EXHIBIT 13
          ELECTRONIC FORMAT OF PAGES OF ANNUAL REPORT TO SHAREHOLDERS
          FOR THE YEAR ENDED MARCH 31, 1997 INCORPORATED BY REFERENCE

ANNUAL REPORT PAGE 22

FINANCIAL REVIEW


Business Restructuring                                                        

Decisions were made to sell the Lynx Golf and Mechanical Power Transmission
segments and the Power Systems segment businesses in the fourth quarter of
fiscal 1996 and second quarter of fiscal 1997, respectively.  In January 1997
the Company acquired Eljer Industries, Inc., a manufacturer and marketer of
plumbing and heating, ventilating and air conditioning (HVAC) building
products.  Following these events, the Company's operations are now
categorized in two industry segments: Building Products and Water Resource
Construction.
   The consolidated financial statements include Eljer since the date of
acquisition following the purchase method of accounting.  The three former
segments are reported as discontinued operations.  Their assets and
liabilities have been removed from the consolidated accounts and are presented
in the statement of financial position as a single net asset.  The statements
of consolidated operations and cash flows, industry segment data, and
quarterly financial data have been restated to present separately for all
periods the continuing operations of the Building Products and Water Resource
Construction segments and the discontinued operations.


Sales And Earnings                                                            

Sales of Building Products increased $90.4 million, with $59.5 million coming
from Eljer's operations during the 68 days of fiscal 1997 it was owned by the
Company.  Zurn Plumbing Products and Fire Protection Systems achieved sales
increases of 17% and 19%.  Revenues in fiscal 1996 increased $24.1 million,
with 82% being derived from Zurn Plumbing Products.  Water Resource
Construction revenues were off $22.1 million as the result of a low beginning-
of-the-year backlog and the sale of one of the segment's two businesses while
its revenues increased $26.7 million in fiscal 1996.  The pro forma results of
operations presented in the notes to consolidated financial statements for
comparative purposes indicate the Company's total sales might have been in the
$660 to $670 million range in each of the last two years if Eljer had been
acquired at the beginning of that two-year period.
   The overall gross profit margin percentage increase in fiscal 1997 was
attributable to a greater percentage of the Company's sales being derived from
Building Products.  That segment's margin percentage was lower, however, as
the products of businesses acquired in the last two years generally are sold
at lower margins.  While marketing and administration expenses, which include
sales commissions, have averaged 19% of sales over the last three years, their
dollar amount has increased in each of those years as a result of the Building


                                                                           -1-<PAGE>
ANNUAL REPORT PAGE 22 CONTINUED

Products sales growth and new product introduction costs and, in the last two
years, the acquisition of businesses.  Inflation's effect on the Company's
costs over the last three years has not been as great as the consumer price
index change due to cost containment measures and outsourcing programs which
reduced the costs of many manufactured products.  Most cost increases have
been recovered currently.
   Interest expense was greater as a consequence of the Company's borrowings
to finance the purchase of Eljer and the debt obligations assumed in the
transaction.  Goodwill amortization is primarily attributable to the
acquisition of Eljer.  The higher interest income level in fiscal 1995 came
from interest on federal income tax refunds.  The greater amount of other
income in fiscal 1996 is attributable to sales of an investment and
underutilized assets which contributed $.07 per share to earnings while a
somewhat smaller amount was recognized in fiscal 1997 from the sale of a Water
Resource Construction business.
   Goodwill amortization, which is not deductible, increased the fiscal 1997
effective tax rate compared to the prior two years when tax exempt investment
income, which was a larger percentage of pretax income, had a greater impact
on the effective tax rate.  Settlement of prior year state tax assessments
significantly reduced the effective tax rate in fiscal 1995 and increased
earnings by $.04 per share.
   Discontinued operations reduced net income by $1.34, $.39, and $.76 per
share in each of the three years.  The losses were less in fiscal 1996
primarily as the result of actions taken to lower operating expenses being
incurred by the Lynx Golf segment.  In fiscal 1997, the Power Systems segment
incurred significant costs as it worked toward completion of two foreign power
plant projects and it continued to seek resolution of the effects of the March
1996 repeal of the State of Illinois Retail Rate Law of 1987 which affected
the construction of two power plants for one of its customers.
   Pro forma income from continuing operations for fiscal 1997 assuming Eljer
had been included for the entire year was $24.5 million, or $1.97 per share,
compared to the reported earnings of $22.0 million, or $1.77 per share. 
Included in the pro forma earnings is a $.25 per share litigation settlement
gain recognized by Eljer prior to the acquisition.


ANNUAL REPORT PAGE 23

   Oral and written comments by the Company's management and Board of
Directors in this annual report and elsewhere about the results of operations
reported in the financial statements and the Company's future are made based
on assumptions and estimates in light of the information available at the
time.  Actual results could differ from the estimates and future operations
may be affected by a variety of factors including: changes in objectives,
plans, and strategies; competitive pricing and new product offerings by the
Company and its competitors; and product cost changes.





                                                                           -2-<PAGE>
ANNUAL REPORT PAGE 23 CONTINUED

Backlog                                  1997          1996         1995
(Millions)

Building Products                        $ 50          $30          $ 26
Water Resource 
  Construction                             81           68            96
                                         $131          $98          $122

Completion after fiscal 1998 is expected for 41% of the Water Resource
Construction amount at March 31, 1997.


Building Products                                                             

Sales of Zurn Plumbing Products had year-over-year increases of 17% and 16% in
the last two years.  Sanitary-Dash, a maker of brass and plastic plumbing
fittings and hardware which was acquired in fiscal 1996's third quarter,
contributed about 5 of  those percentage points and $.09 per share to fiscal
1997's earnings. Other sales increase contributors in both years were higher
volumes, new products introduced over the last several years, and market
increases.  Revenues from the installation of Fire Protection Systems were up
19% in fiscal 1997 and 11% in 1996 after declining in each of the two previous
years as the result of a depressed West Coast commercial construction market. 
   The Eljer Plumbingware and Selkirk HVAC businesses contributed $59.5
million to the segment's sales following their acquisition in fiscal 1997's
fourth quarter.  Their annual revenues for the calendar year prior to being
purchased were $216.0 and $156.9 million, respectively, after adjustment to
conform with the Company's accounting for product delivery costs.
   The segment's operating profits increased $7.8 and $5.7 million in fiscal
1997 and 1996, but those amounts are a smaller percentage of sales primarily
because Eljer and Sanitary-Dash obtain lower margins in the remodeling,
repair, and do-it-yourself markets.  As a result of increased revenues and
cost reduction efforts, the Fire Protection Systems businesses' operating
profit in 1997 was 58% greater than the fiscal 1995 level.
   For the short period between the acquisition date and the Company's fiscal
year end, Eljer reduced continuing operations earnings per share by $.08 as
its income for that seasonally soft period was not sufficient to offset the
interest expense and goodwill amortization arising from the acquisition. 
Looking to the future, marketing and manufacturing synergies should boost the
segment's sales and, over time, reduce costs as a percentage of sales. 
Traditionally Zurn Plumbing Products have been sold primarily in the United
States nonresidential construction market while Eljer Plumbingware and Selkirk
HVAC have focused on the wholesale and retail markets and Selkirk HVAC also
has had a substantial presence in Europe.  Selective introduction of each
unit's products into the other's markets has already begun.


