BRENCO INC, 10-K/A, 1995-03-22

BRENCO INC
10-K/A, 1995-03-22
BALL & ROLLER BEARINGS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A
Amendment No. 1

(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
for the fiscal year ended December 31, 1993

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

Commission File Number 0-6839

BRENCO, INCORPORATED

(Exact name of registrant as specified in its charter)

Virginia 54-0493835

(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

One Park West Circle
Midlothian, Virginia 23113

(Address of principal executive (Zip Code)
offices)

Registrant's telephone number, including area code (804) 732-0202

<PAGE>

Securities registered pursuant to Section 12(b) of the Act:

Name of Each Exchange on
Title of Each Class Which Registered

None None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $1 Par Value

(Title of Class)

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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No

<PAGE>
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]

As of February 25, 1994, there were 10,037,572 shares of common stock
outstanding and the aggregate market value of common stock of Brenco,
Incorporated held by nonaffiliates was approximately $75 million.

The undersigned registrant hereby amends Part IV, Item 14(a)(3) of its
Report on Form 10-K for the year ended December 31, 1993 to file in electronic
format exhibit numbers 3.2, 10.3, 10.5 and 13 which were previously filed in
hardcopy under cover of Form SE dated March 25, 1994. The exhibit index has been
amended to reflect that the foregoing exhibits are filed herewith. Pursuant to
Rule 12b-15 under the Securities Exchange Act of 1934, the complete text of Item
14 is included herein although the only portions of that Item amended by this
Amendment No. 1 are described above.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K:

(a) 1. Financial Statements:

The following statements are incorporated in Part II, Item 8 by
reference to the Brenco Annual Report to Shareholders (page references are to
page numbers in the Brenco Annual Report):

Page Number

Independent Auditor's Report 16

Consolidated Balance Sheets as of
December 31, 1993 and 1992 11

Consolidated Statements of Income for
the three years ended December 31, 1993,
1992 and 1991 9

Consolidated States of Shareholders' Equity
for the three years ended December 31, 1993,
1992 and 1991 10

Consolidated Statements of Cash Flows for the
three years ended December 31, 1993, 1992
and 1991 12

Notes to Consolidated Financial Statements 13-15

(a) 2. Financial Statement Schedules:

The following schedules are included in Part IV of this report:

Independent Auditor's Report on Financial Statement Schedules

2
<PAGE>
V. Property, Plant and Equipment for years ended December 31, 1993,
1992 and 1991

VI. Accumulated Depreciation and Amortization of Property, Plant and
Equipment for years ended December 31, 1993, 1992 and 1991.

VIII. Valuation and Qualifying Accounts for years ended December 31,
1993, 1992 and 1991.

Other schedules or information are omitted because of the absence of
conditions under which they are required or because the required information is
given in the financial statements or notes thereto.

(a) 3. Exhibits

3.1 Articles of Incorporation, as amended.
(incorporated herein by reference to Form SE dated March 27,
1991).

3.2 Bylaws, as amended.

4.1 Note Agreements dated as of September 1, 1992, providing for the
issuance in the aggregate of $10,000,000 7.50% Senior Notes due
May 1, 2002 (filed under cover of Form SE dated March 26, 1993).

10.1 Employment Agreement dated as of September 8, 1983, between the
Company and J. Craig Rice (filed under cover of Form SE dated
March 26, 1993).

10.2 Employment Agreement dated as of September 8, 1983, between the
Company and Jacob M. Feichtner (filed under cover of Form SE dated
March 26, 1993).

10.3 Employment Agreement dated as of September 8, 1983, between the
Company and Robert V. Lawrence.

10.4 1987 Restricted Stock Plan of the Company (incorporated herein by
reference to the Company's Proxy Statement for the 1987 Annual
Meeting of Stockholders dated March 13, 1987).

10.5 1988 Stock Option Plan of the Company, as amended.

13. Portions of the 1993 Annual Report to Shareholders which are
incorporated by reference into this Report on Form 10-K.

21. Subsidiaries of the registrant.

23. Consent of Independent Auditors.

Management Contracts and Compensatory Plans. Set forth below are the
management contracts or compensatory plans and arrangements required to be filed
as Exhibits to this Annual Report pursuant to Item 14(c) hereof, including their
location:

Employment Agreement dated as of September 8, 1983, between the Company
and J. Craig Rice - Exhibit 10.1 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992 (filed under cover of Form SE dated March 26,
1993).
3
<PAGE>
Employment Agreement dated as of September 8, 1983, between the Company
and Jacob M. Feichtner - Exhibit 10.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1992 (filed under cover of Form SE dated
March 26, 1993).

Employment Agreement dated as of September 8, 1983, between the Company
and Robert V. Lawrence - Exhibit 10.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993.

1987 Restricted Stock Plan of the Company - Exhibit A to the Company's
Proxy Statement for the 1987 Annual Meeting of Stockholders dated March 13,
1987.

1988 Stock Option Plan of the Company, as amended April 15, 1993 -
Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.

(b) Reports on Form 8-K

There were no reports on Form 8-K for the three months ended December
31, 1993.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 on
Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly
authorized.

BRENCO, INCORPORATED

March 22, 1995 BY: /s/ Jacob M. Feichtner
Jacob M. Feichtner
Executive Vice President
Secretary and Treasurer

<PAGE>
Exhibit 3.2

BYLAWS OF

BRENCO, INCORPORATED
(As Amended)

ARTICLE I

Shareholders

Section 1. Annual Meeting. A meeting of the shareholders

shall be held annually at the principal office of the Corporation,

or such other place within the State of Virginia as the Board of

Directors may determine, at 3:30 o'clock p.m., on the third

Thursday in April, for the purpose of electing directors, and for

the transaction of any other business authorized or required to be

transacted by the shareholders.

Section 2. Notice. Written notice of the date, time and

place of the meeting and, in the case of a special meeting (or if

required by law, the articles of incorporation or these bylaws),

the purpose or purposes for which the meeting is called shall be

given to each shareholder entitled to vote at the meeting. Such

notice shall be given either by personal delivery or by mail, by

or at the direction of the officer or persons calling the meeting,

not more than 60 days nor less than ten days before the date of

the meeting (except that such notice shall be given to each

shareholder, whether or not entitled to vote, not less than 25

days before a meeting called to act on an amendment to the

articles of incorporation, a plan of merger or share exchange, a

<PAGE>
proposed sale, lease, exchange or other disposition of all, or

substantially all, of the property of the Corporation other than

in the usual and regular course of business, or the dissolution of

the Corporation, which notice shall be accompanied by a copy of

the proposed amendment, plan of merger or share exchange,

agreement of sale or plan of dissolution, as the case may be).

Notice to a shareholder shall be deemed given when mailed postage

prepaid, correctly addressed, to the shareholder at his address as

shown in the current record of shareholders of the Corporation.

Section 3. Special Meetings. Except as otherwise

specifically provided by law, a special meeting of the

shareholders shall be held only upon the call of the Chairman of

the Board, the President or the Board of Directors.

Section 4. Quorum and Voting. A quorum at any meeting of

shareholders shall be a majority of the votes entitled to be cast,

represented in person or by proxy. If a quorum exists, action on

a matter is approved by a majority of the votes cast within the

voting group, unless a greater vote is required by law or the

articles of incorporation (except that in elections of directors,

those receiving the greatest number of votes shall be elected even

though less than a majority).

Section 5. Order of Business. The order of business at all

meetings of shareholders, unless changed by the meeting, shall be

as follows:

(1) Reading of Proof of Notice

(2) Appointment of Tellers

(3) Ascertained of Quorum
(A quorum being present)

(4) Reading of minutes of preceding
meeting and action thereon

6
<PAGE>

(5) Reports of Officers

(6) Reports of Committees

(7) Election of Directors

(8) Unfinished Business

(9) New Business

Section 6. Adjournments. A majority of the votes entitled

to be cast at any meeting, represented in person or by proxy, even

though less than a quorum, may adjourn the meeting to a fixed time

and place. If a meeting of the shareholders is adjourned to a

date more than 120 days after the date fixed for the original

meeting, notice of the adjourned meeting shall be given as in the

case of the original meeting. If a meeting is adjourned for less

than 120 days, no notice of the date, time or place of the

adjourned meeting or, in the case of a special meeting, the

purpose or purposes for which the meeting is called, need be given

other than by announcement at the meeting at which the adjournment

is taken, prior to such adjournment. If a quorum shall be present

at any adjourned meeting, any business may be transacted which

might have been transacted if a quorum had been present at the

meeting as originally called.

Section 7. Organization. The Chairman of the Board or, in

his absence, the President, shall call the meeting of the

shareholders to order and shall act as Chairman of the meeting.

The Chairman shall appointment tellers for the purpose of

ascertaining the representation, in person and by proxy, of stock

entitled to vote at said meeting and for the purpose of counting

<PAGE>

the votes when ballots are taken. All reports of the tellers

shall be filed with the Secretary of the meeting.

Section 8. Secretary. The Secretary of the Corporation, or

some person appointed by the Chairman, shall act as Secretary of

all meetings of the shareholders.

