Document MMVa3mVRXBzoe99XrdJjm8G6y

AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization dated January 2, 1953, between Na t io n a l Lead Co mp a n y , a corporation organized and existing under the laws of the State of New Jersey (hereinafter called National), party of the first part, and Do e h l e r -Ja r v is Co r po r at io n , a corporation organized and existing under the laws of the State of Michigan (hereinafter called Doehler), party of the second part, WITNESSETH: Wh er eas the parties hereto desire that National shall acquire all of the assets, property, business and good will of Doehler through the exchange of all of said assets, property, business and good will for Common Stock of National and the assumption by National of all liabilities of Doehler, and the distribution of such stock of National to the stockholders of Doehler, for the purpose of carrying out a reorganization within the meaning of the provisions of the Internal Revenue Code, pursuant to the plan of reorganization hereinafter set forth, Now Th er ef o r e, in consideration of the premises and the covenants and agreements hereinafter set forth the parties hereto covenant and agree as follows: I. Re p r e s e n t a t io n s b y Na t io n a l National represents that: 1. It is a corporation duly organized and existing under the laws of the State of New Jersey with an authorized capital stock consisting of 20,500,000 shares, of which 250,000 shares are Class A Preferred Stock of the par value of $100 each, 250,000 shares are Class B Preferred Stock of the par value of $100 each, and 20,000,000 shares are Common Stock of the par value of $5 each; of the Class A Preferred Stock 234,293 shares are issued and outstanding and 9,383 shares are held in its treasury; of the Class B Preferred Stock 90,185 shares are issued and outstanding and 13,092 shares are held in its treasury; and of the Common Stock 10,158,375 shares are issued and outstanding, of which, at December 12, 1952, 304,100 shares have been issued pursuant to National's Employees Stock Purchase Plan and are pledged to secure the unpaid balance of the purchase price thereof. 2. Said Preferred Stock, Class A and Class B, is listed on the New York Stock Exchange and said Common Stock is listed on the New York Stock Exchange and an application is pending for its listing on the Toronto Stock Exchange. 3. Attached hereto and marked Exhibit 1 are the Consolidated Balance Sheets of National Lead Company and its wholly owned domestic subsidiaries as of June 30, 1952 and December 31, 1951 and the related statements of Income and Surplus for the six months ended June 30, 1952 and years ended December 31, 1949, 1950 and 1951; and the Balance Sheet of unconsolidated subsidiaries of National Lead Company as of the close of their 1951 fiscal year and the related statements of Income and Surplus for the respective 1949, 1950 and 1951 fiscal years; together with a report of Lybrand, Ross Bros. & Montgomery, Certified Public Accountants, with respect to the financial statements as of December 31, 1951 and the related statements of Income and Surplus for the years ended December 31, 1949, 1950 and 1951; said financial statements have been prepared in accordance with the applicable rules of the Securities and Exchange Commission, and correctly set forth the financial condition (including all con tingent liabilities) of National and its subsidiaries at the dates mentioned and the earnings and surplus of National and its subsidiaries for the periods specified therein; and since June 30, 1952 there have been no substantial changes in the financial condition of National and its subsidiaries except changes occurring in the ordinary course of business. 4. National has not done any of the following acts since June 30, 1952 and will not until the closing or abandonment of this agreement as hereinafter provided (a) enter into any contracts outside 1 NL 000040595 the ordinary course of business which might materially and disadvantageously affect the value of its assets or business, or (b) without the prior written consent of Doehler, issue any additional shares of its stock or other securities (except such shares as are necessary to carry out this agreement and except treasury stock) or (c) authorize any distribution to the holders of its stock of any assets by way of dividend or otherwise, except by way of the regular dividends on its Preferred Stocks, dividends heretofore declared and quarterly dividends on its Common Stock in cash not in excess of fifty cents each per share thereof. 5. National is acquiring the assets and property contemplated to be transferred to it by Doehler hereunder for its own account and not for the account of any subsidiary or other corporation presently in existence or to be formed. 6. This agreement has been duly approved and authorized by its Board of Directors or Executive Committee. II. Re p r e s e n t a t io n s b y Do e h l e r Doehler represents that: 1. It is a corporation duly organized and existing under the laws of the State of Michigan with an authorized capital stock consisting of 1,500,000 shares of Common Stock of the par value of $5 each, of which 1,067,642 shares are duly issued and outstanding (excluding 6,902 shares held in its treasury). 2. Said Common Stock is listed on the New York Stock Exchange and on the Midwest Stock Exchange. 