Document 8Vp9nRKG88wk6Z46D1gM2KLm5

THE FLINTKOTE COMPANY/ANNUAL REPORT 1967 | PLAINTIFF'S | EXHIBIT f FK-140 X CONTENTS The Markets We Serve Report to the Stockholders The Facts in Brief The Year in Review Building Products Group Cement Products Group Packaging Products Group Stone Products Group Pipe Products Group Canadian Group Overseas Group Financial Statements Notes to Financial Statements Ten-Year Comparison The Flintkote Company Pag* 1 3 4 4 6 8 10 12 14 15 16 17 20 22 24 The Markets We Serve % NON-RESIDENTIAL CONSTRUCTION (Compared with 427c in l966and427o in 196S) The percent of sales dollars from this mar keting segment has been maintained for the past three years and is likely to continue at this level in 1968. SIDENTIAL CONSTRUCTION (Comparedwith207c ini96Sand257oin 196S) Percent of sales to this market dropped slightly in 1967 but authoritative predictions point to increased residential construction in 1968. Flintkote should show improvements accordingly. rr '0 REPAIR AND MODERNIZATION (Compared with 107c in 1966 and 97c in 1965/ The growth rate of repair and modernization is expected to continue in 1968. With the help of new products, Flintkote should con tinue to increase its share of this growing market. rO the packaging market (Comparcdwith 167c in 1966and 167c in 1965) With 11 plants strategically located through out the country and planned improvement of its manufacturing facilities. Flintkote's marketing position is strengthened and its ability to serve customers better is improved. Jo industry and agriculture (Comparedwith 127c in 1966 and 87c in 1965) Flintkote sales to industrial processing, agriculture and other markets, along with its ackaging operation, illustrate Flintkote's di versification. This market is a growing force in Flintkote operations. The Flintkote Company/Annual Report 1967 Flintkote's attractive new Corporate headquarters in suburban Westchester County, New York, will be completed and occupied in 1968. 2 To the Stockholders ^ales in 1967 at $296,426,989, de clined from 1966 record sales of $303,849,511, largely due to the delayed recovery of housing--in the nation in general and on the West Coast in par ticular. Non-residentiai construction which normally offsets softness in the residential field also remained at a low level during the first six months of the year. Consolidated earnings before extra ordinary items were $9,334,726. a de crease from 1966 earnings attributable principally to the reduced sales volume. 1967 prices generally firmed compared to 1966 but the price improvement could not offset the higher unit costs resulting from reduced plant operating levels. Capital expenditures during 1967 at $16,361,842 continued to be concen trated on plant improvements and mod ernization to reduce manufacturing costs and improve service to our cus tomers. Significant cost improvements were attained in the gypsum plant at Las Vegas and the floor tile plant in New Orleans. Numerous other improve- Ms in lime plants, aggregate producfacilitics, concrete plants, pipe production facilities and packaging products plants help make the Company more competitive. Profit improvement remains upper most in management's current and longrange thinking. Our program for profit improvement encompasses two princi pal areas; first, cost reduction by mod ernization and technological innova tion, and second, the disposition of products and manufacturing operations which cannot offer a satisfactory return on investment or do not fit the frame work of our long-range planning. Illus trative of the latter objective was the sale of the folding carton operation in Los Angeles in 1967 which had not ade quately contributed to the Company's earnings and growth. There remain other areas in the Company which are being studied with the aim of eliminat ing activities and operations which do not fit into our plans. Increasing emphasis is being placed on product and process research and development. Results during the past year have been most encouraging and justify the time and effort allocated to this essential activity. During 1967, the organizational struc ture of the Company was strengthened with the election of Mr. James D. Moran as executive vice president. Mr. Monte C. Carpenter was named vice president of the Building Products Group and Mr. William L. Bapst was named president of Hankins Container Division filling the position vacated by the retirement of Mr. Willard L. Davis who continues as a director. Mr. William L. Kauffman, vice president, retired after 45 years with the Company. While 1968 is projected to show im provements in sales and earnings over 1967, the Company performance could be adversely affected by a low level of construction activities resulting from a threatened return of a tight money economy. I am encouraged by the aggressive marketing and manufacturing efforts of the Company employees which have sustained earnings during a difficult period. I am appreciative of the em ployee teamwork in the Company, the guidance of the directors and the con tinued support of the stockholders. March 1,1968 George J. Pecaro. President 3 i j j The Year in Review December 31 1967 (In Millions) 1966 Sales .................................................. :.......................... Income Before Extraordinary Items ....................... Extraordinary Items, Net of Tax................................ Net Income................................................................. Cash Dividends (Common and Preferred)............... Working Capital......................................................... Net Assets.................................................................. Depreciation and Depletion of Plant and Property .. Common Shares Outstanding.................................. Common Shareholders of Record............................ Per Common Share (Based on Average Number of Shares Outstanding-- 5,574,287 shares 1967- 5,567,566 shares 1966) Income. After Preferred Dividends: Income Before Extraordinary Items..................... Extraordinary Items, Net of Tax............................. Net Income............................................................. Cash Dividends .............................. ......................... $296.4 9.3 1.1 10.4 7.5 71.6 187.8 14.3 5,574,464 22,186 j \ | \ $1.32 .19 1.51 1.00 Dolsils ere reported in Iho linancial statements on pages 17 through 21 $303.8 12.4 6.4 18.8 7.5 71.3 185.0 14.3 5,574,105 22,702 $1.86 1.16 3.02 1.00 Ii 4 SOURCES OF THE 1967 SALES DOLLAR Building Products Group Cement Products Group Packaging Products Group Stone Products Group Pipe Products Group Foreign Operations (Canadian and Overseas Groups) DISTRIBUTION OF THE 1967 INCOME DOLLAR Production Materials. Supplies, Administrative, Selling and Research Expenses (Excluding Payroll) 0/ >e Retained in the Business Depreciation and Depletion of Plant and Equipment Cash Dividends Federal, Foreign, State and Local Taxes Payrolls and Cost of Employee Security Net sales for the fiscal year ended December 31. 