FLOWSERVE CORP, 10-K405, 1998-03-31

FLOWSERVE CORP
10-K405, 1998-03-31
PUMPS & PUMPING EQUIPMENT

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-13179

FLOWSERVE CORPORATION
(Exact name of registrant as specified in its charter)

NEW YORK 31-0267900
------------------------------ ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

222 W. LAS COLINAS BOULEVARD
SUITE 1500
IRVING, TEXAS 75039
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (972) 443-6500
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
-------------------- ----------------
COMMON STOCK, $1.25 PAR VALUE NEW YORK STOCK EXCHANGE

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

The aggregate market value of the Common Stock held by non-affiliates of the
registrant as of February 13, 1998 (based on the closing sale price as reported
on the New York Stock Exchange on such date) was $1,257,906,020.

The number of shares outstanding of the registrant's Common Stock as of February
13, 1998: 40,616,082 shares

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held on or about May 21, 1998, are incorporated by reference into Part III
of this Form 10-K.

Portions of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1997, are incorporated by reference into Parts I, II and IV
of this Form 10-K.

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<PAGE> 2

PART I

ITEM 1. BUSINESS

Flowserve Corporation ("Flowserve") was incorporated under the laws of the State
of New York on May 1, 1912. On July 22, 1997, Flowserve (formerly known as Durco
International Inc. and The Duriron Company, Inc.) merged with BW/IP, Inc.
("BW/IP") in a stock-for-stock merger of equals, accounted for as a pooling of
interests, with BW/IP becoming a wholly owned subsidiary of Flowserve
("Merger"). The Merger created one of the world's leading providers of
industrial flow management services. All references herein to the "Company" or
"Flowserve" refer collectively to Flowserve and its subsidiaries unless
otherwise indicated by the context.

Flowserve is principally engaged in the design, manufacture, distribution and
service of industrial flow management equipment throughout the world. The
Company provides pumps, valves and mechanical seals primarily for the refinery
and pipeline segments of the petroleum industry, the chemical processing
industry and the power generation industry. Flowserve manufactures certain
standard products, but specializes in the development of precision engineered
equipment for critical service applications where high reliability is required.
The Company's materials expertise, design and engineering capabilities and
applications know-how have enabled it to develop product lines that are
responsive to customers needs for manufacturing efficiency, reduced maintenance
cost, and avoidance of premature equipment failure.

An important element of Flowserve's business is its successful emphasis on
providing aftermarket products and services. These consist of supplying parts,
making repairs and providing a variety of technical services for the upgrade or
retrofit of equipment to extend its useful life or improve its operating
characteristics.

The Company operates in one business segment that includes three types of
products: Rotating Equipment, Flow Control and Fluid Sealing. Included at Note
12 of the Financial Statements, provided as part of Item 8 of this Form 10-K and
incorporated herein by reference, is information concerning the Company's
revenues, operating profit and identifiable assets by geographic area for each
year in the three-year period ended December 31, 1997. For a significant portion
of its products, the Company's domestic operations supply each other and the
Company's foreign manufacturing subsidiaries with components and subassemblies.

ROTATING EQUIPMENT DIVISION

PRODUCTS

Through its Rotating Equipment Division, the Company designs, manufactures,
distributes and services pumps and related equipment. Pump products and services
accounted for approximately 45%, 44% and 43% of the Company's 1997, 1996 and
1995 sales, respectively. Pumps are manufactured to industry-recognized
standards, including those set by the American Petroleum Institute (API) and the
American National Standards Institute (ANSI).

Pump products for the petroleum industry include horizontal double case pumps
used especially for hot oils under high pressure, horizontal multi-stage pumps
used in pipelines, vertical pumps used for low temperature processes, vertical
circulating pumps used for cooling water, submersible pumps used for water or
brine injection in oil fields, and submersible water pumps used on offshore
platforms to supply water for fire fighting.

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Pump products for chemical processing industries include metallic and
non-metallic pumps, varying in size, capacity, material components and sealant
specifications. These pumps are used primarily to move liquids during processing
activities, but also in auxiliary services such as waste removal, water
treatment and pollution control. The pumps are modular in design and
manufactured to withstand the abrasive and/or corrosive service fluids being
processed by customers in these industries.

Pump products for the power generating industry include a variety of pumps used
in both nuclear and fossil fuel facilities to generate steam. Products for the
fossil fuel power generation industry are horizontal double case pumps for high
pressure boiler feed, horizontal multi-stage pumps for low pressure boiler feed,
vertical double case pumps and vertical circulating pumps.

The Company supplies pumps for other industrial uses, including industrial
production, utility services, pollution control, mining operations and municipal
water transport.

MARKETING AND DISTRIBUTION

Pumps or pump components are produced in plant facilities in the United States
(two in California, one in Oklahoma, one in Ohio, two in New Mexico), Mexico,
Argentina, Belgium and two in the Netherlands. Pump manufacturing facilities in
The Netherlands and Belgium are key sources of pumps sold in Europe, Africa and
the Middle East. The Argentine facility provides products primarily for
Argentine customers, but also serves customers in other South American
countries. The Company's Mexican operation manufactures pumps for export and for
Mexican customers. Large vertical circulating pumps manufactured in Mexico are
distributed worldwide. A majority-owned joint venture in India, which began
production in late 1997, manufactures ANSI pumps for export to U.S., Asian and
European markets.

The two specialized component manufacturing facilities in New Mexico provide a
significant portion of pump components (except for ANSI pump components)
previously manufactured at the Company's integrated U.S. pump plants. The
integrated plants were reconfigured to focus on the engineering, assembly and
testing of pumps with machining of components concentrated into two facilities.
The component facilities also supply components to other Company plants outside
of the U.S. on an economically selective basis.

