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                             WASHINGTON, D.C.  20549                     3/11/98
                                    FORM 10-K
                (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 1997
                                       or
             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        Commission File Number 333-22679

                           ZARING NATIONAL CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              OHIO                                           31-1506058
--------------------------------------------------------------------------------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                          Identification No.)

11300 Cornell Park Drive, Suite 500, Cincinnati, Ohio               45242-1825
--------------------------------------------------------------------------------
(Address of principal executive offices)                            (Zip Code)

                                  513-489-8849
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

           Securities registered pursuant to section 12(g) of the Act:

                        Common Shares, without par value
--------------------------------------------------------------------------------
                                (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 twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the 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 (Section 229.405 of this chapter) is not contained herein, and
will not be contained herein, 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.

                               YES      X             NO
                                   -----------           -----------

As of March 6, 1998, there were 4,765,788 common shares issued and outstanding,
and the aggregate market value of those shares held by non-affiliates of the
registrant was approximately $16,059,000. Solely for the purpose of this
calculation, all directors and executive officers were excluded as affiliates of
the registrant.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of the registrant's Annual Report to Shareholders for the year
     ended December 31, 1997 (Parts II and IV).

2.   Portions of the registrant's Proxy Statement for the Annual Meeting of
     Shareholders to be held on April 23, 1998 (Part III).
                                                                    Total Pages:
                                                           Exhibit Index at Page


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                                     PART I
ITEM 1. BUSINESS

GENERAL

Effective May 8, 1997, Zaring National Corporation (formerly Zaring Homes, Inc.)
implemented the formation of a holding company structure. The subsidiaries of
Zaring National Corporation (the "Company") include the following: Zaring Homes,
Inc.; HomeMax, Inc.; Hearthside Homes, LLC; and Legacy Mortgage Corporation.

The Company's subsidiary, Zaring Homes, Inc. ("Zaring Homes") is a recognized
regional builder of luxury site-built homes.

In 1997, the Company expanded its operations to include the retail distribution
of manufactured homes through its subsidiary, HomeMax, Inc. ("HomeMax"). During
1997, the Company acquired three (3) established retail distributors of
manufactured homes and opened its first Company designed and constructed Super
Model Home Village. As of December 31, 1997, all HomeMax locations are in North
Carolina.

On October 1, 1997, the Company, through its subsidiary, Hearthside Homes, LLC
("Hearthside") entered the area of entry level site-built homes by acquiring the
operating assets of an Indianapolis, Indiana entry level builder. At the same
time, the Company acquired the stock of Legacy Mortgage Corporation ("Legacy").
Legacy originates, processes and sells mortgages to third party investors.

Consolidated revenues in 1997 were derived as follows: 95.6% Luxury Site-Built
Homes, 3.6% Retail Distribution Manufactured Homes and 0.8% Entry Level
Site-Built Homes. This revenue mix is projected to change significantly through
the growth of HomeMax and Hearthside.

The Company was founded by Allen G. Zaring, III in 1964 and in 1997 has recorded
its thirty-third consecutive year of profitability. The Company completed its
initial public offering of 2,000,000 Common Shares on June 2, 1993.

In 1994, the Board of Directors appointed George E. Casey as President and Chief
Executive Officer of Zaring Homes, and Mr. Zaring as Chairman of the Board.

RECENT DEVELOPMENTS

In 1997, following the formation of Zaring National Corporation as a holding
company, the Board of Directors appointed Allen G. Zaring, III as Chairman and
Chief Executive Officer of the principal subsidiaries of the Company, Zaring
Homes and HomeMax.

Daniel W. Jones was appointed Executive Vice President and Chief Operating
Officer of Zaring Homes, Matthew S. Massarelli was appointed Executive Vice
President and Chief Operating Officer of HomeMax and Allen G. Zaring, IV, Mr.
Zaring's son, was appointed Chief Executive Officer of Hearthside. On December
15, 1997 the Board of Directors accepted the resignation of George E. Casey,
who had been President and Chief Executive Officer of Zaring Homes.

OPERATING STRATEGY

The Company has adopted a completely new operating strategy with a focus on
increasing the rates of return on invested capital that is decidedly different
from its competitors in the housing industry.

According to industry sources, over the past ten years, manufactured homes have
increased from 25% to 32% of all new homes sold in the United States and is
approaching 50% in several markets served by the Company. The Company's
consolidated business strategy recognizes that the production of all housing is
based on various forms of manufacturing techniques, and this concept is being
applied to all phases of its business.



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ZARING HOMES (LUXURY SITE-BUILT HOMES)

The Company, through its subsidiary, Zaring Homes, identifies existing markets
for housing, purchases and develops land and then designs, constructs and sells
luxury single-family detached homes to meet demand. The Company's focus is to
build distinctive, quality neighborhoods, rather than individual homes. A
variety of architectural styles and different models within a community create
inviting neighborhoods. Homes built by the Company emphasize classic exterior
elevations, innovative interior design and quality construction with attention
to detail. The Company has a reputation for on-time, on-budget construction.

Zaring Homes traditionally has marketed to the Luxury/"Move-Up" market,
comprised of individuals who previously owned a principal residence. In
executing this strategy, the Company builds homes that range in size from 1,900
to 4,000 square feet at prices that range from approximately $128,000 to
$425,000.

MARKETS

Prior to 1994, Zaring Homes conducted its operations in two metropolitan areas:
Cincinnati, Ohio and Nashville, Tennessee. During 1994, the Company expanded
into two new metropolitan areas: Raleigh, North Carolina and Indianapolis,
Indiana. In 1996, the Company expanded into Charlotte, North Carolina and
Louisville, Kentucky. The Company believes that all of these metropolitan areas
have similar characteristics, such as, relatively low unemployment, steady job
growth, diversification of industry, and satisfactory infrastructure and
transportation facilities. The Company believes that the continued customer
response supports the Company's strategy of offering multiple product lines
differentiated by price point in the same market.

