Document KRqdop9ZjK99Zw8zvLb7m65YQ

IMPORTANT Doehler-Jarvis Corporation has approximately 5,660 shareholders, of whom approximately 4,860 own less than 200 shares each. This makes it impor tant that proxies be returned by every shareholder who cannot attend the meeting, whether the particular shareholding is of one or many shares. DOEHLER-JARVIS CORPORATION Notice of Special Meeting of Shareholders To Be Held February 6, 1953 and PROXY STATEMENT A Special Meeting of Shareholders of DOEHLER-JARVIS CORPORATION, a Michigan corporation, will be held at the office of the Corporation, No. 1501 Paris Avenue, S. E., Grand Rapids, Michigan, at 11' o'clock A. M., on February 6, 1953, for the following purposes: (1) To consider and act upon a proposal that: (a) the Corporation sell all its property and assets, including its good-will, to National Lead Company, a New Jersey corporation, substantially upon the terms and condi tions set forth in an Agreement and Plan of Reorganization between National Lead Company and the Corporation dated January 2, 1953 (referred to below as the "Agreement"), the provisions of which are summarized below and copies of which will be available at the meeting; and (b) upon the consummation of the aforesaid sale of assets, the Corporation be dissolved; and (2) To transact such other business as may lawfully come before the meeting or any adjournment thereof. The transfer books will not be closed but only such holders of Common Stock as are holders of record at the close of business on December 29, 1952 will be entitled to notice of and to vote at the meeting. SUMMARY OF PROPOSAL TO SELL ASSETS TO NATIONAL LEAD COMPANY AND TO DISSOLVE THE CORPORATION The performance of the Agreement entered into between the Corporation and National Lead Company (referred to below as "National") is subject to approval by shareholders of the Corpora tion as described below. Briefly, the Agreement provides that: (1) The Corporation will sell, transfer and deliver to National all of its property and assets of every kind and nature, including its good-will; (2) National will assume all of the debts and liabilities of the Corporation; 1 NL 000040642 (3) Upon the consummation of the sale of the Corporation's assets to National, the Corpo ration will be dissolved and National shall cause shares of its Common Stock to be issued and delivered to the Corporation's shareholders at the rate of 1.15 shares thereof for each share of Common Stock of the Corporation outstanding on a date to be selected by the Corporation (which shall be approximately the date of the sale of assets) and entitled to participate in the distribution. Scrip certificates will be issued in lieu of fractional shares. The scrip certificates when combined with other scrip certificates of like tenor representing one or more full shares of Common Stock of National will be exchangeable for shares of Common Stock of National together with all dividends paid to the scrip agent with respect to such shares. They will be in bearer form and will not entitle the bearer to any dividend rights except as referred to above, or any voting rights or other rights of stockholders. The scrip certificates will be exchangeable for Common Stock for approximately two years after the date of issue (at which time the underlying Common Stock will be sold and the proceeds distributed upon surrender of the scrip) and will become void for all purposes approximately six years after the date of issue. The Agreement contains various representations and conditions, including the obtaining of the requisite statutory votes of the shareholders of the Corporation and a condition that the number of shares of stock of the Corporation, the holders of which shall have voted against the sale of assets and shall have demanded payment of the fair cash value of their shares within the time and in the manner provided by the Michigan General Corporation Act as more fully herein after set forth, shall not be greater than shall be acceptable to National in its sole judgment, provided that if such number be not acceptable National shall notify the Corporation to that effect within ten days after such number shall have been determined, or such later date as may-j be mutually agreed upon. National has advised the Corporation that its present intention is that it would proceed with the Agreement if the holders of not more than five per cent of the shares of Common Stock of the Corporation vote against the sale and demand payment as afore said. The Agreement is also conditioned upon a ruling by the Federal Bureau of Internal Revenue to the effect that the transaction will be tax-free for income and capital grains tax purposes. The Agreement further provides that it may be abandoned by either party if prior to the closing representations made by the other party shall prove substantially untrue or the other party shall suffer loss by calamity, substantially and adversely affecting the value of its assets or business, and that the Agreement shall terminate when and if it is determined that the conditions precedent will not be complied with and, in any event, if the closing does not take place prior to April 1, 1953 or such later date as the parties may agree. The Board of Directors of the Corporation has unanimously approved the Agreement, stating that it deemed the proposed sale of assets expedient and for the best interests of the Corporation and has authorized the proper officers of the Corporation to carry out the provisions of the Agreement subject to the performance of the terms and conditions set forth therein. OUTSTANDING VOTING STOCK AND VOTE REQUIRED The Corporation has issued 1,074,544 shares of Common Stock, of which 6,902 shares are held in its treasury, leaving a balance of 1,067,642 shares outstanding and entitled to vote. Each shareholder of record is entitled to one vote for each share held. Approval of the proposal with respect to the sale of assets will require the authorization by affirmative vote of the holders of a majority of the shares of the issued and outstanding Common Stock of the Corporation and approval of the proposal with respect to the dissolution of the Corporation will require the authorization by affirmative vote of the holders of three- 2 NL 000040643 fourths of the issued and outstanding Common Stock of the Corporation. Since the Agreement is conditioned upon the requisite statutory approval of both transactions, the sale of assets will not be completed unless the dissolution of the Corporation is so authorized. Section 73 of the Michigan General Corporation Act provides that within thirty days after the dissolution a certificate, signed by the holders of at least three-fourths of the outstanding stock of the Corporation shall be filed with the Michigan Corporation and Securities Commission and a duplicate original thereof with the county clerk where its registered office is located, showing that all the debts and liabilities have been paid or provision for the payment thereof made and the assets have been distributed pro rata among the shareholders or provision for such distribution made. The enclosed form of proxy authorizes the persons named therein to sign such certificate. BASIC REASONS FOR SALE OF ASSETS In the opinion of the management of the Corporation, the following are basic reasons for and advantages of the proposed sale of assets of the Corporation: 1. Both National and the Corporation are in the metal field. Each has recorded an out standing success. The consolidation of the businesses of the two companies is a logical one and their joint efforts should produce greater accomplishments. Although the products of the two companies differ, both companies are experienced in the production of non-ferrous metal products. Substantial economies can be expected through consolidation of purchase requirements in National. There may also be economies in sales, accounting, auditing, tax, finance and other departments. Furthermore, National already has access to other markets and customers which should provide a ready outlet for the Corporation's production. 2. The modernization program begun in 1946 at three of the Corporation's plants has already required an investment of over twenty million dollars. The sale to National will provide available cash resources to enable the continuance of the expansion program. While the Cor poration, through borrowings or other financing, might itself obtain such cash resources, it is believed that the operation of the Corporation's business as a division of a large and financially strong company should facilitate expansion and growth. In the past, the Corporation has expanded only through the use of accumulated earnings. 3. In exchanging their shares for National's Common Stock, the Corporation's shareholders will acquire a continuing interest in a company catering to many industries. The Corporation's sales to the automotive industry alone have in the last ten years averaged 45% of its total sales. Any recession in the automotive industry could, therefore, have an adverse effect on the Cor poration's future. Assuming that such a recession would not be accompanied by recessions in the fields in which National is now engaged, the consolidation of the business of the Corporation with that of National should minimize this risk, since a decline in sales to the automotive industry alone would represent a relatively small reduction in the total sales of National. 4. National has had a record of excellent attainment in the business world which is attributable in considerable measure to its management. Such management should result in greater success and stability for the future. 5. National has continuously paid dividends since 1906. The Corporation has continuously paid dividends since the consolidation of Doehler Die Casting Co. into W. B. Jarvis Company effective January 1, 1945. Doehler Die Casting Co. (incorporated in 1908) had a record of paying dividends in each year since 1940 and W. B. Jarvis Company (incorporated in 1926) since 1936. The addition of the Corporation's earnings to National's earnings should result in higher sales and earnings of National, and continued dividends on the Common Stock of National may be expected. 3 NL 000040644 The ratio of exchange (1.15 shares of Common Stock of National for 1 share of Common Stock of the Corporation) was arrived at by negotiation between representatives of the two companies following an offer by National, and represents the ratio most favorable to the stockholders of the Corporation which National would agree to. In addition to the statistical factors set forth below, such as relative market values, there were considered such factors as the investment qualities of the two stocks, including their respective market price to earnings ratios, and an estimate of future prospects of each company, bearing in mind the nature of their businesses and the type of management now available to each. BUSINESS AND PROPERTIES OF THE CORPORATION The business of the Corporation consists primarily of the manufacture (including finishing) of die castings in zinc, aluminum, magnesium and copper alloys. The products range in size and character from small simple pieces to large castings of the most intricate form. The outlet for its products includes the following industries: automotive, electrical appliances, office and home appli ances, radio, washing machine, hardware, vacuum cleaner, and other industries requiring parts for mechanical devices. In 1951 approximately 10%, and in the first nine months of 1952 approximately 21%, of the volume of the Corporation was derived from national defense work. The Corporation has nine plants located in five cities: Toledo, Ohio (2), Grand Rapids, Michigan (2), Pottstown, Pa. (2), Batavia, New York (2), and Chicago, Illinois (1). BUSINESS OF NATIONAL LEAD COMPANY (Information relating to National set forth under this heading and elsewhere herein has been furnished to the Corporation by National.) T National Lead Company (including its subsidiaries) is primarily a manufacturer and fabri cator of paints, pigments, oils, lead products, bearings, oil well drilling materials, and special metals. Products National Lead Company makes and sells over 200 individual products, most of which are set forth below under the caption Principal Properties of National Lead Company and Subsidiaries. Among the more important lines of its products are the following: Paints. "Dutch Boy" paints and paint materials are among the best-known in the country, with a record of consistent national advertising under that trade name for over 46 years. Pigments. The last two decades have seen a remarkable growth in the production and use of titanium pigments. These pigments are used extensively in the production of paints and enamels, as well as in plastics, paper, ceramics, floor coverings and rubber goods. National has also con tinued to produce and sell pigments such as white lead and lead oxides, while developing entirely new materials which are now being successfully marketed--largely to paint manufacturers. Oils. Linseed oil and castor oil are produced in substantial quantities through partly owned subsidiaries. These and other special purpose oils are sold mainly to paint manufacturers and to painters, but research is bringing out new uses which are being exploited with promising results. Lead Products. National has had long experience in fabricating lead and its alloys. Such products go into residential and industrial buildings, chemical and textile installations, and auto mobile and electronics work. National also is an important supplier of storage battery plate metal, and is one of the oldest producers of metal for the printing trade. Bearings. National processes railway journal bearings for many railroads. Diesel engine bearings and metals for special-purpose bearings are also produced. 