FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1995
___ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From ___________ To __________
Commission File Number 1-5502
ZURN INDUSTRIES, INC.
IRS Employer
State of Address and Identification
Incorporation Telephone Number Number
Pennsylvania One Zurn Place 25-1040754
Erie, Pennsylvania 16505
814-452-2111
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
August 2, 1995 -- Common Stock, $.50 Par Value -- 12,340,648
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PART I - FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL POSITION
(Thousands)
June 30, March 31,
1995 1995
Assets
Current assets
Cash and equivalents $ 11,282 $ 6,360
Marketable securities 41,941 48,478
Accounts receivable 115,420 115,373
Inventories
Finished products 49,665 47,608
Work in process 12,291 12,751
Raw materials and supplies 15,292 15,577
Contracts in process 11,712 8,328
88,960 84,264
Income taxes 35,024 38,751
Other current assets 7,561 5,153
Total current assets 300,188 298,379
Property, plant, and equipment 146,157 143,606
Less allowances for depreciation
and amortization 89,630 87,444
56,527 56,162
Investments 35,499 35,447
Other assets 25,181 24,708
$417,395 $414,696
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 40,070 $ 49,758
Other current liabilities 101,477 93,086
Total current liabilities 141,547 142,844
Long-term obligations 9,089 9,525
Retirement obligations 43,720 43,397
Shareholders' equity
Common stock 6,285 6,285
Other shareholders' equity 216,754 212,645
223,039 218,930
$417,395 $414,696
See notes to consolidated financial statements.
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CONSOLIDATED OPERATIONS
(Thousands Except Per Share Amounts)
Three Months Ended
June 30
1995 1994
Net sales $122,335 $114,385
Cost of sales 91,207 90,492
Marketing and administration 23,893 21,668
Interest income (885) (1,172)
Interest expense 1,134 978
Other income (633) (525)
Income before income taxes 7,619 2,944
Income taxes 2,970 1,000
Net income $ 4,649 $ 1,944
Earnings per share $.38 $.16
Average shares outstanding 12,347 12,409
Cash dividends declared
per common share $.10 $.22
See notes to consolidated financial statements.
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CONSOLIDATED CASH FLOWS
(Thousands)
Three Months Ended
June 30
1994 1993
Operations
Net income $ 4,649 $ 1,944
Operating assets and liabilities (3,829) (10,142)
Depreciation and amortization 2,385 2,424
Miscellaneous (13) (132)
3,192 (5,906)
Investing
Marketable securities 6,715 10,389
Capital expenditures (2,920) (2,322)
Long-term investments 1,285 758
Sales of operations 151 71
Miscellaneous 68 204
5,299 9,100
Financing
Dividends paid (2,716) (2,732)
Debt payments (853) (621)
Stock options exercised 33
(3,569) (3,320)
Cash and equivalents
Increase (decrease) 4,922 (126)
Beginning of year 6,360 4,137
End of period $11,282 $ 4,011
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the results for the interim
periods presented. The results of operations for the three months ended
June 30, 1995 are not necessarily indicative of the results to be expected for
the full year.
Earnings per share are based on net income and the average shares of common
stock and dilutive stock options outstanding during the period.
The appeal of a jury verdict against the Company in connection with a power
plant construction contract is being aggressively pursued; however, if all
issues are lost, charges in addition to the fiscal 1994 provision could reach
$22.1 million, including interest on the unrecorded contingency which is not
being accrued.
At June 30, 1995, $8.8 million of letters of credit were outstanding under the
$75 million commitment from a group of banks for letters of credit and
revolving credit loans.
In the normal course of business, financial and performance guarantees are
made in connection with major engineering and construction contracts and a
liability is recognized when a probable loss occurs. Also, there are various
claims, legal, and environmental proceedings which management believes will
have no material effect on the Company's financial position or results of
operations when they are resolved.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Liquid assets at June 30, 1995 were invested to a greater extent in shorter-
term debt instruments classified as cash equivalents rather than as marketable
securities. Almost half the increase in contracts in progress and the
increase in other current liabilities, which includes advance billings on
contracts in progress, were associated with Power Systems segment activities.
The litigation disclosed in the notes to consolidated financial statements is
not expected to have a future material effect on the Company's financial
position; however, if all issues are lost on appeal, the resulting cash
expenditure, net of the ensuing income tax payment reductions, could be more
than $34 million.