Cincinnati

The Company operates in four counties in Ohio and two counties in Northern
Kentucky, which constitutes six of the twelve counties in the Cincinnati
metropolitan statistical area, offering homes that range in price from $128,000
to $425,000. Homes ranging in size from 1,900 square feet to 4,000 square feet
are currently offered in 21 communities.

Nashville

The Company operates in two of eight counties in the Nashville metropolitan
statistical area, offering homes that range in price from $169,000 to $302,000
in six communities. The product line encompasses homes ranging from 2,000 square
feet to 3,500 square feet. This product line has provided the Company with
significant growth opportunities within the region.


Indianapolis

The Company operates in one of the nine counties in the Indianapolis
metropolitan statistical area. The Company markets homes ranging in price from
$153,000 to $400,000 in six distinct communities. The product line includes
homes ranging from 2,100 square feet to 3,600 square feet.

Raleigh

The Company operates in one of the six counties which comprise the
Raleigh-Durham-Chapel Hill metropolitan statistical area. The Company markets
homes ranging in size from 2,000 square feet to 3,600 square feet and in price
from $168,000 to $ 345,000 in five communities.

Charlotte

The Company operates in two of the seven counties which comprise the greater
Charlotte-Gastonia-Rockhill metropolitan statistical area. The Company markets
homes ranging in size from 2,100 square feet to 3,600 square feet and in price
from $210,000 to $320,000 in six communities.



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Louisville

The Company operates in one county of the seven counties of the Louisville
metropolitan statistical area. The Company markets homes ranging in size from
2,100 square feet to 4,000 square feet and in price from $190,000 to $402,000 in
one community.

PRODUCTS

The Company's homes normally are purchased for occupancy as primary residences
and are built in a variety of models. The base price of each home includes
standard features such as insulated glass windows, one or more fireplaces,
equipped kitchens and landscaping. Additionally, the Company provides a complete
list of pre-priced options, ranging from extra electrical outlets to bonus
rooms, three-car garages and flex space additions. Such options permit a buyer
to personalize the home and should result in incremental profits to the Company.

The Company uses the same portfolio of home designs in similar communities. The
Company develops new designs to replace existing ones as part of its continuing
efforts to assure that its homes are responsive to assessment of market trends
and requirements. For new designs, the Company engages a number of unaffiliated
architectural firms supervised by an in-house architectural group. During the
design phase, all plans are reviewed by management and by professionals outside
the Company to ensure that the plans meet the needs of the target market and
are engineered for the most effective production techniques and the most
economical usage of materials.

Upon approval of a new home design, a prototype is constructed and evaluated.
During construction, all of those involved in planning, as well as sales
personnel, tour the home to analyze its design in light of their particular
area of expertise. The Company also shows the prototype to potential customers
and actively seeks customer input.

MARKETING AND SALES

The Company's homes are sold primarily through its own staff of Sales Managers
who are compensated on a salary plus commission basis. The Company's marketing
efforts rely heavily on furnished model homes. The furnished models in all
communities are open seven days a week, and are staffed by Sales Managers who
consult with the prospective customer regarding floor plans, elevations and
available options. At December 31, 1997, the Company maintained 61 furnished
model homes. The Company cooperates with outside real estate agents to whom it
pays commissions at market rates. Other marketing tools include the Multiple
Listing Service, local newspaper advertisements, promotions, newsletters to
realtors, entrance signs and illustrated brochures, all of which utilize the
Zaring Homes name.

Additionally, in 1997 the Company opened Design Galleries in both Cincinnati,
Ohio and Nashville, Tennessee. The Design Galleries are fully staffed centers
where the variety of options available to the customer are displayed to
further enhance the customers' opportunity of choice without the need to
customize the base product line.



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Sales of the Company's homes are made pursuant to standard sales contracts.
These contracts generally require a customer to make a deposit of approximately
2% to 20% of the sale price at the time of the execution of the sales contract,
depending on local competitive conditions. Contracts are generally subject to
certain contingencies including the availability of mortgage financing to the
purchaser. Contracts for the sale of homes are at fixed prices. Prices at which
homes are offered normally increase from time to time during the sellout of the
community, reflecting, in part, increased costs. The prices of homes vary with
location as well as style, and standard and optional amenities.

The majority of the Company's homes are completed after a sales contract has
been signed, but the Company frequently commences construction of homes that are
held "under roof," with completed exteriors, as inventory for sale ("Market
Homes"). This practice limits funds committed to construction of the house, but
at the same time permits rapid completion of the interior of the home to a
purchaser's specifications upon execution of a sales contract. The Company has
Market Homes in each community in order to offer a range of homes to prospective
buyers and to be able to complete a house for occupancy in approximately the
same length of time as required for a loan closing in the resale market. Some
sales are of completed homes, including model homes no longer needed for the
Company's marketing efforts. At December 31, 1997, the Company had 193 Market
Homes at various stages of completion. Market Homes are not reflected in the
Company's backlog until placed under a purchase contract by a third-party
purchaser.

BACKLOG AND INVENTORY

The Company's backlog consists of homes for which the Company has entered into a
sales contract, but which it has not yet delivered. As of December 31, 1997, the
Company had a backlog of 240 luxury site-built units under contract, with a
sales value of $60.8 million, substantially all of which will be completed
within 100 days. Construction of homes in backlog is expected to be financed
using cash flow from operations and not through construction loans.

CONSTRUCTION

Zaring Homes enjoys a reputation as a quality builder of luxury homes. The
Company acts as its own construction manager and general contractor using
even-flow production techniques to produce quality homes on a 60 working day (84
calendar day) cycle. The entire value delivery system is managed by a process
circle consisting of a Process Control Executive, Builder, Sales Manager and
Operations Manager who work in concert to construct and deliver its homes
consistently and predictably. Zaring's proprietary software and information age
technologies are deployed in this process.

