Document GN2QEEz7aaEzoy4BM3ZNze5Y

Sttoma THE EAGLE-RICHER COMPANY AND SUBSIDIARIES To't u b St o c k h o l d e r s o f , THE EAGLE-PICHER COMPANY: . ,, . V ` The annual report of your Company for the fiscal year endcd November 30, <1945, together with financial statements as reported :upon by Messrs. Barrow,.Wade, Guthrie & Company., Accountants and Auditors, is presented herewi th ift advance of the Annual. Meeting of Shareholders", which wilTLe ! held on Thursday, May 9- -. .... . EARNINGS AND SALES Consolidated net profit for the year amounted to $1,392,412, or $1.56 per common share, after all charges, including $300,000 in settlement of the long-litigated order of the National Labor Rela tions Board,.which had its origin in 1935- The corresponding figure for the preceding year was $1,259,299.69, equivalent to $1.38 per common share, after provision for dividend requirements on preferred stock then outstanding and the appropriation of $300,000 to tlie .rescrvc for contingencies.. On the basis of net profit before surplus charges, per share earnings for the respective years were $ 1.90 'and $1.71.-' \ ; /gy' . i . . . V. 2 < ' T < V . T ." ' 2 . . Net sales, as reported in the accompanying financial statements, show a decline from $46,962,692 in 1944 to $41,290,803 in 1945. This reduction, however, is more apparent than real: It is largely accounted for by a decrease in production premium payments; a change :in the arrangements under which foreign.concentrates' have been smelted for the account of Government agencies; and a sub stantial -shrinkage in the volume of business of the Insulation Contract Department. The decrease in -production premium payments was in, line with expectations and, as anticipated in last year's annual report, was more than; offset by diminishing charges for depletion and depreciation. With respect to gthc smelting of Mexican concentrates for U. S. Governmen t account, the proceeds of the sale of metal recovered therefrom and the cost of smel ting have, heretofore, appeared in sales and production costs,;: iVeispeCtiycl)';; gHndcrVth.e revised: procedure, only a,net treatment cost ;or snielting 'tali', is'tc/lectgd in.; fsalcs.' The reduction in yoltime of;thc Insulation Contract Department reflects curtailment of defensei plant construction.;; Duririg the war, substantial tonnages of our insulation products were utilized in itheconstructidri of many types of plants. In.ordet to obtain, this business; it. was frequently necessary:; for us to contract to installs complete insulation job, utilizing many products other than those of our own manufacture,, This had a much greater effect onsales than on profits.! -While a normal profit. was realized on out own products, we made only a jobbing profit oh other, materials.-.. With rhe.cur-- tailmcnt of defense;plant construction, the volume of isuch cop tracts ..declined' correspondingly--but '.without significant effect upon profits.. If consideration be given to the combined,effect of the fore going factors, sales of our own products--both in dollar volume and tonhage-- showed a decline of less than 4%. 4 ....<..... . ; - -.....: DEPLETION AND ,DEPRECIATION Provision for depletion and depreciation and for adjustment of the values of certain specific prop erties; and charges in respect of mine exploration and prospecting and net loss on the retirement or sale of capital assets, aggregated $1,369,231.80 for the year under review, in comparison with $3,188,036.97 for the preceding year. Of the net decrease of $1,818,805.17, S1,580,3S7-16 applied to depletion and depreciation; $38,163.82, to adjustment of property values; $205,129.49, to loss on rctirement or sale of capital assets--while exploration and prospecting expenses increased $4,875-30. , . For the current year, charges for depiction and depreciation amounted to $1,053,484.74, which: does not vary widely from the estimate of $1,170,000 contained in last year's report. It is again cs* rim a ted that t h c, correspond ing charges for the 1946 fiscal year will be in that approximate range. . Loss on disposition and revaluation of physical properties during the year aggregated $70,329-52. Only a few non-operating properties remain to be disposed of, loss on which, if any, will he insig- . nificanr, . . . .. . - ,- - .... The investigation, drilling and exploration of new mining properties is following a well con- srdcrcd program arid funds for that purpose will he appropriated to the extent that intelligent use thereof can lx* made. . 