES AND EARNINGS
The single most significant factor affecting consolidated sales and earnings
has been the increases (1996 - $19.8; 1995 - $21.6; 1994 - $11.4 million) in
the Water Control segment's sales of plumbing products. The segment's other
businesses had sales increases totaling $30.4 million, derived primarily from
a water resource construction project, and greater operating profits in fiscal
1996 following a $35.2 million sales decline the prior year. The $24.5
million decline in Power Systems segment revenues is attributable to fewer
power plants being under construction in fiscal 1996 as the segment continued
its transition into the international markets while the $300.7 million drop in
fiscal 1995 reflected the depressed domestic independent power market.
Increasing plumbing products sales and the 11% improvement in their gross
profit margin percentage over the last three years more than offset the
effects of the Power Systems segment and water resource construction margin
percentage declines. In fiscal 1994, the consolidated margin was lower
primarily because a greater proportion of the sales were derived from the
Power Systems segment which has lower margins. In addition, the Power Systems
segment experienced high costs and a weak market for the steam generating
systems it manufactured. 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 1996 and 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 and, in fiscal 1996, the acquisition of a
business. The costs associated with the new Asia-Pacific office opened in
-31-<PAGE>
ANNUAL REPORT PAGE 18 CONTINUED
late fiscal 1995 were offset by lower costs in the Power Systems segment steam
generating systems business and, in fiscal 1995, those lower costs were more
than half of the plumbing products expense increase.
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 $.22 and $.06 per share in fiscal 1996 and 1995 and
they reduced income $2.61 per share in fiscal 1994. In addition, the income
tax refund associated with the 1995 state tax settlement increased income for
that year by $.04 per share. The revaluation of net deferred tax assets
resulting from a tax law change added $.15 per share in fiscal 1994.
Less interest income was derived from financial instruments in fiscal 1996
as cash balances declined. Higher interest rates in fiscal 1995 compared to
1994 mitigated the effect of lower cash levels. The higher income levels in
1995 and 1994 came from interest on federal income tax refunds in 1995, the
financing of equipment 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 was higher as a result of providing for interest on the
litigation liability recorded in fiscal 1994 which was settled in the third
quarter of fiscal 1996. The greater amount of other income in fiscal 1996 is
attributable to increased earnings of a power plant venture operated by the
Power Systems segment and the sale of a minority interest investment in
another company.
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
ANNUAL REPORT PAGE 19
the income level in those years, state taxes were a greater percentage of the
overall effective rates. Settlement of prior year state tax assessments
significantly reduced the effective tax rate in fiscal 1995.
The net income (loss) per share from continuing operations for the last
three years was: 1996 - $1.41; 1995 - $1.24; 1994 - $(.49). Absent the
unusual items, continuing operations net income per share would have been:
1996 - $1.19; 1995 - $1.14; 1994 - $1.97. Discontinued operations reduced net
income by $.06, $.48, and $.63 per share in each of the three years. The
losses declined primarily as the result of actions taken to lower operating
losses being incurred by the Lynx Golf segment.
Backlog 1996 1995 1994
(Millions)
Water Control $ 98 $122 $ 69
Power Systems 73 65 159
$171 $187 $228
Completion after fiscal 1997 is expected for 5% of the Water Control and 9% of
the Power Systems amounts at March 31, 1996.
-32-<PAGE>
ANNUAL REPORT PAGE 19 CONTINUED
Water Control
Plumbing products, the segment's largest business, had sales increases of 16%
in fiscal 1996 and 22% in 1995. $5.9 million of the 1996 increase was derived
from the newly-acquired Sanitary-Dash business. Other sales increase
contributors in both years were higher volumes, greater market share, price
increases, and new products introduced over the last several years which drove
the 13% sales gain in 1994. Water resource construction project revenues in
1996 were slightly less than fiscal 1994's level and declined 32% in 1995 as a
result of the low beginning of the year backlog. Revenues from the
installation of fire protection sprinkler systems were up 11% in fiscal 1996
after declining in each of the last two years as the result of the depressed,
highly-competitive West Coast commercial construction market. The
acquisitions note to the consolidated financial statements provides additional
information about plumbing products businesses acquired by the Water Control
segment.
The segment's fiscal 1996 and 1995 operating profit improvements were
dampened by reduced margins on water resource construction projects, including
the effects of unanticipated contract costs in 1996 and delays experienced in
1995's fourth quarter caused by severe flooding in California, and new
plumbing product development costs. As a result of downsizing and, in fiscal
1996, increased revenues, the fire sprinkler systems businesses' operating
profit more than doubled in each of the last two years.
While the plumbing products business has continued to outperform the
nonresidential construction market it serves, the Water Control segment's
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.
Power Systems
During the 1990-1994 period, the segment's design, engineering, and
construction of power plants made it the Company's most significant source of
revenues. 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. Weak markets also have impacted the segment's equipment
manufacturing businesses which suffered sales declines of 13%, 26%, and 21% in
1996, 1995, and 1994, respectively.
The gross profit margins from construction of power plants were affected by
cost overruns in both fiscal 1996 and 1995. In 1996, there were unanticipated
costs on recent international projects and one domestic contract. In 1995,
the overruns 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. Margins on steam generating systems
have improved each year as the result of outsourcing high cost manufacturing
that had been performed in Company-owned facilities until fiscal 1995. Those
costs, together with the sales decline, adversely affected the Company's
overall gross profit margin in fiscal 1994.
-33-<PAGE>
The Power Systems segment's fiscal 1996 and 1995 operating losses are
attributable to the lower revenues, cost overruns, and the higher cost of
developing the international markets for
ANNUAL REPORT PAGE 20
small- to medium-sized private power plants with long order lead times and, in
1996, the cost of closing a domestic office. 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.
Power Systems revenues and operating profit from the domestic market are
expected to remain at their low level 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 will be substantially below the early 1990's
level. The segment will not reflect the entire amounts for international
projects in its revenues because they likely will be performed by consortiums
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.
Corporate
Compared to earlier years, fiscal 1996 expenses were offset by less investment
income, the recognition of tax-related interest income associated with the
litigation settlement described in the unusual items note to financial
statements, and the gain from selling a minority interest investment in
another company.
Financial Condition
Liquidity is important to the Company's ability to take on construction
contract commitments. Year-end liquid assets amounted to $30.0 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. Cash provided by continuing operations in fiscal 1996 would have
been $21.9 million absent the $23.5 million net cash payments in connection
with the litigation settlement. 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 provided by continuing operations in fiscal 1994 was
nominal partly because of the steam generating systems business loss. Cash
from operations also was adversely affected in fiscal 1996 by the increase in
contracts in progress and in the prior two years by the reductions in advance
billings on contracts collected in fiscal 1993. The advance billings
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.
In addition to supplementing the cash used by operations in fiscal 1996 as
a result of the litigation settlement, the marketable securities reduction was
the source of the increase in cash and equivalents and provided funds for
-34-<PAGE>
capital expenditures, the plumbing products business acquisition, and the
payment of dividends to shareholders. In fiscal 1995, the cash from investing
activities provided 51% of the funds needed to pay dividends. The greater
amount of capital expenditures in 1996 was for two new plumbing products
facilities. Other significant uses of funds have been for ongoing investments
in facilities and equipment, long-term investments, including the purchase of
a plumbing products product line in fiscal 1994, and treasury stock purchases.
