IREX CORP, 10-K, 1997-03-31

IREX CORP
10-K, 1997-03-31
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, 1996 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 ]

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.; CENTIN Corporation; and
Spacecon, Inc. Commercial Interior Builders, Inc. has been inactive since
December 31, 1992 and was merged into ACandS, Inc., with ACandS surviving the
merger, effective as of the close of business on September 30, 1996. Through
ACandS Contracting Ltd., a wholly owned subsidiary of ACandS, Inc., the
Company is engaged in thermal insulation contracting in Canada. In 1996, 52%
of total revenues was the result of contract operations and 48% 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, 1996, the Company had an unbilled contract backlog of
$47.6 million as compared to an unbilled contract backlog of $51.9 million on
December 31, 1995. A substantial portion of this backlog can reasonably be
expected to be installed during 1997, 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
requirements. 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 regional and area offices share facilities at the same location, and
most of the distribution offices are divided into both warehouse and office
space. A few have fabricating shops connected with the warehouse. There are
74 leased regional, area and branch offices in the United States and two
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 five 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 1996, ACandS was served with cases
involving approximately 37,777 individual plaintiffs. Of the 1996 filings,
24,564 were served in the first half of the year. There were 44,904 new
plaintiffs in 1995; 18,122 new plaintiffs in 1994; 20,542 new plaintiffs in
1993; and 13,875 new plaintiffs in 1992. Of the 1993 filings, over 4,000
were dismissed against ACandS shortly after filing.

The large number of filings in 1995 and 1996 includes 35,067 in Texas, 10,661
in West Virginia, and 11,143 from the Maritime Legal Clinic. The Texas
filings are predominantly on behalf of out-of-state claimants. Efforts
during 1995 to reform tort rules in Texas appeared to initially spur
potential claimants to file before any reforms became effective. The reforms
which were enacted did not significantly limit the out-of-state filings, and
such filings from expanded screening programs continued during 1996. West
Virginia filings diminished substantially in the second half of 1996 after
the cut off for participation in a pending consolidated trial passed. A
substantial number of the Maritime Legal Clinic filings have already been
administratively dismissed.

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. Because of this
pattern, historically, about half of the cases filed against ACandS have been
closed without payment. As the scope of the mass screening programs has
increased, the degree of illness of the claimants has appeared to diminish.

The defense of the cases pending against ACandS is now being handled by the
Travelers/Aetna Property Casualty Corp. 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 ACandS's insurance
carriers.

Since the beginning of 1981, approximately 126,000 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 significant defendants in asbestos cases have not significantly
increased the cost of resolving cases. Historically, payments on behalf of
ACandS to resolve consolidated proceedings in jurisdictions which have been
difficult for all defendants 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. The District
Court approved the settlement, but the U.S. Court of Appeals, in an order
dated May 10, 1996, vacated the District Court's order and directed
decertification of the class. The U.S. Supreme Court has agreed to hear an
appeal of the Court of Appeals' decision. Argument is scheduled for February
18, 1997. On July 25, 1996, the U.S. Court of Appeals for the Fifth Circuit
approved a class settlement of future asbestos cases against Fiberboard
Corporation. A Supreme Court petition is also expected in this case. It is
uncertain what impact these decisions 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
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 action 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
significant 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 six 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 15 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 and 1996. Since 1990, only three new
building-related cases have been served on ACandS.

The Travelers/Aetna Property Casualty Corp. is currently providing ACandS
with a defense in these building cases, as well as paying settlements when
necessary. Coverage based on policies of the Travelers Insurance Companies
is furnished pursuant to a settlement agreement, but coverage based on Aetna
Casualty and Surety Co. policies is subject to asserted reservations of
rights to later contest both the availability and the amount of coverage.
Required payments, nevertheless, continue to be made on the Aetna policies.

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
transactions. 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.

High Bid Low Bid

1995 1st Quarter 15 13-1/2
2nd Quarter 19 12-1/2
3rd Quarter 20 13-1/2
4th Quarter 20-1/4 17

1996 1st Quarter 21 20
2nd Quarter 20-1/8 20
3rd Quarter 20-1/4 20
4th Quarter 20-3/4 20-1/4

On March 10, 1997, the stock price quotation according to National Quotation
Bureau, Inc. was 22 bid and none offered, and there were 323 record holders
of the Company's Common Stock. The total number of shares outstanding is
386,078. The Company has not paid a cash dividend on its Common Stock during
the two-year period ended December 31, 1996. In the foreseeable future, the
Company does not expect to pay cash dividends on the outstanding common
shares at December 31, 1996.

Item 6. Selected Financial Data

IREX CORPORATION AND SUBSIDIARIES:

Following is a consolidated summary of operations for the five years ended
December 31, 1996. This summary should be read in conjunction with the
consolidated financial statements and notes thereto, which are included in
Item 8 of this report.