The Company uses subcontractors for virtually all of its construction operations
and selects them and its suppliers based on past performance, reputation,
quality, ability to perform and value. The Company typically attempts to
negotiate one-year arrangements with subcontractors and suppliers. Agreements
with subcontractors and suppliers typically provide for a fixed price for labor
and materials. Such suppliers and subcontractors cannot raise prices to the
Company on any house on which there is a contract of sale. Many of the Company's
subcontractors have worked with the Company for more than 10 years. The Company
recognizes that its subcontractors and suppliers are an integral part of its
success and honors those who excel in their performance by designating them as
Master Contractors at an annual awards luncheon.

The Company does not have major investments in capital equipment, building
supply inventories or component manufacturing facilities rather subcontractors
and suppliers are utilized as part of a "just-in-time" inventory control system.
The use of subcontractors minimizes the Company's payroll and increases its
flexibility in responding to changes in the demand for housing. The Company
utilizes a fast-track scheduling system which generally enables it to complete
its homes in less than 100 days from the date a building permit is issued. A
Market Home normally can be completed within 45 days after a contract is signed.

The Company utilizes building components, such as wall panels, roof trusses,
pre-hung doors and manufactured kitchen cabinets and stair rails, to control
quality and reduce on-site labor. In addition to increasing construction
efficiencies, the use of such components reduces the Company's vulnerability to
weather delays, substantially reduces waste and theft, and allows the Company to
better control material and labor costs.

The principal raw materials used in the construction of the Company's homes are
brick, wood, concrete and other building materials, as well as plumbing and
electrical supplies. All of these materials are generally available from a
variety of sources, but are subject to periodic price fluctuations. The Company
has attempted to reduce its exposure to such volatility through the use of
engineered lumber products and pre-assembled building components purchased from
third parties. To increase purchasing efficiency, the Company utilizes
standardized building materials and products in its homes. Due to the Company's
policy of carefully selecting



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its materials, suppliers and subcontractors, it has not experienced significant
construction delays due to the unavailability of materials or subcontractors.

The Company builds homes on a year-round basis, with minimal seasonal impact on
its construction operations. The Company believes its relationships with its
suppliers and subcontractors to be good.

CUSTOMER SERVICE AND QUALITY CONTROL

The Company believes that its commitment to quality construction and customer
service, as evidenced by its follow-up inspection and warranty program, enhances
its competitive position. The Company grants a one-year limited warranty on
materials and workmanship and passes on to its customers all warranties provided
by manufacturers or suppliers of components installed in each home. The
Company's warranty expense approximated $1,941,000, $1,372,000 and $313,000, in
1997, 1996, and 1995, respectively. The Company's Customer Care program includes
two inspections of the home by the home buyer and a member of the Quality Team
which supervised construction of the home. The first inspection is conducted
shortly before closing, and the other occurs approximately six months after
occupancy. The Customer Care Team has authority to make repairs under the
warranty program to meet Company standards.

LAND ACQUISITION AND DEVELOPMENT

The Company typically buys unimproved land, which has been approved for
immediate development into finished lots. The Company does not buy land for
speculation but only acquires real estate consistent with its planned building
operations. The Company has in the past also utilized joint ventures with both
affiliated and non-affiliated parties to develop land and anticipates that any
future land development-joint ventures will be with non-affiliated parties. Lots
occasionally are sold to other builders by the Company and the joint ventures in
which it participates. The Company also builds in communities developed by
affiliates and third parties. The Company generally seeks to build on parcels of
30 or more lots, whether those parcels are developed by it, affiliates or third
parties.

In considering the suitability of unimproved land for development, the Company
reviews such factors as proximity to existing developed areas, population growth
patterns, availability of existing community services,employment growth rates,
the anticipated absorption rates for new housing,transportation availability,
and the estimated costs of development. Development activities include obtaining
any necessary zoning, environmental and other regulatory approvals and
constructing roads, sewers, drainage systems, amenities and other improvements.
In general, the Company has been able to obtain the government approvals
required for the development of land and the construction of homes on a timely
basis, in part due to its reputation for adding value to an area through the
construction of high-quality, attractive neighborhoods.

The Company generally purchases unimproved land pursuant to contingent purchase
contracts, making only a nominal refundable deposit on the property. Closing of
the land purchase is contingent upon, among other things, the Company's
successful completion of its own economic, geologic, environmental, engineering
and other feasibility studies and the Company's ability to obtain all requisite
approvals from government agencies to develop the land.

At December 31, 1997, the Company owned approximately 995 lots and undeveloped
land which will be developed into approximately 970 additional lots. The
Company also had under contract, subject to the satisfaction of the Company's
purchase contingencies and exercising of option agreements, 428 lots and
undeveloped land which, if purchased, would be developed into approximately
1,103 lots. Of the 1,531 lots under contract, the Company is committed to
purchase 512 lots where the purchase contingencies have been satisfied.

CUSTOMER FINANCING

The Company does not finance the purchase of homes in its communities and does
not contemplate doing so. Virtually all of the Company's customers utilize first
mortgage financing obtained from independent third parties, which typically
require down payments of 20%.

The Company attempts to assist its customers in arranging traditional mortgage
financing with third-party lenders through Blue Chip Mortgage Company, a
Cincinnati, Nashville and Raleigh mortgage broker, in which the Company owns a
50% interest. In 1997, Blue Chip Mortgage Company assisted approximately 33% of
the Company's customers in obtaining mortgages. Revenues from the operations of
Blue Chip Mortgage Company are not material to the Company.



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COMPETITION

The homebuilding business is highly competitive. The Company competes in each of
its local market areas with numerous national, regional, and local homebuilders,
some of which have greater financial and other resources than the Company. The
Company competes primarily on the basis of location, quality, reputation,
service, design and price. At this time, the Company views the home resale
market, rather than other builders of new homes, as its principal competition in
all of its geographic markets and attempts to meet the competition from the home
resale market by offering benefits which that market cannot provide, notably the
latest design features, the flexibility to select interior and exterior finishes
and a new home warranty. In addition, the Company competes with other
homebuilders in the acquisition of undeveloped property for lot development.