17 ,A : ' X: 3 3.' v -8 - ' .-'.TAXES " ... ' - : Provision for Federal and State taxes on estimated taxable income of the 1945 fiscal year amounted, to $275,000, ih comparison with $1,000,000 for the preceding year. Reported income, before taxes, .was subject to reduction by the amount of the payment in settlement .of. the National Labor Relations Board ease; by the credit, long allowed ijndcr Revenue Acts, in respect of percentage- depletion gandl by a, substantial taxable loss on property dispositions, which had been anticipated and, in large part, . previously reserved for. ' 3 .' . During the year under review, tax returns of the combined group were examined by the Treasury. Department to November 30, 1941---that year involving the initial determination of invested capital : for excess prof ts tax purposes. As a result, your companies paid .an additional tax of $259,1 39.97, fwHicih was charged.against, the appropriate reserves; and, interest of $47,634.38, which was charged . .against the current:year's operations. At November 30, 1945, consolidated tax reserves, carried in current liabilities, amounted to $1,137,761.24, against which were held United States.Tax Savings N tcs of a redemption value of $7':|4,759. Reserves applicable to prior years aggregated $873,821.-)2, ;.which should be more than adequate to cover any liability that may be asserted and maintained by -:ft he Treasury: Department.: Pending-'examination of years subsequent to 1941, it is impossible to de-y tc: mine whether or not the Comps ay is entitled to any credit under the car.ry-back provisions of i he : Ej cess Profit Tax Act. As prcviov.ly reported, renegotiation proceedings under the War Profits Control Act were con- cl tided for. tile fiscal years ended November-30, 1942 and 1943, .by a finding that no excessive profits;!y fwere .realized.: .Such proceedings, for the 1944 fiscal year, were waived by the reviewing authofitics; and it is the opin ion of your management that any thought of liability under the provisions of this ' Act can be dismissed. - -.7 ^'7 . . '7 ' 7f m.m-vm . .-" m'.. ;-.-,7... - DIVIDENDS . Throughout the 1945 fiscal year, the annual dividend rate of 60c per share was maintained by regular quarterly payments of 15c per share. Effective with the December, 1945, quarterly payment .7 the rate was increased to 20c---equivalent to an annual rate of 80c per share. .... , .. .; i_ ..._ i4dl Stii -- - -.-. i v- - i i.--*-. -i---- . .j_. j * .( t k1 x *-* . ^ fc * *-f ' >^s^,t` * Thcrc|has been no change.in the dividend policy of your Directors from that enunciated m last j ear s repc|rt. If future earnings exceed dividend requirements under the present scale and if the con- c net and development of your Company's operations docs not: necessitate the retention of such excess, your Direc|ors 'will continue to give Sympathetic consideration to a further increase in the regular rate or to periodic declaration of extra payments. . -.BALANCE. SHEET Net working capital at November 30, 1945, as reflected by the excess of current assets over total liabilities (including unmatured debentures), amounted to $10,410,909.80, in comparison with $8,684,310.13 at November 30,-1944. If reserve fund investments in United States Government se curities be included, the corresponding figures were $12,926,961.55 and $11,157,628.77, respectively-- an increase !of $1,769,3321.78. , . Operating' income.;for the year, after, provision fon income taxes but before deducting charges classified ss depletion, depreciation, etc., amounted to $2,761,643 80. Of this