CONSOLIDATED SUMMARY OF OPERATIONS

Year Ended December 31
1996 1995 1994 1993 1992
(Dollars in thousands, except per share data)

TOTAL REVENUES $271,131 $244,441 $240,636 $237,369 $229,033
NET INCOME (LOSS) $ 2,873 $ 1,778(1) $ 2,227 $ (389) $ 1,026
PREFERRED STOCK
DIVIDENDS (2) $ (980) $ (980) $ (980) $ (980) $ (245)
INCOME (LOSS) APPLICABLE
TO COMMON SHARES $ 1,893 $ 798 $ 1,247 $ (1,369) $ 781
CASH FLOW FROM OPERATIONS $ 1,799 $ (454) $ 2,770 $ (2,937) $ 5,724
TOTAL ASSETS $ 85,325 $ 81,635 $ 82,560 $ 81,483 $ 76,606
LONG TERM DEBT (3) $ 9,286 $ 12,543 $ 15,800 $ 17,414 $ 18,935
REDEEMABLE PREFERRED
STOCK (2) $ 10,490 $ 10,496 $ 10,496 $ 10,496 $ 10,496
PER COMMON SHARE: (2)
EARNINGS $ 4.80 $ 2.01 $ 3.11 $ (3.36) $ 1.03
CASH DIVIDENDS $ - $ - $ - $ - $ 1.50
BOOK VALUE $ 30.58 $ 25.59 $ 23.14 $ 19.94 $ 23.35

1 Includes cumulative effect of accounting change, net of income taxes
of $1,377,000 due to change in the method of estimating workers' compensation
claims liability. See Note 1 to the accompanying consolidated financial
statements.

2 See Note 11 to the accompanying consolidated financial statements.

3 See Note 9 to the accompanying consolidated financial statements.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

The Company reported its highest net income since 1991 with net income of
$2,873,000 for the year ended December 31, 1996. Net income for the year
ended December 31, 1995 was $1,778,000 as compared to income of $2,227,000
for the year ended December 31, 1994. Included in the results for 1995 is
the cumulative effect of an accounting change, net of income taxes, of
$1,377,000 due to the change in method of estimating the liability for
workers' compensation claims.

Net income applicable to common shareholders after preferred dividends was
$1,893,000 for the year ended December 31, 1996, a significant improvement
over the $798,000 and $1,247,000 for the years ended December 31, 1995 and
1994, respectively. Net income per common share was $4.80 for the year ended
December 31, 1996, more than double the $2.01 per common share for the year
ended December 31, 1995, and a 54% increase over the $3.11 per common share
for the year ended December 31, 1994. 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 was $3.47 per
common share.

Return on average common shareholders' equity, calculated on net income
applicable to common stock, was 18.1%, 8.1% and 15.8% for the years ended
December 31, 1996, 1995 and 1994, respectively. The Company's return on
average assets, calculated on net income, was 3.4% for the year ended
December 31, 1996, as compared to 2.2% and 2.7% for the years ended December
31, 1995 and 1994, 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 0.5%, respectively.

The Company's operating results continue to be favorably impacted by strong
growth and earnings performance from the distribution operations. A
combination of weak economic conditions, increased competition and regulatory
change in certain industries key to the contracting businesses has created a
difficult environment in which to improve contracting revenues and earnings.
Faced with the challenge, ACandS, Inc., the Company's principal contracting
subsidiary, has undergone an organizational restructuring whereby numerous
semi-autonomous branches have been transformed into three highly integrated
regions. The key focus of this restructuring is to provide more responsive
services to customers. The restructuring aims to accomplish this end while
also achieving a reduction in administrative expenses.

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 $271.1 million in 1996,
a 10.9% increase from the prior year's total revenue of $244.4 million.
Total revenues in 1994 were $240.6 million. Distribution revenues continue
to grow, accounting for 48.3%, 45.1% and 38.5% of total revenues in 1996,
1995 and 1994, respectively. Distribution revenues increased by $20.8
million, or 18.9% to a record $131.1 million during 1996. Export sales
accounted for 43.3% of the increase, totaling $11 million in 1996 as compared
to the $2 million reported for the prior year. The percentage increase in
1996 approximates the 18.8%, or $17.4 million, increase in distribution
revenues reported for 1995. Distribution revenues were $110.2 million and
$92.8 million in 1995 and 1994, respectively. Contracting revenues increased
4.4% to $140.1 million in 1996. This represents a $5.8 million increase over
1995 contracting revenues of $134.2 million and reverses a trend which had
seen contracting revenues decline in both 1995 and 1994. Contracting
revenues in 1995 declined by $13.7 million, or 9.2%, from $147.9 million
reported for 1994. Increased competitive pressures and deregulation in the
power generation industry have caused a decline in contracting revenues from
this industry. During the three-year period ended December 31, 1996, such
revenues have declined from 40% to 25% of total 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 improved to $60.3 million in 1996 as compared to $52.8 million
in 1995 and $53.3 million in 1994. Gross profit from contracting increased
to $30.8 million from $27.7 million in 1995. The improvement is largely
attributable to a renewed emphasis on project execution and continued strong
safety performance, which has decreased outlays for project overruns and
workers' compensation costs, respectively. Gross profit from contracting was
$32.2 million in 1994, of which $2.9 million was derived from one major
project. Distribution gross profit has climbed steadily during the three-
year period ended December 31, 1996. Distribution gross profit was $29.4
million, representing an increase of 17.1% over the $25.1 million reported
for 1995. Distribution gross profit amounted to $21.1 million in 1994. 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 stable during the three-year period.

Selling, general and administrative (operating) expenses increased by $3.5
million, or 7.0%, to $53.5 million for the year ended December 31, 1996.
Operating expenses were $50.0 million and $47.2 million in 1995 and 1994,
respectively. The growth in operating expenses in 1996 is primarily
attributable to expansion of the distribution business, which added four
branches between the third quarter of 1995 and the second quarter of 1996.
Full-time salaried employees within the distribution business increased by 12
during 1996. However, a decrease of 43 full-time salaried employees within
the contracting businesses more than offset the increase within the
distribution operations. The Company's total salaried employees at December
31, 1996 was 436 as compared to 465 and 443 at year end 1995 and 1994,
respectively. Personnel expenses account for approximately 60% of total
operating expenses.

