FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1998 Commission File Number 2-36877
IREX CORPORATION
Pennsylvania 23-1712949
120 North Lime Street, Lancaster 17603
Registrant's Telephone Number, Including Area Code, (717) 397-3633
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
Common Shares Outstanding (Single Class) 420,884
IREX CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed financial statements included herein have been prepared by
Irex Corporation (the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.
The financial information presented herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the results
for the interim periods presented. Certain prior period amounts have
been reclassified to conform with the current presentation. The results
for interim periods are not necessarily indicative of the results to be
expected for the full year.
IREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months
Second Quarter Ended June 30
1998 1997 1998 1997
(In Thousands Except Per Common Share Amounts)
Contracting Revenues $ 35,621 $ 30,754 $ 66,054 $ 61,399
Distribution and Other Revenues 45,476 36,316 86,334 69,992
Total Revenues 81,097 67,070 152,388 131,391
Cost of Revenues 63,240 52,260 119,350 102,437
Gross Profit 17,857 14,810 33,038 28,954
Selling, General and
Administrative Expenses 13,615 13,214 27,622 26,713
Operating Income 4,242 1,596 5,416 2,241
Interest Expense, Net 520 446 1,010 904
Income Before Income Taxes 3,722 1,150 4,406 1,337
Income Tax Provision 1,547 523 1,817 615
Net Income $ 2,175 $ 627 $ 2,589 $ 722
Less: Dividend Requirements
for Preferred Stock (245) (245) (490) (490)
NET INCOME APPLICABLE
TO COMMON STOCK $ 1,930 $ 382 $ 2,099 $ 232
Average Common Shares
Outstanding - Basic 416,709 386,219 403,697 385,944
Stock Options Issued to
Employees and Directors 1,851 5,215 4,498 4,154
Average Common Shares
Outstanding - Diluted 418,560 391,434 408,195 390,098
Income per Common
Share - Basic $ 4.63 $ 0.99 $ 5.20 $ 0.60
Income per Common
Share - Diluted $ 4.61 $ 0.98 $ 5.14 $ 0.59
IREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30 December 31
1998 1997
(In Thousands)
ASSETS
Cash and Cash Equivalents $ 2,844 $ 374
Receivables, Net 61,916 54,835
Inventories 19,063 16,138
Actual Costs and Estimated Earnings on
Contracts in Process in Excess of Billings 5,760 4,421
Prepaid Income Taxes - 225
Other Prepaid Expenses 992 733
Deferred Income Taxes 4,391 4,391
Total Current Assets 94,966 81,117
Property and Equipment, Net 3,780 3,240
Non-Current Deferred Income Taxes 3,170 3,170
Other Assets 1,834 1,018
TOTAL ASSETS $ 103,750 $ 88,545
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Notes Payable to Banks $ 30,408 $ 18,224
Current Portion of Long-Term Debt 1,876 1,876
Accounts Payable 14,956 10,502
Billings in Excess of Actual Costs and
Estimated Earnings on Contracts in Process 3,168 2,797
Accrued Workers' Compensation Insurance 2,706 2,604
Accrued Liabilities 11,177 12,831
Accrued Income Taxes 259 -
Total Current Liabilities 64,550 48,834
Long-Term Debt (Less Current Portion) 5,629 7,504
Non-Current Liabilities 6,914 8,644
Redeemable Preferred Stock 10,490 10,490
Capital Stock 1,028 1,028
Paid-in Surplus 405 449
Retained Earnings 32,595 30,663
Cumulative Translation Adjustments (243) (213)
Treasury Stock at Cost (17,618) (18,854)
Total Shareholders' Investment 16,167 13,073
TOTAL LIABILITIES AND
SHAREHOLDERS' INVESTMENT $ 103,750 $ 88,545
IREX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30
1998 1997
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,589 $ 722
Reconciliation of net income to net cash
provided by operating activities
Depreciation and amortization 678 444
Provision for (reduction to)
losses on accounts receivable 497 (28)
(Increase) decrease in current assets
Receivables (5,462) 856
Inventories (195) ( 35)
Prepaid income taxes and other prepaid expenses (259) (579)
Actual costs and estimated earnings on contracts
in process in excess of billings, net (968) 1,432
Increase (decrease) in current liabilities
Accounts payable 4,699 (1,110)
Accrued income taxes 484 (198)
Accrued liabilities and other liabilities (3,527) 1,243
Net cash provided by (used for)
operating activities (1,464) 2,747
CASH FLOWS FROM INVESTING ACTIVITIES:
Net additions to property and equipment (310) (419)
Acquisitions of certain businesses,
net of cash acquired
Assets (5,640) -
Intangibles (930) -