3. Attached hereto and marked Exhibit 2 are the Balance Sheets as at December 31, 1951 and June 30, 1952 and Statements of Operations and Earned Surplus for the three years ended December 31, 1951 and for the six months ended June 30, 1952, of Doehler, together with the report of Messrs. Arthur Young & Company, Auditors, with respect to said Balance Sheet as at December 31, 1951 and Statements of Operations and Earned Surplus for the three years ended December 31, 1951; said Balance Sheets and Statements of Operations and Earned Surplus have been prepared in accordance with the applicable rules of the Securities and Exchange Commission, and, respectively, correctly set forth the financial condition (including all contingent liabilities) of Doehler at the dates mentioned and the earnings and earned surplus of Doehler for the periods specified therein; and since June 30, 1952 there have been no substantial changes in the financial condition of Doehler except changes occurring in the ordinary course of business. 4. Doehler has not done any of the following acts since June 30, 1952 and, without the prior written consent of National, will not until the closing or abandonment of this agreement as hereinafter provided (a) enter into any contracts outside the ordinary course of business which might materially and disadvantageously affect the value of its assets or business, or (b) issue any additional shares of its stock or other securities or (c) authorize any distribution to the holders of its stock of any assets by way of dividend or otherwise, except dividends heretofore declared and except that if National shall after the date hereof declare any dividend upon its Common Stock payable to its Common Stock holders of record on a date prior to the closing hereunder, Doehler may declare a dividend on its Common Stock to stockholders of record on the same record date, not exceeding per share of its Com mon Stock 115% of the dividend per share declared by National on National's Common Stock. 5. This agreement has been duly approved and authorized by its Board of Directors subject to obtaining the requisite authorization of its stockholders. III. Pr e l imin a r y s t e p s t o b e t a k e n b y Na t io n a l 1. National will supply Doehler with whatever information is necessary or appropriate in order to enable Doehler to present to the Commissioner of Internal Revenue such data as the Commissioner may require in connection with Doehler's application for a ruling that the proposed reorganization will be free of tax and to comply with all statutory requirements in carrying out the terms of this agreement and the rules and regulations of the Securities and Exchange Commission governing the Proxy State- 2 NL 000040596 ment to be used by Doehler in soliciting proxies for the meeting at which the transactions contemplated by this agreement are to be submitted to Doehler stockholders for approval. National hereby agrees to indemnify and hold harmless Doehler and each of its directors and officers against any liability arising out of or based upon any untrue statement contained in the Proxy soliciting material used by Doehler or arising out of or based upon the omission of a material fact, to the extent that such untrue statement or omission was made in reliance upon information furnished by National. 2. National will make due and timely application for the listing of its Common Stock to be issued hereunder on the New York Stock Exchange and the Toronto Stock Exchange and the registration thereof under the Securities Exchange Act of 1934. 3. National will take any other action necessary to enable it to carry out this agreement and will vote all shares of Common Stock of Doehler owned by it in favor of the transactions contemplated hereby. IV. Pr e l imin a r y St e p s t o b e Ta k e n b y Do e h l e r 1. Doehler will at all times prior to the closing hereunder open its plants, books, accounts and records for full and unrestricted examination and inspection by National, its officers, employees, engineers, accountants and agents, all subject to restrictions imposed by law or Governmental regulations. 2. Doehler will supply National with whatever information is necessary to comply with statutory requirements and the rules and regulations of the Securities and Exchange Commission, the New York Stock Exchange and the Toronto Stock Exchange for the listing on such exchanges of the additional shares of National's Common Stock to be issued pursuant to this agreement. 3. Doehler will call a special meeting of its stockholders to be held on or before the ninetieth day after the date of this agreement and will duly submit to such meeting this agreement and recommend that its stockholders approve the transactions contemplated hereby and authorize the dissolution of Doehler and the distribution of the stock of National received hereunder to the stockholders of Doehler entitled thereto as provided herein. 4. Doehler will notify National promptly as to the result of the action taken at such meeting of stockholders of Doehler. 5. If requested in writing by National, Doehler shall take all actions necessary to its compliance with any applicable Bulk Sales Laws. 6. For the purpose of effecting distribution of the stock of National to which Doehler shall become entitled on the carrying out of this agreement Doehler shall appoint Chemical Bank & Trust Company, or another bank or trust company satisfactory to National, to act as depositary and dis tributing agent (hereinafter referred to as the "Depositary"). 7. Doehler will take any other action necessary to enable it to carry out this agreement. V. Co n d it io n s Pr e c e d e n t t o Cl o s in g The closing of this agreement shall be subject to the following conditions precedent: 1. The transactions contemplated hereby shall have been approved by the requisite statutory vote of the stockholders of Doehler. 2. The number of shares of Doehler stock, 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, shall not be greater than shall be accept able to National in its sole judgment, provided that if such number be not acceptable National shall notify Doehler to that effect within ten days after such number shall have been determined, or such later date as may be mutually agreed upon. 3. The shares of Common Stock of National deliverable hereunder shall have been authorized by the New York Stock Exchange for admission to the List on notice of issuance and registered under the Securities Exchange Act of 1934. 