ACandS, Inc., as noted earlier, completed a restructuring during 1996, and
incurred expenses of approximately $500,000, which primarily consisted of
severance pay and lease termination costs. ACandS and CENTIN, another of the
Company's contracting subsidiaries, closed a total of seven and three
offices, respectively, during 1996. These ten locations incurred direct
operating expenses of approximately $2.9 million for each of the years ended
December 31, 1996, 1995 and 1994, respectively.

Operating income of $6.8 million in 1996 represented a significant increase
from the $2.7 million earned in 1995. Approximately $2.5 million of the $4.1
million increase is attributable to distribution operations. Operating
income for 1994 was $6.1 million. Operating income expressed as a percentage
of revenues was 2.5%, 1.1% and 2.5% for 1996, 1995 and 1994, 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 revenues has
contributed to an increase in accounts receivable, the turnover of accounts
receivable within the distribution operations has increased from 4.8 to 5.5,
an improvement of 14.6%, over the three-year period ended December 31, 1996.
The addition of nine new distribution branches has increased inventories by
almost 30% over the past two years. The contracting operations have made
significant progress in resolving claims, reducing the amount carried to
$75,000 at December 31, 1996 from $460,000 at the prior year end and
$1,759,000 at December 31, 1994. Management continues to set targets for
increasing the turnover of accounts receivable for both the contracting and
distribution operations, while also focusing on programs to improve cash flow
through the turnover of inventories. Contract backlog was $47.6 million at
December 31, 1996. This represents a decline from the contract backlog of
$51.9 million at December 31, 1995. While the restructuring of contracting
operations has served to reduce the backlog, management believes it is now
better positioned to serve its customers and build the contract backlog. The
contract backlog at December 31, 1994 was $48.2 million.

Capital expenditures in 1996 were $1.2 million versus $1.1 million in 1995
and $1.0 million in 1994. 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, 1996 was $24.7 million compared to
$24.6 million at December 31, 1995. Available short-term lines of credit as
of December 31, 1996 were $23.1 million of which $12.2 million was in use.
Credit lines available continue to provide adequate flexibility for
operations. See Note 9 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. During
1996, 191 shares were redeemed, and 349,673 preferred shares remain
outstanding at December 31, 1996. The common shares exchanged were included
in Treasury Stock at December 31, 1996. See Note 11 to the accompanying
financial statements for more information on the Company's redeemable
preferred stock.

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, 1996.
Income Taxes

The effective tax rate was 41.6% in 1996 compared to 51.8% in 1995 and 43.5%
in 1994. The Company's effective tax rate is primarily dependent upon the
amount of operating income and its effect on the rate attributable to the 50%
disallowance for meals and entertainment, the impact of state rates on
deferred tax assets and the sources of state taxable income.

Net deferred income tax assets were $8.2 million at December 31, 1996
compared to $8.3 million at year end 1995. The Company has determined that
no valuation allowance for the deferred income tax asset is required as of
December 31, 1996 and 1995, 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 $12.0 million in order to realize the
portion of deferred tax assets not realizable through carryback availability
or tax planning strategies.

Item 8. Financial Statements and Supplementary Data

1. Irex Corporation and Subsidiaries:

(a) Report of Independent Public Accountants

(b) Consolidated Balance Sheets -- December 31, 1996 and 1995

(d) Consolidated Statements of Shareholders' Investment for the Three
Years Ended December 31, 1996, 1995 and 1994

(e) Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1996, 1995 and 1994

(f) Notes to Consolidated Financial Statements -- December 31, 1996,
1995 and 1994

(g) Schedules:

II Valuation and Qualifying Accounts for the Three Years Ended
December 31, 1996, 1995 and 1994

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

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of
Directors, Irex Corporation:

We have audited the accompanying consolidated balance sheets of Irex
Corporation (a Pennsylvania corporation) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of income,
shareholders' investment and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Irex Corporation and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, 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.

/s/Arthur Andersen LLP

Lancaster, Pennsylvania
February 17, 1997

IREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31

ASSETS 1996 1995

CURRENT ASSETS:
Cash and cash equivalents (Note 5) $ 193,000 $ 411,000
Receivables, less reserves of $1,590,000
in 1996 and $1,440,000 in 1995 53,520,000 51,639,000
Inventories of materials and supplies,
at the lower of cost (first-in,
first-out) or market 14,125,000 12,367,000
Actual costs and estimated earnings
on contracts in process in excess of
billings (Notes 1 and 2) 5,130,000 4,675,000
Prepaid income taxes (Note 3) --- 303,000
Other prepaid expenses 1,022,000 624,000
Deferred income taxes (Notes 1 and 3) 4,759,000 5,386,000

Total current assets 78,749,000 75,405,000

PROPERTY AND EQUIPMENT,
at cost (Note 1):
Land 158,000 178,000
Buildings and improvements 3,155,000 3,310,000
Machinery and equipment 6,933,000 7,726,000
10,246,000 11,214,000

Less - Accumulated depreciation 7,164,000 8,015,000

3,082,000 3,199,000
NON-CURRENT DEFERRED INCOME
TAXES (Notes 1 and 3) 3,425,000 2,912,000

OTHER ASSETS 69,000 119,000

$85,325,000 $81,635,000

December 31
LIABILITIES AND
SHAREHOLDERS' INVESTMENT 1996 1995

CURRENT LIABILITIES:
Notes payable to banks (Note 9) $12,169,000 $ 8,756,000
Current portion of long-term debt (Note 9) 3,257,000 3,257,000
Accounts payable 10,617,000 8,164,000
Billings in excess of actual
costs and estimated earnings
on contracts in process
(Notes 1 and 2) 2,786,000 2,546,000
Accrued workers' compensation
insurance (Note 1) 2,795,000 3,503,000
Accrued liabilities (Note 12) 12,814,000 14,533,000
Accrued income taxes (Note 3) 198,000 ---
Total current liabilities 44,636,000 40,759,000