The exclusion of the assets and liabilities of the discontinued operations
from the individual working capital components in fiscal 1996 was the cause of
most of the reductions from the prior year end. However, the accounts
receivable and contracts in progress of continuing operations were greater as
the result of the increase in construction activities by the Power Systems
segment and the Water Control segment's water resource construction business.
And more efficient cash management resulted in an increase in trade accounts
payable. Most of the working capital components were reduced in both fiscal
1995 and 1994 as construction activities slowed. Year-end working capital
without the discontinued operations' net assets averaged $118.2 million over
the last three years and the fiscal 1996 year-end current ratio was equal to
its historical level of 2.0 to 1.
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
status of two power plant construction projects and the litigation described
in the unusual items, commitments and contingencies note to the financial
statements, is expected to have a
ANNUAL REPORT PAGE 21
future material effect on the Company's financial position. 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 $.22 per share quarterly dividend paid to shareholders since mid-fiscal
1991 was reduced to $.10 per share effective with the second quarter of fiscal
1996 payment as the result of a decision 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. Total capital employed
at March 31, 1996 amounted to $238.5 million which includes $231.0 million
($18.71 per share of common stock) of shareholders' equity. The March 1996
equity to debt ratio was 31 to 1.
Subsequent Event
As stated in the note to financial statements, it was determined in June 1996
that the Company's earnings for the first quarter of fiscal 1997 would be
reduced by approximately $3 million because of recent adverse weather and
labor conditions at the Australian site of the power plant being constructed
by the Power Systems segment's 50% joint venture.
-35-<PAGE>
ANNUAL REPORT PAGE 22
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 $421,539 $395,233 $709,225 $595,498 $536,532
Continuing operations
income (loss) 17,288 15,159 (6,009) 29,750 14,584
Per share 1.41 1.24 (.49) 2.38 1.16
Common stock cash dividends
declared per share .40 .88 .88 .88 .88
FINANCIAL POSITION AT YEAR END
Liquid assets $ 30,031 $ 54,838 $ 65,433 $ 90,643 $ 69,723
Working capital 173,836 155,535 160,516 183,778 171,497
Property, plant,
and equipment 42,054 56,162 57,003 70,423 67,138
Total assets 394,647 414,696 447,893 490,178 441,132
Debt and capital leases 7,549 11,553 13,806 20,934 18,164
Shareholders' equity 230,955 218,930 221,583 249,098 237,601
Per share of
common stock 18.71 17.73 17.86 20.03 18.90
GENERAL STATISTICS
Capital expenditures $ 10,238 $ 6,288 $ 5,746 $ 9,388 $7,237
Depreciation and
amortization 6,527 6,253 7,439 7,573 8,537
Shareholders of record 4,822 5,355 6,277 6,278 6,445
Average common shares
outstanding (thousands) 12,378 12,355 12,438 12,521 12,606
Common stock price range:
High 26 23 3/8 39 1/2 40 3/4 39 1/4
Low 18 3/8 16 3/4 22 3/4 27 3/4 30 1/4
Data has been restated for the effects of the 1996 decision to discontinue the
Lynx Golf and Mechanical Power Transmission segments.
1994 included costs relating to litigation ($38,902 - $2.00 per share) and a
plant closing and the write off of assets ($20,300 - $1.02 per share). 1992
included restructuring costs ($14,700 - $.72 per share).
-36-<PAGE>
<TABLE>
ANNUAL REPORT PAGE 23
UNAUDITED QUARTERLY FINANCIAL DATA
<CAPTION>
Year Ended March 31, 1996 Year Ended March 31, 1995
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 $94,476 $103,267 $110,087 $113,709 $97,788 $97,131 $101,291 $99,023
Gross profit 20,709 24,483 23,984 20,421 18,767 21,816 20,165 21,948
Continuing operations income 2,758 4,112 4,780 5,638 2,807 4,062 3,693 4,597
Discontinued operations 1,891 (37) (1,286) (1,186) (863) (1,590) (2,331) (1,051)
Net income 4,649 4,075 3,494 4,452 1,944 2,472 1,362 3,546
Earnings per share:
Continuing operations .23 .34 .38 .46 .23 .33 .30 .38
Discontinued operations .15 (.01) (.10) (.10) (.07) (.13) (.19) (.09)
Net income .38 .33 .28 .36 .16 .20 .11 .29
Common stock:
Cash dividends declared .10 .10 .10 .10 .22 .22 .22 .22
Market price:
High 20 7/8 26 25 5/8 23 1/4 23 3/8 20 3/8 19 5/8 191/2
Low 18 3/8 19 7/8 20 1/4 19 3/8 19 16 7/8 16 3/4 16 7/8
Fiscal 1996 fourth quarter unusual income items were gains on sales of underutilized assets ($2,442) and tax-
related interest arising from the settlement of litigation ($2,152) totaling $.22 per share which were
substantially offset by changes in the estimated costs of completing Power Systems segment international
contracts.
Fiscal 1995 unusual income items were 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.
Data has been restated for the effects of the fiscal 1996 fourth quarter decision to discontinue the Lynx Golf
and Mechanical Power Transmission segments.
Common stock market prices as reported in The Wall Street Journal.
-37-
/TABLE
<PAGE>
ANNUAL REPORT PAGE 24
CONSOLIDATED OPERATIONS
Year Ended March 31 1995 1994 1993
(Thousands Except Per Share Amounts)
Net Sales $421,539 $395,233 $709,225
Cost of sales 331,942 312,537 611,014
Marketing and administration 70,194 64,517 62,019
Unusual items (4,594) (1,191) 50,839
Interest income (3,368) (5,035) (5,035)
Interest expense 3,496 3,859 3,128
Other income (2,559) (1,303) (1,351)
Continuing Operations Income (Loss)
Before Income Taxes 26,428 21,849 (11,389)
Income tax expense (benefit) 9,140 6,690 (5,380)
Continuing Operations Income (Loss) 17,288 15,159 (6,009)
Discontinued operations:
Loss from operations (18) (5,835) (7,867)
Loss on disposal (600)
Net Income (Loss) $ 16,670 $ 9,324 $ (13,876)
Earnings (Loss) Per Share
Continuing operations $1.41 $1.24 $ (.49)
Discontinued operations (.06) (.48) (.63)
Net income (loss) $1.35 $ .76 $(1.12)
-38-<PAGE>
ANNUAL REPORT PAGE 25
INDUSTRY SEGMENT DATA
Corporate
Water Power and
Control Systems Others Total
(Thousands)
Year Ended March 31, 1996
Net sales $283,047 $136,856 $ 1,636 $421,539
Operating profit (loss) 34,291 (7,808) 445 26,928
Corporate expense 500
Income before income taxes 26,428
Identifiable assets:
Continuing operations 154,520 90,861 92,013
Discontinued operations
and total 57,253 394,647
Capital expenditures 8,900 1,083 255 10,238
Depreciation and
amortization 4,481 1,325 721 6,527
Year Ended March 31, 1995
Net sales $232,862 $161,381 $ 990 $395,233
Operating profit (loss) 28,441 (4,768) 410 24,083
Corporate expense 2,234
Income before income taxes 21,849
Identifiable assets:
Continuing operations 128,032 102,710 110,854
Discontinued operations
and total 73,100 414,696
Capital expenditures 5,358 775 155 6,288
Depreciation and
amortization 3,962 1,553 738 6,253
Year Ended March 31, 1994
Net sales $246,465 $462,049 $ 711 $709,225
Operating profit (loss) 22,095 (31,699) 43 (9,561)
Corporate expense (1,828)
Loss before income taxes (11,389)
Identifiable assets:
Continuing operations 124,042 122,021 126,446
Discontinued operations
and total 75,384 447,893
Capital expenditures 3,923 1,599 224 5,746
Depreciation and
amortization 3,623 3,063 753 7,439
See notes to consolidated financial statements.