1967, were $296,426,989; ompared with the previous year's allime high of $303,849,511. Income before extraordinary items -as $9,334,726; which amounts to $1.32 >er common share. These 1967 earnigs are directly comparable with the et income of $12,354,491 or $1.86 per ommon share as it was reported in the 966 Annual Report. This year the Company is complying vith an opinion of the Accounting Prin ciples Board and has included extra ordinary items in net income for 1967 md restated the net income figures for previous years. (See Notes to Financial Statements--9). With this inclusion of xtraordinary items, net income for 1967 vas $10,404,347 or $1.51 per common chare versus $18,790,507 or $3.02 per mon share in 1966. The earnings share are based on the average lumber of shares outstanding during each year, after provision for preferred dividends. The $0.25 per common share quart erly dividend was continued during 1967, thus maintaining the $1.00 per year dividend rate on common shares established in the last quarter of 1964. Financial Highlights The Company's financial position re mained strong during the year, with working capital on December 31, 1967, increasing to $71,563,596 compared with $71,340,847 at the previous year end. Accounts receivable were main tained in line with sales volume despite the credit stringencies which allected our markets during the year. In addition, a corporate-wide effort successfully re duced the Company's investment in inventories from earlier levels. With this strong working capital position at the beginning of the current year, manage ment expects that the Company can continue to finance its normal invest ment requirements during 1968 from internally generated funds. Expenditures of $16,361,842 for capi tal additions were made in 1967 and are anticipated to run at a higher level in 1968. Provisions for depreciation and depletion were $14,314,000 in 1967 and are estimated to be about $14,750,000 in 1968. The Company continued to amortize investment tax credits over a ten-year period, and 1967 earnings include $468,436 attributable to the investment tax credit. The above pie graph shows the sources of the 1967 sales dollar and reflects the Company's organizational structure.Each domestic product group is shown separately. The Canadian and Overseas Groups are combined and shown as "Foreign Operations". Each group is discussed separately in more detail later in the Report. 5 i II t I i l Building Products Group FLINTKOTEs custom specification roof meets the demands of contemporary design-the Anaheim Convention Center, Anaheim, California. Quality, new styling 01FUNTKOTE drop-in celling panels end vinylcovered gypsum wallboard provide growth opportunity In commercial and residential markets. High quality gypsum ore from Flintkote's Newloundland mines supplies the Company's gypsum products plants along the eastern seaboard. Major organizational changes were made in the Building Products Group in 1967 to more effectively cope with the requirements of today's competitive marketing conditions.The four divisions previously comprising this Group have been realigned according to product lines nationally forming six divisions: Gypsum Products Division, Flooring Products Division, Building Materials Division, Industrial and Automotive Products Division. Pioneer Division and Sealzit Division. The Group produces an extensive line of building materials, adhesives, flooring, industrial and auto motive products. Contribution to Total Flintkote Sales Gypsum Products 8% Roofing and insulation Products 14%. flooring Products 6% Industrial Products 4% Total 34% (S99.360.000) Overall performance of the Group improved in 1967 as cost reduction plans showed results, helping to coun teract some of the negative forces in the market place. The Company's major commitment to its gypsum business is proving justi fied and profitable. The Gypsum Prod ucts Division's performance improved over 1966 in spite of depressed home construction activity during the first half of 1967. Gypsum product demand should continue upward if the late 1967 upturn in new home construction con tinues through 1968 as expected. A brighter outlook for increased sales and improved profits for the gypsum line in 1968 is based on improved prices, major manufacturing facility improve ments at the Las Vegas, Nevada plant serving California markets, and the in dicated upturn in housing construction. Flintkote's exciting Peel and Stick floor tile was moved into nationwide distribution which is a part of the Com pany's continuing efforts to round out Its flooring products line. Peel and Stick floor tile and WALK-EASE Cushioned Sheet Vinyl Flooring, another new prod uct. are enjoying steady growth in con sumer acceptance. The market position of roofing and insulation board products is being strengthened by new promotional tech niques, new marketing ideas and prod uct innovations. The VAN PACKER Industrial Chimneyproduct linewas broadened through increased industrial and commercial applications. Flintkote's diversified line of indus trial and automotive products continues to enjoy wide acceptance making it a more important segment of this Group. Expansion of our SEALZIT contract ing organization continues and has gained importance with successful in stallations utilizing urethane foam to provide monolithic, low temperature in sulation in a variety of applications. The general outlook for this Group in 1968is optimistic but iscontingent upon availability of mortgage money, contin ued expansion of construction and sta bilization of prices and costs. 7 1 Cement Products Group In Calilornia, the new Oroville Dam is the world's highest earth-lilt dam. Its concrete core is built with Flintkote's Calaveras cement. ..A,.-. ./ >v * i. J? ** v^lv. - ."r* , V. '*,r \ ... T.v v-5......... . / _ > rl ' ~V-" -s**V -' - -* -a^~ n:>. > . La*v4 v \ \% ?v. S. r.`\;v rt <V' - <- . * >: s't`*4. ' ; <* , . ^ -. .:'^P .. 4y- " ` -> - .. -.