Water Resource Construction                                                   

Advanco Constructors, a builder of water infrastructure projects in southern

                                                                           -3-<PAGE>
ANNUAL REPORT PAGE 23 CONTINUED

California with revenues of $69.1, $84.2, and $58.8 million in each of the
last three years, is the segment's sole business following the sale of Gary
Concrete in fiscal 1997.  An operating loss was incurred in 1997 and the
Company's income from continuing operations was $.07 per share lower as a
result of Advanco Constructors' loss which was attributable primarily to
subcontractor performance deficiencies on several projects.  Margins on water
resource construction projects were low in the prior two years due to the
effects of unanticipated contract costs in 1996 and delays experienced in
1995's fourth quarter caused by severe flooding in California.
   Many of the segment's water resource construction projects span several
fiscal years and its year-to-year success is highly dependent on the backlog
level.  Because the southern California market it serves has a continuing need
to expand and upgrade its water and wastewater infrastructure, there should be
new projects that can be bid successfully and managed profitably.


Corporate                                                                     

Compared to earlier years, the fiscal 1997 expense was greater as a result of
the interest expense associated with the purchase of Eljer.  In fiscal 1996,
Corporate expense was reduced by the gain from selling a minority interest
investment in another company.


ANNUAL REPORT PAGE 24

Financial Condition                                                           

The business restructuring in fiscal 1997 significantly changed the Company's
financial position and cash flows.  The purchase of Eljer involved cash
expenditures of $178.5 million, net of $16.7 million in unrestricted cash
obtained in the acquisition.  The total purchase price, including $303.2
million of assumed liabilities, was $479.5 million.  Funds for the
expenditures were obtained from long-term and revolving loan borrowings of
$106.8 million, net of $3.3 million in loan origination costs, sales of
discontinued operations, and cash provided by continuing operations and
investing activities.  In addition to the borrowings to finance the
acquisition, additional amounts were obtained to refinance $64.7 million of
Eljer's debt which carried higher interest rates.  Based on preliminary
purchase price allocations, the fair values of the Eljer assets acquired
include $200.6 million in current assets, $70.4 million in property, plant,
and equipment, and $193.4 of goodwill.  Among the other liabilities assumed
were those for litigation, insurance, and environmental obligations.
   During the year, the Company sold the Lynx Golf and Mechanical Power
Transmission segments, certain units of the Power Systems segment, and Gary
Concrete.  The remainder of the Power Systems segment is expected to be sold
in fiscal 1998.
   The greater amount of cash from continuing operations in fiscal 1997 is
attributable to increased sales, the offset of currently payable taxes and tax
refund from the utilization of the discontinued operations' losses, and the

                                                                           -4-<PAGE>
ANNUAL REPORT PAGE 24 CONTINUED

reduction in receivables, 44% of which resulted from the collection of long-
term trade notes.  Only a minor deferred tax asset valuation allowance has
been provided in the financial statements as management has determined it is
more likely than not that the benefits of tax loss carryforwards of acquired
businesses and the temporary differences between financial and tax reporting
will be realized by offsetting future taxable income from continuing
operations.  The current income tax liability assumed in the Eljer acquisition
relates to potential adverse tax consequences arising from pre-acquisition
transactions.
   Cash provided by continuing operations in fiscal 1996 was adversely
affected by receivable increases in the Water Resource Construction and Fire
Protection Systems businesses.  In addition to supplementing the cash used by
discontinued operations in fiscal 1996, the marketable securities reduction
was the source of the increase in cash and equivalents and provided funds for
capital expenditures, the Sanitary-Dash acquisition, and the payment of
dividends to shareholders.  The greater amount of capital expenditures in 1996
was for two new Zurn Plumbing Products facilities. In fiscal 1995, the cash
from investing activities provided 51% of the funds needed to pay dividends.
   As described in the commitments and contingencies note to the consolidated
financial statements, United States Brass Corporation, an Eljer indirect
wholly-owned subsidiary, has sought bankruptcy court protection while
attempting to resolve significant litigation.  The assets, liabilities, and
operations of US Brass are included in the financial statements as management
believes the litigation and bankruptcy will be satisfactorily resolved.  The
amounts provided for such resolution should preclude any material effect on
the Company's financial position; however, if US Brass  is liquidated, the
loss of its earnings would significantly affect the Company's future results
of operations.  Part of the term loan commitment mentioned in the debt and
lines of credit note to the financial statements is designated for payment of
US Brass litigation liabilities and 53% of the amount accrued for the
environmental obligations described in the financial statement commitments and
contingencies note has been set aside in trusts.
   Total capital employed at March 31, 1997 amounted to $426.2 million which
includes $230.7 million ($18.67 per share of common stock) of shareholders'
equity.
















                                                                           -5-<PAGE>
ANNUAL REPORT PAGE 25

FIVE YEAR CONSOLIDATED FINANCIAL SUMMARY

Year Ended March 31           1997       1996       1995       1994       1993
(Thousands of Dollars Except Per Share Amounts)

OPERATING DATA
Net sales                 $353,018   $284,683   $233,852   $247,177   $244,444
Continuing operations 
   income                   22,002     21,527     18,842     13,416     20,384
      Per share               1.77       1.74       1.52       1.08       1.63
Common stock cash dividends 
   declared per share          .40        .40        .88        .88        .88

FINANCIAL POSITION AT YEAR END
Liquid assets             $ 20,892   $ 30,031   $ 54,838   $ 65,433   $ 90,643
Working capital            108,220    173,836    155,535    160,516    183,778
Property, plant, 
   and equipment           105,180     42,054     56,162     57,003     70,423
Total assets               726,357    394,647    414,696    447,893    490,178
Debt obligations           195,505      7,549     11,553     13,806     20,934
Shareholders' equity       230,718    230,955    218,930    221,583    249,098
   Per share of 
      common stock           18.67      18.71      17.73      17.86      20.03

GENERAL STATISTICS
Capital expenditures      $  6,297   $  9,155   $  5,513   $  4,147   $  5,015
Depreciation                 6,588      5,202      4,700      4,376      4,230
Shareholders of record       5,023      4,822      5,355      6,277      6,278
Average common shares
   outstanding (thousands)  12,431     12,378     12,355     12,438     12,521
Common stock price range:
   High                     29         26         23 3/8     39 1/2     40 3/4
   Low                      18 1/2     18 3/8     16 3/4     22 3/4     27 3/4

Fiscal 1997 includes Eljer Industries, Inc. since the date of its acquisition. 
Data has been restated for the effects of decisions to discontinue the Lynx
Golf, Mechanical Power Transmission, and Power Systems segments.  