amount, $607,209.62 was expended for capital additions and $245>417,54, for exploration and prospecting. Acquisition of a forty per j:cnt interest in McArchur-lrwin, Ltd,.,-of Canada absorbed $205,500.95; and other minor accounts increased ir. the net amount of $78,333-98. Common dividends paid or accrued during the year totallqll $577,899-40. These disbursements aggregated $1,714,361.49, leaving $1,047,282-31 available from operating income. Progress in liquidation, of the company's investment in Mexico, reported upon hereinafter, produced $722,050.47, raising.tfae foregoing balance to $1,769,332.78, which represents tile above mentioned increase in the excess of current assets (including reserve fund invest ments) overiltotal liabilities. i. . At November 30, 1945, the 889,076 common shares outstanding had a-book value of $21.90 per share, of which $14-54 was covered by net current assets; $5.35 was. in vested in fixed assets; and $2.01 was represented by all other assets. ' . ' / , , : :: t . - . Reserve funds were again fully invested at November 30, 1945, and excess investments in United States .Government securitics-were included in current assets.' Reserves for future decline in inventory values and for contingencies remained unchanged at $2,100,000. While no specific conditions are ap parent whicli would require substantial charges to these reserves, it is deemed advisable to retain them pending the ibcablishment of more stable economic conditions. , Account^ receivable, at November 30, 1945, were almost-.incredibly current. The Company's policy is to p'rovide reserves for doubtful receivables on the basis of the age of the individual accounts. At the balance-sheet date, the accumulated reserve was some $140,000 in excess of estimated require- meats. Hence, the current year's provsion was reduced by $80,000, as was done in the preceding -yeardt; -(d'V;7 - G G))1, 7.\, - ' GG'GG .r-b,a:.G. Consolidated inventories increased $1,018,855-26 during the year, The increase in value of metal content of ores, metals and metal-bearing products was in direct ratio to the tonnage increase. The , increase in. manufacturing - materials 'and -.supplies reflected moderate accumulation of certain basic commodities, [future delivery of which .could be adversely affected by strikes within the producing .industry,:f .. - ' -^-`Ais-'^xplsilWed. in previous reports, the indenture, under which the Company s,.debentures are is- . sued, contain! certain provisions relating to the payment of dividends. At the present level of indebt edness, maintenance of net working capital of $5,145,000 is required. In comparison therewith, net working capital (as defined in the indenture) at November 30, 1945, amounted to $16,356,961-55 or - an excess of $11,211,961.55- With respect to net quick assets, the corresponding excess was$8,734,783.24 Accumulated earnings to November 30, 1945, available for payment of dividends, amounted to $3,809,243- ;. MINING AMD SMELTING OPERATIONS ' During the year under review, the Company's Tri-State mills bcncficiatcd 3,222,960 thns of ore, in comparison with 3,869,721 tons in 1944; and produced therefrom 123,035 tons of concentrates, in comparison with 170,039 tons in the preceding year. The reduction in ore mined and milled.was ap proximately 17%--which continues to-be substantially below the corresponding decrease of over 26% in the number of employees. In October, 1945--for the first time in many months--employment showed an increase ; and, at date of this report, the improvement in the available labor supply is making itself apparent in a proportiona te increase in mine production.' Of the reduction of 47,004 tons in concentrate production, approximately 40% resulted from a decline in grade of ore; while 60% resulted'from the dccrc&ixf in ore milled as explained above. - - ........ - - , At November 30, 1945, the investment.in and advances to Mexican subsidiaries had been reduced itq $490,835, represented by the following assets: ; . . .7 ... . . Net current and working assets.'