-- . * ' , . - .A v rl;. A precast window panel is lilted into place in tho New Hampshire State Ollice Building at Concord. Flintkote's Glens Falls Portland cement was used in this project. The Calaveras Division pioneered in the electronic control ol the cement manutacturing process. This is the control room at Redding, Calil. The Cement Products Group which includes the Calaveras, Diamond and Glens Falls Divisions, and the Kosmos Portland Cement Company did well in 1967 in spite of the sluggish construc tion market and unseasonably bad weather in many of our marketing areas. The total dollar contribution to Flint kote's sales in 1967 decreased from 1966, due principally to the depressed construction activity in the West Coast marketing areas. The construction slump on the West Coast was also a major cause of a re duction in cement consumption nation- Contribution ally in 1967. This decrease represents the first time since 1960 that cement consumption has dipped from the pre vious year; however, it is expected that the decrease will be overcome and gains enjoyed in 1968 with the pre dicted increase in construction activity. Cost reduction programs and careful management helped reduce the effects of adverse market conditions. Programs for increasing manufacturing efficiency and quality control continued in 1967 with excellent results, and plans for 1968 are well underway. The Calaveras Divi sion will continue its project to develop a new source of raw materials for its plant at San Andreas, California. By constructing a pipe line to convey raw material from the quarries to the burn ing kilns, this division will be tapping high-grade raw materials with supplies sufficient for many years to come. The year ended on a note of optimism with shipments for the last half of the year exceeding those for the same period of 1966. Whether this trend will continue depends, to a large extent, upon the general economy, spending by the various government bodies, interest rates and availability of funds. All popular types of portland cement are produced by the Cement Products Group and marketed to the broad construction industry including building materials dealers, concrete products manufacturers, ready-mixed concrete producers and highway contractors. Our top management structure re mains strong with good middle manage ment back-up. During the year Mr. Wilbur D. Correll was named president and general manager of the Diamond Portland Cement Company Division succeeding the late R. D. Raff, Jr. 9 Packaging Products Group Examples of the wide variety.of corrugated paper products manufactured by the Packaging Products Group. Productive capacity ot Flintkote's Packaging Products Group was increased in 1967. .'A '-A his sketch shows the production line in one ol Flintkote's Packaging Products plants. The Flintkote Packaging Products roup, which includes the Hankins Conjiner and Western Packaging Divi:ons, produces a broad line of corruated paper products and displays at leven plant locations in the United tates. The products are marketed to large variety of industries across the ountry. As forecast last year, 1967 was a good aar. It was highlighted by good profits: ie startup of new facilities at Centerlie, Ohio; Chicago, Illinois and Hous>n, Texas; and new market developients which strengthened our market- Contribution to Total Flintkote Sales 16% ($46,720,000) ing position and broadened our product base. The Hankins Container Division de veloped and improved containers for fruits and vegetables and for air freight cargo, and also developed machinery for more efficient printing and produc tion of special containers. Plans for expansion of the Little Rock, Arkansas plant are underway and should be com pleted in 1968. The Western Packaging Division con tinued its programs for improving the efficiency of production facilities with a new machinery installation at San Leandro. California. This will enable us to become more active in military pack aging. Plans were completed for the installation of many new improvements in 1968 which will further streamline manufacturing operations at Los Angeles. New marketing developments in the Western Packaging Division included an automated garment box line, which is a substantial first for us in this area, and important developments in pro duce packaging. Customer service keynotes the efforts of this group and strongly supports the general sales organization. Specialists are made available to customers to help them solve their packaging prob lems, designing products to individual specifications. With startup costs of the three new facilities behind us and with strong marketing programs, 1968 should bring an even better profit picture for the Packaging Products Division.The future of this group, short and long-range, is a bright one and the capital outlays for new plants, equipment and new prod ucts, exemplifies the Company's confi dence in the potential of the packaging industry. Prices in 1967 continued stable in the parts of the packaging industry served by Flintkote. 11 Stone Products Group This beautiful Merced River bridge in California was built with construction materials Irom Flintkote's Standard Materials Company. Tho growth ot lime consumption with increased use of the Basic Oxygen Furnace (see photo) in steel processing, makes this market even more important to Flintkoto's lime producing divisions. A large portion ol the Stone Products Group's sales comes from ready-mixed concrete. Five of its six divisions produce ready-mixed concrete. The Eastern Stone Products Group is made up of the Harry T. Campbell Sons' Corporation and the M. J. Grove Lime Division. The Western Stone Prod ucts Group consists of the Blue Dia mond Concrete Materials Division, U.S. Lime Division, Standard Materials Com pany and the Stockton Building Mate rials Company. The two groups com prise the Company's Stone Products Group. The products include ready-mixed concrete, lime, stone, calcium carbon ate, gravel, SAKRETE- mixes, asphaltic concrete, industrial and concrete sand and reinforcing steel for concrete. They are marketed to virtually all segments Contribution to Total Flintkote Sales lime Pioducu 4% Apg'efutci end Concrete Products 18% Total 22% (SG6.152.000) of the construction industry, to agricul ture and to industrial processing firms. Sales of the Harry T. Campbell Sons' Corporation reached a new high and 1967 earnings topped those of 1966. A new SAKRETE plant at Oxford, Massa chusetts began operations in 1967 and plans for extending the Company's ready-mixed concrete marketing activ ities are underway. The M. J. Grove Lime Division main tained sales volume compared to the previous year but earnings were off due to increased production costs and lower prices. Additions to the glass house limestone plant at Stephens City, Virginia increased production and im proved product quality. Also, stone reserves were purchased, further strengthening the Company's long-term position in the market. Blue Diamond Division sales were lower in 1967 than in 1966. Its markets for rock and sand, concrete and rein forcing bars suffered from lower con struction activity in southern California. Tho U.S. Lime Division's 1967 sales decreased slightly from 1966 with earnings down somewhat due to the continued low level of residential con struction. New developments give con siderable cause for optimism in this division: the development of the lime stabilization market in California: a new 300-ton-per-day kiln to be constructed in 1963 at the Apex, Nevada operation; a quicklime and hydrating facility to be complete in 1968 to serve the Southern California market, and other improve ments are in the planning stages. The 1967 sales volume of the Standard Materials Company decreased from the 1966 level reflecting the residential con struction decline and the cutbacks in Federal-State spending for street and road construction. In 1968, sales should increase with the predicted step-up in construction activity. The Stockton Building Materials Company experienced a slight increase in sales and profits in 1967 and another increase in sales is predicted for 1968 if California's construction picture im proves as expected. 