Increase in other assets (30) (1)
Net cash used for investing activities (6,910) (420)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from revolving lines of credit 12,184 1,509
Payment on long-term debt (1,875) (2,557)
Dividends paid (490) (490)
Exercise of stock options 1,084 -
Reissuance of common stock - 44
Repurchase of common stock (59) (16)
Net cash provided by (used for)
financing activities 10,844 (1,510)
Net Increase in Cash and Cash Equivalents 2,470 817
Cash and Cash Equivalents at Beginning of Period 3,74 193
Cash and Cash Equivalents at End of Period $ 2,844 $ 1,010
IREX CORPORATION AND SUBSIDIARIES
June 30, 1998 and 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The consolidated financial statements include the accounts of Irex
Corporation (the "Company") and its subsidiaries, all of which are
wholly owned. All significant intercompany accounts and transactions
have been eliminated in consolidation.
The Company consists of two business units. The distribution unit is
primarily a distributor and fabricator of mechanical insulation,
architectural/acoustical products and specialty products. The companies
in the specialty contracting unit primarily engage in mechanical
insulation, abatement, fire protection and interior finish contracting.
(2) The Company has authorization for 2,000,000 shares of its common
stock with a par value of $1.00 per share. At June 30, 1998, 1,028,633
shares were issued, 420,884 shares were outstanding and 607,749 shares
were held, at cost, in Treasury stock.
(3) All highly liquid investments with a maturity of three months or
less at the time of purchase are considered to be cash equivalents. The
Company's income tax and interest payments for the first six months of
1998 and 1997 were:
1998 1997
Income Taxes: $1,332,000 $1,708,000
Interest: $1,090,000 $ 944,000
(4) The Company completed one acquisition during the second quarter of
1998 for cash consideration of approximately $942,000. Certain assets
were acquired from a company primarily engaged in the distribution and
fabrication business. The acquisition was accounted for using the
purchase method of accounting, and the financial statements reflect the
results of operations and cash flows of the operation from the date of
acquisition.
(5) On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130). SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components. Comprehensive income, as
defined by SFAS 130, is the total of net income and all other non-owner
changes in equity. Total comprehensive income for the quarters ended
June 30, 1998 and 1997 was $2,134,000 and $630,000, respectively. Total
comprehensive income for the six months ended June 30, 1998 and 1997 was
$2,559,000 and $714,000, respectively. The difference between net
income and comprehensive income for the above periods is due to
cumulative translation adjustments.
(6) On April 13, 1998, the Company announced that its wholly owned
subsidiary, Specialty Products & Insulation Co. (SPI), had filed a
registration statement with the Securities and Exchange Commission
relating to the initial public offering of 2,000,000 shares of SPI's
Common Stock. The Company had previously announced the planned spin-off
of SPI through a pro rata distribution of all of the capital stock of
SPI to the shareholders of the Company. On June 17, 1998, the Company
announced the postponement of its planned spin-off of SPI due primarily
to adverse conditions in the market for initial public offerings. The
Company and its financial advisors will continue to monitor the various
indicators of market conditions as management remains committed to the
spin-off and ultimate public ownership of SPI. The Company estimates
that it will incur approximately $1.4 million of costs in connection
with the initial public offering, of which $584,000 has been
deferred on the balance sheet at June 30, 1998.
(7) The Company's Board of Directors ("Board") adopted a resolution,
effective May 1, 1998, which merged the Irex Corporation Employee Stock
Ownership Plan ("ESOP") into the Irex Corporation Savings Incentive Plan
("Savings Plan"). The resolution stipulates that (a) no future
contributions be made to the ESOP, (b) prior ESOP account balances
become 100 percent vested and (c) account balances be held as a
component of the Savings Plan but no longer be designed to invest
primarily in Company securities.