-39-<PAGE>
ANNUAL REPORT PAGE 26
CONSOLIDATED FINANCIAL POSITION
March 31 1996 1995
(Thousands)
ASSETS
Current Assets
Cash and equivalents $ 16,195 $ 6,360
Marketable securities 13,836 48,478
Accounts receivable 93,713 115,373
Inventories and contracts in progress 69,753 84,264
Income taxes 32,340 38,751
Discontinued operations' net assets 57,253
Other assets 3,904 5,153
Total Current Assets 286,994 298,379
Property, Plant, And Equipment 42,054 56,162
Investments 37,611 35,447
Other Assets 27,988 24,708
$394,647 $414,696
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 48,441 $ 49,758
Advance billings on contracts in progress 13,787 14,623
Salaries, wages, and payroll items 10,404 10,761
Insurance 14,200 12,436
Litigation 27,501
Other liabilities 26,326 27,765
Total Current Liabilities 113,158 142,844
Long-Term Obligations 6,711 9,525
Retirement Obligations 43,823 43,397
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 35,617 35,637
Retained earnings 194,418 182,393
Treasury stock - 229 and 230 shares (5,365) (5,385)
230,955 218,930
Commitments And Contingencies
$394,647 $414,696
See notes to consolidated financial statements.
-40-<PAGE>
ANNUAL REPORT PAGE 27
CONSOLIDATED CASH FLOWS
Year Ended March 31 1996 1995 1994
(Thousands)
OPERATIONS
Net income (loss) $ 16,670 $ 9,324 $(13,876)
Items not affecting cash from
continuing operations:
Discontinued operations 618 5,835 7,867
Litigation 34,317
Plant closings and asset write-offs (2,442) (645) 20,476
Depreciation and amortization 6,527 6,253 7,439
Deferred income taxes 11,350 4,820 (15,030)
Miscellaneous (2,294) (527) (496)
Changes in operating assets and liabilities:
Receivables (6,044) 1,780 (25,941)
Inventories and prepaid expenses (2,520) (905) 3,531
Trade accounts payable and accrued expenses (21,472) (13,843) (16,100)
Income taxes and interest (1,962) (1,408) 304
Total continuing operations (1,569) 10,684 2,491
Discontinued operations (2,484) 903 (694)
Total (Used By) From Operations (4,053) 11,587 1,797
INVESTING
Marketable securities 34,868 14,679 1,771
Capital expenditures (9,138) (6,288) (5,746)
Purchase of business (5,967) (3,387)
Sales of operations 3,476 521 2,716
Long-term investments 1,309 (2,226) (1,143)
Notes receivable (170) 763 100
Property, plant, and equipment disposals 167 571 236
Discontinued operations (1,772) (2,507) (3,370)
Total From (Used For) Investing 22,773 5,513 (8,823)
FINANCING
Dividends paid (6,415) (10,888) (10,956)
Debt payments (1,458) (1,078) (1,334)
Treasury stock purchased (1,926) (2,632)
Stock options exercised 33 1,569
Discontinued operations (1,012) (1,018) (975)
Total (Used For) Financing (8,885) (14,877) (14,328)
CASH AND EQUIVALENTS
Increase (decrease) 9,835 2,223 (21,354)
Beginning of year 6,360 4,137 25,491
End Of Year $ 16,195 $ 6,360 $ 4,137
See notes to consolidated financial statements.
-41-<PAGE>
ANNUAL REPORT PAGE 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS DESCRIPTION
The Company and its subsidiaries operate in two 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 Water Control segment manufactures and distributes plumbing products
principally 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.
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. Since
fiscal 1995, the Company has focused on the Asia-Pacific and South American
markets; previously, most contracts had been for plants in the United States.
Sales to individual customers amounting to more than 10% of consolidated sales
were: 1995 - $42,253,000; 1994 - $192,456,000.
The decision to sell the Lynx Golf and Mechanical Power Transmission segments
before the end of fiscal 1997 was made in fiscal 1996.
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 have been restated for the decision to discontinue two business
segments. 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.
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.
-42-<PAGE>
ANNUAL REPORT PAGE 28 CONTINUED
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
shareholders' equity as a component of retained earnings.
Earnings Per Share Earnings per share are based on income or loss and the
average shares of common stock and dilutive stock options outstanding during the
year (1996 - 12,378,000; 1995 - 12,355,000; 1994 - 12,438,000).
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, interest
expense, and administrative expenses allocated to discontinued operations and
unallocated. Corporate assets consist principally of cash and equivalents,
short-term marketable securities, long-term investments, and corporate
headquarters and rental properties.
Accounting Pronouncement Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," disclosures are not required until
fiscal 1997 and, as permitted by the Statement, the Company intends to continue
accounting for stock-based compensation pursuant to Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees".
ANNUAL REPORT PAGE 29
UNUSUAL ITEMS, COMMITMENTS AND CONTINGENCIES
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
$2,655,000 for legal costs. Settlement of the litigation in fiscal 1996
involved net cash payments of $23,500,000 and recognition of tax-related
interest income, and provides future power plant investment, construction, and
other business opportunities.
The fiscal 1994 provision for closing the Energy Division manufacturing
facilities of the Power Systems segment included $8,400,000 of probable cash
-43-<PAGE>
ANNUAL REPORT PAGE 29 CONTINUED
expenditures and $11,900,000 in asset write-downs. The cash expenditure
provision has been disbursed or allocated to retirement obligations and unused
provisions were included in fiscal 1995's income. The fiscal 1996 gain on sale
of the equipment was $2,085,000.
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.
The Power Systems segment had nearly completed the construction of one power
plant and commenced work on another when, in March 1996, the State of Illinois
Retail Rate Law of 1987 was repealed and resulted in a bankruptcy filing by the
first project and the halting of work on the other. The projects' owner has
filed suits challenging the retroactive application of the law's repeal. If the
repeal is not reversed and the projects' assets, including debt funding by the
owner, are insufficient, the Company could sustain up to a $14,000,000 pretax
loss for which no provision has been made as management believes the Company's
costs will be recovered.
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.
UNUSUAL ITEMS
Year Ended March 31 1996 1995 1994
(Thousands)
Litigation $(2,152) $38,902
Asset sales and plant closings (2,442) $ (645) 20,300
Doubtful account recovery (8,363)
Prior year state income tax settlement (546)
$(4,594) $(1,191) $50,839
SUBSEQUENT EVENT
Adverse weather conditions and labor relations encountered subsequent to the end
of fiscal 1996 at the site of the power plant being constructed by the Power
Systems segment's 50% joint venture in Australia have increased the costs now
expected to be incurred in completing the contract. The change in estimate is
expected to reduce the Company's pretax earnings for the first quarter of fiscal
1997 by approximately $3,000,000.
-44-<PAGE>
ANNUAL REPORT PAGE 29 CONTINUED
FINANCIAL INSTRUMENTS
Unrealized
March 31, 1996 Cost Gain Loss Fair Value
(Thousands)
Statement Classification
Cash and equivalents $ 4,918 $ 4,918
Marketable securities 13,834 $ 5 $ 3 13,836
Other current assets 1,684 85 1,769
Investments 16,773 50 1,420 15,403
$37,209 $140 $1,423 $35,926
Investment Type
Certificates of deposit $2,177 $2,177
Debt securities:
United States Treasury 6,507 $ 3 6,504
States and subdivisions 11,755 $ 13 12 11,756
Tax exempt bond funds 7,721 127 7,848
Mortgage-backed 9,049 1,408 7,641
$37,209 $140 $1,423 $35,926
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
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.
