FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended December 31, 1995
___ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From ___________ To __________
Commission File Number 1-5502
ZURN INDUSTRIES, INC.
IRS Employer
State of Address and Identification
Incorporation Telephone Number Number
Pennsylvania One Zurn Place 25-1040754
Erie, Pennsylvania 16505
814-452-2111
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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
February 12, 1996 -- Common Stock, $.50 Par Value -- 12,341,309
-1-<PAGE>
PART I - FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL POSITION
(Thousands)
December 31, March 31,
1995 1995
Assets
Current assets
Cash and equivalents $ 13,507 $ 6,360
Marketable securities 16,225 48,478
Accounts receivable 105,204 115,373
Inventories
Finished products 60,715 47,608
Work in process 10,567 12,751
Raw materials and supplies 12,067 15,577
Contracts in process 24,784 8,328
108,133 84,264
Income taxes 34,656 38,751
Other current assets 6,096 5,153
Total current assets 283,821 298,379
Property, plant, and equipment 152,282 143,606
Less allowances for depreciation
and amortization 92,468 87,444
59,814 56,162
Investments 39,715 35,447
Other assets 28,117 24,708
$411,467 $414,696
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 44,327 $ 49,758
Other current liabilities 86,179 93,086
Total current liabilities 130,506 142,844
Long-term obligations 8,400 9,525
Retirement obligations 43,962 43,397
Shareholders' equity
Common stock 6,285 6,285
Other shareholders' equity 222,314 212,645
228,599 218,930
$411,467 $414,696
See notes to consolidated financial statements.
-2-<PAGE>
CONSOLIDATED OPERATIONS
(Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
December 31 December 31
1995 1994 1995 1994
Net sales $124,936 $114,531 $372,123 $341,085
Cost of sales 96,698 91,770 281,528 268,956
Marketing and administration 23,945 21,601 72,840 65,771
Interest income (920) (1,539) (2,649) (3,871)
Interest expense 1,013 999 3,331 3,060
Other income (1,534) (357) (2,965) (1,584)
Income before income taxes 5,734 2,057 20,038 8,753
Income taxes 2,240 695 7,820 2,975
Net income $ 3,494 $ 1,362 $ 12,218 $ 5,778
Earnings per share $.28 $.11 $.99 $.47
Average shares outstanding 12,416 12,331 12,382 12,360
Cash dividends declared
per common share $.10 $.22 $.30 $.66
See notes to consolidated financial statements.
-3-<PAGE>
CONSOLIDATED CASH FLOWS
(Thousands)
Nine Months Ended
December 31
1995 1994
Operations
Net income $ 12,218 $ 5,778
Operating assets and liabilities (22,132) 5,759
Depreciation and amortization 7,200 7,245
Miscellaneous (410) (638)
(3,124) 18,144
Investing
Marketable securities 32,493 8,578
Capital expenditures (9,757) (6,701)
Purchase of business (5,967)
Long-term investments 749 (1,257)
Sales of operations 376 382
Miscellaneous (350) 642
17,544 1,644
Financing
Dividends paid (5,181) (8,171)
Debt payments (2,092) (1,791)
Treasury stock purchased (1,926)
Stock options exercised 33
(7,273) (11,855)
Cash and equivalents
Increase 7,147 7,933
Beginning of year 6,360 4,137
End of period $ 13,507 $ 12,070
See notes to consolidated financial statements.
-4-<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the results for the interim
periods presented. The results of operations for the nine months ended
December 31, 1995 are not necessarily indicative of the results to be expected
for the full year.
Earnings per share are based on net income and the average shares of common
stock and dilutive stock options outstanding during the period.
The litigation against the Company in connection with a power plant
construction contract was settled without further impact on earnings as part
of an agreement for collaboration on future power generation projects with CMS
Generation Co. The settlement involved net cash payments of $10.5 million in
December 1995 and $11.5 million in January 1996.
At December 31, 1995, $18.8 million of letters of credit were outstanding
under the $75 million commitment from a group of banks for letters of credit
and revolving credit loans.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The liquid assets decline was attributable to the purchase of a Plumbing
Products business (assets acquired - $7.8 million; liabilities assumed - $1.8
million), a payment in connection with the litigation described in the notes
to consolidated financial statements, and capital expenditures. The accounts
receivable decline was primarily attributable to the collection of balances
due on Power Systems segment long-term contracts which were almost double the
accounts receivable increase from the Company's other construction businesses.