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Results of Operations
Sales by the Company's industry segments were as set forth below.
Three Months Ended June 30
1995 1994
(Thousands)
Power Systems $ 34,320 $ 36,510
Water Control 59,790 61,108
Lynx Golf 17,665 7,322
Mechanical Power Transmission 10,194 9,275
Others 366 170
$122,335 $114,385
Water Control segment sales declined, despite a 15% increase in sales of
plumbing products, as a result of lower revenues from water resource
construction projects due to delays in starting work on recently awarded
contracts. The Lynx Golf sales increase is attributable to the new irons
introduced in January 1995.
The greater gross profit margin percentage resulted from higher plumbing
products prices and cost benefits derived from increased Lynx Golf volumes.
The gross profit margin contributed by the Power Systems segment continued to
be adversely impacted by the nonrecognition of profit on a power plant project
which contributed 54% of the segment's construction revenues in this year's
first quarter.
Marketing and administration expenses were up primarily as the result of
commissions on the increased Lynx Golf and plumbing products sales. Interest
income last year included earnings recognized on long-term receivables of the
Power Systems segment. Interest associated with prior years' income taxes on
construction contracts increased this year's expense. The higher effective
income tax rate results from tax exempt investment income being a less
significant component of pretax income this year.
The Company's backlog of unfilled orders by industry segment was as follows:
June March June
1995 1995 1994
(Millions)
Power Systems $118 $ 65 $144
Water Control 150 122 58
Lynx Golf 14 23 2
Mechanical Power Transmission 13 11 10
$295 $221 $214
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In June 1995, the Company paid $114,000 to the Commonwealth of Pennsylvania
Department of Environmental Resources (Department) in settlement of its
potential liability under the Department's complaint filed on October 19, 1993
in the United States District Court for the Western District of Pennsylvania.
ITEM 2. CHANGES IN SECURITIES
The Company's Preferred Share Purchase Rights were amended effective June 28,
1995 to (1) reduce the percentage from 40% to 15% of the Company's common
stock that must be acquired by a person or group before rightsholders may
purchase shares of Company stock at a 50% discount, (2) add provisions
allowing the Board of Directors of the Company to defer the triggering of the
Rights if less than 20% of the Company's common stock is acquired, and (3)
specify that the Rights have no application in the event of a offer to
purchase 100% of the Company's stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The exhibits listed in the Exhibit Index to this report on Form 10-Q are
incorporated herein by reference. Management contracts and compensatory plan
arrangements are preceded by an asterisk (*) in the Exhibit Index.
Reports on Form 8-K
No reports were filed during the quarter for which this report is filed.
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.
ZURN INDUSTRIES, INC.
(Registrant)
August 4, 1995 /s/ Dennis Haines
Dennis Haines
General Counsel and Secretary
August 4, 1995 /s/ John E. Rutzler III
John E. Rutzler III
Vice President-Controller
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EXHIBIT INDEX
3 Articles Of Incorporation And By-laws
Restated Articles of Incorporation with Amendments through Incorporated
August 7, 1987 filed as Exhibit 19A to Form 10-Q for the by reference
quarter ended September 30, 1987
By-laws as of April 1990 filed as Exhibit 3 to Form 10-K Incorporated
for the year ended March 31, 1990 by reference
4 Instruments Defining The Rights Of Security Holders,
Including Indentures
Description of Common Stock contained in the prospectus Incorporated
dated July 26, 1972 beginning on page 18 ("Description of by reference
Capital Stock") forming a part of Amendment No. 3 to the
Form S-1 Registration Statement No. 2-44631
Description of Common Stock as set forth in the Restated Incorporated
Articles of Incorporation with Amendments through by reference
August 7, 1987 filed as Exhibit 19A to Form 10-Q for the
quarter ended September 30, 1987