13 Pipe Products Group The Pipe Products Group manufac tures and markets complete lines of FLINTITE5 asbestos cement pipe for private and public water distribution and sewer main construction projects; ORANGEBURG- bituminized fibre pipe for outside underground residential drainage;ORANGEBURG5 fibre conduit for underground electrical and tele phone duct system construction; and ORANGEBURG SP'? ultra high density polyethylene pipe and tubing for water and gas utility and residential service connection installations. All pipe prod ucts except FLINTiTE asbestos cement -->e are marketed nationally. .Although Flintkote's pipe business .as good in terms of volume for 1967, price levels on asbestos cement and bituminized fibre pipe products during the first half of the year adversely affected operating results for the entire year. Price improvements during the last half of 1967 make the projection of operations for 1968 more attractive. Also, improved manufacturing efficien cy during the second half of 1967 will have a beneficial effect on future oper ations. The rapidly growing acceptance of plastic pipe for outdoor underground applications prompted Flintkote to build a plant in Los Angeles (completed dur ing 1967) thus increasing the Company's productive capacity for this product 100%, and to begin the construction of a polyvinyl chloride pipe plant at Rav enna, Ohio. The Los Angeles plant is the first manufacturing facility for this particular product line on the West Coast and will improve our ability to service customers throughout the Southwest. Projected population and industrial growth will require water lines such as this one, and FLINTKOTE Asbestos-Cement Pipe is serving that market. This sketch symbolizes the dynamic road construction industry in Canada which is the source ot a substantial part ot the Canadian Group's sales. Canadian Group The Canadian Group, made up of The Flintkote Company of Canada Limited, King Paving and Materials Limited, Stradwick Industries Ltd. and Flintkote Mines Limited, serves the broad and dynamic Canadian construction indus try. The products include flooring, ad hesives, protective coatings, road emulsions, ready-mixed concrete, as bestos fibres, stone, sand and gravel. The total sales and earnings for King Paving and Materials Limited reached record levels in 1967, and potential de mand in its marketing areas remains dynamic with a long-term outlook of sustained and rapid growth. An increase in the sales of crushed stone and con crete in 1967 helped offset the effect of the sharp drop in construction opera tions. Production efficiency was further improved in 1967 with a new automated concrete batch plant and a new port able asphalt plant. The increased capa city and operating efficiency of these two installations helped reduce costs. Sales of the Flintkote Company of Canada Limited climbed to record vol ume but earnings were down slightly from 1966. New products under active research and expansion of the sheet flooring line will help improve market penetration. The London (Ontario) Vina-Rug plant was transferred from Stradwick Indus tries Ltd. to the Flintkote Company of Canada Limited early in the year, and this resulted in a reduction in Stradwick's total dollar volume. Their sales through retail stores and contract operations, however, were increased, and increased sales are anticipated in 1968 in spite of the very keen competi tive situation in the industry. One ot the floor coverings specified tor each ol the 15B apartments in Canada's Habitat '67 was Flintkote's WALK-EASE* Cushioned Sheet Vinyl Flooring. FUNTKOTE root waterproofing being applied on a large bus garage in Oslo, Norway. Overseas Group The product line of the Overseas Group includes automotive products, protective coatings, adhesives, indus trial and decorative paints, roofing, flooring and insulation systems includ ing the MONOFORM' Roofing System which has been successfully introduced in numerous overseas markets. These products are marketed in over one hun dred countries throughout the world. The Company's overseas divisions are operated through its subsidiary, The Flintkote Company Limited, Lonion, England. Manufacturing subsidiar ies of the London-based company are Enfield Chemicals Limited, Flintkote France S.A.R.L.. Flintkote (New Zea land) Limited and Flintkote South Africa (Pty) Limited. The operating results of this Group were satisfactory when judged against the economic background of the areas it served during the year 1967. The con solidated sales of the Group were lower than in 1966. The decrease was due in large part to the effects of deflationary or restrictive measures taken by the British and other governments; also, to the disruption of export shipments re sulting from the prolonged dock strike at Liverpool and London and to the political and economic consequences of the Middle East conflict. Further steps were taken in 1967 to strengthen the Group's marketing, sales and development activities. The effi ciency of all overseas plants was well maintained and production capacity further expanded. The benefit of in creased investment in production facil ities and personnel is expected to make its impact upon both sales volume and operational profits in the years ahead as economic conditions improve. FLINTKOTE industrial Hooting was installed in this large storage depot for the Galeries Lafayette near Paris, France. jzzu : Tho Flintkote Company and Its Wholly Owned Subsidiaries ' onsolidated Statements of Income and Earned Surplus lor the years ended December 31,1967 and 1966 1967 1966 Sales ........................................ Cost ot goods sold...................................................................................................... Gross profit on sales........................................................................... Selling, administrative and general expenses ........................................................... Other income ........ charges: Cash discounts on sales..................................................................................... Interest ............................................................................................................... Miscellaneous .................................................................................................... Income before federal andforeign taxes on income.......................... Federal and foreign taxes on income: Currently payable: United States .............................................................................................. Foreign ........................................................................................................ Deferred (Note 3)................................................................................................ Charge equivalent to investment tax credit, net (Note 4)................................ Income before extraordinaryitems...................................................... Extraordinary items, net of income taxes: 1967, $992, 275; 1966, $3,453.54 \ (Note 9).......................................................... Net income ........................................................................................... Earned surplus, January 1 .......................................................................................... Less, Cash dividends on: Preferred stocks ......................................................................................... Common stock, $1.00 per share.................................................................. Earned surplus, December 31 (Note 8)...................................................................... $296,426,989 231.611.601 64,815,388 44,667,678 20,147,710 1,752,689 21,900,399 4,700,260 2,357,383 678,654 7,736,297 14,164,102 2,275,818 1,334,280 1,208,057 11,221 4,829,376 9,334,726 1,069,621 10,404,347 97,797,121 -------'---- 1-- 1,976,688 5,574.284 7,550,972 $100,650,496 $303,849,511 234.223,007 69,626.504 45.252.875 24.373,629 4,104,488 28,478,117 4,805,994 2,386,549 1.062.698 8.255.241 20.222.876 5,344,181 1,195,414 1,165,946 162.844 7,868,385 12,354,491 6,436.016 18.790.507 86,556,136 105.346.643 1,982,163 5.567.359 7,549.522 S 97,797,121 number of shares outstanding: Income before extraordinary items ........................................................... Extraordinary items, net of tax................................................................... Net income........................................................................................... $1.32 .19 TTsi $1.86 1.16 $3.02 Soc notes to financial statomor.ts. The Flintkota Company and Its Wholly Owned Subsidiaries Jonsolidated Balance Sheets lor the years ended December 31,1967 and 1966 ASSETS: Cash.................................................................................................................................... Marketable securities, at cost (approximates market) Accounts and notes receivable: Customers, less allowance for doubtful items: 1967, $5,452,189; 1966, $4,808,422 ................................................................... Other ........................................................................................................................... Inventories, at the lower of average cost or market: Finished goods and work in process....................................................................... Raw materials and operating supplies................................................................... Total current assets ......................................................................................... Property, plant and equipment (Note 1)......................................................................... Investments, at cost, and long-term receivables........................................................... Good will, patents and other rights, at cost................................................................... Prepaid and deferred expenses and other assets ....................................................... 1967 1966 $ 13,110,218 $ 13,947,795 6,748,462 4,834,756 44,045,504 1,451,884 45,497,388 44,426,881 7,191.856 51,618,737 21,627,113 23.886,220 17,480,067 39,107,180 104,463,248 17,970,214 41,856,434 112,257,722 169,200,202 169,214,950 1,819,082 2,233,724 4,234,067 4,252,817 5,096,172 $284,812,771 5.275,159 $293,234,372 See notos to financial statements. 18 LIABILITIES: Accounts payable and accrued expenses................................................................ Notes payable ........................................................................................................... Current instalments on long-term debt............. ...................................................... Accrued federal, state and other taxes...................................................................... Reserves for product guarantees and self-insurance............................................. Production payment, net of taxes............................................................................. Total current liabilities............................................................................... ng-term debt (Note 2)............................................................................................ Reserve for product guarantees............. ................................................................. Deferred taxes on income (Note 3)........................................................................... Deferred investment tax credits (Note 4).................................................................. Commitments (Note 5) CAPITAL: Capital stock (Notes 2,6 and 7): Preferred stocks, par or stated amount (aggregate involuntary and voluntary liquidation (or redemption) amounts $44,646,700 and $46,986,789, respectively) .................................................................................................... Common stock, S5 par: Authorized 10.000,000 shares: issued, 1967, 5,574,464 shares: 1966, 5,574,105 shares, stated at................................................................ Issuable under stock option plan purchase contracts, 359 shares............. Earned surplus, statement annexed (Note 8)............................................................ Less, Treasury stock at cost (Note 6)................................................................ 1967 1966 $ 20,051,308 2,055,000 1,105,783 8,344,418 1,250,608 ...........92,535 32,899,652 41,189,312 -- 19,799,577 3,169,799 97,058,340 $ 20,553,983 555,000 1,169,563 14,533,259 1,536,370 2,568,700 40,916,875 43,810,185 1,800,000 18,574,083 3,158,578 108.259,721 27,977,635 27.977,635 59,255,388 -- 100,650,496 187,883,519 129,088 187,754.431 $284,812,771 59,245,870 9,518 97,797,121 185,030,144 55,493 164,974,651 $293,234,372 See notos to financial statements. Notes to Financial Statements 1. Property, plant and equipment are stated at cost, less: 1967 1966 Allowance for depreciation and depletion..................................$152,861,359 $144,473,184 Allowance for estimated losses on disposal of certain plants........ 1.396,071 600.571 At December 31, 1967, properties carried at a depreciated cost of approximately $10,600,000 were pledged under debt agreements. 2. Details of long-term debt at December 31, 1967 are as follows: Description Sinking fund debentures: AiU%, due April. 