The production of new Black Cat irons by Lynx Golf and the Plumbing Products
acquisition accounted for the inventory increase while 57% of the increase in
contracts in progress was associated with Power Systems segment activities.
The greater level of capital expenditures and the increase in property, plant,
and equipment resulted from new and expanded facilities for Plumbing Products
and equipment additions by the water resource construction business.
-5-<PAGE>
Results of Operations
Sales by the Company's industry segments were as set forth below.
Three Months Ended Nine Months Ended
December 31 December 31
1995 1994 1995 1994
(Thousands)
Water Control $ 75,976 $ 55,176 $205,483 $177,957
Power Systems 33,688 45,841 101,088 117,533
Lynx Golf 5,140 4,109 34,140 17,015
Mechanical Power Transmission 9,709 9,131 30,153 27,860
Others 423 274 1,259 720
$124,936 $114,531 $372,123 $341,085
Third quarter and nine months sales by each of the Water Control segment
businesses were greater than the same period last year. The newly acquired
Plumbing Products business (fiscal 1995 sales - $14.2 million) contributed
$2.3 million while the remaining 10% increase in Plumbing Products sales for
the quarter was attributable to new products and increased market share and
prices. The Lynx Golf sales increase was attributable to the new irons
introduced in January 1995.
The greater gross profit margin percentage resulted primarily from cost
benefits derived from increased Lynx Golf volumes and, for the nine-month
period, the increase in Plumbing Products sales. Marketing and administration
expenses were up primarily as the result of commissions on the increased Lynx
Golf and Plumbing Products sales, higher employee costs, and the acquisition
of the Plumbing Products business.
Interest income last year included earnings recognized on long-term
receivables of the Power Systems segment. Interest associated with prior
years' income taxes on construction contracts increased last year's interest
income and this year's interest expense. Most of the other income increase
was derived from the Company's 50% equity in the earnings of a Power Systems
segment joint venture contact to construct a plant in Australia.
The higher effective income tax rate results from tax exempt investment income
being a less significant component of pretax income this year.
The Company's backlog of unfilled orders by industry segment was as follows:
December September December
1995 1995 1994
(Millions)
Water Control $111 $139 $124
Power Systems 72 95 86
Lynx Golf 9 5 13
Mechanical Power Transmission 13 12 9
$205 $251 $232
-6-<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Form 10-Q, Part II, Item 1 for the quarterly period ended June 30, 1995.
At the request of the litigants in connection with a settlement agreement, the
California Court of Appeal, Fourth Appellate District, entered orders on
January 29 and 30, 1996 reversing the judgments against the Company and its
subsidiary, National Energy Production Corporation, in connection with a cross
complaint filed in February 1991 by Imperial Resource Recovery Associates,
L.P., a California Limited Partnership, directing the Superior Court of
Imperial County California to vacate and set aside the judgments and dismiss
the causes with prejudice.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The exhibits listed in the Exhibit Index to this report on Form 10-Q 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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZURN INDUSTRIES, INC.
(Registrant)
February 14, 1996 /s/ Dennis Haines
Dennis Haines
General Counsel and Secretary
February 14, 1996 /s/ John E. Rutzler III
John E. Rutzler III
Vice President-Controller
-7-<PAGE>
EXHIBIT INDEX
3 Articles Of Incorporation And By-laws
Restated Articles of Incorporation with Amendments through Incorporated
August 7, 1987 filed as Exhibit 19A to Form 10-Q for the by reference
quarter ended September 30, 1987
By-laws as of 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 Incorporated
Articles of Incorporation with Amendments through by reference
August 7, 1987 filed as Exhibit 19A to Form 10-Q for the
quarter ended September 30, 1987
Description of Preferred Share Purchase Rights contained Incorporated
in the Form 8-A/A Registration Statement Amendment No. 1 by reference
dated June 27, 1995
10 Material Contracts
* 1986 Stock Option Plan filed as Exhibit 28A to Form S-8 Incorporated
Post-Effective Amendment No. 1 Registration Statement No. by reference
33-19103
* 1989 Directors Stock Option Plan filed as Exhibit 28 to Incorporated
Form S-8 Registration Statement No. 33-30383 by reference
* 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
-8-<PAGE>
* 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
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
10.13* Employment Agreement dated January 22, 1996 with R.R. Womack
* 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
10.14* Indemnity Agreement dated October 30, 1995 with M.K. Brown
-9-<PAGE>
* Irrevocable Trust Agreements for the Grantor's: 1982 Incorporated
Retirement Plan for Outside Directors of Zurn Industries, by reference
Inc.; 1986 Retirement Plan for Outside Directors of Zurn
Industries, Inc.; Deferred Compensation Plan for Non-
Employee Directors; Supplemental Executive Retirement
Plan for Zurn Industries, Inc.; Zurn Industries, Inc.