3 NL 000040597 4. The Federal Bureau of Internal Revenue shall have issued a ruling, satisfactory to National and Doehler, to the effect that the transactions contemplated hereby will result in neither gain nor loss for Federal income tax purposes to Doehler and that the distribution of National's shares to the stockholders of Doehler will result in neither gain nor loss for Federal income tax purposes to the stockholders of Doehler. 5. National shall have received on the closing date the written opinion of Messrs. Beekman & Bogue, counsel for Doehler, in form and substance satisfactory to counsel for National, that Doehler has been duly incorporated and is then validly existing as a corporation under the laws of the State of Michigan with a capitalization as represented in this agreement; that all action has been taken necessary to the due authorization of the execution and performance by it of this agreement, including the due authorization of the transfer and conveyance of all of the property and assets of Doehler to National and the due authorization of the dissolution of Doehler and the distribution of the stock of National to the stockholders of Doehler entitled thereto; that the deeds, conveyances, assignments, bills of sale, drafts, cheques and other instruments of assignment and endorsement tendered to National are in all respects in compliance with this agreement and are sufficient to vest in National such title to all the property, assets, business and good will of Doehler as a going concern as was vested in Doehler immediately prior to the delivery thereof. In rendering such opinion, it is understood that Messrs. Beekman & Bogue may rely upon the opinions of other counsel in connection with the transfer by Doehler of its assets to National. To the extent that such opinions are relied upon, signed copies thereof shall be furnished to National and the opinion of Messrs. Beekman & Bogue shall state that in their opinion they and National are entitled to rely upon such other opinions. 6. On the closing date. National shall have received a certificate of an officer of Doehler that the 'financial condition of Doehler is then as herein provided and Doehler shall have received a certificate of an officer of National that the financial condition of National is then as herein provided. 7. Doehler shall have received on the closing date the written opinion of Messrs. Alexander & Green, counsel for National, in form and substance satisfactory to counsel for Doehler, stating that National has been duly incorporated and is then validly existing as a corporation under the laws of the State of New Jersey with a capitalization in compliance with this agreement; that all action has been taken necessary to the due authorization of the execution and performance by it of this agreement, including the due authorization and issue of the stock of National to be delivered hereunder and that the same will be fully paid and nonassessable; and that the instrument or instruments of assumption by National of the liabilities of Doehler are in all respects in compliance with this agreement. 8. The validity and legality of the incorporation and existence of National and Doehler and of the authorization and execution of this agreement and of all other transactions herein referred to, as well as the form and substance of all legal proceedings and of all papers and documents used hereunder, shall be subject to the approval of Messrs. Alexander & Green, counsel for National, and Messrs. Beekman & Bogue, counsel for Doehler. VI. Cl o s in g 1. This agreement shall be consummated at a closing to be held at the principal corporate trust office of the Depositary on the fifth full business day following the satisfaction of the conditions precedent set forth in paragraphs 1, 2, 3 and 4 of Article V hereof, or at such other time and place as the parties shall agree. 2. Doehler shall transfer to National all of its business, good will, property and assets, real, personal or mixed of every kind and description, wheresoever situated, except only its franchise to be a corporation and its rights under this agreement. Doehler shall cause to be executed and delivered to National all conveyances, deeds, assignments, bills of sale and other documents or instruments of transfer, and all other papers necessary to vest in National such title to all property and assets of 4 NL 000040598 Doehler as was vested in Doehler immediately prior to such delivery. Doehler shall deliver to National such consents or other documents as may be required so that National may use the names "Doehler," "Jarvis," "Doehler-Jarvis" or any variation thereof alone or in combination with other words, in its business or in the business or corporate title of any subsidiary, provided that Doehler shall not be obliged to take corporate action to change its name. 3. National shall make irrevocable arrangements on the closing date with its Transfer Agent and Registrar and with the Depositary so that shares of National's Common Stock will be issued in names and amounts as certified by Doehler and in proper form for delivery to each stockholder of Doehler (a) who shall be such stockholder on a date, to be selected by Doehler, on or prior to the date of closing, and (b) if the closing takes place within 20 days after the date of the aforesaid special meeting of Doehler stockholders, who shall not have voted against the sale of assets contemplated by this agreement; or (c) if the closing takes place more than 20 days after such meeting, who shall not have demanded payment of the fair cash value of his stock, or who shall have validly withdrawn any such demand, in the manner provided