.......... ...... ...........:...................$ 34,174.193 Repair parts, maintenance supplies, etc....................... . . 122,556.31 Mining lands, leases and development work; and mine and mill , buildings and equipment--less depletion and depreciation..3.21,932.87 Prepaid and deferred'charges...'............... .................................. 10,916.83 ; : " ... $489,580,207 Accumulated operating deficit-'to date .(alter provision of . $657,540.52 for depiction and depreciation)__ ... 1,564.08 7 " ' ... , '' . '' . 7, $491,144.28 : Minority interest: (6%) in- Mihas.de Guerrero, S. A...:-,... ... . 309.287 '' 7 7 . : : $490,835.00 -As.explained-in previous.reports, the stock investment in the Mexican parent company, Eagle-Pi chef dc Mexico, 5. A., was restricted, to $20,618.56(100,000 pesos). All.other funds required fprthe develop-. raent of the Mexican properties were supplied, as advances, so, that they might be recovered without 'being subjected to United States income-taxes. Consolidated operating income of Eagle-Pich'er de: MexicOi.and subsidiaries, for; the - fiscal year ended November'30, 1945.,. after- provision pf $126,738.22 for Mexican income taxes but before provisionfor depletion '.and dcptcriationy.itmounred.t6 $532,510.62k' Liquid at i m of various assets prodncc.il an additional- $216,223.91. Of the total- funds of $748,734.53 -sb provided,- $26,684.06'was.,effpdpded for-capital additions arid the balance.of $722,050.47 was appliedi rii re lao ion of the above.'adyanccs,'-which;.at'November 3Q.T944, had amounted, to $1,214,885.47 and; .wdre'thereby reduced to $430.j835 at November 30, T945-7.' In addition to liquidation payments,: yourl Company has:received $94,474.63 as inretest on its advances, paid by the Mexican corporation under tile requirements of Mexican law. and taken into account, from year to year, in the income, acdoiint ofy The EagJe-PiclierCompany. Production ofthcMexican.operation, for.the.year underreview, amounted 7 to 52,342 short tons of concentrates. 7 . 7 :7-: :. . .. 7 .7.;.: ,i.i '7 Operations of the St. Xavier mine arid Suaharita mill, near Tucson, Arizona, produced 32,464 , concentrate tons and a net -profit , of $465,074-98, before provision for Federal .income taxes. As pro. viously reported, die Sr. Xavier mine is operated under a royal tv agreement, whereby your Company becomes owner of the fee when rovalty payments shall have aggregated $300,000. To November 30. 1945, such payments amounted to $217,501.32. G E Nl ERAL Pursuant to the recommendations of vour Board of Directors, the stockholders, at the annual meeting held on March 25, 1945, approved an employees' Retirement Plan. The entire cost of the Plan is borne by the Compaiiv. The funds, as computed bv independent actuaries, are presently being paid over to three non-management directors and, by them, invested in United States Govern ment securities. The Company's contribution (or the fiscal years ended November 30, 1944 and 1945, amounted to $155,000, all of which was charged to operations of the current year. The net cost to the Company, after Federal income taxes, was approximately $90,000. Payments during the first ten years of operation qf flycp Plan will include such amounts as arc required.to liquidate the accumulated prior service'cost; thereafter, only the: current cost will have to be paid each year to maintain the Plan,' While, as consistently pointed our in these reports, your Company has no reconversion problem in the usual sense of the word, it cannot avoid the impact of general economic conditions. Whether or not progress is made in the solution of the nianv problems which hamper resumption of muchneeded full-scale production, vour Company is well equipped--both in facilities and personnel---to maintain and improve its position. In conclusion, it is again our privilege to express to our associates, in the management and to all . employees of the alii Hated companies, wherever and in whatever capacities they may be employed, recognition of their contribution to the year's accomplishment'!