The Company's pump products are primarily marketed to end-users and engineering
contractors through the Company's worldwide pump sales force, regional service
centers, independent distributors and representatives and for modular pumps a
national parts distribution center. Service centers stock a full array of
critical pump parts and have machining and product modification capabilities.

The majority of the Company's sales of pump products in the nuclear power market
are in the United States and Japan, where the Company's large installed base of
equipment provides a continuing market for products and services to ensure
safety and reliability, major customer concerns. A significant characteristic of
the nuclear market worldwide is the stringent requirements that must be met in
order to sell products to nuclear power plants. For example, the Company
maintains a Nuclear Stamp ("N Stamp") from the American Society of Mechanical
Engineers, which is required for qualification to supply certain kinds of
products to the U.S. nuclear industry.

The Company could face liability in excess of its own commercial or government
provided insurance if any of its products were found to contribute to an
accident at a nuclear power facility or at other industrial facilities. The
Company does not maintain nuclear liability insurance for the United States or
Canada, but maintains an aggregate of $15 million in nuclear liability insurance
for all other countries. The Federal Price-Anderson Act of 1954 provides U.S.
nuclear utilities with a system of no-fault

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insurance coverage in an amount up to about $8.7 billion for third party losses
or damages resulting from a nuclear incident. Canada's Nuclear Liability Act
provides for a system of insurance coverage that generally makes the operator of
a nuclear installation absolutely liable for third party claims arising as a
result of a nuclear incident, up to a maximum liability of (C)$75 million.

FLOW CONTROL DIVISION

PRODUCTS

Through its Flow Control Division, the Company designs, manufactures,
distributes and services mechanical and quarter-turn valves, automatic control
valves, actuators, and related components. Valve products and services accounted
for approximately 27%, 28% and 28% of the Company's 1997, 1996 and 1995 sales,
respectively. Valves are used to control the flow of liquids and gases. Valve
products for industrial processing systems include plug and butterfly valves
made of various metals, alloys and plastics and lined ball valves. Actuators and
other control accessories manufactured by the Company are either sold
independently or mounted on valves to move them from open to closed positions
and to various specified positions in between. Valve products for the nuclear
power market include a complete line of gate, globe and check valves (including
valve actuators). Automatic control valves include high pressure valves, rotary
valves, anti-noise and anti-cavitation valves and are generally sold with an
actuator.

MARKETING AND DISTRIBUTION

Valves are produced at facilities in the United States (one in Utah, one in
Pennsylvania, one in Tennessee), Australia, Canada, France, Germany and
Switzerland. Actuators are produced at facilities in the United States (Utah and
Ohio), Canada, France, and Italy. Two Company majority-owned joint ventures in
India (which began production in late 1997) manufacture valves for export to
U.S., Asian and European markets.

Manual valve products and valve actuators are distributed through the Company's
sales personnel, service centers and through a network of independent stocking
distributors. Automatic control valves are marketed through specialized sales
offices with engineers and service centers or on a commission basis through
independent manufacturing representatives in principal marketing centers
throughout the United States and other countries.

FLUID SEALING DIVISION

PRODUCTS

Through its Fluid Sealing Division, the Company designs, manufactures,
distributes and services mechanical seals and sealing systems. Mechanical seal
products and services accounted for approximately 28%, 28% and 29% of the
Company's 1997, 1996 and 1995 sales, respectively. The mechanical seal is
critical to the smooth operation of centrifugal pumps, compressors and mixers
because mechanical seals help prevent leakage between a rotating shaft and a
stationary casing. In doing so, mechanical seals reduce shaft wear on pumps,
compressors and mixers used in many industries. The need to reduce or eliminate
the leakage of liquids and gases due to increasingly stringent environmental
regulations and safety concerns has expanded the market for mechanical seals.
The Company's seals are used on a variety of pumps, mixers, compressors, steam
turbines and specialty equipment, principally in the oil refining and chemical
processing industries. The Company also manufactures a dry gas seal used in gas
transmission and oil and gas production markets.

<PAGE> 5

MARKETING AND DISTRIBUTION

Mechanical seals are produced in facilities in the United States (one in
California, one in Michigan), The Netherlands, Germany, Mexico, Argentina,
Brazil, Singapore, New Zealand and Japan. Seal manufacturing facilities in The
Netherlands and Germany are key sources of seals sold in Europe, Africa and the
Middle East. The Argentine facility provides products primarily for Argentine
markets, but also serves markets in other South American countries. The Japanese
plant provides products for Japan and parts of Southeast Asia.

The Company's mechanical seal products are primarily marketed through the
Company's worldwide seals sales force directly to end users and engineering and
construction firms. A portion of the Company's seal products is sold directly to
original equipment ("OE") manufacturers for pumps, compressors, mixers or other
rotary equipment requiring seals. Distributors, dealers, commissioned
representatives and sales agents are also used in the distribution and sale of
mechanical seal products.

GENERAL BUSINESS

SERVICE AND REPAIR

The Company has established certain facilities throughout the world which have
the capability to provide service and repair functions for all Company products
from the Rotating Equipment, Fluid Sealing and Flow Control Divisions. The
Company believes that these consolidated service and repair facilities provide a
substantial growth opportunity and has established a special management team to
focus on this effort.

BACKLOG

The Company's backlog of orders at December 31, 1997, was $291.6 million
compared to $287.1 million at December 31, 1996. The Company believes that a
high percentage of the current backlog will be shipped by December 31, 1998.

COMPETITION

The markets for the Company's products are highly competitive. Competition
occurs on the basis of price, technical expertise, delivery, previous
installation history and reputation for quality. Delivery speed and the
proximity of service centers are particularly important with respect to
aftermarket products. Customers are more likely to rely on the Company than
competitors for aftermarket products relating to its more highly engineered and
customized products than for its standard products. Price competition tends to
be more significant for OE manufacturers than aftermarket services and has been
increasing with ongoing overcapacity in pump markets.