Section 9. Voting Entitlement of Shares. At all meetings of

the shareholders, shareholders shall be entitled to vote, either

in person or by proxy duly appointed by an instrument in writing,

subscribed by such shareholder or by his authorized attorney-in-

fact; at all meetings each shareholder shall have one vote for

each share of stock entitled under the provisions of the charter

to voting rights which may be registered in his name upon the

books of the Corporation on the day preceding that on which the

transfer books may be closed by order of the Board of Directors;

or on the day which may be designated by the Board of Directors as

the record date of determining the shareholders entitled to notice

of and to vote at such meeting.

ARTICLE II

Board of Directors

Section 1. Number. The business and affairs of the

Corporation shall be managed and controlled by a Board of

Directors, seven in number, which number may be altered from time

to time by amendment of these Bylaws.

Section 2. Term of Office. Each director shall serve for

the term of one year and until his successor shall have been duly

chosen and qualified, unless sooner removed.

<PAGE>

Section 3. Vacancies. Any vacancy in the Board of Directors

(including any vacancy resulting from an increase in the number of

directors) may be filled by the affirmative vote of a majority of

the remaining directors, even though less than a quorum, unless

sooner filled by the shareholders.

Section 4. Place of Meeting, Etc. The directors may hold

their meetings and may have an office at such place or places in

the State of Virginia, or outside the State of Virginia, as the

Board from time to time determine.

Section 5. First Meeting of the Board. Immediately

following the annual meeting of shareholders, the newly elected

directors shall meet for the purpose of organization, the election

of officers and the transaction of other business, and if a

majority of the directors be present at such place and time, no

prior notice of such meeting shall be required to be given to the

directors.

Section 6. Meetings. Regular meetings of the Board may be

held at such time or times as may be fixed by the directors and

special meetings shall be held whenever called by the directors or

the President or by any two of the directors for the time being in

office. Unless otherwise specified in the notice thereof, any and

all business may be transacted at a special meeting. The Board of

Directors may permit any or all directors to participate in a

meeting of the directors by, or conduct the meeting through the

use of, conference telephone or any other means of communication

by which all directors participating may simultaneously hear each

other during the meeting. A director participating in a meeting

<PAGE>

by such means shall be deemed to be present in person at the meet-

ing. When a meeting is so conducted, a written record shall be

made of the action taken at such meeting.

Section 7. Notice of Meetings. The Secretary shall give

notice to each director of all meetings, regular or special, by

mailing, telegraphing or telephoning the same at least two days

before the meeting. If every director shall be present at any

meeting, any business may be transacted without any previous

notice.

Section 8. Quorum. A majority of the directors shall

constitute a quorum for the transaction of business, but a

majority of those present at the time and place of any regular or

special meeting, although less than a quorum, may adjourn the same

from time to time, without further notice, until a quorum be had.

The act of the majority of the directors present at a meeting at

which a quorum is present shall be the act of the Board of

Directors.

Section 9. Order of Business. The Board of Directors may

from time to time determine the order of business at their

meetings. The usual order of business at such meeting shall be as

follows:

(1) Roll Call (a quorum being present)

(2) Reading of minutes of preceding
meeting and action thereon

(3) Reports of Officers

(4) Reports of Committees

(5) Unfinished Business

(6) New Business

<PAGE>
Section 10. Chairman. The Chairman of the Board, or, in his

absence, the Vice-Chairman of the Board, shall preside at all

meetings of the Board of Directors. In the absence of the

Chairman and Vice-Chairman, a Chairman, chosen by the directors

present, shall preside and the Chairman shall appoint a Secretary

for the meeting.

Section 11. Unanimous Consent in Lieu of Meeting. Any

action required by law or which may be taken at the meeting of the

directors, may be taken without a meeting, if a consent in

writing, setting forth the action so to be taken, shall be signed

before such action by all of the directors.

Section 12. Nomination of Director Candidates. The Board of

Directors or a committee appointed by the Board of Directors shall

select and recommend a slate of nominees to be voted on for

election as directors at each annual meeting. However, any

shareholder entitled to vote in the election of directors

generally may nominate one or more persons for election as

directors at a meeting, but only if written notice of such

shareholder's intent to make such nomination(s) has been given,

either by personal delivery or by United States mail, postage

prepaid, to the Secretary of the Corporation not later than (i)

with respect to an election to be held at annual meeting of

shareholders, ninety days prior to the anniversary date of the

immediately preceding annual meeting of shareholders and (ii) with

respect to an election to be held at a special meeting of

shareholders for the election of directors, the close of business

on the tenth day following the date on which notice of such

<PAGE>
meeting is first given to shareholders. Each such notice of a

shareholder's intention to make nomination(s) shall set forth:

(a) the name and address of the shareholder who intends to make

the nomination of the person(s) and of the person(s) to be

nominated; (b) a representation that the shareholder is the owner

of stock of the Corporation entitled to vote at such meeting and

intends to appear in person or by proxy at the meeting to nominate

the person(s) specified in the notice; (c) a description of all

arrangements or understandings between the shareholder and each

nominee for directors and any other person(s) (naming such

person(s)) pursuant to which the nomination(s) are to be made by

the shareholder; (d) such other information regarding such nominee

proposed by such shareholder as would be required to be included

in a proxy statement filed pursuant to the proxy rules of the

Securities and Exchange Commission, had the nominee been

nominated, or intended to be nominated, by the Board of Directors;

and (e) the written consent of each nominee to serve as a director

of the Corporation, if so elected. The presiding officer at any

meeting may refuse to acknowledge the nomination of any person not

made in compliance with the foregoing sentence.

Section 13. Resignation. A director may resign at any time

by delivering written notice to the Board of Directors, the

Chairman of the Board of Directors, the President or the

Secretary. A resignation shall be effective when delivered,

unless the notice specifies a later effective date.

Section 14. Removal. At a meeting of shareholders called

and noticed expressly for that purpose any director may be

<PAGE>

removed, with or without cause, if the number of votes cast to

remove him constitutes a majority of the votes entitled to be cast

at an election of directors.

ARTICLE III

Officers

Section 1. Executive Officers. The Executive Officers of

the Corporation shall be a Chairman of the Board of Directors, a

Chief Executive Officer, a President, one or more Vice Presidents,

a Secretary and a Treasurer, all of whom shall be elected annually

by the Board. The powers and duties of any officer, other than

the President and Secretary, may be exercised and performed by the

same person.

Section 2. Subordinate Officers. The Board may appoint such

other officers as it shall deem necessary, who shall have such

authority and shall perform such duties as, from time to time, may

be prescribed by the Board.

Section 3. Tenure of Officers; Removal. All officers and

agents shall be subject to removal at any time by the affirmative

vote of a majority of the whole Board. The Board may delegate the

power of removal of subordinate officers and agents to any

officer.

Section 4. Chairman of the Board. The Chairman of the Board

shall preside at all meetings of the shareholders and of the Board

of Directors, and may execute all authorized deeds, bonds,

contracts or other obligations in the name of the Corporation. He

<PAGE>

shall perform such other duties as from time to time may be

assigned to him by the Board.

Section 5. Vice-Chairman of the Board. The Vice-Chairman of

the Board, in the absence of the Chairman, shall preside at all

meetings of the directors and shareholders and shall perform such

other duties as from time to time may be assigned to him by the

Board.

Section 6. Chief Executive Officer. The Chief Executive

Officer of the Corporation shall, subject to the control of the

Board of Directors, in general supervise and control all of the

business and affairs of the Corporation. He may also execute all

bonds, deeds, contracts, or other obligations in the name of the

Corporation, and perform all other duties incident to his office

and such other duties as may be prescribed by the Board of

Directors from time to time.

Section 7. The President. The President shall direct the

operation of the Corporation, being responsible to the Chief

Executive Officer. He shall, in the absence or incapacity of the

Chief Executive Officer, perform all duties and functions of that

office. He may also execute all authorized deeds, bonds,

contracts or other obligations in the name of the Corporation, and

perform all other duties incident to his office.

Section 8. Vice Presidents. Each Vice-President shall have

the powers and duties incident to that office and shall have such

other powers and duties as may be prescribed from time to time by

the Chief Executive Officer or the President. In the event of the

absence or incapacity of the Chief Executive Officer and of the

14
<PAGE>

President, a Vice-President designated by the Board of Directors

shall perform such duties of the Chief Executive Officer and of

the President as the Board of Directors shall prescribe. Any

Vice-President may execute contracts in the name of the

Corporation.

Section 9. The Treasurer. The Treasurer shall have the

custody of all funds and securities of the Corporation; he shall

endorse, on behalf of the Corporation for collection, checks,

notes and other obligations, or delegate the said powers and cause

the same to be done, and shall cause the same and all monies of

the Corporation to be deposited to the credit of the Corporation

in such bank or banks, or depositories as the Board of Directors

may designate; he shall sign receipts and vouchers for payments

made to the Corporation, or cause the same to be done; jointly

with such other officer as may be designated by the Board, or

singly, if authorized by the Board, he shall sign checks made by

the Corporation and shall pay out and dispose of the same, under

the direction of the Board; he shall sign, with the President, or

such other person or persons as may be designated by the Board,

all bills of exchange and promissory notes of the Corporation, the

execution of which may have been authorized or approved by the

Board; he shall enter, or cause to be entered, regularly in books

of the Corporation to be kept for that purpose, full and accurate

accounts of all monies received and paid by him on account of the

Corporation, and whenever required by the Board, he shall render a

statement thereof; and he shall perform all duties incident to the

position of the Treasurer, subject to the control of the Board.

