IREX CORP, 10-K, 1996-04-01

IREX CORP
10-K, 1996-04-01
CONSTRUCTION - SPECIAL TRADE CONTRACTORS

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SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1995 Commission file number 2-36877

Irex Corporation
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Pennsylvania 23-1712949
(STATE OR OTHER JURISDICTION OF INC. OR ORG.) (I. R. S. EMPLOYER IDENT. NO.)

120 North Lime Street, Lancaster, Pennsylvania 17602
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

Registrant's telephone number, including area code (717) 397-3633

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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

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 their Form 10-K or any amendment to
this Form 10-K. [X]

As of March 6, 1996, 394,357 common shares were outstanding and the
aggregate market value of the voting stock (based upon the average bid and asked
prices on March 6, 1996) held by nonaffiliates was approximately $5,854,452.

Documents Incorporated by Reference
NONE

PART I

Item 1. Business

Irex Corporation ("The Company") is primarily engaged in the business of
thermal insulation contracting throughout the United States and Canada. Allied
activities include the direct sale of insulation and acoustical materials, the
fabrication of insulation materials, and interior contracting. Domestic
operations are conducted through four wholly owned subsidiaries: ACandS, Inc.;
Specialty Products and Insulation Co. (including Boatwright Insulation Co., a
wholly owned subsidiary of Specialty Products and Insulation Co.); CENTIN
Corporation; and Spacecon, Inc. Commercial Interior Builders, Inc. has been
inactive since Decmber 31, 1992. Through ACandS Contracting Ltd., a wholly
owned subsidiary of ACandS, Inc., the Company is engaged in thermal insulation
contracting in Canada. In 1995, 55% of total revenues was the result of
contract operations and 45% was derived from the direct sale of insulating and
acoustical ceiling materials. These percentages are reflective of a trend over
the past several years, wherein distribution has been a growing part of the
Company's business.

Substantially all of the Company's insulation contracts are made with
private contractors, subcontractors and other builders, and such contracts are
normally awarded on the basis of competitive bids. Insulation contracting, as
part of the general construction business, has been and continues to be highly
competitive. The Company is one of the largest in its field, however, and over
the years has maintained good customer relationships, with a significant
percentage of its sales attributable to contracts with customers for whom the
Company has previously done work.

As of December 31, 1995, the Company had an unbilled contract backlog of
$51.9 million as compared to an unbilled contract backlog of $48.2 million on
December 31, 1994. A substantial portion of this backlog can reasonably be
expected to be installed during 1996, since the average life cycle of the
Company's projects is less than a year. During the past five years, beginning
backlog ranged from 30% to 40% of contract revenues during the ensuing year.

The Company purchases its materials from a number of sources and is not
dependent upon any one supplier for any substantial portion of its require-
ments. Insulation materials are in plentiful supply and no critical shortages
are expected.

The Company owns or holds no significant patents, licenses, franchises or
other concessions. No significant expenditures are made for new product
development, since most materials are purchased directly from manufacturers for
installation by the Company on projects where the owner or his representatives
specify the products to be applied.

Federal, state and local regulations enacted to protect the environment
have not had any material effect upon capital expenditures, earnings or
competitive position.

Item 2. Properties

The Company owns five properties in Lancaster, Pennsylvania. One is used
as the Company's general offices, a two-story brick building containing 21,000
square feet of space. A second is primarily used for general office parking.
The third consists mainly of a 29,000 square foot warehouse and shop facility
which is used by the Company's subsidiary, Specialty Products and Insulation
Co. The fourth, a one-story brick building containing 3,500 square feet of
space, is used primarily as headquarters of Specialty Products and Insulation
Co. The fifth, a two and one-half story brick building containing 2,500 square
feet of space, is predominantly rented to a third party.

All of the remaining offices, warehouses and fabricating shops of the
Company are leased at various locations throughout the United States and
Canada. Some district and branch offices share facilities at the same loca-
tion, and most offices are divided into both warehouse and office space. A few
have fabricating shops connected with the warehouse. There are 81 leased
district and branch offices in the United States and two branch offices in
Canada.

The Company also owns construction tools, light trucks, fabricating
machinery, and such related equipment as required by its undertakings, all of
which are considered to be in good working order and none of which is subject
to any major encumbrances. Most of the automotive fleet has been converted to
an operating lease arrangement with lease terms of up to four years.

Item 3. Legal Proceedings

The Company's principal subsidiary, ACandS, Inc., is one of a number of
defendants in pending lawsuits filed by approximately 98,000 individual
claimants seeking damages for injuries allegedly caused by exposure to asbestos
fibers in insulation products used at one time by ACandS in its business.
ACandS has defenses to these actions, including defenses based on the fact it
is primarily a contracting company in the business of installing products
manufactured by others. During 1995, ACandS was served with cases involving
approximately 44,904 individual plaintiffs. There were 18,122 new plaintiffs
in 1994; 20,542 new plaintiffs in 1993; 13,875 new plaintiffs in 1992; and
10,090 new plaintiffs in 1991. Of the 1993 filings, over 4,000 were dismissed
against ACandS shortly after filing.

The unusually large number of filings in 1995 included 19,730 in Texas,
5,601 from the Maritime Legal Clinic and 4,993 in West Virginia. The Texas
filings were predominantly on behalf of out-of-state claimants and were
apparently motivated by counsels' efforts to get claims on record before the
effective date of a tort reform statute. The West Virginia filings were
attributable to efforts to participate in a scheduled consolidated trial.
Filings nationwide were apparently also increased during the year by plaintiffs
seeking to insure that cases were filed before the passage of possible federal
tort reform legislation. Accordingly, ACandS believes that the 1995 filings
generally represent an advancement of case filings which will not significantly
effect the ultimate number of cases that may be filed.

It is the pattern in this litigation for suits to be filed as the result
of mass screenings of individuals employed at a particular facility, through a
particular union local, or by a particular employer. It is ACandS's experience
that such suits are often filed with little investigation as to whether the
claimant ever had any causative exposure to asbestos-containing products
associated with the various named defendants. As an example, although the
Maritime Legal Clinic has now pending approximately 13,000 cases against
ACandS, ACandS does not believe there is any basis for liability to the
merchant seamen the Clinic represents. Because of the pattern, historically,
about half of the cases filed against ACandS have been closed without payment.

The defense of the cases pending against ACandS is now being handled by
the Aetna Casualty and Surety Co. with the participation of other insurers that
wrote coverage for ACandS. Virtually all of ACandS's liability and defense
costs for these cases are being paid by Aetna and other insurance carriers.

Since the beginning of 1981, approximately 89,000 individual claims
against ACandS have been settled, dismissed or otherwise resolved. Although
payments in individual cases have varied considerably, ACandS's percentage of
the aggregate liability payments for those cases has been small. As a result,
ACandS's average resolution cost for closed cases is very low. The resolution
cost per closed case in recent years has been consistent with long-term
averages. Bankruptcy filings by a number of companies which had been signifi-
cant defendants in asbestos cases have not significantly increased the cost of
resolving cases. Historically, payments on behalf of ACandS to resolve con-
solidated proceedings in jurisdictions which have been difficult for all defen-
dants have exceeded average costs. ACandS anticipates that it will continue to
face such proceedings in the future.

On July 29, 1991, the Judicial Panel on Multidistrict Litigation ordered
that all asbestos-related bodily injury cases pending in the Federal trial
courts and not then in trial should be transferred to Judge Charles R. Weiner
in the United States District Court for the Eastern District of Pennsylvania
for coordinated or consolidated pretrial proceedings. These proceedings
involved less than one-fourth of the cases then pending against ACandS.

Subsequently, on January 15, 1993, certain plaintiffs' counsel and the
members of the Center for Claims Resolution (an organization of 20 asbestos
litigation defendants) filed a class action complaint, answer and settlement
agreement involving all previously unasserted claims by individuals who have
been occupationally exposed to asbestos fibers, which was assigned to Judge
Weiner as related to the Multidistrict Litigation proceedings. In an order
dated August 16, 1994, the District Court approved the settlement. This
approval remains subject to appeal. The District Court for the Eastern
District of Texas has also approved a class settlement of future asbestos cases
against Fiberboard Corporation which is also currently on appeal. Due to the
complexity of these actions and the claims involved, it is uncertain what
impact they will have on the asbestos-related bodily injury litigation.

Although the large number of pending cases, the continued efforts of
certain courts to clear dockets through consolidated or class proceedings, the
bankruptcy filings by defendants, efforts toward national solutions, the trans-
fer of federal cases to the United States District Court for the Eastern Dis-
trict of Pennsylvania, and the Center for Claims Resolution and Fibreboard
class actions render prediction uncertain, ACandS expects that its percentage
of liability payments will continue to be relatively small.

ACandS has secured the commitment through final settlement agreements of a
large percentage of the very substantial insurance coverage applicable to its
asbestos-related bodily injury claims. ACandS believes it will secure signifi-
cant additional coverage, if needed, from those insurers which have not to date
settled with ACandS.

Given the number of currently pending cases and the rate of new filings,
it is anticipated that the aggregate amount to be paid by all defendants for
asbestos-related bodily injury claims will be very large. Nevertheless, as
noted, ACandS's percentage of aggregate liability payments is expected to
remain small. Management, therefore, believes that ACandS's insurance coverage
is adequate to ensure that these actions will not have a material adverse
effect on the long-term business or financial position of the Company.

ACandS is also one of a number of defendants in seven actions by the
owners of schools and other buildings seeking to recover costs associated with
the replacement or treatment of installed asbestos-containing products. These
cases involve school buildings, public buildings, and office buildings. One of
the cases is an alleged class action.

ACandS has substantial defenses to the actions, including defenses based
upon the character of its operations and the fact that ACandS did not manufac-
ture the asbestos-containing products involved. Moreover, ACandS potentially
has indemnification and/or contribution claims against the product manufactur-
ers. To date, ACandS has been dismissed from 102 cases, largely on the basis
it had no connection with the products at issue in the claimants' buildings,
and has agreed to settle 14 claims. The aggregate amount paid has been very
small in the context of this litigation. ACandS was not served with any new
building-related cases in 1995. Since 1990, only three new building related
cases have been served on ACandS.