The Board adopted another resolution to amend the Irex Corporation
Employees' Retirement Plan ("Pension Plan") effective May 1, 1998. The
amendment suspends the Pension Plan, thereby freezing the accrued
benefits of all plan participants and discontinuing future benefit
accruals. For the quarter ended June 30, 1998, the Company recognized a
curtailment gain of approximately $800,000 based on an actuarial
calculation of the projected benefit obligation. The gain was reported
in the Company's income statement for the quarter ended June 30, 1998 as
a reduction to selling, general and administrative expenses.
IREX CORPORATION AND SUBSIDIARIES
June 30, 1998 and 1997
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results from Operations:
The operating results for the quarter ended June 30, 1998 are among the
best quarterly results in the Company's history. These results were
achieved on the strength of improved gross margins for existing centers
in the distribution business and a streamlined overhead structure, put
in place during the restructuring of late 1996 and early 1997, which has
ultimately reduced costs in the contracting business. Operating income
for the three months ended June 30, 1998 increased by more than $2.6
million to $4,242,000 from $1,596,000 in last year's second quarter.
The strong second quarter led to operating income of $5,416,000 for the
six months ended June 30 ,1998, an improvement of nearly $3.2 million
from the $2,241,000 reported in last year's comparable period. The $5.4
million operating income represents the best first-half performance in
the Company's history.
Net income applicable to common shareholders, after the dividend
requirement for preferred stock, was $1,930,000, or $4.63 per share for
the second quarter of 1998. The second quarter of 1997 showed net
income of $382,000, or $0.99 per share. For the six-month period ended
June 30, 1998, net income was $2,099,000, or $5.20 per common share.
In comparison, the Company's highest earnings per share for an entire
fiscal year was $4.90 in 1990. The comparable six months of 1997
indicated net income of $232,000, or $0.60 per common share.
The following table presents, for the periods indicated, certain items
in the Company's consolidated statements of operations as a percentage
of total revenue:
Three Months Six Months
Ended June 30 Ended June 30
1998 1997 1998 1997
Contracting Revenues 43.9% 45.9% 43.3% 46.7%
Distribution and Other Revenues 56.1% 54.1% 56.7% 53.3%
Total Revenues 100.0% 100.0% 100.0% 100.0%
Gross Profit Margin 22.0% 22.1% 21.7% 22.0%
Income from Operations 5.2% 2.4% 3.6% 1.7%
Net Income Before
Preferred Dividend 2.7% 0.9% 1.7% 0.5%
Revenues:
Total revenues for the quarter ended June 30, 1998 increased 20.9% to
$81,097,000 from $67,070,000 in last year's comparable quarter.
Year-to-date revenues of $152,388,000 established a new record start for the
Company, and reflect a 16.0% increase over the $131,391,000 reported for
the first six months of 1997.
Contracting revenues were $35,621,000 for the three months ended June
30, 1998, representing a 15.8% increase from last year's similar
quarter. The increase is primarily attributable to securing contracts
outside the "traditional" mechanical insulation work, for example lead
abatement and marine vessel work. The strong second-quarter performance
led to an improvement of almost $4.7 million, or 7.6%, on a year-to-date
basis.
Distribution revenues grew to $45,476,000 in the quarter ended June 30,
1998. This total is $9,160,000, or 25.2%, above the $36,316,000 for
1997's second quarter. Three acquisitions completed since October of
1997 accounted for approximately 75% of the increase. Distribution
revenues totaled $86,334,000 for the six months ended June 30, 1998 as
the growth strategy of the Company's distribution subsidiary has gained
momentum since the middle of 1997. Year-to-date distribution revenues
are $16.3 million, or 23.3%, ahead of 1997's comparable six-month
revenues of $69,992,000. Approximately 68% of the increase is
attributable to the three acquisitions noted earlier. Existing
distribution centers accounted for another 27% of the increase and the
balance is mostly from two startup distribution centers opened during
the first half of 1997.
Gross Profit:
Gross profit for the three months ended June 30, 1998 increased 20.6% to
$17,857,000 from $14,810,000 in last year's comparable quarter. This
increase was a result of the higher revenue base previously noted.