15
<PAGE>
Section 10. Treasurer's Bond. If and when required by the

Board, the Treasurer shall give a bond for the faithful discharge

of his duties in such sum as the Board may require.

Section 11. The Secretary. The Secretary shall keep the

minutes of all proceedings of the Board of Directors, and the

minutes of all meetings of the shareholders in books provided for

that purpose; he shall attend to the giving and serving of all

notices for the Corporation; he shall sign with the President, in

the name of the Corporation, all contracts authorized by the

Board; and when so ordered by the Board, or otherwise when

appropriate, shall affix the seal of the Corporation thereto; he

shall have charge of the stock certificate books and such other

books and papers as the Board may direct; he shall sign stock

certificates, have custody of the corporate seal, and, in general,

perform all the duties incident to the office of secretary,

subject to the control of the Board.

Section 12. Resignation. An officer may resign at any time

by delivering written notice to the Board of Directors, the

President or the Secretary. A resignation shall be effective when

delivered unless the notice specifies a later effective date.

Section 13. Proxies. Unless otherwise prescribed by the

Board of Directors, the Chairman of the Board of Directors or the

President may from time to time himself, by such proxy or proxies,

attorney or attorneys, agent or agents of the Corporation as he

shall designate in the name and on behalf of the Corporation, cast

the votes to which the Corporation may be entitled as a

shareholder or otherwise in any other corporation, at meetings, or

<PAGE>
consent in writing to any action by any such other corporation;

and he may instruct the individual or individuals so appointed as

to the manner of casting such votes or giving such consent, and

execute or cause to be executed on behalf of the Corporation such

written proxies, consents, waivers or other instruments as he may

deem necessary or desirable.

ARTICLE IV

Capital Stock

Section 1. Form and Execution of Certificates. The

certificates of shares of the capital stock of the Corporation

shall be in such form as shall be approved by the Board. The

certificates shall be signed by the President and the Secretary

and sealed with the seal of the Corporation or a facsimile

thereof.

Section 2. Certificates to be Entered. All certificates

shall be consecutively numbered, and the names of the owners, the

number of shares, and the date of issue, shall be entered in the

Corporation's books. The Corporation shall be entitled to treat

the holder of record of shares as the legal and equitable owner

thereof and accordingly shall not be bound to recognize any

equitable or other claim with respect thereto on the part of any

other person so far as the right to vote and to participate in

dividends is concerned.

Section 3. Old Certificates to be Cancelled. Except in case

of lost or destroyed certificates, and in that case, only after

the receipt of a satisfactory bond, no new certificate shall be

<PAGE>
issued until the former certificate for the shares represented

thereby shall be surrendered and cancelled.

Section 4. Transfer of Shares. Shares shall be transferred

only on the books of the Corporation by the holder thereof in

person or by his attorney, upon the surrender and cancellation of

certificates for a like number of shares.

Section 5. Regulation. The Board may make such rules and

regulations as it may deem expedient concerning the issue,

transfer and registration of certificates of stock of the

Corporation.

Section 6. Determination of Shareholders of Record. The

share transfer books may be closed by order of the Board of

Directors for not more than seventy days for the purpose of a

meeting of the shareholders or any adjournment thereof (or

entitled to receive any distribution or in order to make a

determination of the shareholders for any other purpose). In lieu

of closing such books, the Board of Directors may fix in advance

as the record date for any such determination a date not more than

seventy days before the date on which such meeting is to be held

(or such distribution made or other action requiring such

determination is to be taken). If the books are not thus closed

or the record date is not thus fixed, the record date shall be the

close of business on the day before the effective date of the

notice to shareholders.

Section 7. Redemption of Certain Shares. In accordance with

the provisions of Section 13.1-728.7 of Article 14.1 of the

Virginia Stock Corporation Act, the Corporation may, but is not

<PAGE>
required to, redeem shares of its common stock which have been the

subject of a control share acquisition (as defined in that

Article) under the circumstances set forth in A and B of Section

13.1-728.7.

ARTICLE V

Seal

The Board shall provide a suitable seal, containing the name

of the Corporation, and the word "seal" or other appropriate

words, which seal shall be in the custody of the Secretary who

shall have to affix the seal to all corporate instruments

requiring such seal.

ARTICLE VI

Fiscal Year

The fiscal year of the Corporation shall begin on January 1

of each year and end on December 31 of the same year.

ARTICLE VII

Notice and Waiver of Notice

Section 1. Notice. Any notice to a shareholder or a

director shall be deemed given when mailed postage prepaid,

correctly addressed, to the shareholder at his address as shown in

the current record of the shareholders of the Corporation and to a

director at his address as it appears in the records of the

Corporation.

<PAGE>
Section 2. Waiver of Notice. Notice of any meeting of the

shareholders or the directors may be waived before or after the

date and time of the meeting in a writing signed by the

shareholder or the director entitled to notice and delivered to

the Secretary for inclusion in the minutes of the meeting or

filing with the corporate records.

A shareholder's attendance at a meeting waives objection to:

(i) lack of notice or defective notice of the meeting, unless at

the beginning of the meeting he objects to holding the meeting or

transacting business at the meeting; and (ii) consideration of a

particular matter at the meeting that is not within the purpose or

purposes described in the notice of the meeting, unless he objects

to considering the matter when it is presented.

A director's attendance at or participation in a meeting

waives any required notice to him of the meeting unless he at the

beginning of the meeting or promptly upon his arrival objects to

holding the meeting or transacting business at the meeting and

does not thereafter vote for or assent to the action taken at the

meeting.

ARTICLE IX

Amendments

Section 1. Directors May Amend Bylaws. The Board of

Directors shall have power to make, amend and repeal the Bylaws of

the Corporation by a vote of the majority of all of the directors

at any regular or special meeting of the Board.

<PAGE>
Section 2. Amendment by Shareholders. All Bylaws, howsoever

passed, shall be subject to amendment, alteration and repeal by

the shareholders entitled to vote at any annual meeting and at any

special meeting called for that purpose.

ARTICLE X

Committees

Section 1. Committees: There will be a Compensation

Committee, an Audit Committee and such other committees as the

Board of Directors may, from time to time, create for such

purposes and with such powers as the Board may determine.

Section 2. Compensation Committee. The Board of Directors

shall appoint from among its members a Compensation Committee

consisting of not less than three (3) nor more than five (5)

members (or such other number as the Board may appoint). Members

of the Compensation Committee shall not be officers or employees

of the Corporation or its subsidiaries ("Non-management Members")

other than the Chief Executive Officer who may, in the Board's

discretion, be appointed as a member of the Committee. The Board

shall appoint one member of the Committee as Chairman. The

Compensation Committee shall have and exercise the Board's full

authority with respect to (1) the establishment of cash

compensation (salary, bonuses and perquisites) for the executive

officers of the Corporation and for such other key employees as

may be recommended by the Chief Executive Officer and (2) the

administration of and oversight responsibilities for all employee

benefit plans, including without limitation the retirement plan,

<PAGE>
the supplemental pension plan, welfare benefit, medical and dental

plans, but excluding plans under which stock of the Corporation

may be awarded to executive officers ("Stock Incentive Plans").

The Committee shall review management's recommendation concerning

awards under the Stock Incentive Plans, but discretion with

respect to awards under such plans shall be reserved to and

exercised by the Board. It shall be the responsibility of the

Non-management Members to review and evaluate the goals and

performance of the Chief Executive Officer and his evaluation of

key executives. The Compensation Committee shall meet at least

twice a year, and otherwise upon the call of the Chairman, and

shall report at least once a year to the Board of Directors.

Section 3. Audit Committee. The Board of Directors shall

appoint from among its Non-management Members an Audit Committee

consisting of two (2) members (or such other number as the Board

may appoint). The Board shall appoint one member of the Committee

as Chairman. Management Members of the Board shall be counted for

the purpose of determining the presence of a quorum at meetings of

the Board of Directors at which the Audit Committee members are

appointed, but shall have no vote upon the membership of the Audit

Committee.

The Audit Committee shall meet each year (i) preceding

the selection of the external auditors to perform the annual

audit, (ii) at least once after these auditors have been selected

and before the audit begins or during the early stages of the

audit, and (iii) at least once after the report of the external

auditors is received. Other meetings may be held as necessary or

<PAGE>
convenient. A quorum for any meeting of the Audit Committee shall

be any two members, but there shall be an attempt to have all

members present at each meeting.

The Audit Committee shall report to the Board of

Directors at least once each year, recommending any appropriate

change in operating or accounting practice or in the auditors of

the Corporation and disclosing any acts or practices that are or

may be illegal or contrary to the interests of the Corporation or

to which the attention of the Board should be called for other

reasons, and focusing particularly on the integrity and adequacy

of disclosure of financial information relating to the Corporation

and the identification of any problem areas relating thereto.