In the aftermarket portion of its pump business, the Company competes against
both large and well-established national or global competitors and, in some
markets, against smaller regional and local companies, as well as the in-house
maintenance departments of the Company's end-user customers. In the sale of
aftermarket products and services, the Company benefits from the large installed
base of pumps which require maintenance, repair and replacement parts.

In the petroleum industry the competitors for aftermarket services tend to be
the customers themselves because of their sophisticated in-house capabilities.
In other industries, except the nuclear power industry, the competitors for
aftermarket services tend to be low cost replicators of spare parts and local
repair shops for the Company's products. The Company has certain competitive
advantages in the

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nuclear power industry because it maintains the N stamp that is required to
service customers in that industry, and because the Company has a considerable
base of proprietary knowledge.

Customers for the Company's products are attempting to reduce the number of
vendors from which they purchase in order to reduce the size and diversity of
inventory. Although vendor reduction programs could adversely affect the
Company's business, the Company has been successful in entering into "alliance"
arrangements with a number of customers both in the United States and overseas
which provide competitive advantages to the Company.

RESEARCH AND DEVELOPMENT

The Company conducts research and development at its own facilities in various
locations. In 1997, 1996, and 1995, the Company spent approximately $14.8
million, $13.9 million, and $13.6 million, respectively, on Company-sponsored
research and development, primarily for new product development

The Company's research and development group consists of engineers involved in
new product development as well as the support and improvement of existing
products. Additionally, the Company sponsors consortium programs for research
with various universities and conducts limited development work jointly with
certain of its vendors, licensees and customers. Management believes current
expenditures are adequate to sustain ongoing research and development
activities.

CUSTOMERS

The Company sells to a wide variety of customers. No individual customer
accounted for more than 10% of the Company's 1997 net sales.

RISKS OF INTERNATIONAL BUSINESS

Approximately 48% of the Company's sales are to customer locations outside the
United States. The Company's activities thus are subject to the customary risks
of operating in an international environment, such as unstable political
situations, local laws, the potential imposition of trade restrictions or tariff
increases and the relationship of the U.S. dollar to other currencies. The
impact of these conditions is mitigated somewhat by the strength and diversity
of the Company's product lines and geographic coverage. To minimize the impact
of foreign exchange rate movements on its operating results, the Company enters
into forward exchange contracts to hedge specific foreign currency denominated
transactions. See Note 1 to Consolidated Financial Statements on pages 23 and 24
of the 1997 Annual Report to Shareholders, which is incorporated by reference in
this Form 10-K. The Company conducts substantial business activities in the
Middle East.

INTELLECTUAL PROPERTY

The Company owns a number of trademarks and patents relating to the name and
design of its products. The Company considers its trademarks Byron Jackson(R),
Durco(R), United Centrifugal(R), Byron Jackson/United(R), Durametallic(R), BW
Seals(R), GASPAC(R), Pacific Wietz(TM), Five Star Seal(R), Wilson-Snyder(R),
Valtek(R), Kammer(R), Sereg(TM) and Automax(R) to be important to its business.
The patents underlying much of the technology for the Company's products have
been in the public domain for many years. Surviving patents are not considered,
either individually or in the aggregate, material to the Company's business.
However, the Company's pool of proprietary information, consisting of know-how
and trade secrets relating to the design, manufacture and operation of its
products and their use, is considered particularly important and valuable.
Accordingly the Company protects such proprietary information.

<PAGE> 7
The Company, in general, is the owner of the rights to the products which it
manufactures and sells, and the Company is not dependent in any material way
upon any license or franchise to operate.

RAW MATERIALS

The principal raw materials used by the Company in the manufacture of its
products are normally readily available. While substantially all raw materials
are purchased from outside sources, the Company has been able to obtain an
adequate supply of raw materials, and no shortage of such materials is currently
anticipated. The Company intends to expand its use of worldwide sourcing to
capitalize on low cost sources of purchased goods.

The Company is a vertically-integrated manufacturer of certain products. Certain
corrosion-resistant castings for Company pumps and quarter-turn valves are
manufactured at the Dayton, Ohio foundries; other metal castings are purchased
from outside sources.

The Company also produces most of its highly engineered corrosion resistant
plastic parts for certain pump and valve product lines. This includes
rotomolding as well as injection and compression molding of a variety of
fluorocarbon and other plastic materials.

Suppliers of raw materials for nuclear markets must be qualified by the American
Society of Mechanical Engineers and, accordingly, are limited in number.
However, the Company to date has experienced no significant difficulty in
obtaining such materials.

EMPLOYEES AND LABOR RELATIONS

The Company and its subsidiaries employ approximately 7,200 persons of whom
approximately 59% work in the United States. The Company's hourly employees at
its four principal U.S. pump manufacturing plants in Los Angeles, California,
San Jose, California (to be closed in mid-1998), Dayton, Ohio, and Tulsa,
Oklahoma, at its valve manufacturing plant in Williamsport, Pennsylvania and at
its foundry in Dayton, Ohio are represented by unions. The Company's operations
in Mexico, The Netherlands, Germany and Belgium are unionized. The Company
believes employee relations throughout its operations are satisfactory.

ENVIRONMENTAL REGULATIONS AND PROCEEDINGS

The Company is subject to environmental laws and regulations in all
jurisdictions in which it has operating facilities and periodically makes
capital expenditures for pollution abatement and control to meet environmental
requirements. At present the Company has no plans for any material capital
expenditures for environmental control facilities. However, the Company has
experienced and continues to experience operating costs relating to
environmental matters, although certain costs have been offset in part by the
Company's successful waste minimization programs.

The Company believes that future environmental compliance expenditures will not
have a material adverse effect on its financial position and has established
allowances which it believes to be adequate to cover potential environmental
liabilities.

