Document 0qjygDG81JpxBM2BN1NYdQQDb

National Laad Company n Consolidated Statement of Source and Application of Funds Source: Net income Items not requiring the use of funds: Depreciation Deferred income taxes Minority interest ! Equity in income of subsidiaries consolidated on an equity basis, net of dividends received Years ended December 31 1970 1969 <33,071,000 $50,675,000 25,319.000 4,096,000 290,000 ( 4,769,000) 22.651,000 3,568,000 612,000 ( 4,680,000) 1 Funds provided from operations Long term borrowings, net 1 Disposals of fixed assets Exercise of stock options Other 63,007,000 86,214,000 2,684,000 -- 1,371,000 72,826.000 39,927,000 533,000 297,000 110,000 ! 153,276,000 113,693.000 Application: - j Dividends i Investments: ' Lake View Trust and Savings Bank 4 I - Other, net ! Capital expenditures 3 i Purchase of treasury stock ' Dividends to minority interests ! Other 3i 36,261,000 -- 1,521,000 58,635,000 69,000 240,000 1,667,000 98,413,000 40,272,000 37,620,000 247,000 39,830,000 12,035,000 404.000 1,057,000 131,465,000 i Increase (decrease) in working capital 4 Details of the above increases (decreases) are as follows: Cash i Marketable securities j Accounts and notes receivable Inventories -i Prepaid expenses 4 $54,863,000 $1,460,000 ( 2,203,000) 435,000 20,275,000 ( 47,000) 19,920,000 $(17,772,000) $(13,298,000) 1,050,000 24,912,000 21,708,000 869,000 35,241,000 Loans payable < Accounts payable and accrued liabilities Taxes on income 29,564,000 ( 4,631,000) 10,010,000 34,943,000 (45,256,000) ( 8,104,000) 347,000 ( 53,013,000) $54,863,000 $(17,772,000) : Reference is metie to eccompenying notes - "1 -i if J 002585 j 22 N 3848 Consolidation Principles. The consolidated financial statements j3fi i^e accounts of the Company, all domestic subsidiaries .reptLaxe View Trust and Savings Bank) and major wholly-owned suosidiaries translated at appropriate rates of exchange. re-.; f.nanciai data regarding foreign subsidiaries is shown on i;es 17 and 18. ...^a-'y's investment in major unconsolidated majority-owned subsidiaries and in Lake View Trust and Savings Bank are j; a; cost, adjusted for subsequent changes in equity. The i'~:ary includes m income its equity in the net income of such d.aries. ; ,;*ing is a summary of pertinent financial information relating ; tie Bank: (In Thousands) 1970 1969 tssets $327,429 $311,178 Deposits & other liabilities 301,278 288,714 sationa! Lead's equity in Bank's net income .ess interest cost to National Lead, after applicable tax benefit of $1,617,000 ,r 1970 and $1,690,000 in 1969, on funds borrowed to purchase Bank Net income attributable to Bank $ 4,459 1,669 2,790 4,514 1,510 $ 3,004 See Report of Affiliates, page 16, for comments relating to the Bank Hi ding Company Act of 1970. Acquisitions. During 1970, the Company exchanged 138,091 srares of its treasury stock for all of the outstanding stock of ?egal Mo'ds. Inc. and the remaining outstanding stock of The Baker Castor Oil Company. The acquisition of Regal Molds, "I. has been accounted for as a pooling of interests and, accordingly, the results of operations for 1970 include the net income of Regal Molds, Inc. for the entire year. No adjustment as been made for the prior years since the effect would not be material. The acquisition of the minority interest of The Baker Castor Oil Company has been accounted for as a purchase and tie resuits of operations for 1970 include the earnings applicable :c thus minority interest since the date of its purchase. As a 'suit of these transactions, capital surplus was credited $54,000 and retained earnings was charged $1,357,000, representing principally the appropriate portion of the excess of ' tie cost of treasury shares issued over the fair or carrying value i* the net assets acquired. .Inventories. Inventories are valued at the lower of cost (principally average cost) or market. Certain metal inventories ere valued using the last-in, first-out method, which results in sych inventories being stated at less than current replacement cost at December 31,1970. The valuation of a portion of these same inventories is further reduced by the use of the base stock method. Pursuant to such method, an inventory reserve (amounting to $11,471,000 in 1970 and $10,572,000 in 1969) is maintained based on quantities deemed normal at fixed prices. notes to financial statements 4. Associated Companies. Tne equity of the Comcany m the net assets of Titanium Metals Corporation of America, a 50 per cent owned company, exceeded the investment which is ca-ed at cost, by $12,067,000 at December 31.1970and by $14.88e.000 at December 31,1969. The Company's share of the net losses of Titanium Metals Corporation of America (which is not included in the Company's consolidated statement of income) for the years ended December 31.1970 and December 31. 1969 was $2,821,000 and $251,000. respectively. No dividends we'e received m 1970 or 1969. The equity of the Company in the net assets of the other 50 per cent owned companies exceeded the cost of the Company's investment by approximately $3,942,000 at December 31, 1970 and $3,778,000 at December 31, 1969. The Company's equity in the net income of these Companies in 1970 and 1969 approximated dividends received. 