HOMEMAX (MANUFACTURED HOUSING RETAILING)

The Company, through its subsidiary, HomeMax, is engaged in the retail
distribution, installation and servicing of manufactured homes under the name
"HomeMax." The strategy is to create innovative model home villages designed to
introduce manufactured housing's quality and value to a market previously
untapped by the Company.

The Company opened its first Super Model Home Village in Wake Forest, North
Carolina in December 1997. This Super Model Home Village, a concept unique to
HomeMax, features a 2,700 square foot Welcome Center and more than 15 decorated,
furnished models displayed in a landscaped environment to create a neighborhood
concept.

The Company views manufactured housing producers as complementary to its
process, and has entered into a five year partnering agreement with Champion
Enterprises, Inc. ("Champion"), the number one producer of manufactured housing
revenues in the United States, to produce a proprietary product line of homes
for HomeMax for distribution and installation through its Super Model Home
Villages.


MARKETS

The Company currently operates four (4) retail sales centers in North Carolina.
Three of the sales centers were acquired during 1997 and are located within a
one hour drive of the Raleigh/Durham area. The fourth center is located in Wake
Forest and is the Company's first Super Model Home Village.

PRODUCTS

The Company's manufactured homes are principally manufactured by Champion under
a five year agreement whereby Champion develops and supplies an exclusive
branded product line of single and multi-section manufactured homes
marketed under the "HomeMax" name. The manufactured homes are purchased for
occupancy as primary residences.

These proprietary HomeMax designs include a variety of models ranging in price
from $20,000 to $75,000 and in size from 900 to 2,200 square feet. The base
price of each unit includes many standard features such as wood cabinet doors,
vinyl siding, shingled roof and equipped kitchens. Additionally, the Company
provides a complete list of pre-priced options ranging from additional
electrical outlets to brick exteriors, free standing garages or decks. Such
options permit the buyer to personalize their manufactured home and should
result in incremental profits to the Company. The Company, together with
Champion, develops new designs to replace existing ones as part of its
continuing effort to ensure its manufactured homes are responsive to assessments
of market trends and requirements.

MARKETING AND SALES

The Company markets its manufactured homes to a variety of customers including
first time buyers and "empty nesters", emphasizing quality, options and customer
satisfaction. The Company's manufactured homes are sold through its own staff of
trained home consultants who are compensated through a base salary and a per
home sale bonus. The Company's marketing efforts, through its Model Home Village
concept, emphasize finished model home units. The finished models at all sales
centers are open seven days a week, and are staffed by home consultants, who
consult with prospective customers regarding floor plans and available options.
At December 31, 1997 the Company maintained finished model homes in four
Villages. Other marketing tools include local newspaper, radio and television
advertisements, promotions entrance signs and illustrated brochures all of which
utilize the HomeMax name and trademark. The Company's strategy is to display
model merchandising and retailing concepts in line with super retailers.

Sales of the Company's manufactured homes are pursuant to standard sales
contracts. The contracts generally require that a customer make a deposit of up
to 20% of the sale price at the time of the execution of the sales contract,
depending upon the local competitive conditions and available financing.
Contracts are generally subject to certain contingencies including the
availability of financing to the purchaser. Contracts for the sale of homes are
at fixed prices. Prices at which homes are offered normally increase from time
to time reflecting the cost of manufacturing the home and its options. The
Company attempts to assist its customers in arranging financing with third-party
lenders.


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BACKLOG AND INVENTORY

The Company's backlog consists of homes for which the Company has entered into a
sales contract, but which it has not yet delivered. As of December 31, 1997, the
Company had a backlog of 40 units under contract, with a sales value of $2.4
million, substantially all of which will be completed within 100 days.
Installation of homes in backlog is expected to be financed using cash flow from
operations and not through construction loans.

LAND ACQUISITION AND DEVELOPMENT

Currently, HomeMax does not purchase land for development into lots or finished
lots to offer to its customers, however, land home communities (neighborhoods)
will be developed under the "Tulip Meadows(TM)" trademark in proximity to its
Super Model Home Villages in the near future.

CUSTOMER FINANCING

The Company does not finance the purchase of homes in its communities and does
not contemplate doing so. Virtually all of the Company's customers utilize
financing obtained from independent third parties, which typically requires down
payments of up to 20%.

COMPETITION

The retail manufactured home business is highly competitive. The Company
competes in its current market area with numerous national, regional, and local
retailers, some of which have greater financial and other resources than the
Company. The Company competes primarily on the basis of quality, service,
design, price and the ability to personalize the manufactured homes.

HEARTHSIDE (ENTRY LEVEL SITE-BUILT AND MODULAR HOMES)

The Company, through its subsidiary Hearthside, purchases lots and designs,
constructs and sells entry level single-family detached homes in the
Indianapolis, Indiana area. The Company offers a variety of architectural styles
and models emphasizing classic exterior elevations, innovative interior design
and quality construction with attention to detail. The Company stresses on-time,
on-budget construction.

The Company markets to the "entry level" buyer, comprised of individuals who
have not previously owned a principal residence. In executing this strategy, the
Company builds homes that range in size from 1,200 to 2,400 square feet at
prices that range from approximately $90,000 to $150,000.

MARKETS

The Company conducts its operations in the Indianapolis, Indiana metropolitan
area. Currently, the Company builds in 5 communities in Indianapolis, Indiana.
It is anticipated that Hearthside will expand its operations to Nashville,
Tennessee using the same product line as Indianapolis.

PRODUCTS

The Company's homes normally are purchased for occupancy as primary residences
and are built in a variety of models. The base price of each of the homes
includes standard features such as insulated glass windows, equipped kitchens
and landscaping. Additionally, the Company provides a complete list of
pre-priced options, ranging from extra electrical outlets to three car garages.
Such options permit a buyer to personalize the home and should result in
incremental profits to the Company.

