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omui uuscjjii Licau ^uuijiauj' nunuai xvcjjui i -- i7U4 America's Corporate Foundation; 1962; ProQuest Historical Annual Reports pg. CM Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ANNUAL MEETING The 1963 Annual Meeting of the Stockholder* will he held Monday. Ma\ IM, at the Path Lam; Hotel. Kith Stieel and Paih Avenue. i\eu York, at 11 :(K) ; a.m. All Stockholder* are cordial!) invited to attend. If you are unable to attend. pleae vote l>v piow. v A plow and prow statement will he mailed to von on ii about Apiil 12. l%d. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Annual Report To stockholders for the year ended December 31, 1962 St. Joseph Lead Company TRANSFER OFFICE Si Joseph Lead Company, 250 Park Avenue, New York 17, N. Y. REGISTRAR ;4 First National City Trust Company, 22 William Street, New York 5, N. Y. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ; CONTENTS Page Trustees and Officers . ........................................- * 3 Years' Highlights .............................................................................................. 3 Earnings.................... * Metal Markets ........................................................... 7 Stockpiling . . . 8 Sales .................................................................................................................. 3 Percentage of Gross Earnings . 9 Dividend Income. .............................................................................................. 9 Comparative Earnings......................................................................................... 9 Taxes on Income.............................................................................................. 9 Long-Term Debt ................................................................................................... 9 Capital Expenditures......................................................................................... IT Dividends....................................... 1-3 Working Capital ................................................................................................... 13 Domestic Operations: Southeast Missouri.................................................................... Viburnum......................................................................... Edvvards-Balmat, New York..................................................................... Josephtown. Pennsylvania.......................................................................... Oil Leases--Crockett County. Texas........................................................... Mine La Motte Corporation..................................................................... 13 13 13 13 15 15 Meramec Mining Company............................................................................... 15 Foreign Operations: Argentina .................................................................................................. Peru ............................................................................................................. North Africa .............................................................................................. 17 18 18 Research . . . . 18 Employee Relations: Employment and Payrolls.......................................................................... Pension Program......................................................................................... Deferred Profit Sharing Plan..................................................................... Stock Option Incentive Plan ...................................................................... 19 19 19 19 Organization Changes......................................................................................... 20 Stockholders .... 20 Lead and Zinc Statistics ........................................................................................ 21*22 Financial Statements and Accountants' Reports..................................................... 2.3-31 Products............................................................................................................. 32 General Counsel Deukvoisi:. Pi.imi*ton, Lyons & Gates 320 Park Avenue New York 22, N. Y. Auditors Haskins & Seu.s Two Broadway New Yoik4,N. Y. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. St. Joseph Lead Company INCORPORATED MARCH 25, 1864, UNDER THE LAWS OF THE STATE OF NEW YORK EXECUTIVE OFFICE 250 Park Avenue, New York 17, N. Y. Andrew Fletcher . . C. Merrill Chapin. Jr, , George I. Bhigden . , Francis Cameron . . . Bernard F. Df.sloce . . F.li Whitney Debevoise James W. McAfee . . David R, Calhoun . . Charles R. Inte . . . JOSEPH PlIRSGLOVE. Jl{. , Plato Malozemoff . . Guido F Vf.rbeck. Jr. . Elmer A. Jones . . . BOARD OF TRUSTEES Year Elected .................... ..... .......................................................Chairman 192T . . . . . . i, Retired Vice President, St. Joseph Lead Company 1933 ......................... ..... Retired Vice President, St. Joseph Lead Company 1944 .................................................. ............................................President 1953 . . . . . . ' Vice President, Minerva Oil Co.. St. l.onis, Missouri 1953 . . , . . . Debevoise, Plimpton. Lyons & Gates. New York. N. Y. 1954 , President, Union Electric Company of Missouri. St. Louis, Missouri 1954 ........................................ President, St. Louis Union Trust Company 1957 ...........................................................................Vice Pt esident--Sales 1958 .................... Vice President, Consolidation Coal Co.. Pittsburgh, Pa. 1959 . . , . . . . . . . President, Newmont Mining Corporation 1961 Senior Vice President. Morgan Guaranty Trust Company of New York 1961 . . . . . . . . Division Manager, St. Joseph Lead Company 1963 EXECUTIVE COMMITTEE George I. Bricden Andrew Fletcher. Chairman Francis Cameron Eli Whitney Debevoise executive Officers Andrew Fletcher, Chairman Francis Cameron. President James G. Colvin. Treasurer Charles R. Inch. Vice President--Sales DonoldK. Lourie.Secretary Robert II. Ramsey, Vice President William L. Murphy. Jr.. Comptroller I.awrason Riggs 111. Vice President William J. Elliott. Assistant Secretary John R. Englf.horn. Assistant to the President Edward P. Mkkkell. Assistant Treasurer Manager of Explorations Norman H. Donald, Jr. United States Division Managers Mines Elmer A. Jones, Southeast Missouri Marsh all G. Jones. Eduanls-Balmaf. N.Y. Smelters John W. Shehm \n. Herculaneum, Missouri John G. Wkun, Jospphtown, Penns) Ivania Cia. Minera Aguilar, 5. A., Argentina Wing L. Lew, Managing Director Cia. Minerales Santander, Inc. Francis Cameron. President 3 Reproduced with permission of the copyright owner Further reproduction prohibited without permission. Years' Highlights i '; 1962 Sales of metals, etc...................... ..... . . . Federal income taxes . . . ... . :.' Net earnings, 1 after taxes ) and special credit--1962 ... .v . . . Dividends paid: Cash . . . . . . . ... . . Stock ................................................. . . Shares of capital stock outstanding . . . . $67,667,063 $506,502 $4,319,873 $2,717,622 10% 2,989.382 Per share on capital stock: Taxes on income . . .................... ..... Net earnings (and special credit--1962. $0.51)...................................................... Dividends...................................... ..... Current assets . . . . . ..... Current liabilities . . ...... . Net current assets........................... ..... . . Katio of current assets to current liabilities . Long-term debt . . ..... . . . Cash...................................... ..... Short-term marketable securities . , . . Capital expenditures........................... ..... . Number of employees...................................... Number of stockholders................................. Stockholders' investment in the business: Total................................ ..... , Per share..................... ..... . ... . $0.17 $v11 .4vf1/t $1.00 $46,823.52-1 $ 8,753.333 $38,070,191 5.35 to 1 $21,802,383 $4,269,022 $21,773,537 $3,146,917 3.703 8.986 $84,578,892 $28.29 ' Adjusted to reflect Wr,'c stoi k dividend paid Peiembei 21,I(d)2, 1961 $70,688,751 $1,846,444 $6,332,196 $2,717,247 -- 2,717,322 $0.62* $2.12* $1.00 $54,787,270 $11,276,912 $43,510,358 4.86 to 1 $23,092,857 $2,934,495 $22,278,696 $2,431,188 3.871 9.740 $82,967,539 $27.75* Headframe of ore-hoisting shaft at Pea Ridge. Mo,, iron ore project of Meramec Mining Company. Structure at top of headframe con tains the most modern ore hoists in America. Tubes crossing photograph arc housing fot ore conveyors, about 9 ft. in diarnetei. 5 Reproduced with permission of the copyright owner Further reproduction prohibited without permission. Progress at iron ore project oj Meramec Mining Company includes com* pletion oj ore hoisting shajt (left) and men and materials shaft (right). Between headframes are: Secondary crushing plant and mill building (left); pelletizing furnaces and stack (near center); stacker jor crushed ore storage (foreground); warehouse and shops (center background). Project. should enter production late in 1963. eventually reaching 2,000,000 tons of high grade pellets annually. 