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 September 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.
November 10, 1995 -- Common Stock, $.50 Par Value -- 12,340,757
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PART I - FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL POSITION
(Thousands)
September 30, March 31,
1995 1995
Assets
Current assets
Cash and equivalents $ 5,348 $ 6,360
Marketable securities 44,333 48,478
Accounts receivable 108,819 115,373
Inventories
Finished products 52,434 47,608
Work in process 9,545 12,751
Raw materials and supplies 14,501 15,577
Contracts in process 20,158 8,328
96,638 84,264
Income taxes 35,016 38,751
Other current assets 6,329 5,153
Total current assets 296,483 298,379
Property, plant, and equipment 149,859 143,606
Less allowances for depreciation
and amortization 91,345 87,444
58,514 56,162
Investments 36,247 35,447
Other assets 25,807 24,708
$417,051 $414,696
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 42,376 $ 49,758
Other current liabilities 95,851 93,086
Total current liabilities 138,227 142,844
Long-term obligations 9,002 9,525
Retirement obligations 43,679 43,397
Shareholders' equity
Common stock 6,285 6,285
Other shareholders' equity 219,858 212,645
226,143 218,930
$417,051 $414,696
See notes to consolidated financial statements.
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CONSOLIDATED OPERATIONS
(Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
September 30 September 30
1995 1994 1995 1994
Net sales $124,852 $112,169 $247,187 $226,554
Cost of sales 93,623 86,694 184,830 177,186
Marketing and administration 25,002 22,502 48,895 44,170
Interest income (844) (1,160) (1,729) (2,332)
Interest expense 1,184 1,083 2,318 2,061
Other income (798) (702) (1,431) (1,227)
Income before income taxes 6,685 3,752 14,304 6,696
Income taxes 2,610 1,280 5,580 2,280
Net income $ 4,075 $ 2,472 $ 8,724 $ 4,416
Earnings per share $.33 $.20 $.71 $.36
Average shares outstanding 12,384 12,340 12,365 12,374
Cash dividends declared
per common share $.10 $.22 $.20 $.44
See notes to consolidated financial statements.
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CONSOLIDATED CASH FLOWS
(Thousands)
Six Months Ended
September 30
1995 1994
Operations
Net income $ 8,724 $ 4,416
Operating assets and liabilities (7,962) 6,846
Depreciation and amortization 4,792 4,859
Miscellaneous (163) (346)
5,391 15,775
Investing
Capital expenditures (7,214) (4,075)
Marketable securities 4,346 2,597
Long-term investments 1,068 1,756
Sales of operations 259 218
Miscellaneous 115 230
(1,426) 726
Financing
Dividends paid (3,950) (5,462)
Debt payments (1,027) (881)
Treasury stock purchased (1,926)
Stock options exercised 33
(4,977) (8,236)
Cash and equivalents
(Decrease) increase (1,012) 8,265
Beginning of year 6,360 4,137
End of period $ 5,348 $ 12,402
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 six months ended
September 30, 1995 are not necessarily indicative of the results to be
expected for the full year.
Earnings per share are based on net income or loss 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 September 30, 1995, $16.2 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
The accounts receivable decline was primarily attributable to the collection
of balances due on Power Systems segment long-term contracts which were almost
double the accounts receivable increase from the Company's other construction
businesses. Almost half the increase in contracts in progress was associated
with Power Systems segment activities. The greater amount of capital
expenditures and the increase in property, plant, and equipment resulted from
new and expanded facilities for Plumbing Products and equipment additions by
the water resource construction business.
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 Six Months Ended
September 30 September 30
1995 1994 1995 1994
(Thousands)
Power Systems $ 33,080 $ 35,182 $ 67,400 $ 71,692
Water Control 69,717 61,673 129,507 122,781
Lynx Golf 11,335 5,584 29,000 12,906
Mechanical Power Transmission 10,250 9,454 20,444 18,729
Others 470 276 836 446
$124,852 $112,169 $247,187 $226,554
Second quarter sales by each of the Water Control segment businesses were
greater than the same period last year. New products and increased market
share and prices contributed to a 14% increase from Plumbing Products for the
quarter. The year-to-date sales growth from Plumbing Products was offset by
lower revenues from water resource construction projects due to delays in
starting recently awarded contracts. The Lynx Golf sales increase was
attributable to the new irons introduced in January 1995. Its second quarter
sales were from orders placed in the first quarter; consequently, new orders
in the second quarter were lower than the normal seasonal pattern.
The greater gross profit margin percentage resulted from the increase in
Plumbing Products sales 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 low profit on a power plant project
which contributed 48% of the segment's construction revenues in the six-month
period.
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 year's 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:
September June September
1995 1995 1994
(Millions)
Power Systems $ 95 $118 $116
Water Control 139 150 61
Lynx Golf 5 14 2
Mechanical Power Transmission 12 13 11
$251 $295 $190
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Form 10-Q, Part II, Item 1 for the quarterly period ended June 30, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the August 4, 1995 annual meeting of shareholders, votes were cast as
follows:
Votes For Votes Withheld
Election of directors:
For a term of one year:
David W. Wallace 10,640,936 155,292
For a term of three years each:
Edward J. Campbell 10,646,769 149,459
Robert R. Womack 10,675,282 120,947
Adopt 1995 Directors Stock Option Plan
Votes For 9,685,132 Abstentions 171,317
Votes Against 939,779 Broker Nonvotes -0-
Ratify appointment of auditors
Votes For 10,656,083 Abstentions 42,727
Votes Against 97,418 Broker Nonvotes -0-
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.
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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)
November 10, 1995 /s/ Dennis Haines
Dennis Haines
General Counsel and Secretary
November 10, 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
3.1 By-laws as of August 1995
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
10.10* 1995 Directors Stock Option Plan
* 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;
dated May 1, 1995 with D.L. Butynski and July 1, 1995 with
J.R. Mellett filed as Exhibit 10.8 to Form 10-Q for the
quarter ended June 30, 1995
10.11* Agreement Relating to Employment dated August 14, 1995 with
F.E. Sheeder
* 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; dated May
1, 1995 with D.L. Butynski, June 8, 1995 with R.D. Neary,
and July 1, 1995 with J.R. Mellett filed as Exhibit 10.9
to Form 10-Q for the quarter ended June 30, 1995
10.12* Indemnity Agreement dated August 14, 1995 with F.E. Sheeder
* 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.
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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
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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