                                                                           -6-<PAGE>
<TABLE>
ANNUAL REPORT PAGE 25 CONTINUED

UNAUDITED QUARTERLY FINANCIAL DATA
<CAPTION>
                                     Year Ended March 31, 1997               Year Ended March 31, 1996       
                                 First    Second     Third    Fourth     First    Second     Third    Fourth
                               Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter
(Thousands Except Per Share Amounts)
<S>                              <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>     
Net sales                      $82,235   $81,229   $65,686  $123,868   $60,156   $70,187   $76,399   $77,941
Gross profit                    22,637    22,340    19,795    37,803    18,836    19,732    18,997    21,813
Continuing operations income     6,521     5,534     4,877     5,070     4,928     4,565     4,430     7,604
Discontinued operations         (4,309)   (4,255)    2,164   (10,302)     (279)     (490)     (936)   (3,152)
Net income (loss)                2,212     1,279     7,041    (5,232)    4,649     4,075     3,494     4,452
Earnings per share:
   Continuing operations           .53       .44       .39       .41       .40       .37       .36       .61
   Net income (loss)               .18       .10       .57      (.42)      .38       .33       .28       .36
Common stock:
   Cash dividends declared         .10       .10       .10       .10       .10       .10       .10       .10
   Market price:
      High                      21 5/8    22 1/2    29        26 1/4    20 7/8    26        25 5/8    23 1/4
      Low                       19 1/2    18 1/2    22 1/8    23 3/8    18 3/8    19 7/8    20 1/4    19 3/8

Fiscal 1997 includes Eljer Industries, Inc. since its acquisition on January 22, 1997 (sales - $59,507; pretax
income - $1,152).  Fiscal 1996 fourth quarter includes gains of $1,337 ($.07 per share) from sales of an
investment and underutilized assets and benefited from an unusually low effective tax rate.

Data has been restated for the effects of the fiscal 1997 second quarter decision to discontinue the Power
Systems segment and, for the first nine months of 1997, to conform the Company-wide accounting for product
delivery costs by reducing both sales and marketing expenses with no effect on net income.

Common stock market prices as reported in The Wall Street Journal.







                                                                                                           -7-
/TABLE
<PAGE>
ANNUAL REPORT PAGE 26

CONSOLIDATED FINANCIAL POSITION

March 31                                                  1997        1996
(Thousands)
ASSETS

Current Assets
Cash and equivalents                                  $ 12,403    $ 16,195
Restricted cash                                         10,505
Marketable securities                                    8,489      13,836
Accounts receivable                                    110,194      93,713
Inventories and contracts in progress                  134,266      69,753
Income taxes                                            59,551      32,340
Discontinued operations' net assets                      4,313      57,253
Other assets                                             8,323       3,904
Total Current Assets                                   348,044     286,994

Property, Plant, And Equipment                         105,180      42,054
Goodwill                                               194,064       1,957
Investments                                             38,524      37,611
Other Assets                                            40,545      26,031
                                                                          
                                                      $726,357    $394,647

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Trade accounts payable                                $ 49,243    $ 48,441
Litigation                                              57,471            
Debt obligations                                        34,548         838
Insurance                                               33,180      14,200
Salaries, wages, and payroll items                      18,974      10,404
Income taxes                                            17,402       1,796
Advance billings on contracts in progress                4,151      13,787
Other liabilities                                       24,855      23,692
Total Current Liabilities                              239,824     113,158

Debt Obligations                                       160,957       6,711
Retirement Obligations                                  68,346      43,823
Other Liabilities                                       26,512

Shareholders' Equity
Common stock, $.50 par value per share
  100,000 authorized - 12,570 issued                     6,285       6,285
Capital in excess of par value                          35,525      35,617
Retained earnings                                      193,935     194,418
Treasury stock - 218 and 229 shares                     (5,027)     (5,365)
                                                       230,718     230,955
Commitments And Contingencies                                             
                                                      $726,357    $394,647
See notes to consolidated financial statements.
                                                                           -8-<PAGE>
ANNUAL REPORT PAGE 27

CONSOLIDATED OPERATIONS


Year Ended March 31                                1997       1996       1995
(Thousands Except Per Share Amounts)

Net Sales                                      $353,018   $284,683   $233,852
Cost of sales                                   250,443    205,305    166,854
Marketing and administration                     68,519     51,719     46,210
Interest expense                                  4,340      1,147      1,132
Goodwill amortization                             1,248                      
Interest income                                  (3,308)    (3,081)    (5,035)
Other income                                     (3,626)    (4,212)    (2,841)
Continuing Operations Income 
  Before Income Taxes                            35,402     33,805     27,532
Income taxes                                     13,400     12,278      8,690
Continuing Operations Income                     22,002     21,527     18,842
Discontinued operations:
   Loss from operations                          (9,164)    (4,257)    (9,518)
   Loss on disposal                              (7,538)      (600)          
Net Income                                     $  5,300   $ 16,670   $  9,324

Earnings Per Share
Continuing operations                             $1.77      $1.74      $1.52
Discontinued operations                           (1.34)      (.39)      (.76)
Net income                                        $ .43      $1.35      $ .76

See notes to consolidated financial statements.























                                                                           -9-<PAGE>
ANNUAL REPORT PAGE 28

CONSOLIDATED CASH FLOWS

Year Ended March 31                                1997       1996      1995
(Thousands)

OPERATIONS
Net income                                     $  5,300   $ 16,670  $  9,324
Items not affecting cash from 
   continuing operations:
      Discontinued operations                    16,702      4,857     9,518
      Depreciation and amortization               7,836      5,202     4,700
      Deferred income taxes                       3,540      2,810     1,600
      Miscellaneous                              (3,248)    (5,251)   (1,196)
Changes in operating assets and liabilities:
   Receivables                                    9,795    (17,554)    6,703
   Inventories and prepaid expenses              (9,032)    (6,967)   (5,640)
   Trade accounts payable and accrued expenses   (2,527)     6,820    (7,584)
   Income taxes and interest                     16,543     (2,393)     (886)
Total continuing operations                      44,909      4,194    16,539
Discontinued operations                         (38,121)    (8,247)   (4,952)
Total From (Used By) Operations                   6,788     (4,053)   11,587

INVESTING
Purchases of businesses                        (178,476)    (5,967)         
Capital expenditures                             (6,297)    (8,055)   (5,513)
Marketable securities                             6,087     34,868    14,679
Sales of operations                               4,628      1,391       521
Property, plant, and equipment disposals          2,424         80       270
Long-term investments                             2,039      1,900    (1,463)
Discontinued operations                          68,306     (1,444)   (2,981)
Total (Used For) From Investing                (101,289)    22,773     5,513

FINANCING
Borrowings                                      106,801
Debt payments                                    (8,627)    (1,408)   (1,035)
Dividends paid                                   (4,919)    (6,415)  (10,888)
Treasury stock purchased                                              (1,926)
Stock options exercised                             160                   33
Discontinued operations                          (2,250)    (1,062)   (1,061)
Total From (Used For) Financing                  91,165     (8,885)  (14,877)

CASH AND EQUIVALENTS
(Decrease) increase                              (3,336)     9,835     2,223
Foreign exchange rate effect                       (456)
Beginning of year                                16,195      6,360     4,137
End Of Year                                    $ 12,403   $ 16,195  $  6,360

See notes to consolidated financial statements.