5. Common Stock and Stock Options. Under provisions of the 1968 Stock Option Incentive Plan, 700,000 shares of the Company's common stock have been reserved for issuance to officers and to other key employees. Under the plan, options may be granted to purchase common stock at 100% of the market price at the date of grant and are exercisable over a period of five years from date of grant. Details of shares under option at December 31, 1970 and transactions during the year follow. Balance at January 1,1970 Granted 179.000 216,400 Balance at December 31, 1970 395.400 Price per share of shares granted and outstanding at December 31. 1970 Shares exercisable $20 to $36 395,400 Available for future options at December 31, 1970 304,200 With respect to the 1958 stock option plan, all remaining options expired in 1970 and no additional options may be granted under this Plan. In connection with the acquisition of The Bunting Brass & Bronze Company in 1968, the Company granted to holders of stock options previously granted by Bunting, substitute stock options. During the year, no options were exercised and options for 476 shares at $20.50 per share are outstanding at December 31, 1970. In connection with the acquisition of Jonathan Manufacturing Company in 1969, the agreement provides for the delivery of additional Company stock, not to exceed 135,904 shares, contingent on the amount of Jonathan Manufacturing Company's net income (as defined) for the years 1969,1970 and 1971. The Company is authorized to issue 5,000,000 shares of preferred stock without par value. The rights of the preferred stock as to dividends, redemption, liquidation and conversion will be determined upon issuance. 6. Pensions. The Company and its subsidiaries have various pension plans covering the majority of their employees. Total pension costs approximated $10,100,000 in 1970 and $9,400,000 in 1969. Current service costs under the plans are charged to income as they accrue and are funded as to the major plans. The major portion of the prior service costs is being charged to income and funded over a period of thirty years. Unfunded vested benefits at December 31,1970 amounted to approximately $13,500,000. 7. Litigation. See comments regarding pending litigation on page 5. 6. Other Income. In 1970, a gain on the sale of land of $1,727,000 and provisions for losses in connection with the sale or disposal of certain properties of $2,750,000, are included in other income. 9. Restatements. Certain amounts in the 1969 financial statements have been restated to conform to classifications used in 1970 with no effect on net income or shareholders' equity. NL I 00258,; 23 auditors' report i" To the Shareholders of National Lead Company New York, N.Y. Lybrand, Ron Brat, ft Montgomery Certified Public Accountants 2 Broadway. New York, N.Y. We have examined the consolidated balance sheet of NATIONAL | LEAD COMPANY and its Consolidated Subsidiaries as of December ! 31,1970 and the related consolidated statements of income and retained earnings and of source and application of funds for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included 1 such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. We were furnished reports of other public accountants upon their examinations of the financial statements of certain consolidated and unconsolidated subsidiaries and fifty per cent owned companies. Our opinion expressed herein, insofar as it relates to the amounts included for such subsidiaries and companies, is based solely upon such reports. We made a similar examination of the financial statements of the Company and its Consolidated Subsidiaries for the year 1969. In our opinion, the aforementioned financial statements present fairly the consolidated financial position of National Lead Company and its Consolidated Subsidiaries at December 31,1970 and 1969 and the consolidated results of their operations and the source and application of funds for the years then ended, all in conformity with generally accepted accounting principles applied on a consistent basis. LYBRAND, ROSS BROS. & MONTGOMERY New York, February 18, 1971 ..H n, I I . , i. j^ l. an J c l ni l li, , , ..it . k .< .. ...................... National Lead Company ten year review of operations in thousands of dollars, except per share figures Net sales Income before taxes Net income Per common share 1970 1969 1966 1967 1966 1965 1964 1963 1962 1961 9915,177 5929,785 5858.195 $818,905 5865,687 5837,215 $735,189 $664,606 $615,269 $599,357 65,058 95.268 96,298 93,540 113,379 114,637 108,086 96,888 95,853 100,135 36,071 50,675 49,985 54,309* 61,634 61,252 56,763 50,116 49,546 52.157 1.60 2.12 2.08 2.27* 2.56 2.54 2.43 2.13 2.03 2.14 Dividends paid on common shares Per common share Current assets Current liabilities 36,261 1.525 368,253 126,514 40,272 1.70 348,333 161,457 39,062 1.625 312,077 108,444 38,786 1.625 331,851 102,187 38.295 1.625 310,311 97,721 38,378 1.625 296,548 97,599 38,036 1.625 300,974 99,600 38,049 1.625 276,069 91,461 38,034 38,017 1.625 1.625 270.275' 263.656 80.280 80.918 Working capital 241,739 1B6.876 203,633 229,664 212,590 198,949 201,374 184,608 189,995 182.738 Property, plant and equipment, net Property expenditures Depreciation 303,801 56,636 25,319 273,169 39,830 22,651 252,883 45,0X0 18,187 226,060 32,860 20,120 214,725 32,440 18,302 196,134 41.096 17249 174,961 20,447 16,286 170,263 14,558 15,523 171,696 15,712 15.159 171.595 18.241 14,349 Total assets 752,649 695,260 593,591 588,803 570,754 520,861 497,296 Shareholders' equity 408,915 403,975 404,764 399.640 388,586 356,956 339,744 All per share figures reflect the 2 for 1 stock split which took place in 1969. ) ` L: *Includes extraordinary income of S3,049,000 (after income taxes of SI,083,000) or S I3 per share^ ^ r 467,264 460.973 320.873 360.737 0025S7 452.710 354.576 24 N 3848.01 |tgt| tl