LONG-TERM DEBT, less current
portion (Note 9) 9,286,000 12,543,000

NON-CURRENT LIABILITIES (Notes 1 and 14) 9,127,000 7,759,000

REDEEMABLE PREFERRED STOCK, $1 par
value; authorized 2,000,000 shares;
issued and outstanding 349,673 shares
in 1996 and 349,864 shares in 1995
(Note 11) 10,490,000 10,496,000

SHAREHOLDERS' INVESTMENT:
Common stock $1 par value;
authorized 2,000,000 shares;
issued 1,028,633 shares;
outstanding 385,458 shares in
1996 and 393,857 shares in 1995 1,028,000 1,028,000
Paid-in surplus 459,000 465,000
Retained earnings 29,110,000 27,217,000
Cumulative translation adjustments
(Note 1) (165,000) (158,000)
30,432,000 28,552,000

Treasury stock, 643,175 shares in
1996 634,776 shares in 1995,
at cost (18,646,000) (18,474,000)

Total shareholders' investment 11,786,000 10,078,000

$85,325,000 $81,635,000

The accompanying notes are an integral part of these statements.

IREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31
1996 1995 1994
REVENUES (Note 1):
Contracting $140,063,000 $134,215,000 $147,885,000
Distribution and other 131,068,000 110,226,000 92,751,000

Total revenues 271,131,000 244,441,000 240,636,000

COST OF REVENUES (Note 1) 210,851,000 191,683,000 187,367,000

Gross profit 60,280,000 52,758,000 53,269,000

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 53,451,000 50,022,000 47,165,000

Operating income 6,829,000 2,736,000 6,104,000

INTEREST AND DIVIDEND INCOME 101,000 91,000 68,000

INTEREST EXPENSE (2,007,000) (1,995,000) (2,231,000)

Income before income taxes 4,923,000 832,000 3,941,000

INCOME TAX PROVISION
(Notes 1 and 3) 2,050,000 431,000 1,714,000

INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 2,873,000 401,000 2,227,000

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

NET INCOME $ 2,873,000 $ 1,778,000 $ 2,227,000

Dividend Requirements for
Preferred Stock (Note 11) (980,000) (980,000) (980,000)

NET INCOME APPLICABLE TO
COMMON STOCK $ 1,893,000 $ 798,000 $ 1,247,000

AVERAGE COMMON SHARES
OUTSTANDING 394,653 397,127 401,156

PER COMMON SHARE AMOUNTS:
Income (Loss) Before
Cumulative Effect of
Accounting Change $ 4.80 $ (1.46) $ 3.11

Cumulative Effect of
Accounting Change $ - $ 3.47 $ -

Net Income $ 4.80 $ 2.01 $ 3.11

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, 1994 $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) ---

Net income --- --- 2,873,000 --- --- ---
Cash dividends on
preferred stock --- --- (980,000) --- --- ---
Translation adjustments --- --- --- (7,000) --- ---
Exercise of stock options --- (6,000) --- --- 15,000 ---
Repurchase of common stock --- --- --- --- (187,000) ---

BALANCE, DECEMBER 31, 1996 $1,028,000$ 459,000 $29,110,000 $(165,000) $(18,646,000) $ ---
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
IREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31
1996 1995 1994

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,873,000 $1,778,000 $2,227,000
Reconciliation of net income to
net cash provided by (used for)
operating activities-
Cumulative effect of
accounting change --- (1,377,000) ---
Depreciation and amortization 1,195,000 1,494,000 2,030,000
Deferred income tax provision
(benefit) 114,000 (301,000) (128,000)
Provision for losses on
accounts receivable 1,164,000 1,096,000 1,092,000
Gain on sale of assets (26,000) --- ---
(Increase) decrease in assets-
Receivables (3,045,000) (977,000)(1,545,000)
Inventories (1,758,000) (1,480,000)(1,388,000)
Actual costs and estimated
earnings on contracts
in process in excess of
billings, net (215,000) 53,000 (434,000)
Prepaid income taxes 303,000 (303,000) 1,041,000
Other prepaid expenses (398,000) 403,000 254,000)
Increase (decrease) in liabilities-
Accounts payable 2,453,000 (104,000) 674,000)
Accrued income taxes 198,000 (128,000) 128,000
Accrued liabilities and other
liabilities (1,059,000) (608,000) 675,000
Net cash provided by
(used for)operating
activities 1,799,000 (454,000) 2,770,000

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment (1,247,000) (1,095,000) (963,000)
Proceeds from sales of
property and equipment 226,000 99,000 74,000
Decrease (increase) in other
assets 12,000 81,000 (81,000)
Net cash used for
investing activities (1,009,000) (915,000) (970,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving
lines of credit 3,413,000 2,749,000 1,225,000
Proceeds from long-term debt --- 2,800,000 ---
Payments on long-term debt (3,257,000) (4,219,000)(1,438,000)
Dividends paid (980,000) (980,000) (980,000)
Reissuance of common stock 9,000 8,000 ---
Repurchase of common stock (187,000) (142,000) (111,000)
Repurchase of preferred stock (6,000) --- ---
Net cash (used for)
provided by
financing activities (1,008,000) 216,000 (1,304,000)

NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (218,000) (1,153,000) 496,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 411,000 1,564,000 1,068,000
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 193,000 $ 411,000 $1,564,000

The accompanying notes are an integral part of these statements.

IREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996, 1995 AND 1994

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 intercompany accounts and transactions have been eliminated in
consolidation. Certain 1995 items have been reclassified to conform to 1996
presentation.

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 translation adjustments in shareholders' investment. Foreign
currency transaction gains and losses in 1996, 1995 and 1994 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
purchased 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
cumulative effect, on operating results during 1996, 1995 and 1994 was not
significant nor is it expected to have a significant impact on future results
of operations.

At December 31, 1996 and 1995, the estimated undiscounted liability for
workers' compensation claims was $11,138,000 and $13,399,000, respectively.
The present value of such claims was $8,682,000 and $10,260,000, using a
weighted average discount rate of 6.80% and 7.17%, respectively.

The expected future payments as of December 31, 1996, on an undiscounted
basis, are as follows:

1997 $ 2,866,000
1998 1,797,000
1999 1,300,000
2000 965,000
2001 784,000
2002 and thereafter 3,426,000
$11,138,000

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,
1996, the cumulative amount of such undistributed earnings was $1,211,000.

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

Non-Current Liabilities

Other long-term liabilities consist of the non-current portions of workers'
compensation, insurance, pension and postretirement benefit liabilities.

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, 1996, 1995 and 1994, 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, 1996. Management believes this
concentration does not represent an unusual risk as contracts are widely
dispersed by geography and customer.

2. CONTRACTS IN PROCESS:

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

1996 1995
Costs and estimated earnings
on uncompleted contracts $ 94,950,000 $ 74,687,000

Less: Billings on uncompleted
contracts (92,606,000) (72,558,000)

Net $ 2,344,000 $ 2,129,000

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

1996 1995
Actual costs and estimated
earnings on contracts in
process in excess of billings $ 5,130,000 $ 4,675,000

Billings in excess of actual
costs and estimated earnings
on contracts in process (2,786,000) (2,546,000)

$ 2,344,000 $ 2,129,000

Actual costs incurred on contracts in process in excess of billings includes
contract costs attributable to claims in the amount of $75,000 and $460,000
at December 31, 1996 and 1995, 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 based on the financial reporting
classification of the related liabilities and assets which give rise to
temporary book/tax differences. Deferred taxes relate to the following
temporary differences:

1996 1995

Insurance reserves $ 6,698,000 $ 6,573,000
Bad debt reserves 617,000 549,000
Uniform cost capitalization on inventories 473,000 457,000
Pension and other benefits 436,000 493,000
Contracts 261,000 510,000
Other (301,000) (284,000)
$ 8,184,000 $ 8,298,000

The Company has determined that no valuation allowance for the deferred tax
asset is required as of December 31, 1996 and 1995, 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:

1996 1995 1994

Domestic $ 4,809,000 $ 3,505,000 $ 3,762,000
Foreign 114,000 (397,000) 179,000
$ 4,923,000 $ 3,108,000 $ 3,941,000

Income tax provision (benefit) consists of:

1996 1995 1994
Currently payable:
Federal $ 1,749,000 $ 601,000 $ 1,493,000
State 130,000 329,000 259,000
Foreign 57,000 (198,000) 90,000

Total currently payable 1,936,000 732,000 1,842,000

Deferred:
Federal (67,000) (80,000) (95,000)
State 181,000 (221,000) (33,000)

Total deferred 114,000 (301,000) (128,000)

Total $ 2,050,000 $ 431,000 (1) $1,714,000

(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:

1996 1995 1994

Statutory federal income tax rate 34.0% 4.0% 34.0%
State income taxes ($311,000,
$108,000 and $226,000), net
of federal benefit 4.2 8.6 3.8
Meals and entertainment
(50% disallowance) 3.1 17.7 3.3
Effects of foreign taxes 0.4 (7.6) 0.7
Other, net (0.1) (0.9) 1.7

Effective income tax rate 41.6% 51.8% 43.5%

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:

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 1996, 1995 and 1994 was
not material.

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

1996 1995 1994

Income taxes (net of refunds) $ 1,548,000 $ 1,010,000 $ 673,000

Interest 2,054,000 2,034,000 2,268,000

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:

1996 1995 1994
Service cost-benefits earned
during the period $ 608,000 $ 480,000 $ 564,000

Interest cost on projected
benefit obligation 524,000 439,000 400,000

Loss (return) on plan assets:
Actual (1,042,000) (1,147,000) 129,000
Deferred 510,000 805,000 (466,000)

Recognized return (532,000) (342,000) (337,000)

Net amortization 10,000 (5,000) 24,000

Net pension expense $ 610,000 $ 572,000 $ 651,000

The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheets at December 31, 1996 and 1995:
1996 1995
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$5,568,000 and $5,080,000,
respectively $ 6,039,000 $ 5,559,000

Projected benefit obligation for service
rendered to date $ 7,698,000 $ 6,981,000
Plan assets at fair value (7,528,000) (6,151,000)
Projected benefit obligation in excess of
plan assets 170,000 830,000
Unrecognized net gain (loss) from past experience
different from that assumed and effects
of changes in assumptions 275,000 (114,000)

Accrued pension cost $ 445,000 $ 716,000

Assumptions used in the accounting were:

1996 1995

Weighted average discount rates 7.75% 7.50%
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 hourly employees of the Company's subsidiaries
are covered by union-sponsored, collectively bargained, multiemployer pension
plans. The Company contributed approximately $6,146,000 in 1996, $5,791,000
in 1995, and $6,727,000 in 1994 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 equaled 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.