                                                                          -10-<PAGE>
ANNUAL REPORT PAGE 29

INDUSTRY SEGMENT DATA

                                           Water   
                            Building      Resource       Corporate
                            Products    Construction    and Others    Total  
(Thousands)

Year Ended March 31, 1997
Net sales                   $271,200       $81,818                   $353,018
Operating profit (loss)       40,183          (877)                    39,306
Corporate expense                                                       3,904
Income before income taxes                                             35,402
Identifiable assets:
   Continuing operations     601,984        33,168       $ 76,022            
   Discontinued operations          
      and total                                            15,183     726,357
Capital expenditures           4,523           816            958       6,297
Depreciation                   4,531         1,307            750       6,588

Year Ended March 31, 1996
Net sales                   $180,790      $103,893                   $284,683
Operating profit              32,358         2,347                     34,705
Corporate expense                                                         900
Income before income taxes                                             33,805
Identifiable assets:
   Continuing operations     111,098        44,231       $ 91,204            
   Discontinued operations 
      and total                                           148,114     394,647
Capital expenditures           6,115         2,908            132       9,155
Depreciation                   3,159         1,366            677       5,202

Year Ended March 31, 1995
Net sales                   $156,664       $77,188                   $233,852
Operating profit              26,663         1,905       $    283      28,851
Corporate expense                                                       1,319
Income before income taxes                                             27,532
Identifiable assets:
   Continuing operations      91,130        37,419        110,337            
   Discontinued operations 
      and total                                           175,810     414,696
Capital expenditures           4,422           980            111       5,513
Depreciation                   2,779         1,222            699       4,700

See notes to consolidated financial statements.







                                                                          -11-<PAGE>
ANNUAL REPORT PAGE 30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BUSINESS DESCRIPTION                                                          
The Company and its subsidiaries operate in two industry segments.  Its
products and services are marketed by the Company's sales organizations and
through factory sales offices and independent representatives and agents. 
Generally credit is extended based on evaluations of customers' financial
condition.
   The Building Products segment manufactures and distributes plumbing and
heating, ventilating and air conditioning (HVAC) products for the construction
and remodeling markets in the United States, Canada, and Europe, with
significant suppliers being located in China and the Pacific Rim.  It also
designs and installs fire sprinkler systems in the states of California,
Hawaii, Texas, Utah, and Washington.
   The Water Resource Construction segment constructs a wide variety of
systems to control and treat water and wastewater principally for government
agencies in southern California.
   In January 1997 the Company purchased Eljer Industries, Inc., a
manufacturer and marketer of plumbing and HVAC building products.  The
decisions to sell the Lynx Golf and Mechanical Power Transmission segments and
the Power Systems segment were made in the fiscal 1996 fourth quarter and
fiscal 1997 second quarter, respectively.


SIGNIFICANT ACCOUNTING POLICIES                                               
Basis of Presentation   The financial statements include the accounts of the
Company and its subsidiaries, including Eljer following purchase accounting
since January 22, 1997, after elimination of significant intercompany
transactions.  They have been restated for the decisions to discontinue three
industry segments with certain reclassifications in prior years to conform to
the current presentation.  The reporting of amounts in the financial
statements and related disclosures in conformity with generally accepted
accounting principles requires management to make assumptions and estimates. 
Actual results could differ from the estimates.

Investments   Marketable and irrevocable trust securities are available-for-
sale and are carried at their estimated fair values with unrealized gains and
losses included in shareholders' equity as a component of retained earnings. 
Debt securities maturing within three months of purchase are cash equivalents. 
Notes receivable are carried at cost with interest recognized as it accrues. 
The sales-type lease represents the present value of future minimum rental
payments.  Business ventures are accounted for by the equity method, or
carried at cost if less than 20% of the stock is owned.

Financial Instrument Fair Values   No class of instrument has a significant
difference between its carrying value and estimated fair value based on market
quotations, projected cash flows, and other estimating methods.

Engineering and Construction Contracts   Revenue and costs on long-term
contracts are recognized by the cost-to-cost percentage-of-completion method, 

                                                                          -12-<PAGE>
ANNUAL REPORT PAGE 30 CONTINUED

commencing when progress is sufficient to determine earnings with reasonable
accuracy, based on estimates of total sales value and cost at completion. 
Earnings adjustments arising from changes in estimates are recognized
currently.  Estimated losses are recorded when identified.

Inventories   Inventories are valued at the lower of cost, which includes
material, labor, and manufacturing overhead, or market.

Properties   Property, plant, and equipment are stated at cost with
depreciation being provided over their estimated useful lives by the straight-
line method.

Goodwill  The excess of the purchase price over the fair value of acquired
businesses' net assets is amortized by the straight-line method principally
over thirty years (accumulated amortization: 1997 - $1,351,000; 1996 -
$103,000).

Foreign Currency Translation   Translation adjustments of foreign
subsidiaries, whose local currencies are their functional currencies, are
included in shareholders' equity as a component of retained earnings.

Stock-Based Compensation  The expense recognized in connection with stock
options is based on Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and its Interpretations.

Earnings Per Share   Earnings per share are based on income and the average
shares of common stock and dilutive stock options outstanding during the year
(1997 - 12,431,000; 1996 - 12,378,000; 1995 - 12,355,000).  Statement of
Financial Accounting Standards No. 128, "Earnings per Share," becomes
retroactively effective in the Company's fiscal 1998 third quarter and is
expected to marginally increase amounts reported herein.

Industry Segment Data  Operating profit is net sales less operating costs and
certain corporate administrative expenses, allocated to the segments in
relation to their sales, payrolls, and assets, and excludes interest expense. 
Corporate amounts include gains from sales of businesses, investment income,
interest expense, and administrative expenses allocated to discontinued
operations and unallocated.  Corporate assets consist principally of cash and
equivalents, short-term marketable securities, long-term investments, and
corporate headquarters and rental properties.