in the Michigan General Corporation Art, at the rate of 1.15 shares of National Common Stock for each share of Doehler Common Stock standing in his name on such record date. No fractional shares of National Common Stock shall be issued but stockholders of Doehler who would otherwise be entitled to fractional shares will receive in lieu thereof scrip certificates in form substantially as hereto annexed as Exhibit 3. The certificates for such National Common Stock and scrip in lieu of fractional shares shall be delivered by National promptly after the closing date to the Depositary, which shall act as agent of Doehler in receiving such stock certificates and scrip from National in completion of the exchange of assets of Doehler for stock of National, and simultaneously National shall deliver to the Scrip Agent certificates for National Com mon Stock deliverable upon the surrender of scrip certificates. 4. National shall assume all obligations of Doehler of every nature both fixed and contingent and whether or not ascertained or in existence at the date of closing and shall deliver to Doehler an instrument or instruments evidencing such assumption. VII. Af t e r t h e Cl o s in g . 1. Doehler shall promptly effect its liquidation and dissolution as a Michigan corporation and take all necessary steps to terminate its qualification to do business in all states where it is now so qualified. 2. National shall, from time to time, cause additional shares of its Common Stock to be issued at the rate of 1.15 shares of National Common Stock (with scrip in lieu of fractional shares as afore said) for each share of Doehler Common Stock standing in the name of stockholders of Doehler on the date selected by Doehler as provided in paragraph 3(a) of Article VI above, for whom certificates for shares of National Common Stock or scrip have not been made available as provided in paragraph 3 of Article VI, who become entitled thereto because of their failure to demand payment of the fair cash value of their shares or because they shall have validly withdrawn any such demand. Simultaneously with the issue of additional scrip, pursuant to this paragraph. National shall deliver to the Scrip Agent certificates for National Common Stock deliverable upon the surrender of such scrip certificates. Doehler shall keep National fully advised as to stockholders who shall have duly demanded payment of the fair cash value of their shares or who shall have validly withdrawn such demands. Doehler will authorize National, in the name of and on behalf of Doehler, to enter into agreements with Doehler stock holders who have demanded payment of the fair cash value of their shares and to institute, defend and participate in any proceedings before appraisers or in court under the provisions of the Michigan General Corporation Act so that National may, in the name of Doehler or otherwise, take all such action with respect to dissenting stockholders as Doehler could take itself, and Doehler will take such steps as National may require in connection with such proceeding. 5 NL 000040599 3. The Depositary shall deliver the certificates for Common Stock and scrip of National received under the provisions of paragraph 3 of Article VI and paragraph 2 of this Article VII to the persons in whose names such certificates are registered against proper surrender to such Depositary of correspond ing certificates of Common Stock of Doehler. 4. All certificates of Common Stock of Doehler surrendered by its stockholders or acquired from its stockholders under the provisions of the Michigan General Corporation Act or held in its treasury shall be delivered to its Transfer Agents for cancellation and cancelled. VIII. Ab a n d o n me n t o f Ag r e e me n t 1. Either party may elect to terminate this agreement and abandon the plan of reorganization if prior to the closing: (1) representations made by the other party shall prove substantially untrue or (2) the other party shall suffer loss by fire, flood, tornado, riot, accident or other calamity, whether or not insured, which shall substantially and adversely affect the value of its assets or business. 2. The party electing to terminate this agreement and abandon the plan of reorganization shall give written notice to the other party to that effect and thereupon all obligations hereunder shall cease except that each party shall bear the legal and accounting charges incurred by it and all other expense shall be borne by National. 3. This agreement shall terminate absolutely and the plan of reorganization shall be abandoned if and when it is determined that any one or more of the conditions precedent set forth in paragraphs 1, 2, 3 and 4 of Article V hereof cannot or 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, and thereupon all obligations hereunder shall cease except that each party shall bear the legal and accounting charges incurred by it and all other expense shall be borne by National. IX. No t ic es All notices under this Agreement shall be in writing and if to National shall be sufficient in all respects if delivered in person or sent by mail to National at 111 Broadway, New York 6, New York, and if to Doehler shall be sufficient in all respects if delivered in person or sent by mail to Doehler at Smead Avenue, Toledo 1, Ohio. In Wit n es s Wh er eo f , the parties hereto have, respectively, duly executed, this agreement and plan of reorganization as of the day and year first above written. NATIONAL LEAD COMPANY, Attest: By ............................................................................. President Attest: Secretary DOEHLER-JARVIS CORPORATION, By ............................................................................ President. Secretary 6 ML 000040600 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 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 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. Ly b r a n d , Ro s s Br o s . & Mo n t g o me r y New York, March 6, 1952. 