6 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. St. Joseph Lead. Company March 22, 1963 To the stockholders: EARNINGS Net earnings in 1962. together with special credit, were $4,319,873 equaling $1.44 per share on 2,989, 382 shares outstanding December 31, 1962, which reflects the 10% stock dividend paid December 21, 1962. Earnings for the year 1961 were $6,332,196 and equaled $2.33 on 2,717,322 shares outstanding as of December 31, 1961, or $2.12 on the new num ber of shares. The decline in earnings was prin cipally due to (1) a lead price that was approxi mately 12% lower than the previous year, (2) a strike called by the United Steelworkers of America which on July 27. closed down all Southeast Mis souri lead operations. (3) a non-recurring profit in 1961 from the sale of the Company's investment in the Brunswick Mining and Smelting Corporation Limited. Partially offsetting the above was an in crease in dividend income from foreign investments and a speca! credit from the settlement of the Com pany's income tax returns for the years 1949 through 1959 which resulted in capitalization of certain items previously expensed, tax adjustments, etc. Charges Against Income In 1962, $176,297 in shaft sinking and devel opment expenditures at the Company's Viburnum lead-zinc project were charged against current earn ings as were similar expenditures of $2,115,297 at Meramec Mining Company iron ore project in which the Company has a 50-50% ownership with the Bethlehem Steel Company. The total charges against earnings of $2,291,594 compares with a total of $2,162,627 in 1961. Since 1956, the total Viburnum charges after eliminating disallowances by the Internal Revenue Service amounted to $4, 039,113. Since 1957, St. Joe's share of the Mera mec charge-offs with similar disallowances being eliminated total $5,937,089. It is now estimated that the cost of mine develop ment at the Meramec project in 1963, prior to the commencement of production, will amount to ap1 prpximately $6,000,000--of which sum the Com pany's share will be one-half or about $3,000,000. It is also expected that about $500,000 will be spent in sinking and developing the new No. 29 shaft at Viburnum this year. As similar expenditures for new mines and fa cilities can he expected in future years, the Trustees and the Company's auditors have approved the fol lowing change in accounting for such expenditures. The Company, as in the past, will continue to de duct these expenditures for Federal income tax pur poses. However, commencing January 1, 1963, the Company will adopt the practice of a number of other mining companies and, for financial accounting pur poses, capitalize shaft sinking and development ex penditures on new ventures, including the Meramec and Viburnum projects, reduced by amounts equal to the current tax reductions. The excess of such expenditures over the amounts so capitalized will be charged against current earnings. METAL MARKETS Domestic demand for lead and zinc was satisfactory during 1962 with consumption up 6% and 10% respectively, over 1961, U. S. consumption of zinc in 1962 was the second highest in the history of the industry, only surpassed by the peak year of 1955. Unfortunately foreign production again ex ceeded demand and therefore world prices did not reflect the improved domestic situation. The lead price started the year at 10.25$ and ended it at 10$, 7 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. while zinc declined from 12$ to 11.5$ at the year's end. However, on the yearly average zinc fared bet ter than lead, rising to 11,625$ as compared to 11.542$ the previous year, while lead declined from 10.871$ to 9.631$. The action of the lead market wars particularly disappointing as demand both here and abroad jus tified higher price levels. Free World stocks were reduced by 90,000 metric tons but. nevertheless, the London Metal Exchange declined to a post World War II low of 50 per ton in August. The lack of constructive action by the United Nations Lead and Zinc Study Croup in attaining any voluntary cur tailment of production and the threat of liquidation of U. S. Government stockpiles, were primarily re sponsible for the unfavorable prices of the world market, and inadequate tariff and quota protection precluded an improvement in the U. S. price struc ture. Zinc prices likewise were affected and the de cline to a Jowr of 63 per ton reflected over-produc tion abroad which resulted in a reported increase in foreign metal stocks of 30.000 metric tons. STOCKPILING During 1962 much public attention was focused on the Federal Government's stockpile of strategic ma terials and metals. Your Company's principal inter est of course is in the stockpiles of lead and zinc metal, whether or not they are now in surplus, and whether or not and by what means such surplus stocks should he reduced. No quarrel has been raised with the concept, that stockpiles of certain basic raw materials such as lead and zinc are in the national interest. The only question has been as to the tonnage deemed desir able to protect the industrial security of the United States in the event that foreign and domestic souices of these materials are cut off or eliminated. Defining precise limits beyond which further ac cumulation becomes surplus leads to endless argu ment. The following facts appear pertinent: 1. 'File Government stocks of lead and zinc, now regarded by some as surplus, were acquired at the request of Congress by purchase in the open market without offering special incentives and without preferences being given to any particu lar supplier, 2. It is unquestionably expensive to tiie Govern ment to store and supervise these stocks, although lead and zinc metal do not deteriorate in storage. 3. In a nuclear conflict, foreign sources of metals would suddenly become unavailable, and do mestic smelters might very well be greatly ham pered, if not actually destroyed. The stockpiles would then become, if anything, too small rather than too large, in view of the nation's complete dependence on them to supply metal require ments for reconstruction. *1. Even if it were decided to dispose of stockpiles regarded as surplus, it is virtually impossible to do this without severely injuring both domestic and foreign producers of these metals. This is a fact which w'as demonstrated when Great Brit ain and other countries disposed of much smallei metal stocks in recent years. Finally, appropriate size and possible disposal of stockpiles are complicated problems deserving much greater study than they have hitherto been given, and in no case should the authority over them he transferred from the hands of Congress where it is now and where it belongs. SALES (excluding purchased lead and zinc) St, Joe's lead sales in 1962 amount to 112,990 tons, in comparison with 108.431 for the previous year. The 1962 zinc sales totaled 113.035 tons as com pared with 153,>191 for the year 1961. Because of the strike at all Southeast Missouri mines the supply of lead concentrates for the Herculaneum smelter was materially reduced and only 77,156 tons of pig 8 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. lead were produced during the year. As a result, there was a decrease in lead inventories amounting to 35.834 tons for the year. TAXES ON INCOME The provision in 1962 for United States and foreign income taxes was $506,502, which is equivalent to PERCENTAGE OF 17$ per share. This compares with a 1961 provision of $1,846,444, or 68$ per share, which included a GROSS EARNINGS tax of $491,428 on the profit from the sale of the In 1962 approximately 94% of the gross earnings of the Company came from zinc and 6% from lead as compared to 74% for zinc and 26% for lead in 1961, The low earnings from lead operations were the direct result of the lower lead selling price and of a strike by employees which forced the suspension of all lead mining operations in Missouri from July 27 through the balance of the year. Company's investment in Brunswick Mining and Smelting Corporation Limited. Following the successful termination of the Com pany's suit for a refund of federal income taxes for the year 1949. referred to in the 1961 report, the Company's income tax liabilities for the years 1949 through 1959 have been settled. The settlements in volved a net refund of $670,668 of taxes for the years 1949 through 1954 and a tax deficiency of DIVIDEND INCOME $1,496,9 19 for the years 1955 through 1959. The latter deficiency was brought about principally by The Company's income from foreign and domestic the capitalization of items which had previously been dividends was $3,588,027, in comparison with $1,631,122 in 1961. Included in 1962 was an treated as expenses; the disallowance of deductions for accelerated amortization of emergency facilities, interim dividend of $1,094,001 paid out of current earnings of a foreign subsidiary. This will affect the which will result in increased depreciation deduc tions in later years; and the adjustment of deprecia amount of dividend income on foreign investments tion allowances through lengthening of service lives that may be received in 1963. of certain properties. As a result of these settlements, and the related Comparative Earnings capitalization of items previously treated as ex penses. a Special Credit of $1,532,241 was added to A statement of comparative earnings for the last ten years is as follows: Year Consolidated Net Earnings After Federal Income Taxes of 1953 . . . . 