The expected cost of these benefits is charged to expense during the years
that the employees render service. The transition obligation is being
amortized over 20 years.

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

1996 1995

Service cost-benefits earned during the period $ 8,000 $ 14,000
Interest cost on accumulated postretirement
benefit obligation 71,000 91,000
Expected return on plan assets (9,000) (26,000)
Amortization of transition obligation 48,000 48,000
Amortization of net gain 28,000) ---

Net periodic postretirement benefit cost $90,000 $127,000

The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheet at December 31, 1996 and 1995:

1996 1995
Accumulated postretirement benefit obligation:
Vested benefit obligation $ 798,000 $ 877,000
Non-vested benefit obligation 158,000 329,000
956,000 1,206,000
Plan assets at fair value (51,000) (139,000)

Accumulated postretirement benefit obligation
in excess of plan assets 905,000 1,067,000
Unrecognized transition obligation (769,000) (817,000)
Unrecognized net gain 340,000 150,000

Accrued postretirement benefit liability $ 476,000 $ 400,000

For measurement purposes, a 13% annual rate of increase in the per capita
cost of covered health care benefits was assumed for calendar 1996; 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 1996.

The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.75% and 7.50% at December 31, 1996
and 1995, respectively. The expected long-term rate of return on assets was
8.5% at December 31, 1996 and 1995.

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 $2,621,000 for 1996, $1,698,000 for 1995, and $2,295,000 for
1994.

In July 1994, the Board of Directors approved a Special Incentive Program for
certain designated key executive officers (ten in number at December 31,
1996) 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 are not expected to be
achieved, no compensation expense related to this program was incurred for
1996 or 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. Expense for these plans was $830,000
in 1996, $665,000 in 1995, and $743,000 in 1994.

7. STOCK OPTION PLANS:

The Company maintains two non-qualified stock option plans providing for the
issuance to key employees and outside directors of up to 80,000 options to
purchase shares of the Company's common stock. Generally, options
outstanding under the Company's stock options plans: (i) are granted at
prices which equate to the fair market value of the stock on the date of
grant, (ii) vest over periods of one to three years, and (iii) expire ten
years subsequent to date of grant.

Following is a summary of the status of the number of stock options as of
December 31, 1996, 1995, and 1994, and the activity during the year ended on
those dates, along with the range of exercise prices for options outstanding
at year end:

1996 1995 1994
Options Outstanding at
Beginning of Year 51,350 58,475 37,225

Options Granted 9,550 3,500 23,250

Options Exercised (500) (500) -

Options Expired or Canceled (11,050) (10,125) ( 2,000)

Options Outstanding at
End of Year 49,350 51,350 58,475

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

Options Exercisable End of Year 28,100 20,850 14,125

Options Available for Future Grant 29,650 28,150 166,525

During 1996, the Company adopted Statement of Financial Accounting Standard
(SFAS) No. 123, "Accounting for Stock-Based Compensation." As provided for in
the statement, the Company elected to continue the intrinsic value method of
expense recognition.

Had compensation cost for the stock option plans been determined consistent
with SFAS 123, the Company's net income applicable to common stock and net
income per common share amounts would not have been materially different from
1996 and 1995 results as reported. The proforma effect on net income and net
income per common share in 1996 and 1995 are not necessarily representative
of the proforma amounts for future years.

8. 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 was guaranteed by the Company. In
accordance with generally accepted accounting principles, this loan was
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.

9. BORROWINGS:

Bank Borrowings

The Company had short-term lines of credit totaling $23,081,000 and
$22,749,000, of which $12,169,000 and $8,756,000 was in use, as of
December 31, 1996 and 1995, respectively. These loans bear interest at not
more than the prime rate. (The weighted average interest rate was 6.9% and
7.2% as of December 31, 1996 and 1995, 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, 1996 and 1995:

1996 1995
9% unsecured senior notes payable in equal
annual installments from May 1, 1996 to 2002 $11,143,000 $13,000,000

7.3% unsecured term note payable in equal
semi-annual installments from May 1, 1996
to November 1, 1997 1,400,000 2,800,000

Total 12,543,000 15,800,000
Less current portion 3,257,000 3,257,000

$ 9,286,000 $12,543,000

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.

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,
1996, the Company was in compliance with all of these covenants.

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

1997 $ 3,257,000
1998 1,857,000
1999 1,857,000
2000 1,857,000
2001 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 was $12,682,000 as of December 31, 1996.

10. LEASE COMMITMENTS:

The Company leases warehouses, sales offices and computer equipment under
noncancelable lease agreements. Rental expense for all operating leases was
$5,721,000 in 1996, $5,654,000 in 1995 and $5,283,000 in 1994. As of
December 31, 1996, the future minimum rental commitments under noncancelable
leases that have terms in excess of one year are as follows:

1997 $ 2,882,000
1998 2,101,000
1999 1,439,000
2000 1,024,000
2001 329,000
Subsequent years 124,000

Total minimum rental obligations $ 7,899,000

11. 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, 1996 and 1995, 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,
1996. 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.

12. ACCRUED LIABILITIES:

The components of accrued liabilities as of December 31, 1996 and 1995 are as
follows:

1996 1995

Salaries and wages $ 2,643,000 $ 2,461,000
General and auto liability insurance 5,639,000 5,833,000
Other 4,532,000 6,239,000
$ 12,814,000 $ 14,533,000

13. RESTRUCTURING:

During 1996, the Company's principal contracting subsidiary, ACandS, Inc.,
underwent an organizational restructuring. This restructuring involved
integrating numerous semi-autonomous branches into three highly integrated
regions in the interest of reducing administrative expenses and providing
more responsive services to customers. In conjunction with this
restructuring, ACandS, Inc. incurred expenses of approximately $500,000,
which primarily consisted of severance pay and lease termination costs. The
restructuring was essentially completed during 1996 and no further expenses
are anticipated.