1f 1981 4V*9&, due April 1,1977 Current Portion Due Subsequent to 1968 Total Annual Instalments - $29,680,000 $1,680,000 (or 1969, $1,750,000 through 1980, balance 1981 - 6,442,000 $442,000 for 1969, $500,000 through 1976, balance 1977 4'/j% debentures, due October 1,1980 S 146,000 1,206.000 $147,000 through 1976 except each fourth instalment beginning 1968 shall be $146,000, balance 1977 Notes: 5%, due December 1,1970 437/a*%* *, due April 1,1977 200,000 500,000 $200,000 through 1969, balance 1970 250,000 1,850,000 $250,000 through 1974, with lesser amounts thereafter Other long-term debt 509,783 Varying through 1,511,312 1988 $1,105,783 $41,189,312 The 4VjSo debentures are convertible into common stock at the rate of one share for each $45 principal amount of debentures. At December 31, 1967, 30,045 shares of com mon stock were reserved for conversion of such deben tures. 3. Depreciation for book purposes is provided on the straight-line method and for certain assets is less than de preciation claimed for income tax purposes. Further, cer tain mine development costs are claimed for income tax purposes as incurred but for book purposes are deferred and amortized on a per-ton-mined basis. The resulting cur rent tax benefits are deferred to subsequent periods when book provisions for depreciation and amortization will ex ceed the amounts allowable for income tax purposes. 4. Investment tax credits are being amortized ratably over ten-year periods. 5. At December 31, 1967, the Company had authorized future additions, to plant and property of which the esti mated cost to complete was $14,000,000. The companies have long-term lease obligations involving annual rentals of approximately SI,200,000 through 1970 and reduced amounts thereafter through 2000. 6. Preferred stocks comprise: Shares Authorized Issued $4 cumulative, no par........ ... 53,877 53,877 4'/i% convertible second. $100 par............ ... 72.965 72,965 $4.50 Series A convertible second, $100 par............ ...120,225 120,225 $2.25 Series B convertible second, no par................. .. .648,000 398,800 Amount $ 5,714,329 7,296,500 12,022,500 2.944,306 $27,977,635 The $4 preferred stock has a sinking fund provision re quiring the annual redemption of 2.000 shares, with the privilege of applying any excess redemptions to subse quent periods. Shares have been acquired and retired to meet the sinking fund requirements through 1968. Conversion features: Shares of Common Stock for Each Share of Preferred Stock 4Va% series ........................... 3.000 $4.50 series............................. 2.678 $225 series..............................1.111 Common stock reserved for conversion of preferred stocks aggregated 983,925 shares at December 31,1967. Treasury stock at December 31, 1967 consisted of 990 shares of $4 cumulative preferred and 750 shares of $4.50 Series A convertible second preferred (at December 31, 1966, 750 shares of $4.50 Series A convertible second pre ferred). 7. At December 31, 1967, there were outstanding exercis able stock options, granted to certain officers and employ ees, to purchase 145,153 shares of common stock at prices ranging from $22.00 to $22.50 per share. During 1967, op tions for 104,600 shares were granted at a price of $22.50 per share (the fair market value at date of grant), no options were exercised, and options for 16,329 shares were can celed. Shares reserved for future options at the beginning and end of 1967 were 100,405 and 12,134, respectively. 8. The indentures covering the sinking fund debentures, the long-term note agreements and the Company's Articles of Organization contain restrictive provisions as to the pay ment of cash dividends on. and the purchase or redemption of. Company stocks. Under the most restrictive of these provisions, the amount of earned surplus available for cash H'-widends on common stock at December 31,1967 was ap- imately $49,288,000. 9. Extraordinary items, net of income taxes: 1967: Reduction of 1963 provision for shutdown ex penses and loses on sale of certain plants to estimated amounts presently required Loss on devaluation of foreign currency $1,400,000 (330,379) $1,069,621 1966:Gain oh sale of timberlands and disposal of plant Write-off of intangibles, considered to be no longer of value, relating to businesses ac quired from 1945 to 1960 $ 9.817,911 (3,381,895) $ 6.436.016 The items reported in 1966 as special items (after net in come) have been restated as extraordinary items in con formity with Opinion 9 of the Accounting Principles Board of the American Institute of Certified Public Accountants. 10. Provisions for depreciation and depletion of $14,314,000 in 1967 and $14,288,000 in 1966 are included in the consoli dated statements of income. 11. The Company and its subsidiaries have various pension plans, some of which are contributory, covering substanti ally all salaried and sales employees and certain hourly e* 'oyees. The total pension expense of approximately ,3,000 in 1967 and S2,797,000 in 1966 includes amorti,,_.,on of prior service costs over periods of 20 to 30 years. The Company's policy is to fund pension costs accrued. At December 31, 1967, vested benefits of some plans ex ceeded the total of the applicable pension funds and bal ance sheet accruals by an estimated S2,550,000. Auditors' Report To the Board of Directors and Stockholders. The Flintkote Company : We have examined the consolidated balance sheet Of THE FLINTKOTE COMPANY and its WHOLLY OWNED SUBSIDIARIES as of December 31. 1967 and the related consolidated statement of income and earned surplus for the year then ended. Our examina tion was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other audit ing procedures as we considered necessary in the circumstances. We previously examined and reported upon the consolidated financial statements of the Company for 1966 which have been restated to reflect certain transactions.as extraordinary items as de scribed in Note 9 to the financial statements. In our opinion, the afore-mentioned financial state ments present fairly the consolidated financial posi tion of The Flintkote Company and its Wholly Owned Subsidiaries at December 31, 1967 and 1966, and the results of their operations for the years then ended, in conformity with generally accepted accounting prin ciples applied on a consistent basis. We have made a similar examination of the accom panying consolidated statement of source and appli cation of funds which, in our opinion, when considered in relation to the basic financial statements, presents fairly the source and application of funds of The Flintkote Company and its Wholly Owned Subsidiaries for the year ended December 31,1967. ^A- ^ Y>1'/W5 ,. v New York, February 1,1968. CONSOLIDATED STATEMENT Or SOURCE AND APPLICATION OF FUNDS for the year ended December 31,1967 SOURCE OF FUNDS: Net income................................................................................................................................. $10,404,000 Provision for depreciation and depletion.......................................................................... 