EXPORT LICENSES

Licenses are required from U.S. government agencies to export certain of the
Company's products from the United States. In particular, products with nuclear
applications are restricted, although limitations are placed on the export of
certain other pump, valve and seal products as well.

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ITEM 2. PROPERTIES

The Company's corporate headquarters is a leased facility in Irving, Texas
encompassing approximately 34,000 square feet.

The location, size and products manufactured at the Company's principal
manufacturing facilities are as follows:

LOCATION SQUARE FOOTAGE PRODUCTS MANUFACTURED
-------- -------------- ---------------------

<S> <C> <C>
DOMESTIC:
Dayton, Ohio 600,000 Castings and pumps
Cookeville, Tennessee 190,000 Valves
Springville, Utah 140,000 Valves and actuators
Springboro, Ohio 50,000 Plastic components for pumps and valves
Kalamazoo, Michigan 137,000 Mechanical seals
Temecula, California 64,000 Mechanical seals
Los Angeles, California 273,000 Pumps
Williamsport, Pennsylvania 141,000 Valves
Tulsa, Oklahoma 320,000 Pumps
Albuquerque, New Mexico 50,000 Components for pumps
San Jose, California 99,000 Pumps

INTERNATIONAL:
Mendoza, Argentina 81,000 Pumps and mechanical seals
Petit Rechain, Belgium 65,000 Pumps and valves
Ahaus, Germany 68,000 Valves
Dortmund, Germany 70,000 Mechanical seals
Essen, Germany 50,000 Valves and actuators
Santa Clara, Mexico 154,000 Pumps and mechanical seals
Etten-Leur, The Netherlands 175,000 Pumps
Hengelo, The Netherlands 49,400 Pumps
Roosendaal, The Netherlands 48,400 Mechanical seals
</TABLE>

All of the Company's principal manufacturing facilities are owned with the
exception of the facilities in Cookeville, Tennessee; Springboro, Ohio; Hengelo,
The Netherlands; and Dortmund, Germany.

On the average, the Company utilizes approximately 80% to 90% of its
manufacturing capacity, although there is a variation in usage rate among the
facilities. The Company could, in general, increase its capacity through the
purchase of new or additional manufacturing equipment without obtaining
additional facilities.

The Company maintains a substantial network of domestic and foreign service
centers and sales offices most of which are leased.

The Company is leasing its former manufacturing facility in Van Nuys, California
to a third party with an option to purchase. In November 1997, the Company
announced the closing of its San Jose pump manufacturing facility in 1998 and
has entered into a letter of intent to sell this property.

<PAGE> 9

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in ordinary routine litigation incidental to its
business, none of which it believes to be material to its financial condition.
For further information about such litigation, see Note 9 of the Financial
Statements, provided as part of Item 8 of this Form 10-K and incorporated herein
by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

The common stock of the Company (FLS) is traded on the New York Stock Exchange.
In January 1998, the Company's records showed approximately 2,500 shareholders
of record. Based on these records plus requests from brokers and nominees listed
as shareholders of record, the Company estimates there are approximately 13,200
beneficial owners of its common stock. During 1997, the Company paid a dividend
of fourteen cents per share each calendar quarter, and, in 1996, a dividend of
thirteen cents per share each calendar quarter.

PRICE RANGE OF FLOWSERVE COMMON STOCK
(HIGH/LOW PRICES)

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
First Quarter $27.12/$21.88 $29.25/$20.50
Second Quarter $30.00/$21.25 $29.38/$23.00
Third Quarter $36.63/$28.81 $27.50/$19.25
Fourth Quarter $30.56/$26.38 $28.50/$25.25
</TABLE>

During 1997, 1996 and 1995, the Company issued 21,700, 29,900 and 4,100 shares
of restricted common stock, respectively, pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. Shares were
issued for the benefit of directors and officers of the Company subject to
restrictions on transfer.

ITEM 6. SELECTED FINANCIAL DATA

Selected financial data for the five years ended December 31, 1997, which
appears on page 18 of the 1997 Annual Report to Shareholders, is incorporated
herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's Discussion and Analysis appears on pages 14 through 17 of the 1997
Annual Report to Shareholders and is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements together with the report thereon of Ernst & Young LLP
dated February 20, 1998, and supplementary data appearing on pages 19 through 38
of the 1997 Annual Report to Shareholders are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

Not applicable.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained under the heading "Election of Directors" in the
definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
or about May 21, 1998, (the "1998 Proxy Statement") is incorporated herein by
reference. The executive officers of the Company, all positions and offices
presently held by each person named, their ages as of March 1, 1998, and their
business experience during the last five years are stated below. Executive
officers serve at the discretion of the Board of Directors.

Name and Position Age Principal Occupation During Past Five Years
----------------- --- -------------------------------------------
<S> <C> <C>
Bernard G. Rethore 56 Chairman of the Board of Directors and Chief Executive
Chairman of the Board of Directors and Officer since July 1997; Chairman of the Board of
Chief Executive Officer Directors of BW/IP from February 1997 to July 1997 and
President and Chief Executive Officer and a Director of
BW/IP from 1995 to July 1997; Senior Vice President of
Phelps Dodge Corporation and President of Phelps
Dodge Industries, its diversified international
manufacturing business, from 1989 to 1995.

William M. Jordan 54 President and a Director since 1991 and Chief
President and Chief Operating Officer Operating Officer since July 1997; Chairman of the
Board from 1996 to July 1997 and Chief Executive Officer
from 1993 to July 1997; Chief Operating Officer from
1990 to 1993.