4 NL 000040645 Oil well drilling materials. Modern drilling for oil requires the use of weighting material for efficient operation. National mines and markets barytes, bentonite and related materials for this purpose and furnishes technical service to insure their proper use. In the recent past, other appli cations for these products have been developed and are showing promise. Special metals. Titanium in its metallic form is produced by a 50%-owned subsidiary which operates the first fully-integrated commercial plant for the purpose in the world. This plant is expected shortly to reach an output of ten tons a day of the metal which is in extraordinarily keen demand from the aircraft industry and others which require light weight, great strength, and high heat-resistance. Zirconium, with exceptional corrosion resistance, is another bright-future metal produced by National. Antimony is mined in Mexico and smelted in Texas. A relatively small part of National's lead requirements comes from its two mines in Missouri. One of these mines also produces cobalt and nickel which are about to be extracted by a new process. National, through a majority-owned subsidiary, is operating the Nicaro, Cuba, mine and reduction plant for the production of nickel, under contract with the General Services Administration of the United States Government. The relative amount of business done by National in its major categories is approximately 50% for paints and pigments, 30% for fabricated metal products, 11% for bearings, 7% for oil well drilling materials, and 2% for miscellaneous products. Distribution Paints are sold principally through dealers to the public; most other products are sold direct to manufacturers. Customers include the chemical, construction and maintenance, steel, petroleum, railroad, plastics, printing, automotive, paint, and electronics industries. Because of the large number of separate products produced by National and going to various industries and other uses, a setback in any one particular industry (unless part of a general business and industrial recession) would not seriously affect National's earnings. The sale of any one product of National to any one industry would account for not more than an estimated 15% of total sales. Raw Materials Raw materials are to a great extent bought from primary producers. Noteworthy exceptions are ilmenite (source of titanium pigments and metal) which National mines at its properties in the United States and Norway; oil well drilling materials, mined in the United States; and a por tion of its lead requirements, reclaimed from scrap metal. National is not dependent to any substantial degree on foreign sources for its raw materials. Plants and Physical Properties of National Lead Company and its Subsidiaries National Lead Company and its domestic subsidiary companies own or lease and operate a large number of manufacturing plants, mining properties and retail paint stores in widely separated locations in the United States. Other subsidiary companies own and operate manufac turing plants and mining properties in Canada, Mexico, Argentina, England, Norway and Ger many. The properties are located in or near principal cities and have, in general, been kept and maintained in good condition. A schedule of principal properties owned and/or operated by National and its subsidiary companies follows. NL 000040646 PRINCIPAL PROPERTIES OF NATIONAL LEAD COMPANY AND SUBSIDIARIES Note Location Products and Business Cl) Brooklyn, N. Y. Brooklyn, N. Y. (1) Perth Amboy, N. J. Sayville, L. I. CD Philadelphia, Pa. (1) Baltimore, Md. CD Buffalo, N. Y. CD Cincinnati, Ohio Cl) Atlanta, Ga. Cl) Cleveland, Ohio Cl) Pittsburgh, Pa. (1) St. Louis, Mo. Cl) St. Louis, Mo. 85 Jay Street 105 York Street 231 State Street 2607 East Cumberland Street 214 West Henrietta Street 116 Oak Street 659 Freeman Avenue East and Bishop Streets 1786 Columbus Road 1376 River Avenue 5548 Manchester Avenue Mississippi River and River des Peres Oxides of lead General research laboratories Lead alloys, cast lead, white lead, lead pipe, mixed paints, smelter, refinery Paint testing grounds White lead, lead oxides, lead products, lead chemicals, color pigments Lead pipe:, sheet lead Lead pipe: Lead pipe, lead alloys Oxides of lead, lead pipe, sheet lead, cast lead Lead pipe, sheet lead, cast lead Lead pipe, sheet lead, lead alloys White lead, lead oxides Barium sulphate and calcium carbonate products (2) Genevieve County, Mo. Cl) Granite City, 111. Cl) Granite City, 111. Kansas City, Mo. St. Paul, Minn. Cl) St. Louis Park, Minn. (1) Omaha, Neb. CD Dallas, Tex. Cl) Dallas, Tex. Cl) Charleston, W. Va. (1) Chicago, 111. CD Chicago, 111. CD Chicago, 111. CD Detroit, Mich. CD Indianapolis, Ind. (2) Fredericktown, Mo. C2) Baxter Springs, Kan. C2) Potosi, Mo. (2) Malvern, Ark. C2) Houston, Tex. (2) Merced, Cal. (2) Osage, Wyo. C2) El Portal, Cal. (2) Colony, Wyo. C2) Hector, Cal. CD Los Angeles, Cal. CD San Francisco, Cal. CD San Francisco, Cal. Cl) Oakland, Cal. CD Seattle, Wash. Seattle, Wash. 16th and "C" Streets 15th and State Streets 1406 West 13th Street 102 West Fairfield Avenue Hampshire Street and Highway 7 2810 "A" Street 959 Terminal Street Morrell Street and M.K.T. Tracks 900 West 18th Street 12042 South Peoria Street 2639 West Lexington Street 3501 Griffin Street 1600 East 21st Street Fountain Farm Magnet Cove 2510 Crockett Street Clay Spur Colony Plant 3113 East 26th Street 2240 24th Street Army and DeHaro Street 4701 San Leandro Street 1128 W. Spokane Street 114 Westlake, North Barytes mine Lead pipe, sheet lead, cast lead, smelter Steel package plant Warehouse Warehouse Lead alloys, lead products, refinery Lead alloys, lead products Lead alloys, lead products Oxides of lead, smelter Oxides of lead, lead silicates Lead pipe, lead alloys White lead, lead oxides, mixed paints. Lead pipe, sheet lead, lead products J Kirksite dies Smelter and refinery, secondary metals Mine and concentrator mill for lead bearing ores Mine and concentrator mill for lead and zinc bearing ores Barytes ore bins, ore crusher and concentrator Barytes ore crusher, concentrator and flotation mill Chemical thinners for oil well drilling muds Barytes and bentonite clay mill Mine and mill, bentonite clay Mine and mill, barytes Mine and mill, bentonite clay Mine.bentonite clay Mixed paints Mixed paints Varnish and lacquers White lead, lead oxides Mixed paints Warehouse Spokane, Wash. N. 908 Howard Street Warehouse Cal., Ore., Wash., Idaho, Ariz., Colo., Utah Forty-nine locations Retail stores for paint and paint products CD Laredo, Tex. Smelter and refinery, antimony oxides and metallic antimony C2) Tahawus, N. Y. CD Sayreville, N. J. CD St. Louis, Mo. CD Niagara Falls, N. Y. CD Ellwood City, Pa. Essex County Foot of Chevalier Avenue Mississippi River and River des Peres Lafayette Avenue and Hyde Park Boulevard Early Street Mine, ilmenite ore Titanium oxide pigments Titanium oxide pigments Ceramic materials and metallurgical alloys Steel alloy valves No t e : (1)--Manufacturing plants. (2)--Mines and MUls. 6 IML 000040647 Note (1) Albany, N. Y. (1) Depew, N. Y. (1) Cincinnati, Ohio (1) Waynesboro, Pa. (1) Atlanta, Ga. (1) Houston, Tex. (1) Ft. Worth, Tex. (1) Topeka, Kan. (1) Chicago, 111. (1) St Louis, Mo. (1) Kansas City, Mo. (1) Milwaukee, Wis. (1) Denver, Colo. (1) Los Angeles, Cal. (1) Portland, Ore. (1) Fitchburg, Mass. Location 1120 Central Avenue Ellicott Road 1029 West 7th Street 7th and Ringgold Streets 1090 Pryor Street, S. W. 1417 Hardy Street 101 New York Avenue Adams Street and Santa Fe Yards 2234 West 43rd Street 4153 Clayton Avenue 1711 Cherry Street 4901 West State Street 2945 Blake Street 6135 District Boulevard 3074 N. W. Helen's Road 133 Water Street (1) Cincinnati, Ohio 533 Reading Road (1) Indianapolis, Ind. 0) St. Louis, Mo. 429 South Harding Street 4501 Fyler Avenue Na t io n a l Le a d Co mp a n y o f Ma s s a c h u s e t t s (1) Boston, Mass. 800 Albany Street Th e Ch a s . Ta y l o r So n s Co mp a n y Cincinnati, Ohio Taylor, Kentucky 706-710 Burns Street South Shore Ba k er Ca s t o r Oil Co mp a n y 0) Bayonne, N. J. 0) Jersey City, N. J. (1) Los Angeles, Cal. 40 Avenue A Bay and Washington Streets 5585 East 61st Street Pie r c e Oil Pr o d u c t s Co r p o r a t io n (1) East Rochester, N. Y. Ma s t e r Me t a l s , In c o r po r a t e d (1) Cleveland, Ohio 2850 West Third Street Mo r r is P. Kir k & So n , In c . 0) Los Angeles, Cal. 0) Portland, Ore. (1) Salt Lake City, Utah Emeryville, Cal. 2717 South Indiana Street 5909 N. W. 61st Avenue 977 South Sixth West Street 4050 Horton Street Ca n a d a Me t a l Co mp a n y , Lt d . 0) Montreal, Quebec, Can. 0) Toronto, Ontario, Can. 0) Vancouver, B. C., Can. (1) Winnipeg, Manitoba, Can. 6265 Notre Dame Street East Berkshire and Eastern Avenue 1428 Granville Street 301 Chambers Street Gr e at We s t er n Sme l t in g Co . Lt d . (1) Vancouver, B. C., Can. 310 Prior Street Na t io n a l Le a d Co mp a n y , S.A. (1) Buenos Aires, Argentina Villa Lugano (1) Fridley, Minn. (2) Mexico (2) Mexico (2) Mexico (1) (2) Norway (various locations) (1) England (1) Germany Min n e s o t a Lin s ee d Oil Co mp a n y Cia Ex p l o t a d o r a d e Min e r a l e s d e Me x ic o , S.A., Wadley, S.L.P. Cia Min e r a y Re p in a d o r a Me x ic a n a , S.A., Wadley, S.L.P.. Co mp a n ia Min e r a d e Oa x a c a , S.A. Los Tejocates, Oax. Tit a n Co mp a n y A/S a n d Su b s id ia r ie s Ho y t Me t a l Co mp a n y o f Gr e a t Br it a in , Lt d . Tit a n g es e l l s c h a f t m.b.H Products and Business Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings Railway journal bearings and castings, screen plates and valves Foundry and machine shop, locomotive equipment Precision bearings Precision bearings Lead pipe, sheet lead, lead alloys Refractories Refractories Manufacture castor oil and derivatives Manufacture castor oil and derivatives Manufacture castor oil and derivatives Processing of vegetable oils Smelter and refinery, secondary metals Lead oxides, metallic lead products Smelter and refinery, secondary metals Smelter and refinery, secondary metals Warehouse Metallic lead products Lead oxides, metallic lead products Metallic lead products Metallic lead products Metallic lead products Smelter primary lead, metallic lead products Linseed oil Antimony mines Antimony mines Antimony mines Mine ilmenite ore, manufacture mixed paints Metallic lead products Titanium oxide pigments No t e : (1)--Manufacturing plants. (2)--Mines and Mills. 1 7 NL 000040648 wmm. SELECTED COMPARISONS BETWEEN THE CORPORATION AND NATIONAL Market Prices of the Common Stocks of the Corporation and of National The high and low sales prices of the Common Stock of the Corporation and of National, as quoted on the New York Stock Exchange, for each quarterly period within the past two years, were as follows: Doehler-Jarvis Corporation Common Stock National Lead Company Common Stock1* National Lead Company Common Stock (*1.15)* Low High Low High Low High 1952 4th Quarter..................... ................ 3rd Quarter..................... ................ 2nd Quarter..................... ................ 1st Quarter..................... ................ 27 -- 35 27 -35*4 n31 -34*4 31*4 -36*4 27/--32/ 28*4 -32/ 25*4 -- 32*4 27*4 -- 33 31.63--37.09 33.06 -- 37.38 29.61 -- 37.23 31.48 -- 37.95 1951 4th Quarter.................... ................ .........3rd Quarter..................... 2nd Quarter..................... ................ 1st Quarter..................... ................ 33/ -- 38 31*4 -- 38/ 30/ -- 35*4 30/ --35/ 27/ -33/ 25 -- 32%* 22*4 -- 28/ 21/ -- 25/ 31.63 -- 38.53 28.75 -- 37.28 26.07 -- 32.78 24.92 -- 29.33 * Adjusted for 3 for 1 stock split in October, 1951. The closing market prices of the Common Stock of each company on December 29, 1952 were as follows: 1 Doehler-JarviB Corporation Common Stock (1 share) National Lead Company Common Stock (*1.15) $33.50 $36.51 Comparative Book Values The book value per share of the Common Stocks of the two companies on June 30, 1952 (unaudited) was as follows: the Corporation (1 share), $33.22; National (1 share x 1.15), $15.70 (including $2.34 of intangible assets). 1952 Dividends Dividends declared for the full year 1952 were as follows: the Corporation, $1.75 per share; National, $1.45 per share (equivalent to $1.67 per 1.15 shares of National's Common Stock). Comparative Earnings and Dividends--January 1, 1945-June 30, 1952 Summaries of Earnings of the Corporation and of National, including earnings per share and dividends per share, appear on the two following pages. 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G' is rt Si? 8-3 u6 W o co OS 43 5-g S >* Q * 3 <a Cf 43 o 53 43 Gc 5 4G> CO o<= uJS 43 O U Sox j s a 5^ n x Bi faW HW -< M CO O' CO *o 10 vn o ov $ K" ca c .2 St KS ^ xp PC I sg JZ * |22S S 00 I 6 o U q Cn o v $ ^00 OVO >ntO0N <a a .2 rt jp G O c9r o ca u & -4 laa# 1l2-sa^ ca T o 2S 5M *NrI41sN & s a o b .2 1*325 .a s -2 o |8 a> E 4.3 8S -S . ^a uG H-S ,s*s 0* ca wu <* >t a SM S> al O Q in 2s *0 n 3-e aX 43 WP U> (0 o o o o NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries PRO-FORMA STATEMENT OF INCOME After Giving Effect to Acquisition of Doehler-Jarvis Corporation (Assuming the issuance of 1.15 shares of National Common Stock for each outstanding share of Common Stock of Doehler except for Doehler shares held by National) Sa l e s , Les s Re t u r n s a n d Al l o w an c es ....................................... Six Months Ended 1951 June 30,19521 $475,803,076 $216,058,736 Co s t o f Sa l e s .......................................................................................... Gr o s s Pr o f it ................................................................... 359,159,986 116,643,090 Sh ip p in g , Se l l in g , Ge n er a l a n d Ad min is t r a t iv e Ex p en s e s . Ot h e r In c o me: Dividends: Securities of unconsolidated subsidiaries................................ Marketable securities ............................................................. Other security investments..................................................... Interest ........................................................................................ Investment reserves no longer required..................................... Royalties and rent........................................................................ Miscellaneous ............................................................................. Ot h e r De d u c t io n s : Additions to reserves: Investments in and advances to unconsolidated foreign subsidiaries........................... Inventory, net.................................................................................................................... Excess of cost of subsidiaries stock acquired during year over book amounts of net assets thereof at dates of acquisition.......................................................................... Net loss on sales and other retirements of fixed assets................................................. Interest expense.................................................................................................................... Miscellaneous ...................................................................................................................... 48,671,043 67,972,047 2,364,733 49,332 390,691 586,753 640,495 22,085 31,667 72,057,803 42,945 1,345,147 201,098 35,834 22,423 60,149 1,707,596 70,350,207 Pr o v is io n f o r Fed er al Ta x e s o n In c o me (Note 1)....................................................... Ne t In c o me f o r t h e Per io d ................................................................................ 42,313,823 $ 28,036,384 Ea r n in g s Per Sh ar e (after providing for Preferred Stock Dividends) o n 11,308,452 Sh a r e s ............................................................................................................................................ 2.29 191,563,421* -- -- 24,495,315 430,560 9,193 380,468 269,241 -- 12,481 48,936 25,646,194 -- -- 1,804 10,761 12,565 25,633,629 13,542,730 $ 12,090,899 .97 t In the opinions of the companies all known adjustments necessary to a fair statement of income for the six months ended June 30, 1952 have been included. * Includes shipping, selling, general and administrative expenses, the segregation of which is not practicable for inclusion in June 30, 1952 reports. (1) The provisions for Federal taxes on income represent the totals of the amounts shown by the statements of National Lead Company (and its wholly owned domestic subsidiaries) and Doehler-Jarvis Corporation. It is impractical to attempt a determination at this time of the amount of tax which would have been applicable to the combined operations if a consolidation of the companies had been effected at January 1, 1951. 