The Company develops new designs to replace existing ones as part of its
continuing efforts to assure that its homes are responsive to assessment of
market trends and requirements. For new designs, the Company engages
unaffiliated architectural firms supervised by an in-house architectural group.
During the design phase, all plans are reviewed by management and professionals
outside the Company to ensure that the plans meet the needs of the target market
and are engineered for the most effective production techniques and the most
economical usage of materials.

Upon approval of a new home design, a prototype is constructed and evaluated.
During construction, all of those involved in planning, as well as sales
personnel, tour the home to analyze its design in light of their particular area
of expertise. The Company also shows the prototype to potential customers and
actively seeks customer input.

MARKETING AND SALES

The Company's homes are sold primarily through its own staff of Sales Managers
who are compensated on a commission basis. The Company's marketing efforts
emphasize furnished model homes. All furnished models are open seven days a
week, and are staffed by Sales Managers who consult with the prospective
customer regarding floor plans, elevations and available options. At December
31, 1997, the Company maintained 5 furnished model homes. The Company also
cooperates with outside real estate agents to whom it pays commissions at market
rates. Other marketing tools include the Multiple Listing Service, local
newspaper advertisements, promotions, newsletters to realtors, entrance
signs and illustrated brochures, all of which utilize the "Hearthside Homes"
name.

Sales of the Company's homes are made pursuant to standard sales contracts.
These contracts generally require a customer to make a deposit of approximately
1% to 20% of the sales price at the time of execution of the sales



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contract, depending on local competitive conditions and mortgage financing
requirements. Contracts are generally subject to certain contingencies including
the availability of mortgage financing to the purchaser. Contracts for the sale
of homes are at fixed prices. Prices at which homes are offered normally
increase from time to time, reflecting, in part, increased costs. The prices of
homes vary with location as well as style, and standard and optional amenities.

The majority of the Company's homes are completed after a sales contract has
been signed, but the Company frequently commences construction of Market Homes.
This practice limits funds committed to construction of the house, but at the
same time permits rapid completion of the interior of the home to a purchaser's
specifications upon execution of a sales contract. The Company has Market Homes
in each community, in order to offer a range of homes to prospective buyers and
to be able to complete a house for occupancy in approximately the same length of
time as required for a loan closing in the resale market. Some sales are of
completed homes, including model homes no longer needed for the Company's
marketing efforts. At December 31, 1997, the Company had 14 Market Homes at
various stages of completion. Market Homes are not reflected in the Company's
backlog until placed under a purchase contract by a third-party purchaser.

BACKLOG AND INVENTORY

The Company's backlog consists of homes for which the Company has entered into a
sales contract, but which it has not yet delivered. As of December 31, 1997, the
Company had a backlog of 24 entry-level units under contract, with a sales value
of $3.1 million; substantially all of which will be completed within 60 days.
Construction of homes in backlog is expected to be financed using cash flow from
operations and not through construction loans.

CONSTRUCTION

Construction methods are similar to those employed by Zaring Homes using
even-flow technologies with a 60 day production cycle (see Zaring Homes).

The Company is test marketing a modular housing product that is being produced
and developed for it by a modular housing manufacturer. Pending the outcome of
these tests, it is anticipated that a partnering agreement similar to the
HomeMax arrangement with Champion will be entered into with the modular housing
manufacturer.

CUSTOMER SERVICE AND QUALITY CONTROL

This operation is conducted similar to Zaring Homes (see Zaring Homes).


LAND ACQUISITION AND DEVELOPMENT

This operation is conducted similar to Zaring Homes (see Zaring Homes).

At December 31, 1997, the Company owned approximately 33 lots. The Company also
had under contract, subject to the satisfaction of the Company's purchase
contingencies and exercising of option agreements, 244 lots, of which the
Company is committed to 110 lots.

CUSTOMER FINANCING

The Company does not finance the purchase of homes in its communities and does
not contemplate doing so. Virtually all of the Company's customers utilize FHA
first mortgage financing, which typically requires down payments of up to 20%.

The Company attempts to assist its customers in arranging FHA mortgage financing
with third-party lenders through Legacy. In 1997, Legacy assisted substantially
all of the Company's customers in obtaining mortgages. Revenues from the
operations of Legacy are not material to the Company.

COMPETITION

The competition factors are similar to those of Zaring Homes. (see Zaring Homes)
In addition, the Company competes for customers from rental property,
manufactured housing, other builders and the re-sale market.



                                       9
<PAGE>   10

EMPLOYEES

At December 31, 1997, the Company had 428 full-time employees.

ITEM 2.  PROPERTIES

The Company's corporate and Cincinnati offices are located at 11300 Cornell Park
Drive, Cincinnati, Ohio 45242. These offices occupy approximately 19,439 square
feet under a lease which expires in December 2006. Other locations at which the
Company operates are:

<TABLE>
<CAPTION>
<S>                                                                    <C>
Zaring Homes, Inc.                                                     Zaring Homes, Inc.
Nashville, Tennessee                                                   Charlotte, North Carolina
--------------------                                                   -------------------------
1604 Westgate Circle                                                   1043 East Morehead Street, Suite 200
Brentwood, TN  37027                                                   Charlotte, NC  28204
Size: 16,755 Sq. Ft.                                                   Size:  3,272 Sq. Ft.
Lease Expiration Date:  September 2012                                 Lease Expiration Date:  June 1999

Zaring Homes, Inc.                                                     Zaring Homes, Inc.
Raleigh, North Carolina                                                Louisville, Kentucky
-----------------------                                                --------------------
4700 Homewood Court, Suite 115                                         303 Hurstbourne Parkway, Suite 100
Raleigh, NC  27609                                                     Louisville, KY  40222
Size:  3,878 Sq. Ft.                                                   Size:  2,601 Sq. Ft.
Lease Expiration Date:  October 1998                                   Lease Expiration Date:  June 2001