ACandS's primary insurance carriers, the Aetna Casualty and Surety Co. and
the Travelers Insurance Companies, are currently providing ACandS with a
defense in these building cases, as well as paying settlements when necessary.
Travelers is providing coverage pursuant to a settlement agreement, but Aetna
has asserted reservations of rights to later contest both the availability and
the amount of coverage. Aetna, nevertheless, continues to make its required
payments.

Decisions in litigation involving insurance coverage available for other
defendants in asbestos building cases have thus far varied widely. The
appellate rulings which have fully considered coverage issues for asbestos
building claims to date provide significant coverage for policyholders. The
decisions are consistent with ACandS's view that the trend in the courts is to
provide broad coverage for asbestos building cases.

Although the availability of coverage for existing and future suits is not
resolved, and the aggregate potential loss from these suits may be significant,
management believes that ACandS's defenses, potential indemnification and/or
contribution rights and insurance coverage are adequate to ensure that these
actions will not have a material adverse effect on the long-term business or
financial position of the Company.

From time to time, the Company and its subsidiaries are also parties as
both plaintiff and defendant to various claims and litigation arising in the
normal course of business, including claims concerning work performed under
various contracts. In the opinion of management, the outcome of such claims
and litigation will not materially affect the Company's long-term business,
financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

The Company's Common Stock is traded in limited over-the-counter transac-
tions. The number of shares of Common Stock available for trading has been
small relative to the total number of shares outstanding, and the trading is
sporadic. Price quotations are only binding for a limited number of shares.

The following table sets forth the high and low bid prices per share and
the dividends per share for the periods indicated. Price quotations have been
obtained from National Quotation Bureau, Inc.
<TABLE>
<CAPTION>
High Bid Low Bid
<S> <C> <C>
1994 1st Quarter 19 15
2nd Quarter 17 14
3rd Quarter 14 - 1/4 13 - 1/2
4th Quarter 14 - 1/2 13 - 1/2

1995 1st Quarter 15 13 - 1/2
2nd Quarter 19 13 - 1/2
3rd Quarter 20 13 - 1/2
4th Quarter 20 -1/4 17
</TABLE>
On March 6, 1996, the stock price quotation according to Dean Witter
Reynolds, Inc. was 18 bid and offered, and there were 340 record holders of the
Company's Common Stock. The total number of shares outstanding is 393,857.
The Company has not paid a cash dividend on its Common Stock during the two-
year period ended December 31, 1995. In the foreseeable future, the Company
does not expect to pay cash dividends on the outstanding common shares at
December 31, 1995.

Item 6. Selected Financial Data

IREX CORPORATION AND SUBSIDIARIES:

Following is a consolidated summary of operations for the five years ended
December 31, 1995. This summary should be read in conjunction with the
consolidated financial statements and notes thereto, which are included in Item
8 of this report.
<TABLE>

CONSOLIDATED SUMMARY OF OPERATIONS
Irex Corporation and Subsidiaries
<CAPTION>
Year Ended December 31
1995 1994 1993 1992 1991

(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES $244,441 $240,636 $237,369 $229,033 $220,701
NET INCOME (LOSS) $ 1,778 (1)$ 2,227 $ (389) $ 1,026 $ 3,493
PREFERRED STOCK DIVIDENDS (2)$ (980) $ (980) $ (980) $ (245) $ -
INCOME (LOSS) APPLICABLE
TO COMMON SHARES $ 798 $ 1,247 $ (1,369) $ 781 $ 3,493
CASH FLOW FROM OPERATIONS $ (454) $ 2,770 $ (2,937) $ 5,724 $ (1,065)
TOTAL ASSETS $ 81,635 $ 82,560 $ 81,483 $ 76,606 $ 77,283
LONG TERM DEBT (3) $ 12,543 $ 15,800 $ 17,414 $ 18,935 $ 8,791
REDEEMABLE PREFERRED STK (2) $ 10,496 $ 10,496 $ 10,496 $ 10,496 $ -
PER COMMON SHARE: (2)
EARNINGS $ 2.01 $ 3.11 $ (3.36) $ 1.03 $ 4.63
CASH DIVIDENDS $ - $ - $ - $ 1.50 $ 2.00
BOOK VALUE $ 25.59 $ 23.14 $ 19.94 $ 23.35 $ 26.77
<FN>
<F1>
(1) Includes cumulative effect of accounting change, net of income
taxes, of $1,377,000 due to change in the method of estimating workers' compen-
sation claims liability. See Note 1 to the accompanying consolidated financial
statements.
<F2>
(2) See Note 10 to the accompanying consolidated financial statements.
<F3>
(3) See Note 8 to the accompanying consolidated financial statements.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Net income for the year ended December 31, 1995, was $1,778,000 as compared
to $2,227,000 for the year ended December 31, 1994. The Company reported a net
loss of $(389,000) for the year ended December 31, 1993. Included in the
results for 1995 is the cumulative effect of accounting change, net of income
taxes, of $1,377,000 due to the change in the method of estimating workers'
compensation claims liability. The new method employs actuarial assumptions to
discount to present value the estimated future payments of these claims. The
impact of this change, exclusive of the cumulative effect, on operating results
for 1995 was not significant, nor is it anticipated that it will have a
significant effect on future years.

Net income (loss) applicable to common shareholders after preferred divi-
dends was $798,000 for the year ended December 31, 1995, a decrease of 36.0%
from the previous year's $1,247,000. For the year ended December 31, 1993, the
Company reported a net loss of $(1,369,000) after preferred dividends. Net
income (loss) per common share was $2.01, $3.11 and $(3.36) for the years ended
December 31, 1995, 1994 and 1993, respectively. For the year ended December
31, 1995, the loss per common share before cumulative effect of accounting
change was $(1.46), while the cumulative effect of accounting change increased
net income per common share by $3.47.

Return on average common shareholders' equity, calculated on net income
(loss) applicable to common stock was 8.1%, 15.8% and (15.6)% for each of the
years ended December 31, 1995, 1994 and 1993, respectively. The Company's
return on average assets, calculated on net income (loss), was 2.2% for the
year ended December 31, 1995, as compared to 2.7% and (0.5)% for the years
ended December 31, 1994 and 1993, respectively. For the year ended December
31, 1995, the return on average equity and return on average assets before the
cumulative effect of accounting change were (5.9%) and .5%, respectively.

The Company's operating results have been negatively impacted over the
past three years by the weak performance of its contracting businesses. A
combination of weak economic conditions in certain industries key to the
contracting businesses, declining margins as a result of increased competition
and execution problems resulting in cost overruns on contracts have contributed
to the decline in contracting revenues and earnings. Strong growth and
earnings performance from the Company's distribution operations partially
offset the negative results from contracting. The following discussion and
analysis of results of operations provides additional information on the
Company's businesses and should be read in conjunction with the consolidated
financial statements and accompanying notes.

RESULTS OF OPERATIONS

The Company and its subsidiaries operate within the specialty contracting
industry (Contracting) and the distribution of products related to that
industry (Distribution). Total revenues increased to $244.4 million in 1995, a
1.6% increase from the prior year's total revenue of $240.6 million. Total
revenues in 1994 were $237.4 million. Continued strong growth in distribution
revenues, which accounted for 45.1%, 38.5% and 33.8% of total revenues in 1995,
1994 and 1993, respectively, more than offset declining revenues from contract-
ing. Distribution revenues increased by $17.5 million, or 18.8%, to a record
$110.2 million during 1995. This compares favorably with the 15.5% increase in
distribution revenues, an increase of $12.4 million, reported for 1994.
Distribution revenues were $92.8 million and $80.3 million in 1994 and 1993 ,
respectively. During the three-year period ended December 31, 1995, contract-
ing revenues have steadily declined. Contracting revenues of $134.2 million in
1995, represented a decline of $13.7 million or 9.2% from contracting revenues
of $147.9 million in 1994. Contracting revenues in 1994 also declined by $9.2
million from $157.1 million for 1993. A major contributor to the decline in
contracting revenues has been the reduction in revenues from the power genera-
tion industry. During this three-year period such revenues have declined from
40% to 25% of contracting revenues. While no one customer or contract from the
power generation industry represents an unusual risk, the Company continues to
pursue greater diversification of its sources of contracting revenues.

Gross profit declined in 1995 to $52.8 million as compared to $53.3
million for 1994. This decline in gross profit is attributable to the decline
in contracting revenues and the negative impact of losses sustained on a number
of contracting jobs during the three-year period. Individual contracts with a
loss in excess of $100,000 totaled $2.6 million in 1995, $1.1 million in 1994
and $1.3 million in 1993. The increase in 1995 is attributable to a $1.4
million cost overrun on one major project. Gross profit from contracting
declined to $27.7 million from $32.2 million in 1994 and $33.6 million in 1993.
Conversely, the gross profit contribution from distribution has increased
steadily during this same period. Distribution gross profit was $25.1 million,
representing an increase of 19.0% over the $21.1 million reported for 1994.
Distribution gross profit amounted to $18.2 million in 1993. The growth in
revenues accounts for substantially all of the increase, as distribution
margins, gross profit dollars expressed as a percentage of revenues, have
remained fairly stable during the three-year period.

Selling, general and administrative (operating) expenses increased by $2.8
million, or 6.1%, to $50.0 million. Operating expenses were $47.2 million in
1994 and $50.4 million in 1993. The growth in operating expenses in 1995 is
primarily attributable to expansion of the distribution business, which added
six additional branches between the fourth quarter of 1994 and the first
quarter of 1995. Full-time salaried employees within the distribution business
increased by 20 during 1995. The Company's total salaried employees at
December 31, 1995, was 465 as compared to 443 and 476 at year end 1994 and
1993, respectively. Personnel expenses account for approximately 60% of total
operating expenses. The decline in operating expenses in 1994 was due to the
reduction in salaried employees and action taken by management to offset the
weakness in the Company's contracting operations. Such actions included a six-
month salary freeze for all employees. Depreciation and amortization expense
decreased by $.6 million in 1995 and $.5 million in 1994 primarily as a result
of the declining impact of the amortization of the Company's major investment
in the upgrade of its computer hardware and management information systems.
Substantially all of the capitalized costs of this project have been written-
off as of December 31, 1995. For the three years ended December 31, 1995,
1994, and 1993, operating expenses expressed as a percentage of revenues were
20.5%, 19.6% and 21.2%, respectively.