7 NL 000040601 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) Cu r r e n t As s et s : ASSETS: 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........................................................... Accounts receivable, trade................................................... Accounts and notes receivable, other................................. $ 81,810 27,623,403 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 e s 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 me n t s a n d Ad v a n c es , 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 p r a is e d Va l u e s , Su b s e q 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 e s (Note 5).............................................................. Less, Reserve for amortization........................................... 20,769,088 40,584 20,728,504 20,770,904 38,566 20,732,338 Pr ep aid Ex p en s es , De f e r r e d 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. 8 NL 000040602 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 ........................................................................ $ 34,704,304 Other ......................................................................... 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 er 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 1 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 $ 2,583,081 4,911,632 $ 7,494,713 147,573,718 $230,315,668 The accompanying notes are an integral part of the consolidated financial statements. 9 NL 000040603 Exhibit 1--(Continued) NATIONAL LEAD COMPANY and its Wholly Owned Domestic Subsidiaries CONSOLIDATED STATEMENTS OP 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 a n 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 p en 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 e r 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 Net In c o me f o r t h e Per io d (Note 2)......... $ 11.074.640 Sp ec ial 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)......................................................... 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, 19S2 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. 10 IML 000040604 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 Months Ended June 30,1952 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 .................................... 1951 1950 1949 $61,343,176 $49,942,543 $44,645,882 22,993,717 14,749,012 26,965,735 $71,351,590 $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 $ 1,640,051 $ 1,640,051 $ 1,640,051 517,755 494,400 494,400 14,381,756 13,430,651 7,317,900 Transfer to common capital stock account in connection with reduction in par value and split of the common stock (Note 7) 6,169,768 16,539,562 15,565,102 7,520,381 9,452,351 $ 6,169,768 $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. 11 NL 000040605 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 Excess of aggregate subscription amount over aggregate par value of common stock issued under Stock Purchase Plan (Note 8)...................................................................... 1,082,488 1950 $4,523,071 3,579,894 1949 $4,523,071 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 9,410,244 -- 8,102,965 $8,102,965 1 $4,523,071 The accompanying notes are an integral part of the consolidated financial statements. 12 ml 000040606 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 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................................. Tin................................... Antimony........................ Linseed oil...................... ...................... ...................... ...................... ...................... 49,687)4 1,124)4 1,400 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. 13 NL Exhibit l--(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................................ ....................... $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 subsidiaries 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) $1(54,823 149,159 318,480 Cash Dividends Received $360,000 360,000 360,000 360,000 H NL 000040608 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: 254 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-line 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. 15 NL 000040609 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 I, 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, 1952 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 share 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, after 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 16 NL 000040610 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. 17 NL 000040611 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. 18 NL 000040612 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 in tangible assets (or charges in lieu thereof) (Note A): 1951 ...................................................................................... 1950 ...................................................................................... 1949 ...................................................................................... Taxes, other than income and excess profits taxes (Note ` B): 1951 ...................................................................................... 1950 ...................................................................................... 1949 ...................................................................................... 4,738,400 5,726,284 6,644,586 2,083,978 1,725,709 1,455,982 163,685 170,411 124,857 1,245,940 1,134,013 884,722 4,902,085 5,896,695 6,769,443 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 1950 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 $1,073,292 432,647 115,824 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, 1952 is not practicable. 