Zaring Homes, Inc.                                                     Hearthside Homes, Inc.
Indianapolis, Indiana                                                  Indianapolis, Indiana
---------------------                                                  ---------------------
11555 N. Meridian Street, Suite 530                                    2345 South Lynhurst Drive, Suite 112
Carmel, IN  46032                                                      Indianapolis, Indiana 46241
Size:  2,776 Sq. Ft.                                                   Size: 2,833 sq. ft.
Lease Expiration Date:  November 1999                                  Lease Expiration Date:  September 2001

HomeMax, Inc.
Raleigh, North Carolina
-----------------------
One North Commerce Center
3691 Trust Drive
Raleigh, N.C. 27604
Size:  7,296 Sq. Ft.
Lease Expiration Date:  August 2001
</TABLE>


ITEM 3.  LEGAL PROCEEDINGS

The Company is subject to various claims, lawsuits and administrative
proceedings arising in the ordinary course of business with respect to real
estate, environmental, zoning, and other matters, which seek remedies or
damages. The Company believes that any liability that may finally be determined
will not have a material effect on its financial position, cash flows, or
results of operations.

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

No matter was submitted to a vote of security holders in the fourth quarter of
the fiscal year covered by this report.



                                       10
<PAGE>   11



EXECUTIVE OFFICERS OF THE REGISTRANT (DURING 1997).

The names, ages and positions of the executive officers of the Company are as
follows:

<TABLE>
<CAPTION>
     Name                            Age                             Title
     ----                      (as of 1/1/98)                        -----
                               --------------
<S>                                 <C>              <C>
ZARING NATIONAL CORPORATION
---------------------------
Allen G. Zaring, III                55               Chairman of the Board, President, Chief Executive Officer
Ronald G. Gratz                     50               Chief Financial Officer, Secretary and Treasurer
Stuart B. Frankel                   32               Vice President, Acquisitions and Land Development
Theresa J. Peard                    48               Corporate Assistant Vice President, Administration

ZARING HOMES, INC.
------------------
Allen G. Zaring, III                55               President, Chief Executive Officer
Daniel W. Jones                     38               Executive Vice President, Chief Operating Officer
Patricia A. Payne                   49               Senior Vice President, Marketing and Sales
Douglas C. Hinger                   41               Vice President, Product and Community Planning
Daniel E. Poole                     32               Vice President, Operations
Richard A. Rodriguez                32               Vice President, Process Improvement

HOMEMAX, INC.
-------------
Allen G. Zaring, III                55               President, Chief Executive Officer
Matthew S. Massarelli               31               Executive Vice President, Chief Operating Officer
James C. Miller                     53               Senior Vice President, Marketing
Lloyd C. McCaskill, Jr.             41               Chief Financial Officer
Rolly Bannister, III                34               Vice President, Retail Operations
Eric Scott Daves                    33               Vice President, Development


HEARTHSIDE HOMES, LLC
---------------------
Allen G. Zaring, IV                 28               President, Chief Executive Officer
Diana Binford                       47               Executive Vice President, Chief Operating Officer
</TABLE>







                                       11
<PAGE>   12



ALLEN G. ZARING, III formed the principal predecessor to the Company in 1964 and
is currently Chairman of the Board and Chief Executive Officer. Mr. Zaring, III
has a B.S. in Economics and Finance from Babson College. Mr. Zaring, III is a
graduate of the Owner/President's Management Program of the Harvard Graduate
School of Business. Mr. Zaring also serves as a director of PNC Bank, Ohio,
National Association, and is a member of the Board of Advisors of the Blue Chip
Venture Capital Fund, both located in Cincinnati, Ohio.

RONALD G. GRATZ joined the Company in 1995 as Vice President and Chief Financial
Officer. Mr. Gratz was the Treasurer of Borror Corporation since 1979 and Chief
Financial Officer since 1992. Mr. Gratz is a Certified Public Accountant
registered in the State of Ohio and has a B.S. in Business Administration and
Accounting from Ohio State University.

STUART B. FRANKEL joined the Company in 1996 as Vice President of Business
Expansion. In 1997 Mr. Frankel was promoted to Vice President, Acquisition and
Development. From September 1993 to May 1996, Mr. Frankel was an attorney for
Frost and Jacobs, Cincinnati, Ohio. Mr. Frankel received a J.D. from Vanderbuilt
University in 1993. Mr. Frankel is a Certified Public Accountant registered in
the States of Ohio and Illinois.

THERESA J. PEARD joined the Company in 1989 and served as Office Manager and
Administrative Assistant to the Chairman of the Board and President. In 1995,
Ms. Peard was promoted to Corporate Assistant Vice President of Administration.
Ms. Peard received a B.S. degree in Business Administration and Human Services
from the College of Notre Dame of Maryland.

DANIEL W. JONES joined the Company in 1982 as a production superintendent. Mr.
Jones served as Vice President of Construction for the Company's Nashville
Division from 1989 to 1992. Mr. Jones returned to Cincinnati in 1992 as
Executive Vice President of Production and became Cincinnati Divisional
President. In 1996, Mr. Jones was promoted to Mid-West Regional President. In
1997, Mr. Jones was promoted to Executive Vice President, Chief Operating
Officer of Zaring Homes. Mr. Jones received a B.S. in Construction from the
University of Cincinnati.

PATRICIA A. PAYNE joined the Company in 1987 and served as Vice President of
Merchandising from 1988 to 1993. In 1993, Ms. Payne was promoted to Corporate
Vice President of Marketing. In 1997, Ms. Payne was promoted to Senior Vice
President, Marketing and Sales. Ms. Payne received a B.A. from Edgecliff
College.

