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TABLE OF CONTENTS Summary ................................................................................................................................... 1 - 2 Growth of sales from new products .................................................................... 3 Growth of profits from new products .................................. *.......................... 4 Sales growth of 1/2" and 5/8" Firestop ........................................................ 5 12 months market performance of new products ......................................... 6 6 months market performance of new products ............................................ 7 Budgeted distribution of 1968 research expenditures ......................... 8 New product section ...................................................................................................... 9 - 11 Product improvement section .................................................................................. 12 - 14 Sales service section ................................................................................................. 15 - 16 Gypsum Association - ASTM section .................................................................. 17 Patent section .................................................................................................................. 18 SGP 0015035 SUMMARY Facts and Figures This is our first semi-annual report since we moved into our new Tigard Research headquarters. Since this is the year end, we will in clude some annual figures in addition to the six months figures. The sales and profits generated from new products in 1967 reached all time highs of $3,307,524 and $875,769. This growth since 1962 is shown on the charts on pages 3 and 4. The 1967 figures represent 4.1% of the Gypsum Division sales and 4.6% of the Division profits. Firestop sales escalated to 30,604 M sq ft of 1/2" and 81,792 M sq ft of 5/8" which are increases of 26.1%, and 19.07, respectively over 1966 figures. We feel that improvements in the products and new-fire and sound ratings have been a factor in this growth. In addition, it is estimated that reduced weight limits for Firestop have saved approximately $62,303 in 1967. $200,961 was budgeted for Research in 1967. Our R & D expenses were actually $174,232 for the year. We have budgeted $221,000 for Research in 1968. Our expected distribution of budgeted expenditures in 1968 are shown on the graph on page 8. New Products The only new product released in the last six months was a vermiculite aggregate texture which will be called Bestex D. The major research activity has been the continuation of projects which were started in 1967 or earlier. The molded grainboard pilot plant is com plete and some encouraging trial runs were made. Our option to develop this process has been extended for another six months. The wallboard radiant heating panel is now at" the stage where we will be seeking Under writers approval and at the same time field testing will be started. Another new product is a specially formulated 3/16" thick wallboard which we are proposing to use as a core material in wood paneling. Earlier experiments were conducted at the Savannah plant but the cur rent investigation will be done in cooperation :with the Eugene Division. Improved Products Hard End wallboard may be one of the most significant improve ments in gypsum wallboard in recent years. Very shortly an instal lation will be made in the Acme wallboard line. From this method we can evaluate the method of manufacturing hard end wallboard and also see what the reaction in the field will be. The Denscal operation is currently underway and replacements of Denscal for Densite are being made to take advantage of the lower cost of Denscal. The estimated savings per ton of Densite replaced by Denscal is $11.00. Other pro duct improvements being investigated are the replacement of limestone with gypsum in Joint System, the search for a lower cost emulsion for water proof sheathing and the development of a hard edge wallboard. SGP 0015036 l Sales Service Some new fire and sound ratings have been developed. The most impor tant were the one hour fire rating and 45 STC sound rating for 1/4" gypsum sound deadening board and 1/2" Firestop over wood studs. The fire test pro gram concluded on a disappointing note when we fell short of our objectives in the last three tests. Laboratory testing is underway, using our pilot furnaces, to seek further improvements in the Firestop formula in order to gain the ratings which have eluded us and also to seek lower raw material costs for Firestop. Patents In August of 1967 a patent application was filed for the innovation which has permitted us to manufacture lighter weight Firestop. Our patent counsel was advised by the patent office that the major claims for DensCote base patent application will be allowed so