14,314,000 Increase in deferred taxes and investment tax credits............................................................................................................................... 1,237,000 Other.net..................................................................................................................................... 801,000 $26,756,000 APPLICATION OF FUNDS: Additions to property, plant and equipment........................ $16,362,000 Reduction in long-term debt.................................................................................................. Dividends paid on preferred and common stocks...................................................................................................................................... 2,621,000 7,551.000 26.534,000 Increase in working capital..................................................................................................... 222,000 $26,756,000 The FUntkolo Company and Its Wholly Owned Subsidiaries Ten-Year Comparison CONDENSED CONSOLIDATED BALANCE SHEET (a) Assets: Cash............................... ......................................................... Accounts and notes receivable (less allowances)................ .. Inventories .......................................................................................... Total current assets..................................................... Property, plant and equipment: Gross................................................................................................ Allowance for depreciation and depletion................................. Net .................................................................................................... ... Investments and long-term receivables......................................... Good will, patents and other rights................................................. Prepaid and deferred expenses and other assets....................... Liabilities: Accounts payable and accrued expenses........................................... Notes and current instalments on long-term debt............................. Accrued federal, state and other taxes............................................... Reserves for product guarantees and self-insurance....................... Production payment, net of taxes......................................................... Total current liabilities....................................................... Long-term debt.......................................................................................... Reserve for product guarantees........................................................... Deferred taxes on income...................................................................... Deferred investment lax credits............................................................ Total liabilities...................................................................... Capital: Capital stock: Preferred................................................................................................ Common, issued and subscribed..................................................... Earned surplus.......................................................................................... Less, Treasury stock, at cost.............................................................. 1967 1966 $ 13,110.218 6,748.462 45.497,388 39.107.180 104.463,248 $ 13.947.795 4.834.756 51.618.737 41,856,434 112.257.122 323.457,632 154.257.430(b) 169.200.202 1,819,082 4.234,067 5,096.172 $284,812,771 314.288.705 145,073.755(bl 169,214,950 2.233.724 4,252.817 5.275.159 $293,234,372 $ 20,051,308 3,160.783 8,344,418 1,250.608 92.535 32,899,652 41,189.312 ~ 19,799,577 3,169.799 $ 97,058,340 $ 20,553.983 1.724,563 14.533.259 1,536.370 2.568,700 40.916.875 43,810,185 1,800,000 18,574,083 3,158,578 $108,259,721 $ 27,977,635 59.255.388 87.233.023 100,650,496 187.883.519 129,088 $187,754,431 $284,812,771 $ 27,977.635 59,255,388 87,233.023 97.797,121 185.030.144 55.493 5184,974,651 $293,234,372 CONDENSED STATEMENT OF CONSOLIDATED INCOME (a) Sales ........................................................................................................... Cost of goods sold................................................................................... Gross profit on sales............................................................................ Selling, administrative and general expenses................................... Other income................................................................;.......................... Other charges ........................................................................................... Federal and foreign taxes on income.................................................... Income before extraordinary items........................................................ Extraordinary items, net of income taxes............................................ Net income................................................................................................. Provision for depreciation and depletion included above............... Per share of common stock (alter preferred dividends) based on the averago number of shares outstanding: Income before extraordinary items.............................................. Extraordinary items, net of tax...................................................... Not income..................................................................................... (a) Harry T. Campbell Sons' Corporation, Tho Diamond Portland Cemont Company and M. J. Grove Limo Company included only in years 1959 through 1967. 1967 $296,426,989 231.611,601 64,815,388 44,667,678 20.147,710 1,752,689 21.900.399 7,736,297 14.164,102 4,829,376 9,334,726 1,069.621 $ 10,404.347 $ 14,314,000 $1.32 .19 $1-51 1966 (c) $303,849,511 234,223,007 69.626.504 45.252.875 24.373.629 4,104.488 28.478,117 8,255,241 20.222.876 7.868,385 12.354,491 6,436.016 $ 18,790,507 $ 14,288.000 $1.86 1.16 $3.02 1965 1964 1963 1962 1961 1960 1959 19S8 $ 7.790.135 1,671.150 *9.966,477 377,350 Bd.505.112 $ 12.758.103 3.330.174 40.068.060 36,658.538 92.814.875 $ 10.360.366 1.465.391 37.999.768 35.147,408 84,972,933 $ 10.859,820 385.268 37.595,021 33,161.561 82.001.670 305,761,427 136.338.608(b) 169.422.819 3.871.928 7,744.425 5.992.107 $285,536,391 294,620,395 131.093.812(b) 163.526.583 2.312,032 7,414,515 6.093.402 S272.161.407 291,120,031 129.436.067(b) 161.683.964 2,070,335 7.507.103 5.957.666 $262,192,001 275.648.078 117,606,145 158.041,933 2.360.338 7,595.325 5.709.781 $255,709,047 $ 14.339.093 772.460 36.676.791 32.406.637 84.194.981 254.891.914 109.887.814 145.004,100 2.350,552 7,669.815 5,629.737 S244,849.185 $ 12.683,534 1,987.123 35.044.172 32.134,753 81.849.582 229.804.208 102.338.266 127.465.942 6,588,310 7,512.063 4.954,549 S228.370.446 $ 15.597.009 2.706.901 30,164,111 30.279.908 . 