DOUGLAS C. HINGER joined the Company in 1993 as Product Manager for Zaring
Homes, Cincinnati. From 1995 to 1996, Mr. Hinger served as Director of
Marketing. From 1996 to 1997, Mr. Hinger was Sales Manager for Zaring Homes,
Cincinnati. In 1997, Mr. Hinger was promoted to Vice President, Product and
Community Planning. Mr. Hinger has a B.A. in Environmental Design from Miami
University and is a registered Architect in the State of Ohio.

DANIEL E. POOLE joined the Company in 1996 as Operations Manager, Zaring Homes
Charlotte Divison. In 1998 Mr. Poole was promoted to Vice President, Operations.
From 1994 to 1996, Mr. Poole was Purchasing Manager for Ryland Homes in
Charlotte, North Carolina. From 1992 to 1994, Mr. Poole was Project Manager for
Pulte Homes in Charlotte, North Carolina. Mr. Poole has a B.S. in Religion from
Liberty University.

RICHARD A. RODRIGUEZ joined the Company in 1996 as Vice President, Operations.
In 1997 Mr. Rodriguez was promoted to Vice President, Process Improvement. From
1995 to 1996 Mr. Rodriguez was Manufacturing Manager at Crysteco. From 1993 to
1995 Mr. Rodriguez was Manufacturing Supervisor for Corning, Inc. From 1988 to
1993 Mr. Rodriguez served as a United States Navy Seal Officer. Mr. Rodriguez
has a B.S. in Engineering from the United States Naval Academy and a M.B.A. in
Business Administration from Xavier University.

MATTHEW S. MASSARELLI joined the Company in 1996 as Vice President and General
Counsel. In 1997, Mr. Massarelli was promoted to Executive Vice President and
Chief Executive Officer of HomeMax. Mr. Massarelli was Associate Attorney for
Caterpillar Financial Services Corporation, Nashville, Tennessee from April 1996
to September 1996. From 1991 to April 1996, Mr. Massarelli was an Associate
Attorney for Frost & Jacobs, Cincinnati, Ohio. Mr. Massarelli received a B.S. in
Finance from Miami University and a J.D. from Case Western Reserve University.

JAMES C. MILLER joined the Company in 1997 as Senior Vice President, Marketing
of HomeMax. Mr. Miller was Director of Sales and Marketing for Fleetwood Homes
- Eastern Region. Mr. Miller has a B.S. in Marketing from the University of
Georgia.

LLOYD C. MCCASKILL, JR. joined the Company in 1997 as Chief Financial Officer of
HomeMax. From 1995 to 1997, Mr. McCaskill was Director of Interim Financial
Management Division, Ostrande Burch & Company, Raleigh, North Carolina. From
1982 to 1995, Mr. McCaskill was Chief Financial Officer of MCNC in Raleigh,
North Carolina. Mr. McCaskill is a Certified Public Accountant registered in the
State of North Carolina, has a B.S. in Accounting from the University of
North Carolina and a M.B.A. from the Kenan-Flagler School of Business in North
Carolina.


                                       12
<PAGE>   13
MR. ROLLY BANNISTER, III joined the Company in 1997 as Vice President of Retail
Operations of HomeMax. From 1986 to 1997 Mr. Bannister was President and Chief
Executive Officer of Royal Homes, Inc. Mr. Bannister has a B.S. in Business
Administration from East Carolina University.

ERIC SCOTT DAVES joined the Company in 1996 as Divisional President of Zaring
Homes, Raleigh. In 1997, Mr. Daves transferred to HomeMax as Vice President,
Development. From 1994 to 1996 Mr. Daves was Division President at John Wieland
Homes in Raleigh, North Carolina. From 1987 to 1994 Mr. Daves was Area Manager
for Centex Homes in Charleston, South Carolina. Mr. Daves has a B.A. in Business
Administration from the University of Tennessee.

ALLEN G. ZARING, IV joined the Company in 1996 as Director of Acquisition and
Development and in 1997 was promoted to President and Chief Executive Officer of
Hearthside Homes. From 1990 to 1996 Mr. Zaring, IV was President and Chief
Executive Officer of A Z Homes, Inc. Mr. Zaring, IV has a B.S. in Business
Administration from Babson College.

DIANA BINFORD joined the Company in 1997 as Executive Vice President and Chief
Operating Officer of Hearthside Homes. From 1989 to 1997, Ms. Binford was the
President and Chief Executive Officer of Legacy, Inc. Ms. Binford has a B.A. in
Education and Mathematics from McKenree College.


                                       13
<PAGE>   14



                                     PART II

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

The Company's Common Shares are traded on the NASDAQ Stock Market. The
information required by this item is set forth under the caption "1996 and 1997
Common Stock Price Range" on Page 36 of the registrant's Annual Report to
Shareholders for the year ended December 31, 1997 and incorporated herein by
reference.

ITEM 6.  SELECTED FINANCIAL DATA

The information required by this item is set forth under the caption "Selected
Financial Data" at Pages 34 through 36 of the registrant's Annual Report to
Shareholders for the year ended December 31, 1997 and incorporated herein by
reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The information required by this item is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" at Pages 13 through 18 of the registrant's Annual Report to
Shareholders for the year ended December 31, 1997 and incorporated herein by
reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 14(a) hereof.

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

No disagreements with accountants on any accounting or financial disclosure
occurred during the period covered by this report.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding executive officers required by Item 401 of Regulation S-K
is furnished in a separate disclosure in Part I of this report under the caption
"Executive Officers of the Registrant" since the registrant did not furnish such
information in its definitive proxy statement prepared in accordance with
Schedule 14A. Information regarding directors required by Item 401 of Regulation
S-K is set forth under the caption "Information Concerning Nominees" at page 2
and 3 of the registrant's definitive proxy statement, and incorporated herein by
reference.