-45-<PAGE>
ANNUAL REPORT PAGE 30
ACCOUNTS RECEIVABLE
(Thousands)
At March 31, 1996 accounts receivable include retainage on long-term contracts
expected to be collected in fiscal 1997 - $9,841 and 1998 - $2,491. Allowances
deducted are: 1996 - $2,647; 1995 - $4,238.
INVENTORIES AND CONTRACTS IN PROGRESS
March 31 1996 1995
(Thousands)
Finished products $45,386 $47,608
Work in process 3,708 12,751
Raw materials and supplies 5,430 15,577
Contracts in progress 15,229 8,328
$69,753 $84,264
Last-in, first-out (LIFO) method 77% 75%
First-in, first-out (FIFO) method 23 25
Inventory increase if only the FIFO method, which
approximates replacement costs, had been used $7,104 $13,100
PROPERTY, PLANT, AND EQUIPMENT
March 31 1996 1995
(Thousands)
Land and land improvements $ 6,621 $ 7,235
Buildings and leasehold improvements 31,183 37,217
Machinery and equipment 64,491 99,154
102,295 143,606
Depreciation and amortization 60,241 87,444
$ 42,054 $ 56,162
INVESTMENTS
March 31 1996 1995
(Thousands)
Irrevocable trust securities for nonqualified
pension, deferred compensation, and
other employee plans $15,403 $15,350
Notes receivable 11,690 8,426
Sales-type lease 7,441 7,659
Business ventures 3,058 3,726
Other 19 286
$37,611 $35,447
-46-<PAGE>
ANNUAL REPORT PAGE 30 CONTINUED
DEBT AND LINE OF CREDIT
The Company has a $100,000,000 three-year commitment, annually extendable for
one year by mutual agreement until February 2001, from a group of banks for
letters of credit ($18,656,000 outstanding at March 31, 1996) 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. The line of credit contains restrictive covenants
pertaining to the maintenance of working capital and net worth and limits
certain indebtedness.
Outstanding letters of credit issued under other arrangements amounted to
$2,558,000 at March 31, 1996. Payment of the unsecured note is guaranteed by
the lessee under a sales-type lease.
LONG-TERM OBLIGATIONS
March 31 1996 1995
(Thousands)
Unsecured note - 8.46% interest $6,805 $ 7,148
Notes secured by various
properties - 4% to 7% interest 59 436
Capital lease obligations 685 611
Discontinued operations 3,358
7,549 11,553
Less current portion 838 2,028
$6,711 $ 9,525
Year Ended March 31 1996 1995 1994
(Thousands)
Interest incurred $3,584 $3,883 $3,128
Interest paid 3,306 3,998 2,763
Interest capitalized 88 24
Long-term obligation principal payments due in future fiscal years: 1997 -
$838; 1998 - $691; 1999 - $578; 2000 - $533; 2001 - $572; thereafter - $4,337.
ANNUAL REPORT PAGE 31
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 19% 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.
-47-<PAGE>
ANNUAL REPORT PAGE 31 CONTINUED
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 1996 1995
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 $ 89,766 $ 10,863 $21,606 $ 74,964 $10,990 $ 20,613
Nonvested 1,319 63 5,256 897 249 4,570
Accumulated 91,085 10,926 26,862 75,861 11,239 25,183
Salary
increases 9,356 18 6,682 1,495
Projected 100,441 10,944 26,862 82,543 12,734 25,183
Plans' assets 160,611 1,063 125,686 3,910
Asset excess
(deficiency) 60,170 (9,881) (26,862) 43,143 (8,824) (25,183)
Unrecognized:
Net (gain) loss (37,536) 1,575 (4,743) (22,618) 521 (6,046)
Initial (asset)
obligation (1,311) 463 (3,478) (155)
Prior service cost (2,724) (1) (331) (573)
Minimum liability (2,158) (669)
Prepaid (accrued)
cost $ 18,599 $(10,002) $(31,605) $ 16,716 $(9,700) $(31,229)
COSTS
Company Defined Benefit Plans
Pension Medical and Life
Year Ended March 31 1996 1995 1994 1996 1995 1994
(Thousands)
Service cost $ 1,659 $ 2,205 $ 2,654 $ 268 $ 459 $ 541
Interest 7,990 7,644 7,360 2,075 2,103 2,240
Termination benefits 1,111 2,652 142
Curtailment (gain)
loss (1,112) (116) 63
(Return) loss on
assets (38,165) 3,764 (13,888)
Other 26,340 (15,056) 3,031 (309)
Net expense
(income) $ (2,176) $ (332) $ 697 $2,034 $2,446 $2,986
-48-<PAGE>
ANNUAL REPORT PAGE 31 CONTINUED
Other Plans
Year Ended March 31 1996 1995 1994
(Thousands)
Multiemployer $2,157 $1,841 $2,512
Defined contribution 327 223 341
ACTUARIAL ASSUMPTIONS
Year Ended March 31 1996 1995 1994
Obligation discount 7.25% 8.5% 7.25%
Compensation increase 4.35 to 7.5 4.85 to 8.0 4.35 to 7.5
Asset long-term return 9.0 9.0 9.0
Health care cost trend rate 12.0 12.5 13.0
The accumulated medical and life plan obligation is attributable to: retirees -
68%; fully-eligible employees - 12%; other active employees - 20%. 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 $2,735,000 and the
annual expense by $280,000.
The fiscal 1996 increases in the actuarial present values of projected
benefits generally are attributable to the obligation discount rate decrease.
The pension plans' present value changes were offset by the greater than
projected returns on assets included in the $26,340,000 of other pension costs.
Most of the termination benefits and curtailment gains were included in the
fiscal 1994 plant closing cost provision.
SHAREHOLDERS' EQUITY
There are 1,498,000 shares of unreserved authorized preferred stock and
1,569,000 shares of common stock are reserved for the exercise of stock options.
3,500,000 shares of Second Series Junior Participating Preferred Stock ($1.00
par value, $2.00 liquidation preference to common stock, aggregate liquidation
payment of four times common stock payment, redeemable at the greater of $360 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 $.01 per right and expire in May 2006. 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 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 for $90
or, for $90, they may purchase
ANNUAL REPORT PAGE 32
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 $90, 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
-49-<PAGE>
ANNUAL REPORT PAGE 32 CONTINUED
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 2,000 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 September 1996 to December 2005. In fiscal 1994, 30,000
shares of common stock ($884,000 market value) were received in lieu of cash and
distributed on exercise of options for 42,000 shares and 12,000 additional
shares were issued with a $248,000 charge to retained earnings.
