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                                  UNITED STATES
                       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 October 31, 1996
                                ----------------
                                OR
_____ 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 0-13940
                             -------
                          CENTRAL SPRINKLER CORPORATION
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            (Exact name of Registrant as specified in its charter)

         Pennsylvania                                    23-2328106
--------------------------------                    ----------------------
(State or other jurisdiction                         (I.R.S. Employer
of incorporation or organization)                    Identification Number)

              451 North Cannon Avenue, Lansdale, Pennsylvania 19446
--------------------------------------------------------------------------------
          (Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: 215-362-0700
                                                    ------------
Securities registered pursuant to Section 12(b) of the Act: None
                                                            ----
Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of class)

         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 voting stock held by non-affiliates
of the Registrant (computed by reference to the closing price of such stock in
the NASDAQ National Market System on December 31, 1996 -- $26.25) was
approximately $90.4 million.

         The number of shares of the Registrant's common stock outstanding as of
December 31, 1996 was 3,845,637 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE
                   (Specific pages incorporated are indicated
                         under applicable Item herein):

Registrant's definitive Proxy Statement for its 1997 Annual Meeting of
Shareholders is incorporated by reference into Part III hereof.


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                                     PART I

Item 1.  Business.

         (a)  General Development of Business

         Central Sprinkler Corporation (the "Company"), through its wholly-owned
subsidiaries, Central Sprinkler Company ("Central Sprinkler"), Spraysafe
Automatic Sprinklers Limited ("Spraysafe"), Central Sprink Inc. ("Sprink"),
Central Castings Corporation ("Castings") and Central CPVC Corporation ("CPVC"),
is a leading manufacturer of automatic fire sprinkler heads, valves and other
sprinkler system components as well as a distributor of component parts of
complete automatic fire sprinkler systems that are either manufactured by the
Company or purchased by the Company for resale to its customers.

         The Company acquired Central Sprinkler in May 1984. Key executives of
Central Sprinkler remained with the business and purchased a portion of the
Company's common stock with the remainder purchased by an outside investor
group. Prior to the acquisition, the Company did not have any significant assets
or liabilities or engage in any activities other than those related to the
acquisition. In May 1985, the Company went public by its sale of shares of
common stock of the Company in an underwritten public offering.

         In September 1985, the Company conducted an underwritten public
offering of 8% Convertible Subordinated Debentures due 2010 (the "Debentures")
in an aggregate principal amount of $17.3 million. During 1988, the Company
called for early redemption all of its outstanding Debentures. Holders of $16.8
million face value of such Debentures elected to convert them into 1.6 million
shares of newly issued common stock while $135 thousand face value of such
Debentures were redeemed for cash.

         On November 1, 1985, the Company acquired 80% of the outstanding common
stock and 100% of the outstanding preferred stock of Spraysafe, a sprinkler head
manufacturer and distributor in the United Kingdom. During 1989, the Company
increased its ownership in Spraysafe from 80% to 100% by purchasing all of the
remaining common stock from the minority shareholder. The acquisition resulted
in an expansion of the Company's product lines to include Spraysafe's glass bulb
sprinkler heads and provide a further means of distributing the Company's
products in foreign markets.

         On November 1, 1992, Central Sprinkler acquired certain business assets
of a midwestern company engaged in the distribution of fire sprinkler equipment
at a cost of approximately $1.2 million. The acquired assets consisted primarily
of inventory. Central Sprinkler merged the acquired assets into its distribution
network and strengthened its overall distribution network. On August 17, 1993,
Central Sprinkler acquired certain business assets and assumed certain
liabilities of Sprink, Inc., a company engaged in the business of

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manufacturing and distributing pipe couplings, fittings and other products that
are used in fire sprinkler systems. The assets acquired included, among other
things, inventories (excluding selected items), property and equipment, customer
records, patents, warehouse and office supplies, computer software and the
capital stock of Sprink International, S.A. de C.V. for a purchase price of
approximately $4.1 million. The liabilities assumed were principally warranty
obligations and obligations under operating leases. The acquisition was made
through a newly organized company, Central Sprink Inc. ("Sprink").

         In July 1994, Central Sprinkler formed a new company, Central Castings
Corporation ("Castings"). Castings acquired substantially all of the business
assets of a foundry in the Southeastern United States engaged in manufacturing
piping system components. The purchase price was approximately $1.8 million for
assets consisting primarily of property, plant and equipment. The Company has
incurred approximately $20.8 million in capital expenditures for the expansion
of this facility to accommodate production of several additional product lines.

         In May 1995, Central Sprinkler formed a new company, Central CPVC
Corporation ("CPVC"). Central Sprinkler Company contributed business assets to
CPVC. CPVC is engaged in manufacturing CPVC plastic pipe and fittings.

         On October 31, 1996, Central Sprink Inc. was merged into Central
Castings Corporation in a tax-free merger. Central Castings Corporation assumed
all assets and liabilities of Central Sprink Inc.

         (b) Financial Information About Industry Segments.

             The Company operates in one industry; the manufacture and sale or
purchase and sale of component parts of complete automatic fire sprinkler
systems.

         (c) Narrative Description of Business.

General

         The Company is a leading manufacturer of automatic fire sprinkler heads
and valves and other components as well as a distributor of component parts of
complete automatic fire sprinkler systems. Approximately 56% of the Company's
fiscal 1996 annual net sales are derived from the manufacture and sale of the
Company's primary product lines which are fire sprinkler heads, valves and other
component parts. The balance is derived principally from the sale of

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other component parts, several of which are also manufactured by the Company's
subsidiaries. The Company designs, manufactures and markets a wide variety of
sprinkler heads, valves and other component parts for commercial, industrial,
residential and institutional uses throughout the world. The Company sells its
products to more than 3 thousand customers, most of which are sprinkler
installation contractors.

Products

         The principal components of a sprinkler system are the sprinkler heads
and the valves, both of which are manufactured and marketed by the Company and
represented approximately 47% and 9%, respectively, of the Company's sales in
fiscal 1996 and fiscal 1995 and 49% and 10%, respectively, in fiscal 1994. The
Company also manufactures and distributes several other components and
distributes other sprinkler system component parts. Other product lines
manufactured and sold under the Company's various trade names are steel pipe,
CPVC plastic pipe and fittings and ductile iron grooved fittings and couplings
as well as other piping system components.

         The sprinkler head is the mechanism that is activated by heat and
discharges a water spray. The sprinkler head is composed principally of copper,
brass and other non-corrosive materials. The Company presently produces and
markets six basic types of sprinkler heads: the standard commercial sprinkler,
the residential/life-safety sprinkler, the Flow Control (TM) sprinkler, the
extended coverage commercial sprinkler, the early suppression fast response
sprinkler and specific application series sprinklers.


         The standard commercial sprinkler head is installed near the ceiling of
a structure and consists of a fusable alloy pellet which is sealed into a bronze
center strut by a stainless steel ball. When the alloy melts at its rated
temperature, the ball is forced upward into the center strut, releasing two
ejector springs and activating the sprinkler, which discharges water in a
prescribed flow path. The Company also has standard commercial sprinklers with
glass bulb activating mechanisms. Generally, standard commercial sprinklers are
designed to activate at specified temperatures between 135 and 286 degrees.
Standard commercial sprinkler heads are manufactured in a wide variety of
models, sizes, and finishes. The Company also has several adjustable concealed
standard commercial sprinklers. These models have several advantages over
previous models produced by both the Company and its competitors.

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         The second type of sprinkler head produced and marketed by the Company
are residential/life-safety sprinklers. These sprinklers have quick response
features and are designed to react to a fire before it has a chance to spread,
which effectively minimizes the smoke, fumes and toxic by-products of the fire.
These residential/life-safety sprinklers are recognized today as the best means
to protect a life in the event of a fire. In fiscal 1983, the Company introduced
its first life-safety sprinkler in the form of the Omega (TM) sprinkler. This
patented Omega (TM) sprinkler is equipped with unique design features which
provide two principal advantages over the standard commercial sprinkler. The
Omega (TM) sprinkler operates five to six times faster than a standard
commercial sprinkler and features a spray pattern that has been shown to be more
effective in the control or extinguishment of fire. In late 1989, the Company
introduced new residential/life-safety sprinklers with glass bulb activating
mechanisms. These models featured more traditional sprinkler designs along with
the quick response features previously only available in the Omega (TM) model.
These sprinklers are more moderately priced than the Omega (TM) model. The
Company introduced several new models of its Glass Bulb residential sprinklers
in fiscal 1995 and fiscal 1994. Additionally, the Company introduced a new
residential series of concealed sprinklers called ROC (Residential Optima
Concealed). These sprinklers offer the best flows at the greatest area of
coverage on the market.

         The third type of sprinkler head produced by the Company is the Flow
Control (TM) sprinkler, which the Company has marketed since 1984. Unlike the
standard commercial sprinkler head and the residential/life-safety sprinkler
head, which continue to spray water until manually turned off, the Flow Control
(TM) sprinkler head has a distinct operating feature which allows it to open and
close automatically as heat conditions dictate. It is, therefore, particularly
well suited for areas sensitive to water damage, such as libraries, museums or
computer rooms. The Flow Control (TM) sprinkler operates faster than a standard
commercial sprinkler and is able to react to a fire before it has a chance to
spread, thereby limiting damage to the affected area.

         The fourth type of sprinkler head produced by the Company is the
extended coverage commercial sprinkler. This sprinkler line brings about a
dramatic turning point in sprinkler technology by extending ordinary spacing
from 130 sq. ft. to 400 sq. ft. These sprinklers are being marketed under the
trade name of Optima (TM) sprinklers. The Company introduced the Optima (TM)

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sprinkler in 1993 and developed new models in both fiscal 1995 and 1994. A
patent has been issued on these sprinklers that provide uniform distribution of
minimum densities at very low start pressures, while achieving superior fire
control when compared to the standard commercial sprinkler line.

         The fifth type of sprinkler head produced by the Company starting in
fiscal 1993 is the early suppression fast response ("ESFR") sprinkler. This
sprinkler is designed for use in special hazards situations. It is used
primarily to protect storage areas where there is a need for a high density of
water with a quick responding sprinkler head.

         The sixth type of sprinkler produced and marketed by the Company is the
specific application series. These sprinklers, such as the Window Sprinklers
introduced in fiscal 1995 and the Attic (TM) and the ELO-231 specific
application sprinklers, are designed to provide better fire protection for
specific occupancies while providing overall economic savings to our
installation contractor customers.

         The Company markets a wide variety of sprinkler system valves which are
used specifically in fire sprinkler installations. Several of these valves are
manufactured by the Company (alarm valve, butterfly valve, check valve, deluge
valve and dry pipe valve), while certain other valves are manufactured by others
and marketed by the Company. In fiscal 1995 and 1994, the Company introduced
several new manufactured valve models including butterfly valves and a new
deluge valve. A sprinkler system valve is the mechanical device by which the
water supply is controlled. When the sprinkler head is activated, the valve
allows water to flow into and through the system.

         The average cost of sprinkler heads and valves used in a complete fire
sprinkler system is generally less than 5% of the total cost of a complete
system.

         In addition to its primary product lines of manufactured sprinkler
heads and valve products, the Company also manufactures its own line of CPVC
plastic pipe and CPVC plastic pipe fittings. The Company expanded such CPVC
product lines and manufacturing capacity in fiscal years 1996, 1995 and 1994.
The CPVC plastic pipe and fittings are manufactured using principally Company
owned machinery and equipment under a production supply contract whereby the
Company is using facilities and certain personnel of an unaffiliated plastic
manufacturer. In fiscal 1996, the Company began construction of a Company owned
manufacturing facility in

                                       -6-


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Huntsville, Alabama. Upon completion of the Company owned facility, the
production supply contract will end. The Company also manufactures its own line
of steel sprinkler pipe through a production supply contract with a steel pipe
manufacturer. The steel pipe production supply contract encompasses the
manufacture of such pipe for the Company using Company owned machinery and
equipment and using certain facilities, personnel and machinery and equipment
that are owned by an unaffiliated manufacturer. In fiscal 1993, the Company
started to manufacture its own line of glass bulb ampules for use as activating
mechanisms in sprinkler heads. In addition, the 1993 acquisition of Sprink
brought the Company into the manufacture of pipe couplings and fittings and a
1994 acquisition of a ductile iron foundry and subsequent expansion of the
foundry resulted in the Company's ability to manufacture grooved fittings and
couplings and other piping system components. The Company also distributes a
wide variety of other parts used in sprinkler system installations. The majority
of the other components include fittings, control valves, electric switches,
hangers and a variety of other items. The Company developed and markets computer
aided design ("CAD") systems to architects, designers, and contractors for use
in the design and installation of sprinkler systems. The Company also provides
other CAD related services through its SprinkCAD division.

Marketing and Customers

         The Company's products are marketed by its own sales and marketing
staff. The sales, marketing and distribution staff consists of approximately 200
people and operates from eighteen regional sales office/distribution centers
located near Boston, Atlanta, Miami, Dallas, Chicago, Los Angeles, San
Francisco, Seattle, Philadelphia, Baltimore, Salt Lake City, Greensboro,
Portland, Cleveland and from one distribution center in the United Kingdom and
one in Singapore. New sales offices were opened in the latter part of fiscal
1996 in China and Hong Kong. Unlike the majority of the industry which markets
its products primarily through wholesale distributors, the Company sells most of
its products directly to sprinkler installation contractors. This places the
Company in direct contact with its customers and allows it to respond
effectively to customer demands and suggestions.

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         The Company's sales and marketing efforts are directed primarily to
these sprinkler installation contractors. Additional sales and marketing efforts
are directed to the introduction and promotion of the Company's products to
architects, engineers, builders, end-users, local fire authorities and insurance
underwriters, for purposes of encouraging them to recommend or specify the
Company's sprinklers for use in new construction and retrofit installations.