Operating income of $2.7 million in 1995 represented a significant decline
from the $6.1 million earned in 1994. The decline of $3.4 million is solely
attributable to contracting operations. Operating income for 1993 was $1.4
million. Operating income expressed as a percentage of revenues was 1.1%, 2.5%
and 0.6% for 1995, 1994 and 1993, respectively.

FINANCE AND LIQUIDITY

The Company has continued to focus on the effective management of its
working capital position. While the strong growth in the distribution business
has contributed to an increase in accounts receivable, the rate of growth has
slowed considerably over the three-year period. The addition of six new
distribution branches has increased inventories over the past two years. The
contracting operations have made significant process in resolving claims,
reducing the amount carried to $460,000 at December 31, 1995, from $1,759,000
at the prior year end. While continuous improvement is reflected in these
areas, management continues to focus on several programs which will ultimately
improve its turnover of accounts receivable and distribution and contract
inventories. Contract backlog was $51.9 million at December 31, 1995. This
represents an increase from the contract backlog of $48.2 million at 1994
year's end. The contract backlog at December 31, 1993, was $50.7 million.

Capital expenditures in 1995 were $1.1 million, versus $1.0 million in
1994 and $1.2 million in 1993. Management does not foresee any significant
capital expenditures in the near term other than the normal replacement of
equipment.

Total debt outstanding at December 31, 1995 was $24.6 million compared to
$23.4 million at December 31, 1994. Available short-term lines of credit as of
December 31, 1995 were $22.7 million of which $8.8 million was in use. Credit
lines available continue to provide adequate flexibility for operations.
Beginning May 1, 1993, the Company began repaying $7 million of senior notes in
semi-annual installments of $700,000. Total payments of $1.4 million were made
in both 1995 and 1994. At November 1, 1995, the company prepaid the remaining
10.41% unsecured senior notes, at a premium of 102% of principal amount. The
Company funded the prepayment with a 7.3% unsecured term note. During 1992,
the Company obtained $13 million of long-term debt financing at a fixed rate of
interest, which was used to reduce the Company's dependence on short-term debt.
See Note 8 to the accompanying financial statements for more information on the
Company's borrowings.

PREFERRED STOCK ISSUANCE AND DIVIDENDS

During 1992, the Company exchanged 349,864 shares of redeemable preferred
stock for an equal number of the Company's outstanding common shares. The
common shares exchanged were included in Treasury Stock at December 31, 1995

Dividends on the preferred stock accrue at an annual rate of $2.80 per
share. In the foreseeable future, the Company does not expect to pay cash
dividends on the outstanding common shares at December 31, 1995.

INCOME TAXES

The effective tax rate was 51.8% in 1995 compared to 43.5% in 1994 and
2.3% in 1993. The rise in the effective tax rate in 1995 in largely attribut-
able to the decline in operating income. The 1993 effective tax rate was
impacted by the net provision for state income taxes exceeding the federal tax
benefit derived from that year's operating loss. The impact of the overall
effective state rate on deferred tax assets coupled with the fact that several
of the states within which the Company operates do not provide for the
carryback or carryforward of operating losses, resulted in the Company's
effective state tax rate increasing to 32.2% in 1993 as compared to 8.6% in
1995 and 3.8% in 1994.

Current deferred income tax assets were $8.3 million at December 31, 1995,
compared to $8.9 million at year end 1994. The Company has determined that no
valuation allowance for the deferred income tax asset is required as of
December 31, 1995 and 1994, as the future realization of such tax benefits is
considered to be more likely than not through the combination of carryback
availability, certain tax planning strategies that would allow for acceleration
of deductible temporary differences to utilize remaining carryback availability
and through expected future taxable income. Future taxable income must be
approximately $11.2 million in order to realize the portion of deferred tax
assets not realizable through carryback availability or tax planning strate-
gies.

Item 8. Financial Statements and Supplementary Data

1. Irex Corporation and Subsidiaries:
(a) Report of Independent Public Accountants

(b) Consolidated Balance Sheets -- December 31, 1995 and 1994

(d) Consolidated Statements of Shareholders' Investment for the
Three Years Ended December 31, 1995, 1994 and 1993

(e) Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1995, 1994 and 1993

(f) Notes to Consolidated Financial Statements -- December 31,
1995, 1994 and 1993

(g) Schedules:

II Valuation and Qualifying Accounts for the Three
Years Ended December 31, 1995, 1994 and 1993

All other schedules are omitted as not applicable
because the required matter or conditions are not present.

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of
Directors, Irex Corporation:

We have audited the accompanying consolidated balance sheets of Irex Corpora-
tion (a Pennsylvania corporation) and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholders' invest-
ment and cash flows for each of the three years in the period ended December
31, 1995. These financial statements and the schedule referred to below are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with generally accepted auditing stan-
dards. 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 esti-
mates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Irex Corporation and subsid-
iaries as of December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.

As explained in Note 1 to the financial statements, effective January 1, 1995,
the Company changed its method of accounting for the estimated liability for
workers' compensation claims.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

Lancaster, Pa.
February 16, 1996
<PAGE>
<TABLE>
IREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31 December 31
<S> <C> <C> <C> <C>
LIABILITIES AND
ASSETS 1995 1994 SHAREHOLDERS' INVESTMENT 1995 1994
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents (Note 5) $ 411,000 $ 1,564,000 Notes payable to banks (Note 8) 8,756,000 6,007,000
Receivable, less reserves of Current portion of LTD (Note 8) 3,257,000 1,580,000
$1,440,000 in 1995 and $1,430,000 Accounts payable 8,164,000 8,268,000
in 1994 51,639,000 51,758,000 Billings in excess of actual cost
Inventories of mater. and supp., at and estimated earnings on
the lower of cost (first-in, first- contracts in process (Note 1 and 2) 2,546,000 2,381,000
out) or market 12,367,000 10,887,000 Accrued workers' compensation Ins. 10,260,000 13,310,000
Actual costs and est. earnings on Accrued liabilities (Note 11) 15,535,000 15,369,000
contracts in process in excess of Accrued income taxes (Note 3) --- 128,000
billings (Notes 1 and 2) 4,675,000 4,563,000 Total current liabilities 48,518,000 47,043,000
Prepaid income taxes (Note 3) 303,000 ---
Other prepaid expenses 624,000 1,027,000 LONG-TERM DEBT, less current
Deferred inc. taxes (Notes 1 and 3) 8,298,000 8,896,000 portion (Note 8) 12,543,000 15,800,000

Total current assets 78,317,000 78,695,000 REDEEMABLE PREFERRED STOCK, $1
par value; authorized 2,000,000 shares;
issued and outstanding 349,864 shares
in 1995 and 1994 (Note 10) 10,496,000 10,496,000

SHAREHOLDERS' INVESTMENT:
Common stock $1 par value;
authorized 2,000,000 shares; issued
1,028,633 shares; outstanding 393,857
shares in 1995 and 398,482 shares
in 1994 1,028,000 1,028,000
PROPERTY AND EQUIPMENT, Paid-in surplus 465,000 472,000
at cost (Note 1): Retained earnings 27,217,000 26,419,000
Land 178,000 178,000 Cumulative translation adjustments
Buildings and improvements 3,310,000 3,086,000 (Note 1) (158,000) (190,000)
Machinery and equipment 7,726,000 8,066,000 28,552,000 27,729,000
11,214,000 11,330,000 Treasury stock, 634,776 shares in 1995 and
630,151 shares in 1994, at cost (18,474,000) (18,347,000)
Less - Accumulated depreciation 8,015,000 7,849,000
Employee Stock Ownership Plan
3,199,000 3,481,000 shares financed with debt (Note 7) --- (161,000)

OTHER ASSETS (Note 1) 119,000 384,000 Total shareholders' investment 10,078,000 9,221,000

$ 81,635,000 $ 82,560,000 $ 81,635,000 $ 82,560,000
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
IREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>

Year Ended December 31

1995 1994 1993
<S> <C> <C> <C>
REVENUES (Note 1):
Contracting $134,215,000 $147,885,000 $157,054,000
Distribution and other 110,226,000 92,751,000 80,315,000

Total revenues 244,441,000 240,636,000 237,369,000

COST OF REVENUES (Note 1) 191,683,000 187,367,000 185,617,000

Gross profit 52,758,000 53,269,000 51,752,000

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 50,022,000 47,165,000 50,369,000

Operating income 2,736,000 6,104,000 1,383,000

INTEREST AND DIVIDEND INCOME 91,000 68,000 339,000

INTEREST EXPENSE (1,995,000) (2,231,000) (2,102,000)

Income (loss) before income taxes 832,000 3,941,000 (380,000)

INCOME TAX PROVISION (Notes 1 and 3) 431,000 1,714,000 9,000

INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 401,000 2,227,000 (389,000)

CUMULATIVE EFFECT OF
ACCOUNTING CHANGE,
net of income taxes
of $899,000 (Note 1) 1,377,000 - -

NET INCOME (LOSS) $ 1,778,000 $ 2,227,000 $ (389,000)

Dividend Requirements for
Preferred Stock (Note 10) (980,000) (980,000) (980,000)

NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK $ 798,000 $ 1,247,000 $ (1,369,000)

AVERAGE COMMON SHARES
OUTSTANDING 397,127 401,156 407,823

PER COMMON SHARE AMOUNTS:

(Loss) Income Before Cumulative Effect
of Accounting Change $ (1.46)$ 3.11 $ (3.36)

Cumulative Effect of
Accounting Change $ 3.47 $ - $ -

Net Income (Loss) $ 2.01 $ 3.11 $ (3.36)

</TABLE>

The accompanying notes are an integral part of these statements.<PAGE>
<TABLE>
IREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
<CAPTION>
Cumulative ESOP Shares
Common Paid-in Retained Translation Treasury Financed
Stock Surplus Earnings Adjustments Stock With Debt

<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $ 1,028,000 $ 460,000 $ 26,541,000 $ (66,000) $(17,995,000) $ (411,000)

Net loss --- --- (389,000) --- --- ---
Cash dividends on preferred
stock --- --- (980,000) --- --- ---
Debt repayments by Employee
Stock Ownership Plan --- --- --- --- --- 120,000
Translation adjustments --- --- --- (50,000) --- ---
Reissuance of common stock --- 12,000 --- --- 114,000 ---
Repurchase of common stock --- --- --- --- (355,000) ---