we expect a patent to issue in the near future. We have resumed the investigation of National Gypsum's infringement of our Firestop patent. Fresh evidence from new analyses of the National Gypsum products have been submitted to patent counsel. It is now a matter of deciding whether the patent is strong enough to support a suit against National. The Future Next year should bring the molded grainboard, the radiant heating panels and the hard end wallboard to a conclusion. If they are successful, we will be furnishing technical assistance to manufacturing and sales to help launch these products. There will probably be many ramifications of these products to be pursued. A very comprehensive investigation into our Firestop formula is also planned. In addition, there will undoubtedly be some completely new developments plugged into our program in 1968. The rebuilding of our research organization will continue into 1968. The current research group consists of George Green and Ray Hinkel who came with us from Paoli; Don Klus, who transferred to Tigard from our Grand Rapids plant; and the new men, Kelly Stalker and Mike Robinson. The training of the new men will be done simultaneous with the pursuit of our research objectives. Our objectives for 1968 offer more opportunity for us to con tribute to the profits of the company than ever before. We will be doing everything possible to make the most of this opportunity. SGP 0015037 2 $400,000 $300,000 $200,000 $100,000 $3,307,525 SGP 0015038 3 4 SGP 0015039 M SQ. FT. SGP 0015040 5 12 MONTHS 1967 MARKET PERFORMANCE OF NEW PRODUCTS Product Sales Volume Dens-Cote Base (all) 18,106.6 Tile Backer Board (all) 4,824.7 Gypsum Sound Deadening Board 764.0 One Day Joint Compound 292.9 Ready Mix 6,782.0 Triple Duty 4,885.0 Grabit Adhesive 74.4 Bestex A Texture 1,043.3 Bestex B Texture 41.0 Bestex C Texture 222.7 Bestex D Texture 1.0 Dens-Cote Plaster (all) 3,043.9 Dens-Cote Tape 1.2 Model Densite .1 Ram Process Plaster 37.3 Dnescal PR Denscal HP Tooling Plaster High Expansion Plaster .5 0. 0. 0. List Sales $801,372.60 409,567.83 30,168.65 50,168.98 837,517.99 735,909.21 11,073.37 170,678.85 8,115.44 42,805.84 165.00 185,353.80 18,099.07 2.20 6,050.22 35.20 0. 0. 0. Gross Operating P $272,235.77 197,884.02 9,617.16 11,210.74 127,674.46 172,559.93 4,207.96 28,072.27 72.46 (2,083.65) 9.35 45,584.34 5,332.58 .33 3,380.30 11.40 0. 0. 0. TOTALS $3,307,524.00 $875,769.00 SGP 0015041 6 6 MONTHS 1967 MARKET PERFORMANCE OF NEW PRODUCTS Product Dens-Cote Base (all) Tile Backer Board (all) Gypsum Sound Deadening Board One Day Joint Compound Ready Mix Triple Duty Grabit Adhesive Bestex A Texture Bestex B Texture Bestex C Testure Bestex D Texture Dens-Cote Plaster (all) Dens-Cote Tape Model Densite Ram Process Plaster Denscal PR Denscal HP Tooling Plaster High Expansion Plaster Sales Volume 10,452.3 2,694.7 438.6 180.1 3,632.4 2,692.7 45.1 616.2 24.8 121.2 1.0 1,370.31.1 .1 58.3 .5 0. 0. 0. List Sales $468,296.17 232,895.11 15,317.34 25,468.63 427,326.03 388,806770 5,362.79 101,691.66 4,933.60 22,560.45 165.00 83,743.11 11,117.65 2.20 3,894.27 35.20 0. 0. 0. Gross Operating Prof $169,231.36 113,571.94 4,872.29 5,590.25 63,066.03 84,917.45 1,915.58 18,215.63 63.52 1,241.59 9.35 21,304.96 3,716.43 .33 2,397.30 11.40 0. 0- 0. TOTALS $1,791,526.00 $481,125.00 SGP 0015042 7 1968 R&D BUDGET OF PROJECT EXPENDITURES A - Product and Process Improvement B - Sales Service C - New Product Development D - Fundamental Research and General Testing E - Other SGP 0015043 8 NEW PRODUCT SECTION Molded Grainboard - R&D 304 The first trials of the Brunswick pilot plant were made in October. Since then there have been three experimental runs and after each, equipment revisions were made. Some short term but continuous runs have led us to be encouraged by it will require some sustained runs to make a final determination. We hope to be able to make some sat isfactory trial runs of long duration (several hours) in early 1968. The next step will be to develop some finishing methods so that panels will be available for laboratory testing and field testing. Below are some pictures illustrating the pilot plant equipment and some of the operations. 9 SGP 0015044 2. Gypsum Wallboard Radiant Heating Panel - R&D 235 For several years we have worked on radiant heating panels in general and for the past 1% years the development has been directed to a panel with wallboard manufactured with conductive paper as the basic component. The paper, furnished by Armstrong Cork Co. and called Temsheet, is the resistance medium through which the current passes to produce heat. Some very small field trials were held to evaluate different methods of the panel fabriaction and installation. We needed to have as much information as possible before approaching Underwriters for approval. One of the questions was, "Should we have a pre-laminated panel with all of the electrical connections incor porated, or should we have a system that would involve job lamina tion and job electrical connections?" It has been decided that the pre-laminated panel will offer less resistance from Underwriters and also permit greater separation of the drywall and electrical trades during installation. These two factors seem to outweigh the disadvantages of involvement of Georgia-Pacific in an unfamiliar fabrication and inherent packaging and shipping problems. Suffi cient conductive Temsheet has been ordered from Armstrong for us to manufacture the board and fabricate the necessary full size panels for Underwriters testing as well as for some large scale field testing. The sketch below illustrates the composition of the panel. 