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, 1996
___ 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 1, 1996 -- Common Stock, $.50 Par Value -- 12,341,309
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PART I - FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL POSITION
(Thousands)
June 30, March 31,
1996 1996
Assets
Current assets
Cash and equivalents $ 6,596 $ 16,195
Marketable securities 24,143 13,836
Accounts receivable 97,084 93,713
Inventories
Finished products 44,250 45,386
Work in process 5,705 3,708
Raw materials and supplies 5,278 5,430
Contracts in process 12,347 15,229
67,580 69,753
Income taxes 29,170 32,340
Discontinued operations' net assets 53,105 57,253
Other current assets 4,272 3,904
Total current assets 281,950 286,994
Property, plant, and equipment 102,551 102,295
Less allowances for depreciation
and amortization 61,521 60,241
41,030 42,054
Investments 38,002 37,611
Other assets 28,497 27,988
$389,479 $394,647
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 38,483 $ 48,441
Other current liabilities 68,190 64,717
Total current liabilities 106,673 113,158
Long-term obligations 6,606 6,711
Retirement obligations 44,082 43,823
Shareholders' equity
Common stock 6,285 6,285
Other shareholders' equity 225,833 224,670
232,118 230,955
$389,479 $394,647
See notes to consolidated financial statements.
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CONSOLIDATED OPERATIONS
(Thousands Except Per Share Amounts)
Three Months Ended
June 30
1996 1995
Net sales $104,330 $94,476
Cost of sales 80,725 73,767
Marketing and administration 18,237 16,180
Interest income (857) (885)
Interest expense 356 1,084
Other expense (income) 2,217 (358)
Continuing operations income
before income taxes 3,652 4,688
Income taxes 1,440 1,930
Continuing operations income 2,212 2,758
Discontinued operations
income from operations 1,891
Net income $ 2,212 $ 4,649
Earnings per share
Continuing operations $.18 $.23
Net income $.18 $.38
Average shares outstanding 12,353 12,347
Cash dividends declared
per common share $.10 $.10
See notes to consolidated financial statements.
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CONSOLIDATED CASH FLOWS
(Thousands)
Three Months Ended
June 30
1996 1995
Operations
Net income $ 2,212 $ 4,649
Operating assets and liabilities (5,471) 599
Depreciation and amortization 1,649 1,542
Discontinued operations 2,237 (3,574)
Miscellaneous (75) (24)
552 3,192
Investing
Marketable securities (10,226) 6,715
Capital expenditures (1,430) (2,427)
Long-term investments (237) 1,285
Sales of operations 754 151
Discontinued operations 3,807 (450)
Miscellaneous 525 25
(6,807) 5,299
Financing
Dividends paid (1,236) (2,716)
Debt payments (212) (418)
Discontinued operations (1,896) (435)
(3,344) (3,569)
Cash and equivalents
(Decrease) increase (9,599) 4,922
Beginning of year 16,195 6,360
End of period $ 6,596 $11,282
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As the result of the decision made in the fourth quarter of fiscal 1996 to
sell the Lynx Golf and Mechanical Power Transmission segments before the end
of fiscal 1997, the financial statements for fiscal 1996 have been restated.
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, 1996 are not necessarily indicative of the results to be expected for
the full year.
Earnings per share are based on income and the average shares of common stock
and dilutive stock options outstanding during the period.
At June 30, 1996, $20.2 million of letters of credit were outstanding under
the $100 million commitment from a group of banks for letters of credit and
revolving credit loans and letters of credit issued under other arrangements
amounted to $2.2 million.
If the March 1996 repeal of the State of Illinois Retail Rate Law of 1987 is
not reversed and the assets of two power plants being constructed by the
Company, including debt funding by the owner, are insufficient, a pretax loss
of up to $14 million could be sustained for which no provision has been made
as management believes the Company's costs will be recovered.