19 NL 000040613 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...................................................................... $ 7,855,665 998,776 40,841 9,951,131 1 14,392,097 231,162 236,703 33,706,375 Re c e iv a bl e s , De f e r r e d .......................................................................................... 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 .................................................................................................................. 1,421,190 1,278,604 Mis c e l l a n eo 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 1,239,316 Pl a n t , Pr o per t y a n d Eq u ip me n t (Note 4)................................................ Less, Reserves for depreciation...................................................................... Go o d Wil l ........................................................................................................... Pr e p a id Ex p e n s e s , De f e r r ed Ch a r g e s , Et c ................................................ 17,340,301 6,248,725 11,091,576 2,220,134 522,967 $51,480,162 The accompanying notes are an integral part of the combined financial statements. 20 ML 000040614 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)) 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 ............................................................................................................. $ 4,958,027 197,291 166,634 Total current liabilities............................................................... $ 1,209,151 600,000 5,679,612 5,321,952 12,810,715 Ad v a n c e s f r o m Na t io n al 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 er v es (Note 5): Contingencies .................................................................................................... Statutory .......................................................................................................... 134,894 24,742 3,614,155 100,000 159,636 Min o r it y In t e r e s t s In : Capital stock ..................................................................................................... Earned surplus ................................................................................................. Surplus reserves, appropriated surplus (Note 5)...................................... 5,406,584 5,848,501 436,081 11,691,166 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 : i Ca p it a l St o c k ..................................................................................................... 12,255,769 Ea r n e d Su r pl u s ..................................................................... 10,156,942 Su r p l u s Res er v es , Ap p r o p r 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. 21 ML 000040615 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 OF 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)............................................................ 106,424,523 Gross profit...................................................... 14,332,329 Selling, general and administrative expenses....................... 5,314,806 $ 9,017,523 Other income: Dividends: Securities of unconsolidated subsidiaries..................... Other security investments.............................................. Miscellaneous ...................................................................... $ $ 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,S89 Income before provisions for taxes on income (Note 1)............................................ $ 9,567,597 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 1949 $74,086,667 66,722,292 7,364,375 3,482,384 $ 3,881,991 $ 324,138 220,560 $ 544,69$ $ 4,426,689 $ 1,736,350 300,000 229,585 $ 2,265,935 $ 2,160,754 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 $ 1,840,729 1,156,197 $ 2,996,926 $ 904,314 599,346 $ 1,503,660 $ 2,450,106 1,128,875 3,578,981 ? 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. 22 NL 000040616 UNCONSOLIDATED SUBSIDIARIES *o dc$ d S o da> U t<*y P u4co>u d H > z < A os o o o ..XecStf a> a d J*d C o O Q < w p P sco s t. p sI < g^ o rd to + 4> w <u w4 H < U CO OS*S42 to to *9 a> d C W a a xcso u"- 3O w fe cn S2 g tOa O V) O. 2 < m Ol a co O <HM ,Q*v 2 a S3 8H T3 < vo M d v a ia a 3 2 s Si. .2 O ad CD ao Q uOGd 3sVuo ^ hCH o " ta w e fc*-l Q. V rct 6 ooc TO CUh 2 m CrOH CO r-T 69- in ltxo <vf VO Exhibit 1--(Continued) N lx fO q C " VO CO co^ vO co" Ov CO VO CO in 69- eg co p) n lx lx m 69- in to CO Ov in CO co eg^ in 69- 69- mco lx eg lx co" lx in CO VeOg co" * N^ lOx m00 Cg CNJ 00^ oT in ix" i0s0. ON C*O 69- 69- <0 O oooo ?3 gs CO in O Ih .as CeOg S3,5 in 69- "2 aa ,, as |T6O w 2 CSJ 00 ON o' K On" 69- >3 C8 in II S3,5 s- i6n0- m m CO 00 rH oolx t j - 00 eg^ O1-N4 eg00" ix" tsT in in lx -H 0\ 5?. 00 00 in 69- 69 694 iP lx tx no t3 CO Tj- Th lx eg^ <5 Ix W RVO co" On co <5 m" eg m co rt- eg" t-H co" 00 m- 69- 69- G 1C .ISS i N MV so S l s3 oo" Tu^3 MO- t: S5- IP OTOgOONfi % iexntg- oo" 69- 4 00 infOfc Tf lx Tjf in $ 00^ lx co" eg" 69- co m co eg lx ^ ^ Tt Ov" in vC ^ co co *--< eg" 69- d bo bJD d >\u drCtX d dH T43) +J OCj `3 >s t* <0 d `>s d ccOx Souu cO I 5 On ^5 bo CX d. cO 4J >V O 4a fO tfi <D * 0) dtrt a-* ^.d 4> cC '?* S 0cd3x._t^2 3 <^uu bo .`SS d rmwt-tr\2ri' *40) 3 ow a, to *do cO 'So e3 -B'^&a to eg ^.a >;.1sc -o_ 6ou d oR6_ E4> c a; u aoi 7CQ3 c i?^"3JsPS'Z Sw w < u 4) to 23 USo crt rtOO 03 o 4> s^ 4Uoa *QdJ 4J tO 4a N Si 2 *o-> Oau, S jj d c to .. *d j3 ^ +Oj J* 4> 2o tO -4J 3gUW *4d> rS> 2 H -po ga < PP a eo 60 c CL o JHC W0a3; ad; ao> dcj 73 CQ 1 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 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 $12,058,973 666,488! $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) 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. 