BALANCE, DECEMBER 31, 1993 1,028,000 472,000 25,172,000 (116,000) (18,236,000) (291,000)

Net income --- --- 2,227,000 --- --- ---
Cash dividends on preferred
stock --- --- (980,000) --- --- ---
Debt repayments by Employee
Stock Ownership Plan --- --- --- --- --- 130,000
Translation adjustments --- --- --- (74,000) --- ---
Repurchase of common stock --- --- --- --- (111,000) ---

BALANCE, DECEMBER 31, 1994 1,028,000 472,000 26,419,000 (190,000) (18,347,000) (161,000)

Net income --- --- 1,778,000 --- --- ---
Cash dividends on preferred
stock --- --- (980,000) --- --- ---
Debt repayments by Employee
Stock Ownership Plan --- --- --- --- --- 161,000
Translation adjustments --- --- --- 32,000 --- ---
Exercise of stock options --- (7,000) --- --- 15,000 ---
Repurchase of common stock --- --- --- --- (142,000) ---

BALANCE, DECEMBER 31, 1995$ 1,028,000 $ 465,000 $ 27,217,000 $ (158,000) $(18,474,000) $ ---

</TABLE>
The accompanying notes are an integral part of these statements.<PAGE>
<TABLE>
IREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31

1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,778,000 $ 2,227,000 $ (389,000)
Reconciliation of net income (loss) to net cash
(used for) provided by operating activities-
Cumulative effect of acctg. change (1,377,000) --- ---
Depreciation and amortization 1,494,000 2,030,000 2,666,000
Deferred income tax benefit (301,000) (128,000) (452,000)
Prov. for losses on acct receivable 1,096,000 1,092,000 901,000
(Increase) decrease in operating assets-
Receivables (977,000) (1,545,000) (5,459,000)
Inventories (1,480,000) (1,388,000) 804,000
Actual cost and estimated earnings on contracts
in process in excess of billings, net 53,000 (434,000) (1,587,000)
Prepaid income taxes (303,000) 1,041,000 (1,041,000)
Other prepaid expenses 403,000 (254,000) 185,000
(Decrease) increase in operating liabilities-
Accounts payable (104,000) (674,000) 2,416,000
Accrued income taxes (128,000) 128,000 (1,106,000)
Accrued liab. and workers' compensation (608,000) 675,000 125,000
Net cash (used for) provided by
operating activities (454,000) 2,770,000 (2,937,000)

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,095,000) (963,000) (1,236,000)
Proceeds from sales of P & E 99,000 74,000 110,000
Decrease (increase) in other assets 81,000 (81,000) (332,000)
Net cash used for invest. act. (915,000) (970,000) (1,458,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrow. from revol. lines 2,749,000 1,225,000 4,365,000
Proceeds from long-term debt 2,800,000 --- ---
Payments on long-term debt (4,219,000) (1,438,000) (1,432,000)
Dividends paid (980,000) (980,000) (980,000)
Reissuance of common stock 8,000 --- ---
Repurchase of common stock (142,000) (111,000) (355,000)
Other --- --- 82,000
Net cash provided by (used for)
financing activities 216,000 (1,304,000) 1,680,000

NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (1,153,000) 496,000 (2,715,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,564,000 1,068,000 3,783,000
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 411,000 $ 1,564,000 $ 1,068,000

</TABLE>
The accompanying notes are an integral part of these statements.<PAGE>

IREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995, 1994 AND 1993

1. PRINCIPLES OF CONSOLIDATION AND ACCOUNTING POLICIES:

The following summarizes the significant accounting policies employed by Irex
Corporation (the Company) and subsidiaries.

Principles of Consolidation

The consolidated financial statements include the accounts of Irex Corporation
and its subsidiaries, all of which are wholly owned. All significant intercom-
pany accounts and transactions have been eliminated in consolidation.

In accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation," gains and losses resulting from foreign currency
transactions during the year are included in operating results, while gains and
losses resulting from translation of the financial statements of the Company's
Canadian subsidiary at the end of the year are reflected as cumulative t-
ranslation adjustments in shareholders' investment. Foreign currency transac-
tion gains and losses in 1995, 1994 and 1993 were not material.

Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Methods of Accounting for Revenues

Revenues from lump-sum basis construction contracts are recognized on the
percentage of completion method, measured by the percentage of costs incurred
to date to estimated total costs for each contract. This method is used
because management considers this to be the best available measure of progress
on these contracts. Revenues from time and material contracts are recognized
on the basis of costs incurred during the period plus the fee earned.

Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation costs. Selling, general and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes
in job performance, job conditions and estimated profitability, including those
arising from contract penalty provisions and contract settlements, result in
revisions to costs and income and are recognized in the period in which the
revisions are determined.

Distribution and other revenues consist primarily of outright sales of pur-
chased insulation and acoustical products.

Reserves for Certain Self-Insured Business Risks

The Company is self-insured against a portion of its workers' compensation and
other insurance risks. The process of determining reserve requirements for
losses within its self-insured retention limits utilizes historical trends,
involves an evaluation of claim frequency, severity and other factors and also
includes the effect of future inflation.

Effective January 1, 1995, the Company changed its method of measuring the
estimated liability for workers' compensation claims. The new method employs
actuarial assumptions to discount to present value the estimated future
payments for these claims, using a risk-free interest rate. The Company
believes this method is preferable because it more accurately reflects the
current impact on its financial condition of the future cash outflows. The
cumulative effect of this accounting change was $1,377,000 ($2,276,000 less the
related tax effect of $899,000) and was included in net income for the year
ended December 31, 1995. The impact of this change, exclusive of the cumula-
tive effect, on operating results during 1995 was not significant nor is it
expected to have a significant impact on future results of operations.

At December 31, 1995, the estimated undiscounted liability for workers'
compensation claims was $13,399,000. The present value of such claims was
$10,260,000, using a weighted average discount rate of 7.17%.

The expected future payments as of December 31, 1995, on an undiscounted basis,
are as follows:
<TABLE>
<S> <C>
1996 $3,581,000
1997 2,012,000
1998 1,450,000
1999 1,127,000
2000 913,000
2001 and thereafter 4,316,000
$13,399,000
</TABLE>
Income Taxes

Deferred income taxes are not provided on the undistributed earnings of the
Company's Canadian subsidiary since taxes payable upon distribution, net of
foreign tax credits, are not expected to be significant. At December 31, 1995,
the cumulative amount of such undistributed earnings was $1,155,000.

Property and Equipment

Property and equipment are depreciated using principally the straight-line
method over the estimated useful lives of the assets. Expenditures for
maintenance and repairs are charged against income as incurred.

Classification Estimated Useful Lives

Buildings 15 to 30 years
Leasehold improvements 3 to 10 years
Machinery and equipment 3 to 7 years

Other Assets

Beginning in 1990, the Company initiated a significant project to improve its
management information systems, including the lease of new computer hardware
and the purchase of a comprehensive software package. The Company has incurred
certain costs, including training and other fees paid to the software vendor
and others, in connection with the implementation of the new system. Such
costs have been capitalized in Other Assets and are being amortized over
periods from three to five years.

Concentration of Business

The Company and its subsidiaries operate within the specialty contracting
industry and the distribution of products related to that industry.

For the years ended December 31, 1995, 1994 and 1993, no one customer accounted
for more than 10% of revenues. The Company's contracting and distribution
businesses purchase materials for use in contracts or resale from a limited
number of major suppliers. Such concentration is normal for the industry and
does not present an unreasonable risk or vulnerability to the Company. Based
on completed contracts, between 25% and 40% of contracting revenues were
derived from the power generation industry during the three-year period ended
December 31, 1995. This concentration does not represent an unusual risk as
contracts are widely disbursed by geography and customer.

2. CONTRACTS IN PROCESS:

Contracts in process as of December 31 are comprised of the following elements:

1995 1994

Costs and estimated
earnings on
uncompleted contracts $ 74,687,000 $ 77,267,000

Less: Billings on
uncompleted contracts (72,558,000) (75,085,000)

Net $ 2,129,000 $ 2,182,000

Contracts in process as of December 31 are reflected in the accompanying
balance sheets under the following captions:

1995 1994

Actual costs and estimated
earnings on contracts in
process in excess of billings $ 4,675,000 $ 4,563,000

Billings in excess of actual
costs and estimated earnings
on contracts in process (2,546,000) (2,381,000)

$ 2,129,000 $ 2,182,000

Actual costs incurred on contracts in process in excess of billings includes
contract costs attributable to claims in the amount of $460,000 and $1,759,000
at December 31, 1995 and 1994, respectively. Contract costs related to claims
are carried at the lower of actual costs incurred or estimated net realizable
value.

3. INCOME TAXES:

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109).
Deferred income taxes are computed based on the differences between financial
reporting and income tax reporting bases of assets and liabilities using
enacted tax rates. The impact of changes in tax rates is reflected in income
in the period in which the change is enacted. In conformity with SFAS 109,
deferred tax assets are classified as current based on the financial reporting
classification of the related liabilities and assets which give rise to
temporary book/tax differences. The deferred tax asset relates to the follow-
ing temporary differences:

1995 1994
Insurance reserves $ 6,573,000 $ 7,157,000
Bad debt reserves 549,000 532,000
Uniform cost capitalization on
inventories 457,000 416,000
Pension and other benefits 493,000 589,000
Contracts 510,000 482,000
Other (284,000) (280,000)
$ 8,298,000 $ 8,896,000

The Company has determined that no valuation allowance for the deferred tax
asset is required as of December 31, 1995 and 1994, as the future realization
of such tax benefits is considered to be more likely than not through the
combination of carryback availability, certain tax planning strategies that
would allow for acceleration of deductible temporary differences to utilize
remaining carryback availability and through expected future taxable income.