1954 . . . . 1955 . . . . 1956 . . ,. . 1957 . . .. . 1958 . . .. . 1959 . . . . 1960 . . . . 1961 . . . . 1962 . . . . $ 6,300,342 7,523,503 12,729,820 10,291,357 8,026,273 3,986,880 6,263,076 2,972,068 6,332,196 4,319,873* Includes special credit, $1,532,241. $4,283,768 4,545,190 6,385,243 5,194,085 3,884,706 699,564 1,518,318 326,930. 1,846,444 506,502 the Company's 1962 earnings. LONG-TERM DEBT At December 31. 1962, the long-term debt was $21,802,381, in comparison with $23,092,857 as of December 31, 1961. Two semi-annual installments on the 3% % notes of $125,000 each were paid on July 1 and December 31. 1962, reducing liability on these notes to $5,525,000. The installment due July 1. 1963 is shown as a current liability and $5,100,000 due after one year, as a long-term debt. Under the Company's Credit Agreement with its bankers, the Company has borrowed $7,000,000 at 4 % and $13,000,000 at 4%%. repayable in semi annual installments of $1,428,571 beginning Jan- 9 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Control room in new bag house (dust collecting equipment) at Lead Smeller. Herculaneum, Mo., makes possible nearly auto matic cleaning of 350,000 cu. ft. per min. of smelter gases from sinter plant and blast furnaces. Although Missouri lead ore con tains little silver, enough silvetbearing residues from zinc smell er at Josephtown are treated at Herculaneum to require refining in modernized equipment shown in operation here. These are re torts for distillation of impuri ties as one step in refining pro cedure which is conducted inter mittently. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. uary 15. 1962. The semi-annual installments due in 1962 were paid January 15 and July 15 reducing the liability to $17,142,857. Installments due January 15 and July 15. 1963 in the total amount of $2,857, 143 are included under current liabilities and the amount of $14,285,714 due after one year is shown as a long-term debt. The Credit Agreement requires the maintenance of not less than $20,000,000 in working capital and re.-tricts the declaring of cash dividends which, taken with aggregate dividends paid since December 31, 1957, would exceed the sum of 75(/< of net earnings since that date, plus $6,000,000. At December 31. 1962. working capital amounted to $40,927,333. after excluding from current liabilities installments of indebtedness under the Credit Agreement due within one year. There were $10,363,735 of ac cumulated earnings free from the prohibition against dividends. On January 9. 1962 the Company under its Credit Agreement with Bethlehem Steel Corporation bor rowed $3,000,000 against its \x/> % Notes. As col lateral security for such loans, St. Joe has assigned to Bethlehem royalties to be received from Meramec Mining Company to the extent of $1,000,000 per annum. As royalties of $729,166 were due from Meramec Mining Company for the period June 1. 1962 to December 31.1962, $583,331 of this amount was assigned as a payment against the loan in Jan uary, 1963. As of December 31. this amount is shown as a current liability while the balance. $2, 416.669, is shown as a long-term debt. Such royalty is included in the consolidated statement of earnings at $361,583 since 50% of such expenditures of Meramec is borne by St. Joe. CAPITAL EXPENDITURES Capital expenditures for the last ten years, together with an estimate for the year 1963, are shown in the following table: Comparative Capital Expendstores Year ' Lead Belt 1953 1954 1955 1956 1957 $3,972,871 817,306 458,947 706,272 348,436 1958 1959 1960 437,876 484,128 399,211 1961 1962 420,965 867,143 Total $8,913,155 1963 (Est.) $ 390,000 Viburnum . ----i . -- --- $ 17,593 119,561 1,879,115 6,973,387 5,162,174 1,828,693 1,378,487 $17,359,010 $ 655,000 foglPhtown-----------_ Zinc Plant Power Plant $ 720,665 208,499 1,769,847 2,171,031 2,273,128 570,297 1,019,091 188,118 139,728 680,703 $9,741,107 . ^ --] ' " -- -- $ 633,088 11,803,420 8,896,219 806,684 -- , "' $22,139,411 $ 310,000 -- Edwards Oil and Gas and Balmat Leases Total $ 94,475 99,938 1,445 6,000 233,000 3,250 -- 81,368 22,684 35,813 $577,973 $ 92,804 -- 6,776 -- 239,503 43,752 -- 81,785 33,173 184,771 $682,564 $ 4,880,815 1,125,743 2,237,015 3,533,984 15,017,048 11,830,509 9,283,290 5,912,656 2,445,243 3,146,917 $59,413,220 $ 75,000 -- $ 1,430,000 11 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Shaft-sinking and development began during 1962 at No. 29 Mine near Viburnum, Mo. (shoivn above). When in op eration, No. 29 will complete a trio of mines sending ore to Viburnum Mill, where capacity will be increased to more than 6,000 tons per day. Center of gravity of Missouri mining op erations ivill gradually shift in the direction of new mining areas in and near Viburnum. New slag treatment plant for re covering coke and iron products from residue of zinc furnaces in Josephtown zinc smeller. Resi due was formerly regarded as valueless but, when treated in this plant, yields 10% of its weight in usable coke, 15% in a saleable iron product, and the re mainder is available for road construction and ballast. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. DIVIDENDS A cash dividend of S1.00 per share, in four quarterly payments of 25^ per share, was paid during 1962 on the number of shares outstanding before the 10% stock dividend, the same as made for the year 1961. In order that shareholders might benefit from the earnings that have been reinvested in the Com pany's business in tile past years, a 10% stock dividend was authorized by the Trustees and was paid December 21. 1962. thereby increasing the Company's capital stock outstanding from 2,717.622 shares to 2,989.382 shares. On February 19, 1963. the Board of Trustees declared a dividend of 25<i per share on stock pres ently outstanding payable March 15, 1963, to stock holders of record March 1, 1963. Below is the record of cash dividend payments for the past ten years and the number of shares outstanding at the end of each period. Dividends 1953-1962 Year Shares Outstanding 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 2,716,222 2,716,222 2,716,222 2,716,222 2,716,222 2,716,222 2,716,222 2,717,222 2,717,322 2,717,622* * Before 10% stock dividend. Per Share $2.75 2.00 3.00 3.00 2.00 1.00 1.00 1.00 1.00 LOO Amount $7,468,290 5,432,076 8,148,666 8,148,666 5,432,486 2,716,222 2,716,222 2,717,222 2,717,247 2,717,622 WORKING CAPITAL At December 31.1962, current assets were $46,823, 524 and current liabilities of $8,753,334, a 5.35 to 1 ratio. The net working capital amounted to $38, 070,190, a decrease of $5,140,168 from the previous year. A summary of the principal changes in work ing capital follows: Sources of Decrease: Increase in Investments: Meramec Mining Company ... $ 4,229,987 Campania Minerales Santander, Inc. !................................. 405,000 Capital expenditures................... 3,146,917 Reduction of long-term debt . . . 4,290,476 Cash dividends............................ 2,717,622 Increase in deferred charges, etc. . 1,518,037 Total................................... $16,308,039 Sources of Increase; Net earnings before special credit. $ 2,787,632 Special credit........ 1,532,241 Depreciation and depletion . . . 3,538,848 Loan from Bethlehem Steel Corporation........ 3,000,000 Stock options exercised .... ______ 9,150 Total..................................... $10,867,871 Net Decrease in Working Capital during 1962 ............................................... $ 5,440,168 DOMESTIC OPERATIONS Southeast Missouri In an election held March 30, 1962, Lead Belt payroll employees elected the United Steelworkers of America AFL-CIO to represent them as bargain ing agent, replacing the Oil, Chemical and Atomic Workers International Union AFL-CIO, who had decided not to contest the election. Following a breakdown in negotiations, the Steel workers called a strike on July 27, suspending all the Company's lead mining operations in Southeast Missouri. After a series of meetings, proposals and counter proposals, the Company made what it con sidered a fair offer in January, 1963 in a final effort to settle the strike. The Company made this offer 13 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Continual underground exploration is car ried on at mines of Edwards-Balmat Divi sion. This recently purchased diamond drill can drill holes of over 1.000 ft. in depth in search for ore below deepest mining level. 