Description of Preferred Share Purchase Rights contained Incorporated
in the Form 8-A/A Registration Statement Amendment No. 1 by reference
dated June 27, 1995
10 Material Contracts
* 1986 Stock Option Plan filed as Exhibit 28A to Form S-8 Incorporated
Post-Effective Amendment No. 1 Registration Statement No. by reference
33-19103
* 1989 Directors Stock Option Plan filed as Exhibit 28 to Incorporated
Form S-8 Registration Statement No. 33-30383 by reference
* 1991 Stock Option Plan filed as Exhibit 28 to Form S-8 Incorporated
Registration Statement No. 33-49224 by reference
* Supplemental Executive Retirement Plan of Zurn Incorporated
Industries, Inc. filed as Exhibit 10.1 to Form 10-Q for by reference
the quarter ended December 31, 1994
* 1982 Retirement Plan for Outside Directors of Zurn Incorporated
Industries, Inc. filed as Exhibit 19A to Form 10-Q for by reference
the quarter ended June 30, 1989
* 1986 Retirement Plan for Outside Directors of Zurn Incorporated
Industries, Inc. filed as Exhibit 19B to Form 10-Q for by reference
the quarter ended June 30, 1989
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* Agreements Relating to Employment dated June 5, 1989 with Incorporated
D.F. Fessler, W.A. Freeman, and J.A. Zurn filed as Exhibit by reference
10H to Form 10-Q for the quarter ended June 30, 1989;
dated October 17, 1994 with R.R. Womack filed as Exhibit
10.2 to Form 10-Q for the quarter ended December 31, 1994
10.8 * Agreements Relating to Employment dated May 1, 1995 with
D.L. Butynski and July 1, 1995 with J.R. Mellett
* Zurn Industries, Inc. Deferred Compensation Plan for Non- Incorporated
Employee Directors filed as Exhibit 19E to Form 10-Q for by reference
the quarter ended June 30, 1989
* Zurn Industries, Inc. Deferred Compensation Plan for Incorporated
Salaried Employees filed as Exhibit 10.3 to Form 10-Q for by reference
the quarter ended December 31, 1994
* Zurn Industries, Inc. Optional Deferment Plan for Incorporated
Incentive Compensation Plan Participants filed as Exhibit by reference
10.4 to Form 10-Q for the quarter ended December 31, 1994
* Zurn Supplemental Pension Plan filed as Exhibit 10.5 to Incorporated
Form 10-Q for the quarter ended December 31, 1994 by reference
* Indemnity Agreements dated August 14, 1986 with E.J. Incorporated
Campbell, A.S. Cartwright, D.W. Wallace, and J.A. Zurn by reference
filed as Exhibit 19J to Form 10-Q for the quarter ended
September 30, 1986; dated October 20, 1986 with D.F.
Fessler and W.A. Freeman filed as Exhibit 19A to Form
10-Q for the quarter ended December 31, 1986 and with
J.E. Rutzler III filed as Exhibit 10B to Form 10-Q for
the quarter ended December 31, 1988; dated January 25,
1993 with W.E. Butler, April 1, 1993 with D. Haines, and
August 6, 1993 with Z. Baird filed as Exhibit 10A to Form
10-Q for the quarter ended June 30, 1993; dated October
17, 1994 with R.R. Womack filed as Exhibit 10.6 to Form
10-Q for the quarter ended December 31, 1994
10.9 * Indemnity Agreements dated May 1, 1995 with D.L. Butynski,
June 8, 1995 with R.D. Neary, and July 1, 1995 with
J.R. Mellett
* Irrevocable Trust Agreements for the Grantor's: 1982 Incorporated
Retirement Plan for Outside Directors of Zurn Industries, by reference
Inc.; 1986 Retirement Plan for Outside Directors of Zurn
Industries, Inc.; Deferred Compensation Plan for Non-
Employee Directors; Supplemental Executive Retirement
Plan for Zurn Industries, Inc.; Zurn Industries, Inc.
Supplemental Pension Plan for Participants in the
Deferred Compensation Plan for Salaried Employees;
Deferred Compensation Plan for Salaried Employees;
Optional Deferment Plan for Incentive Compensation Plan
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Participants filed as Exhibit 19I to Form 10-Q for the
quarter ended September 30, 1986
* Second Irrevocable Trust Agreement for the Grantor's Incorporated
Indemnity Agreements filed as Exhibit 10A to Form 10-Q by reference
for the quarter ended December 31, 1988
* Incentive Compensation Plan filed as Exhibit 10.7 to Incorporated
Form 10-K for the year ended March 31, 1995 by reference
11 Statement Re Computation Of Per Share Earnings
Computation of Earnings Per Share
27 Financial Data Schedule SEC Edgar
Filing Only
* - Management contracts and compensatory plan arrangements.
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