Income (loss) before income taxes is comprised of the following components:

1995 1994 1993

Domestic $ 3,505,000 $ 3,762,000 $ (370,000)
Foreign (397,000) 179,000 (10,000)
$ 3,108,000 $ 3,941,000 $ (380,000)

Income tax provision (benefit)
consists of:
1995 1994 1993
Currently payable:
Federal $ 601,000 $ 1,493,000 $ 447,000
State 329,000 259,000 19,000
Foreign (198,000) 90,000 (5,000)

Total currently payable 732,000 1,842,000 461,000

Deferred:
Federal (80,000) (95,000) (572,000)
State (221,000) (33,000) 120,000

Total deferred (301,000) (128,000) (452,000)
(1)
Total $ 431,000 $ 1,714,000 $ 9,000

(1) Excludes provision of $899,000 as of January 1, 1995, from the
cumulative effect of the change in accounting (see Note 1).

The effective income tax rate is different from the statutory Federal income
tax rate as indicated below:
1995 1994 1993
Statutory federal income tax
rate (benefit) 34.0% 34.0% (34.0%)
State income taxes ($108,000,
$226,000 and $139,000), net
of federal benefit 8.6 3.8 32.2
Meals and entertainment (50% disallowance) 17.7 3.3 -
Effects of foreign taxes (7.6) 0.7 (0.6)
Other, net (0.9) 1.7 4.7

Effective income tax rate 51.8% 43.5% 2.3%

The changes in the effective state income tax rate are due to the impact of
state rate changes on deferred tax assets, as well as the changes in the
sources of the Company's state taxable income.

4. CLAIMS AND CONTINGENCIES:

The unusually large number of filings in 1995 included 19,730 in Texas, 5,601
from the Maritime Legal Clinic and 4,993 in West Virginia. The Texas filings
were predominantly on behalf of out-of-state claimants and were apparently
motivated by counsels' efforts to get claims on record before the effective
date of a tort reform statute. The West Virginia filings were attributable to
efforts to participate in a scheduled consolidated trial. Filings nationwide
were apparently also increased during the year by plaintiffs seeking to insure
that cases were filed before the passage of possible federal tort reform
legislation. Accordingly, ACandS believes that the 1995 filings generally
represent an advancement of case filings which will not significantly effect
the ultimate number of cases that may be filed.

It is the pattern in this litigation for suits to be filed as the result of
mass screenings of individuals employed at a particular facility, through a
particular union local, or by a particular employer. It is ACandS's experience
that such suits are often filed with little investigation as to whether the
claimant ever had any causative exposure to asbestos-containing products
associated with the various named defendants. As an example, although the
Maritime Legal Clinic has now pending approximately 13,000 cases against
ACandS, ACandS does not believe there is any basis for liability to the
merchant seamen the Clinic represents. Because of the pattern, historically,
about half of the cases filed against ACandS have been closed without payment.

The defense of the cases pending against ACandS is now being handled by the
Aetna Casualty and Surety Co. with the participation of other insurers that
wrote coverage for ACandS. Virtually all of ACandS's liability and defense
costs for these cases are being paid by Aetna and other insurance carriers.

Since the beginning of 1981, approximately 89,000 individual claims against
ACandS have been settled, dismissed or otherwise resolved. Although payments
in individual cases have varied considerably, ACandS's percentage of the
aggregate liability payments for those cases has been small. As a result,
ACandS's average resolution cost for closed cases is very low. The resolution
cost per closed case in recent years has been consistent with long-term
averages. Bankruptcy filings by a number of companies which had been signifi-
cant defendants in asbestos cases have not significantly increased the cost of
resolving cases. Historically, payments on behalf of ACandS to resolve con-
solidated proceedings in jurisdictions which have been difficult for all defen-
dants have exceeded average costs. ACandS anticipates that it will continue to
face such proceedings in the future.

On July 29, 1991, the Judicial Panel on Multidistrict Litigation ordered that
all asbestos-related bodily injury cases pending in the Federal trial courts
and not then in trial should be transferred to Judge Charles R. Weiner in the
United States District Court for the Eastern District of Pennsylvania for
coordinated or consolidated pretrial proceedings. These proceedings involved
less than one-fourth of the cases then pending against ACandS.

Subsequently, on January 15, 1993, certain plaintiffs' counsel and the members
of the Center for Claims Resolution (an organization of 20 asbestos litigation
defendants) filed a class action complaint, answer and settlement agreement
involving all previously unasserted claims by individuals who have been
occupationally exposed to asbestos fibers, which was assigned to Judge Weiner
as related to the Multidistrict Litigation proceedings. In an order dated
August 16, 1994, the District Court approved the settlement. This approval
remains subject to appeal. The District Court for the Eastern District of
Texas has also approved a class settlement of future asbestos cases against
Fiberboard Corporation which is also currently on appeal. Due to the complexi-
ty of these actions and the claims involved, it is uncertain what impact they
will have on the asbestos-related bodily injury litigation.

Although the large number of pending cases, the continued efforts of certain
courts to clear dockets through consolidated or class proceedings, the bank-
ruptcy filings by defendants, efforts toward national solutions, the transfer
of federal cases to the United States District Court for the Eastern District
of Pennsylvania, and the Center for Claims Resolution and Fiberboard class
actions render prediction uncertain, ACandS expects that its percentage of
liability payments will continue to be relatively small.

Given the number of currently pending cases and the rate of new filings, it is
anticipated that the aggregate amount to be paid by all defendants for
asbestos-related bodily injury claims will be very large. Nevertheless, as
noted, ACandS's percentage of aggregate liability payments is expected to
remain small. Management, therefore, believes that ACandS's insurance coverage
is adequate to ensure that these actions will not have a material adverse
effect on the long-term business or financial position of the Company.

ACandS is also one of a number of defendants in seven actions by the owners of
schools and other buildings seeking to recover costs associated with the
replacement or treatment of installed asbestos-containing products. These
cases involve school buildings, public buildings, and office buildings. One of
the cases is an alleged class action.

ACandS has substantial defenses to the actions, including defenses based upon
the character of its operations and the fact that ACandS did not manufacture
the asbestos-containing products involved. Moreover, ACandS potentially has
indemnification and/or contribution claims against the product manufacturers.
To date, ACandS has been dismissed from 102 cases, largely on the basis it had
no connection with the products at issue in the claimants' buildings, and has
agreed to settle 14 claims. The aggregate amount paid has been very small in
the context of this litigation. ACandS was not served with any new building-
related cases in 1995. Since 1990, only three new building related cases have
been served on ACandS.

ACandS's primary insurance carriers, the Aetna Casualty and Surety Co. and the
Travelers Insurance Companies, are currently providing ACandS with a defense in
these building cases, as well as paying settlements when necessary. Travelers
is providing coverage pursuant to a settlement agreement, but Aetna has
asserted reservations of rights to later contest both the availability and the
amount of coverage. Aetna, nevertheless, continues to make its required pay-
ments.

From time to time, the Company and its subsidiaries are also parties as both
plaintiff and defendant to various claims and litigation arising in the normal
course of business, including claims concerning work performed under various
contracts. In the opinion of management, the outcome of such claims and
litigation will not materially affect the Company's long-term business,
financial position or results of operations.

5. CONSOLIDATED STATEMENTS OF CASH FLOWS:

The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents. The effect of
changes in foreign exchange rates on cash balances in 1995, 1994 and 1993 was
not material.

The Company's income tax and interest payments are summarized below:

1995 1994 1993

Income taxes
(net of refunds) $ 1,010,000 $ 673,000 $ 2,608,000

Interest 2,034,000 2,268,000 2,116,000

Certain funding of the Company's defined contribution savings incentive plan
(see Note 6) during 1993 was treated as a noncash financing activity in the
consolidated statements of cash flows.

6. EMPLOYEE BENEFIT PLANS:

Defined Benefit Pension Plan

The Company and its subsidiaries have a defined benefit pension plan covering
substantially all of their salaried employees. The benefits under the plan are
based on years of service and salary levels. The Company's policy is to fund
pension costs in accordance with the requirements of the Employee Retirement
Income Security Act of 1974.

Actuarially computed net pension expense includes the following components:

1995 1994 1993

Service cost-benefits earned
during the period $ 480,000 $ 564,000 $ 518,000

Interest cost on projected
benefit obligation 439,000 400,000 358,000

Loss (return) on plan assets:
Actual (1,147,000) 129,000 (221,000)
Deferred 805,000 (466,000) (58,000)

Recognized return (342,000) (337,000) (279,000)

Net amortization (5,000) 24,000 9,000

Net pension expense $ 572,000 $ 651,000 $ 606,000

The following table sets forth the plan's funded status and amounts recognized
in the consolidated balance sheets at December 31, 1995 and 1994:

1995 1994

Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$5,080,000 and $3,800,000,
respectively $ 5,559,000 $ 4,089,000

Projected benefit obligation for service
rendered to date $ 6,981,000 $ 5,392,000
Plan assets at fair value (6,151,000) (3,953,000)
Projected benefit obligation in excess of
plan assets 830,000 1,439,000
Unrecognized net loss from past experience
different from that assumed and effects
of changes in assumptions (114,000) (63,000)

Accrued pension cost $ 716,000 $ 1,376,000

Assumptions used in the accounting were:
1995 1994

Weighted average discount rates 7.50% 8.50%

Rates of increase in future
compensation levels 5.00% 5.00%

Expected long-term rate of return on assets 8.50% 8.50%

A substantial number of the domestic hourly employees of the Company's subsid-
iaries are covered by union-sponsored, collectively bargained, multiemployer
pension plans. The Company contributed approximately $5,791,000 in 1995,
$6,727,000 in 1994 and $6,500,000 in 1993 to such plans. Information is not
available from the plans' administrators to permit the Company to determine its
share of the unfunded vested benefits of these plans.

Postretirement Benefits Other Than Pensions

In addition to providing pension benefits, the Company and its subsidiaries
provide certain health care benefits under company-sponsored plans for the
majority of retired salaried employees. Active salaried employees who were at
least age 55 and had 10 years of consecutive service at January 1, 1990 are
eligible for these benefits upon retirement. Also, active salaried employees
of the Company whose age plus years of service equalled at least 55 at January
1, 1990 are eligible for these benefits upon retirement when they attain age 62
as long as such employees have either 20 years of service or their age plus
years of service equals 90 upon retirement. Cash payments of up to $60.00 per
month are given to retirees over age 65 to purchase supplemental Medicare
coverage. Eligible retirees under age 65 are fully covered by the Company's
insurance plan. The number of retirees under age 65 currently participating in
the plan is not significant.