The Chairman of the Board of the Corporation may

designate an officer of the Corporation to serve as liaison

between the Audit Committee and the officers. The Audit Committee

or any one or two of its members may interview any employee,

agent, customer or former or potential customer, supplier or

former or potential supplier, auditor or former or potential

auditor, or any other person, or examine any document, at any time

and without offering any reasons so long as such action is in the

discharge of the responsibilities of the Audit Committee. No

officer or employee of the Corporation shall be present at such

interview or examination or seek to learn the substance or subject

of the inquiry, without the consent of the Audit Committee or the

member or members acting. The Audit Committee may consult at any

time with counsel regularly retained by the Corporation, and may

<PAGE>

after informing the Board of Directors consult with other counsel,

at the cost of the Corporation.

<PAGE>
Exhibit 10.3

September 8, 1983

Mr. Robert V. Lawrence
Director of Engineering
Brenco, Incorporated
Post Office Box 389
Petersburg, Virginia 23803

Dear Mr. Lawrence:

In recognition of your past service to Brenco,
Incorporated, and in consideration of your continued best efforts
on behalf of the Company, the Board of Directors has duly
authorized and approved the following modification in the general
compensation and benefits package provided to you. This
modification is effective as of the date hereof but is premised
upon the occurrence of a "change of control" of Brenco as
hereinafter defined.

As agreed upon by the Board of Directors, if you are
involuntarily transferred to another location or your present
duties are materially altered and you do not consent to said
transfer or alteration, or you are terminated or discharged from
your present position as Director of Engineering of Brenco, as a
result of or following a change in control of the Company, then
you shall be entitled to receive a severance allowance equal to
one year's salary payable in regular semi-monthly installments;
provided, however, that such severance allowance shall be due and
payable only if such transfer, alteration, or termination occurs
within one year of the effective date of the change in control of
Brenco. Notwithstanding the foregoing, no severance allowance
shall be payable hereunder if your duties are modified or
terminated because of death, retirement, just cause, disability or
for any reason other than one directly associated with a change in
control of the company.

For purposes of this letter, "change in control" means a
change in the composition of a majority of the Board of Directors
of Brenco as a result of a successful tender or exchange offer for
Brenco's common stock, the transfer or ownership of 28% or more of
Brenco's voting stock to any person or group of associated or
affiliated persons acting together, the merger or consolidation of
the company with another concern, or the sale of all or
substantially all of its assets.

Sincerely yours,

Charles L. Reed
Chairman, Board of Directors

<PAGE>
Exhibit 10.5

BRENCO, INCORPORATED
1988 STOCK OPTION PLAN
(As Amended)

1. Definitions. The following terms shall have the meanings
set forth in this Paragraph unless the context requires a different meaning:

1.1 "Agreement" means a written agreement (including any
amendment or supplement thereto) between Brenco and a Participant specifying the
terms and conditions of an Option or SAR granted to such Participant.

1.2 "Board" means the Board of Directors of Brenco.

1.3 "Code" means the Internal Revenue Code of 1986, as
amended.

1.4 "Committee" means a committee, consisting of not less
than three persons appointed by the Board to administer the Plan. No member of
the Committee shall be eligible to participate, and no person shall become a
member of the Committee if, within one year prior thereto, he shall have been
eligible to participate in the Plan or in any other plan of Brenco or any
Subsidiary entitling the participants therein to acquire Options or SARs of
Brenco. A majority of the members of the Committee shall constitute a quorum,
and all actions of the Committee shall be taken by a majority of those members
voting.

In the event that the Board chooses not to establish a
Committee to administer the Plan, the word "Committee" as used herein shall mean
the Board; provided, however, that any grants of awards under the Plan may be
made by the Board only if a majority of those acting are not eligible to
participate in the Plan or any other plan of Brenco or any Subsidiary entitling
the Participants therein to acquire Options or SARs of Brenco.

1.5 "Common Stock" means the Common Stock of Brenco.

1.6 "Brenco" means Brenco, Incorporated, a Virginia
Corporation.

1.7 "Fair Market Value" means, on any given date, the closing
sales price of Common Stock as quoted in the NASDAQ National Market System, on
the date in question if it is a trading date, or if not, on the first trading
day prior to such day. If the Common Stock is not quoted in the NASDAQ National
Market System, Fair Market Value shall mean the mean between the closing bid and
asked prices as reported by NASDAQ on the date in question if it is a trading
date, or if not, the first trading date prior to such day. If either such
valuation method is inapplicable for any reason, the Fair Market Value shall be
determined by the Committee using any reasonable method in good faith.

1.8 "Grant Date" means the date as of which an Option or SAR
is granted under the Plan.

<PAGE>

1.9 "Incentive Stock Option" means an Option that qualifies
as an Incentive Stock Option under Section 422A of the Code.

1.10 "Non Qualified Stock Option" means an Option which is not
an Incentive Stock Option.

1.11 "Option" means the right of the holder to purchase from
Brenco a stated number of shares of Common Stock at the price set forth in an
Agreement, which right shall be designated as either an Incentive Stock Option
or Non Qualified Stock Option.

1.12 "Participant" means an employee of Brenco or a
Subsidiary, including an employee who is a member of the Board, who satisfies
the requirements of Paragraph 3 and is selected by the Committee to receive an
Option.

1.13 "Plan" means Brenco, Incorporated 1988 Stock Option Plan.

1.14 "SAR" means a stock appreciation right (which may be
granted only in conjunction with an Option) that entitles the holder to receive,
with respect to each share of Common Stock encompassed by the exercise of such
SAR, the increase in the Fair Market Value of such shares to be payable in
shares of Common Stock, subject to such limitations in amounts as the
Committee may designate in the Agreement.

1.15 "Subsidiary" means any corporation at least 50% of the
total combined voting power of which is owned by Brenco, either directly or
through one or more of its Subsidiaries, within the meaning of Section 425(f) of
the Code and rules and regulations thereunder.

2. Purpose. The Plan is intended to aid Brenco and its
Subsidiaries in attracting and retaining key executive officers and management
personnel with exceptional ability by enabling such executive officers and
management personnel to acquire a proprietary interest in Brenco and to have an
additional incentive to promote its success, as well as to encourage them to
remain in the employ of Brenco or a Subsidiary.

3. Eligibility. Any executive officer or other key employee
of Brenco or one of its Subsidiaries is eligible to be granted one or more
Options or SARs if so employed at the time of such grant. Directors of Brenco
who are employees and are not members of the Committee are eligible for awards
under the Plan.

4. Shares Subject to Options or SARs. The maximum aggregate
number of shares of Common Stock with respect to which Options may be granted
under this Plan shall not exceed 1,100,000 shares, except as may be adjusted
pursuant to Paragraph 10. Upon the exercise of any Option or SAR, Brenco may
deliver to the Participant authorized but unissued shares of Common Stock. If
an Option is terminated, in whole or in part, for any reason other than its
exercise or the exercise of a related SAR, the number of shares of Common Stock
allocated to the Option or portion thereof may be reallocated to other Options
and SARs to be granted under this Plan. Shares which are subject to Options in
connection with which SARs also have been granted shall be counted only once in
applying the above aggregate share limitation.

<PAGE>

5. Administration. The Plan shall be administered by the
Committee which shall have all the powers necessary for such administration,
including without limitation, the power:

(a) To determine, consistent with the terms and conditions of
the Plan, annually or otherwise from time to time, in consultation with
management of Brenco, (i) which executive officers and key employees of Brenco
and its Subsidiaries shall be Participants to whom Options and SARs shall be
granted; (ii) the number of shares which may be purchased under each Option
or with respect to which SARs may be granted; (iii) the per share Option
exercise price; (iv) the duration of Options and SARs; (v) the time or times at
which each Option or SAR may be exercised and (vi) whether Options shall be
Incentive Stock Options or Nonqualified Stock Options;

(b) To interpret the Plan, to prescribe, amend and rescind
rules, regulations and guidelines relating to it, and to make all other
determinations necessary or advisable for its administration, all of which
decisions made or actions taken shall be binding and conclusive; and

The express grant in this Plan of any specific power to the
Committee shall not be construed as limiting any power or authority of the
Committee. No member of the Committee shall be liable for any act done in good
faith with respect to this Plan or any Agreement, Option or SAR.

6. Terms and Conditions of Options. All Options and SARs
granted by the Committee shall be evidenced by Agreements in such forms as the
Committee from time to time shall approve, subject to the following terms and
conditions:

(a) Each Agreement shall state whether the Option granted is
an Incentive Stock Option or Nonqualified Stock Option and shall state the
number of shares as to which the Option or SAR pertains.

(b) The Option exercise price shall in no case be less than
100% of the Fair Market Value of Common Stock on the Grant Date; provided,
however, that in the case of an Incentive Stock Option granted to an individual
who owns more than 10% of the combined voting power of all classes of stock of
Brenco or its Subsidiaries within the meaning of Section 422A(b) (6) of the Code
and the rules and regulations thereunder, the Option exercise price shall be at
least 110% of the Fair Market Value on the Grant Date.

(d) No Option shall be exercisable in whole or in part prior
to one (1) year from the Grant Date. Subject to the provisions of this
Paragraph 6(d) Options may be exercised as to all or, from time to time, as to
any part of the total number of shares as to which the right to purchase has
accrued, provided, however, that no Option may be exercised at any one time as
to less than 25 shares of Common Stock unless any smaller number of shares
represents the balance then currently exercisable in which case such balance may
be exercised without regard to any minimum share limitation.

28
<PAGE>

(e) No Option may be granted more than 10 years from the
effective date of the Plan.