Renee J. Hornbaker 45 Vice President and Chief Financial Officer since
Vice President and December 1997; Vice President, Business Development
Chief Financial Officer from July 1997 to December 1997. Vice President,
Finance and Chief Financial Officer of BW/IP from May
1997 to July 1997; Vice President, Business Development
of BW/IP from 1996 to May 1997. Director-Business
Analysis and Planning of Phelps Dodge Industries, the
diversified international manufacturing business of
Phelps Dodge Corporation, from February to April 1996
and Director Financial Analysis and Control from July
1991 to February 1996.

Rick L. Johnson 45 Vice President, Business Development since January
Vice President, 1998; Vice President and Controller of the
Business Development Industrial Products Division from July 1997 to January
1998; Industrial Products Group Vice President and
Controller from 1995 to July 1997; President Durco
Valtek (Singapore) from 1993 to 1995; Corporate
Controller 1991 to 1993.

Rory E. MacDowell 47 Vice President and Chief Information Officer since
Vice President and March 1998; Chief Information Officer of Keystone
Chief Information Officer International, Inc., a manufacturer and distributor of
flow control products from 1993 to September 1997;
various information technology management positions in
the oilfield services division of Schlumberger from 1985
to 1993.

</TABLE>

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<TABLE>

<S> <C> <C>
Cheryl D. McNeal 47 Vice President, Human Resources since 1996;
Vice President, Assistant Vice President, Human Resources and other
Human Resources Human Resource management positions at NCR from 1978
to 1996.

George A. Shedlarski 54 President, Fluid Sealing Division since October 1997.
President, Fluid Sealing Division President, Service Repair Division from July 1997 to
October 1997. President Rotating Equipment Group from
March 1997 to July 1997. Group Vice President,
Industrial Products Group from 1994 to March 1997;
Vice President U.S. Operations from 1990 to 1994.

Ronald F. Shuff 45 Vice President since 1990 and Secretary and General
Vice President, Secretary and Counsel since 1989 .
General Counsel

Mark E. Vernon 45 President, Flow Control Division since October 1997
President, Flow Control Division and President, Industrial Products Division from July
1997 to October 1997. Group Vice President, Flow Control
Group from 1993 to July 1997. President of the Company's
Valtek, Inc. subsidiary from 1991 to 1993.

Reid B. Wayman 45 President, Service Repair Division since October 1997;
President, Service Repair Division President Flow Control Division from July 1997 to
October 1997; Group Vice President, Flow Control Group
from March 1997 to July 1997; Vice President, Sales and
European Operations of the Rotating Equipment Group from
1996 to March 1997; Vice President -European Operations
of the Flow Control Group from December 1992 to April
1996.

Howard D. Wynn 51 President, Rotating Equipment Division since July
President, Rotating Equipment Division 1997; Vice President of BW/IP and President, Pump
Division from August 1996 to July 1997; Vice President
of the BW/IP Pump Division from 1993 to August 1996;
Operations Manager, Service of BW/IP from 1988 to 1993.

Charles F. Cargile 33 Corporate Controller since July 1997; Corporate
Corporate Controller Controller of BW/IP from December 1996 to July 1997;
Director Corporate Accounting of BW/IP from March 1996
to December 1996; Manager Operations and Financial
Analysis from 1992 to March 1996.

Scott E. Messel 39 Treasurer since January 1998; Vice President and
Treasurer Director, International Treasury from 1994 to December
1997 and other increasingly responsible management
positions from 1983 to 1994 at Ralston Purina Company, a
manufacturer of pet foods, food-related products and
battery products.
</TABLE>

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<PAGE> 13

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 is set forth in the 1998 Proxy
Statement and is incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item 12 is set forth in the 1998 Proxy
Statement and is incorporated herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item 13 is set forth to the extent applicable
in the 1998 Proxy Statement and is incorporated herein by this reference.

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The financial statements, together with the report thereon of Ernst &
Young LLP dated February 20, 1998, appearing on pages 19 through 38 of
the 1997 Annual Report to Shareholders, listed in the accompanying
index on page F-1, are incorporated herein by reference.

2. Financial Statement Schedules

The required financial statement schedules together with the report
thereon of Ernst & Young LLP dated February 20, 1998, listed in the
accompanying index on page F-1, are filed as part of this Form 10-K.

3. Exhibits

The exhibits listed on the accompanying index to exhibits on pages 14
through 19 are filed as part of this Form 10-K.

(b) Reports on Form 8-K

None.

(d) See Item 14(a) 2 above.

<PAGE> 15

INDEX TO EXHIBITS*

EXHIBIT DESCRIPTION
NO.

2.1 Agreement and Plan of Merger dated as of May 6, 1997, among the
Company, Bruin Acquisition Corp. and BW/IP, Inc. ("BW/IP") was
filed as Annex I to the Joint Proxy Statement/Prospectus which is
part of the Registration Statement on Form S-4, dated June 19,
1997.

3.1 1988 Restated Certificate of Incorporation of The Duriron Company,
Inc. was filed as Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1988.

3.2 1989 Amendment to Certificate of Incorporation was filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1989.

3.3 By-Laws of The Duriron Company, Inc. (as restated) were filed with
the Commission as Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987.

3.4 1996 Certificate of Amendment of Certificate of Incorporation was
filed as Exhibit 3.4 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.

3.5 Amendment No. 1 to Restated Bylaws was filed as Exhibit 3.5 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995.

3.6 April 1997 Certificate of Amendment of Certificate of
Incorporation was filed as part of Annex VI to the Joint Proxy
Statement/Prospectus which is part of the Registration Statement
on Form S-4, dated June 19, 1997.

3.7 July 1997 Certificate of Amendment of Certificate of Incorporation
was filed as Exhibit 3.6 to the Company's Quarterly Report on Form
10-Q, for the Quarter ended June 30, 1997.