RETAINED EARNINGS COMPONENTS
March 31 1996 1995 1994
(Thousands)
Investment unrealized loss $ (809) $ (2,064) $ (1,241)
Pension minimum liability (1,064) (291) (1,007)
Currency translation (1,101) (912) (1,288)
Retained earnings 197,392 185,660 187,206
STOCK OPTIONS
Option Price
Shares Per Share
(Thousands of Shares)
Year Ended March 31, 1996
Granted 220 $20.00 - $24.375
Canceled 10 20.75 - 34.50
At year end:
Outstanding 1,158 18.25 - 45.375
Average 29.37
Exercisable 547 20.75 - 45.375
Available for grant 411
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
-50-<PAGE>
ANNUAL REPORT PAGE 32 CONTINUED
CONSOLIDATED SHAREHOLDERS' EQUITY
Capital in
Common Excess of Retained Treasury
Stock Par Value Earnings Stock Total
(Thousands)
Balance April 1, 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
Net income 16,670 16,670
Cash dividends declared -
$.40 per common share (4,938) (4,938)
Conversion of preferred
stock - 1 shares (20) 20
Investment unrealized gain 1,255 1,255
Pension minimum liability (773) (773)
Currency translation (189) (189)
Balance March 31, 1996 $6,285 $35,617 $194,418 $(5,365) $230,955
-51-<PAGE>
ANNUAL REPORT PAGE 33
INCOME TAXES
NET DEFERRED TAX ASSET COMPONENTS
March 31 1996 1995
(Thousands)
Retirement obligations $12,700 $14,140
Litigation 10,090
Engineering and construction contracts 5,980 5,350
Insurance 4,830 4,650
Discontinued operations 4,280
Warranties 2,240 2,900
Deferred compensation 1,530 1,660
Plant closings 1,450 3,690
Allowance for doubtful accounts 1,220 3,560
Miscellaneous 1,220 2,520
35,450 48,560
Valuation allowance (40) (380)
Depreciation and amortization (4,950) (6,440)
$30,460 $41,740
PROVISIONS
Year Ended March 31 1996 1995 1994
(Thousands)
Current federal $(2,540) $2,400 $ 8,310
Current state 330 200 1,340
Prior year state tax settlement (730)
(2,210) 1,870 9,650
Deferred federal 10,380 3,880 (12,210)
Deferred state 970 940 (910)
Deferred tax rate change (1,910)
11,350 4,820 (15,030)
$ 9,140 $6,690 $ (5,380)
TAX RATE RECONCILEMENT
Year Ended March 31 1996 1995 1994
Federal statutory rate 35.0% 35.0% (35.0)%
State income taxes, net
of federal tax benefit 4.0 4.3 (7.9)
Tax exempt investment income (2.2) (3.7) (9.4)
Deferred tax valuation allowance (1.3) (1.4) 4.7
Prior year state tax settlement (2.2)
Miscellaneous (.9) (1.4) .4
Effective rate 34.6% 30.6% (47.2)%
-52-<PAGE>
ANNUAL REPORT PAGE 33 CONTINUED
TAXES PAID
Year Ended March 31 1996 1995 1994
(Thousands)
$4,473 $3,525 $ 9,357
JOINT VENTURE
The Power Systems segment has a 50% joint venture interest in a contract to
construct a natural gas-fired combined-cycle power plant in Australia and is
providing engineering, construction management, and start-up services to the
venture. Venture financial data for the twelve months ended March 31, 1996 and
amounts included in the Company's fiscal 1996 consolidated financial statements
related to the venture are:
Joint Venture Data
(Thousands)
Revenues $ 74,273
Profit 884
Cash equivalents $ 2,894
Accounts receivable 13,439
Accounts payable (13,265)
Advance billings on contracts in progress (1,545)
Other assets and liabilities, net 191
Net assets $ 1,714
Consolidated Financial Statement Data
(Thousands)
Net sales $ 3,741
Accounts receivable 887
Advance billings on contracts in progress (430)
See Subsequent Event note.
ACQUISITIONS
The Water Control segment purchased a plumbing products business in fiscal
1996's third quarter. The fair value of the assets acquired and liabilities
assumed were $7,726,000 and $1,759,000, respectively. The business had fiscal
1995 sales of $14,204,000 and net income of $761,000. A plumbing products
product line was purchased in fiscal 1994.
-53-<PAGE>
ANNUAL REPORT PAGE 33 CONTINUED
DISCONTINUED OPERATIONS
The net sales and pretax income (loss) of the Lynx Golf and Mechanical Power
Transmission segments for the last three fiscal years and their net assets at
March 31, 1996 were:
1996 1995 1994
(Thousands)
Net sales $86,016 $67,948 $76,463
Income (loss) before income taxes 41 (8,465) (12,081)
Accounts receivable $24,224
Inventories 29,891
Property, plant, and equipment 16,537
Trade accounts payable (6,763)
Long-term obligations (2,411)
Other assets and liabilities, net (4,225)
Net assets $57,253
-54-
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
NEPCO of Fulton Heights, Inc. -C Illinois
NEPCO of Pakistan, Inc. -C Washington
Nuevo Camino Constructors Co. California
Operational Energy Corp. -C California
Pakistan Construction Services, Inc. Delaware
Sanitary-Dash Manufacturing Co., Inc. Delaware
Sharyn Steam, Inc. California
ZED Erection Services of Thailand, Inc. Delaware
Zurco, Inc. Delaware
Zurn (Cayman Islands), Inc. Delaware
Zurn Constructors, Inc. California
Zurn Export, Inc. U.S. Virgin Islands
Zurn Industries Limited Ontario, Canada
Zurn Industries (Thailand) Company Limited Thailand
Zurn Thailand of Delaware, Inc. Delaware
A-Subsidiary of Zurn Constructors, Inc.
B-Subsidiary of Lynx Golf, Inc.
C-Subsidiary of National Energy Production Corporation
-55-
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., in
Registration Statement on Form S-8 No. 333-00823 pertaining to the Zurn
Retirement Savings Plan, and in Registration Statement on Form S-8 No. 333-
00813 pertaining to the Zurn/NEPCO Retirement Savings Plan of our report dated
May 16, 1996, except for the Subsequent Event note, as to which the date is
June 27, 1996 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, 1996
-56-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
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<S> <C>
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<PERIOD-END> MAR-31-1996
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<SECURITIES> 13,836
<RECEIVABLES> 96,360
<ALLOWANCES> 2,647
<INVENTORY> 69,753
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<PP&E> 102,295
<DEPRECIATION> 60,241
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<INCOME-TAX> 9,140
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<TABLE> <S> <C>
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<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
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<S> <C> <C> <C>
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1996 MAR-31-1996
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<CASH> 11,282 5,348 13,507
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<DEPRECIATION> 89,630 91,345 92,468
<TOTAL-ASSETS> 417,395 417,051 411,467
<CURRENT-LIABILITIES> 141,547 138,227 130,506
<BONDS> 9,089 9,002 8,400
0 0 0
0 0 0
<COMMON> 6,285 6,285 6,285
<OTHER-SE> 216,754 219,858 222,314
<TOTAL-LIABILITY-AND-EQUITY> 417,395 417,051 411,467
<SALES> 94,476 103,267 110,087
<TOTAL-REVENUES> 0 0 0
<CGS> 73,767 78,784 86,103
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,084 1,133 974
<INCOME-PRETAX> 4,688 6,732 7,710
<INCOME-TAX> 1,930 2,620 2,930
<INCOME-CONTINUING> 2,758 4,112 4,780
<DISCONTINUED> 1,891 (37) (1,286)
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 4,649 4,075 3,494
<EPS-PRIMARY> .38 .33 .28
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE RESTATED STATEMENTS OF CONSOLIDATED
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YEAR ENDED MARCH 31, 1995 LISTED IN ITEM 14 OF THIS REPORT
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IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