Supplemental Pension Plan for Participants in the
Deferred Compensation Plan for Salaried Employees;
Deferred Compensation Plan for Salaried Employees;
Optional Deferment Plan for Incentive Compensation Plan
Participants filed as Exhibit 19I to Form 10-Q for the
quarter ended September 30, 1986
* Second Irrevocable Trust Agreement for the Grantor's Incorporated
Indemnity Agreements filed as Exhibit 10A to Form 10-Q by reference
for the quarter ended December 31, 1988
* Incentive Compensation Plan filed as Exhibit 10.7 to Incorporated
Form 10-K for the year ended March 31, 1995 by reference
11 Statement Re Computation Of Per Share Earnings
Computation of Earnings Per Share
27 Financial Data Schedule SEC Edgar
Filing Only
* - Management contracts and compensatory plan arrangements.
-10-
EXHIBIT 10.13 - EMPLOYMENT AGREEMENT
January 22, 1996
Mr. Robert R. Womack
1333 South Shore Drive
Erie, PA 16505
Re: Employment Agreement
Dear Mr. Womack:
This letter sets forth the understanding between you and Zurn Industries,
Inc. ("Zurn") concerning your employment by Zurn as its Chief Executive
Officer ("CEO").
1. Base Salary. Effective as of November 1, 1995, your base annual
salary shall be $350,000.
2. Retirement Benefits. You shall participate in the Zurn Industries
Retirement Plan ("ZIRP"), the Zurn Retirement Savings Plan, and the
Supplemental Executive Retirement Plan of Zurn Industries, Inc. dated
October 1, 1981, as the same may be amended from time to time (the
latter plan being referred to herein as the "SERP") in accordance
with the provisions of such plans; provided, however, that
notwithstanding any term of the SERP to the contrary,
(a) Your SERP rights shall vest if you are employed as Zurn"s CEO
through October 17, 1998,
(b) SERP benefits shall begin on the later of your attaining age 65
and the date of your retirement,
(c) Cash and/or securities equal in value to the present value of
your accrued SERP benefit as determined by an independent
actuary selected by Zurn shall from time to time, but at least
annually, be deposited in a trust (provided, however, the trust
funds shall at all times be subject to claims of general
creditors of Zurn),
(d) Your aggregate benefit shall total 2 1/4% of the average of the
last three years of Compensation (as defined in the SERP) for
each year of service as CEO, consisting of the sum of your ZIRP
benefits, SERP benefits otherwise payable in accordance with
the terms of the SERP, and such additional amount as is
required to cause the total to equal the 2 1/4% benefit as
defined in this paragraph, and
-11-<PAGE>
Mr. Robert R. Womack
January 22, 1996
- -2-
(e) In the event of your death within five years following the
commencement of the payment of your SERP benefits, the benefit
otherwise payable to your surviving spouse in accordance with
the terms of the SERP shall not apply, and instead she shall be
paid 60% of your benefit for her life.
3. Death During Employment. In the event that you die while you are
employed as CEO, then in addition to such other benefits as may be
payable in accordance with the terms of Zurn"s benefit plans in which
you are a participant at the date of death, your salary shall be paid
to your surviving spouse for as long as she survives you, up to one
year.