ANNUAL REPORT PAGE 31

ACQUISITIONS                                                                  
All the outstanding common stock of Eljer Industries, Inc. was purchased in
January 1997 for $171.7 million and transaction expenses of $4.6 million. 
Concurrent with the purchase, a substantial portion of Eljer's debt was
refinanced.  Presented below are the fair values of the assets acquired and
liabilities assumed after preliminary allocation of the purchase price.  Also 

                                                                          -13-<PAGE>
ANNUAL REPORT PAGE 31 CONTINUED

presented are unaudited pro forma results of operations for the Company giving
effect to the purchase as if it had occurred at the beginning of each of the
1997 and 1996 fiscal years.  These pro forma results are for comparative
purposes only and do not purport to be indicative of the results which
actually would have resulted or may result in the future.  They include pre-
acquisition litigation amounts for Eljer (1997 pro forma - $.25 per share
settlement gain; 1996 - $.41 per share in expenses).

ASSET AND LIABILITY FAIR VALUES
                                                                             
(Thousands)

Current assets                                                       $200,572
Property, plant, and equipment                                         70,351
Goodwill                                                              193,369
Other assets                                                           15,252
Current liabilities                                                  (190,483)
Long-term liabilities                                                (112,755)
                                                                     $176,306

PRO FORMA RESULTS OF OPERATIONS

Year Ended March 31                                         1997         1996
(Thousands Except Per Share Amounts)

Net sales                                               $666,400     $660,100
Continuing operations income                              24,500       15,500
Net income                                                 7,798       10,643
Earnings per share:
   Continuing operations                                    1.97         1.25
   Net income                                                .63          .86

The Building Products segment purchased a plumbing products business (fiscal
1995: sales - $14.2 million; net income $.8 million) in fiscal 1996's third
quarter.


FINANCIAL INSTRUMENTS
(Thousands)
                                                                             
Restricted cash supports letters of credit securing certain long-term debt.
The marketable securities at March 31, 1997 were pledged in lieu of customers
holding construction contract retainage.  Irrevocable trust securities include
mortgage-backed instruments maturing from 1997 to 2023 carried at a fair value
of $6,559 which was $2,300 less than their cost at March 31, 1997.           






                                                                          -14-<PAGE>
ANNUAL REPORT PAGE 31 CONTINUED

ACCOUNTS RECEIVABLE
(Thousands)
                                                                             
At March 31, 1997 accounts receivable include retainage on long-term contracts
expected to be collected in fiscal 1998 - $4,312, 1999 - $961, and 2000 -
$1,055.  Allowances deducted are: 1997 - $8,295; 1996 - $2,647.              


INVENTORIES AND CONTRACTS IN PROGRESS

March 31                                                  1997           1996
(Thousands)

Finished products                                     $ 80,473       $ 45,386
Work in process                                         13,722          3,708
Raw materials and supplies                              28,604          5,430
Contracts in progress                                   11,467         15,229
                                                      $134,266       $ 69,753
Last-in, first-out (LIFO) method                            85%            77%
First-in, first-out (FIFO) method                           15             23

Inventory increase if only the FIFO method, which
approximates replacement costs, had been used         $  6,474       $  7,104


PROPERTY, PLANT, AND EQUIPMENT

March 31                                                  1997           1996
(Thousands)

Land and land improvements                            $  7,963       $  6,621
Buildings and leasehold improvements                    50,483         31,183
Machinery and equipment                                 95,903         64,491
                                                       154,349        102,295
Depreciation                                            49,169         60,241
                                                      $105,180       $ 42,054















                                                                          -15-<PAGE>
ANNUAL REPORT PAGE 31 CONTINUED

INVESTMENTS

March 31                                                  1997           1996
(Thousands)

Irrevocable trust securities for:
   Nonqualified pension, deferred compensation,
      and other employee plans                        $  9,838       $ 15,403
   Environmental obligations                             8,178
Notes receivable                                         8,779         11,690
Sales-type lease                                         7,186          7,441
Business ventures                                        4,543          3,058
Other                                                                      19
                                                      $ 38,524       $ 37,611


ANNUAL REPORT PAGE 32

DEBT AND LINES OF CREDIT                                                      
The Company entered into a $250 million credit agreement in January 1997 with
a group of banks for revolving loans and letters of credit up to $50 million
and up to $200 million in term loans to acquire Eljer, refinance existing debt
of Eljer subsidiaries, and fund a proposed trust in connection with the US
Brass bankruptcy settlement.  Interest is at prime or Eurodollar rates plus 0%
to 1.5% and .75% to 2.5%, respectively, based on the defined ratio of debt to
earnings before interest, taxes, depreciation, and amortization.  Fees up to
 .375% are payable on unutilized loan commitments.  Outstanding letters of
credit ($20 million at March 31, 1997) may not exceed the lesser of the
available revolving loan commitment and $40 million prior to 1998 and $30
million thereafter.  All amounts become due if there is a change in control,
as defined (generally if 20% or more of the Company's common stock is
acquired), and scheduled term loan payments are required to be reduced by
annual excess cash flow, as defined and, in inverse order, by proceeds from
sales of specified assets and investments.  As required by the credit
agreement, the Company entered into two-year 8.78% fixed interest rate swaps
for $105 million and a 10.5% interest rate cap for $20 million.















                                                                          -16-<PAGE>
ANNUAL REPORT PAGE 32 CONTINUED

DEBT OBLIGATIONS
March 31                                                  1997           1996
(Thousands)

Current
Industrial revenue bonds due in 1997 -
   10.24% and 14% interest                            $  9,700
US Brass revolving loan due in 1998                      6,780
German bank credit line                                    780
Current portion of long-term obligations                17,288         $  838
                                                      $ 34,548         $  838

Long-Term
Term loans due 1997-2002, net of $3,278
   discount - 8.44% effective rate                    $149,807
Revolving loans due 2002                                17,250
Unsecured note - 8.46% interest                          6,364         $6,805
Foreign bank term loan due 1997-1999                     4,197
Capital lease obligations                                  627            685
Other                                                                      59
                                                       178,245          7,549
Current portion                                         17,288            838
                                                      $160,957         $6,711

Long-term debt obligation principal payments due in future fiscal years: 1998
-$17,288; 1999 - $22,384; 2000 - $26,597; 2001 - $38,077; 2002 - $51,983;
thereafter - $25,194.  Operating lease rental payments due in future years:
1998 - $4,569; 1999 - $3,433; 2000 - $1,320; 2001 - $681; 2002 - $461;
thereafter - $3,907.

Year Ended March 31                        1997           1996           1995
(Thousands)

Interest incurred                        $4,340         $1,147         $1,132
Interest paid                             3,780          2,155            750

The industrial revenue bonds are secured by letters of credit supported by
cash subject to withdrawal restrictions until the debt is repaid ($8.7 million
was repaid in April 1997 and $9.4 million of restricted cash was released).  A
subsidiary in Germany has unsecured bank credit lines approximating $5
million, without scheduled maturity, which the banks review annually for
renewal, with a year-end interest rate of 7%.
   The US Brass revolving loan is debtor-in-possession financing for up to $20
million based on a percentage of accounts receivable and inventories with
interest at the prime rate plus 1.75%.  A subsidiary in the United Kingdom has
a bank agreement for British pound sterling or German deutsche mark revolving
loans equivalent to approximately $4 million until September 1997 and for a
term loan, both with LIBOR interest plus 1.5% to 1.75% based on the
subsidiary's operating cash flow to debt servicing ratios.  Payment of the
unsecured note is guaranteed by the lessee under a sales-type lease.