10 SGP 0015045 3. 3/16" Wallboard Core For Wood Paneling-R&D 309 In the previous six month period some experiments were conducted in an attempt to determine whether thin gypsum wallboard would be a satisfactory filler for wood paneling. The objectives are to lower the costs of the paneling and to incorporate some fire re sistant qualities. The first panels made at Savannah didn't give conclusive results so it was decided to make another thin wallboard but with some modifications such as increasing the thick ness from 1/8" to 3/16", increasing the width from 48" to 50", increasing the length from 96" to 98", using a paper with high internal ply strength and incorporating 2.5 lbs of glass fiber/M in the board. This time we will be working with the Eugene Division so a run of the special 3/16" board was made at Lovell and shipped to Eugene in late December. 4. Firedoor Filler - R&D 295 This project was deflated when repeated efforts to make a door were unsuccessful. Each time the gypsum filler collapsed during lamination. It was found that the moisture from the glue line was permeating and weakening the filler which caused it to col lapse. A waterproofing material (sodium methyl siliconate) seems to offer a possible solution to the problem. Some slabs will be made with the waterproofing agent and tested in small press be fore making another attempt to make full size doors. 5. Road Plaster - R&D 10 At the request of sales a special gypsum road patch material has been developed. This product consists of Densite, coarse sand, * and zinc stearate which is the waterproofing agent. Some patches are being applied in heavy traffic locations in order to check the permanence of this patching material. The idea is to have a road patch which could be applied and the road be opened to traffic almost immediately. 11 SGP 0015046 PRODUCT IMPROVEMENT SECTION 1. Reduction of Glass Fibers in Firestop - R&D 290 An attempt to reduce the amount of glass fiber in Firestop was made to realize the substantial savings that would result and also to ease manufacturing problems associated with the amount of glass we are using. Our limited pilot testing indicated that using 1/4" instead of 1/2" glass fiber would permit a reduction of 507,, in the amount of glass fiber required. Our pilot facilities were in the pro cess of being moved so it wasn't possible to do as much testing as had been planned. It was decided to take a conservative ap proach and try to get U. L. approval with a 257, reduction using 1/4" glass fiber. A retest of design No. 259 - 2 hours was se lected by U.L. as the criterion to establish whether the fiber content could be reduced. This is the design we have which no other manufacturer has been able to match. The test at U.L. was unsuccessful and left us without a clear reason for the failure. It was far short of the 2 hours we were seeking so it is appar ent that our pilot test results misled us. As soon as the pilot test facilities are re-installed, some rechecks can be made. Several plants have purchased Finn and Fram glass cutters and they are helping to alleviate the problems in cutting the large quantity of glass fiber required in Firestop. This will not stop us from continuing to seek a means for reducing the glass fiber in Firestop. 2. Denscal Operation - R&D 308 Research assistance was provided to get the Denscal plant in full scale operation. As had previously been determined, a reheater was necessary to drive off the last traces of water and permit the manufacture of a product with a sufficiently stable setting time. The present Denscal is more stable than U.S.G. Hydrocal, judging from the Hydrocal samples we have tested. Another phase of the Denscal investigation was to replace Densite with Denscal in our industrial product line. This substitution has taken place in pottery plaster, tooling plaster and Ram Pro cess plaster. This substitution will lower the raw material cost of these products. The Densite in Dens- Cote has also been re placed with Denscal. This alone will save about $2 per ton of Dens-Cote or an annual savings of $6000 based on last years Dens Cote sales. 