         The Company markets its products to more than 3 thousand customers, the
majority of whom are sprinkler industry contractors, for commercial, industrial,
residential and institutional use throughout the world.

         In fiscal 1996, no single customer accounted for more than 3% of the
Company's net sales.

         The Company typically manufactures about 90% of its products for
estimated shipping demands and 10% pursuant to specific customer orders. The
Company does not have any significant order backlog.

         The Company advertises its products through various media including
insurance publications and trade journals. The Company also participates in
trade shows and trade organizations. Approximately $555 thousand was spent on
advertising the Company's products in 1996.

         The Company's products are not marketed pursuant to long-term purchase
agreements, but are sold pursuant to individual purchase orders. Often the
Company's published sales terms sheet is the controlling purchase document.

         The Company is affected by seasonal factors and the weather as well as
the level of new construction activity, remodeling and retrofitting of older
properties in the commercial, industrial, residential and institutional real
estate markets. The Company's sales tend to increase the most when there is a
high level of new construction activity in all such real estate markets and
decline when there is a slowdown in new construction activity. In addition, as a
result of relatively higher levels of new construction during warmer spring and
summer months, the demand for sprinkler system components tends to be greater
during the summer and fall than during other seasons.

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Competition

         The Company competes on the basis of price, service, product quality,
design and performance characteristics. The Company encounters competition
worldwide primarily from approximately seven domestic manufacturers of sprinkler
heads and valves and a large number of manufacturers and/or distributors of
other sprinkler system component parts.

         The Company is the world's leading manufacturer of fire sprinklers. The
Company also believes its position is due in large part to its relationships
with customers and the innovative technological features of its products.

Research and Development

         Research and development has contributed significantly to the Company's
success over the years and will be a major factor in the Company's ability to
continue its future growth.

         The Company maintains a staff of fifteen engineers and thirty-five
support technicians who devote their time to research and development
activities. During the 1996 fiscal year, the Company spent $5.5 million on
research and development compared to $5.1 million in fiscal 1995 and $4.1
million in fiscal 1994. The Company's efforts in this area are primarily focused
on sprinkler head and valve design and development, and are directed toward both
new product development and further refinement of the quick response technology
designed for residential/life-safety purposes, extended coverage sprinklers,
enhancements to dry pendant and Optima(TM) sprinklers, and the specific
application sprinkler series. In fiscal 1996, the Company expanded the research
and development facilities in Lansdale, Pennsylvania. The Company's heavy
emphasis on the development of new products continued throughout the year and
led to new products in fiscal years 1996, 1995 and 1994.

Patents

         The Company holds a number of patents. The Omega (TM) sprinkler head
patent, which expires January 1, 2002, protects a unique operating feature
(relating to increased activating speed and extended water coverage of the spray
pattern) and sets the Omega (TM) head apart from standard commercial sprinklers.
In December 1996, the Company was issued a patent on the extended coverage
ceiling sprinklers. The Company was issued a patent in fiscal 1995 on the new
extended coverage

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commercial sprinkler and additional related patent applications are pending.
These are very important to the Company based upon the
Company's substantial investment in the product line and the dramatic turning
point they provide in fire sprinkler protection and technology. The Company has
also filed for patent protection on a number of other products.

Trademarks

         The Company has a number of trademarks on various product names and
selected product components. An important trademark is on the appearance of
installed Omega (TM) products and the Company hopes it will ultimately prevent
others from copying this product.

Sources of Supply

         The Company uses a number of component parts in its manufacture of
sprinkler heads and valves. The principal components of the sprinkler head
include the frame, the deflector and the activating mechanism. The major
component of the valve is the metal casting.

         Materials, parts and components purchased by the Company for the
production of its sprinkler heads and valves are generally available from a
large number of suppliers. The vast majority of items are manufactured
specifically for the Company's needs from molds, dies and patterns owned by the
Company. The Company has not experienced any shortages or significant delays in
delivery of these materials in the recent past, and management believes that
adequate supplies will continue to be available.

         The Company also has a non-exclusive supply contract with the B.F.
Goodrich Company to supply the resin that the Company uses to produce CPVC
plastic pipe and fittings. This supply contract, which expires in December 2000,
provides the Company with a source of resin that is not generally available.
Other products manufactured by the Company such as steel pipe, fittings and
couplings and other piping system components use raw materials that are
available from a wide variety of suppliers.

         Other component parts purchased by the Company for distribution
purposes are generally available from a number of manufacturers.

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Effect of Environmental Protection Regulations

         The Company is subject to compliance with various federal, state and
local regulations relating to protection of the environment. The Company has not
made nor does it currently expect to make any material capital expenditures for
environmental protection and control equipment for its current operations. As
more fully discussed in Item 7, "Environmental Matters", the Company has been
advised by the Environmental Protection Agency of a potential contamination
problem in the vicinity of the Company's primary plant.

Employees

         The Company employs approximately 1300 people, of whom approximately
950 are production or shipping employees, with the remainder serving in
executive, administrative or sales capacities. The Company's sprinkler and valve
production and shipping employees are covered by a collective bargaining
agreement with the International Association of Machinists & Aerospace Workers
that expries in October 1997. In late December 1996, the agreement was extended
to October 2000. All of the covered employees are located at the Company's
primary manufacturing plant in Lansdale, Pennsylvania.

         (d) Financial Information about Foreign and Domestic Operations and
Export Sales.

         The Company operates in one business segment and engages in business
activity outside the United States. During fiscal 1996, 1995 and 1994, the
combined export and foreign sales represented approximately 12.5%, 10.1% and
11.3%, respectively, of the Company's net sales. Included in foreign sales are
the sales of the Company's United Kingdom subsidiary (Spraysafe). Spraysafe
primarily manufactures sprinkler heads and distributes them and other products
in Europe and other foreign countries. Significant financial information about
Spraysafe's operations consists of the following in thousands of dollars:

                            Year Ended October 31,
                     ------------------------------------
                       1996          1995          1994
                     -------        -------       -------
Sales                $16,807       $11,210        $8,800
Operating Income       1,390         1,202           702
Net Income               789           699           440
Total Assets          10,803         7,903         5,065
Total Liabilities      6,799         4,862         2,710


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Item 2.  Properties.

         The Company's primary manufacturing plant and executive offices are
located in Lansdale, Pennsylvania. The Lansdale facility is owned by the
Company. It is comprised of several buildings which contain approximately 166
thousand square feet of floor space on a parcel of about 7 acres. This facility
is pledged as security for a mortgage loan. In fiscal 1996, the Company
purchased a building and land for additional offices in Lansdale, Pennsylvania
which contains approximately 14 thousand square feet. The SprinkCAD division is
in a separate leased facility in Lansdale, Pennsylvania of approximately 3
thousand square feet. The lease expires upon thirty days notice given by the
Company. The Company also owns a separate fire sprinkler component manufacturing
facility of approximately 10 thousand square feet in Pennsylvania and a piping
systems components manufacturing facility and foundry of approximately 155
thousand square feet on a 67 acre parcel in Alabama purchased in fiscal 1994.

         The Company's fourteen domestic sales office/distribution centers are
located in major cities across the United States listed in Item 1(c), Marketing
and Customers, hereof and range in size from 11 thousand to 66 thousand square
feet per building. These facilities are leased by the Company pursuant to leases
which terminate from 1996 through 2002. The Company has options to extend
certain of its leases for additional periods on similar terms.

         The Company's United Kingdom subsidiary owns a manufacturing plant in
the United Kingdom which contains approximately 16 thousand square feet of floor
space on a parcel of about 1 acre. This facility is also pledged as security for
a loan. The United Kingdom subsidiary also leases a distribution center of
approximately 5 thousand square feet in the United Kingdom under a lease that
expires in 2000, leases a distribution center of approximately 3 thousand square
feet in Singapore under a lease that expires in 1997, leases 1 thousand square
feet of office space in Hong Kong and leases 1 thousand square feet in Beijing,
China.

         The Company's manufacturing and assembly facilities operate on a
two-shift per day basis. All of the manufacturing equipment used in the
production process is owned by the Company.


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At October 31, 1996, the Company's owned and leased facilities are generally
adequate and suitable for the Company's needs and are virtually fully utilized
for their intended use. In the normal course of business, the Company
continually evaluates its properties for their adequacy and suitability. As
discussed in Item 1 (c) and Footnote #15 of the Notes to Consoliated Financial
Statements, the Company is building a Company owned manufacturing facility for
CPVC pipe and fittings components in Huntsville, Alabama. This new facility will
manufacture the Company's CPVC plastic pipe and fittings with expanded
production capacity.

Item 3.  Legal Proceedings.

         The Company is engaged in discussions with the Environmental Protection
Agency concerning a claim which may develop in connection with the Company's
primary manufacturing plant in Lansdale, Pennsylvania. This potential claim is
more fully discussed in Item 7, "Environmental Matters". While there are various
other claims pending and threatened against the Company pursuant to the ordinary
conduct of business, the Company does not expect these claims nor legal
proceedings in total to have any material adverse effect on the consolidated
financial position, results of operation or liquidity of the Company.

Item 4.  Submission of Matters to a Vote of Security Holders.

         No matters were submitted to a vote of security holders of the Company,
through the solicitation of proxies or otherwise, during the fourth quarter of
fiscal 1996.

Item 4(a). Executive Officers of the Registrant.

         The names and ages of the Registrant's executive officers and key
employees, their positions with the Company and with Central Sprinkler, its
primary operating subsidiary, and their principal occupations during the past
five years are as follows:

                                             Position(s) with the Company, and
                                             where indicated, with Central
Name                         Age             Sprinkler
------------------------    ----             -----------------------------------
Winston J. Churchill         56              Chairman of the Board and Director

William J. Meyer             76              President and Director, and
                                             Chairman of the Board and Treasurer
                                             of Central Sprinkler


                                 -13-

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George G. Meyer              47              Chief Executive Officer, Secretary,
                                             Treasurer and Director, and
                                             President and Chief Executive
                                             Officer of Central Sprinkler

James R. Buchanan            47              Executive Vice President, Sales of
                                             Central Sprinkler

Stephen J. Meyer             45              Director, and Executive Vice
                                             President of Central Sprinkler

William J. Pardue            46              Executive Vice President of Central
                                             Sprinkler

Albert T. Sabol              44              Executive Vice President, Finance
                                             and Administration of the Company
                                             and Central Sprinkler

James E. Golinveaux          33              Senior Vice President, Engineering
                                             of Central Sprinkler

Anthony A. DeGregorio        37              Vice President, SprinkCAD of
                                             Central Sprinkler

Michael J. Graham            46              Vice President, International
                                             Operations of Central Sprinkler

Richard C. Hobbs             37              Vice President, Materials and
                                             Quality Assurance of Central
                                             Sprinkler

George S. Polan              46              Vice President, Research and
                                             Development of Central Sprinkler

Douglas F. Rice              34              Vice President, Marketing and
                                             Technical Services of Central
                                             Sprinkler

Carmine L. Schiavone         30              Vice President, Piping Products of
                                             Central Sprinkler

Leonard E. Schiavone         30              Vice President, Piping Products of
                                             Central Sprinkler

Albert H. Schoenberger, Jr.  69              Vice President, Manufacturing of
                                             Central Sprinkler

Marilyn M. Thomas            37              Vice President, Distribution
                                             Operations of Central Sprinkler

                                -14-

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         WINSTON J. CHURCHILL - Mr. Churchill has been Chairman of the Board and
a director of the Company and a director of Central Sprinkler since 1984. Mr.
Churchill has been President of Churchill Investment Partners, Inc., a private
investment firm, since 1989. He was a partner of Bradford Associates, a private
investment firm, from 1984 to 1989. Mr. Churchill is also a director of IBAH,
Inc., Geotek Communications, Inc. and Tescorp, Inc.

         WILLIAM J. MEYER - Mr. Meyer has been President and a director of the
Company and Chairman of the Board of Central Sprinkler since 1984. He has also
served Central Sprinkler as a director and Treasurer since 1975 and as President
from 1975 to 1984.

         GEORGE G. MEYER - Mr. Meyer has been Chief Executive Officer since 1987
and Secretary and Treasurer of the Company since 1985, and a director of the
Company and President and a director of Central Sprinkler since 1984. He was
Executive Vice President of the Company from 1985 to 1987.

         JAMES R. BUCHANAN - Mr. Buchanan has been Executive Vice President,
Sales of Central Sprinkler since 1996. He was Vice President, Sales of Central
Sprinkler since 1984.

         STEPHEN J. MEYER - Mr. Meyer has been a director of the Company and
Executive Vice President of Central Sprinkler since 1986. He has been a director
of Central Sprinkler since 1983.

         WILLIAM J. PARDUE - Mr. Pardue has been Executive Vice President of
Central Sprinkler since 1980.

         ALBERT T. SABOL - Mr. Sabol has been Executive Vice President, Finance
and Administration and Chief Financial Officer of the Company and Central
Sprinkler since 1996. He was Vice President, Finance and Chief Financial Officer
of the Company and Central Sprinkler since 1986.

         JAMES E. GOLINVEAUX - Mr. Golinveaux has been Senior Vice President,
Engineering of Central Sprinkler since 1996. He was Vice President, Technical
Service and Engineering of Central Sprinkler since 1993 and Vice President,
Technical Service of Central Sprinkler since 1992. He was Director of Technical
Service from 1991 to 1992. From 1986 to 1991 he was the Design Manager for a
large fire protection installation contractor.

         ANTHONY A. DEGREGORIO - Mr. DeGregorio has been Vice President,
SprinkCAD of Central Sprinkler since 1993 and was manager of SprinkCAD sales and
service from 1990 to 1993. From 1986 to 1990 he was General Manager of a 
computer aided design services company.


                                      -15-

<PAGE>
         MICHAEL J. GRAHAM - Mr. Graham has been Vice President, International
Operations of Central Sprinkler since 1995 and Managing Director of Spraysafe
Automatic Sprinkler Limited (U.K.) since 1990.