4. Termination By Zurn Without Cause.
(a) In the event that you are terminated by Zurn without cause:
(i) Except as provided in subparagraph (c) below, you shall
receive one year"s salary, to be paid in twelve monthly
installments commencing with the month immediately
following the month in which notice of termination is
issued;
(ii) Your moving expenses to Princeton, New Jersey, or another
location of your choosing within the United States shall
be paid by Zurn; and
(iii) If said termination occurs prior to October 17, 1998, the
Stock Option Agreement Under 1991 Plan dated October 17,
1994 ("Initial Option Agreement"), by which you were
granted options for 75,000 shares of Zurn common stock,
shall be deemed to be modified to provide that the
options thereunder shall become exercisable on the date
of the notice of termination.
(b) As used herein, "cause" means dishonest, illegal, unethical, or
immoral action.
(c) The provision for payment of one year"s salary as provided in
subparagraph (a)(i) shall not apply in the event that a lump-
sum severance payment becomes payable under paragraph 4(iv)(B)
of the Agreement Relating to Employment dated October 17, 1994,
between you and Zurn ("Severance Agreement"), due to the
occurrence of a "change in control" as defined therein.
5. Surviving Agreements. Except as modified by the foregoing terms, the
following agreements are in force and effect in accordance with their
terms and survive the execution of this Agreement:
-12-<PAGE>
Mr. Robert R. Womack
January 22, 1996
- -3-
(a) Initial Option Agreement;
(b) Stock Option Agreement Under 1991 Plan dated December 5, 1995,
between you and Zurn; and
(c) Severance Agreement.
6. Entire Agreement. This Agreement supersedes all agreements, either
oral or written, existing prior to this date between you and Zurn.
You agree that you have not relied on any representation, warranty,
or promise not explicitly stated in this Agreement, that no oral
statement has been made to you that in any way tends to modify or
waive any of the terms and conditions of this Agreement, and that
this Agreement constitutes the final, complete, and exclusive written
expression of all of those terms. This Agreement may be amended,
waived, or modified only in a writing signed by the parties.
7. Notices. Every notice hereunder shall be in writing to the address
set forth in this section and shall be effective upon receipt.
If to Zurn: One Zurn Place
Erie, Pa. 16505
Att'n: Chairman, Management Development & Compensation
Committee, with copy to General Counsel & Secretary
If to you: 1333 South Shore Drive
Erie, PA 16505
8. Governing Law. This Agreement shall be construed by and governed in
accordance with the internal laws of the Commonwealth of Pennsylvania
(it being agreed by the parties that Pennsylvania choice-of-law rules
shall be deemed to have selected Pennsylvania law as governing).
9. Disputes. Any dispute hereunder, or otherwise arising between the
parties, shall be resolved first by non-binding mediation, then by
binding arbitration, both to be in accordance with the rules of the
CPR Institute for Dispute Resolution, and to be held in New York
City. In no event may an arbitrator award consequential, incidental,
or punitive damages.
10. Signatures. This Agreement may be executed in counterparts. A
party executing and FAXing a copy of the Agreement to the other party
shall be deemed to have delivered a legally binding instrument to the
other party.
-13-<PAGE>
Mr. Robert R. Womack
January 22, 1996
- -4-
11. Unenforceability. In the event that a provision of this Agreement is
held to be unenforceable or invalid by a court of competent
jurisdiction, the validity and enforceability of the remaining
provisions shall not be affected thereby, and the parties shall
negotiate an equitable adjustment to this Agreement with a view
toward effecting the purposes hereof.
12. Assignment. You acknowledge that your services are unique and
personal. Accordingly, you may not assign your rights or delegate
your duties under this Agreement. Zurn"s rights and obligations
under this Agreement shall inure to the benefit of, and shall be
binding upon, Zurn"s successors and assigns.
13. Headings. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.
If you are in agreement with the foregoing, please return a signed copy
of this letter to the Office of General Counsel & Secretary of Zurn.
Very truly yours,
ZURN INDUSTRIES, INC.
/s/ David W. Wallace
David W. Wallace, Chairman,
Management Development &
Compensation Committee
ACCEPTED AND AGREED:
__________________________________
Robert R. Womack
Date:_____________________________
-14-
EXHIBIT 10.14 - INDEMNITY AGREEMENT
Indemnity Agreement in the form of the attached entered into with the
following Indemnitee as of the date indicated:
M.K. Brown October 30, 1995
-15-<PAGE>
INDEMNITY AGREEMENT
This Agreement is made as of the ________ day of ________________, by and
between ZURN INDUSTRIES, INC., a Pennsylvania corporation (the
"Corporation"), and _____________________, ("Indemnitee"), a Director.