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 amounted to $30,739 and $30,031 at June 30 and March 31, 1996,
respectively. At the end of March, they were invested to a greater extent in
shorter-term debt instruments classified as cash equivalents rather than as
marketable securities. Trade accounts payable declined during the first
quarter in line with the more efficient cash management practices instituted
in fiscal 1996.
The status of two power plant construction projects and the litigation
disclosed in the notes to consolidated financial statements are not expected
to have a future material effect on the Company's financial position.
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Results of Operations
Sales by the Company's industry segments were as set forth below.
Three Months Ended June 30
1996 1995
(Thousands)
Water Control $ 82,270 $59,790
Power Systems 21,773 34,320
Others 287 366
$104,330 $94,476
The Water Control segment sales increase was derived primarily from plumbing
products and water resource construction. Almost half of the 26% increase in
sales of plumbing products was attributable to the acquisition last fall of
Sanitary-Dash with the remainder generated by higher volumes in each of the
other product lines, including sales of new products. Revenues from water
resource construction projects were up sharply as work progressed this year on
a large contract which had been awarded but delayed in starting in the first
quarter of last year.
The greater gross profit margin percentage resulted from a larger proportion
of the sales being derived from plumbing products which have higher margins
than those obtained from construction contracts and from increased
profitability in the Water Control segment.
Marketing and administration expenses were up primarily as the result of
commissions on the increased plumbing products sales and several items which
lowered 1995's costs compared to those incurred this year. Interest expense
last year included a provision related to a litigation liability recorded in
fiscal 1994 which was settled in the third quarter of fiscal 1996.
The Company's backlog of unfilled orders by industry segment was as follows:
June March June
1996 1996 1995
(Millions)
Water Control $ 86 $ 98 $150
Power Systems 122 73 118
$208 $171 $268
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PART II - OTHER INFORMATION
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
The following reports were filed during the quarter for which this report is
filed:
April 24, 1996 incorporating a news release announcing the intention to sell
the Lynx Golf and Mechanical Power Transmission businesses.
June 25, 1996 incorporating a news release announcing anticipated reduced
earnings for the first quarter of fiscal 1997 ending June 30, 1996.
June 28, 1996 incorporating a news release announcing the Company had agreed
to sell its Lynx Golf business.
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 14, 1996 /s/ Dennis Haines
Dennis Haines
General Counsel and Secretary
August 14, 1996 /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
April 22, 1996 filed as Exhibit 3.1 to Form 10-K for the by reference
year ended March 31, 1996
By-laws as of August 1995 filed as Exhibit 3.1 to Form Incorporated
10-Q for the quarter ended September 30, 1995 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
April 22, 1996 filed as Exhibit 3.1 to Form 10-K for the
year ended March 31, 1996
Description of Preferred Share Purchase Rights contained Incorporated
in the Form 8-A Registration Statement dated May 17, 1996 by reference
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
* 1995 Directors Stock Option Plan filed as Exhibit 99 to Incorporated
Form S-8 Registration Statement No. 33-65219 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 and J.A. Zurn filed as Exhibit 10H to Form by reference
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; dated August 14, 1995 with F.E. Sheeder
filed as Exhibit 10.11 to Form 10-Q for the quarter ended
September 30, 1995
* Employment Agreement dated January 22, 1996 with R.R. Incorporated
Womack filed as Exhibit 10.13 to Form 10-Q for the by reference
quarter ended December 31, 1995
* 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, D.W. Wallace, and J.A. Zurn filed as Exhibit by reference
19J to Form 10-Q for the quarter ended September 30, 1986;
dated October 20, 1986 with D.F. Fessler 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; dated August 14, 1995 with F.E. Sheeder
filed as Exhibit 10.12 to Form 10-Q for the quarter ended
September 30, 1995; dated October 30, 1995 with M.K. Brown
filed as Exhibit 10.14 to Form 10-Q for the quarter ended
December 31, 1995
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* 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
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 10.15 to Incorporated
Form 10-K for the year ended March 31, 1996 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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