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<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<FISCAL-YEAR-END> MAR-31-1995 MAR-31-1995 MAR-31-1995 MAR-31-1995
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<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<CASH> 4,011 12,402 12,070 6,360
<SECURITIES> 50,246 57,841 54,405 48,478
<RECEIVABLES> 137,333 115,101 107,889 119,611
<ALLOWANCES> 0 0 0 4,238
<INVENTORY> 80,158 80,835 81,008 84,264
<CURRENT-ASSETS> 319,763 314,688 302,636 298,379
<PP&E> 140,066 140,587 142,129 143,606
<DEPRECIATION> 83,494 84,649 85,845 87,444
<TOTAL-ASSETS> 435,873 429,782 418,173 414,696
<CURRENT-LIABILITIES> 159,805 155,361 145,249 142,844
<BONDS> 10,413 10,245 9,793 9,525
0 0 0 0
0 0 0 0
<COMMON> 6,285 6,285 6,285 6,285
<OTHER-SE> 214,325 212,281 210,637 212,645
<TOTAL-LIABILITY-AND-EQUITY> 435,873 429,782 418,173 414,696
<SALES> 97,788 97,131 101,291 395,233
<TOTAL-REVENUES> 0 0 0 0
<CGS> 79,021 75,315 81,126 64,517
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 927 1,032 947 3,859
<INCOME-PRETAX> 4,147 6,092 5,518 21,849
<INCOME-TAX> 1,340 2,030 1,825 6,690
<INCOME-CONTINUING> 2,807 4,062 3,693 15,159
<DISCONTINUED> (863) (1,590) (2,331) (5,835)
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 1,944 2,472 1,362 9,324
<EPS-PRIMARY> .16 .20 .11 .76
<EPS-DILUTED> 0 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE RESTATED STATEMENTS OF CONSOLIDATED
FINANCIAL POSITION AND CONSOLIDATED OPERATIONS FOR THE
YEAR ENDED MARCH 31, 1994 LISTED IN ITEM 14 OF THIS REPORT
ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> MAR-31-1994
<PERIOD-END> MAR-31-1994
<PERIOD-TYPE> YEAR
<CASH> 4,137
<SECURITIES> 61,296
<RECEIVABLES> 138,531
<ALLOWANCES> 6,203
<INVENTORY> 86,379
<CURRENT-ASSETS> 331,662
<PP&E> 138,781
<DEPRECIATION> 81,778
<TOTAL-ASSETS> 447,893
<CURRENT-LIABILITIES> 171,146
<BONDS> 10,972
0
0
<COMMON> 6,285
<OTHER-SE> 215,298
<TOTAL-LIABILITY-AND-EQUITY> 447,893
<SALES> 709,225
<TOTAL-REVENUES> 0
<CGS> 611,014
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,128
<INCOME-PRETAX> (11,389)
<INCOME-TAX> (5,380)
<INCOME-CONTINUING> (6,009)
<DISCONTINUED> (7,867)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,876)
<EPS-PRIMARY> (1.12)
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.1
FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
X Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the Fiscal Year Ended December 31, 1995
___ Transition Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the Transition Period From ___________ To __________
Commission File Number 1-5502
ZURN RETIREMENT SAVINGS PLAN
(Full title of the Plan)
ZURN INDUSTRIES, INC.
One Zurn Place, Erie, Pennsylvania 16505
(Name and address of issuer of securities held pursuant to the Plan)
-1-<PAGE>
Pension Committee
Zurn Industries, Inc.
Erie, Pennsylvania
We have audited the accompanying statements of net assets available for benefits
of the Zurn Retirement Savings Plan as of December 31, 1995 and 1994, and the
related statements of changes in net assets available for benefits for the years
then ended. These financial statements are the responsibility of the Plan's
administrator. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
administrator, 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 referred to above present fairly, in
all material respects, the net assets available for benefits of the Zurn
Retirement Savings Plan as of December 31, 1995 and 1994, and the changes in its
net assets available for benefits for the years then ended in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of expressing an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes at December 31, 1995 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Pashke Twargowski & Lee
Erie, Pennsylvania
June 21, 1996
-2-<PAGE>
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
ZURN RETIREMENT SAVINGS PLAN
December 31
1995 1994
ASSETS
Investments in T. Rowe Price Funds:
U.S. Treasury Money $2,608,541 $2,232,858
U.S. Treasury Intermediate 69,515 26,922
New Income 658,843 445,518
Balanced 223,059 58,186
Capital Appreciation 2,871,205 2,070,228
Equity Index 2,582,553 1,611,665
International Stock 424,092 306,343
OTC 205,270 84,488
9,643,078 6,836,208
Contributions receivable 24,080 30,369
Participants' loans 210,856 126,543
NET ASSETS AVAILABLE FOR BENEFITS $9,878,014 $6,993,120
See notes to financial statements.
-3-<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
ZURN RETIREMENT SAVINGS PLAN
Year Ended December 31, 1995
<CAPTION>
T. Rowe Price Funds
U.S. Treasury New Capital
Money Intermediate Income Balanced Appreciation
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income:
Dividends $ 125,150 $ 3,260 $ 36,488 $ 7,590 $ 224,572
Net appreciation in
value of investments 4,035 53,407 21,570 270,135
125,150 7,295 89,895 29,160 494,707
Participants' contributions 538,334 80,697 161,506 76,928 508,542
Participants' loan interest 2,972 1,006 577 1,036 3,788
TOTAL ADDITIONS 666,456 88,998 251,978 107,124 1,007,037
BENEFITS PAID TO PARTICIPANTS 275,850 764 52,008 3,998 128,003
NET ADDITIONS 390,606 88,234 199,970 103,126 879,034
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 2,232,858 26,922 445,518 58,186 2,070,228
Transfers (14,923) (45,641) 13,355 61,747 (78,057)
End of year $2,608,541 $ 69,515 $ 658,843 $ 223,059 $2,871,205
See notes to financial statements.
-4-
/TABLE
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS - Continued
ZURN RETIREMENT SAVINGS PLAN
Year Ended December 31, 1995
<CAPTION>
T. Rowe Price Funds
Equity International
Index Stock OTC Other Total
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income:
Dividends $ 99,425 $ 12,780 $ 23,671 $ 532,936
Net appreciation in
value of investments 553,875 25,783 14,782 943,587
653,300 38,563 38,453 1,476,523
Participants' contributions 444,790 120,500 53,309 $ (6,289) 1,978,317
Participants' loan interest 4,871 530 55 14,835
TOTAL ADDITIONS 1,102,961 159,593 91,817 (6,289) 3,469,675
BENEFITS PAID TO PARTICIPANTS 117,529 3,424 1,476 1,729 584,781
NET ADDITIONS (DEDUCTIONS) 985,432 156,169 90,341 (8,018) 2,884,894
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 1,611,665 306,343 84,488 156,912 6,993,120
Transfers (14,544) (38,420) 30,441 86,042
End of year $2,582,553 $ 424,092 $ 205,270 $ 234,936 $9,878,014
See notes to financial statements.
-5-
/TABLE
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
ZURN RETIREMENT SAVINGS PLAN
Year Ended December 31, 1994
<CAPTION>
T. Rowe Price Funds
U.S. Treasury New Capital
Money Intermediate Income Balanced Appreciation
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income (loss):
Dividends $ 70,445 $ 1,039 $ 29,592 $ 2,978 $ 163,988
Net (depreciation) in
value of investments (1,474) (37,461) (3,411) (96,013)
70,445 (435) (7,869) (433) 67,975
Participants' contributions 572,980 11,123 193,726 18,455 556,320
Participants' loan interest 1,488 473 1,822
TOTAL ADDITIONS 644,913 10,688 186,330 18,022 626,117
BENEFITS PAID TO PARTICIPANTS 160,548 7,719 2,499 80,112
NET ADDITIONS 484,365 10,688 178,611 15,523 546,005
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 1,893,688 364,646 1,596,947
Transfers (145,195) 16,234 (97,739) 42,663 (72,724)
End of year $2,232,858 $ 26,922 $ 445,518 $ 58,186 $2,070,228
See notes to financial statements.