4.1 Lease agreement, indenture of mortgage and deed of trust, and
guarantee agreement, all executed on June 1, 1978 in connection
with 9-1/8% Industrial Development Revenue Bonds, Series A, City
of Cookeville, Tennessee. +

4.2 Lease agreement, indenture of trust, and guaranty agreement, all
executed on June 1, 1978 in connection with 7-3/8% Industrial
Development Revenue Bonds, Series B, City of Cookeville,
Tennessee. +

14
<PAGE> 16

4.3 Lease agreement and indenture, dated as of January 1, 1995 and
bond purchase agreement dated January 27, 1995, in connection with
an 8% Taxable Industrial Development Revenue Bond, City of
Albuquerque, New Mexico.+

4.4 Rights Agreement dated as of August 1, 1986 between the Company
and BankOne, N.A., as Rights Agent, which includes as Exhibit B
thereto the Form of Rights Certificate which was filed as Exhibit
1 to the Company's Registration Statement on Form 8-A on August
13, 1986.

4.5 Amendment to Rights Agreement dated August 1, 1996 was filed as
Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.

4.6 Interest Rate and Currency Exchange Agreement between the Company
and Barclays Bank PLC dated November 17, 1992 in the amount of
$25,000,000 was filed as Exhibit 4.9 to Company's Annual Report on
Form 10-K for year ended December 31, 1992.

4.7 Loan Agreement in the amount of $25,000,000 between the Company
and Metropolitan Life Insurance Company dated November 12, 1992
was filed as Exhibit 4.10 to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.

4.8 Revolving Credit Agreement between the Company and First of
America Bank - Michigan, N.A. in the amount of $20,000,000 and
dated August 22, 1995 was filed as Exhibit 4.11 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.

4.9 Credit Agreement dated as of November 26, 1997, among Flowserve
Corporation, Bank of America National Trust and Savings
Association as Agent and Letter of Credit Issuing Bank and the
other Financial Institutions Party thereto. (filed herewith)

4.10 Material Subsidiary Guarantee, dated as of November 26, 1997, by
BW/IP International, Inc. in favor of and for the benefit of Bank
of America National Trust and Savings Association, as Agent.
(filed herewith).

4.11 Rate Swap Agreement in the amount of $25,000,000 between the
Company and National City Bank dated November 14, 1996 was filed
as Exhibit 4.9 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.

4.12 Rate Swap Agreement in the amount of $25,000,000 between the
Company and Key Bank National Association dated October 28, 1996
was filed as Exhibit 4.10 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996.

4.13 Guaranty, dated August 1, 1997 between Flowserve Corporation and
ABN-AMRO Bank N.V. was filed as Exhibit 4.12 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.

15
<PAGE> 17

4.14 Credit Agreement, dated as of September 10, 1993, between BW/IP
International B.V. and ABN/AMRO was filed as Exhibit 10.dd to
BWIP's Annual Report on Form 10-K for the year ended December 31,
1993.

4.15 Note Agreement, dated as of November 15, 1996, between BW/IP
International, Inc. and the Note Purchasers named therein, with
respect to $30,000,000 principal amount of 7.14% Senior Notes,
Series A, due November 15, 2006, and $20,000,000 principal amount
of 7.17% Senior Notes, Series B, due March 31, 2007, was filed as
Exhibit 4.1 to BW/IP's Registration Statement on Form S-8
(Registration No. 333-21637) as filed February 12, 1997.

4.16 Note Agreement, dated as of April 15, 1992, between BW/IP
International, Inc. and the Note Purchasers named therein, with
respect to $50,000,000 principal amount of 7.92% Senior Notes due
May 15, 1999, filed as Exhibit 4.a to BW/IP's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1992.

10.1 The Duriron Company, Inc. Incentive Compensation Plan (the
"Incentive Plan") for Senior Executives, as amended and restated
effective January 1, 1994, was filed as Exhibit 10.1 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993. **

10.2 Amendment No. 1 to the Incentive Plan was filed as Exhibit 10.2 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. **

10.3 The Duriron Company, Inc. Supplemental Pension Plan for Salaried
Employees was filed with the Commission as Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1987. **

10.4 The Duriron Company, Inc. amended and restated Director Deferral
Plan was filed as Attachment A to the Company's definitive 1996
Proxy Statement filed with the Commission on March 10, 1996. **

10.5 Form of Change in Control Agreement between all executive officers
and the Company was filed as Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. **

10.6 The Duriron Company, Inc. First Master Benefit Trust Agreement
dated October 1, 1987 was filed as Exhibit 10.24 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1987.**

10.7 Amendment #1 to the First Master Benefit Trust Agreement dated
October 1, 1987 was filed as Exhibit 10.24 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.**

10.8 Amendment #2 to First Master Benefit Trust Agreement was filed as
Exhibit 10.25 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993.**

16
<PAGE> 18

10.9 The Duriron Company, Inc. Second Master Benefit Trust Agreement
dated October 1, 1987 was filed as Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1987.**

10.10 First Amendment to Second Master Benefit Trust Agreement was filed
as Exhibit 10.26 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.**

10.11 The Duriron Company, Inc. Long-Term Incentive Plan (the "Long-Term
Plan"), as amended and restated effective November 1, 1993 was
filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.**

10.12 Amendment No. 1 to the Long-Term Plan was filed as Exhibit 10.13
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.**

10.13 The Duriron Company, Inc. 1989 Stock Option Plan as amended and
restated effective January 1, 1997 was filed as Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.**

10.14 The Duriron Company, Inc. 1989 Restricted Stock Plan (the
"Restricted Stock Plan") as amended and restated effective January
1, 1997 was filed as Exhibit 10.15 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.**

10.15 The Duriron Company, Inc. Retirement Compensation Plan for
Directors ("Director Retirement Plan") was filed as Exhibit 10.15
to the Company's Annual Report to Form 10-K for the year ended
December 31, 1988.**

10.16 Amendment No. 1 to Director Retirement Plan was filed as Exhibit
10.21 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.**