         RICHARD C. HOBBS - Mr. Hobbs has been Vice President, Materials and
Quality Assurance of Central Sprinkler since 1996 and was Director of Purchasing
from 1995 to 1996. From 1990 to 1995 he was Engineering Manager.

         GEORGE S. POLAN - Mr. Polan has been Vice President, Research and
Development of Central Sprinkler since 1990. He was Vice President, Engineering
of Central Sprinkler from 1986 to 1989.

         DOUGLAS F. RICE - Mr. Rice has been Vice President, Marketing and
Technical Services of Central Sprinkler since 1996 and was Director of Marketing
from 1995 to 1996 and Director of Technical Services from 1993 to 1995. He was
Manager of Technical Services from 1992 to 1993. From 1990 to 1993 he was a 
consultant in the fire sprinkler industry.

         CARMINE L. SCHIAVONE - Mr. Schiavone has been Vice President of Piping
Products of Central Sprinkler since 1996 and was Director of Piping Products
from 1995 to 1996 and Manager of Piping Products from 1993 to 1995. He was
Manager of Customer Service from 1989 to 1993.

         LEONARD E. SCHIAVONE - Mr. Schiavone has been Vice President of Piping
Products of Central Sprinkler since 1996 and was Director of Piping Products
from 1995 to 1996. He was Marketing Manager from 1989 to 1995.

         ALBERT H. SCHOENBERGER, JR. - Mr. Schoenberger has been Vice President,
Manufacturing of Central Sprinkler since 1977.

         MARILYN M. THOMAS - Ms. Thomas has been Vice President, Distribution
Operations of Central Sprinkler since 1995 and was Director of Warehouse
Operations from 1984 to 1994.

         George G., Stephen J. Meyer, and Marilyn M. Thomas are brothers and
sister and are sons and daughter of William J. Meyer. William J. Pardue is
William J. Meyer's son-in-law.

                                      -16-


<PAGE>

                                     PART II

Item 5.  Market for Registrant's Common Stock and Related
         Stockholder Matters.

         The Company's Common Stock is traded on the NASDAQ National Market,
NASDAQ symbol - CNSP. The following table sets forth, for the fiscal years
indicated, the range of high and low price quotations.

Fiscal 1996:
------------
                                                  High       Low
                                                -------   -------
                First Quarter...............    $38 3/4   $28 3/4
                Second Quarter..............     39 1/4    27 1/4
                Third Quarter...............     28 3/4    20
                Fourth Quarter..............     22 1/2    16

Fiscal 1995:
------------

                First Quarter...............    $12       $ 8 5/8
                Second Quarter..............     21        10 3/4
                Third Quarter...............     29 1/2    18 1/2
                Fourth Quarter..............     37 1/4    26 1/2



         As of December 31, 1996, there were approximately 1 thousand holders of
record of Common Stock of the Company. The closing price of such stock on the
NASDAQ National Market on December 31, 1996 was $26.25.

         The Company has not paid dividends on Common Stock since its inception
in 1984. The Company intends to continue its policy of retaining earnings to
finance future growth.

Item 6.  Selected Financial Data.

         The following summary sets forth selected financial data with respect
to the Company for the last five fiscal years. The selected financial data has
been derived from the consolidated financial statements of the Company.

         This data should be read in conjunction with other financial
information of the Company, including the consolidated financial statements of
the Company and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein.

                                      -17-
<PAGE>

SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except per share)

The following fiscal year information should be read in conjunction with the
accompanying consolidated financial statements appearing elsewhere in this
report.

<TABLE>
<CAPTION>
                                                                       Interest
                                                             (1)        Expense
                                       Net      Gross     Operating    (Income),   Net       Earnings
CONSOLIDATED OPERATIONS               Sales     Profit      Income       Net     Income     Per Share
__________________________________________________________________________________________________
<S>                                 <C>        <C>        <C>          <C>       <C>        <C>
Year Ended October 31, 1996         $187,220   $52,225(2) $ 8,999(2)   $2,939    $3,763(2)  $1.13(2)
Year Ended October 31, 1995          158,849    51,684     15,305       1,902     8,458      2.50
Year Ended October 31, 1994          116,249    35,237      6,428         678     4,018(3)    .80(3)
Year Ended October 31, 1993           82,481    23,396      2,881        (295)    2,376       .50
Year Ended October 31, 1992           60,471    17,139        196        (509)      582       .13


                                                           Long-
CONSOLIDATED FINANCIAL    Working   Current     Total      Term     Total  Shareholders'
POSITION                  Capital    Ratio      Assets     Debt      Debt     Equity
_______________________________________________________________________________________
As of October 31, 1996    $35,522    1.5:1    $150,918   $24,674   $62,914   $54,392
As of October 31, 1995     47,292    2.2:1     117,360    27,516    45,391    49,550
As of October 31, 1994     53,168    3.0:1      99,061    19,391    30,955    51,101
As of October 31, 1993     38,078    2.4:1      80,303     3,544    19,001    46,563
As of October 31, 1992     34,675    5.6:1      55,415       623     1,131    44,633
_______________________________________________________________________________________

</TABLE>

SELECTED FINANCIAL DATA FOOTNOTES

  (1) Operating income represents income before income taxes and interest
      expense (income), net.
  (2) After unusual non-recurring fourth quarter charge of $3,750 ($2,362 net 
      of tax or $.72 per share).
  (3) After favorable cumulative effect of $238 ($.05 per share) due to 
      accounting change for income taxes.

                                      -18-
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.

Results of Operations

     The following table shows, for the years indicated, the percentage
relationships to net sales of the items included in the Consolidated Statements
of Income and the percentage changes in the dollar amounts of such items from
year-to-year.


                            Percentage of Net Sales        
                        ------------------------------     Percentage Increase
                             Year Ended October 31,             (Decrease)
                        ------------------------------    ----------------------
                                                          Year 1996    Year 1995
                          1996         1995      1994     Over 1995    Over 1994
                         -----        -----      -----    ---------    ---------

Net sales............    100.0%       100.0%     100.0%      17.9%       36.6%
Cost of sales........     72.1         67.5       69.7       26.0        32.3
                         -----        -----      -----                    

Gross profit.........     27.9         32.5       30.3        1.0        46.7
                         -----        -----      -----

Selling, general and
  administrative.....     20.5         20.0       21.4       20.8        27.5
Research and
  development........      2.9          3.2        3.5        6.3        25.5
Other income, net....      (.3)         (.3)       (.1)      13.7       154.2 
                         -----        -----      -----

                          23.1         22.9       24.8       18.8        26.3
                         -----        -----      -----

Operating income.....      4.8          9.6        5.5      (41.2)      138.1
                         -----        -----      -----

Interest expense.....      1.8          1.5        1.1        43.5       81.4
Interest income .....      (.2)         (.3)       (.5)     (  2.2)     (26.2)
                         -----        -----      -----
                           1.6          1.2         .6        54.5      180.5
                         -----        -----      -----

Income before
  income taxes.......      3.2          8.4        4.9       (54.8)     133.1
Income taxes.........      1.2          3.1        1.7       (53.5)     151.0
                         -----        -----      -----
Income before
  cumulative effect
  of accounting
  change.............      2.0          5.3        3.2       (55.5)     123.8

Cumulative effect of
  accounting change
  for income taxes...     -              -          .3        N/M       N/M
                         -----        -----      -----
Net income...........      2.0          5.3        3.5       (55.5)     110.5
                         =====        =====      =====

N/M indicates not meaningful.

                                      -19-





<PAGE>



         Fiscal 1996 set a new net sales record. Fiscal 1996 net sales increased
$28.4 million or 17.9% to $187.2 million from fiscal 1995 net sales of $158.8
million. The sales increase reflects a continuing strong market demand for fire
sprinkler products, the continued strong market share held by the Company as
well as strong sales for several of the Company's fire sprinkler models. New
construction and the retrofit of existing buildings drive the worldwide market
demand for the Company's fire sprinklers and related products. The Company's
programs to develop and expand production and marketing of products have
continued to increase sales. The Company experienced unit sales gains in sales
of virtually all major product groups. The glass bulb fire sprinkler models
continue to lead the Company's sprinkler sales gains. Strong market demand
helped the Company achieve increased unit sales in other products that are sold
for use in complete automatic fire sprinkler systems. The Company also
experienced particularly strong unit sales of its valves and CPVC plastic pipe
and fittings products. Sales also benefited from several new or expanded
distribution centers and sales offices in the U.S. and abroad as well as the
expansion of the Company's pipe and fittings product lines.

         In fiscal 1996, domestic sales increased 14.7% and sales outside the
U.S. increased 45.8% from fiscal 1995. The Company has experienced very
competitive conditions in the sprinkler market causing increased price
competition resulting in depressed sales prices. Sales were also unfavorably
impacted early in the fiscal year due to severe weather conditions in many parts
of the U.S. which slowed construction activity and demand as well as
construction and expansion delays limiting production at the Company's grooved
fittings facility in Alabama. The significant increase outside the U.S. is the
result of increased marketing efforts worldwide, increased production capacity
in the U.S. and at Spraysafe and new sales offices in Hong Kong and China. In
July 1996, the Company announced sales list price increases of 8% on most of its
sprinkler and valve products in an effort to improve the Company's gross profit.

         Fiscal 1995 net sales were $158.8 million, an increase of $42.6 million
or 36.6% from the net sales recorded in fiscal 1994. The significant increase in
sales was led by the strong demand for fire sprinklers and related products.
Growth in the new construction market and higher levels of product usage in the
retrofit market have driven the strong market demand for the Company's range of
products. The Company's innovation and expansion of its lines of fire sprinkler
and related products also improved sales from the prior year. The Company
experienced sales gains in virtually all major product groups. The Company's
major product line of fire sprinklers experienced strong sales gains
particularly for its Optima (TM) and Glass Bulb models. Significant sales gains
were experienced in other product lines including plastic, steel pipe and pipe
fittings. Sales improvements were realized in all regions throughout the United
States. Foreign and export sales increased 22.6% in fiscal 1995 from fiscal 
1994. Late in fiscal 1995, Spraysafe opened a distribution center in Singapore.
Sales prices continued to be very competitive in fiscal 1995. Overall, sales
prices were slightly higher in fiscal 1995 when compared to fiscal

                                     - 20 -


<PAGE>

1994. The Company increased its list prices on most manufactured products by 7%
in July 1995. This price increase contributed to the overall sales and gross
margin increase for the year.

         Cost of sales for fiscal 1996, in terms of dollars of expense,
increased 26.0% or $27.8 million from fiscal 1995. The increase in cost of sales
is due to higher sales volume, increased costs of manufacturing and an unusual
non-recurring charge in the fourth quarter of fiscal 1996. The Company's cost of
sales increased to 72.1% of net sales from 67.5% of net sales in fiscal 1995.
This resulted in a gross margin percentage of 27.9% in fiscal 1996 compared to
32.5% in fiscal 1995. The decrease in gross margin percentage was due to several
items. In the fourth quarter of fiscal 1996, the Company recorded an unusual
non-recurring charge of $3.75 million resulting from the program announced by
the Company to encourage customers to test and possibly replace some Omega (TM)
sprinklers that have been exposed to harmful substances in certain
installations. (See Footnote #15 of the Notes to Consolidated Financial
Statements). Excluding the unusual non-recurring charge, cost of sales as a
percent of net sales would have been 70.1% in fiscal 1996 and the gross margin
percentage would have been 29.9% in fiscal 1996. Another factor reducing the
gross margin percentage in fiscal 1996 from fiscal 1995 were increased costs of
manufacturing sprinklers, valves and associated products. In response to
increased sales volumes, the Company significantly increased production levels
which resulted in some manufacturing inefficiencies. These inefficiencies along
with higher raw material costs and the delay in the startup of the grooved 
fittings facility all contributed to the reduction in gross margin in fiscal
1996. 

         Late in fiscal 1996 the Company experienced improvement in sprinkler 
and valve manufacturing efficiencies as compared to earlier in the fiscal year.
The expansion of the grooved fittings facility which depressed earnings in the
earlier quarters of fiscal 1996 improved in virtually all areas in the fourth
quarter including improved production levels and lower costs per unit.

         Cost of sales for fiscal 1995 increased $26.2 million, or 32.3%, to 
$107.2 million from fiscal 1994. The increase is primarily due to the
significantly higher sales volume. The Company's cost of sales decreased to
67.5% of net sales from 69.7% of net sales in fiscal 1994. This resulted in a
gross margin percentage of 32.5% in fiscal 1995 compared to 30.3% in fiscal
1994. This increase in gross profit margin percentage was due primarily to a
stronger sales mix of higher margin product lines. Other factors include
additional sales from new products, certain price increases that were put into
effect in fiscal 1995 and lower costs of certain products. The increase in
production of manufactured fire sprinkler products to meet market demand has
increased utilization of the Company's production capacity. This has resulted in
a lower unit product cost for certain products. The gross profit margin
percentage for fiscal 1995 was somewhat

                                     - 21 -


<PAGE>

lower than expected due to the costs related to the continuing expansion of the
foundry and manufacturing facility for grooved piping products acquired in late 
fiscal 1994. The gross profit margin was also negatively impacted by price 
increases to the Company from suppliers of certain materials in fiscal 1995.

         Selling, general and administrative expenses increased $6.6 million or
20.8% to $38.4 million in fiscal 1996 from $31.8 million in fiscal 1995. Such
expenses were 20.5% of net sales in fiscal 1996 as compared to 20.0% of net
sales in fiscal 1995. The principal increases in selling, general and
administrative expenses are due to the increase in sales volume and the
expansion of its distribution operations to better serve existing and new
customers. The Company expanded five existing distribution centers to better
serve those markets with more space, personnel and expanded product lines and
opened a new distribution center in Cleveland, Ohio in November 1995. Spraysafe
opened a sales location in Singapore in July 1995 and opened sales locations in
Hong Kong and China late in fiscal 1996. The principal components of the dollar
increase included salaries and fringes of $2.3 million, freight of $1.1 million,
building and vehicle expenses of $832 thousand and travel of $657 thousand.