-6-
/TABLE
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS - Continued
ZURN RETIREMENT SAVINGS PLAN
Year Ended December 31, 1994
<CAPTION>
T. Rowe Price Funds
Equity International
Index Stock OTC Other Total
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income (loss):
Dividends $ 59,665 $ 18,785 $ 8,722 $ 355,214
Net (depreciation) in
value of investments (41,456) (28,283) (8,332) (216,430)
18,209 (9,498) 390 138,784
Participants' contributions 447,897 72,005 26,142 $ (1,693) 1,896,955
Participants' loan interest 1,874 548 29 6,234
TOTAL ADDITIONS 467,980 63,055 26,561 (1,693) 2,041,973
BENEFITS PAID TO PARTICIPANTS 84,853 4,111 390 1,745 341,977
NET ADDITIONS (DEDUCTIONS) 383,127 58,944 26,171 (3,438) 1,699,996
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 1,332,328 105,515 5,293,124
Transfers (103,790) 247,399 58,317 54,835
End of year $1,611,665 $ 306,343 $ 84,488 $ 156,912 $6,993,120
See notes to financial statements.
-7-
/TABLE
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ZURN RETIREMENT SAVINGS PLAN
December 31, 1995
PLAN DESCRIPTION
The Zurn Retirement Savings Plan is a defined contribution plan providing
retirement benefits through participant-directed investments to participants
in the Zurn Industries Retirement Plan and Cosco Fire Protection Plan for
Salaried Employees. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
The Company has agreed to contribute participants' elective deferrals of up to
20% of eligible compensation. Participants also may contribute non-taxed
distributions from other employers' qualified plans and they may borrow from
their accounts subject to specified limitations.
Information about the Plan agreement and the benefit provisions is contained
in the "Summary Plan Description" which may be obtained from Zurn Industries,
Inc., the Plan Administrator.
SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Investments The investments are stated at market value as
determined by the funds.
Investment Transactions Investment transactions are recorded as of the date
the order to buy or sell is executed with realized gains and losses being
included in investment income as a component of the net appreciation
(depreciation) in the value of investments.
Participants' Loans Participants' loans are stated at the principal amount
due from the participants.
Dividends Dividend income is recognized on the ex-dividend date.
Expenses Administrative expenses are paid by the Plan Administrator.
INCOME TAX STATUS
The Internal Revenue Service has ruled that the Plan qualifies under Section
401(a) of the Internal Revenue Code and is, therefore, not subject to tax
under present income tax law. Once qualified, the Plan is required to operate
in conformity with the Code to maintain its qualification. The Plan
Administrator is not aware of any course of action or series of events that
might adversely affect the Plan's qualified status.
-8-<PAGE>
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
ZURN RETIREMENT SAVINGS PLAN
December 31, 1995
ASSETS OWNED AT YEAR-END
Cost Current Value
T. Rowe Price Funds:
U.S. Treasury Money $2,608,540 $2,608,541
U.S. Treasury Intermediate 67,037 69,515
New Income 635,976 658,843
Balanced 205,290 223,059
Capital Appreciation 2,623,516 2,871,205
Equity Index 2,008,677 2,582,553
International Stock 420,724 424,092
OTC 198,867 205,270
Participants' loans - 7% to 10% interest -0- 210,856
-9-<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Pension Committee of Zurn Industries, Inc. has duly caused this
annual report to be signed on its behalf by the undersigned thereunto duly
authorized.
ZURN RETIREMENT SAVINGS PLAN
(Plan)
June 21, 1996 /s/ James A. Zurn
James A. Zurn, Chairman
Pension Committee of
Zurn Industries, Inc.
-10-<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 No. 333-00823 pertaining to the Zurn Retirement Savings Plan of our
report dated June 21, 1996 with respect to the financial statements and
supplemental schedule included in the Annual Report on Form 11-K of the Zurn
Retirement Savings Plan.
/s/ Pashke Twargowski & Lee
Erie, Pennsylvania
June 21, 1996
-11-
EXHIBIT 99.2
FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
X Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the Fiscal Year Ended December 31, 1995
___ Transition Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the Transition Period From ___________ To __________
Commission File Number 1-5502
ZURN/NEPCO RETIREMENT SAVINGS PLAN
(Full title of the Plan)
ZURN INDUSTRIES, INC.
One Zurn Place, Erie, Pennsylvania 16505
(Name and address of issuer of securities held pursuant to the Plan)
-1-<PAGE>
Pension Committee
Zurn Industries, Inc.
Erie, Pennsylvania
We have audited the accompanying statements of net assets available for
benefits of the Zurn/NEPCO Retirement Savings Plan as of December 31, 1995 and
1994, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's administrator. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the administrator, 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 referred to above present fairly, in
all material respects, the net assets available for benefits of the Zurn/NEPCO
Retirement Savings Plan as of December 31, 1995 and 1994, and the changes in
its net assets available for benefits for the years then ended in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of expressing an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes at December 31, 1995, and loans or fixed income
obligations for the year then ended are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Pashke Twargowski & Lee
Erie, Pennsylvania
June 21, 1996
-2-<PAGE>
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
ZURN/NEPCO RETIREMENT SAVINGS PLAN
December 31
1995 1994
ASSETS
Investments in T. Rowe Price Funds:
U.S. Treasury Money $1,034,694 $ 960,357
U.S. Treasury Intermediate 29,088 14,646
New Income 329,704 219,579
Balanced 156,206 77,858
Capital Appreciation 2,549,859 1,757,743
Equity Index 2,019,045 1,226,294
International Stock 514,214 360,970
OTC 201,807 55,369
6,834,617 4,672,816
Participants' loans 373,881 221,555
Contributions receivable:
Participants' 41,905 38,184
Employers' 10,171 10,470
TOTAL ASSETS 7,260,574 4,943,025
FORFEITED EMPLOYERS' CONTRIBUTIONS 24,151 23,562
NET ASSETS AVAILABLE FOR BENEFITS $7,236,423 $4,919,463
See notes to financial statements.
-3-<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
ZURN/NEPCO RETIREMENT SAVINGS PLAN
Year Ended December 31, 1995
<CAPTION>
T. Rowe Price Funds
U.S. Treasury New Capital
Money Intermediate Income Balanced Appreciation
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income:
Dividends $ 52,207 $ 1,620 $ 19,015 $ 6,319 $ 199,497
Net appreciation in
value of investments 2,014 27,427 18,772 239,574
52,207 3,634 46,442 25,091 439,071
Contributions:
Participants' 194,690 14,071 94,624 53,638 468,247
Employers' 53,980 2,633 20,382 8,441 99,679
Participants' loan interest 4,004 27 533 583 5,991
TOTAL ADDITIONS 304,881 20,365 161,981 87,753 1,012,988
DEDUCTIONS
Benefits paid to participants 153,935 607 36,475 5,179 175,464
Forfeited employers' contributions 3,244 12 4,416 397 8,261
TOTAL DEDUCTIONS 157,179 619 40,891 5,576 183,725
NET ADDITIONS 147,702 19,746 121,090 82,177 829,263
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 960,357 14,646 219,579 77,858 1,757,743
Transfers (73,365) (5,304) (10,965) (3,829) (37,147)
End of year $1,034,694 $ 29,088 $ 329,704 $ 156,206 $2,549,859
See notes to financial statements.