14 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. reluctantly because it would have meant that the Leaf I wood Mill and part of the Lead Belt Mines would not reopen. The Union Committee rejected the offer and presented a new .set of demands which actually were in some respects more costly than the original demands made last July. These new de mands were unacceptable to the Company. As this report is written the strike is still in effect, but nego tiations under the sponsorship of the Federal Media tion and Conciliation Service are continuing with some prospects of early settlement. Prior to the strike, the mills operated normally on a 5-day week basis. Ore milled during the period January 1. to July 27, 1962. totaled 2.990.181 tons including 611,1128 tons from Viburnum as com pared with 5,635.423 tons including 712.466 tons from Viburnum for the full year of 1961. The pig lead and slab zinc equivalent of concentrate pro duction was 60.918 tons and 2.996 tons respectiudy, as compared with 98.126 tons and 6.201 tons for the year 1961. Until October 8, when smelter operations were suspended, due to the lack of concentrates, the Her culaneum smelter operated normally on a two fur nace basis producing 77.156 tons of pig lead as compared with the 1961 record production of 116.I 18. There was no production of slab zinc from blast furnace slag in 1962 or 1961. At present, the only activities at the smelter are tin* refining of pur chased lead ingots, deferred maintenance work, and shipping pig lead. Viburnum Further expansion of the ore resejves in the Vi burnum area of Washington. Crawford, and Iron Counties. Missouri, continued during 1962. The second shaft, known as No. 28, went on a produc tion basis on January 1. 1962. Development work on the third production shaft. No. 29. has been sus pended by the strike. The capacity of the mill was increased in 1962 to 6.000 tons of ore per day and until operations were suspended because of the strike, the mill processed 611.820 tons of ore. Edwards-Balmat, New York Operations of the mines and mills at this division were on a 40-hour week basis throughout the year producing 98.915 tons of zinc concentrates and 1.747 tons of lead concentrates, in comparison with 100.627 tons of zinc concentrates and 1,406 tons of lead concentrates in 1961. As in previous years, all production of zinc concentrates was shipped to the Company's zinc smelter at Joseph town, and the Lad concentrates to the Company's lead smelter at Herculaneum. josephtown, Pennsylvania The Josephtown zinc smelter operated on a 10hour-week basis during the entiie year. Tile zinc content of metal and oxide production for the smelter reached a record high of 153.968 tons for 1962 as compared with 141.209 tons for 1961. The Re search Department's continuing studies of furnace feed preparation and of furnace operation itself, together with improved techniques developed by the plant operating staff, have steadily increased the output of which each furnace is capable. 4 he efficiency of metal production has improved steadily over the past 3 years, and further improvement is expected in 1963. Product research program*- are under way to widen the markets for both zinc metal and zinc oxide produced by Josephtowm. Oil Leases--Crockett County, Texas Net income fiom our joint working interest in the Ranch Strawn and West World units amounted to S314.820 for the year as compared to $319,550 for 1961. Allowable days of production in 1962 weie 97 compared with 101 for the previous year. St, Joe's portion of sales was 105.187 ban els of oil, in comparison with 116.601 in 1961. During tin* year the West World Gas Products Plant was com pleted by Cities Service Petroleum Company at a cost of $909.711 in which St. Joe has an interest of 18.67C or an investment of $169,843. This plant W'us built to recover liquid products from gases pro- 15 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission Underground hoist on 8 level of Aguilar Mine in Northern Argentina is a thoroughly modern and efficient installation, ena bling extension of mine to deepest levels. Despite dif ficult mining conditions, efficiency at Aguilar is steadily improving. duced at both units before they are reinjected into the reservoir for pressure maintenance. Processing gas began in June but because of the lack of a sat isfactory market the propane gas produced, which would normally represent 50% of the plant's prod ucts, is being pumped back into the ground for possible future recovery. Mine La Motte Corporation This corporation which is a 50% owned affiliate, owns a lead mine in Madison County, Missouri. Due to depressed conditions prevailing in the lead in dustry, this mine, idle since 1959, has been allowed to flood after all usable equipment had been sal vaged. MERAMEC MINING CO. The Pea Ridge iron ore property which is located about 40 miles northwest of Bonne Terre is operated by the Meramec Mining Company, owned jointly f50% each) by Bethlehem Steel and St. Joseph 16 Lead. During the year, there was completed ap proximately 30% of the underground development work necessary to bring the mine into production at a capacity of 12.000 tons of ore per day. All of the major surface installations are approaching com pletion with the exception of the mill which at year end was about 75% completed and the pellet plant (including stacking and loading facilities) which was approximately 20% completed. In 1962, Bethlehem and St. Joe each advanced a total of $6,287,444 of which $4,229,987 was set up by St. Joe as an additional investment in Meramec Mining Company and $2,115,297 of shaft sinking and development expenses together with $57,840 of deferred charges, wrere written off against current earnings. In 1963. further development will continue as well as the expected completion of the construction of the mill and most of the pellet plant. It is expected that under this program expenditures for 1963 will ap proximate $17,160,000, of which St. Joe's portion will be $8,580,000. First production is expected in the latter part of the fourth quarter of 1963. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Spectacular surroundings characterize Santander Mine at 14,500 ft. in Peru' vian Andes. Shown above are mill building with new rod mill in foreground, which has increased capac ity to 700 tons of ore daily. Staff houses are at left, ga rage, shops and warehouse in center, lake for tailings in background. FOREIGN OPERATIONS approaches. There is reasonable hope for continued stability. Economically, industrial activity in Argentina Argentina slowed markedly in the latter half of the year, but there was a resumption of confidence in late De Cia. Minkha Aguilar, S. A. (99.9% owned) op cember when a new economic team was brought into erate* a lead-zinc-silver mine in the Province of the Government. The peso strengthened somewhat, Jujuy in Northern Argentina. Net earnings for 1962 and as this report is written, there are some indica were 288.887,086 pesos compared with 214,138,244 tions of firmness in the Government's approach to pesos for 1961. The equivalent dollar value of these basic economic problems of an unbalanced budget, * earnings computed at the free rate of exchange as labor disputes, and continuing inflationary pressure. of December 31, 1962 and 1961 was 2,166,653 and The Aguilar mine is in an excellent position with 2.569,659 respectively. proven ore reserves higher than they have ever been The mine operated without interruption through in the 27-year history of the operation. Staff posi 1962. producing 30,041 metric tons of lead con tions at all levels are competently handled, and no centrates and 50,807 metric tons of zinc concen trates. In 1961, 28,409 metric tons of lead concen trates and 50,434 metric tons of zinc concentrates insurmountable labor problems have presented them selves. The outlook for Aguilar itself is excellent. were produced. Politically, Argentina is still in a state of suspense Sulfacid, S. A. (50% owned affiliate of Aguilar) operates a sulfuric acid plant and an electrolytic zinc that began with the ousting of President Frondizi in plant. The latter began production in November, April, 1962. Elections have been promised for June, 1962. Sales of sulfuric acid were only 23,522 tons 1963, but increased tension is developing ris4 the time in 1962 compared with 31,546 in 1961. Markets 17 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. are being developed gradually for the Special High Grade zinc produced by Sulfacid, but until the econ omy picks up again, this is an extremely difficult task. Technologically, the new zinc plant is working excellently. Net earnings for Sulfacid for 1962 were approximately 19,500.000 pesos as compared with 12,334,220 pesos in 1961. ClA. MeTALURGICA A U ST RA L-A RG E NT INA. S. A. (43.3% owned affiliate of Aguilar) operates a zinc smelter at Comodoro Rivadavia in Patagonia which produced 10,517 metric tons of Prime Western zinc in 1962 as compared with 0.722 metric tons in 1961. A sharp curtailment in zinc demand during the latter part of 1962 resulted in sales of only 6,821 metric tons in comparison with 12,953 metric tons for the previous year. Net earnings for the year were about 11.303,000 pesos compared with 11.567.257 for the year 1961. Peru Compama Minerales Santander, Inc. (100% owned) operates an open pit lead-zinc mine in the Peruvian Andes in which, as of December 31, 1962, St. Joe's investment was $3,512,607. For the year 1962. the Company had a loss of $245,700 after provision for interest payments $124. 973, depieciation $278,838 anil depletion $100,621, in comparison with a profit of $22,776 for 1961. Fac tors in this loss were depressed metal prices and the need for higher than normal development expense to expose sufficient ore to mine economically. De velopment costs for 1962 were $432,088 of which $222,791 was charged against earnings and $209. 