         Selling, general and administrative expenses were 20.0% of net sales in
fiscal 1995 compared to 21.4% of net sales in fiscal 1994. The reduced
percentage of such expenses to net sales is due to sales increasing at a faster
rate than the selling, general and administrative rate of increase. The total
dollar amount of selling, general and administrative expenses increased by 27.5%
or $6.9 million from fiscal 1994. The majority of the increase in expenses is
due directly to the increased sales volume. The expense increases included a
higher amount of personnel, fringe benefits, freight, travel and certain
marketing costs. Distribution costs also increased due to the opening of three
new distribution centers in late 1994 and relocations to larger facilities. In
July 1995, Spraysafe opened a new distribution center in Singapore. The Company
also started a project to increase efficiency of its distribution centers and to
increase service to its customers. Fringe benefit costs increased due to higher
costs of the Employee Stock Ownership Plan ("ESOP") resulting from the
significant increase in the Company's stock price as compared to fiscal 1994.
Legal fees incurred in fiscal 1995 increased significantly over fiscal 1994 to
protect our patents on innovative products.

         Research and development expenses for fiscal 1996 were $5.5 million
which was a 6.3% increase of $322 thousand from fiscal 1995. Research and
development expenses were 2.9% of net sales in fiscal 1996 as compared to 3.2%
in fiscal 1995. The research and development expense increase was due to an
increase in the number of personnel for the development and testing of new and
improved products. The decrease in research and development as a percent of
sales was attributable to the significant increase in sales in 1996. The Company
has continued its emphasis on research and development to improve existing
product lines and to provide innovative new products. Research and development
programs are a very important part of the long term growth plan of the Company.
New products have helped the Company maintain its leadership position in the 
fire sprinkler industry.

                                     - 22 -


<PAGE>


         Research and development expenses for fiscal 1995 reached $5.1 million
which was an increase of $1 million or 25.5% over fiscal 1994. Research and
development expenses were 3.2% of net sales in fiscal 1995 as compared to 3.5%
in fiscal 1994. Such expenses increased at a high rate but somewhat lower than
the growth rate in sales. The higher expenses in fiscal 1995 were related to
increased product development and testing, along with increases in the use of
outside services and in the number of personnel. The Company continued to incur
incremental research and development costs associated with the development and
expansion of the piping products line.

         Net interest expense of $2.9 million was 1.6% of net sales in fiscal
1996 as compared to $1.9 million, or 1.2% of net sales in fiscal 1995. Interest
expense was $3.4 million, after capitalizing $290 thousand of interest incurred,
in fiscal 1996 as compared to $2.4 million, after capitalizing $333 thousand in
fiscal 1995. Interest expense increased due to higher levels of debt required to
finance the increased growth in the Company's business, principally in
manufacturing capital expenditures and increased accounts receivable and
inventories. At October 31, 1996, total debt was $62.9 million as compared to
$45.4 million at October 31, 1995. Interest income was $451 thousand in fiscal
1996 as compared to $461 thousand in fiscal 1995. A higher average investment
balance in fiscal 1996 was offset by slightly lower interest income rates.

         Net interest expense for fiscal 1995 of $1.9 million was 1.2% of net
sales as compared to $678 thousand, or .6%, in fiscal 1994. Interest expense was
$2.4 million, after capitalizing $333 thousand of interest incurred, as compared
to $1.3 million in fiscal 1994. The increase in interest expense was primarily
due to increased levels of debt. At October 31, 1995, total debt was $45.4
million as compared to $31 million at the end of fiscal 1994. The additional
debt was required to repurchase treasury stock, to fund the Company's capital
expenditures in primarily manufacturing and distribution expansions and to
provide for increased accounts receivable and inventories. Interest income
decreased to $461 thousand in fiscal 1995 from $625 thousand in fiscal 1994. The
Company had lower interest income due primarily to a decline in the investment
balance due to the repurchase of 1.2 million shares of the Company's common
stock for the treasury in December 1994.

         The Company's effective income tax rate for fiscal 1996 was 37.9% as 
compared to 36.9% in fiscal 1995. The increase in the overall effective income
tax rate is the result of the unfavorable impact of non-deductible expenses on
the lower level of income in 1996 offset by a reduction in the effective state
income tax rate and higher tax-exempt investment income as a percentage of
pre-tax income as compared to fiscal 1995. The overall effective federal income
tax rate includes the unfavorable effect of the market value adjustment of ESOP
shares.

         The effective income tax rate for fiscal 1995 was 36.9% as compared to
34.3% in fiscal 1994. The increase in the effective income tax rate includes a
higher effective state income tax rate due to several factors that also
increased the effective U.S. Federal income tax rate. One factor is a
substantial reduction in the nontaxable investment income in fiscal 1995 as
compared to fiscal 1994 resulting from a lower balance in

                                     - 23 -


<PAGE>


investments. The Company also had a higher level of pretax income. Income before
income taxes increased by $7.7 million, or 133.1%, to $13.4 million. The higher
level of pretax income combined with lower amounts of nontaxable income and tax
credits proportionately reduces the favorable effect on the effective tax rate
in fiscal 1995.

         The Company's sales are affected by seasonal factors and the weather as
well as the level of new construction activity, remodeling and retrofitting of
older properties in the commercial, industrial, residential and institutional
real estate markets. The Company's sales tend to increase the most when there is
a high level of new construction activity in all such real estate markets. In
addition, as a result of relatively higher levels of new construction during
warmer spring and summer months, the demand for sprinkler system components
tends to be greater during the summer and fall than during other seasons.

Liquidity and Capital Resources

         The Company's primary sources of long-term and short-term liquidity are
its current financial resources, projected cash from operations and borrowing
capacity. The Company believes that these sources are sufficient to fund the
programs necessary for future growth and expansion. The Company's combined cash,
cash equivalents and short-term investments were $15.4 million at October 31,
1996 as compared to $12.1 million at October 31, 1995. The increase was a result
of normal fluctuations in operations. As of October 31, 1996, the Company has
approximately $3.2 million of available borrowing capacity under its current
lines of credit. The Company is currently in the process of negotiating with its
primary lenders to increase the available borrowings under these lines of
credit. In addition, the Company is currently in the process of obtaining
long-term financing for the construction of a company owned manufacturing
facility for CPVC pipe and fittings.

         Cash provided by operating activities in fiscal 1996 was $4.2 million
as compared to $3.9 million in fiscal 1995. Net income plus non-cash items
generated $7.4 million of cash in 1996 as compared to $12.4 million in 1995. The
reduction in 1996 was the result of lower income in 1996. Net cash used for
working capital purposes decreased from $8.5 million in 1995 to $3.3 million in
1996 primarily as a result of increases in accounts payable and accrued
expenses. Increases in sales volume will continue to utilize operating cash flow
to support increased levels of inventories and accounts receivable.

         Cash used in investing activities was $21.0 million in fiscal 1996 as
compared to $7.8 million in fiscal 1995. The primary use of cash was for the
acquisition of property, plant and equipment during these periods. These capital
expenditures were primarily for buildings, building improvements and machinery
and equipment to expand the manufacturing

                                     - 24 -


<PAGE>


capacity and improve the operations for the Company's various product lines.
During fiscal 1996 and 1995, $8.6 million and $12.2 million, respectively, were
used for the expansion at the Company's grooved fittings facility in Alabama.
During fiscal 1995, net proceeds of $8.3 million were generated from the sale of
short-term investments which were utilized primarily for the repurchase of
treasury stock.

         Cash provided by financing activities in fiscal 1996 was $17.7 million
as compared to $3.8 million in fiscal 1995. The primary source of cash was from
additional borrowings under the Company's lines of credit which increased $9.3
million in fiscal 1996 as compared to an increase of $16.0 million in fiscal
1995. In addition, in November 1995 the Company received proceeds of $11.0
million from the issuance of Industrial Revenue Bonds ("IRB's"). At October 31,
1995, $11.0 million of short-term borrowings had been classified as long-term
debt based upon the issuance of these IRB's. The increase in short-term
borrowings in fiscal 1996 and 1995 and the proceeds from the IRB's were needed
to finance the increased growth in the Company's business, including working
capital needs and capital expenditures. In fiscal 1995, the Company utilized
$11.8 million for the repurchase of 1.2 million shares of its common stock which
are being held in the treasury for possible future issuance.

         In July 1994, the Company purchased substantially all of the business
assets of a foundry in the southeastern United States engaged in manufacturing
grooved components for piping systems for $1.6 million and a $200 thousand note
payable. The assets acquired were principally property, plant and equipment. The
Company substantially expanded this facility's production capacity to
accommodate several additional product lines. In addition to the cash required
for the purchase, substantial amounts of working capital and additional
property, plant and equipment were used in the business after the purchase.

         The Company purchases property, plant and equipment from time to time
as required to maintain and expand its offices, manufacturing and research
facilities and distribution centers. The Company has expanded and improved its
operations over the years with such purchases and the Company intends to
continue this policy in the future. The Company has commitments in the ordinary
course of business for such expansions of facilities and equipment and for
research and other contracts.

         The Company has made certain commitments to build a Company owned
manufacturing facility for CPVC pipe and fittings components in Huntsville,
Alabama. It is expected that the capital expenditures for this facility and
equipment will aggregate $7.5 million of which $1.3 million was incurred in
fiscal 1996 and $2.2 million and $4.0 million are expected to be incurred in
fiscal 1997 and 1998, respectively. It is expected that the first phase of the
facility will be completed and in operation in fiscal 1997.

         The Company believes that its current cash and investments along with
its future earnings and borrowing capacity will be sufficient to meet the
Company's working capital requirements and anticipated capital expenditures for
fiscal 1997.

                                     - 25 -


<PAGE>

         The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company is required to adopt this
standard for the year ending October 31, 1997. The Company has elected to adopt
the pro-forma disclosure requirement of this pronouncement. The Financial
Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and undiscounted cash flows
estimated to be generated by those assets are less than the assets carrying
amount. SFAS No. 121 also addresses the accounting for long-lived assets where
disposal is expected. The Company will adopt SFAS No. 121 in the first quarter
of fiscal year 1997 and does not expect the adoption to have a material impact
on the Company's financial position or results of operations.

         This document contains certain forward-looking statements that are
subject to risks and uncertainties. Forward-looking statements include certain
information relating to general business strategy, the potential market and uses
for the Company's sprinklers and other products, expansion plans, the effects of
competition on the structure of the markets in which the Company competes,
operating performance and liquidity, as well as information contained elsewhere
in this document where statements are preceded by, followed by or include the
words "believes," "expects," "estimates," "anticipates" or similar expressions.
For such statements the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Actual events or results may differ materially from those discussed
in forward-looking statements as a result of various factors, including without
limitation, those discussed elsewhere in this document.
 
         The Company and approximately thirty other local businesses were
notified by the Environmental Protection Agency ("EPA") in August 1991 that they
may be a potentially responsible party with respect to a groundwater
contamination problem in the vicinity of the Company's primary manufacturing
plant in Lansdale, Pennsylvania. The Company has entered into an Administrative
Order of Consent for Remedial Investigation/Feasibility Study ("AOC") effective
May 19, 1995 with the EPA. Pursuant to the AOC, in 1996 the Company performed
certain tests on the Company's property to determine whether any land owned by
the Company could be a source of any of the contamination at the site. Based
upon such tests, management believes that the Company's operations did not
contribute to this contamination problem and the Company has no liability to
clean up this site. Should the EPA mandate the Company's participation cleanup
efforts, it is estimated that such costs could range from a minimal amount to
$2.7 million. The Company has not accrued for such cleanup costs.

         The Company, in the normal course of business, is party to various
claims and lawsuits with regard to its products and other matters. Management
believes that the ultimate resolution of these matters as well as the other
matters discussed herein will not have a material impact on the Company's
financial position, results of operations or liquidity.

                                     - 26 -


<PAGE>



Item 8.  Financial Statements and Supplementary Data.

         The financial statements of the Company for the years ended October 31,
1996, 1995, and 1994, together with the report thereon of Arthur Andersen LLP
dated December 11, 1996, are set forth on pages F-1 through F-15 hereof. The
supplementary financial data for the Company is set forth on page F-16 hereof.

         The remainder of the financial information required by this report is
set forth on page S-1 which follow the financial statements and supplementary
financial data set forth on pages F-1 through F-16 hereof. Such information is
listed in Item 14(a)(2) hereof.

Item 9.  Disagreements on Accounting and Financial Disclosure.

         There have been no disagreements on any matter of accounting principles
or practices or financial statement disclosure between the Company and its
independent public accountants within the past two fiscal years.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

         The information called for by this Item regarding the executive
officers of the Registrant is incorporated herein by reference to the material
under the caption "Executive Officers of the Registrant" in Part I - Item 4(a)
hereof.

         The remainder of the information called for by this Item is
incorporated herein by reference to Registrant's definitive Proxy Statement for
its 1997 Annual Meeting of Shareholders which Registrant intends to file with
the Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K.

Item 11. Executive Compensation.

         The information called for by this Item is incorporated herein by
reference to Registrant's definitive Proxy Statement for its 1997 Annual Meeting
of Shareholders which Registrant intends to file with the Commission not later
than 120 days after the end of the fiscal year covered by this Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and
         Management.

         The information called for by this Item is incorporated

                                     - 27 -


<PAGE>





herein by reference to Registrant's definitive Proxy Statement for its 1997
Annual Meeting of Shareholders which Registrant intends to file with the
Commission not later than 120 days after the end of the fiscal year covered by
this Form 10-K.

Item 13. Certain Relationships and Related Transactions.