(f) Each Option shall provide that it is not transferable by
the Participant otherwise than by will or the law of descent and distribution,
and shall be exercisable, during the Participant's lifetime, only by the
Participant.

(g) During the lifetime of a Participant hereunder, the
Option may be exercised only by him (or his guardian or other representative)
and then only if (i) on the exercise date, he has been in the employ of the
Brenco or one or more of its Subsidiaries, or a combination thereof,
continuously since the first date of his employment by Brenco or one of its
Subsidiaries or (ii) he has terminated his employment and such termination was
because of a permanent disability or retirement under a retirement benefit plan
of Brenco or of one of its Subsidiaries; provided, however, that in the case of
such total and permanent disability or retirement under a retirement benefit
plan of Brenco or one of its Subsidiaries, the Participant shall only be
entitled to exercise the Option to the extent exercisable by the Participant at
the date of termination of employment because of such permanent disability or
retirement.

If the employment of a Participant terminates by death while in
the employ of Brenco or a Subsidiary, or if the employment of a Participant
terminates because of permanent disability or retirement under a retirement
benefit plan of Brenco or a Subsidiary and the Participant dies thereafter, then
within one (1) year after his death his Option may be exercised to the extent
that he was entitled to exercise it on the date of his termination from
employment by reason of death, permanent disability or retirement, by the person
or persons to whom the Participant's rights under his Option shall pass by will
or by applicable law, of if no other person has such right, then by his legal
representative, subject, however, to the condition that no Option shall be
exercisable after the expiration of five (5) years from the Grant Date. Except
as provided in this subparagraph 6(g) above, no Option may be exercised after
termination of employment.

(h) During the 20-day period beginning on a "Transaction
Date" as defined below, a Participant may elect to surrender to Brenco for
cancellation, without regard to the exercise date thereof, all or any portion of
an Option which shall have been granted at least six months previously and to
receive in exchange therefor, in whole shares of Common Stock, an amount
equivalent to the difference between the Option exercise price and the Fair
Market Value of the shares, as hereinafter defined, covered by the portion of
the Option surrendered; provided that no fractional shares or cash in lieu of
any such fractional shares shall be paid. For purposes of the preceding
sentence, the "Fair Market Value" of a share of Common Stock shall be deemed to
be the cash offered for a share of Common Stock in a tender offer, or the value
determined by the Committee in its discretion, of the securities (or combination
of cash and securities) to be delivered for a share of Common Stock to be
acquired in an exchange offer or to be converted in a merger, in each case as of
the Transaction Date. For purposes of this subparagraph (h), a "Transaction
Date" shall mean the date on which an offeror other than Brenco shall first
publicly offer to acquire shares of Common Stock pursuant to a tender offer or
exchange offer or the date of mailing the proxy materials to the shareholders

<PAGE>
concerning the approval of a merger or other reorganization which shall result
in Common Stock being converted into cash or securities of another corporation.
This right shall be exercised only during the 20-day period beginning on the
Transaction Date in accordance with the other terms and conditions imposed on
exercise of Options by Paragraph 8 hereof.

7. Limitations on Incentive Stock Options. Notwithstanding
the provisions of Paragraph 6, the aggregate Fair Market Value (determined at
the time the Incentive Stock Options are granted) of the Common Stock with
respect to which Incentive Stock Options granted under the Plan are exercisable
for the first time by the Participant during any calendar year may not exceed
$100,000 or such lesser or greater amount as shall be specified in Section 422A
of the Code and the rules and regulations thereunder. Incentive Stock Options
granted after December 31, 1987 under this Plan and under all plans of Brenco
and any of its Subsidiaries shall be aggregated for purposes of this limitation.

8. Exercise of Options. An Option may be exercised in whole
or in part by delivery to Brenco, at the office of its Secretary at Petersburg,
Virginia, of written notice of the exercise identifying the Option and stating
the number of shares with respect to which it is being exercised, in such form
as the Committee may prescribe, accompanied by payment for the Common Stock with
respect to which the Option is exercised. Payment of the purchase price may be
made in cash or, with the consent of the Committee, by delivery of shares of
Common Stock owned by Participant valued at Fair Market Value on the date of
exercise of the Option, or, with the consent of the Committee, a combination
thereof.

9. Stock Appreciation Rights. The Committee may grant SARs
in connection with any Option (whether granted before or concurrently with the
SAR) with respect to the number of shares subject to the Option or any lesser
number of shares. The Committee shall determine from among those eligible, the
persons to whom, and the time or times at which, SARs should be granted and the
number of shares which should be subject to SARs.

Each SAR granted under the Plan shall be evidenced by an
Agreement specifying the number of shares subject thereto and such terms and
conditions consistent with the Plan as the Committee shall determine.

SARs shall expire no later than the expiration of the related
Option; shall be transferable only when and under the same conditions as the
related Option is transferable; shall be exercisable only when the related
Option is eligible to be exercised; and may not be exercised unless the Fair
Market Value of the Common Stock subject to the related Option exceeds the
exercise price of the Option. In no event shall any SAR be exercisable for
cash.

A SAR may be exercised in whole or in part upon the delivery to
Brenco of written notice of the exercise in such form as the Committee may
prescribe.

Upon the exercise of a SAR, the holder shall be entitled to the
amount by which the date of exercise Fair Market Value of the number of shares
of Common Stock as to which the SAR was exercised exceeds the exercise price of
the related Option for that number of shares.

<PAGE>
Payment to the holder shall be made in whole shares of Common
Stock, valued at Fair Market Value on the date of exercise, provided that no
fractional shares or cash in lieu of any such fractional share shall be paid.
The Committee shall not consent to any election for settlement of SARs in cash
in the case of any Participant.

Upon the exercise of a SAR, the number of shares of Common
Stock subject to the related Option shall be reduced by the number of shares
with respect to which the SAR was exercised.

Upon the exercise of an Option, the number of shares of Common
Stock subject to the related SAR shall be reduced by the number by which the
number of shares with respect to which the Option was exercised exceeds any
difference between the number of shares subject to the Option immediately before
the exercise and the number of shares with respect to which the SAR was
exercisable immediately before the exercise.

10. Adjustment Upon Change in Common Stock. If Brenco
effects one or more stock dividends, stock splits, subdivisions or
consolidations of shares, or other similar changes in capitalization, the
maximum number of shares as to which Options and SARs may be granted under the
Plan shall be proportionately adjusted, and the Committee shall make equitable
adjustments in the number and option price of the shares which are or may become
the subject to Options then outstanding or thereafter granted.

Neither Options nor SARs shall be affected or caused to be
adjusted by the issuance by Brenco of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of Brenco convertible into such shares or other securities.

11. Compliance with Law and Approval of Regulatory
Authorities. No Option or SAR shall be exercisable, no Common Stock shall be
delivered, and no payment shall be made under this Plan except in compliance
with all applicable federal and state laws and regulations, including, without
limitation, securities laws, and withholding tax requirements. Brenco shall
have the right to rely on the advice of counsel as to such compliance. Any
certificates issued to evidence Common Stock for which an Option or SAR is
exercised may bear such legends and statements as the Committee may deem
advisable to assure compliance with Federal and state laws and regulations. No
Option or SAR shall be exercisable, no Common Stock shall be issued, no
certificate for shares shall be delivered, and no payment shall be made under
this Plan until Brenco has obtained such consent or approval as the Committee
may deem advisable from regulatory bodies having jurisdiction over such matters.

12. General Provisions. Neither the adoption of this Plan,
nor any documents describing or referring to this Plan (or any part thereof)
shall confer upon any employee any right to continue in the employ of Brenco or
a Subsidiary, or in any way affect any right and power of Brenco or a Subsidiary
to terminate the employment of any employee at any time with or without cause.
The establishment of the Plan does not confer upon any employee any legal or
equitable right against Brenco, any Subsidiary, or the Committee, except as
expressly provided in the Plan.

<PAGE>
Neither absence on leave, if approved by Brenco, nor any
transfer between the service of Brenco and that of a Subsidiary, or between
Subsidiaries, shall be considered a termination of employment.

An Optionee shall have no rights as a record shareholder with
respect to any shares covered by the Option until the date of the issuance of a
stock certificate for such shares.

This Plan shall be unfunded, and Brenco shall not be required
to segregate any assets that may at any time represent grants under the Plan.
No obligation of Brenco to any person with respect to any grant under this Plan
shall be deemed to be secured by any pledge of, or other encumbrance on, any
property of Brenco.

The interests of any Participant under the Plan are not subject
to the claims of creditors and may not, in any way, be assigned, alienated or
encumbered. No Option or SAR, nor any rights and privileges pertaining thereto,
shall be transferred, assigned, pledged, or hypothecated, by operation of law or
otherwise, except as otherwise provided herein, nor shall such Option or SAR be
subject to execution, attachment or similar process.

All money received by Brenco in payment upon the exercise of an
Option shall constitute part of its general funds, available for any corporate
purpose.

The provisions of the Plan are intended to comply with the
provisions of Rule 16b-3 under the Securities Exchange Act of 1934.

13. Amendment. The Board may amend or terminate this Plan
from time to time; provided, however, that no amendment may become effective
until shareholder approval is obtained if (i) except as provided in Paragraph
10, the amendment increases the aggregate number of shares that may be issued
pursuant to the exercise of Options or SARs, (ii) the amendment materially
modifies the requirements as to the eligibility for participation in the Plan;
or (iii) materially increases the benefits accruing to Participants.