                                                                          -17-<PAGE>
ANNUAL REPORT PAGE 32 CONTINUED

   Substantially all assets and the Company's investments in domestic
subsidiaries, other than those comprising discontinued operations, are pledged
as security under the loan agreements.  Restrictive covenants imposed by the
agreements include maintenance of specified capitalization, net worth,
interest expense, and fixed charge ratios.  Also, they limit: annual capital
expenditures to $22 million, decreasing to $18 million in fiscal 2000; common
stock dividends, redemptions and purchases to $6 million per year; incurrence
of additional debt; and acquisitions.
   Certain facilities and equipment are subject to operating leases, none of
which contain significant contingent rent or renewal options or impose
material restrictions on the Company.


ANNUAL REPORT PAGE 33

RETIREMENT OBLIGATIONS                                                       
Substantially all employees are covered by noncontributory Company sponsored
or multiemployer defined benefit plans.  Benefits of stated amounts for each
year of service are provided by the multiemployer plans and to 33% of the
participants in the Company's domestic plans, while benefits for others are
based on years of service and compensation.  The compensation base for 63% of
active participants in domestic plans has been frozen at 1995 levels and those
under age 50 at that time do not receive future service credit.  Funding of
Company sponsored plans, invested primarily in listed stocks and bonds and
cash equivalents, is the minimum required by law and additional amounts as
deemed appropriate from time to time.  Contributions to multiemployer plans
are related to hours worked or compensation levels.  
   The Company also sponsors defined contribution plans for certain domestic
employees and matches their contributions in cash or common stock of
equivalent value up to 3% or 6% of their compensation, with those whose
pension benefits have been frozen receiving and additional 2% to 9% of
compensation based on years of service.
   Postretirement medical and death benefits for certain domestic retirees and
their spouses are provided by the Company from unfunded plans.  Employees
eligible for these benefits are those participating in the Company's pension
plans prior to specified dates in the 1986-1989 period and certain employees
of businesses acquired after 1995, with their retirees required to contribute
toward the plan's costs.
   The accumulated medical and life plan obligation is attributable to:
retirees - 83%; fully-eligible employees - 7%; other active employees - 10%. 
The assumed health care cost trend rate declines 1/2% each year to 5% in 2005. 
A 1% greater rate would increase the accumulated obligation by $3.2 million
and the annual expense, which would have been $4.1 million if Eljer were
included for a full year, by $343,000.







                                                                          -18-<PAGE>
ANNUAL REPORT PAGE 33 CONTINUED

   The fiscal 1997 changes in the actuarial present values of projected
benefits generally are attributable to overfunded plan curtailments associated
with discontinued operations and underfunded plans assumed in the acquisition
of Eljer. The increase in the plans' assets is attributable to the Eljer
acquisition and the assets' earnings which increased the net unrecognized gain
to the extent they exceeded the assumed return rate. 













































                                                                          -19-<PAGE>
ANNUAL REPORT PAGE 33 CONTINUED

FUNDING STATUS
March 31                          1997                          1996          
                         Pension Plans    Medical     Pension Plans    Medical
                         Over     Under  And Life      Over    Under  And Life
                      Funded    Funded     Plans    Funded   Funded     Plans
(Thousands)

Actuarial present value
   of benefits:
     Vested         $ 90,476  $ 30,269   $40,608  $ 89,766 $ 10,863   $21,606
     Nonvested         1,328     2,518     4,405     1,319       63     5,256
     Accumulated      91,804    32,787    45,013    91,085   10,926    26,862
     Salary
        increases      6,558     3,038               9,356       18          
     Projected        98,362    35,825    45,013   100,441   10,944    26,862
Plans' assets        181,494    23,586             160,611    1,063          
Asset excess 
  (deficiency)        83,132   (12,239)  (45,013)   60,170   (9,881)  (26,862)
Unrecognized:
  Net (gain) loss    (55,593)    1,595   (10,802)  (37,536)   1,575    (4,743)
  Initial (asset) 
     obligation       (1,787)                       (1,311)     463          
  Prior service cost  (1,275)      349              (2,724)      (1)         
Minimum liability                  (68)                      (2,158)         
Prepaid 
   (accrued) cost   $ 24,477  $(10,363) $(55,815) $ 18,599 $(10,002) $(31,605)

CONTINUING OPERATIONS' COSTS
Company Defined Benefit Plans
                                Pension                   Medical and Life    
Year Ended March 31     1997      1996      1995      1997     1996      1995
(Thousands)

Service cost         $ 1,541   $   874   $ 1,180    $  345   $  268    $  459
Interest               8,383     7,990     7,644     2,245    2,075     2,103
Curtailment gain         (34)                                                
(Return) loss on 
   assets            (27,238)  (38,165)    3,764          
Other                 14,592    26,405   (14,991)     (185)    (309)         
(Income) expense     $(2,756)  $(2,896)  $(2,403)   $2,405   $2,034    $2,562

Other Plans
Year Ended March 31               1997                1996               1995
(Thousands)

Multiemployer                   $2,398              $2,157             $1,841
Defined contribution               576                  18                   




                                                                          -20-<PAGE>
ANNUAL REPORT PAGE 33 CONTINUED

ACTUARIAL ASSUMPTIONS

Year Ended March 31              1997                1996               1995

Obligation discount               7.5%               7.25%               8.5%
Compensation increase     4.6 to 7.75         4.35 to 7.5        4.85 to 8.0
Asset long-term return            9.0                 9.0                9.0
Health care cost trend rate       9.0                12.0               12.5