24 ML 000040618 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. 25 NL 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 -- 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 "f 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. 26 NL 000040620 m 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)) 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 27 1 NL 000040621 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 28 NL 000040622 This page intentionally left blank 1 29 NL 000040623 DOEHLER-JARVIS CORPORATION Exhibit 2--(Continued) BALANCE SHEET 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 Inventories at the lower of cost or market (Note 1) : Finished product ........................... $ 991,800 Work in process.................................. 2,157,229 Raw material and supplies............. 4,555,086 7,704,115 Prepaid expenses and tools............... 1,162,836 Total current assets..................... $22,056,785 June 30,1952 (Unaudited) $ 2,897,019 $ 8,894,489 231,114 8,663,375 $ 1,599,899 2,674,444 4,755,284 1 9,029,627 1,049,639 $21,639,660 Pr o p e r t y , Pl a n t a n d Eq u ip me n t , a t Co s t : Land..................................................... $ 379,682 Buildings and building equipment..... 9,962,113 Machinery and equipment....................... 15,864,032 $26,205,827 Less: Accumulated depreciation......... 6,202,076 20,003,751 $ 399,362 10,980,083 16,820,535 $28,199,980 7,004,800 21,195,180 Pa t en t s ...................................................... Def er r ed Ch ar g es ................................. 1 226,969 $42,287,506 1 80,408 $42,915,249 30 NL 000040624 DOEHLER-JARVIS CORPORATION Exhibit 2--(Continued) BALANCE SHEET LIABILITIES AND SHAREHOLDERS' EQUITY December 31,19S1 Cu r r e n t Lia b il it ie s : Notes payable.......................................... -- Accounts payable .................................... $ 3,913,654 Federal taxes on income (Note 2)..... $ 5,516,294 Less: U. S. Government short term securities ............................................. 5,516,294 -- Other taxes .............................................. 446,853 Payrolls .................................................... 1,251,781 Other accrued liabilities......................... 498,983 Liability for replacement of customers' dies........................................................ Total current liabilities.............. 720,055 $ 6,831,326 June 30,1952 (Unaudited) $ 2,618,835 $ 1,000,000 1,623,018 1,617,148 1,001,687 513,489 2,174,435 842,283 287,965 $ 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 Paid-in surplus (No change)................. 634,375 Reserve for contingencies (1951-- $300,000, 1952 -- $310,735 restored to earned surplus).............................. 400,000 Earned surplus........................................ ' 29,076,693 $35,483,788 Less 6,902 shares of common stock held in treasury, at cost.............................. 27,608 35,456,180 $42,287,506 $ 5,372,720 634,375 89,265 29,403,620 $35,49S',980 27,608 35,472,372 $42,915,249 31 NL 000040625 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 re arranging 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 64,925,076 $18,382,410 Year 1951 $85,861,763 68,100,693 $17,761,070 Six Months Ended June 30,1952 (Unaudited) $39,873,348 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 6,267,360 $12,115,050 6,962,337 $10,798,733 3,540,101 $ 1,913,560 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 64,072 29,449 $ 93,521 $12,208,571 81,887 30,985 $ 112,872 $10,911,605 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 e r v e f o r Co n t in g e n c ie s ...................................... 1,550,000 $ 5,775,104 Div id e n d s Pa id .......................................... 2,669,105 Ea r n e d Su r p l u s a t Be g in n in g o f Per io d .................................................... $ 3,105,999 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 32 250,000 $ 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 NL 000040626 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 Re p a ir s .................................................................................................... De p r e c ia t io n ......................................................................................................................................... Tax es --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 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(C) 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 an c e an d Repair s .............................................................. Depr ec iat io n .................................................................................... Tax es --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 ......................................................................................... $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 $ 2.596(A) $3,203,346 $1,059,430 $ 675,381 187,871 171,000 80,922 $1,115,174 $ 71275 $ 6,673 Note (A) Charged against sales. Year 1951 Al Ma in t e n an c e an d Repair s ............................................................. $3,816,617 $ 8,623 $3,825,240 Depr ec iat io n ..................................................... .............................. $1,171,571 $ 59,-137 $1,231,008 i Tax es --Other than taxes on income: Social security ............................................................................... $ 732,393 $ 38,938 $ 771,331 Real and personal property......................................................... 