In the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standard, (SFAS), No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". This standard requires that the expected cost
of these benefits must be charged to expense during the years that the employ-
ees render service. The Company adopted this statement prospectively and is
amortizing a transition obligation of $961,000 at January 1, 1993, over 20
years. In prior years, the Company expensed the cost of these benefits as
claims were paid. Claim payments were $91,000, $87,000 and $54,000 in 1995,
1994 and 1993, respectively.

Actuarially computed net periodic postretirement benefit cost included the
following components:

1995 1994

Service cost-benefits earned during the period $ 14,000 $ 22,000

Interest cost on accumulated postretirement
benefit obligation 91,000 93,000

Expected return on plan assets (26,000)
(22,000)
Amortization of transition obligation 48,000 48,000

Net periodic postretirement benefit cost $ 127,000 $ 141,000

The following table sets forth the plan's funded status and amounts recognized
in the consolidated balance sheet at December 31, 1995 and 1994:

1995 1994

Accumulated postretirement benefit obligation:
Vested benefit obligation $ 877,000 $ 869,000
Non-vested benefit obligation 329,000 323,000
1,206,000 1,192,000
Plan assets at fair value (139,000) (213,000)

Accumulated postretirement benefit obligation
in excess of plan assets 1,067,000 979,000
Unrecognized transition obligation (817,000) (865,000)
Unrecognized net gain 150,000 177,000

Accrued postretirement benefit liability $ 400,000 $ 291,000

For measurement purposes, a 13% annual rate of increase in the per capita cost
of covered health care benefits was assumed for calendar 1995; the rate was
assumed to decrease to 10% in 1998 and 7% for 2001 and remain level thereafter.
Due to the provisions of the plan, increasing the assumed health care cost
trend rates by one percentage point in each year would not have a significant
impact on the accumulated postretirement benefit obligation or the aggregate of
the service and interest cost components of net periodic postretirement benefit
cost for 1995.

The weighted-average discount rate used in determining the accumulated postret-
irement benefit obligation was 7.50% and 8.50% at December 31, 1995 and 1994,
respectively. The expected long-term rate of return on assets is 8.5% at
December 31, 1995 and 1994.

Other

The Company and its subsidiaries have incentive compensation plans covering
substantially all of their officers and key employees. The amount of incentive
compensation is primarily dependent upon the rate of return on assets of the
Company's subsidiaries and their particular district or branch offices and the
net income of the Company. Total incentive compensation expense was $1,698,000
for 1995, $2,295,000 for 1994 and $2,159,000 for 1993.

In July 1994, the Board of Directors approved a Special Incentive Program for
certain designated key executive officers (nine in number at December 31, 1995)
of the Company. The program covers the period beginning January 1, 1995
through December 31, 1997, and provides for an award of up to 2,000 shares of
the Company's common stock to each participant if certain specified financial
goals are obtained by the Company. Specifically, the Company must achieve a
17% return on common shareholders' equity and cumulative income to common
shareholders of $6,000,000 for the three-year period ended December 31, 1997,
for any shares to be granted. In addition, there is a three-year vesting
period after any shares are granted. The cumulative effect of the accounting
change discussed in Note 1 is not included in determining actual performance
against goal. Because the targets were not achieved, no compensation expense
related to this program was incurred for 1995.

The Company and its subsidiaries also maintain defined contribution savings
incentive and employee stock ownership (ESOP) plans covering substantially all
salaried employees. Contributions to the savings incentive plan are based on
specified percentages of employee contributions to the plan, while ESOP
contributions are discretionary. A portion of the 1993 contribution to the
savings incentive plan was funded with shares of the Company's common stock.
Expense for these plans was $665,000 in 1995, $743,000 in 1994 and $1,026,000
in 1993.

The Company also maintains a non-qualified stock option plan providing for the
issuance to employees and outside directors of up to 80,000 options to purchase
shares of the Company's common stock. The number of options available for
future grant was reduced during 1995. The following is a summary of certain
information pertaining to options under this plan:

1995 1994 1993

Options Outstanding at Beginning of Year 58,475 37,225 53,300

Options Granted 3,500 23,250 37,225

Options Exercised (500) - -

Options Expired or Canceled (10,125) (2,000) (53,300)

Options Outstanding at End of Year 51,350 58,475 37,225

Range of Prices of Options Outstanding $16.125- $16.125- $31.00

$31.00 $31.00

Options Exercisable 20,850 14,125 7,625

Options Available for Future Grant 28,150 166,525 162,775

7. EMPLOYEE STOCK OWNERSHIP PLAN FINANCING TRANSACTION:

In December 1985, the Company's Employee Stock Ownership Plan (ESOP) purchased
on the open market 45,227 shares of the Company's common stock for an aggregate
purchase price of approximately $1,000,000. The shares were solicited pursuant
to a Schedule 13E-4 Tender Offer Statement. Financing for the purchase was
obtained by the ESOP through a ten year bank loan which bears interest at 9%
per annum and is guaranteed by the Company. In accordance with generally
accepted accounting principles, this loan has been reflected as long-term debt
in the Company's consolidated balance sheets, with a corresponding charge to
equity for the purchase price of the related shares, less principal repayments
on the bank loan. The loan was repaid during 1995.

8. BORROWINGS:

Bank Borrowings:

The Company had short-term lines of credit totaling $22,749,000 and
$19,025,000, of which $8,756,000 and $6,007,000 was in use, as of December 31,
1995 and 1994, respectively. These loans bear interest at not more than the
prime rate. (The weighted average interest rate was 7.2% and 7.7% as of
December 31, 1995 and 1994, respectively.) The Company maintains deposits at
several banks which serve various corporate purposes including the support of
its lines of credit available or in use. All lines of credit are renegotiated
annually.

Long-Term Debt

Long-term debt consists of the following at December 31, 1995 and 1994:

1995 1994
9% unsecured senior notes payable
in equal annual installments from
May 1, 1996 to 2002 $13,000,000 $13,000,000

10.41% unsecured senior notes payable
in equal semi-annual installments from
May 1, 1993 to November 1, 1997 - 4,200,000

7.3% unsecured term note payable in equal
semi-annual installments from
May 1, 1996 to November 1, 1997 2,800,000 -

9.0% company ESOP bank loan (see Note 7) - 161,000

Other - 19,000

Total 15,800,000 17,380,000
Less current portion 3,257,000 1,580,000

$12,543,000 $15,800,000

On May 1 and November 1, during the term of the 9% unsecured senior notes, the
Company has the option to prepay principal balances in multiples of $100,000
plus accrued interest and a prepayment penalty.

At November 1, 1995, the Company prepaid the 10.41% unsecured senior notes, in
whole, at a premium of 102% of their principal amount, plus accrued interest.
The Company used the proceeds from the 7.3% unsecured term note to fund the
prepayment.

The Company's long-term debt agreements contain restrictions on the incurrence
of debt, investments, dividend payments and the redemption of capital stock and
preferred stock, as well as requiring that the Company maintain certain
financial ratios and levels of net worth. At December 31, 1995, the Company
was in compliance with all of these covenants.

Long-term borrowings maturing during the next five years are as follows:

1996 $3,257,000
1997 3,257,000
1998 1,857,000
1999 1,857,000
2000 1,857,000

Based on the borrowing rates currently available to the Company for bank loans
with similar terms and average maturities, the estimated fair market value of
long-term debt is $16,470,000 as of December 31, 1995.

9. LEASE COMMITMENTS:

The Company leases warehouses, sales offices and computer equipment under
noncancelable lease agreements. Rental expense for all operating leases was
$5,654,000 in 1995, $5,283,000 in 1994 and $5,270,000 in 1993. As of Decem-
ber 31, 1995, the future minimum rental commitments under noncancelable leases
that have terms in excess of one year are as follows:

1996 $2,810,000
1997 2,155,000
1998 1,271,000
1999 740,000
2000 528,000
Subsequent years 197,000
Total minimum rental obligations $ 7,701,000

10. REDEEMABLE PREFERRED STOCK:

During 1992, the Company offered to exchange one share of preferred stock with
a par value of $1 per share for each share of the Company's outstanding common
stock up to a maximum of 350,000 common shares (the Offer). A total of 349,864
common shares were exchanged in December 1992 in accordance with the Offer.

Dividends on the preferred stock accrue at an annual rate of $2.80 per share.
Such dividends are cumulative and payable quarterly in arrears commencing
January 1, 1993. At December 31, 1995 and 1994, the Company had accrued
$245,000 for such dividends. In the foreseeable future, the Company does not
expect to pay cash dividends on the outstanding common shares at December 31,
1995. The preferred stock is nonvoting except in certain circumstances.

On or after February 1, 1998, the Company may, at its option, redeem the
preferred stock, in whole or in part, initially at $31.50 per share and
declining to $30 per share on and after February 1, 2003, plus accrued and
unpaid dividends. Prior to February 1, 2013, the Company will not have the
right to redeem shares of preferred stock which have been continuously owned
beneficially by the holder thereof since the issuance of the preferred stock in
connection with the Offer, if such holder elects to prohibit such redemption.

On December 1, 1998, and on each December 1 thereafter through and including
December 1, 2012, the Company will be obligated to redeem shares of the
preferred stock that any holders thereof have requested the Company to redeem
at $30 per share, plus accrued and unpaid dividends, subject to an annual
limitation on the number of shares that the Company will be obligated to
redeem.

The preferred stock has a liquidation value of $30 per share, plus accrued and
unpaid dividends thereon. The payment of dividends on, and the redemption of,
the preferred stock may be restricted by the terms of Company loan agreements
or by the terms of future financing arrangements.

11. ACCRUED LIABILITIES:

The components of accrued liabilities as of December 31, 1995 and 1994 are as
follows:

1995 1994

Salaries and wages $ 2,461,000 $ 3,047,000
General and auto liability insurance 5,888,000 4,822,000
Other 7,186,000 7,500,000
$ 15,535,000 $ 15,369,000

<PAGE>

IREX CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

For the Three Years Ended December 31, 1995

Balance at Additions Deductions Balance
Beginning Charged to from at End
of Period Income Reserve of Period

DEDUCTED FROM BALANCE SHEET
CAPTION TO WHICH IT APPLIES:
Reserve for Doubtful Accounts -

Year Ended December 31, 1993 $1,316,000 $ 901,000 $ (872,000) $1,345,000
Year Ended December 31, 1994 $1,345,000 $1,092,000 $(1,007,000) $1,430,000
Year Ended December 31, 1995 $1,430,000 $1,096,000 $(1,086,000) $1,440,000

<PAGE>

Item 9. Disagreements on Accounting and Financial Disclosure

Not Applicable

PART III

Item 10. Directors and Executive Officers

(a) Identification of Directors

Positions and Offices Held Period Held
Name (Age) and Other Directorships From To

Carlton E. Hughes (64) Director, Irex Corporation 1980 1997
(1) (4) Chairman, Stewart-Amos Steel, Inc.
(steel fabricator)
Director, CoreStates Financial
Corporation (bank holding company)
Director, Arnold Industries, Inc.