3. Hard End Wallboard - R&D 311 Increased sales pressure to make a round edge wallboard like U.S.G.'s has caused us to accelerate the "hard end" board devel opment which we feel could counter this competitive system of U.S.G. Our method of making a hard end board is to treat the ends of the gypsum board with polyvinyl acetate resin. This re duces beading by keeping the face paper from swelling. It also 12 SGP 0015047 reduces end splitting of the paper and makes the end of the board harder and therefore less subject to damage in handling. It is our opinion that reducing beading at the end joints is attacking the problem where it is most prevalent. Furthermore, our method willnot involve new materials or extra operations as does the U.S.G. method. A spray system appears best for producing the hard end wallboard. The apparatus for applying the hard end treatment has been pur chased, test operated in Tigard and sent to Acme, where it will be installed in their wallboard line between the end sawing and end bundling operations. Mr. Hollingsworth suggested adding a green dye to the resin treatment for identification and to use as a pro motional aid. Tests are currently in progress to determine whether the green dye has any tendency to migrate through to the finished surface. 4. Lower Cost Sheathing - R&D 90 In view of the narrow profit in sheathing, an all out effort is being expended to reduce costs whenever possible. One approach was to make the edges square instead of tongue and groove. Sales, however, felt they could not sell a square edge sheathing because of the FHA requirement that the edges be tongue and groove. Re ducing the weight and quality of the apaper is another considera tion being acted on by manufacturing. Still another potential cost reduction is to try some wax-rosin emulsions to see if they will make the core water resistant less expensively than the as phalt wax emulsion we now use. Trials are being conducted at the Akron, N. Y. plant to determine whether there are any savings to be gained from the emulsion. 5. Reduce Limestone Costs in Joint System - R&D 275 Two different limestones are used in our Acme Joint System pro ducts. One of these (Purestone) is cheaper than the other by about $5 per ton. The more expensive limestone (Thompson Weiman marbledust) is used in the high volume products such as Topping and Triple Duty. A coarser version of Purestone was tried to make it more like the marble dust but there is still a difference in the working characteristics which we feel would adversely af- feet the working properties of the products. Any gain in raw mat erial savings could easily be wiped out by a possible reduction in sales, so it is not worth the risk tomake the change. Another possibility for cost reduction is the substitution of gypsum for limestone in Joint System. While this is a more difficult ob jective to achieve, the potential saving is much greater than a mere limestone substitution would offer. There are two reasons why gypsum is not used as a filler in Joint System. Gypsum counteracts the alkali in the casein products and keeps the casein from going into solution. The casein must go into solution in order to provide adhesion. This would not be a problem in Triple Duty or Ready Mix since these products contain vinyl adhesives. The other problem is the inherent absorbency of gypsum. This causes the joint system SGP 0015048 13 to be more absorbent than the wallboard paper and results in dec oration problems. One approach is to use anhydrous gypsum. An other is to treat dihydrate gypsum with a waterproofing agent to give it the required properties. Both methods are presently under investigation. SGP 0015049 14 SALES SERVICE SECTION 1. Fire Test Program The following full scale fire tests were conducted in the last half of 1967: a. Design #30 - 1 hour was obtained when a wood stud partition with 1/4" Sound Deadening board and 1/2" Firestop on each side easily passed the hour test. There were no attachments of the face board into the studs except at the top and bottom. All other fastenings of the face board were to the 1/4" Sound Deadening board. b. The repeat of Design #259 - 2 hours to achieve lower glass fiber usage was unsuccessful. c. The fire test of the Dens-Cote system over metal studs using 1/2" Firestop Dens-Cote base fell short of the hour in spite of apparent good performance of the wallboard. d. A repeat of Design #46 also did not achieve the re sult desired which was for the board to remain in place for the entire test and thereby satisfy the building code requirement in San Francisco. Now that our pilot furnaces will be available again, we will begin a comprehensive pilot fire testing program. We will be attempting to answer some of the questions posed by the unsuccessful tests and also be seeking improvements in performance and cost for our Firestop products. The only full scale test planned is a flamespread of Eternawall with 6 mil vinyl and a new adhesive. The ultimate goal is a 25 flamespread rating. 