WHEREAS, it is essential to the Corporation to retain and attract as
Directors and Officers the most capable persons available, and
WHEREAS, the substantial increase in corporate litigation subjects
Directors and Officers to expensive litigation risks and Directors' and
Officers' liability insurance is expensive and contains many limitations,
deductibles, and exclusions, and
WHEREAS, it is now and has always been the express policy of the
Corporation to indemnify its Directors and Officers so as to provide them with
the maximum possible protection permitted by the Pennsylvania Business
Corporation Law (the "Law") and the Corporation's By-Laws, and
WHEREAS, the parties recognize the potential inadequacy of the protection
available under the Law, the Corporation's By-Laws, and by Directors' and
Officers' liability insurance, and
WHEREAS, such Law and By-Laws specifically provide that they are not
exclusive, and thereby contemplate that agreements may be entered into between
the Corporation and Directors and Officers with respect to indemnification of
such Directors and Officers, and
WHEREAS, in order to resolve such questions and thereby induce Directors
and Officers to serve in their respective capacities, the Corporation has
determined and agreed to enter into this Agreement with the Indemnitee.
NOW THEREFORE, in consideration of Indemnitee's continued service after
the date hereof, the Corporation and Indemnitee do hereby agree as follows:
1. Agreement to Serve.
Indemnitee agrees to serve as a Director or Officer (as applicable) of
the Corporation for so long as he is duly elected or appointed or until such
time as he tenders his resignation in writing.
2. Definitions.
As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought by or in
the right of the Corporation or otherwise and whether of a
civil, criminal, administrative or investigative nature, in
which Indemnitee may be or may have been involved as a party or
-16-<PAGE>
Indemnity Agreement
Page 2
otherwise, by reason of the fact that Indemnitee is or was a
Director or Officer of the Corporation, by reason of any action
taken by his or of any inaction on his part while acting as a
Director or Officer, or by reason of the fact that he is or was
serving at the request of the Corporation as a director,
officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise; in each
case whether or not he is acting or serving in any such
capacity at the time any liability or expense is incurred for
which indemnification or reimbursement can be provided under
this Agreement.
(b) The term "Expenses" shall include, without limitation, expenses
of investigations, judicial or administrative proceedings, or
appeals, judgments, fines and penalties, amounts paid in
settlement by or on behalf of Indemnitee, attorneys' fees and
disbursements, and any expenses of establishing a right to
indemnification under Paragraph 7.
3. Indemnity in Third-Party Proceedings.
The Corporation shall indemnify Indemnitee in accordance with the
provisions of this Paragraph 3 if Indemnitee is a party to or threatened to be
made a party to or otherwise involved in any Proceeding (other than a
Proceeding by or in the right of the Corporation) by reason of the fact that
Indemnitee is or was a Director or Officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, against all Expenses actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such Proceeding,
but only if Indemnitee acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation and,
in the case of a criminal proceeding, in addition, had no reasonable cause to
believe that his conduct was unlawful. The termination of any such Proceeding
by judgment, order of court, settlement, conviction, or upon a plea of nolo
contendere, or its equivalent, shall not, of itself, create a presumption that
Indemnitee did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any criminal proceeding, that such person had reasonable cause
to believe that his conduct was unlawful.
4. Indemnity in Proceedings by or in the Right of the Corporation.
(a) In the event the Corporation has purchased and has in effect
policies of Directors' and Officers' liability insurance at the
time of request by Indemnitee for indemnification thereunder,
the Corporation shall, subject to the provisions of Paragraph
4(c), indemnify Indemnitee as follows: if Indemnitee is a party
to or threatened to be made a party to any Proceeding by or in
-17-<PAGE>
Indemnity Agreement
Page 3
the right of the Corporation by reason of the fact that
Indemnitee is or was a Director or Officer of the Corporation,
or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against
all Expenses actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such Proceeding,
but only if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best
interests of the Corporation.