11 1 NL 000040652 fSS hi INTERESTS OF DIRECTORS AND OFFICERS OF THE CORPORATION No director or officer of the Corporation and no associate (as that term is used in Regulation X-14 of the Securities and Exchange Commission) of any director or officer has any interest directly or indirectly in any matter to be acted upon at the meeting except in so far as the owner ship by such person of securities of the Corporation might be deemed to create an interest and except that he may become a director, officer or employee of National and except as hereinafter noted. Although National has not entered into any agreement with, or otherwise committed itself to, any such officer, director (other than Mr. Martino) or employee regarding continued employment by National or service as a director, officer or employee of National, it is contem plated that officers and employees of the Corporation will continue in the employment of the Doehler-Jarvis division of National and it is a custom of National to have the heads of its major divisions serve as directors and vice presidents of National so that in the normal course of events it is contemplated that Mr. Koegler, President of the Corporation, will become a vice president and director of National. No salaries have as yet been agreed upon. The amount of securities of the Corporation and of National beneficially owned directly or indirectly as of December 8, 1952 by the officers and directors of the Corporation, as furnished by them, is as follows: Name and Position Corporation Common Stock Shares Held as of December 8,1952 National 7% Cumulative Class A Preferred Stock 6% Cumulative Class B Preferred Stock Common Stock Herman H. Doehler............................. Honorary Chairman of the Board and Director 1,000 -0- -0-- -0- Lewis A. Jarvis...................................... Chairman of the Board and Director (1) 10,100 -O- -o~ -0- Frank J. Koegler.................................... President and Director (2) 1,700 -0- -0- Charles Pack.......................................... Vice President and Director 100 -0- -a- -0- Ernest R. Zabriskie.............................. Vice President and Director 2,100 -0- -o~ -0- Lemuel R. Boulware........................... Director (3) 2,500 -o- -a- -0- Arthur P. Caldwell, Jr......................... Director (4) 100 -0- -0- -O- Paul H. Davis....................................... Director (5) 450 -0- -0- -0- James Gerity, Jr.................................... -0- -0- -0- Director (6) -0- Joseph A. Martino............................... Director of the Corporation and President and Director of National Lead Company (7) 100 -0- -0- 29,823 Harold A. Nehrbas............................... Director 100 -0- -44- -O- 12 NL 000040653 Corporation Name and Position Jansen Noyes ................................. Director (8) Arthur W. Wakeley...................... Director (9) W. G. Gutmueller.......................... ....... Vice President (10) A. G. Gutmueller.......................... Vice President (11) R. H. Kitzman................................ ....... Vice President H. W. Bartholomew.................... ....... Vice President R. Bernhard ................................. Controller G. M. Bendiksen........................... Treasurer H. L. Samuels............................... ....... Secretary Common Stock 2,000 500 -0-0-0397 15 -0110 Shares Held as of December 8,1952 National 7% Cumulative Class A Preferred Stock 6% Cumulative Class 6 Preferred Stock -0- -0- -0- -0- -0- -0- -0- -0- -O- -0- -0- -0- -0- -0- -0- -0- -0- -0- Common Stock -0-0-0-0-0-0--0-- -0-0- (1) In addition, Mr. Jarvis is a trustee of a trust which owns 250 shares of Common Stock of the Corporation and 600 shares of Common Stock of National and Mr. Jarvis holds of record . but not beneficially an additional 62 shares of Common Stock of the Corporation. (2) Mrs. Koegler owns 500 shares of Common Stock of the Corporation. (3) Mrs. Boulware owns 1,300 shares of Common Stock of the Corporation. (4) It is contemplated that Chemical Bank & Trust Company, of which Mr. Caldwell is a Vice President, will act as Depositary and Distributing Agent under the Agreement. The Bank has in the ordinary course of business served as transfer agent for the Corporation and as trustee under retirement and pension plans, and the Corporation, as well as National Lead Company, has maintained bank accounts with it. (5) In addition, 500 shares of Common Stock of the Corporation were held in a trust from which Mr. Davis is entitled to the net income pursuant to the terms of a certain trust indenture. Mr. Davis disclaims beneficial ownership of said stock. Mrs. Davis owns 300 shares of Common Stock of the Corporation. (6) Gerity-Michigan Corporation, of which Mr. Gerity is President, beneficially owns 25,000 shares of Common Stock of the Corporation. (7) National Lead Company, of which Mr. Martino is President, beneficially owns 67,575 shares of Common Stock of the Corporation. National Lead Company is a party to the above mentioned Agreement and Plan of Reorganization. Mr. Martino's wife, daughter and son each owns 200 shares of National's Common Stock. (8) In addition, 100 shares of Common Stock of the Corporation are owned by a trust of which Mr. Noyes is one of two trustees. Mrs. Noyes owns 1,700 shares of Common Stock of the Corporation. (9) Mrs. Wakeley owns 400 shares of Common Stock of the Corporation. (10) Mrs. W. G. Gutmueller owns 2,000 shares of Common Stock of the Corporation. (11) Mrs. A. G. Gutmueller owns 200 shares of Common Stock of the Corporation. 13 NL 000040654 --------- - ' ....................... CERTAIN INFORMATION RELATING TO DIRECTORS OF NATIONAL Shares of Stock of National Beneficially Owned ______ Directly or Indirectly--Dec. 1,1952 Directors Class A Pfd. Class B Pfd. Common Leonard T. Beale, Chairman of the Board of Pennsylvania Salt Manufacturing Co............................................................. William V. Burley, Vice President......................................... AlfredH. Drewes, Vice President.............................................. Joseph A. Martino, President.................................................. David A. Merson, Vice President............................................ George L. Ratcliffe, Vice President....................................... Joseph H. Reid, Vice President.............................................. Winthrop Sargent, Jr. (Retired)............................................. James A. Taylor, President of The Canada Metal Co. Limited (a subsidiary of National)..................................... Herman T. Warshow, Vice President..................................... William J- Welch, Manager, Metal Department................. Harry C. Wildner, Vice President............... 20 -- -- -- -- -- -- -- -- -- -- -- -- 1,857 -- 19,130 -- 8,230 -- 29,823 -- 17,730 -- 11,330 -- 18,630 171 6,936 -- 18,030 -- 16,930 -- 4,530 -- 19,341 Remuneration The following table gives the names of the Directors of National in 1951, including the three highest paid officers, whose aggregate remuneration from National and its subsidiaries for 1951 was in excess of $25,000, exclusive of pension, retirement and similar payments. i m Column A shows the names of the individuals, and the capacities in which remuneration was i ;ii received; Column B, the fees, salaries and commissions received by each of such individuals; Column C, the bonuses and shares in profits paid to or set aside for each; Column D, the amount^ of National's portion of the premiums paid in 1951, supplementing the amounts paid by the :: below-named individuals themselves, under National's Retirement Annuity and Life Insurance Plan: A BCD William V. Burley, Vice President; General Manager, Magnus Metal Division.......... ................... ......................... Walter P. Carroll, former Vice President (Deceased)..... Alfred H. Drewes, Vice President.......................................... Joseph A. Martino, President.................................................. David A. Merson, Vice President; Sales Manager, Paints, Oils and Pigments.................................................................. George L. Ratcliffe, General Manager, Baroid Sales Division .................................................................................... Joseph H. Reid, Vice President; Manager, Titanium Division .................................................................................... Winthrop Sargent, Jr., General Manager, Titanium Alloy Manufacturing Division....................................................... Charles Simon, former Treasurer (Retired)....................... James A. Taylor, President, The Canada Metal Co. Limited...................................................................................... Herman T. Warshow, Vice President................................... Harry C. Wildner, Vice President.......................................... All persons as a group who were directors or officers during 1951 .............................................................................. $ 91,250.00 56,289.09 71,291.65 187,500.00 91,250.00 35,000.00 91,250.00 37,828.32 58,708.26 9,000.00 98.750.00 91.250.00 1,001,408.98 $ 13,687.50 9,568.75 28,125.00 $ 11,582.05* 7,769.83* 2,563.02 16,461.91 13,687.50 7,797.17 61,343.08f 15,516.16* 13,687.50 6,707.00 5,674.25 2,586.98 10,381.95 56,657.5If 14.812.50 13.687.50 7,955.62 10,965.60* 9,913.50* 241,962.34 114,609.46 * During 1951, National, in order to provide for the discharge of its obligations with respect to the below-named Directors under the Plan of Past Service and Minimum Pensions, purchased annuities for said Directors at the costs indicated opposite their respective names: William V. Burley--$14,437.29; Walter P. Carroll--$25,490.54; George L. Ratcliffe--$13,908.40; Herman T. Warshow--$25,409.69; Harry C. Wildner--$7,463.26. t Contract of Employment provides for profit-sharing arrangement. Amounts paid to and for Mr. James A. Taylor are in Canadian Dollaxs. 14 NL 000040655 COMPARATIVE TERMS OF COMMON STOCKS The following is a brief comparison of the rights of the holders of Common Stock of the two companies (and does not include any comparison of rights under statutes or other law of the respective states of incorporation) : Preferences and Priorities The Corporation has only one class of stock, i.e. its Common Stock. National has authorized 250,000 shares of 7% Class "A" Preferred Stock (par value $100 per share) of which 234,293 shares are issued and outstanding (exclusive of 9,383 shares held in its treasury), 250,000 shares of 6% Class "B" Preferred Stock (par value $100 per share), of which 90,185 shares are issued and outstanding (exclusive of 13,092 shares held in its treasury), and 20,000,000 shares of Common Stock (par value $5 per share), of which 10,158,375 shares are issued and outstanding. Dividends on both classes of such Preferred Stock are cumulative, and full cumulative dividends on such Preferred Stock must be paid before dividends may be paid on National's Common Stock. Shares of neither class of such Preferred Stock are redeemable. On liquidation, dissolution or winding up, each share of either class is entitled to be paid its par value plus all unpaid cumulative divi dends in priority to National's Common Stock. Except as otherwise provided by law, each share of Preferred Stock of National, of each class, is entitled to 30 votes and the Common Stock of National is entitled to one vote per share. Election of Directors The entire Board of Directors of the Corporation is elected annually by vote of the holders of its Common Stock and the by-laws of the Corporation (in accordance with the Michigan statutes) provide for cumulative voting. One third of the Board of Directors of National is elected each year for a term of three years by its Preferred and Common Stockholders, there being no provision for cumulative voting. The Corporation believes that there are no other material differences in the rights of the holders of Common Stock of the two companies under their present charters and by-laws. SHAREHOLDERS WHO DISSENT In accordance with the provisions of Section 44 of the Michigan General Corporation Act, any holder of Common Stock who votes against the proposed sale of the assets of the Corporation may, within 20 days after the date of the Special Meeting at which the sale was authorized, but not thereafter, object thereto in writing and demand from the Corporation the payment of the fair cash value of his shares as of the day preceding the day of such Special Meeting, excluding from such fair cash value any appreciation or depreciation in consequence of the action authorized, and surrender at such time to the Corporation the certificate oir certificates for his shares as to which he is demanding payment. If the Corporation and the shareholder cannot agree upon the fair cash value of the shares within 30 days after receipt of the demand by a shareholder, the Act provides for the appointment of appraisers whose determination, upon confirmation by court order, shall be final and conclusive. The right of any dissenting shareholder to be paid the fair cash value of his shares shall cease if and when the Corporation shall, within six months after such demand for payment, abandon such action or the shareholders shall revoke such action. No demand for payment of such fair cash value may be withdrawn by the shareholder making the same unless a majority of the Board of Directors of the Corporation shall consent thereto. Any shareholder who so demands payment for his shares shall not be entitled to vote such shares or to receive any dividends or distributions thereon, or to exercise any rights respecting such shares, unless and until such action entitling such shareholder to payment shall be abandoned or a majority of the Board of Directors of the Corporation shall consent to the withdrawal of such demand. 