118,914 101,633 220,547 State and city income.................................................................... -- 166,251 166,251 State franchise and miscellaneous................................................. -- 100,719 100,719 $ 851,307 $407,541 $1,258,848 Ren t s .............................................................................................. Ro y al t ies ......................................................................................... $ 20,124 $ 4,831 $ 55,897 364(A) $ 76,021 5,195 Note (A) Charged against sales. 33 ML 000040627 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 Repair s ............................................ ...................... Depr ec iat io n .................................................................. ...................... Tax es --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 $2,015,259 $ 6,497 $ 763,865 $ 39,357 $ 572,476 76,370 -- $ 648,846 $ 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 34 NL 000040628 DOEHLER-JARVIS CORPORATION Exhibit 2--(Continued) NOTES TO FINANCIAL STATEMENTS 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, 19S0, requires annual payments for benefits based on current services and payment before August 31, 19SS 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 Six Months to 1951 June 30,1952 $376,000 65,000 380,000 980,000 182,000 43,000 $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 life, as periodically reviewed, of the individual assets or minor group classifications. The periodic reviews limit fully 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 Six Months to 1951 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,S07. $671,829.39 $787,755. $817,405. $179,507. 35 NL 000040629 DOEHLER-JARVIS CORPORATION Exhibit 2--(Continued) NOTES TO FINANCIAL STATEMENTS -- (Continued) Additional compensation was determined by the Executive Committee. Of the foregoing, the following amounts were paid or accrued pursuant to a plan under which both the amount as to each participant and the aggregate total were subject to formula limitations: 1949 ............................................ $478,234.39 1950 ............................................ 672,755.00 1951 ............................................ 702,405.00 No t e 5-- At June 30, 1952 the Corporation had no known contingent liabilities which would aggregate a material amount. No t e 6-- In the opinion of the Corporation all known adjustments necessary to a fair statement of income for the six months ended June 30, 1952 have been included. 1 36 NL 000040630 Exhibit 3 The Right to Exchange this Scrip Certificate for Common Stock Expires at 3 P.M. E.S.T. , 1955 This Scrip Certificate will be Void for All Purposes after 3 P.M. E.S.T. , 1959 No. S0000000 SCRIP CERTIFICATE -- SERIES D-J /lOOths of One Share IN RESPECT OF COMMON STOCK of NATIONAL LEAD COMPANY (Incorporated under the Laws of the State of New Jersey) THIS IS TO CERTIFY that the bearer of this Scrip Certificate, upon surrender hereof to National Lead Company (hereinafter called the "Company") at the office of The Chase National Bank of the City of New York (hereinafter called the "Scrip Agent"), 11 Broad Street, in the Borough of Manhattan, City of New York, before 3 :00 o'clock P.M. Eastern Standard Time , 1955, together with other Scrip Certificates of like tenor, representing in the aggregate one or more full shares of Common Stock, $5 par value, of the Company, will be entitled to receive in exchange therefor a certificate for the number of shares of such Common Stock equal to the aggregate number of full shares represented by the Scrip Certificates so surrendered, together with (1) all dividends paid to the Scrip Agent on such number of shares of such Common Stock since , 1953, and (2) a new Scrip Certificate of like tenor for the difference, if any, between the aggregate number of full shares and fractions thereof represented by the Scrip Certificates so surrendered and the number of full shares represented by the stock certificate so received. This Scrip Certificate does not entitle the bearer hereof to any rights to dividends or any voting rights or any other rights of a stockholder of the Company or any other rights, except as herein expressly provided. As soon as practicable after 3:00 o'clock P.M. Eastern Standard Time , 1955, there will be sold for cash, for the account of the holders of the Scrip Certificates then outstanding, in such manner and on such terms as the Board of Directors of the Company shall determine, the shares of Common Stock of the Company represented by such Scrip Certificates then outstanding; and thereafter and until 3:00 o'clock P.M. Eastern Standard Time , 1959 each holder of such Scrip Certificates upon surrender thereof to the Company at said office of the Scrip Agent, will be entitled to receive his pro rata portion of (1) the net proceeds of such sale, and (2) all dividends paid to the Scrip Agent on such shares of such Common Stock since , 1953 (but without interest thereon). THIS SCRIP CERTIFICATE WILL BE VOID FOR ALL PURPOSES AFTER 3:00 O'CLOCK P.M. EASTERN STANDARD TIME , 1959. Every bearer of this Scrip Certificate by receiving and accepting the same consents and agrees with the Company and with every subsequent bearer hereof as follows: (a) to be bound by all of the terms herein contained, (b) title to this Scrip Certificate shall be transferred by delivery, and (c) the Company 3? NL 000040631 and the Scrip Agent may treat any bearer as the absolute owner hereof for all purposes, without being affected by any notice to the contrary; and delivery to any bearer hereof of a stock certificate or certificates, if any, called for by this and other Scrip Certificates of like tenor, or payment to any bearer hereof of his pro rata portion of the cash proceeds of sale of shares of Common Stock as above provided, shall be a complete discharge to the Company and the Scrip Agent. Dated: , 1953. NATIONAL LEAD COMPANY By Th e Ch a s e Na t io n a l Ba n k o f t h e Cit y o f Ne w Yo r k , as Scrip Agent By Vice President 1 38 NL 000040632