ANNUAL REPORT PAGE 34

SHAREHOLDERS' EQUITY                                                          
There are 1.5 million shares of unreserved authorized preferred stock and 2
million shares of common stock are reserved for stock and option grants and
the exercise of outstanding stock options.
   Second Series Junior Participating Preferred Stock (3.5 million shares,
$1.00 par value, $2.00 liquidation preference to common stock, aggregate
liquidation payment of four times common stock payment, redeemable at the
greater of $360 or four times the current common stock market price) is
reserved for issuance on exercise of rights attached to outstanding common
stock.  The rights may be redeemed at $.01 per right and expire in May 2006. 
If 15% or more of the Company's common stock becomes beneficially owned by a
person or group (subject to the Board of Directors' authority to defer
distribution and exercise of the rights until 20% is acquired), or if an
exchange or tender offer which would result in 15% or more ownership is
commenced, the rightholders, except such beneficial owners, may purchase one-
quarter share of the preferred stock for $90 or, for $90, they may purchase
shares of the Company's common stock at one-half their market value.  If other
change in control events occur, the same rightholders may, for $90, purchase
shares of the acquirer's common stock at one-half their market value.
   The Company's 1996 Employee Stock Plan provides for awarding no more than
500,000 shares of common stock (485,000 available at March 31, 1997), with
maximum award limits for each participant during any twelve month period, in
the form of: nonqualified and incentive stock options to purchase common stock
at its market value on the award date (125,000 share limit); stock equivalent
units based on common stock fair market values with settlement in common stock
or cash on the achievement of established performance goals (15,000 share
limit); performance units denominated in cash with settlement in common stock
or cash not exceeding $300,000 per participant per year on the achievement of
specific business objectives; and annual incentive stock awards (30,000 share
limit) to insiders, as defined, in settlement of incentive compensation plan
awards.  Under previous stock option plans, nonqualified stock options were
granted to key employees to purchase shares of common stock at its market
value on the grant date. 
   Another plan provides to each director who is not employed by the Company
an annual award of 500 shares of common stock ($52,000 total fair value in
fiscal 1997) restricted as to sale for five years or, if earlier, until the
director attains age 65 and completes five years of service as a director or 


                                                                          -21-<PAGE>
ANNUAL REPORT PAGE 34 CONTINUED

the occurrence of a change in control or other events.  The plan also provides
for the annual distribution of a nonqualified option for 2,000 shares of
common stock at its market value on the distribution date.  In fiscal 1997,
1,649 shares of restricted common stock ($34,000 fair value) were issued to
directors for their unvested accrued pension benefits upon the termination of
future service accruals under the directors pension plan.


STOCK OPTIONS

March 31, 1997                    Outstanding          
                                    Weighted Average          Exercisable    
                                  Remaining                          Weighted
Exercise                        Contractual    Exercise               Average
Price Range           Shares   Life (Years)       Price   Shares        Price
(Thousands of Shares)

$18.25 - $25.25          764        7.8         $20.50       105       $20.93
 28.75 -  35.00          398        2.9          32.82       398        32.82
 36.75 -  45.375         253        3.6          39.58       171        40.70
$18.25 - $45.375       1,415        5.7         $27.37       674       $32.96

                                                             Weighted Average
                                                               Exercise Price
                                       Shares                  Or Price Range
(Thousands of Shares)

Year Ended March 31, 1997
Granted                                   316                         $20.45
Exercised                                   7                          20.75
Forfeited                                  52                          30.59
At year end:
   Outstanding                          1,415                          27.37
   Exercisable                            674                          32.96

Year Ended March 31, 1996
Granted                                   220                         $21.10
Forfeited                                  10                          27.17
At year end:
   Outstanding                          1,158                          29.37
   Exercisable                            547                          34.78

Year Ended March 31, 1995
Granted                                   262              $18.25  - $22.00 
Exercised                                   2                         21.125
Forfeited                                  15               21.125 -  21.25 

The estimated fair value of options granted and pro forma net income and 



                                                                          -22-<PAGE>
ANNUAL REPORT PAGE 34 CONTINUED

earnings per share that would have been reported if Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," had
been followed in the accounting for stock options granted since April 1, 1995
are presented below.  These estimates were computed using the Black-Scholes
option pricing model with weighted-average assumptions of: risk-free interest
rate - 6.6%; dividend yield - 1.9%; expected option life - 7.1 years; expected
common stock volatility - 25.5%.

Year Ended March 31                                      1997           1996
(Thousands Except Per Share Amounts)

Options Granted
Estimated weighted-average fair value per share        $ 6.99        $  7.18

Net Income
Reported                                               $5,300        $16,670
   Per share                                              .43           1.35
Pro forma                                               4,760         16,443
   Per share                                              .38           1.33
































                                                                          -23-<PAGE>
ANNUAL REPORT PAGE 35

CONSOLIDATED SHAREHOLDERS' EQUITY

                                   Capital in           
                           Common   Excess of   Retained   Treasury          
                            Stock   Par Value   Earnings      Stock     Total
(Thousands)

Balance April 1, 1994      $6,285     $36,226   $183,670   $(4,598)  $221,583
Net income                                         9,324                9,324
Cash dividends declared - 
   $.88 per common share                         (10,870)             (10,870)
Treasury stock purchased - 
   103 shares                                               (1,926)    (1,926)
Conversion of debentures - 
   37 shares                             (577)               1,095        518
Stock options - 2 shares                  (12)                  44         32
Investment unrealized loss                          (823)                (823)
Pension minimum liability                            716                  716
Currency translation                                 376                  376
Balance March 31, 1995      6,285      35,637    182,393    (5,385)   218,930 

Net income                                        16,670               16,670
Cash dividends declared - 
   $.40 per common share                          (4,938)              (4,938)
Conversion of preferred 
   stock - 1 shares                       (20)                  20
Investment unrealized gain                         1,255                1,255
Pension minimum liability                           (773)                (773)
Currency translation                                (189)                (189)
Balance March 31, 1996      6,285      35,617    194,418    (5,365)   230,955

Net income                                         5,300                5,300
Cash dividends declared - 
   $.40 per common share                          (4,942)              (4,942)
Stock options and 
   awards - 11 shares                     (92)                 338        246
Investment unrealized loss                          (631)                (631)
Pension minimum liability                          1,025                1,025
Currency translation                              (1,235)              (1,235)

Balance March 31, 1997     $6,285     $35,525   $193,935   $(5,027)  $230,718










                                                                          -24-<PAGE>
ANNUAL REPORT PAGE 35 CONTINUED

RETAINED EARNINGS COMPONENTS

March 31                                      1997         1996         1995
(Thousands)

Investment unrealized loss                $ (1,440)    $   (809)    $ (2,064)
Pension minimum liability                      (39)      (1,064)        (291)
Currency translation                        (2,336)      (1,101)        (912)
Retained earnings                          197,750      197,392      185,660


ANNUAL REPORT PAGE 36

INCOME TAXES                                                                

NET DEFERRED TAX ASSET COMPONENTS

March 31                                                   1997         1996
(Thousands)

Litigation                                              $25,370      $   270
Retirement obligations                                   21,800       12,700
Insurance                                                 8,840        4,830
Discontinued operations                                   5,650        4,280
Environmental obligations                                 5,440          420
Deferred compensation                                     4,780        1,530
Tax carryforward benefits                                 4,700          560
Engineering and construction contracts                    3,240        5,980
Miscellaneous                                             3,000        4,840
                                                         82,820       35,410
Inventories                                              (5,110)
Depreciation                                            (13,810)      (4,950)
                                                        $63,900      $30,460

Tax carryforward benefits are amounts recognized in the financial statements
for $8.3 million of net operating loss carryforwards of acquired businesses
expiring in 2011 and 2012 and $1.4 million of minimum tax credit carryforwards
with no expiration which will be realized when they are used to reduce future
federal taxable income and income taxes, respectively.  No federal or state
income taxes have been provided on $5.3 million of foreign subsidiaries'
undistributed earnings as the Company intends to indefinitely reinvest the
earnings in foreign operations, or to repatriate them only when doing so would
be tax effective, and it is not practicable to determine the amount of such
deferred taxes.