15 NL 000040656 Under Section 44 of the Michigan General Corporation Act, objection by any such shareholder pursuant thereto and his rights thereafter under said section shall be his exclusive remedy. The outcome of the votes at the Special Meeting will be released to the press immediately, and thereafter a written notice thereof will be mailed to all shareholders, but the giving of such notice will not operate so as to affect or extend the statutory periods set forth above. FINANCIAL STATEMENTS There are attached as Exhibits 1 and 2 hereto certain financial statements of National and of the Corporation. All of said financial statements are part of this Proxy Statement and are incorporated herein by reference. OTHER MATTERS This Proxy Statement is furnished in connection with the solicitation by the management of Proxies to be used at the aforesaid Special Meeting and any adjournment thereof. If a Proxy in the accompanying form is executed and returned, it may, nevertheless, be revoked at any time prior to its exercise. Shares represented by properly executed Proxies will be voted in accordance with the specifications, if any, made by the shareholder and if no specification is made will be voted in favor of the proposals. The management does not know of any matter other than those referred to in the foregoing Notice of Special Meeting of Shareholders and Proxy Statement that may come before said meeting. If any other matter properly comes before the Special Meeting-, however, the persons named in the accompanying form of Proxy intend to vote thereon in accordance with their best judgment. EXPENSE OF SOLICITATION The cost of solicitation of Proxies will be borne by the Corporation or, to the extent provided in the Agreement, by National. In addition to the use of mails. Proxies may be solicited personally, by telephone, or by telegraph, and the Corporation may pay persons holding stock for others their expenses for sending material to their principals. The Corporation has also retained Georgeson & Co. to assist in the solicitation of Proxies by the same methods by approxi mately 40 employees of said firm for limited periods. It is anticipated that said firm will receive a fee of $2,500 for such service, plus out-of-pocket expenses and disbursements estimated at $7,500. By Order of the Board of Directors: H. H. DOEHLER Honorary Chairman F. J. KOEGLER President January 2, 1953 Shareholders who are unable to attend the meeting in person are requested to complete, date and sign the enclosed Proxy and return it promptly in the enclosed envelope, which requires no postage if mailed in the United States. A prompt return of this Proxy will save the Corporation the expense of further communications. 16 NL 000040657 AUDITORS' REPORT Exhibit 1 To the stockholders of Na t io n a l Le a d Co mp a n y , New York, N. Y. We have examined the consolidated and individual balance sheets of Na t io n a l Le a d Co mp a n y and its wholly owned domestic subsidiaries (other than one wholly owned domestic subsidiary) as of December 31, 1951 and the related statements of income and surplus for the years ended December 31, 1949, 1950 and 1951. Our examinations were 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. We have also examined or reviewed, or have received reports of other independent public accountants upon their examinations of, the balance sheets of the afore-mentioned wholly owned domestic subsidiary, the major domestic subsidiaries more than 50, but less than 100 per cent owned and the major foreign subsidiaries other than Continental European, as of the close of their respective 1951 fiscal years and the related statements of income and surplus for the respective 1949, 1950 and 1951 fiscal years. In our opinion, based upon the above-outlined examinations and the above-mentioned reports of other independent public accountants, the accompanying financial statements present fairly the consolidated financial position of National Lead Company and its wholly owned domestic subsidiaries at December 31, 1951 and the consolidated results of their operations for the years ended December 31, 1949, 1950 and I 1951, and the combined financial position of National Lead Company's major domestic subsidiaries more than 50, but less than 100 per cent owned and major foreign subsidiaries (other than Continental European) at the close of their respective 1951 fiscal years and the combined results of their operations for the respective 1949, 1950 and 1951 fiscal years, in conformity with generally accepted accounting I principles applied on a consistent basis, except for the changes, which we approve, in the method of pricing ! inventories explained in Note 2 to the consolidated financial statements and Note 1 to the combined financial statements. is )\ Ly b r an d , Ross Br o s . & Mo n t g o me r y New York, March 6,1952. 17 NL 000040658 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries CONSOLIDATED BALANCE SHEETS June 30, 1952 (Not Examined by Independent Certified Public Accountant!)) December 31, 1951 (Examined by Independent Certified Public Accountants) Cu r r e n t As s e t s : June 30,1952 Cash ................................................................................... $ 21,357,536 United States Government securities at cost (approxi mately equivalent to amounts at market quotations) (Note 1) ....................................................................... 9,784,993 Other marketable securities, at cost, less reserves of: 1952, $109,181; 1951, $129,960 (at market quotations: 1952, $3,756,292; 1951, $3,129,564).............................. 1,594,811 Notes receivable, trade....................................................... $ 81,810 Accounts receivable, trade............................................... 27,623,403 Accounts and notes receivable, other............................... 2,608,951 Less, Reserves for losses............................................... 30,314,164 2,067,754 28,246,410 Inventories (Note 2)......................................................... Notes receivable from employees.................................... 59,505,764 299,579 Total current assets........................................ 120,789,093 December 31,1951 $ 23,418,857 22,762,718 $ 55,468 30,799,447 2,119,832 32,974,747 2,047,334 817,964 30,927,413 55,404,739 302.519 133,634,210 In v e s t me n t s in a n d Ad v an c es t o Un c o n s o l id a t e d Su b s id ia r ie s (Note 3) : Investments, at cost or below...................................... Advances ........................................................................ Less, Reserves ................................................................ 11,947,753 3,624,503 15,572,256 4,724,152 10,848,104 11,504,976 3,614,155 15,119,131 4,776,385 10,342,746 Mis c e l l a n e o u s In v e s t men t s a n d Ad v a n c e s , a t Co s t o r Bel o w ........................................................................... Less, Reserves ................................................................ 1,804,124 45,826 1,758,298 1,806,529 45,826 1,760,703 Pl a n t , Pr o p e r t y a n d Eq u ip me n t , a t 1915 Ap pr a is e d Va l u e s , Su b s eq u e n t Ad d it io n s a t Co s t (Note 4).... Less, Reserves for depreciation, depletion and amor tization ........................................................................ 137,560,495 73,665,149 63,895,346 133,320,357 71,215,202 62,105,155 In t an g ibl es (Note 5)......................................................... . 20,769,088 Less, Reserve for amortization........................................ 40,584 20,728,504 20,770,904 38,566 20,732,338 Pr ep aid Ex p e n s e s , Def er r ed Ch a r g e s , Et c .................... 2,456,692 $220,476,037 1,740,516 $230,315,668 The accompanying notes are an integral part of the consolidated financial statements. 18 NL 000040659 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries CONSOLIDATED BALANCE SHEETS June 30, 1952 (Not Examined by Independent Certified Public Accountants) December 31, 1951 (Examined by Independent Certified Public Accountants) LIABILITIES: Cu r r e n t Lia b il it ie s : Notes payable, miscellaneous............................................ Accounts payable ............................................................... June 30,1952 $ 564,297 13,094,899 Accrued liabilities: Taxes ............................................................................. Other ............................................................................... $ 34,704,304 4,588,062 39,292,366 Dividend payable August 1, 1952 and February 1, 1952 on Class B preferred stock............................................ Due to unconsolidated subsidiaries................................... 135,277 275,076 Total current liabilities.................................. 53,361,915 December 31,1951 $ 129,990 13,773,217 $ 50,283,364 1,498,103 51,781,467 135,277 231,162 66,051,113 Re s e r v e s : Pension (Note 6).... Inventory (Note 2) 730,416 13,746,400 14,476,816 1,679,060 15,011,777 16,690,837 CAPITAL: Ca p it a l St o c k (Notes 7 and 8) : Preferred Class A, 7 pet cumulative, noncallable, $100 par value, shares authorized 250,000; issued and out standing 243,676 ............................................................. Preferred Class B, 6 pet cumulative, noncallable, $100 par value, shares authorized 250,000; issued and out standing 103,277 ............................................................. Common, $5 par value, shares authorized 20,000,000; issued and outstanding 10,158,375 (including shares issued under Stock Purchase Plan, Note 8).............. 24,367,600 10,327,700 50,791,875 Ea r n e d Su r p l u s : Appropriated (Note 9): Fire insurance reserve.......... Employer's liability reserve. Contingencies reserve .......... Unappropriated ........................ 85,487,175 4,797,284 426,664 4,080,358 65,181,822 Less: Reacquired capital stock (Note 10)......................... Employees' notes receivable under Stock Purchase Plan (Note 8)......................................................... $159,973,303 $ 2,583,081 4,752,916 $ 7,335,997 152,637,306 $220,476,037 24,367,600 10,327,700 50,791,875 85,487,175 4,797,284 426,664 4,080,358 60,276,950 $155,068,431 $ 21,583,081 4,911,632 $ 7,494,713 147,573,718 $230,315,668 The accompanying notes are an integral part of the consolidated financial statements. 19 1 NL 000040660 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries CONSOLIDATED STATEMENTS OF INCOME For the Six Months Ended June 30, 1952 (Not Examined by Independent Certified Public Accountants) For the Years 1951, 1950 and 1949 (Examined by Independent Certified Public Accountants) Six Months Ended June 30,1952f Sa l e s , Les s Re t u r n s a n d Al l o w an c e s (Note 11)...... Co s t o f Sal es (Note 2)....................................................... $176,185,388 153,603,633* Gr o s s Pr o f it ................................................. Se l l in g , Ge n er a l a n d Ad min is t r a t iv e Ex pe n s es ........ Ot h e r In c o me: Dividends (Note 3) : Securities of unconsolidated subsidiaries...................... Marketable securities ..................................................... Other security investments.............................................. Group life insurance dividend............................................ Interest ............................................................................... Investment reserves no longer required......................... Miscellaneous .................................................................... 22,581,755 430,560 76,768 380,468 225,623 48,936 Ot h e r De d u c t io n s : Additions to reserves: Investments in and advances to unconsolidated foreign subsidiaries .................................................................. Inventory, net (Note 2)................................................. Pension reserve, to cover estimated additional past service requirements ................................................... Excess of cost of subsidiaries' stocks acquired during year over book amounts of net assets thereof at dates of acquisition .................................................................. Net loss on sales and other retirements of fixed assets.... Miscellaneous .................................................................... $ 23.744,110 $ 10,761 ` $ 10,761 Pr o v is io n s f o r Fe d er a l Ta x e s o n In c o me (including excess profits taxes, $2,135,000 in 1952, $8,770,000 in 1951 and $4,245,000 in 1950) (Notes 2 and 12).............. $ 23,733,349 12,658,709 Ne t In c o me f o r t h e Pe r io d (Note 2)......... Sp e c ia l It e m: Adjustment of December 31, 1949 inventory ($766,276) less applicable federal taxes on income incident to adoption of ``last-in, first-out" inventory valuation method (Note 2)............................................................. $ 11.074.640 Ne t In c o me a n d Sp ec ial It e m..................... 1951 $389,941,313 291,068,193 98,873,120 41,708,706 57,164,414 2,364,733 218,270 390,691 482,443 640,495 31,667 $ 61.292.713 $ 42,945 1,345,147 201,098 35,834 60,149 $ 1,685,173 $ 59,607,540 36,613,823 $ 22.993.717 1950 $342,727,911 254,498,120 88,229,791 37,367,616 50,862,175 2,694,206 213,558 380,080 426,940 100,840 $ 54.677.799 $ 120,000 $ 120,000 $ 54,557,799 28,067,155 $ 26,490,644 475,091 $ 26,965,735 1949 $257,461,599 205,614,738 51,846,861 31,271,069 20,575,792 1,035,234 220,666 388,116 302,290 83,690 $ 22.605.788 $ 770,674 216,387 427,147 $ 1,414,208 $ 21,191,580 6,442,568 $ 14.749.012 t In the opinion of the company all known adjustments necessary to a fair statement of income for the six months ended June 30, 1952 have been included. * Includes selling, general and administrative expenses the segregation of which is not practicable for inclusion in June 30, reports. The accompanying notes are an integral part of the consolidated financial statements. See accompanying schedule for distribution of supplementary profit and loss information. 20 mmm NL 000040661 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries CONSOLIDATED STATEMENTS OF EARNED SURPLUS UNAPPROPRIATED For the Six Months Ended June 30, 1952 (Not Examined by Independent Certified Public Accountants) For the Years 1951, 1950 and 1949 (Examined by Independent Certified Public Accountants) Six Mouths Ended June 30,19S2 Balance at beginning of period........................... $60,276,950 Add: Net income, per accompanying statement.... 11,074,640 Net income and special item, per accom panying statement .................................... $71,351,590 1951 1950 1949 $61,343,176 $49,942,543 $44,645,882 22,993,717 14,749,012 26.965,735 $84,336,893 $76,908,278 $59,394,894 Deduct: Cash dividends declared: Preferred, Class A, $7 per share........... $ 820,026 Preferred, Class B, $6 per share........... 270,555 Common, $.50 per share in 1952, $1.41% in 1951, $1.33% in 1950 and $.75 in 1949 (adjusted to reflect the 1951 stock split) ............................................ 5,079,187 Transfer to common capital stock account in connection with reduction in par value and split of the common stock (Note 7) 6,169,768 $ 6,169,768 $ 1,640,051 $ 1,640,051 $ 1,640,051 517,755 494,400 494,400 14,381,756 16,539,562 13,430,651 15,565,102 7,317,900 9,452,351 7,520,381 $24,059,943 $15,565,102 $ 9,452,351 Balance at end of period............. $65,181,822 $60,276,950 $61,343,176 $49,942,543 The accompanying notes are an integral part of the consolidated financial statements. 21 NL 000040662 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries CONSOLIDATED STATEMENTS OF CAPITAL SURPLUS For the Years 1951, 1950 and 1949 (Examined by Independent Certified Public Accountants) Balance at beginning of year 1951 $8,102,965 1950 $4,523,071 1949 $4,523,071 Excess of aggregate subscription amount over aggregate par value of common stock issued under Stock Purchase Plan (Note 8)...................................................................... 1,082,488 3,579,894 Excess of amount based on market quotation over cost of 7,785 shares of Preferred Class B treasury stock issued for capital stock of another company.................................. Transfer to common capital stock account in connection with reduction in par value and split of the common stock (Note 7) .............................................................................. Balance at end of year...................................... 224,791 9,410,244 8,102,965 9,410,244 -- $8,102,965 i $4,523,071 The accompanying notes are an integral part of the consolidated financial statements. 