297 deferred, as compared with development ex penses for 1961 of $216,226 of which $207,719 was charged against earnings and $8,177 deferred. The mill is now operating at about 700 tons of ore per day and the property should show a small profit when the stripping rate returns to normal about mid year. During the year, 8.823 short dry tons of lead concentrates and 29,356 short dry tons of zinc con centrates were produced, compared with 6,744 and 37,806 short dry tons respectively for 1961. North Africa Socikte Nord Africaine dij Plomb (NAP I and Societe Algerienne du Zinc (ALZI), both owned 17.15'/ by St. Joe, have mining operations near the AIgerian-Moroccan border south of Oujda. Morocco. The mines produced 103.600 metric tons of ore in 1962, in comparison with 130.300 metric tons in 1961. Because of the disturbed political situation in Al geria. exploration work at ALZI has been curtailed and the remaining known ore reserves are being rap idly depleted. Consideration is being given to a con solidation of ALZI and the adjoining Ain Arko property and the eventual liquidation of NAP. The Expanded Research Program of the Lead In dustries Association and the American Zinc Institute was established approximately five years ago in 1958. This research effort, sponsored by domestic as well as foreign lead and zinc producers, already has con tributed in a concrete manner to the preservation and expansion of existing markets for the two metals. This category of work is of a continuing nature. How ever. most of these industry supported projects in volve the use of lead or zinc for entirely new markets and several of these have reached a point where com mercial development seems feasible. Some of these projects lend themselves to an industry-wide market development effort. This is being accomplished with a large measure of cooperation on the part of St. Joe. Other projects lend themselves to individual com pany effort--St. Joe is alert to this opportunity and is organized in such a manner that it can capitalize effectively and quickly on this research. This same Company organization is pursuing several proprie tary research anti development project.-, all of which are directed toward furthering the Company's effort to expand its profitability base into fabricated and semi-fabricated products of lead and zinc. The pur suance of this goal certainly will require future capi tal expenditures for physical as-ets. Furthei. it un- 18 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. doubtediy will involve cooperative ventures with companies possessing specialized skills. EMPLOYEE RELATIONS Employment and Payrolls At the end of the year 1962, the Company and its subsidiaries employed in the United States 3.703 men and women, including 1.500 on strike, com pared with 3.871 at the end of 1961. Of this num ber. more than 24'/ have over 25 years of service and 58'/ have been employed between 10 and 25 years. During the year the employees received direct salaries and wages amounting to 818.792.736 which is 16.8'/ or $3,805,653 lower than the amount of $22,598,389 received in 1961. The principal reason for the decline in wages is the strike which has cost the employees involved, including those laid off at Herculaneum, approximately 83,000.000. Pension Program The Company's pension program consists of two non-contributory plans, a Retirement Plan for Sal aried Employees, and a Pension Plan for Payroll Employees. A total of 2.971 employees are presently covered by these Plans. In 1962, the Company contributed $939,017 to the Pension Trust Fund of the Plans, and the amount was charged against current earnings. During 1962. re tired employees received a total of S457.701. At the end of the year. 920 former employees were receiv ing pensions as compared with 886 at the end of 1961. The cost of past service under both Plans has been entirely funded through contributions to the Fund. Deferred Profit Sharing Pian Under the Deferred Profit Sharing Plan for Sal aried Employees, which was established as of Jan uary 1, 1956, contributions by the Company are 3% of the consolidated net earnings, or 10% of the !. ' \ aggregate salaries of the eligible employees, which ever is less. However, no contribution can be made which would result in the consolidated net earnings after such contribution being less than S2.00 per share based on the capital stock outstanding as of the effective date of the Plan. The limitation that no contribution can be made to the Plan which would result in the consolidated net earnings being less than $2.00 per share is subject to adjustment to take into account any stock dividends, stock splits, changes in par value, or similar changes in the capital stock of the Company. As a 10% stock dividend was declared November 20. payable December 21.1962. the $2.00 limitation is reduced to $1,818 per share. As the Company's consolidated net earnings for the year were less than $1,818 per share in 1962. no contribution was made. Stock Option Incentive Plan Under the Stock Option Incentive Plan approved by the stockholders in 1958, 130,000 shares of the Company's unissued stock was reserved for is suance and sale to officers and other key employees under 60 years of age. at a price not less than the market price at the time the options were granted. Due to the 10% stock dividend declared November 20, payable December 21. 1962. the total amount so reseived was increased to 142,860 shares after the elimination of the stock dividend applicable to op tions exercNed totaling 1.400 shares. Outstanding options at December 31. 1962 ad justed to reflect the 10% stock dividend both in the number of shares and the option prices were as fol lows: Date of Grant Number of Shares Option Price September 24. .1958 . . . 37.950 September 22. 1959 . , . 9.900 April 9. 1961....................... U.825 Total ...... 59.675 527.73 27.73 27.39 The options may be exercised in equal annual in stallments on the anniversary date of each grant. Any 19 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. part of an option not exercised at the end of five years from the date of the grant becomes void. During 1962. no additional options were granted, and three for 100 shares each were exercised. At December 31, 1962, there remained available for future grants 81,785 shares. ORGANIZATION CHANGES At a meeting of the Board of Trustees held on Feb ruary 19, 1963, the resignation of Mr. Irwin H. Cor nell as a member of the Board and of the Executive Committee was accepted with profound regret. Mr. Cornell, formerly Vice President and Sales Manager until his retirement in 1948, was elected to the Board of Trustees on December 12,1913 and after 50 years as a member resigned because of ill health. At the same meeting, Mr. Elmer A. Jones, Division Man ager of the Southeast Missouri lead operations was elected to fill the vacancy caused by the resignation of Mr. Cornell. STOCKHOLDERS At December 31, 1962, there were 8,986 registered stockholders, compared with 9,740 the previous year. A classification of stockholders at the end of 1962 is as follows: Stockholders Percent Men............................................................ Women...................................................... Joint Accounts........................................... Fiduciaries.......................................... Insurance Companies................................. Brokers and Security Dealers...................... Nominees.............................................. Institutions and Others........................... .... .... .... .... . . .. . ... 3,388 1,466 17 175 230 165 34.42 37.70 16.31 5.03 .19 1.96 2.56 1.83 8,986 100.00 Shares Held 479,024 380,289 95,031 150,051 176,440 392,897 1,049,663 265,987 2,989,382 Percent 16.02 12.72 3.18 5.02 5.90 13.14 35.12 8.90 100.00 Chairman President 20 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UNITED STATES Lead and Zinc Statistics LEAD IN'ISHORT TONS 1962 1961 m Available Supply: (Est.) (Final) U. S. mine production . . . . ................................ . . From scrap................................................................................... 237,000 471,000 262,000 476.000 Imports of concentrates and bullion (lead content) .... 126,000 133.000 Metal imports (net)................................................................... 228,000 213.000 Total Lead Metal Available . . ............................. 1,062,000 1,084,000 Consumption: Batteries.............................................. Ethyl gasoline......................................... Cables......................................... ..... i. . . . . Construction.......................... . . . . .......................... Pigments ................................................................................... Other uses ........ . ... . . . . . Total Consumption .................................................... Surplus or I deficit)........................................................................ 