         The information called for by this Item is incorporated herein by
reference to Registrant's definitive Proxy Statement for its 1997 Annual Meeting
of Shareholders which Registrant intends to file with the Commission not later
than 120 days after the end of the fiscal year covered by this Form 10-K.

                                     - 28 -

<PAGE>


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on
         Form 8-K.

(a)  The following documents are filed as a part of this report:

         (1) The financial statements and supplemental financial data required
             by Item 8 of this report are filed below:

FINANCIAL STATEMENTS:

                                                                        Page(s)
                                                                        --------
Report of Independent Public Accountants..............................    F-1

Consolidated Balance Sheets as of October 31, 1996 and
  1995................................................................    F-2-3

Consolidated Statements of Income for the years ended
  October 31, 1996, 1995 and 1994.....................................    F-4

Consolidated Statements of Cash Flows for the years
  ended October 31, 1996, 1995 and 1994...............................    F-5-6

Consolidated Statements of Shareholders' Equity for the
  years ended October 31, 1996, 1995 and 1994.........................    F-7

Notes to Consolidated Financial Statements............................    F-8-15

Supplementary Financial Data (unaudited):

                                                                          Page
                                                                          ------

Quarterly Financial Data..............................................    F-16

         (2) The financial statement schedules required by Item 8 of this report
are listed below:

                                                                           Page
                                                                          ------

Schedule II - Valuation and Qualifying Accounts.......................    S-1

         Other Schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in the
financial statements or notes thereto.

                                     - 29 -


<PAGE>

         (3) Index of Exhibits

         The following is a list of the Exhibits filed as a part of this report:

         Footnote to Exhibits:-

       * Indicates this is a management contract which is a compensatory plan
         or arrangement which is required to be filed as an exhibit to this
         form pursuant to Item 14(c) of this report.

         The following Exhibit has previously been filed with the Registrant's
Annual Report on Form 10-K for the year ended October 31, 1990 as Exhibit 3(a)
and is incorporated herein by reference thereto:

         3(a)     Restated Articles of Incorporation of the Registrant

         The following Exhibit has been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1987 as Exhibit 3(b)
and is incorporated herein by reference thereto:

         3(b)     Restated By-Laws of the Registrant

         The following Exhibits 10(a) through 10(b) have been previously filed
with Registrant's Form S-1 Registration Statement No. 2-96850 dated April 3,
1985, to Amendment No. 1 thereto dated May 8, 1985 or to Amendment No. 2 thereto
dated May 17, 1985 as the Exhibit numbers indicated and are incorporated herein
by reference thereto:

         10(a)    Deferred Compensation Plan (formerly 10(f))*

         10(b)    Multiemployer Union-Sponsored Pension Plan (formerly 10(i))

         The following Exhibit has been previously filed with Registrant's
Amendment No. 1 to S-1 Registration Statement No. 33- 4828 dated April 24, 1986
as the Exhibit number indicated and is incorporated herein by reference thereto:

         10(c)    Employment Agreement between Central Sprinkler and Albert H.
                  Schoenberger, Jr. (formerly 10(t))*

         The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1986 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:

                                     - 30 -


<PAGE>




         10(d)    Form of Indemnification Agreement among Central Sprinkler
                  Corporation, Central Sprinkler Company, CSC Finance Company
                  and their Executive Officers and Directors dated September 15,
                  1986 (formerly 10(t))*

         10(e)    1986 Incentive Stock Option Plan, as amended to date (formerly
                  10(v))*

         The following Exhibit has been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1988 as the Exhibit
number indicated and is incorporated herein by reference thereto:

         10(f)    Incentive Compensation Plan, as amended to date (formerly
                  10(k))*

         The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1990 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:

         10(g)    Employment Agreement with William J. Meyer dated March 19,
                  1990 (formerly 10(n))*

         10(h)    Employment Agreement with George G. Meyer dated March 19, 1990
                  (formerly 10(o))*

         10(i)    Employment Agreement with Stephen J. Meyer dated March 19,
                  1990 (formerly 10(p))*

         The following Exhibit has been previously filed with Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended April 30, 1992 as
the Exhibit 19 and is incorporated herein by reference thereto:

         10(j) 1988 Non-Qualified Stock Option Plan, as amended*

         The following Exhibits have been previously filed with Registrant's
Annual Report or Form 10-K for the year ended October 31, 1992 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:

         10(k)    Form of Employment Agreement, Schedule of Compensation and
                  Amendment thereto dated September 22, 1992 for certain
                  officers (formerly 10(m))*

         10(l)    Employment Agreement with George S. Polan dated October 1,
                  1992 (formerly 10(n))*

                                     - 31 -


<PAGE>

         10(m)    Central Sprinkler Company Term Loan Agreement dated November
                  20, 1992 (formerly 10(n))

         The following Exhibit has been previously filed with Registrant's Form
8-K dated August 17, 1993 as the Exhibit number indicated and is incorporated
herein by reference thereto:

         10(n)    Agreement to Purchase Assets dated August 12, 1993 among
                  Sprink Inc., James Hardie Irrigation, Inc., J.H. Industries
                  (U.S.A.) Inc., Central Sprink Inc., Central Sprinkler Company
                  and Central Sprinkler Corporation (formerly Exhibit 2.1 and
                  10(o))

         The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1993 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:

         10(o)    Consulting Agreement between the Company and Churchill
                  Investment Partners, Inc. dated June 21, 1993 (formerly 10(p))

         10(p)    Consulting Agreement between the Company and Bradford
                  Ventures Ltd. dated June 21, 1993 (formerly 10(r))

         10(q)    1993 Non-Employee Director Stock Option Plan (formerly (10(s))

         The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1994 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:

         10(r)    Central Sprinkler 401(k) Profit Sharing Plan and Trust, as
                  amended to date (formerly 10(s))

         10(s)    Term Loan Agreement between Central Sprinkler Company and
                  First Fidelity Bank, including exhibits and amendments thereto
                  (formerly 10(t))

         10(t)    Term Loan Agreement between Central Sprinkler Company and
                  CoreStates Bank, N.A., including exhibits and amendments
                  thereto (formerly 10(u))

                                     - 32 -


<PAGE>

         The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1995 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:

         10(u)    Amendment of Employment Agreement with William J. Meyer dated
                  January 5, 1996 (formerly 10(v))*

         10(v)    Amendment of Employment Agreement with George G. Meyer dated
                  January 5, 1996 (formerly (10(w))*

         10(w)    Amendment of Employment Agreement with Stephen J. Meyer dated
                  January 5, 1996 (formerly 10(x))*

         10(x)    Employment Agreement with James E. Golinveaux dated November
                  30, 1995 (formerly 10(y))*

         10(y)    Amendments to Term Loan Agreement between Central Sprinkler
                  Company and First Fidelity Bank (formerly 10(z))

         10(z)   Amendments to Term Loan Agreement between Central Sprinkler
                  Company and CoreStates Bank, N.A. (formerly 10(aa))

         10(aa)   Loan Agreement between Alabama State Industrial Development
                  Authority and Central Castings Corporation dated as of
                  November 1, 1995 (formerly 10(ab))

         10(ab)   Lease Agreement between Calhoun County Economic Development
                  Council and Central Castings Corporation dated as of November
                  1, 1995 (formerly 10(ac))

         10(ac)   Letter of Credit and Reimbursement Agreement by and between
                  First Fidelity Bank, National Association and Central Castings
                  Corporation dated as of November 1, 1995 (formerly 10(ad))

         The following Exhibits are filed herewith:

         10(ad)   Central Sprinkler Corporation Employee Stock Ownership Plan,
                  as amended to date. (pages 58-114 in the sequential numbering
                  system)

         10(ae)   Central Sprinkler Corporation 1996 Equity Compensation Plan
                  (pages 115-124 in the sequential numbering system)*

                                     - 33 -


<PAGE>


         10(af)   Interest Rate and Currency Exchange Agreement between Central
                  Castings Corporation and CoreStates Bank, N.A.(pages 125-150
                  in the sequential numbering system)

         10(ag)   Construction Loan Agreement between Central CPVC Corporation
                  and CoreStates Bank, N.A. including exhibits and amendments
                  thereto. (pages 151-232 in the sequential numbering system)

         11       Statement of Computation of Earnings per Common Share (page
                  233 in the sequential numbering system)

         21       Subsidiaries of Registrant (page 234 in the sequential
                  numbering system)

         23       Consent of Independent Public Accountants (page 235 in the
                  sequential numbering system)

(b) No reports on Form 8-K were filed during the quarter ended October 31, 1996.

                                     - 34 -


<PAGE>

                                   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.

                                                   CENTRAL SPRINKLER CORPORATION

                                                   By: /s/William J. Meyer
                                                       _________________________
                                                       William J. Meyer
                                                       President

Date: January 24, 1997

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

      Signature                    Title                         Date
_______________________     _______________________      _______________________

/s/Winston J. Churchill     Chairman of the              January 24, 1997
-----------------------     Board and Director
Winston J. Churchill        

/s/William J. Meyer         President and                January 24, 1997
-----------------------     Director
William J. Meyer          

/s/George G. Meyer          Chief Executive              January 24, 1997
-----------------------     Officer, Treasurer
George G. Meyer             Secretary and
                            Director

/s/Albert T. Sabol          Executive Vice-              January 24, 1997
-----------------------     President Finance
Albert T. Sabol            (Principal Financial
                            and Accounting Ofricer)            

/s/Stephen J. Meyer         Director                     January 24, 1997
-----------------------
Stephen J. Meyer

/s/Joseph L. Jackson        Director                     January 24, 1997
-----------------------
Joseph L. Jackson

                                     - 35 -


<PAGE>

      Signature                    Title                         Date
_______________________     _______________________      _______________________

/s/Barbara M. Henagan       Director                     January 24, 1997
-----------------------
Barbara M. Henagan

/s/Richard P. O'Leary       Director                     January 24, 1997
-----------------------
Richard P. O'Leary

/s/Thomas J. Sharbaugh      Director                     January 24, 1997
-----------------------
Thomas J. Sharbaugh

/s/Timothy J. Wagg          Director                     January 24, 1997
-----------------------
Timothy J. Wagg

                                     - 36 -




<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Central Sprinkler Corporation:

We have audited the accompanying consolidated balance sheets of Central
Sprinkler Corporation (a Pennsylvania corporation) and subsidiaries as of
October 31, 1996 and 1995, and the related consolidated statements of income,
cash flows and shareholders' equity for the years ended October 31, 1996, 1995,
and 1994. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Central Sprinkler Corporation
and subsidiaries as of October 31, 1996 and 1995, and the results of their
operations and their cash flows for the years ended October 31, 1996, 1995, and
1994, in conformity with generally accepted accounting principles.

As explained in Note 2 to the consolidated financial statements, effective
November 1, 1994, the Company adopted the provisions of Statement of Position
No. 93-6 "Employers' Accounting for Employee Stock Ownership Plans". In
addition, as explained in Note 1 to the consolidated financial statements,
effective November 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes".

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. The schedule has been subjected to the auditing procedures applied 
in the audits of the basic financial statements and, in our opinion, fairly 
states in all material respects the financial data required to be set forth 
therein in relation to the basic financial statements taken as a whole.


                                              Arthur Andersen LLP

Philadelphia, Pa.,
  December 11, 1996

                                      F-1
<PAGE>

Central Sprinkler Corporation and Subsidiaries 
Consolidated Financial Statements 
CONSOLIDATED BALANCE SHEETS 
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE) 

<TABLE>
<CAPTION>
                                                                        October 31, 
                                                                 ------------------------ 
ASSETS                                                               1996         1995 
----------------------------------------------------------------------------------------- 
<S>                                                              <C>           <C>
Current Assets: 
     Cash and cash equivalents                                     $  2,884     $  2,025 
     Short-term investments                                          12,466       10,079 
     Accounts receivable, less allowance for doubtful 
        receivables of $4,622 in 1996 and $3,813 in 1995, 
        respectively                                                 38,518       31,686 
     Inventories                                                     43,414       35,955 
     Deferred income taxes                                            7,245        5,038 
     Prepaid expenses and other assets                                  610          650 
                                                                  ----------   ---------- 
      Total current assets                                          105,137       85,433 
                                                                  ----------   ---------- 

Property, Plant and Equipment: 
     Land                                                               810          337 
     Buildings and improvements                                      10,246        6,306 
     Machinery and equipment                                         47,122       35,529 
     Furniture and fixtures                                           1,988        1,421 
                                                                  ----------   ---------- 
                                                                     60,166       43,593 
     Less -- Accumulated depreciation                               (18,807)     (15,567) 
                                                                  ----------   ---------- 
                                                                     41,359       28,026 
                                                                  ----------   ---------- 

Goodwill, less accumulated amortization of $3,263 in 1996 and 
   $3,012 in 1995, respectively                                       2,759        3,010 
                                                                  ----------   ---------- 

Other Assets                                                          1,663          891 
                                                                  ----------   ---------- 
                                                                   $150,918     $117,360 
                                                                  ==========   ========== 

</TABLE>

----------------------------------------------------------------------------- 
The accompanying notes are an integral part of these statements. 