22 NL 000040663 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. United States Government securities include cost amounts on deposit as follows: 1952 In connection with self-insurance of workmen's compensation risks, etc..... $1,010,262 As collateral for bank loan of an unconsolidated subsidiary......................... 750,259 $1,760,521 1951 $1,010,345 750,275 $1,760,620 2. Inventories consist of metals and other raw materials on hand and in process, finished stocks, etc. (it is not practicable to state the classifications separately) the amounts of which enter into the computation of cost of sales; and materials and supplies; as follows: June 30, 1952 1951 December 31, " '' 1950 1949 1948 Metals, etc............................ $52,874,410 Materials and supplies...... 6,631,354 $48,478,172 6,926,567 $43,287,406 5,537,074 $40,977,094 4,279,216 $53,033,532 6,084,781 $59,505,764 $55,404,739 $48,824,480 $45,256,310 $59,118,313 Inventories are priced at the lower of cost (on various "average", "first-in, first-out" or "last-in, first-out" bases) or market. During 1950 the company adopted the Lifo method of pricing with respect to certain basic inventories. In accordance with income tax requirements inventories as of December 31, 1949 were increased by $1,399,178, with compensating credits to the normal stock reserve and to earned surplus. In these financial statements the last named credit is shown on the income statement as a special item. As a result of the adoption of the Lifo method, income for 1950 before provision for federal taxes on income was $2,317,496 less, provision for federal taxes on income was $3,843,948 less, and net income was $1,526,452 more than would otherwise have been the case. The inventory reserve has been maintained on the basis of the following quantities and prices of normal stocks: Normal Quantities (Short Tons) Fixed Inventory Price per Pound Lead........................................................................................................ 49,687^ Tin.............................................................................................................. 1,124 yi Antimony................................................................................................... 1,400 Linseed oil................................................................................. 3,125 $ .03 .21 .05 .06 A charge of $507,745 was made to income for 1949 in connection with an increase in the normal quantity of antimony and a credit of $430,000 was made to income for 1951 in connection with the elimination of the normal quantity of flaxseed. Physical quantities of certain metals were lower at the end than at the beginning of 1951. A provision of $1,775,147, representing the difference between year-end market prices and cost (determined under the last-in, first-out method), for replacement of such quantities is included in the inventory reserve at December 31, 1951. Partial replacement was made during the six months ended June 30, 1952. The inventory reserves include, in addition to the normal stock reserves, general inventory reserves of $800,000 at both June 30, 1952 and December 31, 1951. There were no changes in the general inventory reserves during the periods covered by these financial statements. Intercompany profits in inventories are not considered to be material in amount. 3. Unconsolidated subsidiaries comprise foreign subsidiaries, which are subject to various exchange and other controls of the respective foreign governments, and domestic subsidiaries more than 50, but less than 100 per cent owned. 23 1 ML 000040664 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued Combined financial statements at December 31, 1951 of the major unconsolidated subsidiaries (other than Continental European) are attached. Changes in this group of subsidiaries are described in Note 2 of notes to combined financial statements. The equity of National Lead Company and its wholly owned domestic subsidiaries, consolidated, in the net assets of unconsolidated subsidiaries included in the accompanying combined financial statements exceeded its investments in- and advances to such subsidiaries, after deducting applicable reserves on the books of National Lead Company, by $16,641,268 at December 31, 1951. Financial statements at June 30, 1952 of unconsolidated subsidiaries are not available. The equity of National Lead Company and its consolidated subsidiaries in net income of the combined subsidiaries as a group, and the cash dividends received from this group of subsidiaries and included in consolidated income, are as follows: Equity in Net Income Cash Dividends Received Six months ended June 30, 1952............................. ........................ Year ended December 31, 1951................................... ........................ Year ended December 31, 1950................................... ........................ Year ended December 31, 1949................................... ......................... (not available) $3,435,649 2,450,106 26,777 $ 381,693 2,364,733 2,596,477 879,274 During 1950 certain domestic unconsolidated subsidiaries adopted the Lifo method of inventory pricing. As a result of this change the equity of National Lead Company, consolidated, in the net income of sub sidiaries included in the combined statement of income for 1950 was $850,445 less than would otherwise have been the case. The accompanying combined financial statements do not include the financial statements of The Titanium Alloy Manufacturing Co. Pty. Limited (an Australian subsidiary) organized in October, 1951. The invest ment therein of National Lead Company is not material. Unaudited financial statements received from the Continental European subsidiaries (other than the German subsidiary) indicate that the equity of the National Lead Company interests in the net assets thereof at September 30, 1951 approximated the following foreign currency amounts: Norwegian kroner............................................................................................................................. Belgian francs .................................................................................................................................. Dutch florins ..................................................................................................................................... French francs..................................................................................................................................... 11,420,000 17,680,000 1,300,000 36,480,000 National Lead Company's investments in and advances to Continental European subsidiaries, less applicable reserves, amounted to $136,120 at June 30, 1952 and December 31, 1951. Cash dividends paid to National Lead Company by a Norwegian subsidiary are included in consolidated income at the U. S. dollar amount received, as follows: Six months ended June 30, 1952................................................................................................... Year ended December 31, 1950 ..................................................................................................... Year ended December 31, 1949 ..................................................................................................... $48,867 97,729 70,264 The equity of National Lead Company in net income (based on unaudited financial statements) of companies of which exactly 50 per cent of the outstanding capital stock is owned by National Lead Company, and the cash dividends received from such companies are as follows: Six months ended June 30, 1952 Year ended December 31, 1951... Year ended December 31, 1950... Year ended December 31, 1949... Equity in Net Income (not available) $164,823 149,159 318,480 Cash Dividends Received $360,000 360,000 360,000 360,000 24 NL 000040665 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued 4. Plant, property and equipment at June 30, 1952 and December 31, 1951 comprise the following: Manufacturing properties: Land....................................... Buildings............................... Machinery and equipment. Mining properties................... Construction in process........ Miscellaneous.......................... 1952 $ 4,020,895 29,415,288 81,934,647 17,728,155 1,340,395 3,121,115 1951 $ 4,057,035 26,422,888 67,079,724 17,739,954 15,215,946 2,804,810 $137,560,495 $133,320,357 Provisions for depreciation, depletion and amortization are charged to income on the following bases: Manufacturing facilities (except as set forth in the following paragraph) on the straight-line method at the following rates: Buildings: 2)4 per cent to 5 per cent per annum Machinery and equipment: 4 per cent to 10 per cent per annum During 1949, the company adopted the diminishing balance method of computing depreciation on the manufacturing facilities of its Titanium Division, at a 20 per cent rate, in lieu of the straight-line method theretofore employed. (As a result of the change in 1949 in the method of computing depre ciation on manufacturing facilities of the Titanium Division, depreciation charges were approximately $2,571,000. higher, and consolidated net income was approximately $2,571,000 lower, for that year, than would have been the case if the company had continued the use of the straight-line method.) The diminishing balance method was continued, during 1950, 1951 and the six months ended June 30, 1952, as applied to facilities acquired prior to December 31, 1948 and subsequent normal acquisi tions. The company has adopted the straight-line method of computing depreciation with respect to the costs of manufacturing facilities put into operation in 1952 in connection with a material expansion program of the Titanium Division. Mining facilities, including land, buildings and machinery and equipment--at rates per ton of material produced, or on the straight-lme method at varying rates, based on the shorter of estimated physical or economic life of the property. Furniture and fixtures--at 10 per cent per annum. Autos and trucks--at 40 per cent for the first year of service and 20 per cent for each of the next three years of service. Patents, licenses, etc. -- over their respective lives. Trade-marks and good will -- none, see Note 5. Some properties whose values are considered to be contingent upon such factors as patents, licenses, leaseholds, etc., are amortized over the lives of such factors. Maintenance, repairs, renewals and minor betterments are charged to income. Reserves for depreciation, depletion and amortization are generally relieved of the accumulated amounts applicable to properties retired or otherwise disposed of at the time of disposition of such properties and profit or loss is currently recognized. 5. Intangibles include "trade-marks and good will'' of $20,692,311, representing substantially the excess of book amounts of fixed assets in 1915 over the amounts thereof as shown- by appraisals made in that year. No reserves for amortization of such intangibles have been provided. As explained on several occasions in annual reports to shareholders of the company, no attempt was made prior to 1915 to determine the amounts of such intangibles, since in most cases going concerns (including tangible assets, business, good will and trade-marks) were acquired through the issuance of shares of capital stock of National Lead Company. The properties so acquired, including intangibles, were recorded on the books of the company at an aggregate amount equal to the par value of the shares so issued. Patents and licenses are included at amortized cost. 25 NL 000040666 RWaBRSi Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued 6. The company's Retirement Annuity Plan became effective January 1, 1937 and covers service subsequent to that date. All full time employees under age 64 are eligible on completion of one year of service before reaching that age. Employees are required to make monthly contributions under the plan and such contributions, together with the company's, are paid to an insurance company which assumes responsibility for retirement annuities purchased thereby. National Lead Company has reserved the right to change or discontinue the plan at any time. The annual cost to the company is presently estimated to be $1,200,000. The company's Plan of Past Service and Minimum Pensions (non-contributory) provides for pensions for qualified employees who were in the company's service on December 31, 1936 and covers service prior to that date. Such pensions are not part of the plan underwritten by the insurance company. National Lead Company has, however, reserved the right to purchase from an insurance company annuities for past service and minimum pensions and has provided a reserve for the cost of such annuities which cost at June 30, 19S2 is estimated to be $905,000. Under both plans, the annual retirement benefits are based on average annual salaries and periods of service; the combined annual retirement benefits of no officer or employee may exceed $37,500. 7. In October, 1951, the stockholders approved an increase in the authorized common stock of the company from 5,000,000 shares of $10 par value to 20,000,000 shares of $5 par value, and also approved the exchange of three shares of $5 par value common stock for each share of $10 par value common stock then outstanding. The split of the common stock and reduction of par value resulted in an increase of $16,930,625 in the aggregate par value of common stock issued, which increase was provided by the transfer of $9,410,244 from the capital surplus account, being all of the then existing capital surplus, and $7,520,381 from earned surplus unappropriated. The stockholders also approved an increase in the number of votes to which each share of Class A preferred stock and each shave of Class B preferred stock, of the par value of $100 each, shall be entitled, except as otherwise provided by law, at all meetings and for all purposes, from 10 votes per share to 30 votes per share. 8. Under the company's Stock Purchase Plan for Officers and Other Key Employees, adopted in- 1950, certain officers and employees contracted to purchase common stock of the company. The purchase prices (market prices at the dates of execution of the purchase contracts) are evidenced by promissory notes bearing interest at 3 per cent payable within 10 years from dates thereof, the shares serving; as collateral. Payments against interest and principal of the notes shall be not less than fifty per cent of the dividends paid on such collateral shares. The employees have the option to, and the company may require that they, withdraw the collateral in hundred-share lots as payments become equal to the purchase price thereof. Upon death or retirement of an employee, the company shall, if requested, repurchase at the original sales price shares not then fully paid for. Under other circumstances if the employee shall not complete payments, the company shall have the option of so repurchasing shares not then fully paid for but may exercise any legal right to compel completion of the contract. Shares issued in accordance with the plan aggregated 19,050 in 1951 and 113,850 in 1950. Shares held as collateral aggregated 321,000 at June 30, 1952 and 333,100 at December 31, 1951, sifter giving effect to the split of the common stock. No further purchases may be made under the plan. 9. Reserve balances at January. 