401,000 170,000 56,000 121,000 98,000 234,000 1,080,000 (18,000 I 368.000 164.000 60,000 117.000 99.000 219.000 1,027,000 57.000 ZINC IN SHORT TONS Available Supply: Recoverable U. S. mine production.......................................... Less--used to make pigments .................................................... Recoverable domestic zinc available to metal smelters . . . From scrap................................................................................... Imports of concentrates (recoverable zinc content) .... Imports of slab zinc .................................................................... Total Zinc Metal Available .......................................... 506,000 97,000 409,000 55,000 322,000 130,000 916.000 Consumption: Galvanizing.............................................. Zinc-base alloys............................... . . .......................... Brass.......................................... . . ..................................... Rolled zinc.................................... Oxides............................... Other.................................... 390,000 400,000 132,000 42,000 19,000 27,000 Total Consumption.......................................................... 1,010,000 Exports.............................................. 38,000 Total Zinc Metal Consumed and Exported .... 1,0^8,000 Deficit........................................................................ 132,000 464.000 91.000 373.000 55.000 305.000 125.000 858.000 382.000 342.000 129.000 41.000 18.000 19.000 931.000 50.000 981.000 123.000 21 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. St. Joseph Lead Company Lead and Zinc Statistics IN SHORT TONS Year 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 .. .. .. .. .. .. .. .. .. .. Lead Concentrates Produced from Company's Mines Lend Concentrates Purchased . 160.625 38.294 . 164.171 39,373 . 162.552 43.100 . 158.861 44.353 . 163.079 46,309 . 149.624 ; . Wlift"-: 25.102 . 143.167 .... 8,300 . 147.879 13.656 . 139.817 4,927 . 86.375 4,453 Pis lead Equivalent of Produced and Purchased Concentrates 129,281 133.932 136.668 136,921 140.617 119.489 106.678 114,328 102,587 65.119 Pig Lead Production 130,430 129.766 138,796 137,429 137.940 116,799 101,478 98.447 116,118 77,156 Pig Lead Sales Including 1953-1960 Sales Under Agency Contracts 167.192 183.079 212.100 199.294 183.942 139,131 164,084 131,852 108,447 112,857 ZINC IN SHORT TONS Year Zinc Concentrates Produced from Company's Mines 1953 . . . . 101,744 1954 . . . . 109.547 1955 . . . . 109.303 1956 . . . . 111,138 1957 . . . . 123.417 1958 . . . . 99,523 1959 . . . . 81.292 1960 . . . . 128,762 1961 . . . . 111,598 1962 . . . . 104,080 Zinc Concentrates Purchased 112.991 61,640 111.868 126.161 105,604 84,987 104,493 134.773 100,858 151.150 Slab Zinc Equivalent of Produced and Purchased Concentrates 126.968 105.610 134,012 146.897 144,011 120,515 121,138 173.016 139,521 160,058 Slab Zinc Equivalent of Smelter Production 121.592 111,021 138,201 ] 36.879 151,554 122,774 128.670 148,788 141.209 153,968 Zinc Sales Including 1953-1960 Sales Under Agency Contracts 152,522 167.542 202.545 181.324 192,112 174,083 179.478 158.276 162.005 147,744 Sulphuric Acid Sales 174.715 147.076 183.609 190,004 204.255 171.938 176,607 186.722 194.327 189,866 22 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission St. Joseph Lead Company STATEMENT OF Consolidated Earnings and Consolidated Subsidiaries for the years ended December 31,1962 and 1961 * Net Sales, of Metals, Metal Products.. Etc. Cost of Sales, Etc........................................ Other Income: Dividend^: From foreign investments..................................................... .......................... From dome-tic investment"................................ . ................................ Intere-I income.......................................................................................................... Income from sale of oil................................................................................................ Income from royalties. Meiamcc Mining Company--net . ........................... Profit from -ale of inve-tment in lit un-wick Mining arid Smelting Corporation Limited. . . . . . . . . ... . . . Other ineome less charges....................... . Total............................................................................. . . ,! . ........................... Deduct: Selling, geneial and administ rathe expenses..................................................... Strike ami shutdown expense ...................................................... .......................... Shaft sinking and development expenseMeramee and Viburnum Project- ............. Operating expen-es---oil pjoperlie*..................................................................... Otliet exploration and development e\pen-e- ...................................................... Past service annuities (Note 6).......................................................................... . Depreciation........................... ..................................... ..... .......................................... Depletion................................................................................................................ ..... lntere-t on indebted ue-s........................................................................... . . . Total deduction-..................................................................................... Earnings Before Income Taxes........................................................... U. S. and Foreign Income Taxes..................................................................................... Net Earnings for the Year (1962. 80.93 per share: 1961. $2.i2 per -luue. based on 2.989.382 -luue- outstanding Decent her 31. 1962 t J........................................... Special Credit--capitalization of item- pre\ iuu-ly expensed, lax adjustments, etc., as a le-ulr of settlement of Compain'- Fedeial ineome tax returns for the years 1949 through 1959 (Note 4)..................................................................... Net Earning- for the Year and Special Credit f 1962. $1.44 per share) . . . . Retained Earning- at Beginning of the Year . . , ... . ... . . . Dividends Puid During the Year: Ca-h ($1.00 per-hate)................................ $2,717,622 Stock (10c c->................................................ ..... . . 6.576.640 Retained Earnings at End of the Year........................................... ............................... .Set* note.s to financial statement!). 1962 S67.667.063 58.027.842 9.639.221 3,360.152 227.875 716.672 314.820 364.583 235.381 14.858.704 2.400.464 1.844,107 2.291.594 78.406 114.574 153.580 3.402.232 136.616 1,142.997 11.564.570 3.291.134 506.502 2.787.632 1.532.241 4.319.873 37.615.273 41.935.146 9.294.262 $32,640,884 1961 $70,688,751 58.009,385 12.679.366 1.406.547 227,875 448,442 319.550 1.965.711 79.111 17.126.602 2.118.555 2,162.627 54,283 141.575 153,580 3.052.207 128.400 1.136,735 8.947.962 8.178.640 1.846.444 6.332.196 _ 6.332,196 34.000.324 40.332.520 2.717.247 $37,615,273 23 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. St Joseph Lead Company Consolidated Balance Sheet and Consolidated Subsidiaries December 31,1962 and 1961 ASSETS December 31.1962 Current Assets: Cash.................................................................................... Marketable securities................................. . . . Accounts receivable--trade . . . . . . . . . U. S. Government--claims for income tax refunds . . Other accounts receivable . ................................ - . Inventories (Note 1): Lead, zinc, etc.................................................................. Materials and supplies................................................ $ 4.269.022 21.773,537 5.106.737 271.268 1.362.442 8.382.086 5.658.431 S 46.823.524 Investments and Advances (Note 2) 19,811.855 Property, Plant and Equipment (Note 3)..................... Less allowance for depreciation and depletion . . . 134.782.968 87,685.447 47,097,521 Other Assets: Securities on deposit witli Governmental agencies . . Cash and marketable securities--Fire Insurance Fund (ee contra) ..................................................................... 964.575 329.550 1.294,125 Deferred Charges: Deferred exploration charges . Other deferred charges . . . 2,018.370 851.913 2.870.283 Total Assets $117,897,308 December 31,1961 $ 2,934,495 22.278,696 6,031,037 480.201 575,608 16.377.764 6.109.469 S 54.787.270 15.204.189 131.151,068 84,427.146 46.723.922 964.956 290.345 1,255.301 1,411.002 916.479 9 327.481 $120,298,163 m 24 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIABILITIES Dccembtr.11,1962 Current Liabilities: Accounts payable and accrued liabilities..................... Long-term debt due within one year (Note 4) . . . Federal income taxes (Note 4)............................. A $ 4.289.074 3.865.474 598.785 $ 8.753.333 Long-Term Debt (Note 4)............................................... 21.802,383 Deferred Federal Income Taxes--related to accelerated amortization and depreciation ............................... 1.339,633 Reserves: .. Injury claims and workmen's liability insurance . . Employees life insurance and retirements..................... Fire insinance (sue contra).......................................... 