                                      F-2
<PAGE>

<TABLE>
<CAPTION>
                                                                   October 31, 
                                                            ------------------------ 
LIABILITIES AND SHAREHOLDERS' EQUITY                            1996         1995 
------------------------------------------------------------------------------------ 
<S>                                                         <C>           <C>
Current Liabilities: 
     Short-term borrowings                                    $ 34,390     $ 14,062 
     Current portion of long-term debt                           3,850        3,813 
     Accounts payable                                           19,993       12,724 
     Accrued expenses                                           10,388        6,896 
     Accrued income taxes                                          994          646 
                                                             ----------   ---------- 
      Total current liabilities                                 69,615       38,141 
                                                             ----------   ---------- 
Long-Term Debt                                                  24,674       27,516 
                                                             ----------   ---------- 
Other Noncurrent Liabilities                                       448          577 
                                                             ----------   ---------- 
Deferred Income Taxes                                            1,789        1,576 
                                                             ----------   ---------- 
Commitments and Contingent Liabilities (Note 15)
 
Shareholders' Equity: 
     Common stock, $.01 par value; shares authorized -- 
        15,000; issued -- 5,474 in 1996 and 5,472 in 1995, 
        respectively                                                55           55 
     Additional paid-in capital                                 29,763       29,118 
     Retained earnings                                          46,702       42,939 
     Cumulative translation adjustments                             (7)        (109) 
     Deferred cost-Employee Stock Ownership Plan (ESOP)         (6,018)      (6,360) 
     Unrealized investment holding gains, net                       --           10 
                                                             ----------   ---------- 
                                                                70,495       65,653 
     Less -- Common stock in treasury, at cost -- 1,680 
        shares in 1996 and 1995                                (16,103)     (16,103) 
                                                             ----------   ---------- 
      Total shareholders' equity                                54,392       49,550 
                                                             ----------   ---------- 
                                                              $150,918     $117,360 
                                                             ==========   ========== 

</TABLE>

----------------------------------------------------------------------------- 
The accompanying notes are an integral part of these statements. 


                                      F-3
<PAGE>

CONSOLIDATED STATEMENTS OF INCOME 
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE) 

<TABLE>
<CAPTION>
                                                        Year Ended October 31, 
                                                ------------------------------------- 
                                                    1996         1995         1994 
------------------------------------------------------------------------------------- 
<S>                                             <C>           <C>           <C>
Net Sales                                         $187,220     $158,849     $116,249
 
Cost of Sales                                      134,995      107,165       81,012 
                                                 ----------   ----------    ---------- 
     Gross profit                                   52,225       51,684       35,237 
                                                 ----------   ----------    ---------- 
Operating Expenses: 
     Selling, general and administrative            38,395       31,795       24,934 
     Research and development                        5,455        5,133        4,091 
     Other income, net                                (624)        (549)        (216) 
                                                 ----------   ----------    ---------- 
                                                    43,226       36,379       28,809 
                                                 ----------   ----------    ---------- 
     Operating income                                8,999       15,305        6,428 
                                                 ----------   ----------    ---------- 
Interest Expense (Income): 
     Interest expense                                3,390        2,363        1,303 
     Interest income                                  (451)        (461)        (625) 
                                                 ----------   ----------    ---------- 
                                                     2,939        1,902          678 
                                                 ----------   ----------    ---------- 
     Income before income taxes                      6,060       13,403        5,750
 
Income Taxes                                         2,297        4,945        1,970 
                                                 ----------   ----------    ---------- 
     Income Before Cumulative Effect of 
        Accounting Change                            3,763        8,458        3,780 
     Cumulative Effect of Accounting Change 
        for Income Taxes                                --           --          238 
                                                 ----------   ----------    ---------- 
Net Income                                        $  3,763     $  8,458     $  4,018 
                                                 ==========   ==========    ========== 
Net Income per Common Share: 
     Before Cumulative Effect of Accounting 
        Change                                    $   1.13     $   2.50     $    .75 
     Cumulative Effect of Accounting Change 
        for Income Taxes                                --           --          .05 
                                                 ----------   ----------    ---------- 
     Net Income per Common Share                  $   1.13     $   2.50     $    .80 
                                                 ==========   ==========    ========== 

</TABLE>

----------------------------------------------------------------------------- 
The accompanying notes are an integral part of these statements. 


                                      F-4
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS 
(AMOUNTS IN THOUSANDS) 

<TABLE>
<CAPTION>
                                                         Year Ended October 31, 
                                                  ------------------------------------ 
                                                      1996         1995         1994 
--------------------------------------------------------------------------------------  
<S>                                               <C>           <C>           <C>
Operating activities: 
Net Income                                          $  3,763     $  8,458     $ 4,018 
Noncash items included in income: 
     Depreciation and amortization                     4,731        3,520       3,083 
     Cumulative effect of accounting change               --           --        (238) 
     Deferred income taxes                            (1,878)        (144)     (1,708) 
     Deferred costs                                      818          529         183 
Decrease (increase) in -- 
     Accounts receivable, net                         (6,832)      (6,779)     (4,587) 
     Inventories                                      (7,459)      (7,302)     (4,978) 
     Prepaid expenses and other assets                    40          252        (233) 
Increase (decrease) in -- 
     Accounts payable                                  7,269        4,993        (386) 
     Accrued expenses                                  3,492        1,595       1,381 
     Accrued income taxes                                232       (1,260)      1,690 
                                                   ----------   ----------    --------- 
Cash provided by (used for) operating 
   activities                                          4,176        3,862      (1,775) 
                                                   ----------   ----------    --------- 
Investing activities: 
     Acquisition of property, plant and 
        equipment                                    (17,813)     (16,047)     (6,285) 
     Acquisition of business                              --           --      (1,571) 
     Sales of short-term investments                   5,716       22,069       7,283 
     Purchases of short-term investments              (8,103)     (13,814)     (8,318) 
     Other long-term assets                             (772)          (9)         22 
                                                   ----------   ----------    --------- 
Cash used for investing activities                   (20,972)      (7,801)     (8,869) 
                                                   ----------   ----------    --------- 
Financing activities: 
     Short-term borrowings, net                        9,328       16,576      13,908 
     Purchase of treasury stock                           --      (11,750)         -- 
     Proceeds from long-term debt                     12,018          948          20 
     Repayments of long-term debt                     (3,823)      (3,088)     (2,174) 
     Proceeds from exercised stock options                31          745          17 
     Tax benefits from exercised stock options             9          368           3 
     Other -- net                                         92          (23)        158 
                                                   ----------   ----------    --------- 
Cash provided by financing activities                 17,655        3,776      11,932 
                                                   ----------   ----------    --------- 
Increase (decrease) in cash and cash 
   equivalents                                           859         (163)      1,288 
Cash and cash equivalents at beginning of year         2,025        2,188         900 
                                                   ----------   ----------    --------- 
Cash and cash equivalents at end of year            $  2,884     $  2,025     $ 2,188 
                                                   ==========   ==========    ========= 

</TABLE>

The accompanying notes are an integral part of these statements. 


                                      F-5
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) 
(AMOUNTS IN THOUSANDS) 

<TABLE>
<CAPTION>
                                                                    Year Ended October 31, 
                                                             ---------------------------------- 
                                                                1996         1995        1994 
----------------------------------------------------------------------------------------------- 
<S>                                                          <C>           <C>         <C>
Supplemental disclosures of cash flow information:
 
Cash paid (received) during the year for: 
   Interest expense                                            $ 3,466      $ 2,638     $ 1,239 
                                                              =========    =========   ========= 
   Income taxes                                                $ 3,943      $ 6,061     $ 2,016 
                                                              =========    =========   ========= 
   Interest income                                             $  (485)     $  (854)    $  (928) 
                                                              =========    =========   ========= 
Supplemental schedule of non-cash investing and 
   financing activities: 
   Refinancing of short-term borrowings with 
     long-term debt                                            $    --      $11,000     $20,000 
                                                              =========    =========   ========= 
   Acquisition: 
     Fair value of assets acquired                             $    --      $     --    $ 1,771 
     Note payable issued                                            --            --       (200) 
                                                              ---------    ---------   --------- 
     Cash paid for net assets acquired                         $    --      $     --    $ 1,571 
                                                              =========    =========   ========= 

</TABLE>

----------------------------------------------------------------------------- 
The accompanying notes are an integral part of these statements. 


                                      F-6
<PAGE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 
(AMOUNTS IN THOUSANDS) 

<TABLE>
<CAPTION>
                                             
                                                                                                      Unrealized                
                         Common Stock        Additional                  Cumulative      Deferred     Investment      Treasury  
                    ----------------------    Paid-in       Retained     Translation       Cost-        Holding        Stock,   
                       Shares     Amount      Capital       Earnings     Adjustments       ESOP       Gains, Net       Common 
 -------------------------------------------------------------------------------------------------------------------------------- 
   
<S>                 <C>         <C>        <C>            <C>          <C>              <C>          <C>            <C>
Balance, October 
  31, 1993             5,396       $54        $27,654       $30,463         $(279)        $(6,976)       $  --        $  (4,353) 
     Exercise of 
        stock 
        options            2        --             20            --            --              --          --               -- 
     Annual ESOP 
        costs             --        --             --            --            --             297          --               -- 
     Translation 
        adjustments       --        --             --            --           203              --          --               -- 
     Net income           --        --             --         4,018            --              --          --               -- 
                     ---------- ---------- -------------- ------------ ---------------  ------------ -------------- ------------- 
   
Balance, October 
   31, 1994            5,398        54         27,674        34,481           (76)         (6,679)         --           (4,353) 
     Purchase of 
        1,237 shares 
        of common 
        stock for 
        treasury          --        --             --            --            --              --          --          (11,750) 
     Unrealized 
        investment 
        holding 
        gains, net        --        --             --            --            --              --          10               -- 
     Exercise of 
        stock 
        options           74         1          1,112            --            --              --          --               -- 
     Annual ESOP 
        costs             --        --            332            --            --             319          --               -- 
     Translation 
        adjustments       --        --             --            --           (33)             --          --               -- 
     Net income           --        --             --         8,458            --              --          --               -- 
                     ---------- ---------- -------------- ------------ ---------------  ------------ -------------- ------------- 
   
Balance, October 
   31, 1995            5,472        55         29,118        42,939          (109)         (6,360)         10          (16,103) 
     Unrealized 
        investment 
        holding 
        losses, net       --        --             --            --            --              --         (10)              -- 
     Exercise of 
        stock 
        options            2        --             40            --            --              --          --               -- 
     Annual ESOP 
        costs             --        --            605            --            --             342          --               -- 
     Translation 
        adjustments       --        --             --            --           102              --          --               -- 
     Net income           --        --             --         3,763            --              --          --               -- 
                     ---------- ---------- -------------- ------------ ---------------  ------------ -------------- ------------- 
   
Balance, October 
   31, 1996            5,474       $55        $29,763       $46,702         $   (7)       $(6,018)       $  --        $(16,103) 
                     ========== ========== ============== ============ ===============  ============ ============== ============= 

</TABLE>

----------------------------------------------------------------------------- 
The accompanying notes are an integral part of these statements. 


                                      F-7
<PAGE>

Central Sprinkler Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share) 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 

   The Company -- The Company's operations are conducted in one business 
segment as a manufacturer and distributor of components used in automatic 
fire sprinkler systems. These fire sprinkler system components are used in 
commercial, industrial, residential and institutional properties and are sold 
to over 3 thousand customers, most of which are sprinkler installation 
contractors. 

   Principles of Consolidation -- The consolidated financial statements 
include the accounts of Central Sprinkler Corporation and its subsidiaries 
(the "Company"). All significant intercompany transactions and accounts have 
been eliminated. 

   Cash Equivalents -- The Company considers all highly liquid debt 
instruments purchased with an original maturity of three months or less to be 
cash equivalents for the purpose of determining cash flows. 

   Short-Term Investments -- The Company adopted Statement of Financial 
Accounting Standards ("SFAS") No. 115-Accounting for Certain Investments in 
Debt and Equity Securities prospectively effective November 1, 1994. The 
short-term investments have been categorized as available for sale and as a 
result are stated at fair value. Unrealized holding gains and losses are 
included as a separate component of shareholders' equity until realized. All 
of the Company's investment holdings have been classified in the consolidated 
balance sheet as current assets. 

   Inventories -- Inventories are stated at the lower of cost (first-in, 
first-out) or market. 

   Property, Plant and Equipment -- Property, plant and equipment are stated 
at cost. Depreciation and amortization are being recorded on a straight-line 
basis over the estimated lives of the assets which range from 3 to 20 years. 

   Goodwill -- Goodwill represents the excess of the purchase cost of net 
assets acquired over their fair market value and is amortized primarily on a 
straight-line basis over 25 years. The Company considers goodwill to be fully 
realizable through future operations. 

   Fair Value of Financial Instruments -- The Company's financial instruments 
consist primarily of cash and cash equivalents, short-term investments, 
accounts receivable, accounts payable, accrued expenses and debt instruments. 
The book values of cash and cash equivalents, short-term investments, 
accounts receivable, accounts payable and accrued expenses are considered to 
be representative of their respective fair values. Based on the terms of the 
Company's debt instruments that are outstanding as of October 31, 1996, the 
carrying values are considered to approximate their respective fair values. 
See Note 7 for the terms and carrying values of the Company's various debt 
instruments. 

   Foreign Currency Translation -- Assets and liabilities of a foreign 
subsidiary are translated into U.S. dollars at the rate of exchange 
prevailing at the end of the year. Income statement accounts are translated 
at the average exchange rate prevailing during the year. Translation 
adjustments resulting from this process are recorded directly in 
shareholders' equity. 

   Research and Development Costs -- Costs of research, new product 
development and product redesign are expensed as incurred. 

   Income Taxes -- Effective November 1, 1993, the Company adopted Statement 
of Financial Accounting Standards ("SFAS") No. 109-Accounting for Income 
Taxes. The cumulative effect of this accounting change resulted in the 
recognition of a one-time gain of $238 or $.05 per common share in fiscal 
1994. SFAS No. 109 requires that deferred tax liabilities and assets be 
recognized for the tax effects of difference between the financial reporting 
and tax bases of assets and liabilities. 



                                      F-8
<PAGE>
   Net Income Per Common Share -- Net income per common share is computed 
using the weighted average number of shares of common stock and common stock 
equivalents outstanding (dilutive stock options). 

   Use of Estimates -- The preparation of financial statements in conformity 
with generally accepted accounting principles requires management to make 
estimates and assumptions that affect the reported amounts of assets and 
liabilities and disclosure of contingent assets and liabilities at the date 
of the financial statements and the reported amounts of revenues and expenses 
during the fiscal year. Actual amounts could differ from those estimates. 