78.747.929 $ 14,021.674 2.683.370 23.842.258 26.252.860 66.800.162 206.549.925 90.619.004 115.930.921 2.893.028 2,962.004 4.517.803 $205,051,685 160.851,720 71.980.904 88.870.816 3.398.910 2.962.004 3.664.967 S165.696.859 $ 23,080,965 12,960.831 5,760,385 1.688,318 503.566 43,994,065 46,537,168 1,900.000 17.328,711 2,995,734 $112,755,678 $ 18,509,641 2.341,939 10.153.464 2.071.878 2.939.500 36.016,422 49,395,813 1,950,000 14,946,089 2,388.025 $104,696,349 $ 20,525,122 2,059,877 10,725,986 1,972,637 - 35,283,622 52,353.014 2.300,000 10.982.866 1.929.347 SI 02.848.849 $ 19,507,217 2,966.732 10,669.531 1.361,670 34.505.150 53,831.097 - 7,552,996 483.430 $ 96.372.673 $ 17.322.268 1,813.549 11,551.461 1,099,480 - 31.786.758 55,941.097 - 3.935,597 - S 91.663.452 S 16,969.637 13,219,037 17.087,518 880.537 48,156.729 27.869,976 - 2,344.322 -- S 78.371.027 S 15.649.567 1.380.742 17.964,317 759,554 -- 35.754,180 22,496,666 - 990,382 - S 59.241,228 $ 12.688.910 1,007,403 8,045.384 630,879 -- 22.372.576 16,874,852 -- 582,930 - $ 39.830,368 -77.635 -.255.387 87.233.022 86.082.587 173.315,609 534,896 SI 72,780.713 $285,536,391 $ 27,977,635 59.249.643 87,227.278 80.772.676 167.999.954 534.896 SI 67.465.058 S272.161.407 $ 27.977,635 59.381.710 87,359,345 72.518.703 159.878.048 534.896 _ $159,343,152 S262.192.001 1965 $286,917,507 221.567,784 65,349,723 40,307.809 25.041.914 2,674,127 27.716.041 8.614.042 19,101.999 6.258.936 12,843,013 -- S 12.843,013 S 13.240.000 1964 S278.279.704 207.249.901 71,029.803 37.723.960 33.305.843 1,687,983 34,993.826 8,260.704 26,733,122 11.788.238 14.944.884 - S 14.944.884 $ 12.778.000 1963(c) $278,789,673 209.690.645 69.099,028 37,269.865 31.829.163 1,438.305 33.267,468 8,724,598 24,542.870 11,163.950 13,378,920 (7,100,000) $ 6.278.920 $ 12,753,000 $ 27,977,635 59.249.647 87.227.282 72.643.988 159.871,270 534.896 Si 59.336.374 S255.709.047 - S 27.977,635 59.297,193 87.274,828 66.445.801 153,720.629 534.896 S153.185.733 S244.849.185 $ 28,190.526 58,991,644 87,182.170 63.055.838 150.238,008 238.589 S149.999.419 S228.370.446 $ 28.433,567 56.503,084 84.936,651 61,062.704 145,999,355 188 898 S145.810.457 $205,051,685 $ 26.931,315 51.685.977 78,617.292 47.483.657 126,100.949 234.458 S125.866.491 Si 65.696.859 1962 S272.357.365 205.906.404 66,450.961 36.499.500 29.951,461 2.002.002 31.953.463 8,705.172 23.248.291 10.646,119 12.602,172 - $ 12.602.172 $ 11.470.000 1961 $248,758,325 187.461.261 61.297.064 34.675,922 26.621.142 1.683.553 28.304,695 7.252,686 21.052,009 9,573.269 11.478,740 -- S 11.478.740 $ 10.504.000 1960 S252,171.900 189.324,957 62.846.943 34,071.915 28,775.028 1.708.915 30,483.943 6.578,318 23.905.625 10.941,998 12.963,627 -- S 12.963.627 $ 10,434.000 1959 $253,054,691 189,197,174 63.857,517 31,733,440 32,124,077 1.821.245 33.945.322 5.636.682 28.308,640 13.240,222 15.068,418 -- S 15.008,418 $ 10,490.000 1958 $194,071,638 147.434.190 46.637.448 23.626.000 23.011.448 1,605.160 24.616.608 4 549.608 20.067,000 9078.862 10.988,138 _ S 10.988,138 S 7.720.000 $1.96 $1.96 $2.34 $2.34 $2.06 (120) $ .78 $1.92 $1.92 (t>) Includes rcservo lor properly losses not ol federal taxos. (c) Restated to reflect certain transactions us extraordinary items $1.72 $1.72 $1.98 $1.90 $2.37 $2.37 $1.96 $1.96 23 DIRECTORS Raul Abbott R. McLean Campbell W. L. Davis Allen 0. Eaton "Varies Horner nes E. McCauley Wm. Wallace Mein, Jr. James D. Moran George J. Pecaro Noel J. Redmond J. A. Thomas B. A. Tompkins Harry F. Vickers EXECUTIVE AND FINANCE COMMITTEE J. A. Thomas, Chairman Paul Abbott R. McLean Campbell George J. Pecaro Noel J. Redmond B. A. Tompkins Harry F. Vickers OFFICERS George J. Pecaro, President James D. Moran, Executive Vice President M. C. Carpenter, Vice President Thomas L. Donoghue. Vice President Wilson Harvey. Vice President John Legh-Jones, Vice President James E. McCauley, vice President Wallace Mein, Jr,, Vice President old F. Stepanek, Vice President H. G. Wace, Wee President R. McLean Campbell, Wee President and Treasurer Gene G. Curry. Secretary and Legal Counsel John E. Igoe, Controller Allen O. Eaton, Clerk Donald E. Trimble. Assistant Treasurer Frank D. Curtis, Assistant Secretary Harry J. Lange. Assistant Controller Robert W. Russell. Assistant Controller and Assistant Secretary TRANSFER AGENTS Bankers Trust Company 16 Wall Street, New York. N.Y. Bank ol America Nat'l Trust and Savings Assoc, ill West 7th Street. Los Angeles. Cali!. Old Colony Trust Company 45 Milk Street. Boston. Mass. REGISTRARS The Manufacturers Hanover Trust Company The First National Bank of Boston United California Bank AUDITORS i.ybrand. Ross Bros. & Montgomery JNSEL While A Case. New York, N.Y. Ropes & Gray. Boston, Mass. .M i The Flintkote Company EXECUTIVE OFFICES 30 Rockefeller Plaza New York, N.Y. 10020 Pipe Products Group Orangeburg and Flintite Products Orangeburg, New York DOMESTIC PRODUCT GROUPS Building Products Group Gypsum Products Division Flooring Products Division Building Materials Division Industrial and Automotive Products Division 480 Central Avenue East Rutherford, New Jersey Pioneer Division 5500 South Alameda Street Los Angeles, California Sealzit Division 3640 Chicago Avenue Riverside, California Cement Products Group Calaveras Division 315 Montgomery Street San Francisco. California Diamond Division Middle Branch, Ohio Glens Falls Division 313 Lower Warren Street Glens Falls, New York Kosmos Portland Cement Company 1529 Starks Building Louisville. Kentucky Packaging Products Group Hankins Container Division 14801 Emery Avenue Cleveland, Ohio Western Packaging Division 5500 South Alameda Street Los Angeles. California Eastern Stone Products Group Harry T. Campbell Sons' Corporation Towson, Baltimore, Maryland M. J. Grove Lime Division Lime Kiln, Maryland Western Stone Products Group Blue Diamond Concrete Materials Div. 1650 South Alameda Street Los Angeles, California U.S. Lime Division 2244 Beverly Boulevard Los Angeles, California Standard Materials Company Modesto. California Stockton Building Materials Company Stockton. California FOREIGN GROUPS Canadian Groups The Flintkote Company of Canada Limited 30th Street, Long Branch Toronto. Ontario Stradwick Industries Limited King Paving & Materials Limited Flintkote Mines Limited Overseas Group The Flintkote Company Limited Adam House. One Fitzroy Square London W.1, England Enfield Chemicals Limited Flintkote France S.A.R.L. Flintkote (New Zealand) Limited Flintkote South Africa (Ply.) Limited NEW ZEALAND FRANCE HAWAII GREAT BRITAIN aA m SOUTH AFRICA a- I' B II ea h* A `~ 3 A ' ^ 4A -.n aA _ _ 4. .. r j. AA* 8 aa AA #>A4AJ AAA A AAAAAAA a uai.r;fi | a# A A A A uf<>) | A Manufacturing nnd Processing Plants. si riincp.nl S.i!i.-s Olliccs. Natural Resources, A o a fi AA AAA A rr:-\ 'A A C A aa A A AAA BBAt? 8A 13 n AAA U AA A u AAA 0 o A A 0A AA A2 ?4k A ? A', AA A. A AA# A AAAA nan no* AA AA zun , A A KHA* A .** *- ~i aV. Z D u A 4^ * ** a. a AAA (I B A a A A IU aa A aa BB AA aa Note: T/io map symbol locations are approximate breouso oI space limitations.