10.17 The Company's Benefit Equalization Pension Plan (the "Equalization
Plan") was filed as Exhibit 10.16 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1989.**

10.18 Amendment #1 dated December 15, 1992 to the Equalization Plan was
filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.**

10.19 The Company's Equity Incentive Plan as amended and restated
effective July 21, 1995 was filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995.**

10.20 Supplemental Pension Agreement between the Company and William M.
Jordan dated January 18, 1993 was filed as Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.**

10.21 1979 Stock Option Plan, as amended and restated April 23, 1991,
and Amendment #1 thereto dated December 15, 1992, was filed as
Exhibit 10.17 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992.**

17
<PAGE> 19

10.22 Deferred Compensation Plan for Executives was filed as Exhibit
10.19 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.**

10.23 Executive Life Insurance Plan of The Duriron Company, Inc. was
filed as Exhibit 10.29 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.**

10.24 Executive Long-Term Disability Plan of The Duriron Company, Inc.
was filed as Exhibit 10.30 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995.**

10.25 Employee Protection Plan, as revised effective March 1, 1997
(which provides certain severance benefits to employees upon a
change of control of the Company) was filed as Exhibit 10.32 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.**

10.26 1997 Stock Option Plan was included as Exhibit A to the Company's
1997 Proxy Statement which was filed with the Commission on March
17, 1997.**

10.27 Supplemental Executive Retirement Plan was filed as Exhibit
10.rrrr to BW/IP's Registration Statement on Form S-1
(Registration No. 33-45165) as filed February 18, 1992.**

10.28 Amendment Number One to the Supplemental Executive Retirement Plan
was filed as Exhibit 10.ee to BW/IP's Annual Report on Form 10-K
for the year ended December 31, 1993.**

10.29 Amendment to the BW/IP International, Inc. Supplemental Executive
Retirement Plan was filed as Exhibit 10.nn to BW/IP's Annual
Report on Form 10-K for the year ended December 31, 1994.**

10.30 Amendment to the BW/IP International, Inc. Supplemental Executive
Retirement Plan was filed as Exhibit 10.z to BW/IP's Annual Report
on Form 10-K for the year ended December 31, 1995.**

10.31 Form of Employment Agreement between the Company and certain
executive officers (filed herewith).**

10.32 Amendment No. 1 to the amended and restated Director Deferral Plan
(filed herewith).**

10.33 Amendment # 1 to the 1989 Restricted Stock Plan as amended and
restated (filed herewith). **

10.34 BW/IP International, Inc. 1997 Management Incentive Plan was filed
as Exhibit 10.kk to BW/IP's Annual Report on Form 10-K for the
year ended December 31, 1996.**

18
<PAGE> 20

10.35 Employment Agreement, effective July 22, 1997, between the Company
and Bernard G. Rethore was filed as Exhibit 10.53 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.**

10.36 Employment Agreement, effective July 22, 1997, between the Company
and William M. Jordan was filed as Exhibit 10.54 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.**

13.1 1997 Annual Report to Shareholders (filed herewith as part of this
report to the extent incorporated herein by reference).

21.1 Subsidiaries of the Company (filed herewith).

23.1 Consent of Ernst & Young LLP (filed herewith).

23.2 Consent of Price Waterhouse LLP (filed herewith).

27.1 Financial Data Schedule submitted to the SEC in electronic format
(filed herewith).

- -----------
"*" For exhibits of the Company incorporated by reference into this
Annual Report on Form 10-K from a previous filing with the
Commission, the Company's file number with the Commission since
July 1997 is "1-13179" and the previous file number was "0-325".
All filings of BW/IP incorporated by reference in this Annual
Report on Form 10-K cover the periods prior to the Merger.

"+" Indicates that the document relates to a class of indebtedness
that does not exceed 10% of the total assets of the Company and
subsidiaries and that the Company will furnish a copy of the
document to the Commission upon request.

"**" Management contracts and compensatory plans and arrangements
required to be filed as exhibits to this Annual Report on Form
10-K pursuant to Item 14(c) of this Form 10-K. Compensatory plans
of BW/IP were assumed by the Company in accordance with the
Agreement and Plan of Merger.

19
<PAGE> 21

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 on this 19th day of
February 1998.

FLOWSERVE CORPORATION
(Registrant)

By: /s/ Bernard G. Rethore
---------------------------
Bernard G. Rethore
Chairman and Chief Executive
Officer

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

SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ BERNARD G. RETHORE Chairman, February 19, 1998
- --------------------------------- Chief Executive Officer and Director
Bernard G. Rethore (Principal Executive Officer)

/s/ WILLIAM M. JORDAN President, Chief Operating Officer and Director February 19, 1998
- ---------------------------------
William M. Jordan

/s/ RENEE J. HORNBAKER Vice President and Chief Financial Officer February 19, 1998
- --------------------------------- (Principal Financial Officer)
Renee J. Hornbaker

/s/ CHARLES F. CARGILE Corporate Controller February 19, 1998
- --------------------------------- (Principal Accounting Officer)
Charles F. Cargile

/s/ WILLIAM C. RUSNACK Director, Chairman of Audit/Finance Committee February 19, 1998
- ---------------------------------
William C. Rusnack

/s/ DIANE C. HARRIS Director, Member Audit/Finance Committee February 19, 1998
- ---------------------------------
Diane C. Harris

/s/ JAMES O. ROLLANS Director, Member Audit/Finance Committee February 19, 1998
- ---------------------------------
James O. Rollans

/s/ R. ELTON WHITE Director, Member Audit/Finance Committee February 19, 1998
- ---------------------------------
R. Elton White
</TABLE>

20
<PAGE> 22

FLOWSERVE CORPORATION

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

ITEM 14(a)(1) AND (2)