*;.and, to customers, dealers and dis tributors, appreciation of their continued confidence, loyalty and tolerance under conditions that have not shown the improvement rhar we had hoped for and cxpccred. .. ' ., ; ' v \ o . '. ' x;, v" For the Hoard of Directors, fV ' C . ., . .. TCiw c in j s t a t i , Oii;iio Sg ;J nil '23, 11946 , 'i .. : Jo s e p h Hu mme l , Jr . " ' . Chairman . Jo e l M, Bo w l b y President 3imTh<* Common shares of the Com pa nr are dealt: in on the New York Stock-Exchange, ! s ^cm&idiclaiegi iMa/aiice as tsi'o ASSETS CURRENT ASSETS: NOVEMBER 30. IMS NOVEMBER 30, 1144 Cash in Banks and .on'.'Hand.......... ; ' . . $ 3,830,428.99 $ 3,311698.31: U. S. Government Obligations--at cost let value at November 30, 1945--$1,313,549.21)................. / ' , ' Accounts and Notes Receivable.................................. $ 4,362,031.02 Less: Reserves for Doubtful Accounts and Notes,....... 345,423 00 1,313,440.31' $ 4,514,909.09 4,016,608.02 358,722.31 1,530,000.00 ' 4,156.186.78 Inventories of B.aw Materials, Work in Process, Finished Products and Supplies: Ores, Metals, and Metal-1 can ig Products--valued at the lower of cost or tr arlctt price of i ictal con tent, plus manufacturing- co;ts on Materials in Process and Finished Products.................... . Other Products and Merchandise for Resale--at cost 6,193,629.63 367,468.10 5,349,860.48, . 346,938.54 7. ' . 6,561,097.73 5,696,799.02' '" . Manufacturing Materials and Supplies--at cost....... 776,080.58 7,337,,178.31 . 621,524.03 6,318,323-05 16,497,655.63 15,316,208.14 RESERVE FUND -'INVESTMENTS;- U. S. Government . Obligations--at cost fMarket value at November 30, 1945--$2,519,030.12) ....................... 2,516,031.75 : 2,473,318.44 OTHER ASSETS: Repair Parts, Maintenance Supplies', etc.-- ............ ......' , Miscellaneous Accounts, Advances, etc......... .. ......... ' Sundry Securities-v-at or below cost. . .1 ........ . 648,332.28 . 217,211.85 18,427.93 883,972.06 638,564.86 118,557.89 15,667.70 -l , 772,790.45. INVESTMENT IF AND ADVAN3ES TO ATr LIA P'S: Subsidiary not consolidated..... ..... ....................... Other Affiliate............................ ................. ..... ....... 490,835.00 205,500.S-'5 " ,1,212,885.47 . cl f ' ' 696,335.93 ' 1,212,885.47 FIXED ASSETS: Mining Lands and Leases; Mills, Sm.-ltrn and fabricat ing Plants and Equipment; Railroad Trackage and Equipment; and Miscellaneous Prope ties and Equip ment (incJudirg $64,777.33 excess :o t of acquisition over book valuc of net assets acquiicd)........................ l ess: Reserves for Depletion, Depreciation, etc............... 32,506,48:3 40 27,754,707-62 . 377 33,971,242.06 * ,751,775-78- 27,702,861.64 -v 5,26,360.42 TR1 ASURY STOCK--10,924 shins .4 tost............................... 61,797.56'; 61.79 h 56 PRtFAID AMD DEFERRED CHARGE;;: Prepaid Freight, Insurance, e x........ Miscellaneous Deferred Charges .... 104,58: .05 105,560.24 . ' ' -'118,909.67' ': 210,141.29' d 81,101.70200,011.37,- PATENTS, >3 3 0 0WIL, lie. 1.00 $25,617,731.02 S .00 $25,305,392.85 Flf N l RES' 'F COt; :A - ; Is SI.;,: . r. iiwwsqn a pasrasnawm ifltnn FM<fii|M!Ki| ce|P3R |* I ,r SS iu T*"' 5 Ia& cU 'jtycnie'mA&y- 3, 43-35 a&u 4,93/M LIABILITIES CURRENT LIABILITIES: , : Accounts Payable............................-. . Dividend on Common Stock.............. - Accrued Liabilities: . Wages and Salaries................... ....., Taxes--other than taxes on income. . Other........... .. .'.. i .........'.... . Provision for Federal and State Taxes on Income. Less: U. S. Treasury Tax Savings Notes.at redemption value................................ .......... . . Debenture Sinking Fund Payment....... .................. .......... , NOVEM'B.ER 38, 1945' , $ 1,444,484.11 177,815.20 NOVEMBER 30. 1S44 $ 1,529,300.78 133.551.40 333,611.01 140,382.64 167/'30-63 1,137,761.24 :l7 . 744,759.00 ; $. 288,041.13 186.306.78 641,444.28;.,,. 83 760.21 2,190,864.91 393 .'002.24 1,499,737.40 285,000-00 2,941,745.83 563,108.12. 