   New Accounting Pronouncements -- The Financial Accounting Standards Board 
has issued SFAS No. 123, "Accounting for Stock-Based Compensation." The 
Company is required to adopt this standard for the year ending October 31, 
1997. The Company has elected to adopt the pro-forma disclosure requirement 
of this pronouncement. The Financial Accounting Standards Board issued SFAS 
No. 121, "Accounting for the Impairment of Long-Lived Assets and for 
Long-Lived Assets to Be Disposed Of," which requires impairment losses to be 
recorded on long-lived assets used in operations when indicators of 
impairment are present and undiscounted cash flows estimated to be generated 
by those assets are less than the assets carrying amount. SFAS No. 121 also 
addresses the accounting for long-lived assets where disposal is expected. 
The Company will adopt SFAS No. 121 in the first quarter of fiscal year 1997 
and does not expect the adoption to have a material impact on the Company's 
financial position or results of operations. 

   Reclassifications -- Certain reclassifications of previously reported 
balances have been made to conform with the current year classification of 
such balances. 

2. NET INCOME PER COMMON SHARE: 

   The weighted average common shares outstanding were 3,330, 3,382, and 
5,004 for the years ended October 31, 1996, 1995 and 1994, respectively. 

   Effective November 1, 1994, the Company adopted Statement of Position No. 
93-6, "Employers' Accounting for Employee Stock Ownership Plans" ("SOP"). The 
SOP requires that unreleased shares of the Company's stock in the ESOP are 
excluded from the average number of common shares outstanding when computing 
net income per common share. In accordance with this SOP, 640 and 672 
unreleased ESOP shares were excluded from the average number of common shares 
outstanding in fiscal year 1996 and 1995, respectively. In accordance with 
the provisions of the SOP, fiscal year 1994 information has not been 
restated. 

3. FOREIGN OPERATIONS: 

   The Company owns Spraysafe Automatic Sprinklers Limited ("Spraysafe"), a 
Company in the United Kingdom. Spraysafe manufactures sprinkler heads and 
distributes these and other products in Europe and other foreign countries. 

   Significant financial information about Spraysafe's operations consist of 
the following-- 
                                                       Year Ended October 31, 
                                 1996                   1995           1994 
------------------------------------------------------------------------------ 
Sales                           $16,807               $11,210         $8,800 
Operating income                  1,390                 1,202            702 
Net income                          789                   699            440 
Total assets                     10,803                 7,903          5,065 
Total liabilities                 6,799                 4,862          2,710 
------------------------------------------------------------------------------ 

   Foreign and export net sales for the Company are comprised of the 
following -- 
                                         Year Ended October 31 
                          ---------------------------------------------------- 
                            1996                  1995                 1994 
------------------------------------------------------------------------------ 
Pacific and 
  Far East                 $10,127              $ 6,679              $ 5,775 
Europe                       7,038                4,901                3,747 
Canada                       4,847                3,987                3,358 
Other                        1,379                  478                  203 
                          ----------            ---------            --------- 
                           $23,391              $16,045              $13,083 
                          ==========            =========            ========= 
----------------------------------------------------------------------------- 


                                      F-9
<PAGE>
4. SHORT-TERM INVESTMENTS: 

   The following is a summary of the estimated fair value of available for 
sale securities by balance sheet classification -- 
                                                      October 31, 
                                         ------------------------------------ 
                                            1996                       1995 
----------------------------------------------------------------------------- 
Cash Equivalents: 
 U.S. Money Market 
  Funds                                    $   872                    $   517 
                                          =========                   ======== 
Short-Term Investments: 
 Tax-Exempt 
 Securities                                $12,466                    $10,079 
                                          =========                   ======== 
----------------------------------------------------------------------------- 

   Gross unrealized holding gains and losses for the years ended October 31, 
1996 and 1995 were not material. The net unrealized holding gains for the 
years ended October 31, 1996 and 1995 have been recorded as a separate 
component of shareholders' equity. The gross proceeds from sales and 
maturities of investments were $5,716 and $22,069 for the years ended October 
31, 1996 and 1995, respectively. Gross realized gains and losses for the 
years ended October 31, 1996 and 1995 were not material. For the purpose of 
determining gross realized gains and losses, the cost of securities sold is 
based upon specific identification. 

   Short-term investments are generally comprised of variable rate securities 
that provide for optional or early redemption within twelve months and the 
contractual maturities are generally greater than twelve months. 

5. INVENTORIES: 

   Inventories consist of the following -- 
                                                    October 31, 
                                       --------------------------------------- 
                                         1996                          1995 
------------------------------------------------------------------------------ 
Raw materials and 
  work in process                      $12,957                       $11,237 
Finished goods                          30,457                        24,718 
                                       ---------                     --------- 
                                       $43,414                       $35,955 
                                       =========                     ========= 
----------------------------------------------------------------------------- 

6. SHAREHOLDERS' EQUITY: 

   Redeemable Preferred Stock -- The Company has authorized 2,000 shares of 
Redeemable Preferred Stock, $.01 par value. At October 31, 1996, 1995 and 
1994, there were no shares issued and outstanding. 

                                      
<PAGE>

   Treasury Stock -- The Company repurchased 1,237 shares of its common stock 
on December 21, 1994 at a cost of $11,750. There were no repurchases in 
fiscal 1996 or 1994. All shares are being held in the treasury for possible 
future issuance. 

   Stock Options -- The Company has stock option plans ("Option Plans") which 
cover a maximum of 936 shares of common stock which may be granted. The 
Option Plans provide for the granting of 163 incentive stock options under a 
plan adopted in 1986 and 713 nonqualified or incentive stock options under a 
plan adopted in 1988 and amended in fiscal 1991. Under a plan adopted in 
1993, the Company can issue up to 60 nonqualified options under a 
non-employee director stock option plan. Options have been granted to 
officers, other key employees and non-employee directors at exercise prices 
not less than 100% of the fair market value of the Company's common stock on 
the date of the grant. The options become exercisable after the date of the 
grant and expire ten years from the date of grant. 

   The following table presents data related to the Option Plans -- 

 ----------------------------------------------------------------------------- 
                            In-                Non- 
                          centive           qualified 
                           Stock              Stock                Option 
                          Options            Options                Price 
                          ---------         -----------         -------------- 
October 31, 1993            126                393                $8.60-$13.80 
 Granted                      -                 12                       13.00 
 Exercised                   (2)                 -                        8.60 
                          ---------         ----------- 

October 31, 1994            124                405                 8.60- 13.80 
 Granted                      -                 12                       15.60 
 Exercised                  (29)               (44)                8.60- 13.80 
                          ---------         ----------- 

October 31, 1995             95                373                 8.60- 15.60 
 Granted                    100                 12                       29.95 
 Exercised                    -                 (2)                      13.00 
                          ---------         ----------- 
October 31, 1996            195                383                $8.60-$29.95 
                          =========         ===========
------------------------------------------------------------------------------
   At October 31, 1996, 503 of the outstanding options were exercisable and 
237 nonqualified or incentive stock options were available for 


                                      F-10
<PAGE>

grant under the 1988 plan and 24 nonqualified stock options were available 
for grant under the 1993 plan. 

7. DEBT: 

   The Company's long-term debt consists of the following -- 

                                                      October 31, 
                                         ------------------------------------ 
                                            1996                       1995 
----------------------------------------------------------------------------- 
Industrial Revenue Bonds                   $10,450                   $    -- 
Term Loan                                    7,417                     8,417 
Term Loan                                    7,500                     8,500 
Term Note                                    1,000                     2,000 
Mortgage Loans                               1,067                       464 
Foreign Term Loan                            1,090                       948 
Short-term borrowings 
  refinanced subsequent 
  to year end                                   --                    11,000 
                                          ---------                  --------- 
                                            28,524                    31,329 
Less-Current portion                        (3,850)                   (3,813) 
                                          ---------                  --------- 
                                           $24,674                   $27,516 
                                          =========                  ========= 
------------------------------------------------------------------------------

   The Company's Industrial Revenue bonds consist of principal amount of 
$8,000 State of Alabama Industrial Development Authority Adjustable 
Convertible Taxable Industrial Revenue Bonds and principal amount of $3,000 
Calhoun County (Alabama) Economic Development Council Adjustable Convertible 
Taxable Industrial Revenue Bonds ("IRB's") which were issued in November 
1995. The IRB's have a 20 year term and are payable in annual installments of 
$550 and bear interest at a variable rate which was 5.55% at October 31, 
1996. The IRB's are collateralized by a letter of credit and are subject to 
early redemption under certain circumstances. In January 1996, the Company 
entered into an interest rate swap agreement which fixes the interest rate on 
the IRB's in order to reduce the impact of changes in interest rates. The 
interest rate is fixed at 6.13% for the remainder of the 20 year term. 
Interest expense is recorded monthly at the fixed rate plus related fees. The 
difference between the variable rate paid to IRB bondholders and the fixed 
rate costs are settled monthly between the Company and a bank which is party 
to the swap agreement. As of October 31, 1996, the swap agreement has a 
notional principal balance of $10,450 and the swap agreement matures at the 
time the related IRB's mature. The swap agreement is with a large national 
bank and the Company does not anticipate nonperformance by the counterparty. 

   In January 1996, the Company converted the two term loans, the term note 
and the mortgage loan secured by the Company's primary manufacturing facility 
from a variable interest rate option to a fixed interest rate option under 
the terms of the respective loan agreements. 

   The Company obtained two $10,000 ten-year term loans from banks in fiscal 
1994. These term loans are unsecured and the proceeds of such loans were used 
to refinance borrowings under unsecured lines of credit from such banks. The 
loan proceeds were used primarily for working capital purposes and the 
acquisition and expansion of facilities to accommodate the growth in the 
Company's business. One term loan is payable through 2004 in monthly 
principal installments of $84 and bears interest at a fixed rate which was 
6.67% at October 31, 1996. The other term loan is payable through 2004 in 
quarterly principal installments of $250 and bears interest at a fixed rate 
which was 6.48% at October 31, 1996. 

   The Company's term note is unsecured and payable through 1997 in 
semi-annual payments of $500. Interest on this note is fixed and was 5.98% at 
October 31, 1996. 

   For both the term loans and the term note, the Company must maintain 
certain tangible net worth, certain financial ratios and other requirements 
under the provisions of these loan agreements. As of October 31, 1996, the 
Company is in compliance with these loan agreements, as amended. 

   The Company's mortgage loans consists of two mortgages. One mortgage is 
secured by the Company's primary manufacturing facility and is payable 
through 2002 in monthly installments of $6 and bears interest at a fixed rate 
which was 6.20% at October 31, 1996. The second mortgage note was obtained in 
August 1996 for land and buildings for expanded offices and is payable 
through 2006 in monthly installments of $6 and bears interest at a variable 
rate which was 8% at October 31, 1996. 


                                      F-11
<PAGE>

   In fiscal 1996, Spraysafe refinanced a five-year unsecured term loan 
obtained in 1995 with a seven-year term loan in the amount of $1,065. This 
loan is secured by machinery and equipment and is payable through 2003 in 
monthly installments of $10 and bears interest at a variable rate which was 
7.13% at October 31, 1996. The loan proceeds were used primarily for 
machinery and equipment and the expansion of Spraysafe's manufacturing 
facility. 

   The Company's short-term borrowings are demand loans under lines of 
credit. At October 31, 1995, $11,000 of short-term borrowings were classified 
as long-term debt based on the Company's issuance of the IRB's on November 
21, 1995. The Company has domestic demand loans outstanding at October 31, 
1996 of $31,770 which bear interest at variable interest rates. The weighted 
average interest rate on these loans was 5.90% and 6.46% at October 31, 1996 
and 1995, respectively. Spraysafe has short-term borrowings in the form of a 
demand loan which is payable in British pounds in the amount of $2,620 at 
October 31, 1996. This loan bears interest at a variable interest rate which 
was 7.13% and 7.98% at October 31, 1996 and 1995, respectively. Approximately 
$3,230 of the Company's lines of credit were unused and available for use at 
October 31, 1996. 

   Annual principal payments required under long-term debt obligations are as 
follows -- 

 ----------------------------------------------------------------------------- 
             Fiscal Year 
             ------------- 

                 1997               $ 3,850 
                 1998                 2,828 
                 1999                 2,836 
                 2000                 2,847 
                 2001                 2,859 
                Thereafter           13,304 
                                   --------- 
                                    $28,524 
                                   ========= 
----------------------------------------------------------------------------- 

8. CAPITALIZED INTEREST: 

   The interest cost incurred by the Company for fiscal year 1996 and 1995 
amounted to $3,680 and $2,696, respectively. The Company capitalized $290 and 
$333 of interest cost in fiscal years 1996 and 1995, respectively, in 
connection with the expansion of the grooved fittings manufacturing facility. No
interest was capitalized in fiscal 1994. 

9. INCOME TAXES: 

   The following table summarizes the source of income before income taxes 
and information concerning the provision for income taxes -- 

                                         Year Ended October 31, 
                           --------------------------------------------------- 
                             1996                 1995                 1994 
------------------------------------------------------------------------------ 
Income before income taxes-- 
   Domestic                $ 4,876              $12,284              $ 5,102 
   Foreign                   1,184                1,119                  648 
                           ---------            ---------            --------- 
Total                      $ 6,060              $13,403              $ 5,750 
                           =========            =========            ========= 
Provision for income taxes: 
Current-- 
   U.S. Federal            $ 3,040              $ 3,674              $ 2,774 
   State                       740                1,067                  696 
   Foreign                     395                  348                  208 
                           ---------            ---------            --------- 
Total                        4,175                5,089                3,678 
                           ---------            ---------            --------- 
Deferred-- 
   U.S. Federal             (1,386)                  54               (1,328) 
   State                      (492)                (270)                (380) 
   Foreign                       -                   72                    - 
                           ---------            ---------            --------- 
Total                       (1,878)                (144)              (l,708) 
                           ---------            ---------            --------- 
Total tax 
   provision               $ 2,297              $ 4,945              $ 1,970 
                           =========            =========            ========= 
----------------------------------------------------------------------------- 

   Income tax expense differs from the amount currently payable because 
certain revenues and expenses are reported in the income statement in periods 
which differ from those in which they are subject to taxation. The principal 
differences in timing between the income statement and taxable income involve 
certain accrued expenses and reserves not currently deductible for tax 
purposes, tax regulations which limit deductions for bad debt expense, the 
uniform cost capitalization rules and different methods used in computing tax 
and book depreciation. Such differences are recorded as deferred income taxes 
in the accompanying balance sheets under the liability method. 