Brenco, may, without approval of shareholders of the
Corporation, accept the surrender of, and cancel outstanding Options (to the
extent not therefore exercised) and, subject to the terms and conditions of the
Plan, grant new Options in substitution therefor at an Option exercise price in
conformity with the requirements of Paragraph 6(b), but which is lower than
provided for in the Options surrendered.

14. Effective Date and Duration of Plan. The effective date
of this Plan shall be April 21, 1988, but only if it is approved by the
affirmative vote of a majority of shares of Common Stock entitled to vote,
present or represented by proxy at the 1988 Annual Meeting of shareholders.
Unless sooner terminated by the Board, this Plan will terminate on April 20,
1988, except that Options and SARs granted prior to that date shall remain valid
in accordance with their terms.

Exhibit 13
Selected Quarterly Data
<CAPTION>
(In thousands, except per share amounts)

1993 Quarters
1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . $25,613 $27,427 $22,914 $22,770
Gross profit. . . . . . . . . . . . . . . . 5,723 6,067 4,929 4,754
Net income (loss) . . . . . . . . . . . . . 1,675 1,767 1,158 ( 359)
Net income (loss) per share . . . . . . . . .17 .18 .11 ( .04)

1992 Quarters
1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . $20,676 $20,334 $20,462 $22,180
Gross profit. . . . . . . . . . . . . . . . 3,361 3,457 2,977 4,646
Net income. . . . . . . . . . . . . . . . . 471 489 143 874
Net income per share. . . . . . . . . . . . .05 .05 .01 .09

Stock Prices (Wall Street Journal) 1993 1992
High Low High Low
<S> <C> <C> <C> <C>
1st Quarter . . . . . . . . . . . . . 8 3/4 6 7 7/8 5 1/2
2nd Quarter . . . . . . . . . . . . . 12 3/8 7 7/8 8 1/4 5 5/8
3rd Quarter . . . . . . . . . . . . . 15 11 5/8 7 1/8 5 3/8
4th Quarter . . . . . . . . . . . . . 12 1/2 9 1/4 6 5/8 5 1/2

Dividends Declared 1993 1992
<S> <C> <C>
1st Quarter . . . . . . . . . . . . . $ .05 $ .05
2nd Quarter . . . . . . . . . . . . . .05 .05
3rd Quarter . . . . . . . . . . . . . .05 .05
4th Quarter . . . . . . . . . . . . . .05 .05

<FN>
We have paid a cash quarterly dividend since
1952. The amount of future dividends is
dependent on future earnings, capital
requirements and the general financial
condition of the company.

</TABLE>
<PAGE>
<TABLE>

Consolidated Statements of Income

<CAPTION>
Years Ended December 31

1993 1992 1991
<S> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . $98,723,878 $83,652,308 $78,599,810

Costs and Expenses:
Cost of goods sold . . . . . . . . . . . 77,250,896 69,211,320 61,763,756
Administrative and selling expenses . . . 12,161,980 10,952,890 9,467,641
89,412,876 80,164,210 71,231,397
Operating Income. . . . . . . . . . . . . . 9,311,002 3,488,098 7,368,413
Other Income (Expense). . . . . . . . . . . ( 118,436) 26,496 185,619
Income before Income Taxes and Special
Charge for Environmental Expenditures . . 9,192,566 3,514,594 7,554,032
Special Charge for Environmental
Expenditures (Note 8) . . . . . . . . . . 2,300,000 300,000 300,000
Income before Income Taxes. . . . . . . . . 6,892,566 3,214,594 7,254,032
Income Taxes (Note 3) . . . . . . . . . . . 2,651,600 1,237,600 2,798,755

NET INCOME. . . . . . . . . . . . . . . . . $ 4,240,966 $ 1,976,994 $ 4,455,277
=========== =========== ===========
Net Income per Share . . . . . . . . . . . $ .43 $ .20 $ .46
=========== =========== ===========

Weighted Average Number of Shares
Outstanding . . . . . . . . . . . . . . . 9,941,909 9,841,396 9,738,587
=========== =========== ===========

<FN>
See Notes to Consolidated Financial Statements.

34
</TABLE>
<PAGE>
<TABLE>

Consolidated Statements of Shareholders' Equity

<CAPTION>
Additional
Common Stock, Issued Paid-In Retained
Shares Par Value Capital Earnings
<S> <C> <C> <C> <C>
Balance, December 31, 1990 . . . . 9,669,174 $ 9,669,174 $ -- $ 31,907,379
Net income . . . . . . . . . . . 4,455,277
Issuance under stock
option and stock
participation plans . . . . . 136,200 136,200 132,690 433,054
Reacquired shares . . . . . . . ( 5,622) ( 5,622) ( 32,779) --
Dividends declared
($.20 per share) . . . . . . ( 1,950,765)

Balance, December 31, 1991 . . . . 9,799,752 9,799,752 99,911 34,844,945
Net income . . . . . . . . . . . 1,976,994
Issuance under stock
option and stock
participation plans . . . . . 63,000 63,000 293,764 --
Reacquired shares . . . . . . . ( 2,388) ( 2,388) ( 14,637) --
Dividends declared
($.20 per share). . . . . . . ( 1,969,561)

Balance, December 31, 1992 . . . . 9,860,364 9,860,364 379,038 34,852,378
Net income . . . . . . . . . . . 4,240,966
Issuance under stock
option and stock
participation plans . . . . . 145,148 145,148 637,752 --
Reacquired shares . . . . . . . ( 167) ( 167) ( 1,815) --
Tax benefit from
disqualifying
disposition of
option shares . . . . . . . . 166,524
Dividends declared
($.20 per share) . . . . . . ( 1,991,080)

Balance, December 31, 1993 . . . . 10,005,345 $ 10,005,345 $ 1,181,499 $ 37,102,264
============ ============= =========== =============

<FN>
See Notes to Consolidated Financial Statements.

</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
<CAPTION>
December 31
ASSETS 1993 1992
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . $ 3,581,725 $ 6,218,063
Accounts receivable-net of allowance for doubtful
accounts of $258,597 (1992-$272,132) . . . . . . 14,565,163 12,854,405
Inventories:
Finished goods . . . . . . . . . . . . . . . . . 4,814,117 6,585,712
Work in process . . . . . . . . . . . . . . . . 9,436,818 9,316,205
Raw material . . . . . . . . . . . . . . . . . . 1,877,943 1,043,166
16,128,878 16,945,083
Less: Lifo reserve. . . . . . . . . . . . . . . 1,224,802 1,429,504
14,904,076 15,515,579
Prepaid expenses . . . . . . . . . . . . . . . . . 1,452,108 1,570,935
Deferred income taxes (Note 3). . . . . . . . . . . 1,902,385 1,831,631
Income taxes recoverable 667,549 196,110
TOTAL CURRENT ASSETS . . . . . . . . . . . . . 37,073,006 38,186,723
Other Assets - Investments at Cost. . . . . . . . . . 51,139
Property and Equipment:
Land and improvements . . . . . . . . . . . . . . . 2,770,098 2,636,080
Buildings . . . . . . . . . . . . . . . . . . . . . 11,387,143 11,266,284
Machinery and equipment . . . . . . . . . . . . . . 83,466,123 77,433,936
97,623,364 91,336,300
Less: Accumulated depreciation . . . . . . . . . . 64,945,797 64,448,695
32,677,567 26,887,605
$ 69,801,712 $ 65,074,328
LIABILITIES AND SHAREHOLDERS' EQUITY ============ ============
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . $ 3,413,897 $ 2,375,877
Dividends payable . . . . . . . . . . . . . . . . . 500,183 493,018
Pension . . . . . . . . . . . . . . . . . . . . . . 454,736 120,203
Compensated absences. . . . . . . . . . . . . . . . 615,956 552,181
Accrued liabilities . . . . . . . . . . . . . . . . 747,142 885,572
Income taxes payable 150,641
Environmental expenditures (Note 8) . . . . . . . . 2,883,734 3,195,600
TOTAL CURRENT LIABILITIES . . . . . . . . . . 8,766,289 7,622,451
Deferred Income Taxes (Note 3). . . . . . . . . . . . 2,746,315 2,360,097
Long-Term Debt (Note 5) . . . . . . . . . . . . . . . 10,000,000 10,000,000
Commitment and Contingencies (Note 8) . . . . . . . .
Shareholders' Equity:
Preferred stock, par value $1 per share, authorized
1,000,000 shares; none issued
Common stock, par value $1 per share, authorized
15,000,000 shares; issued 10,005,345 shares
(1992-9,860,364 shares) . . . . . . . . . . . . 10,005,345 9,860,364
Additional paid-in capital. . . . . . . . . . . . . 1,181,499 379,038
Retained earnings . . . . . . . . . . . . . . . . . 37,102,264 34,852,378
48,289,108 45,091,780
$ 69,801,712 $ 65,074,328
============ ============
<FN>
See Notes to Consolidated Financial Statements.