(b) In the event the Corporation is not covered by policies of
Directors' and Officers' Liability insurance which are
applicable to the indemnification claim being made by
Indemnitee for indemnification thereunder, the Corporation
shall, subject to the provisions of Paragraph 4(c), indemnify
Indemnitee as follows: 1) to the fullest extent of the coverage
provided for the benefit of Directors and Officers in the case
of a Proceeding by or in the right of the Corporation pursuant
to the policy of insurance in effect on the date of this
Agreement; 2) if Indemnitee is a party to or threatened to be
made a party to any Proceeding by or in the right of the
Corporation by reason of the fact that Indemnitee is or was a
Director or Officer of the Corporation, or is or was serving at
the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against all Expenses
actually and reasonably incurred by Indemnitee in connection
with the defense or settlement of such Proceeding, but only if
he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
Corporation; and 3) to the fullest extent as may be provided to
Indemnitee by the Corporation under the Agreement, the By-Laws
of the Corporation, and the Law. The foregoing provisions shall
be taken cumulatively and construed as being consistent with
one another.
(c) No indemnification for Expenses shall be made under Paragraphs
4(a) and 4(b):
(1) in respect to remuneration paid to Indemnitee if it shall
be determined by a final judgment or other final
adjudication that such remuneration was in violation of
law;
(2) on account of any suit in which judgment is rendered
against Indemnitee for an accounting of profits made from
the purchase or sale by Indemnitee of securities of
Corporation pursuant to the provisions of Section 16(b)
-18-<PAGE>
Indemnity Agreement
Page 4
of the Securities Exchange Act of 1934 and amendments
thereto or similar provisions of any federal, state, or
local law;
(3) on account of Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent, deliberately
dishonest, or willful misconduct;
(4) if a final decision by a Court having jurisdiction in the
matter shall determine that such indemnification is not
lawful.
5. Indemnification of Expenses of Successful Party.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding or in defense of any claim, issue, or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.
6. Advances of Expenses.
Expenses incurred by the Indemnitee pursuant to Paragraphs 3 and
4 shall be paid by the Corporation in advance upon the written request
of the Indemnitee if Indemnitee shall undertake to repay such amount to the
extent that it is ultimately determined that Indemnitee is not entitled to
indemnification.
7. Right of Indemnitee to Indemnification Upon Application.
Any indemnification under Paragraphs 3 and 4 shall be made no later than
45 days after receipt by the Corporation of the written request of Indemnitee,
unless a determination is made within said 45-day period by (1) the Board of
Directors by a majority vote of a quorum consisting of directors who are not
parties to such Proceeding or (2) independent legal counsel, which counsel
shall be appointed if the quorum of the Board of Directors specified in
Paragraph 7(1) is not obtainable, in a written opinion that the Indemnitee has
not met the relevant standards for indemnification set forth in Paragraphs 3
and 4.
The right to indemnification or advances as provided by this Agreement
shall be enforceable by Indemnitee in any court of competent jurisdiction. The
burden of proving that indemnification is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors or independent legal counsel) to have made a determination prior to
the commencement of such action that indemnification is proper in the
circumstances because Indemnitee has met the applicable standard of conduct,
nor an actual determination by the Corporation (including its Board of
Directors or independent legal counsel) that Indemnitee has not met such
-19-<PAGE>
Indemnity Agreement
Page 5
applicable standard of conduct, shall bar the action or create an irrefutable
presumption that Indemnitee has not met the applicable standard of conduct.
Indemnitee's expenses reasonably incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
Proceeding shall also be indemnified by the Corporation.
8. Indemnification Thereunder Not Exclusive.
The indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under the
Bylaws, any agreement, any vote of shareholders or disinterested Directors,
Law, or otherwise, both as to action in his official capacity and as to action
in any capacity while holding such office.
The indemnification under this Agreement shall continue as to Indemnitee
even though Indemnitee may have ceased to be a Director or Officer.
9. Partial Indemnification.
If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Corporation for a portion of the Expenses actually and
reasonably incurred by his in the investigation, defense, appeal, or
settlement of any Proceeding but not, however, for the total amount thereof,
the Corporation shall nevertheless indemnify Indemnitee for the portion of
such Expenses to which Indemnitee is entitled.