14. NON-CURRENT LIABILITIES:

The components of non-current liabilities as of December 31, 1996 and 1995
are as follows:

1996 1995
Workers compensation and
other insurance $ 8,087,000 $ 6,757,000
Retirement benefits 1,040,000 1,002,000

$ 9,127,000 $ 7,759,000

IREX CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

For the Three Years Ended December 31, 1996

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 12/31, 1994 $1,345,000 $1,092,000 $(1,007,000) $1,430,000
Year Ended 12/31, 1995 $1,430,000 $1,096,000 $(1,086,000) $1,440,000
Year Ended 12/31, 1996 $1,440,000 $1,164,000 $(1,014,000) $1,590,000

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

William W. Adams (62) Director, Irex Corporation 1996 1998
(2) Former Chairman and President, 1988 1993
Armstrong World Industries, Inc.
Director, Bell Atlantic Corporation

Carlton E. Hughes (65) 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 (44) Director, Irex Corporation 1993 1999
(2) (3) Attorney, Stevens & Lee 1996 Present
Former President and Chief 1987 1993
Executive Officer, Community
Hospital of Lancaster

David C. Kleinman (61) Director, Irex Corporation 1984 1999
(3) Senior Lecturer,
University of Chicago
Graduate School of Business
Management Consultant
Director, Acorn Funds 1972 Present
(Diversified Common Stock
Mutual Funds)
Director, Plymouth Tube Co. 1993 Present
Director, Wisconsin Paper and
Products Co. 1994 Present

Michael J. Lardner (53) Director, Irex Corporation 1989 1998
(2) Chairman, Wide World of Golf 1996 Present
President and Chief
Operating Officer
High Construction, Inc. 1993 1996
(general contractor)
President, Chief Operating
Officer, 1989 1992
Director, Horst Group

W. Kirk Liddell (47) Director, Irex Corporation 1980 1997
(1) (3-Ex officio President and CEO,
w/o vote) Irex Corporation
Director, High Industries, Inc.
(steel, real estate and
other service company)
Director, Penn Fuel Gas, Inc.
(regulated gas distributor)

Wilson D. McElhinny (67) Director, Irex Corporation 1975 1999
(1) (3) (4) Director, Educators Mutual Life
Insurance Company
Director, Hunt Manufacturing Company
(office and art/craft product
manufacturer)

John O. Shirk (53) Director, Irex Corporation 1987 1997
(1) (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 (67)Director, Irex Corporation 1980 1998
(1) (2) (4) Administrative Consultant,
Getty Petroleum Corporation
(petroleum distribution)

(1) - Member of the Executive Committee
(2) - Member of the Audit Committee
(3) - Member of the 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 (47) President and Chief Executive Officer

James E. Hipolit (46) Vice President, General Counsel and Secretary
since 1996
Vice President and General Counsel
from 1986 to 1996

Jane E. Pinkerton (57) Vice President, Finance and Administration
since 1996
Vice President, Administrative Services
and Secretary from 1992 - 1996;
Vice President and Director of Personnel
from 1988 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]

Name and Principal Year Salary Bonus Options All Other
($) ($) (#) Compensation
Positions ($)
(1) (2)
W. K. Liddell 1996 274,000 145,768(3) 450 6,750
President and Chief 1995 264,000 -0- - 8,274
Executive Officer 1994 253,000 117,898 3,000 8,448

J. E. Hipolit 1996 119,400 50,435 150 5,974
Vice President, General 1995 111,200 13,344 - 8,228
Counsel and Secretary 1994 109,200 37,259 1,000 6,858

J. P. Kane (5) 1996 90,000 27,000 2,000 3,240
President, ACandS, Inc.

J. E. Pinkerton 1996 103,700 42,686 150 5,021
Vice President, Finance 1995 87,400 7,866 - 6,750
and Administration 1994 82,800 21,189 1,000 6,451

A. V. Stoycos (4) 1996 115,720 75,172 300 6,750
President, Specialty Products 1995 108,220 49,998 - 8,223
and Insulation Co. 1994 105,720 40,047 1,000 7,112

(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.

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 invested in Irex
Corporation common stock and is subject to the Company achieving a specific
financial performance target.

On December 31, 1996 there were 340 employees of the Company and its
subsidiaries participating in the Savings Incentive Plan and 30,343 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 Jerome P. Kane are
trustees. All salaried employees of the Company and its U.S. subsidiaries
automatically become participants in the ESOP on the January 1 following
their date of hire. Participants are neither required nor permitted to make
contributions to the ESOP. Contributions to the Plan are based upon the
Company's achievement of specific financial performance targets. No
contribution was made to this Plan during 1996.

On December 31, 1996, there were 345 employees of the Company and its
subsidiaries eligible to participate in the ESOP and the total of 45,531
shares of common stock held by the ESOP were fully allocated to such
participants' accounts.

(3) Mr. Liddell's bonus also included a grant of 620 shares of Irex
Corporation stock valued at $13,562.

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

(5) Mr. Kane is included in his capacity as President of a major wholly-
owned subsidiary of the Company. Compensation is less than a full year for
1996 as Mr. Kane commenced employment with ACandS, Inc. on May 16, 1996.
Effective on May 16, 1996, ACandS, Inc. entered into an agreement with Mr.
Kane which provides total compensation during 1996 of $117,000. For 1997,
this compensation guarantee is $202,800. In the event Mr. Kane's employment
with ACandS, Inc. is terminated during the two-year period of this agreement,
a payment equal to six months' salary will be made.