                                                                          -25-<PAGE>
ANNUAL REPORT PAGE 36 CONTINUED

PRETAX INCOME AND TAX PROVISIONS

Year Ended March 31                         1997            1996         1995
(Thousands)

Income Before Income Taxes
Domestic                                 $35,182         $33,795      $24,942
Foreign                                      220              10          (70)
                                         $35,402         $33,805      $24,872

Tax Provisions
Current federal                          $ 8,750         $ 9,340      $ 7,260
Current state                                960             120          550
Current foreign                              150               8           10
Prior year state tax settlement                                          (730)
                                           9,860           9,468        7,090
Deferred federal                           5,580           2,130        1,370
Deferred state                               240             680          230
Deferred foreign                              30
Loss carryforward benefit                 (2,310)                            
                                           3,540           2,810        1,600
                                         $13,400         $12,278       $8,690

TAX RATE RECONCILEMENT

Year Ended March 31                         1997            1996         1995 

Federal statutory rate                      35.0%           35.0%        35.0%

State income taxes, net
   of federal tax benefit                    2.2             1.6          2.0
Goodwill amortization                        1.2
Tax exempt investment income                (1.1)           (1.8)        (3.0)
Prior year state tax settlement                                          (1.7)
Miscellaneous                                 .6             1.5          (.7)
Effective rate                              37.9%           36.3%        31.6%

TAXES PAID

Year Ended March 31                         1997            1996         1995 
(Thousands)
                                          $1,296          $4,473       $3,525


ANNUAL REPORT PAGE 37

COMMITMENTS AND CONTINGENCIES                                                 

United States Brass Corporation, an Eljer indirect wholly-owned subsidiary,
filed in 1994 a voluntary petition for reorganization under Chapter 11 of the 

                                                                          -26-<PAGE>
ANNUAL REPORT PAGE 37 CONTINUED

United States Bankruptcy Code for the purpose of systematically resolving
issues resulting from sales of polybutylene plumbing systems and related
litigation.  US Brass has proposed a reorganization plan which provides for
payment, satisfaction, and discharge of all claims involving the polybutylene
systems and, currently, it operates as a debtor-in-possession under Section
1108 of the Bankruptcy Code subject to the supervision and orders of the
bankruptcy court.
   The polybutylene system lawsuits allege the systems leaked and seek
recovery based on negligence, breach of warranty, strict tort liability and,
in some cases, fraud or misrepresentation.  Defendants in various of the cases
among others include: US Brass; Eljer and its wholly-owned subsidiary Eljer
Manufacturing, Inc. (EMI), neither of which ever manufactured or sold the
systems; Shell Chemical Company, the polybutylene resin manufacturer; and
Hoechst Celanese Corporation, the manufacturer of a resin for system fittings. 
Data is not currently available to permit estimating the number of
installations that have failed or the number of claims that have been settled
by parties other than US Brass.  Until July 1991, US Brass, Shell, and Hoechst
Celanese shared the costs of system repairs and replacements with insurance
carriers reimbursing substantial portions of the amounts paid by US Brass. 
Some reimbursement of insurance payments may be required under reservations of
rights, retrospective premium adjustments, or indemnification agreements.
   The polybutylene claimants committee in the bankruptcy proceeding has filed
a motion to convert the case from Chapter 11 to Chapter 7 of the Bankruptcy
Code which, if granted, would cause US Brass to be liquidated.  In connection
with settlements by various parties in two national class actions dealing with
polybutylene plumbing systems, Eljer, EMI, and US Brass have entered into a
tentative settlement, contingent on confirmation of a bankruptcy plan
embodying the tentative settlement terms, which would require contribution to
a settlement fund of insurance proceeds, $53.4 million in cash, and a $20
million noninterest bearing note payable over ten years.  In consideration for
such contribution, which has been provided for in the statement of
consolidated financial position, Eljer, EMI, and US Brass would receive relief
from polybutylene claims satisfactory to them and US Brass would remain an
indirect, wholly-owned operating subsidiary.
   The Company operates plants that generate hazardous and nonhazardous wastes
which are subject to federal and state disposal laws and believes it is in
material compliance with such laws and related regulations.  Several of the
Eljer facilities have implemented required remediation programs to remedy the
effects of past waste disposal and others have not undergone comprehensive
environmental studies.  Included in the statement of financial position is a
$15.5 million reserve for environmental, health, and safety matters which
management believes is adequate and expects payments of substantial portions
to be made over the next three years.  Environmental trusts amounting to $8.2
million have been funded to secure obligations with respect to specified
sites.
   In the normal course of business, financial and performance guarantees are
made in connection with major engineering and construction contracts and a
liability is recognized when a probable loss occurs.  Also, there are various
other claims, legal, and environmental proceedings which management believes
will have no material effect on the Company's financial position or results of
operations when they are resolved. 
                                                                          -27-<PAGE>
ANNUAL REPORT PAGE 37 CONTINUED

DISCONTINUED OPERATIONS                                                      
In fiscal 1997, the Lynx Golf and Mechanical Power Transmission segments, and
portions of the Power Systems segment, were sold.  The remainder of the Power
Systems segment is expected to be disposed of in fiscal 1998.  The net sales
and loss from operations of the three segments prior to the dates of the
decisions to discontinue them, the net assets of the two segments discontinued
as of March 1996 and the remaining net assets at March 31, 1997, and the
components of the disposal net losses were:

Year Ended March 31                        1997            1996          1995
(Thousands)

Net sales                              $181,243        $221,330      $227,733
Loss from operations
   before income taxes                  (14,364)         (7,337)      (14,148)
Income tax benefit                        5,200           3,080         4,630
Net loss                               $ (9,164)       $ (4,257)     $ (9,518)

Loss on disposal 
   before income taxes                 $ (9,138)       $ (1,700)
Income tax benefit                        1,600           1,100              
Net loss                               $ (7,538)       $   (600)             

Receivables                            $ 46,591        $ 24,224
Inventories and other assets              2,458          30,498
Property, plant, and equipment            2,109          16,537
Trade accounts payable                  (16,227)         (6,763)
Contract advance billings               (14,403)
Other liabilities                       (16,215)         (7,243)             

Net assets                             $  4,313        $ 57,253              

The Company has agreed to reimburse a third party for all payments it might be
required to make to the issuer of a $27.6 million letter of credit provided to
secure the payment of potential liquidated damages in connection with a power
plant construction project recently begun in Pakistan.















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