Joanne M. Judge (43) Director, Irex Corporation 1993 1996
(2) Former President and Chief 1987 1993
Executive Officer, Community
Hospital of Lancaster

David C. Kleinman (60) Director, Irex Corporation 1984 1996
(3) Senior Lecturer,
University of Chicago
Graduate School of Business
Management Consultant
Director, Acorn Fund (Diversified
Common Stock Mutual Fund)

Michael J. Lardner (52) Director, Irex Corporation 1989 1998
(2) President and Chief Operating Officer
High Construction, Inc. 1993 Present
(general contractor)
President, Chief Operating Officer, 1989 1992
Director, Horst Group

W. Kirk Liddell (46) Director, Irex Corporation 1980 1997
(1) President, Irex Corporation
Director, High Industries

Wilson D. McElhinny (66) Director, Irex Corporation 1975 1996
(1) (3) (4) Director, Educators Mutual Life
Insurance Company
Director, Hunt Manufacturing Company
(office and art/craft product
manufacturer)

John O. Shirk (52) Director, Irex Corporation 1987 1997
(3) (4) Partner, Barley, Snyder, Senft
and Cohen (law firm)
Director, Fulton Financial Corporation
(bank holding company)
Director, Educators Mutual Life
Insurance Company

N. Thompson Washburn (66) Director, Irex Corporation 1980 1998
(1) (2) Administrative Consultant,
Getty Petroleum Corporation
(petroleum distribution)

(1) - Member of the Executive Committee
(2) - Member of the Audit Committee
(3) - Member of the Nominating and Corporate Governance Committee
(4) - Member of the Compensation and Benefits Committee

Note: Unless otherwise indicated, principal occupations listed
were the same for the past five years.

(b) Identification of Executive Officers

Positions and Offices Held
Name (Age) During Past Five Years

W. Kirk Liddell (46) President and Chief Executive Officer

Donald M. Coffin (62) Vice President and Director of Business
Development

James E. Hipolit (45) Vice President and General Counsel

Jane E. Pinkerton (56) Vice President, Administrative Services
and Secretary since 1992;
Vice President and Director of Personnel
from 1988 to 1992

Terry L. Troupe (48) Vice President and Chief Financial Officer
since 1993;
Vice Chairman, Meridian Bancorp, Inc.,
(financial services) 1989 to 1992

(d) Not Applicable.

(e) Business Experience. A brief account of the business experience during
the past five years of each director or executive officer and the other
directorships of registered companies held by each director has been provided
above.

(f) Involvement in Certain Legal Proceedings. None

(g) Not Applicable.

Item 11. Executive Compensation
Summary Compensation Table

The following table sets forth information required concerning cash and noncash
compensation of the Chief Executive Officer and the four other most highly
compensated executive officers for each of the last three fiscal years.

Annual Compensation Long-Term
Compensation
All Other
Name and Principal Year Salary($) Bonus($) Options(#) Compensation
Positions ($)
(1) (2)

W. K. Liddell 1995 $264,000 $ -0- - $ 8,274
President and Chief 1994 253,000 117,898 3,000 8,448
Executive Officer 1993 248,000 -0- 3,750 10,613

D. M. Coffin 1995 93,700 8,433 - 6,461
Vice President 1994 88,200 22,570 1,000 5,324
1993 87,000 10,830 500 4,339

J. E. Hipolit 1995 111,200 13,344 - 8,228
Vice President and 1994 109,200 37,259 1,000 6,858
General Counsel 1993 104,400 12,528 500 5,372

A. V. Stoycos (3) 1995 108,220 49,998 - 8,223
President, Specialty 1994 105,720 40,047 1,000 7,112
Prod. and Insul. Co. 1993 101,720 20,547 500 5,412

T. L. Troupe (4) 1995 118,800 14,256 - 8,340
Vice President and 1994 61,408 40,424 1,000 6,451
Chief Financial Officer1993 - 7,369 2,500 2,430

(1) Bonus amounts for the year represent bonuses accrued for the
calendar year listed but paid in the following calendar year.

(2) Includes amounts earned under the Company's Savings Incentive Plan
and Employee Stock Ownership Plan.

Savings Incentive Plan. The Company offers a Savings Incentive Plan for
all salaried employees whereby they can elect to contribute up to 15% of their
salary and incentive compensation into accounts in their names which are
independently managed and invested. Pursuant to amendments adopted by the
Board of Directors which became effective January 1, 1985, the employees'
contributions to the Plan were made in accordance with the provisions of
Section 401(k) of the Internal Revenue Code. The Company's match is 75% of the
first 6% of employee contributions. One-third of the Company's match is in-
vested in Irex Corporation common stock and is subject to the Company achieving
a specific financial performance target.

On December 31, 1995, there were 374 employees of the Company and its
subsidiaries participating in the Savings Incentive Plan and 27,438 shares of
common stock held by such Plan.

Employee Stock Ownership Plan. Effective January 1, 1983, the Company
established an Employee Stock Ownership Plan (ESOP) and Trust for the benefit
of employees, of which, W. Kirk Liddell, Jane E. Pinkerton, Alexander V.
Stoycos, and Terry L. Troupe are trustees. All salaried employees of the
Company and its U.S. subsidiaries automatically become participants in the ESOP
on the January 1st following their date of hire. In December 1985, the Trust
borrowed $1,000,000 and used the proceeds of the loan to purchase a total of
45,227 shares of Company common stock. The stock is held in an unallocated
stock account and then allocated to participants' accounts as the loan is paid
off and will be transferred to participating employees and their beneficiaries
upon retirement or other termination of service. Participants are neither
required nor permitted to make contributions to the ESOP. Additional Company
contributions are permitted upon the Company's achievement of specific finan-
cial performance targets. The loan was repaid during 1995.

On December 31, 1995, there were 427 employees of the Company and its
subsidiaries eligible to participate in the ESOP and the total of 49,202 shares
of common stock held by the ESOP were fully allocated to such participants'
accounts.

(3) Mr. Stoycos is included in his capacity as President of a major
wholly-owned subsidiary of the Company.

(4) Compensation is less than a full year for 1993 as Mr. Troupe
commenced employment with the Company as of June 7, 1993.

Stock Option Plans

On February 28, 1990, the Board of Directors of the Company adopted the
Irex Corporation Non-Qualified Stock Option Plan under which options to
purchase not more than 200,000 shares of the Company's common stock may be
granted over the next ten years to employees of the Company and its subsidiar-
ies. The number of shares available for options was reduced during 1995 from
200,000 shares to 55,000 shares. The recipients of options and the number of
options granted to them are determined by the Compensation and Benefits
Committee of the Board of Directors. Unless otherwise determined by the
Compensation and Benefits Committee, no option may be exercised before three
years nor more than ten years after the date of grant. On July 20, 1994, the
Board of Directors amended the plan to provide that Fair Market Value on the
date of the grant shall be defined as (i) the mean between the highest and
lowest prices of actual sales of Shares on the principal national securities
exchange on which the Shares are listed on such date, or, (ii) if there are no
such sales on such date, the mean between the closing bid and asked prices of
the Shares on such exchange on such date, or, (iii) if the Shares are not
listed on any national securities exchange, the mean between the closing high
bid and low asked prices of the Shares in over-the-counter trading as identi-
fied by the National Quotation Bureau or other comparable source selected by
the Committee, or (iv) if the Committee determines that the mean is not an
accurate reflection of the market value of the Shares, the fair market value as
determined for purposes of the Company's Employee Stock Ownership Plan, less a
discount reflecting the lack of liquidity of Shares in the open market, or, (v)
if the Company's Employee Stock Ownership Plan has terminated, or has failed to
provide a current valuation of the Shares for any other reason, the fair market
value as determined by a disinterested third party selected by the Committee
and qualified to perform an evaluation of the Shares. Prior to this amendment,
the option price was established at the fair market value as determined for
purposes of the Company's Employee Stock Ownership Plan, less a discount
reflecting the lack of liquidity of shares in the open market.

There were no stock options granted to management nor were any options
exercised by management during the year ended December 31, 1995. The following
table sets forth information as to the aggregate options granted and outstand-
ing as of December 31, 1995, for the individuals named.

Number of Value of Unexercised
Unexercised Options In-the-Money Options
Name Exercisable Unexercisable Exercisable Unexcercisable

W. K. Liddell 8,750 6,750 $ - 0 - $18,000
D. M. Coffin 1,000 1,500 $ - 0 - 6,000
J. E. Hipolit 1,250 1,500 $ - 0 - 6,000
A. V. Stoycos 1,500 1,500 $ - 0 - 6,000
T. L. Troupe 0 3,500 $ - 0 - 6,000

Special Incentive Program

In July 1994, the Board of Directors approved a Special Incentive Program
for certain designated key executive officers (nine in number at December 31,
1995) of the Company. The program covers the period beginning January 1, 1995
through December 31, 1997, and provides for an award of up to 2,000 shares of
the Company's common stock to each participant if certain specified financial
goals are obtained by the Company. Specifically, the Company must achieve a
17% return on common shareholders' equity and cumulative income to common
shareholders of $6,000,000 for the three-year period ended December 31, 1997,
for any shares to be granted. In addition, there is a three-year vesting
period after any shares are granted. The cumulative effect of the accounting
change or extraordinary items are not included in determining actual perfor-
mance against goal. Because the targets were not achieved, no compensation
expense related to this program was incurred for 1995.