   The components of the deferred income tax assets and liabilities, measured 
under SFAS No. 109 at the beginning and end of the fiscal year, are listed 
below. There is no valuation reserve for deferred tax assets. 


                                      F-12
<PAGE>

                                         10/31/96                    11/1/95 
------------------------------------------------------------------------------ 
Deferred Tax Assets-- 
   Accounts receivable                    $ 2,129                    $ 1,813 
   Inventories                              2,672                      1,702 
   Pensions                                   179                        230 
   Patents                                    613                        466 
   ESOP                                       362                        282 
   Other non-deductible 
     liabilities                            2,024                        813 
                                         ----------                  --------- 
   Deferred tax assets                      7,979                      5,306 
                                         ----------                  --------- 

Deferred Tax Liabilities-- 
   Depreciation                            (1,762)                    (1,105) 
   Other                                     (761)                      (739) 
                                         ----------                  --------- 
   Deferred tax 
     liabilities                           (2,523)                    (1,844) 
                                         ----------                  --------- 
Net Deferred Tax Asset                    $ 5,456                    $ 3,462 
                                         ==========                  ========= 
----------------------------------------------------------------------------- 

   The effective tax rate is reconciled to the statutory U.S. Federal Income 
tax rate as follows-- 

                                            Year Ended October 31, 
                                 --------------------------------------------- 
                                  1996               1995               1994 
------------------------------------------------------------------------------ 
U.S. Federal 
  statutory rate                  34.0%              34.0%              34.0% 
Amortization of 
  goodwill                         1.3                 .6                1.4 
State income 
  taxes, net of 
  U.S. federal 
  benefit                          3.3                3.9                2.3 
Income tax credits 
  utilized                        (1.3)              (1.6)              (1.9) 
Tax-exempt interest               (2.3)              (1.0)              (3.5) 
Market value 
  adjustment of 
  ESOP shares                      3.1                 .8                  - 
Other                              (.2)                .2                2.0 
                                 -------            -------            ------- 
                                  37.9%              36.9%              34.3% 
                                 =======            =======            ======= 

----------------------------------------------------------------------------- 

10. RELATED-PARTY TRANSACTIONS: 

   The Company has financial consulting agreements with companies affiliated 
with certain of its directors/shareholders. These agreements provide for 
aggregate annual fees of $200 per year plus out-of-pocket expenses. These 
agreements extend through October 1997 and automatically renew for an additional
year unless notice of cancellation is given. 

   The Company leases an aircraft from a business in which a director and 
executive officer of the Company is the sole proprietor. For the years ended 
October 31, 1996, 1995, and 1994, the Company recorded lease expense of $395, 
$322, and $270, respectively. 

   The Company expensed $346, $594, and $97 in the years ended October 31, 
1996, 1995, and 1994, respectively, for legal fees to a firm having a member 
who is also a director of the Company.
 
<PAGE>

11. LEASES: 

   The Company has operating leases for its warehousing facilities and 
certain transportation and office equipment. The total rental expense for the 
years ended October 31, 1996, 1995 and 1994 was $1,325, $1,118, and $975, 
respectively. The future minimum rental payments required under operating 
leases that have initial or remaining lease terms in excess of one year as of 
October 31, 1996 are as follows--
-----------------------------------------------------------------------------

                       Fiscal Year 
                      ------------- 
                          1997                   $1,451 
                          1998                    1,192 
                          1999                      933 
                          2000                      605 
                          2001                      416 
                         Thereafter                 144 

----------------------------------------------------------------------------- 

12. INCENTIVE COMPENSATION PLANS: 

   The Company has an Incentive Compensation Plan which provides awards to 
officers and other employees of the Company. Amounts credited to the 
incentive compensation fund are 8% of monthly operating income, as defined in 
the Plan, if monthly operating income meets specified levels. Another plan 
provides three executive officers with a bonus paid on annual net income in 
excess of the 1985 base income level at a combined rate of 2 1/2 % of the 
increase. The total amounts charged to expense for all such plans were 
$1,013, $1,553 and $590 for the years ended October 31, 1996, 1995 and 1994, 
respectively. Awards from the Incentive Compensation Plan are made to 
officers and other employees based on both specified percentage participation 
in the Plan as well as special awards determined at the discretion of the 
Company's Chairman. 


                                      F-13
<PAGE>

13. EMPLOYEE BENEFIT PLANS: 

   Certain of the Company's manufacturing employees are covered by a 
union-sponsored, collectively bargained, Multiemployer Pension Plan. The 
Company contributed and charged to expense $277, $248 and $210 for the years 
ended October 31, 1996, 1995 and 1994, respectively. These contributions are 
determined in accordance with the provisions of negotiated labor contracts 
and generally are based on the number of hours worked. At October 31, 1996, 
the Company had no liability for unfunded vested benefits of this plan. 

   The Company sponsors a 401(K) Profit Sharing Plan which covers certain 
employees not covered by collective bargaining agreements and maintains 
Deferred Compensation Plans which provide retirement benefits for certain 
officers. The expense under these plans was $222, $189 and $175 for the years 
ended October 31, 1996, 1995 and 1994, respectively. 

   The Company has an ESOP which covers certain employees not covered by 
collective bargaining agreements. At October 31, 1996, the ESOP holds 778 
shares of the Company's common stock. On April 28, 1993, the ESOP purchased 
750 shares of the Company's common stock in a leveraged transaction at a 
market value of $9.70 per share for a total cost of $7,275. The total cost of 
the plan for this transaction is being amortized over 15 years. The 
unamortized cost is reported as Deferred Cost-ESOP in the equity section of 
the accompanying balance sheets. The ESOP issued a note payable to the 
Company which will be repaid over 15 years with interest at a variable rate. 
This note will be repaid from cash contributed to the plan by the Company. 
The stock will be committed to be released to the eligible employees over 15 
years based upon the annual principal and interest payments made by the ESOP 
on the note payable to the Company. As described in Note 2, the Company 
adopted SOP 93-6 effective November 1, 1994. Compensation expense is recorded 
for shares committed to be released to employees based on the fair market 
value of those shares in the period in which they are committed to be 
released. The difference between cost and fair market value of committed to 
be released common shares, which was $605 in 1996 and $332 in 1995, is 
recorded in additional paid-in capital. The ESOP shares are summarized as 
follows - 

                                                     October 31, 
                                      --------------------------------------- 
                                         1996                          1995 
-----------------------------------------------------------------------------
Committed to be 
  released shares                           157                           123 
Unreleased shares                           621                           657 
                                       ---------                      -------- 
Total ESOP shares                           778                           780 
                                       =========                      ======== 
Fair value of 
  unreleased 
  shares                                $11,023                       $21,681 
                                       =========                      ======== 

----------------------------------------------------------------------------- 

   The ESOP expense for the years ended October 31, 1996, 1995 and 1994 was 
$947, $651 and $297, respectively. 

14. ACQUISITION: 

   The Company purchased substantially all of the business assets of a foundry 
in the Southeastern United States engaged in manufacturing components for piping
systems for a purchase price of $1,771 effective July 15, 1994. The assets
consist primarily of property, plant and equipment and were acquired for cash
and a $200 note payable that reduced the cash payment of the purchase price.

15. COMMITMENTS AND CONTINGENT LIABILITIES: 

Unusual Non-Recurring Omega Charge 
The Company has become aware of installation problems in certain steel pipe 
systems utilizing Omega(TR) sprinklers. The addition of stop-leak products or 
the presence of excessive hydrocarbons has been found in certain 
circumstances to impair the operation of such sprinklers. In order to assess 
the extent of the problems, the Company has strongly recommended that a 
sampling of Omega(TR) sprinklers from each such installed system be returned 
to the Company for testing. Based on the results of the tests, the Company 
will review each situation with the building owner and develop an appropriate 
action plan, as needed. 


                                      F-14
<PAGE>

The Company did not install such sprinklers and installation of the 
sprinklers is the responsibility of the building owner. However, the 
Company's primary concern is to offer the finest possible fire protection to 
building owners while working within its sales and warranty policy to 
maintain customer goodwill. In the fourth quarter of 1996, the Company 
recorded an unusual non-recurring charge in cost of sales of $3,750 ($2,362 
net of tax or $.72 per share) for the estimated costs to be incurred by the 
Company for this program. The Company will continue to monitor the results of 
the tests and costs incurred. 

Agreements and Contracts
The Company has made certain commitments to build a Company owned 
manufacturing facility for CPVC pipe and fittings components in Huntsville, 
Alabama. It is expected that the capital expenditures for this facility and 
equipment will aggregate $7,500 and is intended to be financed by a long-term 
obligation. Capital expenditures incurred in fiscal 1996 amounted to $1,300 
and are expected to be $2,200 in fiscal 1997 and $4,000 in fiscal 1998. These 
commitments are for buildings and various machinery and equipment. As of 
October 31, 1996, the open commitments relating to this facility were 
approximately $6.2 million for fiscal 1997 and 1998. It is expected that the 
first phase of the facility will be completed and in operation in fiscal 
1997. A second phase will include additional building and machinery and 
equipment to expand further the Company's productive capacity. 

The Company is a party to patent licensing agreements to manufacture and sell 
certain types of sprinkler devices. Under the terms of the agreements, the 
Company is required to pay a royalty on net commissioned sales (as defined in 
the agreements) of the licensed product during the terms of the patents. The 
expense under these agreements was $323, $417 and $389 for the years ended 
October 31, 1996, 1995 and 1994, respectively. 

The Company has employment contracts with certain officers under which their 
employment could not be terminated without five years 
prior notice. The Company also has various purchase commitments for 
materials, supplies, machinery and equipment incident to the ordinary conduct 
of business. Such commitments are not at prices in excess of current market. 

Environmental Matters 
The Company and approximately thirty other local businesses were notified by 
the Environmental Protection Agency ("EPA") in August 1991 that they may be a 
potentially responsible party with respect to a groundwater contamination 
problem in the vicinity of the Company's primary manufacturing plant in 
Lansdale, Pennsylvania. The Company has entered into an Administrative Order 
of Consent for Remedial Investigation/Feasibility Study ("AOC") effective May 
19, 1995 with the EPA. Pursuant to the AOC, in 1996 the Company performed 
certain tests on the Company's property to determine whether any land owned 
by the Company could be a source of any of the contamination at the site. 
Based upon such tests, management believes that the Company's operations did 
not contribute to this contamination problem and the Company has no liability 
to clean-up this site. Should the EPA mandate the Company's participation in 
cleanup efforts it is estimated that such costs could range from a minimal 
amount to $2,700. The Company has not accrued for such cleanup costs. 

Summary
The Company, in the normal course of business, is party to various claims and 
lawsuits with regard to its products and other matters. Management believes 
that the ultimate resolution of these matters as well as the other matters 
discussed herein will not have a material impact on the Company's financial 
position or results of operations. 


                                      F-15
<PAGE>

SUPPLEMENTARY FINANCIAL DATA 

Quarterly Financial Data (Unaudited) 

<TABLE>
<CAPTION>
                                             (Amounts in thousands, except per share) 
                                          ---------------------------------------------- 
                                             First      Second      Third      Fourth 
                                          ---------------------------------------------- 
<S>                                       <C>          <C>         <C>       <C>
1996 
Net sales                                  $40,750     $44,801     $49,491   $52,178 
Gross profit                                12,281      13,281      14,251    12,412* 
Net income                                   1,041       1,265       1,304       153* 
Net income per share                           .31         .38         .39       .05* 

1995 
Net sales                                  $33,714     $37,990     $42,758   $44,387 
Gross profit                                10,612      12,258      14,006    14,808 
Net income                                   1,448       1,923       2,389     2,698 
Net income per share                           .39         .60         .73       .82 

1994 
Net sales                                  $24,463     $25,766     $30,831   $35,189 
Gross profit                                 7,438       8,339       9,049    10,411 
Income before cumulative effect of 
  accounting change                            424         769       1,188     1,399 
Net income                                     662         769       1,188     1,399 
Net income per share before cumulative 
  effect of accounting change                  .08         .15         .24       .28 
Net income per share                           .13         .15         .24       .28 

</TABLE>

*After unusual non-recurring fourth quarter charge of $3,750 ($2,362 net of 
tax or $.72 per share). 

Note: The total of the individual quarterly net income per common share may 
not equal the net income per common share for the year due to changes in the 
number of shares outstanding during the year. 


                                      F-16
<PAGE>



                                                                     SCHEDULE II

                          CENTRAL SPRINKLER CORPORATION

                        VALUATION AND QUALIFYING ACCOUNTS

                        RESERVE FOR DOUBTFUL RECEIVABLES

                             (Amounts in thousands)

                    Balance   Charges                         Balance
                   Beginning    to                            End of
   Year Ended      of Period  Expense  Recoveries  Writeoffs  Period
   ----------      ---------  -------  ----------  ---------  ------

October 31, 1996    $3,813     $1,330      $90        $611     $4,622
                    ======     ======      ===        ====     ======

October 31, 1995    $3,737     $  975      $64        $963     $3,813
                    ======     ======      ===        ====     ======

October 31, 1994    $2,691     $1,467      $89        $510     $3,737
                    ======     ======      ===        ====     ======

                                      S-1