-4-
/TABLE
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS - Continued
ZURN/NEPCO RETIREMENT SAVINGS PLAN
Year Ended December 31, 1995
<CAPTION>
T. Rowe Price Funds
Equity International
Index Stock OTC Other Total
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income:
Dividends $ 78,000 $ 15,496 $ 23,271 $ 395,425
Net appreciation in
value of investments 430,321 32,551 11,687 762,346
508,321 48,047 34,958 1,157,771
Contributions:
Participants' 348,541 164,940 69,919 $ 3,721 1,412,391
Employers' 71,042 33,642 11,256 (300) 300,755
Participants' loan interest 7,267 1,776 326 20,507
TOTAL ADDITIONS 935,171 248,405 116,459 3,421 2,891,424
DEDUCTIONS
Benefits paid to participants 141,596 13,080 7,141 15,613 549,090
Forfeited employers' contributions 4,052 2,569 1,834 589 25,374
TOTAL DEDUCTIONS 145,648 15,649 8,975 16,202 574,464
NET ADDITIONS (DEDUCTIONS) 789,523 232,756 107,484 (12,781) 2,316,960
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 1,226,294 360,970 55,369 246,647 4,919,463
Transfers 3,228 (79,512) 38,954 167,940
End of year $2,019,045 $ 514,214 $ 201,807 $ 401,806 $7,236,423
See notes to financial statements.
-5-
/TABLE
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
ZURN/NEPCO RETIREMENT SAVINGS PLAN
Year Ended December 31, 1994
<CAPTION>
T. Rowe Price Funds
U.S. Treasury New Capital
Money Intermediate Income Balanced Appreciation
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income (loss):
Dividends $ 32,619 $ 587 $ 16,328 $ 3,750 $ 139,112
Net (depreciation) in
value of investments (700) (21,794) (4,164) (80,215)
32,619 (113) (5,466) (414) 58,897
Contributions:
Participants' 228,335 2,486 98,460 15,795 414,694
Employers' 68,708 877 26,818 3,955 106,452
Participants' loan interest 2,147 391 233 3,725
TOTAL ADDITIONS 331,808 3,250 120,203 19,569 583,768
DEDUCTIONS
Benefits paid to participants 155,576 85 29,041 415 172,703
Forfeited employers' contributions 9,993 6,185 171 22,776
TOTAL DEDUCTIONS 165,569 85 35,226 586 195,479
NET ADDITIONS 166,239 3,165 84,977 18,983 388,289
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 906,824 256,413 1,424,286
Transfers (112,707) 11,481 (121,811) 58,875 (54,832)
End of year $ 960,357 $ 14,646 $ 219,579 $ 77,858 $1,757,743
See notes to financial statements.
-6-
/TABLE
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS - Continued
ZURN/NEPCO RETIREMENT SAVINGS PLAN
Year Ended December 31, 1994
<CAPTION>
T. Rowe Price Funds
Equity International
Index Stock OTC Other Total
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income (loss):
Dividends $ 45,759 $ 22,134 $ 5,716 $ 266,005
Net (depreciation) in
value of investments (33,620) (32,242) (5,426) (178,161)
12,139 (10,108) 290 87,844
Contributions:
Participants' 306,932 131,710 15,218 $ (19,558) 1,194,072
Employers' 78,827 28,297 4,138 1,768 319,840
Participants' loan interest 2,962 468 109 10,035
TOTAL ADDITIONS 400,860 150,367 19,755 (17,790) 1,611,791
DEDUCTIONS
Benefits paid to participants 125,159 13,566 219 11,216 507,980
Forfeited employers' contributions 16,414 3,290 55 4,063 62,947
TOTAL DEDUCTIONS 141,573 16,856 274 15,279 570,927
NET ADDITIONS (DEDUCTIONS) 259,287 133,511 19,481 (33,069) 1,040,864
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 1,126,505 164,571 3,878,599
Transfers (159,498) 227,459 35,888 115,145
End of year $1,226,294 $ 360,970 $ 55,369 $ 246,647 $4,919,463
See notes to financial statements.
-7-
/TABLE
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ZURN/NEPCO RETIREMENT SAVINGS PLAN
December 31, 1995
PLAN DESCRIPTION
The Zurn/NEPCO Retirement Savings Plan is a defined contribution plan
providing retirement benefits through participant-directed investments to
participants in the National Energy Production Corporation Pension Plan. It
is subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
The Company has agreed to contribute participants' elective deferrals of up to
18% of eligible compensation plus one-half of such amounts up to 2% of
eligible compensation. Participants also may contribute non-taxed
distributions from other employers' qualified plans and they may borrow from
their accounts subject to specified limitations.
Information about the Plan agreement and the benefit provisions is contained
in the "Summary Plan Description" which may be obtained from Zurn Industries,
Inc., the Plan Administrator.
SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Investments The investments are stated at market value as
determined by the funds.
Investment Transactions Investment transactions are recorded as of the date
the order to buy or sell is executed with realized gains and losses being
included in investment income as a component of the net appreciation
(depreciation) in the value of investments.
Participants' Loans Participants' loans are stated at the principal amount
due from the participants.
Dividends Dividend income is recognized on the ex-dividend date.
Expenses Administrative expenses are paid by the Plan Administrator.
INCOME TAX STATUS
The Internal Revenue Service has ruled that the Plan qualifies under Section
401(a) of the Internal Revenue Code and is, therefore, not subject to tax
under present income tax law. Once qualified, the Plan is required to operate
in conformity with the Code to maintain its qualification. The Plan
Administrator is not aware of any course of action or series of events that
might adversely affect the Plan's qualified status.
-8-<PAGE>
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
ZURN/NEPCO RETIREMENT SAVINGS PLAN
December 31, 1995
ASSETS OWNED AT YEAR-END
Cost Current Value
T. Rowe Price Funds:
U.S. Treasury Money $1,034,694 $1,034,694
U.S. Treasury Intermediate 28,138 29,088
New Income 318,360 329,704
Balanced 142,387 156,206
Capital Appreciation 2,357,438 2,549,859
Equity Index 1,586,559 2,019,045
International Stock 506,410 514,214
OTC 197,190 201,807
Participants' loans - 7% to 10% interest -0- 373,881
-9-<PAGE>
SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
ZURN/NEPCO RETIREMENT SAVINGS PLAN
Year Ended December 31, 1995
Amount Received
Original During The Year Unpaid Amount Overdue
Amount Principal Interest Balance Principal Interest
Kelly A. Perry $1,000 $-0- $-0- $-0- $1,000 $-0-
Route 2 Box 260 Participant loan - 9.5%
Madrid, NY 13660 Distributed to participant
-10- <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Pension Committee of Zurn Industries, Inc. has duly caused this
annual report to be signed on its behalf by the undersigned thereunto duly
authorized.
ZURN/NEPCO RETIREMENT SAVINGS PLAN
(Plan)
June 21, 1996 /s/ James A. Zurn
James A. Zurn, Chairman
Pension Committee of
Zurn Industries, Inc.
-11-<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 No. 333-00813 pertaining to the Zurn/NEPCO Retirement Savings Plan of
our report dated June 21, 1996 with respect to the financial statements and
supplemental schedules included in the Annual Report on Form 11-K of the
Zurn/NEPCO Retirement Savings Plan.
/s/ Pashke Twargowski & Lee
Erie, Pennsylvania
June 21, 1996
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