1, 1951 transferred to and reclassified as earned surplus appropriated. There were no other changes in these accounts during the periods covered by these financial statements. 10. Reacquired capital stock, carried at first-in, first-out cost, comprises: Number of Shares Preferred Class A....................................................................... 9,383 Preferred Class B....................................................................... 13,092 Cost $1,147,727 1,435,354 $2,583,081 26 NL 000040667 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued 11. Intercompany transactions among consolidated companies have been eliminated from sales and cost of sales. Sales to unconsolidated subsidiaries are included in the following approximate amounts: Six months ended June 30, 1952............................................................................. Year ended December 31,1951............................................................................ Year ended December 31,1950............................................................................ Year ended December 31,1949.............................................................................. $ 4,204,000 10,701,000 9,430,000 7,227,000 12. Numerous differences exist between taxable income and book income, including certain fluctuations in the inventory reserves; percentage depletion; depreciation charges; and purchases of past service annuities deductible for tax purposes but charged on the books to reserve for pensions. General: The consolidated financial statements include all wholly owned domestic subsidiaries of National Lead Com pany operating in the United States. The companies included in consolidation were the same during the six months ended June 30, 1952 and the years 1951, 1950 and 1949 except as follows: American Lead Corporation and John T. Lewis & Bros. Company were liquidated as of June 30 and December 31, 1949, respectively, and as of those dates their assets were transferred to and liabilities assumed by National Lead Company. In November, 1950, National Lead Company acquired all of the capital stock of Sayre and Fisher Land Company and the latter company is included since December 31, 1950. The following companies are included from the dates of their formation or from the dates of acquisition of all their capital stock by National Lead Company, in 1951: Titanium Pigment Export Corporation Cobalt Nickel Reduction Company The Chas. Taylor's Sons Company National Lead Company of Hawaii, Ltd. Baroid Sales Export Corporation is included from the date of its formation in 1952. , The equity of National Lead Company in the net assets of consolidated subsidiaries, as shown by the books of the latter, was $1,170,886 and $596,432 in excess of the investment in such subsidiaries shown by the books of the parent company at June 30, 1952 and December 31, 1951, respectively. Such excesses have been adjusted in consolidation by a debit to land in the amount of $536,956 and credits to earned surplus in the amounts of $1,707,842 at June 30, 1952 and $1,133,388 at December 31, 1951. Under agreements with the Atomic Energy Commission, two consolidated subsidiaries are operating plants constructed with funds supplied by the Commission. Neither the assets, liabilities, nor results of operations of such plants are included in the accompanying financial statements. Annual fixed fees received by such subsidiaries as contract-operators are included in miscellaneous other income in the accompanying consoli dated statements of income. Refunds under the Renegotiation Act of 1951, if any, are not considered to be material and no provisions have been made therefor. No provisions have been made for such taxes as may be paid if and when accumulated earnings of subsidiaries are distributed to the parent company, since such taxes may never accrue. In connection with the final decree heretofore entered in the civil antitrust suit brought by the government, the company now has an extension of time to January 1, 1953 within which to submit a plan either for the sale of the company's interests in its partly owned company in Japan or for the purchase by the company of the interests of others in that company. Also in connection with the plan submitted by the company and approved by the court Titangesellschaft m.b.H. of Leverkusen, Germany, in which the company formerly had a fifty per cent interest, became wholly owned through purchase, during the six months ended June 30, 1952, of the remaining capital stock. 27 NL 000040668 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued National Lead Company is a party to the following suits or proceedings: A proceeding by the Federal Trade Commission against National Lead Company and four other companies concerning lead pigments. Proceeding still pending. Anti-trust actions instituted by the Government in the United States District Court for the Western District of Missouri against National Lead Company and a number of other companies with respect to the sale and distribution of used storage batteries and lead salvaged therefrom. Actions still pending. Declaratory judgment action instituted by the Dutch Paint Company in- the United States District Court for the Northern District of California involving alleged infringement of National Lead Company's "Dutch Boy" trade-mark. Action still pending. Treble damage anti-trust action instituted by Dutch Paint Company in the United States District Court for the Northern District of California against National Lead Company and another company in regard to the sale and distribution of titanium pigments. Action still pending. Two actions instituted by individual patent owners against National Lead Company in the United States District Court for the Southern District of Texas alleging that the well logging activities of one of National Lead Company's divisions infringe certain United States Letters Patent. Action still pending. Suit instituted by the Government in the United States District Court for the Southern District of New York under the Defense Production Act to enjoin National Lead Company's alleged violations of price stabiliza tion regulations and to recover alleged damages therefor. Suit still pending. 28 NL 000040669 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries SUPPLEMENTARY PROFIT AND LOSS INFORMATION For the Years Ended December 31, 1951, 1950 and 1949 Item Maintenance and repairs: 1951 ...................................................................................... 1950 ...................................................................................... 1949 ....................................................................................... Charged Directly to Profit and Loss To Cost of Goods Sold Other $10,866,039 8,102,029 8,050,921 $ 154,529 121,313 101,580 Totals $11,020,568 8,223,342 8,152,501 Depreciation, depletion, and amortization of fixed and intangible assets (or charges in lieu thereof) (Note A) : 1951 ....................................................................................... 1950 ...................................................................................... 1949 ....................................................................... .............. 4,738,400 5,726,284 6,644,586 163,(585 170,411 124,857 4,902,085 5,896,695 6,769,443 Taxes, other than income and excess profits taxes (Note B): 1951 ...................................................................................... 1950 ...................................................................................... 1949 ...................................................................................... 2,083,978 1,725,709 1,455,982 1,245,940 1,134,013 884,722 3,329,918 2,859,722 2,340,704 Management and service contract fees.................................. Rents: 1951 ....................................................................................... 1950 ...................................................................................... 1949 ...................................................................................... 406,228 304,402 273,121 539,763 528,934 455,272 None 945,991 833,336 728,393 Royalties: 1951 ........... ........................................................................... 1950 ....................................................................................... 1949 ....................................................................................... 838,476 493,353 585,755 838,476 493,353 585,755 Notes: (A) Exclusive of depreciation on miscellaneous assets which is credited directly to the asset accounts. The segregation of such depreciation is not practicable. (B) Taxes: 1951 195 1949 Real estate and personal property................................. State franchise, etc................................................................ Foreign withholding taxes........................................ ........ Social security taxes.................................................................. Sales taxes, licenses and miscellaneous......................... $1,089,745 564,420 31,696 1,309,786 334,271 $1,073,292 432,(547 115,824 1,045,991 191,968 $ 915,024 441,565 46,702 722,165 215,248 Total, as above.................................................... $3,329,918 $2,859,722 $2,340,704 The accumulation of supplementary profit and loss information for the six months ended June 30, 19S2 is not practicable. 29 NL 0001 Exhibit 1--(Continued) UNCONSOLIDATED SUBSIDIARIES of NATIONAL LEAD COMPANY (Domestic Subsidiaries More than 50, but Less than 100 Per Cent Owned and Foreign Subsidiaries (other than Continental European)) COMBINED BALANCE SHEET, December 31, 1951 ASSETS: Cu r r e n t As s e t s : Cash ................................................................................................................... United States Government securities, at cost plus accrued interest (approximately equivalent to amounts at market quotations)............... Other marketable securities at cost (at market quotations $52,697)....... Notes receivable, trade..................................................................................... $ 5,429 Accounts receivable, trade............................................................................... 9,501,168 Accounts receivable, other............................................................................... 833,912 Less, Reserve for losses................................................................................ 10,340,509 389,378 Inventories (Note 1): Ores, concentrates, scrap metals, finished products, etc.......................... Materials and supplies.................................................................................. 13,088,824 1,303,273 Receivable from National Lead Company.................................................... Net reduction between July 31, and December 31, 1951, in amount receiv able from National Lead Company by a subsidiary included in the combined statements as of July 31, 1951 (Note 3).................................. Total current assets...................................................................... Rec eiv abl es , Def er r ed ............................................................................... In v e s t me n t s ^ in (a t Co s t ) a n d Ad v a n c e s t o Un c o n s o l id a t e d Su b s id ia r ie s ........................................................................................................... Mis c el l a n e o u s In v e s t me n t s , Et c ., a t Co s t ................................................ Less, Reserve ................................................................................................... 1,475,716 236,400 Pl a n t , Pr o per t y a n d Eq u ip me n t (Note 4)................................................ Less, Reserves for depreciation...................................................................... 17,340,301 6,248,725 Go o d Wil l ........................................................................................................... Pr e p a id Ex p e n s e s , Def er r ed Ch a r g e s , Et c ................................................ $ 7,855,665 998,776 40,841 9,951,131 1 14,392,097 231,162 236,703 33,706,375 1,421,190 1278,604 1,239,316 11,091,576 2,220,134 522,967 $51,480,162 The accompanying notes are an integral part of the combined financial statements. 30 IML 000040671 Exhibit 1--(Continued) UNCONSOLIDATED SUBSIDIARIES of NATIONAL LEAD COMPANY (Domestic Subsidiaries More than 50, but Less than 100 Per Cent Owned and Foreign Subsidiaries (other than Continental European)) COMBINED BALANCE SHEET, December 31, 1951 LIABILITIES: Cu r r e n t Lia b il it ie s : Bank loans .................................................... Dividend payable ......................................... Accounts payable ......................................... Accrued liabilities: Taxes .......................................................... Compensation ............................................ Other .......................................................... Total current liabilities............ $ 4,958,027 197,291 166,634 Ad v a n c e s f r o m Na t io n a l Le a d Co mp a n y . 7 Pe r Ce n t Re d e e ma b l e Ge n e r a l Bo n d s o f Ca n a d ia n Tit a n iu m Pig me n t s Limit e d , due January 1, 1967; authorized $1,100,000, issued and outstanding $100,000 (all held by National Lead Company)..................... Re s e r v e s (Note 5): Contingencies .................................................................................................... Statutory .......................................................................................................... 134,894 24,742 Min o r it y In t e r es t s In : Capital stock ..................................................................................................... Earned surplus ................................................................................................. Surplus reserves, appropriated surplus (Note 5)...................................... 5,406,584 5,848,501 436,081 $ 1,209,151 600,000 5,679,612 5,321,952 12,810715 3,614,155 100,000 159,636 11,691,166 1 Na t io n a l Le a d Co mp a n y In t e r e s t in Ca p it a l : Ca p it a l St o c k ............................................................................................................ 12,255,769 Ea r n e d Su r p l u s ............................................................................ 10,156,942 Su r p l u s Re s e r v es , Ap p r o pr ia t e d Su r p l u s (Note 5)................................... 691,779 23,104,490 $51,480,162 The accompanying notes are an integral part of the combined financial statements. 31 NL 0000406^2 to** Exhibit 1--(Continued) UNCONSOLIDATED SUBSIDIARIES of NATIONAL LEAD COMPANY (Domestic Subsidiaries More than 50, but Less than 100 Per Cent Owned and Foreign Subsidiaries (other than Continental European)) COMBINED STATEMENTS OP INCOME For the Years Ended December 31, 1951, 1950 and 1949 1951 Sales, less returns and allowances (Note 7)....................... $120,756,852 Cost of sales (Note 1)............................................................ Gross profit...................................................... 106,424,523 14,332,329 Selling, general and administrative expenses....................... Other income: Dividends: Securities of unconsolidated subsidiaries..................... Other security investments.............................................. Miscellaneous ...................................................................... 5,314,806 $ 9,017,523 $ 47,132 78,873 464,958 $ 590,963 $ 9,608,486 Other deductions: Foreign exchange losses, net (gains*)............................. $ 157,630* Provisions for reserves for investments in and advances to unconsolidated subsidiaries........................................ 197,640 Miscellaneous ...................................................................... 879 $ 40,889 Income before provisions for taxes on income (Note 1).............................................. $ 9,567,597 Provisions for taxes on income: United States income taxes (Note 1)............................. Foreign taxes on income...................................................... Net income for the year (Note 1): National Lead Company's portion.......... ........................... Minority interests' portion.................................................. Total net income for the year....................... $ 3,243,572 1,406,511 $ 4,650,083 $ 3,435,649 1,481,865 4,917,514 1950 $98,757,735 87,639,896 11,117,839 4,286,945 $ 6,830,894 $ 11,331 73,068 213,281 $ 297,680 $ 7,128,574 $ 400,053 120,000 32,614 $ 552,667 $ 6,575,907 $ 1,840,729 1,156,197 $ 2,996,926 $ 2,450,106 1,128,875 3,578,981 1949 $74,086,667 66,722,292 7,364,375 3,482,384 $ 3.881.991 $ 324,138 220,560 $ 544,698 $ 4,426,689 $ 1,736,350 300,000 229,585 $ 2,265,935 $ 2,160,754 $ 904,314 599,346 $ 1.503,660 $ 26,777 630,317 $ 657,094 Special item: Recoveries of Continental European assets charged off in prior years.................................................................... 378,832 Net income and special item........................... $ 5,296,346 174,529 $ 3,753,510 The accompanying notes are an integral part of the combined financial, statements. See accompanying schedule for distribution of supplementary profit and loss information. 32 NL 000040673 U N C O N S O LID A T E D S U B S ID IA R IE S o ato aa> a O^ Es sg' u B. u<u 3S A >< 2 < A 2 ts s 3 oo eo O P < W P 4 Pa 3 ja ** u ->o "2 -O w 2 O H H S g S <! iTO 2 cduCOn> C**9O3 3 > xn s M on 09 & Ok 4 T3 1 d(0 3 mO Qo W < m Ok fa co O M ,Qua> SE* 2 H oa S W Q E-t < co Q H 2H4 CVO >> m S o a> $ o to* sv o P 8 gS3 SCH m co 2 cT--oJ 69- ^sl 73 ag c2 Eo t8i 'S<8 Uh mNm c m" VO 9- Exhibit 1--(Continued) O CO On CM CO R * NOm, mCOON iCnO OvCOON oCVOO' cVcooO ON 5? S CM*' 5 CO cCMow CO in <A\ 69- 69- in' mCO NN mGO CO N VCOM vS CM ts> NO Cm*O CM CM 00 On" in in T N o n CO 00 co" o" CM 0o0\ o' R on 69- 69H 69-1 o<o # o M iCnO^ o-H .ss,s| CCMO in' 69- m $5 m rH CO 00 Ov CM tsT N N 00 in in ON 00 in 69- tO- 69i Ss.8 IP nfo.S 2 CM C On o' R on" vp S N VO Q Q CO rj- N CM ts. 00 VO ON m CO CO 8 R" in CM co^ Ov M* c m" |H co" 00 69- 69- 9-1 <a43 c r-H &4J ON | 8 in" c8 3E Sf. in 9- 4,, &S *g 3 o." 2 BS .38,09 we <Q 5 Jt 00^ iCnM rh 00^ m- 0m Is *-H t -H mVO VO 1On mTj* CO % in 5? sf 00 to tx M; 8 T-H 00" 69- mm mO |s 69-1 in 691 ao <4&3 <0d ~h5 1& 5 * -S G uoi>3. d- bao >aoadSi.***Cdrot 5o .g8 o Is CSONr wtf Sts 10 +0 3 r*s3 a* aj H *N CO 40 d CO bo d 'ao3> D< S OOuoS tduO w&a>. '?d> .tE^s fcuO d d 4) j u d 3TM -3 m . <0 4 >>0 -a E .sS oayrt utuao* *aS 2ShSv"M^ 0t ^ "So *a d & a3; .2 c m rt <U S-y ^.sd o <udctui g|i s^ 5g w w a> g a0 oe Sg gH **C"* s*oJJ 4) 4J 13 33 so u d03 s;l qj w ci *4d) .$* 03 Ih J O+-"*` xVQ}J Ok CO 4J >- br>t O 5& -S S2 4.1. o 4O31 CO d ^.5> U to *4&- d slH H <s- wd `^Wo < >.v c a, PP 4>} > <du <uu drt 13 PQ ttt G Grat ao J3 H 1 Exhibit 1--(Continued) UNCONSOLIDATED SUBSIDIARIES of NATIONAL LEAD COMPANY (Domestic Subsidiaries More than SO, but Less than 100 Per Cent Owned and Foreign Subsidiaries (other than Continental European)) NOTES TO COMBINED FINANCIAL STATEMENTS 1. Inventories consist of metals and other raw materials on hand and in process, finished stocks, etc. (it is not practicable to state the classifications separately) the amounts of which enter into the computation of cost of sales; and materials and supplies, as follows: December 31 1951 1950 1949 1948 Metals, etc........................... $13,088,824 Materials and supplies....... 1,303,273 $14,392,097 $11,611,928 1,063,802 $12,675,730 $12,058,973 666/188 $12,725,461 $12,352,449 669,261 $13,021,710 Inventories are priced generally at the lower of cost (on various bases) or market. Inventories of the Argentine subsidiary include the following quantities of base stocks valued at fixed prices: Base Quantities (Kilos) Average Fixed Price per 100 Kilos (Argentine Paper Pesos) 1 Lead.................................................. Tin .................................................... Antimony ........................................ 2,076,000 68,000 10,000 30.65 208.52 51.38 During 1950 certain combined domestic subsidiaries of National Lead Company adopted the Lifo method of pricing with respect to certain of their basic inventories. As a result of the adoption of the Lifo method, income of these combined domestic subsidiaries for 1950 before provision for federal taxes on income was $3,069,498 less, provision for federal taxes on income was $1,435,370 less, and net income was $1,634,128 less than would otherwise have been the case. 2. The combined financial statements include all major domestic subsidiaries of National Lead Company more than 50, but less than 100 per cent owned and all major foreign subsidiaries other than Continental European. Subsidiaries included in the combined statements for 1951, 1950 and 1949 are the same except as follows: Baker Castor Oil Company, in which a minority interest was previously held, became majority owned in 1949 and is included since June 30, 1949. Antilles Minerals, S. A. was liquidated as of December 31, 1951. 3. The combined balance sheet includes the assets and liabilities at June 30, 1951 (adjusted generally for miscel laneous interim transactions with National Lead Company to December 31, 1951), and the accompanying combined statements of income and earned surplus include the statements of income and earned surplus for the respective fiscal years ended June 30, of the Argentine subsidiary. The combined balance sheet includes the assets and liabilities at July 31, 1951, and the accompanying combined statements of income and earned surplus include the statements of income and earned surplus for the respective fiscal years ended July 31, of Minnesota Linseed Oil Company, adjusted to reflect cash dividends declared and paid subsequent to July 31, 1951. The amount of such dividends received by National Lead Company has been included in consolidated net income. Since this subsidiary is an active supplier of materials to National Lead Company, it is not feasible to adjust its balance sheet for other interim trans actions (sales, collections, etc.) with National Lead Company, and the net difference (reduction) in the amount receivable by it from National Lead Company between July 31, and December 31, 1951 has been shown as a separate item in the combined balance sheet. 34 NL 000040675 Exhibit 1--(Continued) UNCONSOLIDATED SUBSIDIARIES of NATIONAL LEAD COMPANY (Domestic Subsidiaries More than 50, but Less than 100 Per Cent Owned and Foreign Subsidiaries (other than Continental European)) NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued 4. Plant, property and equipment comprise the following: Manufacturing properties: Land ............................................................................... Land improvements...................................................... Buildings ......................................................................... Machinery and equipment .......................................... Construction in process................................................ Miscellaneous ................................................................ $ 876,176 211,806 6,640,067 8,569,887 69,044 405,074 Mining properties: Mining claims, buildings, equipment, etc.................. Miscellaneous ........................................... 543,292 24,955 $17,340,301 Provisions for depreciation, depletion and amortization generally are made in accordance with the following methods and rates: Manufacturing facilities, on the straight-line method at the following rates: Buildings, 2 per cent to 5 per cent per annum Machinery, 5 per cent to 20 per cent per annum Miscellaneous: Furniture and fixtures, 10 per cent to 20 per cent per annum Autos and trucks, 15 per cent to 33 per cent per annum. Mining facilities, on the straight-line method, variously at 5 per cent to 50 per cent per annum, based on the estimated useful lives of the individual items. No policy for amortizing good will has been adopted. In addition, such special depreciation as is allowed for Canadian corporate tax purposes has been provided by a Canadian subsidiary. In general, depreciation is first provided for in the year following that in which the asset is acquired, except that provisions relating to autos and trucks are usually commenced during the year of acquisition. Maintenance, repairs, renewals and minor betterments are charged to income. Reserves for depreciation are generally relieved of the accumulated amounts applicable to properties retired or otherwise disposed of at the time of disposition of such properties and any resulting profit or loss is included in income. 5. Reserves are included in the combined balance sheet in accordance with the classifications shown in the balance sheets of the several subsidiaries. 6. The combined balance sheet includes the following amounts of foreign assets and liabilities (excluding amounts receivable from and due to National Lead Company) translated at appropriate rates of exchange: current assets and deferred charges, $12,029,049; current liabilities, $4,098,638; plant, property and equipment, net, plus other assets, $5,556,896; reserves, other than surplus reserves, $159,637. The realization of foreign assets is subject to various exchange and other restrictions imposed by the respective foreign governments. Although the assets and liabilities of the Argentine subsidiary have been included in the combined balance sheet as of June 30, 1951, the current assets and deferred charges and the current liabilities of that company have been translated at the rate prevailing at December 31, 1951. 35 NL 000040676 Exhibit 1--(Continued) UNCONSOLIDATED SUBSIDIARIES of NATIONAL LEAD COMPANY (Domestic Subsidiaries More than 50, but Less than 100 Per Cesnt Owned and Foreign Subsidiaries (other than Continental European)) NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued All income and expense items of the foreign subsidiaries, except depreciation, have been translated into U. S. dollars generally at the average rates of exchange prevailing during the periods. Depreciation charges are based on the U. S. dollar amounts of the related fixed assets. The item "Foreign exchange losses, net (gains*)" included in the combined statements of income reflects generally the losses or gains (in terms of U. S. dollar equivalents of net current assets and deferred charges) resulting from foreign exchange adjustments. See also Note 3. The amounts of net foreign exchange losses or gains and the net income of foreign subsidiaries (after such foreign exchange losses or gains) included in the combined statements of income are as follows: 1951 1950 1949 Foreign exchange losses, net (gains*)............. $ 157,630* Net income (losses*) of foreign subsidiaries..... 1,720,021 $ 400,053 1,036,289 $1,736,350 976,722* 7. Profits arising from transactions between the companies included in these statements or between such com panies and National Lead Company are not considered to be material in amount. Sales include sales to National Lead Company in the following approximate amounts: 1951......................................................................... $14,365,000 i 1950.......................................................................... 10,727,000 1949.......................................................................... 8,876,000 8. At December 31, 1950 the capital of Titan Company, Incorporated which had been previously credited to the deficit resulting from write-off of foreign assets was restored due to subsequent recoveries of such assets. 36 NL 000040677 Exhibit 1--(Continued) UNCONSOLIDATED SUBSIDIARIES of NATIONAL LEAD COMPANY (Domestic Subsidiaries More than 50, but Less than 100 Per Cent Owned and Foreign Subsidiaries (other than Continental European)) SUPPLEMENTARY PROFIT AND LOSS INFORMATION For the Years Ended December 31, 1951, 1950 and 1949 Item Maintenance and repairs: 1951 ............................................................. ........................ 1950 ............................................................ ........................ 1949 ............................................................. ........................ Charged Directly to Profit and Loss To Cost of Goods Sold Other $929,778 714,279 657,767 $31,380 19,108 5,916 Depreciation, depletion and amortization of fixed and intan gible assets (or charges in lieu thereof) (Note A) : 1951 ...................................................................................... 1950 ...................................................................................... 1949 ...................................................................................... 675,428 605,060 564,549 46,802 99,828 86,455 Taxes, other than income and excess profits taxes (Note B) : 1951 ...................................................................................... 1950 ...................................................................................... 1949 ...................................................................................... 893,558 687,508 536,001 85,157 87,983 70,324 Management and service contract fees: 1951 ...................................................................................... 1950 ...................................................................................... 1949 ........:.................................... ;....................................... 3,519 6,322 8,981 18,000 50,400 Rents and royalties: 1951 ................. 1950 ................. 1949 ................. 199,577 24,575 Total $961,158 733,387 663,683 722,230 704,888 651,004 978,715 775,491 606,325 3,519 24,322 59,381 Not significant Not significant 224,152 Notes: (A) Exclusive of depreciation on miscellaneous assets which is credited directly to the asset accounts. The segregation of such depreciation is not practicable. (B) Taxes: 1951 1950 1949 Real estate and personal property.................................. ........... State franchise, etc........................................................................... Sales tax ................................................................................ ........... Foreign mining production and export taxes............... .......... Social security ...................................................................... ........... Miscellaneous licenses, etc................................................. ........... $288,357 71,413 178,142 231,498 136,381 72,924 $263,541 60,935 195,866 54,788 132,153 68,208 $151,111 30,380 137,355 147,940 77,231 62,308 Total, as above.............................................. ........... $978,715 $775,491 $606,325 37 NL This page intentionally left blank 1 38 NL 000040679 Exhibit 2 ACCOUNTANTS' REPORT December 8, 1952. To the Board of Directors and Shareholders of DOEHLER-JARVIS CORPORATION: We have examined the balance sheet of Doehler-Jarvis Corporation, at December 31, 1951 and the related statements of operations and earned surplus for the three years 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 and statements of operations and earned surplus present fairly the financial position of Doehler-Jarvis Corporation at December 31, 1951 and the results of its operations for the three years then ended, in conformity with generally accepted accounting principles applied on a consistent basis during the period. ARTHUR YOUNG & COMPANY. 1 39 NL 000040680 DOEHLER-JARVIS CORPORATION BALANCE SHEET Exhibit 2--(Continued) ASSETS ______December 31,1951 Cu r r e n t As s e t s : Cash.......................................................... U. S. Government short-term securities at cost and accrued interest, which ap proximates market (excluding amount deducted from liability for Federal taxes on income).................................. Accounts receivable ............................... $ 6,330,551 Less: Allowance for doubtful accounts 231,114 $ 5,558,385 1,532,012 6,099,437 June 30,1952 (Unaudited) $ 2,897,019 $ 8,894,489 231,114 8,663,375 Inventories at the lower of cost or market (Note 1) : Finished product ........................... $ 991,800 $ 1,599,899 1 :l Work in process............................. 2,157,229 2,674,444 Raw material and supplies............. 4,555,086 7,704,115 4,755,284 9,029,627 Prepaid expenses and tools.......... ...... 1,162,836 1,049,639 Total current assets..................... $22,056,785 $21,639,660 Pr o pe r t y , Pl a n t a n d Eq u ip me n t , a t Co s t : III ' Land.................................................... . $ 379,682 $ 399,362 | |j j Buildings and building equipment 9,962,113 10,980,083 fill!5 j. j< ' Machinery and equipment................. 15,864,032 16,820,535 Ill; I ^ f' $26,205,827 $28,199,980 II i Less: Accumulated depreciation........ 6,202,076 20,003,751 7,004,800 21,195,180 iL; Pa t e n t s ................. 11 De f e r r e d Ch a r g e s 226,969 $42,287,506 80,408 $42,915,249 40 NL 000040681 i DOEHLER-JARVIS CORPORATION Exhibit 2--(Continued) BALANCE SHEET LIABILITIES AND SHAREHOLDERS' EQUITY * Cu r r e n t Lia b il it ie s : Notes payable.......................................... December 31,1951 -- June 30,1952 (Unaudited) $ 1,000,000 Accounts payable .................................... $ 3,913,654 1,623,018 Federal taxes on income (Note 2)..... $ 5,516,294 $ 2,618,835 Less: U. S. Government short term securities .............................................. 5,516,294 -- 1,617,148 1,001,687 Other taxes.............................................. 446,853 513,489 Payrolls.................................................... 1,251,781 2,174,435. Other accrued liabilities......................... 498,983 842,283 Liability for replacement of customers' dies........................................................ Total current liabilities.............. 720,055 $ 6,831,326 287,965 $ 7,442,877 Sh a r e h o l d e r s ' Eq u it y : Common Stock, $5 par value: Authorized--1,500,000 shares Issued--1,074,544 shares ................. $ 5,372,720 $ 5,372,720 Paid-in surplus (No change)................. 634,375 4i Reserve for contingencies (1951-- $300,000, 1952 --$310,735 restored I to earned surplus).............................. 400,000 Earned surplus........................................ 29,076,693 634,375 89,265 29,403,620 $35,483,788 Less 6,902 shares of common stock held in treasury, at cost............................. 27,608 35,456,180 $35,499,980 27,608 35,472,372 $42,287,506 $42,915,249 41 ----- NL 000040682 Exhibit 2--(Continued) DOEHLER-JARVIS CORPORATION STATEMENT OF OPERATIONS AND EARNED SURPLUS Year 1949 Gr o s s Sa l e s , less returns and allowances $65,019,856 Co s t o f Go o d s So l d , including $1,113,766 --1949; $543,226--1950; $732,224-- 1951; $439,407--1952 of preproduction expenses in new plants and costs of rearranging plant facilities (Notes 3 & 4) 52,691,553 Gr o s s Pr o f it Fr o m Sa l e s ......................... $12,328,303 Year 1950 $83,307,486 Year 1951 $85,861,763 Six Months Ended June 30,1952 (Unaudited) $39,873,348 64,925,076 $18,382,410 68,100,693 $17,761,070 34,419,687 $ 5,453,661 Sh ip p in g , Se l l in g , Ad min is t r a t iv e a n d Ge n e r al Ex p e n s e s (Notes 3 & 4) 5,669,559 Op e r a t in g Pr o f it ...................................... .'. $ 6,658,744 Ot h e r In c o me : Interest (less interest expense)............ Royalties and rent.......................... ....... . 65,261 26,099 $ 91,360 In c o me Be f o r e Fe d e r a l Ta x e s o n In c o me ........................................................ $ 6,750,104 6,267,360 $12,115,050 64,072 29,449 $ 93,521 $12,208,571 6,962,337 $10,798,733 81,887 30,985 $ 112,872 $10,911,605 3,540,101 $ 1,913,560 T 41,814 12,481 $ 54,295 $ 1,967,855 Pr o v is io n f o r Fe d e r a l Ta x e s o n In c o me : Normal tax and surtax......................... Excess profits tax.................................. 2,525,000 -- $ 2,525,000 Ne t In c o me ............ ....................................... $ 4,225,104 5,130,000 360,000 $ 5,490,000 $ 6,718,571 5,535,000 165,000 $ 5,700,000 $ 5,211,605 884,021 -- $ 884,021 $ 1,083,834 Re s t o r a t io n o f Po r t io n o f Re s er v e .f o r Co n t in g e n c ie s ........................................ 1,550,000 $ 5,775,104 Div id en d s Pa id ........,........................;...... :... 2,669,105 $ 3,105,999 Ea r n e d Su r p l u s a t Be g in n in g o f Per io d .......................................................... . 18,828,728 Ea r n e d Su r p l u s a t En d o f Pe r io d ........ $21,934,727 250,000 $ 6,968,571 2,669,105 $ 4,299,466 21,934,727 $26,234,193 300,000 $ 5,511,605. 2,669,105 $ 2,842,500 26,234,193 $29,076,693 310,735 $ 1,394,569 1,067,642 $ 326.927 29,076,693 $29,403,620 42 NL 000040683 i 1! DOEHLER-JARVIS CORPORATION Exhibit 2--(Continued) SUPPLEMENTARY PROFIT AND LOSS INFORMATION Year 1949 Item Ma in t e n a n c e a n d Repair s ......................................... .................... Depr ec iat io n .......... ,.................................................... .................... Ta x e s --Other than taxes on income: Social security ............................................................... .................... Real and personal property.......................................... .................... State and city income................................................ State franchise and miscellaneous............................. Ren t s .......................................................................... .................... Ro y al t ies ............................................................ ............................ Charged directly to profit and loss To cost of goods sold Other $2,506,186 $ 7,557 $1,008,819 $ 38,731 $ 396,275 78,458 $ 474,733 $ 19,980 $ 4,084 $ 23,668 69,179 11,554(A) 50,612 (B) $155,013 $ 43,903 $ 1,082(0 Total $2,513,743 $1,047,550 $ 419,943 147,637 11,554 50,612 $ 629,746 $ 63,883 $ 5,166 Note (A) After deduction of $23,594 for refunds and adjustment of previous accruals. Note (B) After deduction of $94,945 for refunds and adjustment of previous accruals. Note (C) Charged against sales. Year 1950 Ma in t e n a n c e a n d Re p a ir s ................................................................................... De p r e c ia t io n ................................................................................................................ Ta x e s --Other than taxes on income: Social security ..................................................................................... Real and personal property................................................................. State and city income.......................................................................... State franchise and miscellaneous..................................................... Re n t s .............................................................................................................................. Ro y a l t ie s ....................................................................................................................... $3,193,829 $1,001,679 $ 644,067 92,679 $ 736,746 $ 25.209 $ 4,077 $ 9,517 $ 57,751 $ 31,314 95,192 171,000 80,922 $378,428 $ 46.066 $ 2.396(A) $3,203,346 $1,059,430 1 $ 675,381 187,871 171,000 80,922 $1,115,174 $ 71.275 $ 6,673 Note (A) Charged against sales. Year 1951 Ma in t e n a n c e a n d Re p a ir s ................................................................................... De p r e c ia t io n ................................................................................................................ Ta x e s --Other than taxes on income: Social security ..................................................................................... Real and personal property................................................................ State and city income...................................................................... . State franchise and miscellaneous..................................................... Re n t s .............................................................................................................................. Ro y a l t ie s ....................................................................................................................... Note (A) Charged against sales. $3,816,617 $1,171,571 $ 732,393 118,914 $ 851,307 $ 20,124 $ 4,831 $ 8,623 $ 59,4137 $ 38,5138 101,633 166,251 100,719 $407,541 $ 55,897 364(A) $3,825,240 $1,231,008 $ 771,331 220,547 166351 100,719 $1,258,848 $ 76,021 5,195 43 NL 000040684 DOEHLER-JARVIS CORPORATION Exhibit 2--(Continued) SUPPLEMENTARY PROFIT AND LOSS INFORMATION 1st 6 Months 1952 (Unaudited) Item Ma in t en a n c e a n d Re p a ir s ........................................................ ................... De p r e c ia t io n ...................................................................................... ................... Ta x e s --Other than taxes on income: Social security............................................................... ................... Real and personal property.............................................................. State and city income.................................................... State franchise and miscellaneous............................... Re n t s .................................................................................................. .................... Ro y a l t ie s ............................................................................................ .................... Charged directly to profit and leas To cost of goods sold Other $2,015,259 $ 6,497 $ 763,865 $ 39,357 $ 572,476 76,370 $ 648,846 $ 9,930 $ 184 $ 27,405 50,692 31,950 66,225 $176,272 $ 22,214 -- Total $2,021,756 $ 803,222 $ 599,881 127,062 31,950 66,225 $ 825,118 $ 32,144 $ 184 44 NL 000040685 DOEHLER-JARVIS CORPORATION NOTES TO FINANCIAL STATEMENTS Exhibit 2--(Continued) No t e 1--Inventories: Inventories were priced as follows: Raw materials at the lower of actual or average purchase cost (first-in, first-out) or replacement market value. Supplies at average purchase cost. Work in process and finished product at the lower of average purchase cost or replacement market value as to material, with labor at actual and overhead at standards which approximated actual. No t e 2--Federal taxes on income: Claims for refunds of Federal income and excess profits taxes for 1940 and subsequent years are not reflected in the balance sheet pending final determination of amounts to be allowed. Federal tax returns have been examined through the year 1949. No t e 3--Pensions and Retirement Plan expense: A non-contributory pension plan for hourly-wage employees, adopted in 1947 and incorporated in a five-year Union Agreement dated July 1, 1950, requires annual payments for benefits based on current services and payment before August 31, 1955 of an amount equal to five yearly payments of the level amount required to fund benefits based on past services over a period of 30 years. The estimated cost of funding the total past service benefits by a single payment at June 30, 1952 would be approximately $3,500,000. The Union Agreement also provides for a contributory insurance program. The Corporation has a contributory Retirement Plan for salaried employees, under which there is no past service liability, and a non-contributory insurance plan. The Corporation also pays certain supplemental pensions. The plans for hourly-wage employees are subject to termination on July 1, 1955 and the plans for salaried employees may be discontinued at any time; however, it is intended that all plans will be continued indefinitely. The costs of the foregoing plans included in the statement of income are as follows: Hourly-wage employees pension plan: Current Service ........................................... Past Service ................................................. Hourly-wage employees insurance program. .. Salaried employees retirement plan................ Salaried employees insurance plan.................. Supplemental pensions ................................... 1949 $185,000 54,000 9,000 653,000 64,000 24,000 1950 $187,000 33,000 132,000 733,000 109,000 27,000 1951 $376,000 65,000 380,000 980,000 182,000 43,000 Six Months to June 30,1952 $201,000 24,000 210,000 532,000 132,000 23,000 No t e 4--Profit and Loss Information: Depreciation of property, plant and equipment is provided, in general, on the basis of the estimated useful as periodically reviewed, of the individual assets or minor group classifications. The periodic reviews limit : depreciated assets to items within minor group classifications. The cost and reserve accounts are relieved of fully depreciated items and disposals. The profit or loss resulting from disposals is included in the income account. The method of providing depreciation results in a wide variation of rates which cannot be reasonably stated in tabular form by asset classification. Substantially all expenditures for maintenance, renewals and betterments are charged to expense. Betterments which materially prolong the life of the related assets are capitalized. Bonuses or additional compensation, exclusive of factory production bonuses, were paid or accrued as follows: 1949 1950 1951 Six Months to June 30,1952 To elected officers.................... To appointed officers, plant executives, department heads, salesmen and other salaried employees ............... $156,309.39 515,520.00 $211,000. 576,755. $204,000. 613,405. None $179,507. $671,829.39 $787,755. $817,405. $179,507. 1 45 NL 000040686 MI Wwii.