36
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements Of Cash Flows
<CAPTION>
Years Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Cash Flows From Operations:
Net Income. . . . . . . . . . . . . . . . $4,240,966 $ 1,976,994 $4,455,277
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation . . . . . . . . . . . . . 3,003,015 2,551,721 2,576,034
Reserve for environmental expenditures 2,300,000 295,600 300,000
Deferred income taxes . . . . . . . . 315,464 ( 21,223) ( 113,163)
Loss (gain) on sale of property and
equipment. . . . . . . . . . . . . . 11,835 ( 25,335)
Pension expense. . . . . . . . . . . . 334,533 219,159 262,504
Other. . . . . . . . . . . . . . . . . 72,218 13,638
Changes in the following:
Accounts receivable. . . . . . . . . . ( 1,710,758) ( 3,643,142) 234,881
Inventories. . . . . . . . . . . . . . 611,503 312,676 (2,263,853)
Prepaid expenses . . . . . . . . . . . 224,827 ( 116,648) 300,163
Accounts payable . . . . . . . . . . . 1,038,020 ( 36,052) ( 475,137)
Accrued liabilities. . . . . . . . . . ( 74,656) 667,701 ( 69,828)
Income taxes . . . . . . . . . . . . . ( 154,274) ( 211,663) ( 363,315)
Environmental expenditures . . . . . . ( 2,611,866)
Net cash provided by operations . . . . . 7,528,609 2,067,341 4,831,866

Cash Flows From Investing Activities:
Acquisition of property and equipment. ( 8,814,699) ( 5,532,962) (4,420,719)
Proceeds from the sale of property
and equipment. . . . . . . . . . . . 9,888 46,315 140,237
Other investments. . . . . . . . . . . ( 51,139)
Net cash (used in) investing activities . ( 8,855,950) ( 5,486,647) (4,280,482)

Cash Flows From Financing Activities:
Proceeds from long-term borrowing. . . 10,000,000
Cash dividends paid. . . . . . . . . . ( 1,983,915) ( 1,966,630) (1,944,136)
Re-purchase of common stock. . . . . . ( 1,982) ( 17,025) ( 13,401)
Proceeds from issuance of common stock 676,900 234,014 620,881
Net cash provided by (used in)
financing activities . . . . . . . . ( 1,308,997) 8,250,359 (1,336,656)
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . ( 2,636,338) 4,831,053 ( 785,272)
Cash and cash equivalents at beginning
of year . . . . . . . . . . . . . . . . . 6,218,063 1,387,010 2,172,282
Cash and cash equivalents at end of year. . $ 3,581,725 $6,218,063 $1,387,010
=========== ========== ==========
Supplemental Disclosures Of Cash Flow
Information:
Cash payments for income taxes. . . . . . $ 2,418,024 $1,470,486 $2,778,440
=========== ========== ==========
Cash payments for interest. . . . . . . . $ 750,000 $ 95,608
=========== ==========

<FN>
See Notes to Consolidated Financial Statements.

<PAGE>
<FN>
Notes to Consolidated Financial Statements

Note 1.
Significant Accounting Policies
The company's operations are primarily in the bearing and forging industries.
Significant accounting policies follow:
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of all
subsidiaries. All significant intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents:
For purposes of reporting cash flows, the company considers all commercial paper with
a purchased maturity of three months or less to be cash equivalents.
Inventories:
Inventories are valued at the lower of cost or market. Cost for approximately one
half of inventories is determined on the last-in, first-out (LIFO) method and the remaining
one half on the first-in, first-out (FIFO) method.
Property and Equipment:
Property and equipment are stated at cost and are depreciated over their estimated
useful lives of 20 to 45 years for buildings and 4 to 12 years for machinery and equipment.
Depreciation is computed primarily on the straight-line method.
Income Taxes:
Deferred taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax credit
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax assets and liabilities will be
adjusted for the effects of changes in tax laws and rates on the date of enactment. See
Note 3 regarding a change in the method of accounting for income taxes.
Net Income per Share:
Net income per share is computed based upon the weighted average number of common
shares outstanding during the year. Issuance of the shares upon exercise of all options
outstanding would not have a material effect upon net income per share.

Note 2.
Inventories
The FIFO cost of LIFO inventories would have been $1,225,000, $1,430,000, and
$1,248,000 higher at December 31, 1993, 1992 and 1991, respectively, than at LIFO values.
Reductions of inventory quantities in 1993 and 1992 resulted in a liquidation of LIFO
inventory quantities carried at costs prevailing in prior years which were lower than
current costs. The effect of this reduction in 1993 was to increase net income by
approximately $127,000 or $.01 per share, net of additional decrease to the reserve due to
current year price changes. The effect on net income for 1992 was not material.

Note 3.
Accounting Change and Income Tax Matters
Effective January 1, 1993, the company adopted FASB Statement No. 109, Accounting for
Income Taxes. The adoption of Statement 109 changes the company's method of accounting for
income taxes from the deferred method to a liability method. Under the deferred method,
the company deferred the past tax effects of timing differences between financial reporting
and taxable income. As explained, in Note 1, the liability method requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the reported amounts of assets and liabilities and their tax
bases. The effect on earnings of adopting this statement was not material.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

The components of income tax expense for the years ended December 31, 1993, 1992 and
1991 were as follows:

1993 1992 1991
<S> <C> <C> <C>
Current
Federal . . . . . . . $1,797,064 $1,010,085 $2,364,926
State . . . . . . . . 539,072 248,738 509,629
Deferred
Federal . . . . . . . 290,227 ( 15,975) ( 49,043)
State . . . . . . . . 25,237 ( 5,248) ( 26,757)
$2,651,600 $1,237,600 $2,798,755
========== ========== ==========
<FN>

The differences between the amounts of reported total income tax expense and the
amounts computed by multiplying income before income tax by applicable statutory federal
income tax rates for the years ended December 31, 1993, 1992 and 1991 are as follows:

1993 1992 1991
<S> <C> <C> <C>
Income tax
computed at
statutory
federal income
tax rates . . . . $2,343,472 $1,092,962 $2,466,371
Increase
(decrease) in
taxes resulting
from:
State income
taxes, net of
federal
income tax
benefit . . . 372,444 160,703 312,781
Other net . . . . ( 64,316) ( 16,065) 19,603
Income taxes . . . $2,651,600 $1,237,600 $2,798,755
========== ========== ==========

39
</TABLE>

Net deferred tax liabilities consist of the following components at December 31, 1993
and 1992:

1993 1992
<S> <C> <C>
Deferred tax liabilities,
accelerated depreciation $2,746,315 $2,360,097

Deferred tax assets:
Reserve for environmental
expenditures 1,095,817 1,214,320

Inventory capitalization
and allowances 213,029 157,886

Accrued pension and
vacation benefits 406,863 255,506

Other expenses not
deductible currently, net 186,676 203,919

$1,902,385 $1,831,631

Net deferred tax
liabilities $ 843,930 $ 528,466
========== ==========
<FN>

The components giving rise to the net deferred tax liabilities described above have
been included in the accompanying balance sheets at December 31, 1993 and 1992. The 1992
balance sheet has been restated to adopt the following classification of deferred tax
assets and liabilities, which had previously been reported as a non-current liability.

1993 1992
<S> <C> <C>
Current Assets $1,902,385 $1,831,631

Non Current Liabilities 2,746,315 2,360,097

Net Deferred Tax Liabilities $ 843,930 $ 528,466
========== ==========
<FN>
Note 4.
Pension Plan and Retirement Plan
The company and its subsidiaries have a defined benefit retirement plan covering
substantially all employees. The company accounts for the plan in accordance with
generally accepted accounting principles which require, in general, that the cost of
benefits be accrued during the period of employee service. The company's funding policy is
to make the minimum annual contribution, if required by applicable regulations, plus such
amounts as the company may determine to be appropriate from time to time.

40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Net pension cost for the company's defined benefit pension plan consisted of the
following components for the years ended December 31, 1993, 1992 and 1991:

1993 1992 1991
<S> <C> <C> <C>
Service cost
(benefits
earned) $ 603,316 $ 506,901 $ 494,599
Interest cost on
projected benefit
obligation 734,383 689,659 632,078
Actual return on
plan assets ( 1,021,585) ( 573,036) (1,095,258)
Net amortization
and deferral 18,419 ( 404,365) 231,085
$ 334,533 $ 219,159 $ 262,504
=========== ========== =========
<FN>

The following assumptions were used in actuarial calculations for the company's
defined benefit pension plan for the years ended December 31, 1993, 1992 and 1991:

1993 1992 1991
<S> <C> <C> <C>
Weighted average discount rate 7% 8% 8.5%

Rate of increase in future compensation:
Salaried employees 5% 6% 6.5%

Hourly employees 4% 5% 5.5%

Expected long-term return on assets 8.5% 8.5% 8%

1993 1992
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefits. . . . . . . . . . . . . . . $8,074,970 $6,236,506
========== ==========

Accumulated benefits . . . . . . . . . . . . $8,783,760 $6,757,276
========== ==========

Projected benefits . . . . . . . . . . . . . . ($11,584,117) ($9,331,156)

Plan assets at fair value,
consisting primarily of cash
equivalents, common stocks,
and insurance contracts . . . . . . . . . 10,420,047 9,677,917

<PAGE>

1993 1992
<S> <C> <C>
Plan assets (under) in excess of
projected benefit obligation. . . . . . . ( 1,164,070) 346,761
Unrecognized net loss. . . . . . . . . . . . 1,482,974 500,086
Unrecognized net obligation
from January 1, 1987. . . . . . . . . . . ( 773,640) ( 967,050)

(Liability) included on
balance sheet . . . . . . . . . . . . . . ($ 454,736) ($ 120,203)
========== ==========
<FN>

The company and its subsidiaries also have a defined contribution plan. Expense
incurred on behalf of this plan was $867,000, $791,000 and $656,000 in 1993, 1992 and 1991,
respectively.