691,127.51 '285,000.00'': 3.201,897.81 ? TTTEN YEAR ' INKING I IJND DEBENTURES--DUE .. NOV EM BEIi 30, 1937.......... .................................. I.en.\ Sinking Fund-Payment di c within one year , (included in Current Liabilities). ..................... .. 3,430,000.00}' ;-T d . - -' 285,0)0.00 .T, 145,000.00 3,715,000.00. .' -V ; 285,000.00 3,430,000.00- .RESERVES:-'; ;W. Y':;. v- i. V;, Foi Self Insurance: orl: men's Compensacion. Fire and Tornado.............. Foe Furisre Dccline in Inventory Values. Fo: lorringcncies. .. a............................ 315,751.19 101,5*7.17 417,2??. 36. 1,300,000 00 800,000,00 2,517,298.36 280.526.55 93,794.26 374,3 20.81 1,530,000 DO " - 'SeO.OOO.OO-^ 2,474,320.81 IC0 MMI K ! T '.ICl? -- Par 1 rai-ic $.10: Authorised..................................... 1,000,000 shares. Issue I r.ud '.Outstanding................. 9'00,000 shares. 9,000,000.00 9.000,000 00 c'SUMPtlVS: Cap'1, al Surplus................................................. Earr-d durplu:.--per accompanying statement. 1,900,999.32 6,112,687-51 8,013,686.83 $25,617,731-02 1,900,999.32 3,293,174.91__.',.1.99,-174.33 $25,305,392.85 I pd qii ss irassf*! f in THE EAGLE-PICHER COMPANY AND SUBSIDIARIES (/rjo)tAo/rc/<r/"f/ r /J <:/ ' i'/W'/U <mul & <mu / Scmietl FOR THE YEARS ENDED NOVEMBER 30, 1S45 AND 1944 , NET, S^C:ES'(i,hfI^din'g"pfpjij,cri,6i),'T>teitl,itvifhs)'w;V PRODUCTION AND MANUFACTURING COSTS... NOVEMBER 30, 194b ,, - $41,290,803.05 35,532,733.66 GROSS OPERATING PROFIT --before Depletion and Depredation................... . .................................... 5,758,069.39 EXPENSES: , Selling.'........ . .. ................................................ Traffic, Warehousing, and Shipping....... .............. General and Administrative___...................... .. $1,004,846.95 . 434,791.97. 1,333,802.93 ; V . 2,773,441.85 NET OPERATING INC0ME---before Depletion and Depreciation: . Mining and Manufacturing......... ............... ... . Northeast Oklahoma Railroad Company......... : ' ' OTHER INCOME: .: .... .................. Royalties....................................... ,.................... . Interest From Subsidiary not consolidated.... . Other Interest and Dividends......................... ... Miscellaneous............ ............... 75,382.25 31,054.15 58,148.18 120,127.17 INTEREST PAID: ^ On Debentures................... /.................................... On Federal tax deficiency............ ............. 130,025.00 147,634.38 DEPLETION, DEPRECIATION, ETC.: ~" Provision for Depletion and Depreciation .... . 1,053,484.74 Provision for Write-down of Properties .................. 25,000.00 . 1 Abandoned Projects, Prospecting Expenses and : Loss on Retirement or SaleofCapital Assets 290,747.06 '2,984,627.54 244,963.89 3,229,591T43 284,711.75 3,514,303.18 177,659-38 3,336,643.80 ;. 1,369,231.80 NET PROFIT--before provision for Federal and.. State Income Taxes.................................... . 1,967,412.00 PROVISION FOR FEDERAL AND STATE INCOME TAXES (Excess Profits Tax--nil)................. . . .. 275,000.00 NET PROFIT FOR YEAR ,....... 1,692,412.00 SURPLUS CHARGES: . Settlement of National Labor Relations Board , . ; case (including legal fee).................................... - Appropriation to Reserve for Contingencies ... - . 300,000.00 s SURPLUS NET PROFIT.............................................. 1,392,412.00 EARNED SURPLUS AT BEGINNING OF YEAR .. DIVIDENDS PAID AND ACCRUED: ` Preferred................................... Common ............................. ........... .. EARNED SURPLUS AT END 0 F Y EAR ........ . 5,298,174.91 6,690,586.91 ^ 577,899-40 $6,112,687.51 NOVEMBER 30, 1944 $46,962,692.64 39,045,481.70 7,917,210.94 $1,035,111.29 352,013-88 1,304,440.90 2,691,566.07 96,856.31 43,839-24 35,568.11 129,756.42 151,672.50 2,633,871.90 63,163-82 491,001.25* 5,225,644.87 367,344.21 5,592,989.08 306,020.08 5,899,009.16 151,672.50 5,747,336.66 3,188,036.97 2.559.299.69 1,000,000.00 1.559.299.69 32,934.00 533,445.60 300,000-00 1.259.299.69 4,605,254.82 5,864,554-51 566,379.60 $5,298,174.91 Page Eight "" "