Retirement Income Plan Table

The Company's Retirement Income Plan which became effective September 1,
1984, covers all salaried employees. All costs are paid by the Company, and
the amount of retirement income is determined by the career average rate of
compensation and length of credited service at retirement. Effective January
1, 1989, the Plan provides for an annual benefit based on 1% of annual compen-
sation up to the Social Security covered compensation level and 1.5% of
compensation over that level.

The Retirement Income Plan in effect prior to the adoption of this Plan
provided for benefits based on the final five years average compensation and
length of service at retirement. Assets of the former Plan sufficient to fund
all accrued benefits under that Plan for participants were used to purchase
annuities for the participants or transferred to the participants' accounts in
the Savings Incentive Plan.

The following table sets forth required Pension Plan information for the
Chief Executive Officer and the four other most highly compensated executive
officers.
Estimated Annual
Name of Individual Amounts Transferred Benefits Upon
or Number of from Retirement Under
Persons in Group Former Plan New Plan

W. Kirk Liddell $ 3,025 $70,498
Donald M. Coffin 0 17,562
James E. Hipolit 1,176 55,710
Alexander V. Stoycos 27,011 32,060
Terry L. Troupe 0 37,241

Compensation of Directors

All Directors who are not officers of the Company receive an annual fee of
$7,500 and $500 per board meeting attended. The Board of Directors has various
committees as identified in Item 10 (a), above, and the outside directors on
those committees receive $500 per committee meeting attended. Directors who
are officers of the Company or its subsidiaries receive no additional compensa-
tion for attendance at meetings of the board or board committees. The Chairman
of the Board of the Company receives an additional annual fee of $17,500.

On April 28, 1994, the shareholders approved a Non-Qualified Stock Option
Plan for Outside Directors of the Company. This plan authorized the granting
of options on 25,000 shares of Common Stock to directors who are not employees
of the Company. Each outside director automatically receives an option to
purchase 500 shares as of January 1, 1994 and each January 1 thereafter through
and including January 1, 1998. Options are granted at Fair Market Value
consistent with the pricing mechanism established under the Non-Qualified Stock
Option Plan for employees. Options are exercisable at any time more than one
year from the date of grant, but no more than ten years from the date of the
grant.

Item 12. Security Ownership of Certain Beneficial Owners and Management

(a) Security Ownership of Certain Beneficial Owners

Following is a list of the persons known by the Company to be the beneficial
owners of more than five percent of the Company's Common Stock, as of March 6,
1996. There is no beneficial owner with more than 5% of preferred stock.

Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class

W. Kirk Liddell 41,079 Shares (1) 10.43%
175 River Hill Road
Conestoga, PA 17516

(1) Does not include 12,682 shares in wife's name to which Mr. Liddell
disclaims beneficial ownership. Includes 24,000 shares as custodian for
dependent children, 880 allocated shares in the Irex Corporation Employees'
Stock Ownership Plan, and 564 shares in the Irex Corporation Savings Incentive
Plan (401k).

(b) Security Ownership of Management

The amounts of the Company's Common and Preferred Stock held directly or
indirectly by the directors, and by the directors and executive officers as a
group, are shown below as of March 6, 1996. Unless otherwise described in the
footnotes following the listing, in each case the beneficial ownership repre-
sents the sole voting and investment power.

Amount Held Percent of Class
Common Preferred Common Preferred

Donald M. Coffin 669 (1) - .17% - %
James E. Hipolit 1,275 (1)(5) - .32 -
Carlton E. Hughes 3,070 - .78 -
Joanne M. Judge 600 - .15 -
David C. Kleinman 50 - - -
Michael J. Lardner 50 - - -
W. Kirk Liddell 41,079 (2) - 10.43 -
Wilson D. McElhinny 7,366 - 1.87 -
John O. Shirk 1,178 - .30 -
Alexander V. Stoycos 2,989 (1) 4,519 .76 1.29
Terry L. Troupe 10,442 (1) - 2.65 -
N. Thompson Washburn 894 (3) - .23 -

Directors and Executive
Officers as a Group 72,238 (4) 5,091 18.34% 1.46%
(17 Persons)

(1) Includes allocated shares in the Irex Corporation Employees' Stock
Ownership Plan and allocated shares in the Irex Corporation Savings Incentive
Plan (401k) as follows, respectively: Mr. Coffin, 405 and 264; Mr. Hipolit,
547 and 328; Mr. Stoycos, 563 and 345; and Mr. Troupe, 116 and 92.

(2) Does not include 12,682 shares in wife's name to which Mr. Liddell
disclaims beneficial ownership. Includes 24,000 shares as custodian for
dependent children, 880 allocated shares in the Irex Corporation Employees'
Stock Ownership Plan, and 564 shares in the Irex Corporation Savings Incentive
Plan (401k).

(3) Includes 200 shares to which Mr. Washburn shares voting and
investment power.

(4) Includes 3,636 allocated shares in the Irex Corporation Employees'
Stock Ownership Plan and 2,212 shares in the Irex Corporation Savings Incentive
Plan (401k).

(5) Includes 400 shares to which Mr. Hipolit shares voting and
investment power.

None

Item 13. Certain Relationships and Related Transactions

(a) Transactions with Management and Others

None

(b) Certain Business Relationships

None

(d) Transactions with Promoters

None

PART IV

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

(a) Documents filed as part of this report

1. See Item 8

2. See Item 8

3. Exhibits required to be filed by Item 601 of Regulation S-K
(Exhibit numbers correspond to those in the Exhibit Table, Item 601, Regulation
S-K)

(3) The Articles of Incorporation of the Company filed as
an exhibit to the Company's 1982 Annual Report on Form 10-K are hereby incorpo-
rated by reference. An amendment to the Articles of Incorporation, changing
the Company's name, filed as an exhibit to the Company's 1983 Annual Report on
Form 10-K is hereby incorporated by reference. An amendment to the Articles of
Incorporation, which includes the authorization of Preferred Stock, cumulative
voting, term and number of directors and limits to the number of employees on
the Board of Directors, filed as an exhibit to the Company's 1992 Annual Report
on Form 10-K is hereby incorporated by reference.

(4) The Form of Stock Certificate filed as an exhibit to
the Company's 1980 Annual Report on Form 10-K is hereby incorporated by refer-
ence. A revised Form of Stock Certificate reflecting the Company's name change
filed as an exhibit to the Company's 1983 Annual Report on Form 10-K is hereby
incorporated by reference.

(9) None

(10) None

(11) Not Applicable

(12) Not Applicable

(13) Annual Report To Shareholders - See Supplemental
Information below.

(16) Not Applicable

(18) Not Applicable

(19) Not Applicable

(21) A chart showing the subsidiaries of the registrant is
filed as an exhibit to this report.

(22) Not Applicable

(23) Not Applicable

(24) Not Applicable

(27) Not Applicable

(28) Not Applicable

(99) Not Applicable

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the last quarter of 1995.

(d) See Item 8

Supplemental Information

Copies of the Company's 1995 Annual Report to Security Holders, 1996 Proxy
Statement, and 1996 Proxy are being furnished to the Commission for its infor-
mation under separate cover.

<PAGE>

SUBSIDIARIES OF THE REGISTRANT

IREX CORPORATION
A Pennsylvania Corporation

IREX FINANCIAL
CORPORATION
A Delaware Corporation
Wholly Owned Subsidiary of
Irex Corporation

CENTIN
CORPORATION
A Pennsylvania Corporation
Wholly Owned Subsidiary
of Irex Corporation

SPECIALTY PRODUCTS
AND INSULATION CO.
A Pennsylvania Corporation
Wholly Owned Subsidiary
of Irex Corporation

ACandS, Inc.
A Delaware Corporation
Wholly Owned Subsidiary
of Irex Corporation

SPACECON, Inc.
A Delaware Corporation
Wholly Owned Subsidiary
of Irex Corporation

COMMERCIAL
INTERIOR
BUILDERS, Inc.
A Delaware Corporation
Wholly Owned Subsidiary
of Irex Corporation

ACandS
CONTRACTING LTD.
Incorporated in Dominion
of Canada
Wholly Owned Subsidiary
of ACanS, Inc.

ACandS
Abatement
A Delaware Corporation
Wholly Owned Subsidiary
of ACandS, Inc.

ALL OF THE ABOVE CORPORATIONS ARE INCLUDED IN THE CONSOLIDATED
FINANCIAL STATEMENTS

CHART #9 MARCH 1996<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

IREX CORPORATION

By /S/T. L. Troupe 3/29/96
T. L. Troupe Date
Vice President and Chief Financial Officer
(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

By /S/W. K. Liddell 3/29/96
W. K. Liddell Date
President and Director
(Principal Executive Officer)

By /S/T. L. Troupe 3/29/96
T. L. Troupe Date
Vice President and Chief Financial Officer
(Principal Financial Officer)

By /S/J. P. Farrell 3/29/96
J. P. Farrell Date
Controller
(Principal Accounting Officer)

By /S/C. E. Hughes 3/29/96
C. E. Hughes, Director Date

By /S/J. M. Judge 3/29/96
J. M. Judge, Director Date

<PAGE>

By /S/D. C. Kleinman 3/29/96
D.C. Kleinman, Director Date

By /S/M. J. Lardner 3/29/96
M. J. Lardner, Director Date

By /S/W. D. McElhinny 3/29/96
W.D. McElhinny, Director Date

By /S/J. O. Shirk 3/29/96
J. O. Shirk, Director Date

By /S/N. T. Washburn 3/29/96
N. T. Washburn, Director Date
<PAGE>

- 43 -<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf of the undersigned, thereunto duly authorized.

IREX CORPORATION

By 3/29/96
T. L. Troupe Date
Vice President and Chief Financial Officer
(Principal Financial Officer)

By 3/29/96
W. K. Liddell Date
President and Director
(Principal Executive Officer)

By 3/29/96
T. L. Troupe Date
Vice President and Chief Financial Officer
(Principal Financial Officer)

By 3/29/96
J. P. Farrell Date
Controller
(Principal Accounting Officer)

By 3/29/96
C. E. Hughes, Director Date

By 3/29/96
J. M. Judge, Director Date
<PAGE>

By 3/29/96
D. C. Kleinman, Director Date

By 3/29/96
M. J. Lardner, Director Date

By 3/29/96
W. D. McElhinny, Director Date

By 3/29/96
J. O. Shirk, Director Date

By 3/29/96
N. T. Washburn, Director Date
<PAGE>

- 43 -

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