Note 5.
Long-Term Debt and Line of Credit
The company has outstanding senior unsecured notes payable in the amount of
$10,000,000. The notes are due in annual installments of $1,250,000, beginning in 1995,
with a final payment due in 2002. Interest at 7.50% is payable semi-annually. The note
agreement contains various restrictive covenants, including maintenance of minimum
consolidated net worth, which restricts the amount of dividends. Approximately $6,200,000
of retained earnings were available for dividends at December 31, 1993.

The company has an agreement with a bank to borrow $1,000,000 in 1994 on an unsecured
basis, to be repaid in quarterly installments of approximately $26,000 over a 9 year
period, plus interest at 7.06%.

The company also has available $5,000,000 in a line of credit with a bank. At
December 31, 1993 and 1992, there were no outstanding borrowings under the line, nor were
there any borrowings under the line at any time during 1993 or 1991. The maximum amount
outstanding at any month-end during 1992 was $1,000,000. The average amount outstanding
during 1992, computed on month-end balances, was $250,000. The weighted average interest
rate during 1992, computed on months outstanding, was 4.57%.

Total interest expense was $740,844 for 1993 and $218,000 for 1992 (none in 1991).

Note 6.
Stock Participation Plans
The company has options outstanding under key employee stock option plans. Options
expire five years from the date of grant, are non-transferable other than at death, and are
exercisable 25% at the end of one year, one and one-half years, two years, and three years
after date of grant. The option price of the stock is equal to its market value at the
date of grant.

At December 31, 1993 there were 181,031 shares which were exercisable, and 530,275
shares are reserved for future issuance.

42
</TABLE>

A summary of stock option transactions follows:

Number Average
of Price Per
Shares Share
<S> <C> <C>
Outstanding,
December 31, 1990 393,500 $ 5.90
Granted 148,000 5.86
Lapsed ( 15,625) 6.01
Exercised ( 122,000) 5.17

Outstanding,
December 31, 1991 403,875 6.10
Granted 134,500 5.70
Lapsed ( 17,750) 6.55
Exercised ( 42,982) 4.87

Outstanding,
December 31, 1992 477,643 6.08
Granted 89,100 10.75
Lapsed ( 5,500) 5.63
Exercised ( 166,018) 6.42

Outstanding,
December 31, 1993 395,225 7.00
========

<FN>

For all other employees, the company will give one share of Brenco stock for each four
shares purchased by the employee up to 10% of his or her base compensation. Under this
plan, shares were issued as follows: 1,945 in 1993, 3,268 in 1992, and 2,700 in 1991.

The company has a restricted stock plan which provides for the award of shares of
common stock to key employees. The company has reserved 100,000 shares of unissued common
stock for this plan. The period of restriction ranges from 2 years to 5 years. During the
period of restriction the employee will have the right to vote such shares and to receive
dividends. There were 16,000 shares granted under this plan for the year ended December 31,
1993, 16,750 granted in 1992, and 11,500 granted in 1991.

Note 7.
Export Sales and Major Customers
Sales to foreign customers amounted to $17,849,000 in 1993, $11,094,000 in 1992, and
$14,147,000 in 1991. No one customer accounted for more than 10% of sales in 1993, 1992,
or 1991.

<PAGE>
Note 8.
Commitment and Contingent Liability
During 1990, the company received a cost estimate for a proposed remediation plan from
outside consultants who had been conducting environmental studies at a former foundry site
that has been inactive since 1979. The results of the studies indicated that the estimated
costs of the proposed remediation plan would be $2,600,000. Based on this estimate, the
company established a reserve for this amount believing it to be a reasonable estimate of
the expenditures to be incurred. The reserve was increased by $300,000 in 1991 and
$300,000 in 1992 in anticipation of the impact of inflation on estimated costs of the
proposed remediation plan. In November, 1992 the company received approval from the
appropriate state regulatory agency to proceed with a plan of actual site restoration. The
remediation process began in December, 1992.

During 1993, the company and outside consultants reevaluated the expected cost
estimate of the remediation plan. Based on the results of this study, an additional
$2,300,000 has been recorded to the reserve to account for the expected cost to complete
the remediation plan. Actual costs may differ from the reserve which has been established.

The effects of the special charge recorded in 1993 for the estimated additional
expenditures was to reduce net income by approximately $1,414,000 or $.14 per share. The
charges in 1992 and 1991 decreased net income by approximately $185,000, or $.02 per share
in each year.

44
</TABLE>

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders
Brenco, Incorporated
Petersburg, Virginia

We have audited the accompanying consolidated balance sheets of Brenco,
Incorporated and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Brenco,
Incorporated and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with generally accepted
accounting principles.

As described in Note 3 to the consolidated financial statements, the company
changed its method of accounting for income taxes in 1993.

McGladrey & Pullen

Richmond, Virginia
January 31, 1994

Selected Financial Data

(In thousands, except per share amounts)
1993 1992 1991 1990 1989

<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . $98,724 $83,652 $78,600 $73,063 $70,291
Net income. . . . . . . 4,241 1,977 4,455 3,829 2,974
Net income
per share . . . . . . .43 .20 .46 .40 .31
Total assets . . . . . 69,802 65,074 51,783 49,330 48,325
Long-term debt. . . . . 10,000 10,000
Cash dividends
declared per share. . .20 .20 .20 .20 .20

</TABLE>

Management's Discussion and Analysis of
Financial Condition and Results of Operations

Results of Operations
Net sales in 1993 increased 18% over sales in 1992, to $98,724,000.
Railroad products and services were up 20%, to $79,859,000 which accounted
for the major portion of the increase. Export sales of railroad products,
which were off $3,053,000 in 1992 compared to 1991, recovered nicely to
$17,849,000, an increase of $6,755,000. Sales for Quality Bearing Service
(QBS), our reconditioning subsidiary, were up $7,837,000 as we continue to
gain market share. The revenues of Rail Link, our rail switching subsidiary
were up $1,096,000, with the addition of three additional switching
locations.

Net sales in 1992 increased 6% over sales in 1991, to $83,652,000.
Automotive forgings were up $4,071,000, or 59% while railroad products and
services were down $442,000. Sales for QBS were up $4,453,000 in 1992 over
1991 due principally to market share gains. The growth of QBS revenues
helped offset the $3,053,000 decline in export sales in 1992 compared to
1991, resulting in a slight decrease in railroad products and services over
1991.

Operating income rose 167% in 1993 to $9,311,000, compared to
$3,488,000 in 1992. The increase in operating income in 1993 was primarily
the result of higher sales volumes and improvement in margins in our QBS
subsidiary. In the fourth quarter of 1993 a special charge to earnings was
made in the amount of $2,300,000, representing anticipated environmental
expenditures for our former foundry site that has been inactive since 1979.
As a consequence, net income for 1993 was $4,241,000 or $.43 per share,
compared to $1,977,000 or $.20 per share in 1992, an increase of 115%.

Net income for 1992 was $1,977,000, or $.20 per share, compared to
$4,455,000 or $.46 per share in 1991, a decrease of 56%. While sales were
higher in 1992, growth came in lower margin businesses. This coupled with
depressed pricing in our principal product line, bearings for new railcars
and bearing reconditioning services, resulted in reduced earnings.

46
<PAGE>

Liquidity and Capital Commitments

Cash and cash equivalents were $3,582,000 at December 31, 1993,
compared to $6,218,000 at the end of 1992 and $1,387,000 at the end of 1991.

Capital expenditures totaled $8,815,000 in 1993, compared to $5,533,000
in 1992 and $4,421,000 in 1991. Capital expenditures in 1994 are expected
to increase to approximately $9,613,000, which includes $2,890,000 of
carryovers from prior years plus $6,723,000 in new projects approved for
1994. We expect to finish the Puddledock plant site cleanup in the first
quarter.

During 1992 we completed the placement of $10,000,000 in senior
unsecured notes, to provide funding for our planned capital outlays and
environmental expenditures.

During 1993 we increased our investment in accounts receivable by
$1,711,000, to $14,565,000. Two invoices, which were due for payment by
December 31, totaling $1,538,000 were not collected until early January.

The ratio of current assets to current liabilities was 4.23 at December
31, 1993, as compared to current ratios of 5.01 and 7.75 at the end of 1992
and 1991, respectively. The total amount of working capital decreased by
$2,257,000 to $28,307,000 at the end of 1993. This compares to $30,564,000
and $24,240,000 at the end of the prior two years. The increase in 1992
over 1991 was the result of the placement of the senior notes while the
decrease in 1993 from 1992 is the result of putting the monies from the
senior notes to use.

The company has a $5,000,000 revolving line of credit. This line was
not used during 1993. Management believes that its cash balances and
earnings before depreciation charges in the coming year will be adequate to
cover its capital needs and dividend payments for 1994.