Gross profit margins, which are gross profit dollars expressed as a
percentage of total revenues, were 22.0% and 22.1% for the respective
quarters in 1998 and 1997. The decrease in contracting margins was
mostly offset by an increase in distribution margins.
For the six months ended June 30, 1998, margins of 21.7% were down
slightly from 22.0% during the same period of 1997. Distribution
margins improved approximately 0.9 percentage points on the basis of
fewer direct-ship sales. Direct-ship sales, where products are shipped
directly from the manufacturer to customer without passing through a
distribution center, generally earn lower margins. Margins for the
contracting business decreased approximately 1.8 percentage points as
competitive bidding to secure lump-sum contracts continues to squeeze
pricing while placing a premium on contract execution. For the year-to-date
period ended June 30, 1998, the net result was that gross profit
dollars increased by 14.1% over 1997's first six months, falling
slightly below the 16.0% improvement in revenues noted above.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses (SG&A) amounts to
$13,615,000, or 16.8% of total revenues, for the quarter ended June 30,
1998. Prior-year SG&A for the similar period totaled $13,214,000, or
19.7% of revenues. As described earlier in Note 7 to the consolidated
financial statements, an approximate $800,000 gain attributable to the
curtailment of the Company's pension plan was recorded in this year's
second quarter. For the six-month period ended June 30, SG&A increased
3.4% to $27,622,000 in 1998 from $26,713,000 in 1997. However, as a
percentage of total revenues, SG&A decreased to 18.1% for the six months
ended June 30, 1998 from 20.3% for the comparable period in 1997.
In comparing the year-to-date period ended June 30, 1998 to the same six
months of 1997, SG&A increased by $1,709,000, or 6.4%, exclusive of the
approximate $800,000 curtailment gain previously noted. Higher SG&A
attributable to expansion of the distribution business was partially
offset by a decrease in SG&A for the contracting business as a result of
its streamlined organization. The contracting unit actually reduced
SG&A by approximately $1.6 million in its effort to operate under area
and regional overhead structures which enable it to address customer
needs with competitively-priced services. This reduction was exclusive
of the approximate $800,000 curtailment gain previously noted. The
distribution unit, on the other hand, increase SG&A by approximately
$3.3 million as the Company's strategic growth of this business gained
momentum. The three acquisitions and two startup distribution centers
noted earlier contributed approximately 67% of the increase.
Financial Condition and Liquidity:
At June 30, 1998, the Company has working capital of $30.4 million and
stockholders' equity (excluding preferred stock) of $16.2 million.
Working capital at December 31, 1997 was $32.3 million and stockholders'
equity was $13.1 million. The increase in accounts receivable and
inventories from the amounts reported at December 31, 1997 is primarily
attributable to the two acquisitions completed in 1998 and the overall
growth in revenues.
Total debt outstanding at June 30, 1998 was $37.9 million as compared to
$27.6 million at December 31, 1997. Long-term debt, excluding current
portion, was $5.6 million at June 30, 1998. Available short-term lines
of credit as of June 30, 1998 were $36.3 million and remain adequate to
provide sufficient liquidity for operations. Outstanding balances under
these unsecured lines of credit were $30.4 million, an increase of $12.2
million from December 31, 1997. Cash outlays of $6.5 million for two
acquisitions, $1.9 million for long-term debt paydown and $1.8 million
for workers' compensation funding under the Company's self-insured
program contributed significantly to the outstanding balance increase.
As indicated earlier in Note 6 to the consolidated financial statements,
the Company remains committed to the eventual spin-off of SPI through a
pro rata distribution of all of the capital stock of SPI to shareholders
of the Company. After the spin-off, the Company expects that funds from
operations and available lines of credit will provide sufficient
liquidity to meet its working capital requirements.
Year 2000 Issue:
The Company's ability to conduct its day-to-day operations is dependent
in part on an integrated software program and data-based system
(collectively, the System). The System serves as a critical tool in
carrying out functions in several key areas of the business, including
inventory management, contract management, pricing, sales, financial
reporting and personnel administration.