<TABLE>
<CAPTION>
ANNUAL REPORT ANNUAL REPORT
TO ON
SHAREHOLDERS FORM 10-K
------------ ----------
<S> <C> <C>
Flowserve Corporation Consolidated Financial Statements

Reports of Independent Auditors 38 F-2
Consolidated Balance Sheets at
December 31, 1997 and 1996 20
For the three years ended December 31, 1997:
Consolidated Statements of Income 19
Consolidated Statements of Shareholders' Equity 21
Consolidated Statements of Cash Flows 22
Notes to Consolidated Financial Statements 23-37

Flowserve Corporation Financial Statement Schedules
for the three years ended December 31, 1997

Report of Independent Auditors on
Financial Statement Schedules F-3
Schedule II - Valuation and Qualifying Accounts F-4
</TABLE>

Financial statement schedules not included in this Annual Report on Form 10-K
have been omitted because they are not applicable or the required information is
shown in the consolidated financial statements or notes thereto.

F-1
<PAGE> 23

REPORT OF INDEPENDENT ACCOUNTANTS

In our opinion, the consolidated balance sheet and the related consolidated
statements of income and retained earnings and of cash flows of BW/IP, Inc. (not
presented separately herein) present fairly, in all material respects, the
financial position of BW/IP, Inc. and its subsidiaries at December 31, 1996 and
the results of their operations and their cash flows for each of the two years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Los Angeles, California
January 28, 1997

F-2
<PAGE> 24

REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Shareholders
Flowserve Corporation

We have audited the consolidated financial statements of Flowserve Corporation
and subsidiaries as of December 31, 1997 and 1996, and for each of the three
years in the period ending December 31, 1997, and have issued our report thereon
dated February 20, 1998 appearing on page 38 of the 1997 Annual Report (which
report and consolidated financial statements are incorporated by reference in
this Form 10-K). Our audits also included the financial statement schedules
listed in Item 14(a) of this Form 10-K. These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. We did not audit the 1996 and 1995 financial statements of BW/IP,
Inc., a wholly owned subsidiary, which statements reflect total assets
constituting 49% of the related consolidated total as of December 31, 1996, and
total revenues constituting 45% and 46% of the related totals for the years
ended December 31, 1996 and 1995, respectively. We have been furnished with the
report of other auditors with respect to Schedule 14(a) of BW/IP, Inc.

In our opinion, based on our audits and the report of other auditors, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

Ernst & Young LLP

Dallas, Texas
February 20, 1998

F-3
<PAGE> 25

FLOWSERVE CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)

Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Additions Deductions Balance at
beginning charged to from reserve end of
Description of year earnings year
- ------------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:

Allowance for doubtful accounts (a): $ 4,826 $ 2,458 $ 2,225 $ 5,059
============ ============= =============== =============

Year ended December 31, 1996:

Allowance for doubtful accounts (a): $ 5,183 $ 1,786 $ 2,143 4,826
============ ============= =============== =============

Year ended December 31, 1995:

Allowance for doubtful accounts (a): $ 4,437 $ 2,650 $ 1,904 5,183
============ ============= =============== =============

Year ended December 31, 1997:

Inventory reserves (b): $ 13,716 $ 4,308 $ 619 $ 17,405
============ ============= =============== =============

Year ended December 31, 1996:

Inventory reserves (b): $ 16,252 $ 860 $ 3,396 13,716
============ ============= =============== =============

Year ended December 31, 1995:

Inventory reserves (b): $ 13,759 $ 3,075 $ 582 $ 16,252
============ ============= =============== =============
</TABLE>

(a) Deductions from reserve represent accounts written off net of recoveries.
(b) Deductions from reserve represent inventory written off.

F-4

<PAGE> 26

INDEX TO EXHIBITS*

EXHIBIT DESCRIPTION
NO.

3.1 1988 Restated Certificate of Incorporation of The Duriron Company,
Inc. was filed as Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1988.

3.2 1989 Amendment to Certificate of Incorporation was filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1989.

3.3 By-Laws of The Duriron Company, Inc. (as restated) were filed with
the Commission as Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987.

3.4 1996 Certificate of Amendment of Certificate of Incorporation was
filed as Exhibit 3.4 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.

3.5 Amendment No. 1 to Restated Bylaws was filed as Exhibit 3.5 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995.

3.7 July 1997 Certificate of Amendment of Certificate of Incorporation
was filed as Exhibit 3.6 to the Company's Quarterly Report on Form
10-Q, for the Quarter ended June 30, 1997.

<PAGE> 27

4.5 Amendment to Rights Agreement dated August 1, 1996 was filed as
Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.

<PAGE> 28

10.2 Amendment No. 1 to the Incentive Plan was filed as Exhibit 10.2 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. **

10.4 The Duriron Company, Inc. amended and restated Director Deferral
Plan was filed as Attachment A to the Company's definitive 1996
Proxy Statement filed with the Commission on March 10, 1996. **

10.5 Form of Change in Control Agreement between all executive officers
and the Company was filed as Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. **

10.7 Amendment #1 to the First Master Benefit Trust Agreement dated
October 1, 1987 was filed as Exhibit 10.24 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.**

10.8 Amendment #2 to First Master Benefit Trust Agreement was filed as
Exhibit 10.25 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993.**

<PAGE> 29

10.10 First Amendment to Second Master Benefit Trust Agreement was filed
as Exhibit 10.26 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.**

10.12 Amendment No. 1 to the Long-Term Plan was filed as Exhibit 10.13
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.**

10.16 Amendment No. 1 to Director Retirement Plan was filed as Exhibit
10.21 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.**

10.17 The Company's Benefit Equalization Pension Plan (the "Equalization
Plan") was filed as Exhibit 10.16 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1989.**

10.18 Amendment #1 dated December 15, 1992 to the Equalization Plan was
filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.**

<PAGE> 30