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 subsidiaries.
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
identified 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. The following table sets forth, for the
individuals named, options granted during 1996.

INDIVIDUAL GRANTS
Potential realizable
Percent value at assumed annual
of Total Exercise rates of stock price
Options Price appreciation for
Options Granted to Per Expiration option term (1):
Name Granted Employees Share Date 5% ($) 10% ($)
(#)
W. K. Liddell 450 7.5% $22.125 12/31/06 6,270 15,870
J. E. Hipolit 150 2.5% $22.125 12/31/06 2,090 5,290
J. P. Kane 2,000 33.1% $22.125 12/31/06 27,880 70,360
J. E. Pinkerton 150 2.5% $22.125 12/31/06 2,090 5,290
A. V. Stoycos 300 5.0% $22.125 12/31/06 4,180 10,580

(1) The potential realizable value of each grant of options assuming that
the market price of the underlying security appreciates in value from the
date of grant to the end of the option term at the indicated annualized rate.
The actual value, if any, an executive may realize will depend on the excess
of the stock price over the exercise price on the date the option is
exercised.

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

W. K. Liddell 12,500 3,450 $ - 0 - $17,250
J. E. Hipolit 1,750 1,150 $ - 0 - 5,750
J. P. Kane - 0 - 2,000 $ - 0 - - 0 -
J. E. Pinkerton 1,000 1,150 $ - 0 - 5,750
A. V. Stoycos 2,000 1,300 $ - 0 - 5,750

For the year ended December 31, 1996, there were 6,050 options granted to
management and no options were exercised by management. The above table sets
forth information as to the aggregate options granted and outstanding as of
December 31, 1996, for the individuals named.

In July 1994, the Board of Directors approved a Special Incentive Program for
certain designated key executive officers (ten in number at December 31,
1996) 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 in 1995 is not included in determining actual performance
against goal. Because the targets are not expected to be achieved, no
compensation expense related to this program was incurred for 1996.

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
compensation 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 $69,675
James E. Hipolit 1,176 55,710
Jerome P. Kane - 0 - - 0 -
Jane E. Pinkerton 7,500 22,970
Alexander V. Stoycos 27,011 31,040

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 compensation 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
10, 1997. 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 47,395 Shares (1) 12.28%
175 River Hill Road
Conestoga, PA 17516

(1) Does not include 14,217 shares in wife's name to which Mr. Liddell
disclaims beneficial ownership. Includes 27,804 shares beneficially owned by
dependent children, 855 allocated shares in the Irex Corporation Employees'
Stock Ownership Plan, and 580 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 10, 1996. Unless otherwise described in
the footnotes following the listing, in each case the beneficial ownership
represents the sole voting and investment power.

Amount Held Percent of Class
Common Preferred Common Preferred

William W. Adams 1,000 .26 -
James E. Hipolit 1,265 (1)(4) - .33 -
Carlton E. Hughes 3,340 - .87 -
Joanne M. Judge 965 - .25 -
Jerry P. Kane 0 - 0 -
David C. Kleinman 50 - - -
Michael J. Lardner 50 - - -
W. Kirk Liddell 47,395 (2) - 12.28 -
Wilson D. McElhinny 7,420 - 1.92 -
Jane E. Pinkerton 874 (1) - .23 -
John O. Shirk 1,378 - .36 -
Alexander V. Stoycos 2,979 (1)(5) 4,519 .77 1.29
N. Thompson Washburn 894 (3) - .23 -

(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. Hipolit, 531 and 334; Mr. Stoycos,
547 and 351; and Ms. Pinkerton, 350 and 216.

(2) Does not include 14,217 shares in wife's name to which Mr. Liddell
disclaims beneficial ownership. Includes 27,804 shares beneficially owned by
dependent children, 885 allocated shares in the Irex Corporation Employees'
Stock Ownership Plan, and 580 shares in the Irex Corporation Savings
Incentive Plan (401k).

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

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

(5) Includes 2,057 shares to which Mr. Styocos shares voting and
investment power.

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
incorporated 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
reference. 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 1996.

(d) See Item 8

Supplemental Information

Copies of the Company's 1996 Annual Report to Security Holders, 1997 Proxy
Statement, and 1997 Proxy are being furnished to the Commission for its
information under separate cover.

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

ACandS Contracting Ltd.
Incorporated in Dominion of Canada
Wholly Owned Subsidiary of ACandS, Inc.

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

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

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

CHART #9 FEBRUARY 1997

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/J. E. Pinkerton 3/31/97
J. E. Pinkerton
Vice President, Finance and Administration
(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 3/31/97
W. K. Liddell
President and Director
(Principal Executive Officer)

By /s/J. E. Pinkerton 3/31/97
J. E. Pinkerton
Vice President, Finance and Administration
(Principal Financial Officer)

By /s/B. C. Werner 3/31/97
B. C. Werner
Director, Management Accounting
(Principal Accounting Officer)

By /s/C. E. Hughes 3/27/97
C. E. Hughes, Director

By /s/J. M. Judge 3/27/97
J. M. Judge, Director

By /s/W. W. Adams 3/29/97
W. W. Adams, Director

By /s/J. O. Shirk 3/28/97
J. O. Shirk, Director

By /s/N. T. Washburn 3/27/97
N. T. Washburn, Director

<ARTICLE> 5

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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 193,000
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<CURRENT-ASSETS> 78,749,000
<PP&E> 10,246,000
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