The Company has assessed the System and determined that modifications
are required to properly utilize dates beyond December 31, 1999. The
Company had already committed to upgrade the System in order to renew
the vendor maintenance agreement (under which the Company receives
technical support), and believes the upgrade will substantially resolve
Year 2000 issues in the System. The Company will utilize both internal
and external resources to replace, reprogram and test software for Year
2000 compliance and plans to complete the conversion prior to December
31, 1998. These costs arising through the normal course of business
will be expensed as incurred. In relation to hardware within the System
(primarily desktop computers networked to a central location),
management does not have an estimate of the cost to replace these items.
On July 17, 1998, the Company began an outsourcing arrangement under
which it contracted to lease AS400 and related data communications
services from an off-site provider. Thus, the Company is now operating
on mainframe hardware which is fully Year 2000 compliant.
The Company does not currently have any information concerning Year 2000
compliance status of its suppliers and customers. In the event that any
of the Company's significant suppliers or customers does not
successfully and timely achieve Year 2000 compliance, the Company's
business or operations could be adversely affected.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company's ACandS, Inc. subsidiary is one of a number of defendants
in pending lawsuits filed by approximately 117,000 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 the first half of
1998, ACandS was served with cases involving 19,334 individual
plaintiffs. In 1997, ACandS was served with cases involving approximately
31,489 individual plaintiffs. There were 37,777 new plaintiffs in 1996;
44,904 new plaintiffs in 1995; and 18,122 new plaintiffs in 1994.
The great majority of the filings in recent years are the direct result
of screenings and other mass solicitation efforts. Close to two-thirds
of the claims filed since 1994 have been filed in Texas or West
Virginia, or by the Maritime Legal Clinic. Almost all of the Maritime
Legal Clinic filings have been administratively dismissed.
Developments in Texas and West Virginia have somewhat reduced the
filings in those states, but 4,764 cases have been filed against ACandS
in Mississippi during 1998. ACandS has not had liability exposure in
Mississippi, and the 1998 filings in that state include a large number
of duplicate filings.
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 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 163,000 individual claims
against ACandS have been settled, dismissed or otherwise resolved.
Payments in individual cases have varied considerably. Nevertheless,
ACandS's average cost for all cases has remained low, and 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 do not appear to have
significantly increased the cost of resolving cases.
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 a
group of 20 asbestos litigation defendants filed a class action
complaint 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. On June 25, 1997, the U.S.
Supreme Court affirmed dismissal of the class action and settlement,
finding that the case did not meet the requirements of the rules
permitting class actions.
Although the large number of pending cases, the continued efforts of
certain courts to clear dockets through consolidated proceedings, the
bankruptcy filings by defendants, efforts toward national solutions, and
the transfer of federal cases to the United States District Court for
the Eastern District of Pennsylvania 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
most of the very substantial insurance coverage applicable to its
asbestos-related bodily injury claims. ACandS believes it will secure
additional coverage, if needed, from those insurers which have not to
date settled with ACandS. Two insurers which wrote significant
applicable coverage for ACandS have encountered financial difficulties
in recent years, in part because of asbestos and environmental
liabilities, but ACandS does not believe these difficulties will affect
the adequacy of the coverage available to it.
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. ACandS's
percentage of aggregate liability payments, however, 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 four actions by the
owners of buildings seeking to recover costs associated with the
replacement or treatment of installed asbestos-containing products.
These cases involve 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 103
cases, largely on the basis it had no connection with the products at
issue in the claimants' buildings, and has agreed to settle 16 claims.
The aggregate amount paid has been very small in the context of this
litigation. ACandS has not been served with any new building-related
cases since 1994 . Since 1990, only three new building-related cases
have been served on ACandS.
The Travelers 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 policies of Aetna Casualty and Surety Co. (now part of
Travelers) 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 varied widely. The appellate
rulings which have fully considered coverage issues for asbestos
building claims provide significant coverage for policyholders. The
decisions are consistent with ACandS's view that broad coverage is
available 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.
On August 27, 1997, the U.S. Occupational, Safety and Health
Administration cited Centin Corporation for alleged regulatory
violations involving asbestos abatement work at Wright Patterson Air
Force Base. This citation has been settled by Centin's payment of a
civil fine of $105,000.
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, claims
and litigation arising in the normal course of business will not
materially affect the Company's long-term business, financial position
or results of operations.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IREX CORPORATION
Date: August 14, 1998 B. C. Werner
Controller
Duly Authorized Signer
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10,490,000
0
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</TABLE>