ITEM 11.  EXECUTIVE COMPENSATION

The information required by this item is set forth under the caption "Executive
Compensation" at Page 5 of the registrant's definitive proxy statement, and
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is set forth at Page 3 through Page 4 of
the registrant's definitive proxy statement, and incorporated herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is set forth under the caption
"Transactions Involving Directors and Executive Officers" at Page 11 of the
registrant's definitive proxy statement, and incorporated herein by reference.



                                       14
<PAGE>   15


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON FORM 10-K

(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
<S>                                                                                                                         <C>
1.   Consolidated Financial Statements...................................................................................   Page

     Report of Independent Public Accountants............................................................................     *
     Consolidated Balance Sheets as of December 31, 1997 and 1996 .......................................................     *
     Consolidated Statements of Income for the Years Ended December 31, 1997, 1996 and 1995 .............................     *
     Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1997, 1996
       and 1995..........................................................................................................     *
     Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 .........................     *
     Notes to Consolidated Financial Statements..........................................................................     *
</TABLE>

     *  Incorporated herein by reference to the appropriate portions of the
        registrant's Annual Report to Shareholders for the fiscal year ended
        December 31, 1997.

2. Financial Statement Schedules

   None

3. Exhibits required to be filed by Item 601 of Regulation S-K:

<TABLE>
<CAPTION>
  Exhibit Number    Description                                                         Location
  --------------    -----------                                                         --------
<S>                 <C>                                                                 <C>
     3.1            Amended Articles of Incorporation                                   Filed herewith

     3.2            Amended Regulations                                                 Filed herewith


     10.1           Key Employees Stock Option Plan                                     Incorporated by
                                                                                        reference to Proxy
                                                                                        Statement for Annual
                                                                                        Meeting to be held
                                                                                        April 23, 1998.

     10.2           Outside Directors Stock Option Plan                                 Incorporated by
                                                                                        reference to Proxy
                                                                                        Statement for Annual
                                                                                        Meeting to be held April
                                                                                        23, 1998.


     10.3           Zaring Homes Retirement Benefit Plan                                Incorporated by
                                                                                        reference to Exhibit
                                                                                        4.b to Form S-8,
                                                                                        Registration Number
                                                                                        33-85588, effective
                                                                                        October 26, 1994.

     10.4           Amendments to Zaring Homes, Inc. Retirement                         Filed herewith
                    Benefit Plan, effective as of January 1, 1996
                    and as of May 8, 1997
</TABLE>

                                       15
<PAGE>   16
<TABLE>
<CAPTION>
<S>                 <C>                                                                 <C>

     10.5           Loan Agreement between the Company and The                          Incorporated by
                    Fifth Third Bank dated as of March 31, 1994                         reference to Exhibit
                                                                                        10.7 to Form 10-K 1994.

     10.6           Loan Agreement between the Company and The                          Incorporated by
                    Provident Bank dated as of March 31, 1994                           reference to Exhibit
                                                                                        10.8 to Form 10-K 1994.

     10.7           Loan Agreement between the Company and PNC                          Incorporated by
                    Bank, Ohio, National Association dated                              reference to Exhibit
                    as of March 31, 1994                                                10.9 to Form 10-K 1994.

     10.8           Tax Indemnification Agreement                                       Incorporated by
                                                                                        reference to Exhibit
                                                                                        10.11 to Form S-1.

     10.9           Zaring Homes Inc. Executive Deferred                                Incorporated by
                    Compensation Plan                                                   reference to Exhibit
                                                                                        10.13 to Form 10-K

     10.10          Amendment to Zaring Homes, Inc.                                     Filed herewith
                    Executive Deferred Compensation Plan, effective
                    as of May 8, 1997

     10.11          Credit Agreement between the Company,                               Incorporated by
                    Zaring Holdings, Inc., Zaring Homes of                              reference to Exhibit
                    Indiana, LLC, Zaring Homes Kentucky, LLC                            10.14 to Form 10-Q
                    and PNC Bank, Ohio National Association,                            March 31, 1996.
                    as Agent, NationsBank, N.A. and The First
                    National Bank of Chicago as Co-Agents
                    dated as of May 9, 1996.

     13.1           Zaring National Corporation 1997 Annual Report to
                    Shareholders (furnished for the information of the
                    Securities and Exchange Commission only and not to be deemed
                    to be filed as part of this Report, except for Pages 13
                    through 37, which material is incorporated
                    herein by reference).

     21.1           List of Subsidiaries

     23             Consent of Independent Public Accountants

</TABLE>



(b)   REPORTS ON FORM 8-K

      No reports on Form 8-K were filed during the last quarter of the period
covered by this report.




                                       16
<PAGE>   17


                                   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.


                                            ZARING HOMES, INC.

Date:  March 31, 1998                      By: /s/ ALLEN G. ZARING, III
                                               ------------------------
                                               Allen G. Zaring, III
                                               Chairman of the Board, President


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


Date:  March 31, 1998                       By: /s/ ALLEN G. ZARING, III
                                               -------------------------
                                               Allen G. Zaring, III
                                               Chairman of the Board, President



Date:  March 31, 1998                       By: /s/ RONALD G. GRATZ
                                               --------------------
                                               Ronald G. Gratz
                                               Chief Financial Officer
                                               Secretary and Treasurer
                                               (Principal Financial and
                                               Accounting Officer)


Date:  March 31, 1998                       By: /s/ DANIEL W. GEEDING
                                               ----------------------
                                               Daniel W. Geeding
                                               Director


Date:  March 31, 1998                       By: /s/ ROBERT NELSON SIBCY
                                               ------------------------
                                               Robert Nelson Sibcy
                                               Director


Date:  March 31, 1998                       By: /s/ JOHN H. WYANT
                                               ------------------
                                               John H. Wyant
                                               Director


Date:  March 31, 1998                       By: /s/ JOHN R. BROOKS
                                               ------------------
                                               John R. Brooks
                                               Director


Date:  March 31, 1998                       By: /s/ MURAT H. DAVIDSON
                                               ----------------------
                                               Murat H. Davidson
                                               Director






                                       17