737.417 356.101 329.550 1.423,068 Stockholders' Equity (Notes 4 and 5): Capital stock, par value S10 per share: Authorized--5.000.000 shares Outstanding--1962. 2.989.382.5 shares; 1961. 2.717.322.5 shares (after deducting shares in Treasury; 1962.21.416.35: 1961, 21.414.35) . . . Other Capital--lepresenting principally excess of amount of stock dividends over par value of capital stock................................................................... Retained Earning-.............................................. 29.893.825 22.044.183 32.640.883 84,578.891 Total Liabilities............................................... S117.897.308 December 31, 1961 5.503.237 3.282,143 2,491.532 11.276.912 23,092,857 1.639.014 658.097 373.399 290.345 1.321.811 27,173.225 18,179.041 37.615,273 82.967.539 S120.298.163 25 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. St. Joseph Lead Company and Consolidated Subsidiaries Notes to financial statements 1. Inventories of lead, zinc. etc. (finished, in process, and concentrates) are valued at cost {not in excess of market), determined substantially on last-in. first-out (LIFO) method. Materials and supplies are valued at average eost. 2. The carrying value of investments in the consoli dated balance sheet, which are stated at cost, or cost less non-taxable dividends (as to The New Jersev Zinc Company stock) or at nominal values of 81 as to two companies (see below'). do not indicate the current values of suchinvestments. The following is a summary of investments andadvances: , Subsidiaries not Consolidated: Compania Minera Aguilar. S. A. 8 1 Compania Minerales Santaiulej. Inc. (capital stock--$899,071. dehen- lures--$2,363,536. and advances --8280.000) 3.542.607 Other 100 Fifty-Percent Owned Companies: Meramec Mining Company (capital stock -- $2,500 and advances -- 89,813.908) Mine La Motte Corporation (capital stock--81 and advances-- 8150.000) ........ : 9.816.198 150.001 Other Securities. Loans. Etc.: The New Jersey Zinc Company-- 100.000 shares capital stock Sundry securities, loans, etc.. less rcseive of $200,000 5.721.028 578.710 $19.81X855 The financial statements of Compania Minera Agui lar. S. A. are included herein on pages 28 to 31. Divi dends received or receivable from the subsidiary are recorded as they are converted into U. S. dollars. The net assets of Compania ?vlitierales Santander, Inc. and its liability to the Company on debentures and advances totaled $3,945,307 at that date, and its net loss for the year then ended was >'215.700. Refeience is made to the comments on page 16 of this report related to Meramec Mining Company. The Company's equity in the net assets of Mine La Motte Corporation at December 31, 1962 was 8281.992 and its equity in the corporation's net earnings for the >ear then ended was 83.565. 3. Mining properties and mineral rights include $17. 000.000. which has been fully depleted, represent ing March 1, 1913 appiaised values, and subse quent additions at cost. All other properties are stated at cost. 'Flic net value of properly, plant and equipment as shown in the consolidated balance sheet does not indicate the present value of these assets, as such value could he arrived at only by current estimates which would vary from lime to lime depending on the price of metals, rate of production, cost of labor, and other factors. 4. Reference is made in the text of this report relative to earnings, charges against income, taxes on in come. long-term debt I including the amount of re tained earnings available for dividends) and slock option incentive plan. 5. On December 21. 1962. the Company issued 271. 762 shares of Capital Stock as a 10'/o stock dividciul. The excess of the fair market value of the dividend, determined at $24.20 a share, over the par value of the shares issued, which excess was $3,859,020. was credited to Other Capital. 6. The Company and its domestic subsidiaries have u Retirement Plan for Salaried Employees and a Pen sion Plan for Payroll Employees, covered either by a contract with an insurance company or by funds deposited with a Trustee, no part of which is re flected in the accompanying consolidated balance sheet. Both plans are non-contributory and all past service costs have been funded. The deferred past service cost is being amortized over a 10-year period. Current annual costs of both the Retire ment Plan and Pension Plan aggregated $939,017 and $944,152 in 1962 and 1961. respectively. 26 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. HASKINS a SELLS certified public accountants TWO BROADWAY NEW YORK 4 To the Stockholders of St. Joseph Lead Company: We have examined the consolidated balance sheet of St. Joseph Load Company and its consolidated subsidiaries as of December 31. 1962 and the related statement of consolidated earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we con sidered necessary in the circumstances. In our opinion, the accompanying consolidated balance sheet and statement of consolidated earnings, with the notes to financial statements, present fairly the financial position of St. Joseph Lead Company and its consolidated subsidiaries at December 31, 1962 and the results of their operations for tin; year then ended, in conformity with generally accepted accounting principles applied on a basis con sistent with that of the preceding year. HASKINS & SELLS Mai eh 6,1963 27 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ; Com pan ia M i ne ra Aguilar, S. A. Balance Sheet December 31, 1962 and 1961 ASSETS Dcrcinber 3], 1962 Argentine paper pesos (Note 1) December 31, 1961 Argentine paper pesos (Note 1) Current Ansels: Cash........................................................... .......................... 76.909.762 287,280.890 Marketable securities: Argentine Government (at cost) ....... 6.756.850 14.000.000 Other (at cost. less reserve--1962 and 1961. 19.493.471) ........................................... ..... 240.070.205 163.730.309 Accounts receivable--trade (less reserve---1962. 12.834.535; 1961.7.612.315) . . . ... . . 112.199,721 64,421.934 Due from partly-owned company--trade..................... Other accounts receivable, etc..................................... .! Inventories (Note 3): Lead and zinc concentrate**.......................................... Materials and supplies........................... 35.149.101 722,617.132 '! ' 143.703.188 279.141.938 916.547.897 19.761,683 13.573.573 129.988.247 169.933.145 862.689.781 6):Investments (Note Sulfacid. S. A. Industrial--Iiive**tim*iit and Advances (at cii'-t--50% owned)................................................ 85.929.135 20.428.902 Compania Mctalurgiea Au*4ru!-Argentinu. >S. A. Com et cial (at eo**t--43.3% owned)............................... 8.746.356 94,675,491 8.746.356 29,175.258 (Capita! Assets Note 2): Mining properties and mineral right**, including ex ploration and development prior to the commence ment of operations..................................................... Less allowance for depletion from January 1. 1960 Land, buildings, plant and equipment.......................... 63.133.687 11,035,580 611.642.870 52.098.107 63.133.687 7.435.215 542.652,641 55.698.472 Less allowance for depreciation from January 1, 1960 ...................................................... .................... 102.718.981 508.923.889 64.414A 92 478.238.449 Deferred Charge's................................. .. .. Noleti: Total........................................... ..... . . . . / 13.067.089 1.585.312.473 10.206.584 1.436.008.544 t J) Tin* quoted flee rate of exchange for a poo wa* approximately 0.75 cents at December 31. 1%2 and 1.2 tents at Deeenibei .11, I'Jfi], ' (2) As of January 1. 1960 capital assets weie subject to a revaluation a- permitted bv Argentine I .an No. 15.272. The total appieeiation of pesos 395,738.090 was applied to mining properties and mineral rights (pesos 52,489,4541 and to land, buildings, plant and equipment (peso* 341.248.636); concurrently an equal amount was credited to other capital--arising from revaluation. At their revalued amount, net capital asset*; are still considered to be stated at less than present value. The method of revaluation in terms of the Law consists in deducting from original cost the accumulated depletion or depreci ation to the date of revaluation, and adding to such net figure the amount of appreciation permitted hv the Law. For accounting purpose*. in Argentina, the resulting total is the basis for providing depletion or depreciation which, under the terms of the Law. is calculated on the ba**is of extending the useful life originally assigned to each capital asset by fifty prtccnt. Additions subsequent to the revaluation are being depreciated, over the estimated useful life previously assigned to each asset. Accordingly, the capital assets at December 31. 3961 and 1962 are slated at the net aggregate amounts of costs, less depletion oi depreciation to January 1, 1960. plus the amounts added foi the revaluations at that dale, and the allowances for depletion or depreciation are the amounts accumulated since the revaluation date, 28 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIABILITIES December 31,1962 Argentine paper pesos < \ote / ) December 31, 1961 Argentine paper peso* (.Vote l) Current Liabilities: Account- payable--trade............................................. Due to St. jo-epli Lead Companv ....... Due to partly-owned company ........ Wage- accrued............................................. Accrued Argentine income and other taxe- .... Other accounts payable.................................................. 62.436.612 4.662.990 5.032.271 21,298,085 104.548.001 10.840.980 208.818.939 18.041.609 3,871,543 16.800,383 15.046,440 71,807.089 __54.025.1_76 179.592.240 Advance from St. Joseph Lead Companv.................... 7.859.578 7.559,349 Deferred Credit---Unearned intere-t. etc........................ Reserves: Replacement of capital a-.-ets (Note 2) . . . Employee-'conipen-atton undei Argentine .-octal lawAecident-..................................................................... Other ................................................................................ Stockholders' Equity: Capital Slock--Nominal value of 80 Argentine paper pe-o- each (Note 5): Authoi i/.ed 5.000.000 -hares I-tied--1962.4.700.000 .-hare-: 1%1. 3.325.000 share- ...................................................................... Other Capital (Notes 2.4 and 5): Aii-ing lrum 1936 valuation of mining properties and mineral right- (remainder after tiansfer of pesos 48.000.000 to -tated value of capital stock) 434.220.312 31,731,499 49.227.627 35.352.616 V' : 1.446.736 -- 550,532.054 376.000.000 128.150 364,448,627 27,316,372 38,402,144 29.465,680 459.632.823 266,000.000 1.446.736 Arising fiom 1960 revaluation of capital assets (1962--temainder after transfer of pesos 106.400.000 to -tated value of capital stock) . , 211.338.090 317.738.090 Arising front .-hare.- teceived from other com panies (1962--temainder after transfer of pe-o3-600.000 to-tated value of capital-lock) . . . 15.396.115 228.180.941 3.924.781 323,109.607 Retained Earning.-: Appropriated for statutory reserve........................... Unappropiiated........................................................... Total Stockholder-' Equity........................... Total...................................................................... 18.471.213 213.920.961 818.101.902 1,585,312.473 14.151.448 185.834.927 -- 199,986,375 789,095,982 1.436.008.544 Note.- Continued: Following the practice of prior years a special appropriation of pe-o- 69.771,685 for replacement of capital as-ets has beet: made out of earnings for the year 1962. Similar -pcrial appropriation.- weie made out of earnings, in the preceding eleven years, aggre< guting pesos 347,080,285. (3) With few exception-, the inventories, were valued on the FIFO ba-K (4) During the year the company ili-continncd it- previous practice of crediting income with -took dividend- received at par. Amount- -o credited during 1961 amounted to approximately pe-o- 16,200.000 wherea-, the par value of the stock dividends received during 1962, which have not been recorded, amounted to approximately pe-o- 61.000.000. Shares received from othet companies aa re-ult of their capitalizing the appreciation arising on revaluation of capital assets under Argentine Law No. 15,272 have, in accordance with the Law, been credited to Other Capital. (5) During 1962, 1,375,000 -hare- of capital -lock of pe-o- 80 each were is-ued to shareholders in pioportiun to their respective holdings. In this connection peso- 106,400,000 and pe-o- 3,600.000 were transferred to stated value of Capital Stock from Othet Capital arising from I960 revaluation of capital asset- ami share- received from other companies respectively, t6) Refctence i- made to page- 17 and 18 of thi- report relative to opeiatioiis of the Company'- two afliliate-, Sidfaehl, S, A. fmhi-trial and Cnmpania Metaiurgica Vu-tral-\igentinu. S. V Comercial. 29 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Compania Mipera AguiIar, S. A STATEMENT of Earnings for the years ended December 31,1962 and 1961 Net Sales of Lead and Zinc Concentrates, Etc, Cost Thereof (Note 3).................................. 1962 Argentine papet pesos (Note l) 914.730.250 415.Q49.05fi 499.681.191 1961 Argentine paper pesos (Note 1) 838,538.175 455.720.827 382.817.348 Other Income: Profit on exchange.................................................................................................... Dividends (Note 4)............................................................................................... Profit from'.ale of marketable securities . ........................................... Interest.................................................................................... ............................... Other, less charges.................................................................... . .... Total................................................................................................................... Deduct: Selling, general and administrative expenses . . .......................................... Taxes, other than taxes on income . . . .... . . ................ .......................... Depreciation and depletion (Note 2)......................... . . . . ......................... Total Deductions................................ ............................................... Earnings Before Taxes on Income and Special Appropriation ....... Provision for Argentine Income and Extraordinary Profits Taxes, Net .... Earnings before Special Appropriation...........................,.................................... Special Appropriation for Replacement of Capital Assets (Note 2) ..... Net Earnings for the Year (after special appropriation) . ........ See notes on an ompnnying balanre sheet. 59.382.032 5.359.250 511.417 3.373.816 14.181,654 582.489.363 30,929.526 16.759,954 42.583.865 90.273.345 492,216,018 133.557.247 358.658.771 69,771.685 288.887.086 23.327.802 3.296 1.350.063 16.581.510 424.080.019 25,355,775 9.974,468 36,533,456 71.863.699 352.216.320 90.846,947 261.369.373 47.231,129 214,138.244 STATEMENT OF UNAPPROPRIATED. RETAINED EARNINGS for the years ended December 31,1962 and 1961 Unappropriated Retained Earnings at Beginning of the Year . . . Add--Net Earnings for the year (after special appropriation) . . . Total.................................................................................... .... .... 1962 Argentine paper pesos (Note J) 185.834.927 288.887.086 1961 Argentine paper pesos (Note i} 110.650.632 214.138.244 324.788.876 Deduct: Dividends paid during tite year--cash . . . . ... Appropriation for .statutory reserve .......... Total Deductions ........................................... Unappropriated Retained Earnings at End of the Year ... .... 274,952,500 135.802.500 3,151.449 138,953.949 185.834.927 See notes on nrrompanying balanre sheet. 30 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. DELOITTE, PLENDER, HASKINS Bt SELLS AV. ROQUE SAENZ PENA 788 BUENOS AIRES St. J oseph Lead Company: We have examined the balance sheet of Compania Minera Aguilar, S. A. (incorporated and doing business in Argentina) as of December 31, 1962 and the related statements of earnings and unappropriated retained earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet with the footnotes thereon, and the statements of earnings and unappropriated retained earnings present fairly the financial position of Compania Minera Aguilar, S. A. at December 31, 1962 and the results of its operations for the year then ended, in conformity with account ing principles generally accepted in Argentina and applied (except for the change in method of accounting for stock dividends received explained in Note 2 to the balance sheet) on a basis consistent with that of the preceding year. The accounting for capital assets and related depletion and depreciation, and for special appropriations out of earnings for replacement of capital assets, as described in Note 2 to the balance sheet differs from that normally accepted in the United States of America. However, in all other material respects the accompany ing financial statements, in our opinion, have been prepared in conformity with accounting principles generally accepted in the United States of America. DELOITTE, PLENDER, IIASKINS & SELLS February 12,1963 31 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Si Joseph Lead Company PRODUCTS LEAD Si. Joe Chemical Lead Herculaneum Common Lead Doe Run Super Refined Lead St. Joe Caulking Lead Special Alloys for Ammunitions, Cable and Tube Industries ZINC Special High Grade Slab Zinc High Grade Slab Zinc Intermediate Slab Zinc Brass Special Slab Zinc Prime Western Slab Zinc Continuous-Line Galvanizing Alloys ZINC OXIDE American Process--All Grades French Process--All Grades CADMIUM SULPHURIC ACID AGRICULTURAL LIMESTONE COPPER CONCENTRATES New electrolytic zinc plant anti power plant of Cia. Sulfacid, S. A., near Rosario in Argentina, appears in background with shops, laboratory and acid plant in foreground. Thoroughly modern, electrolytic zinc plant began producing 99.99% zinc metal in November 1962. Will eventually reach production of ]H tons of metal daily. Reproduced with permission of the copyright owner.! Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.