The Corporation shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. The Corporation shall not settle any action or
claim in any manner which would impose any penalty or limitation on Indemnitee
without Indemnitee's written consent. Neither the Corporation nor the
Indemnitee will unreasonably withhold their consent to any proposed
settlement.
10. Saving Clause.
If this Agreement or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, the Corporation shall
nevertheless indemnify Indemnitee as to Expenses with respect to any
Proceeding to the full extent permitted by any applicable portion of this
Agreement that shall not have been invalidated or by any other applicable law.
11. Notice.
Indemnitee shall, as a condition precedent to his right to be indemnified
under this Agreement, give to the Corporation notice in writing as soon as
practicable of any claim for which indemnification will or could be sought
under this Agreement. Notice to the Corporation shall be directed to Zurn
Industries, Inc., One Zurn Place, P.O. Box 2000, Erie, PA 16514-2000,
-20-<PAGE>
Indemnity Agreement
Page 6
Attention: President (or such other address as the Corporation shall designate
in writing to Indemnitee). Notice shall be deemed received three days after
the date postmarked if sent by prepaid mail properly addressed. In addition,
Indemnitee shall give the Corporation such information and cooperation as it
may reasonably require.
12. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall constitute the original.
13. Applicable Law.
This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
14. Successors and Assigns.
This Agreement shall be binding upon the Indemnitee and upon the
Corporation, its successors and assigns, and shall inure to the benefit of the
Indemnitee's heirs, personal representatives, and assigns and to the benefit
of Corporation, its successors and assigns.
IN WITNESS WHEREOF, the parties thereby have caused this Agreement to be
duly executed and signed as of the day and year first above written.
ZURN INDUSTRIES, INC.
By:
Chairman, Management Development
and Compensation Committee
INDEMNITEE:
This Agreement was approved by stockholders of Zurn Industries, Inc. at the
Annual Meeting on August 1, 1986.
-21-
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
December 31 December 31
1995 1994 1995 1994
Primary Earnings Per Share
Net income $3,494 $ 1,362 $12,218 $ 5,778
Preferred stock dividends 1 2 2
$3,493 $ 1,362 $12,216 $ 5,776
Shares outstanding
Weighted average common shares 12,341 12,331 12,341 12,359
Net common shares issuable on
exercise of stock options 75 41 1
Average common shares outstanding
as adjusted 12,416 12,331 12,382 12,360
Primary earnings per share $.28 $.11 $.99 $.47
Fully Diluted Earnings Per Share
Net income $ 3,494 $ 1,362 $12,218 $ 5,778
Interest on convertible debentures,
net of applicable income taxes (7) 8
$ 3,494 $ 1,355 $12,218 $ 5,786
Shares outstanding
Average common shares as adjusted
for primary computation 12,416 12,331 12,382 12,360
Common shares issuable if the
preferred stock and convertible
debentures were converted at
the beginning of the year 5 22 5 41
Additional common shares issuable
on exercise of stock options 16 1
Average common shares outstanding
as adjusted 12,421 12,353 12,403 12,402
Fully diluted earnings per share $.28 $.11 $.99 $.47
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE STATEMENTS OF CONSOLIDATED FINANCIAL
POSITION AND CONSOLIDATED OPERATIONS INCLUDED IN PART I OF
THIS REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<PERIOD-TYPE> 9-MOS
<CASH> 13,507
<SECURITIES> 16,225
<RECEIVABLES> 105,204
<ALLOWANCES> 0
<INVENTORY> 108,133
<CURRENT-ASSETS> 283,821
<PP&E> 152,282
<DEPRECIATION> 92,468
<TOTAL-ASSETS> 411,467
<CURRENT-LIABILITIES> 130,506
<BONDS> 8,400
0
0
<COMMON> 6,285
<OTHER-SE> 222,314
<TOTAL-LIABILITY-AND-EQUITY> 411,467
<SALES> 372,123
<TOTAL-REVENUES> 0
<CGS> 281,528
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,331
<INCOME-PRETAX> 20,038
<INCOME-TAX> 7,820
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,218
<EPS-PRIMARY> .99
<EPS-DILUTED> 0
</TABLE>