2. Sound Test Program A STC rating of 45 was achieved for the wood stud partition with 1/4" sound board and 1/2" Firestop. This partition along with the metal stud partition previously tested with these same board pro ducts provides information for Sales to use in promoting our new 1/4" Sound Deadening board. 3. ICBO Approval Lightweight Board Some 1/2" board weighing 1850 and 1698 lbs/M was manufactured at Blue Rapids and shipped to an independent testing laboratory. T.he purpose is to convince ICBO that the lighter weight wallboard is satisfactory. ICBO's not inclined to go along with the new ASTM weights without supporting data. 4. Predecorated Panels A ceiling panel with a grid design was prepared for purposes of SGP 0015050 15 discussion at one of the Sales/R&D meetings. Sales is interested in our developing a predecorated ceiling panel as well as predec orated wall panels such as molded grainboard as a step toward eli mination of joint finishing and painting. This project is in an exploratory stage at the present time. 16 SGP 0015051 GYPSUM ASSOCIATION - ASTM SECTION 1. Technical Committee Meeting in French Lick The technical committee of the gypsum Association met in August. Since the light weight board issue has been resolved, U.L. Label .Service is the only controversial subject. We are still alone in our stand to continue label service but thus far have restrained any action on the part of the others to drop label service. 2. Fire Resistance Design Manual The manual is undergoing revision and we have submitted a rewritten section of the manual that had been assigned -to us. 3. Destructive Tests at White Plain Urban Renewal Project Georgia-Pacific was represented on the task force which investi gated the White Plains urban renewal area. Several buildings were selected for possible burn out tests. The object of such tests is to show how gypsum performs in an actual fire. The tests are to show: a. The effect of gypsum board if it were used as a sub-floor component. b. The effect of a suspended gypsum ceiling as a pro tection for open beam ceilings. c. The effect of a fire in a house where there is a roof instead of a floor assembly above the ceiling. There is some question whether the one hour rating is still valid if there is a roof over the ceiling. d. The effect of certain junctures in fire rated parti tions. For example, the fire rating of a partition is suspect when a partition is only as high as the suspended ceiling. Conceiveably, fire can spread through the ceiling and over the top of the partition. Based on our task force investigation the Technical Committee will decide what tests to recommend and request approval from the board of directors of the Gypsum Association. SGP 0015052 17 PATENT SECTION 1. Improved Firestop A patent application for the new light weight Firestop formula was filed in August. 2. Dens-Cote Base Some affidavits were prepared for the continuation of the patent application on the combination of pinholes and wetting agent as a surfacing for plaster bases. We understand that the examiner is inclined to allow our claims. If so, a patent covering this product will be forthcoming. It is difficult to assess the sig-> nificance since we do not know how many other companies are cur rently using this method or how many companies we could license if this were our desire. Samples of competitive plaster bases are being requested. 3. Infringement of Firestop Patent The subject of National Gypsum Co.'s infringment of our Fire stop patent was raised again. We have nine companies under lic ense an it seems unfair to them if we permit the National Gypsum Company to infringe. New evidence of infringment in the way of analysis results have been submitted to Synnestvedt and Lechner, our Philadelphia patent counsel. They have been asked to advise us if our patent is sufficiently strong to stand up if we sue. Our objective is to receive royalty payments from National for the remaining 6 years of the patent. 4. Radiant Heating Panel There appears to be no patentable feature here. Armstrong has an application on the process for manufacturing the paper. We have gotten a 3 year exclusive purchase agreement from Armstrong extendto 5 years, so this will provide some degree of protection for us. 5. Hard End Wallboard A patent search has not turned up any prior art. The next step -is to determine whether there is a basis for a patent application. 6. Patent Policy As a result of some questions which came up when the company change took place, John Synnestvedt of Synnestvedt & Lechner in Philadelphia suggested that a company policy be adopted and submitted a rough draft for our consideration. A discussion was held between Messrs. Wilson, Breuer, Pound, Stephanson and Lehnert and a revised draft of the patent policy was put together. This will be prepared in final form by Mr. Breuer and submitted to management for approval. SGP 0015053 18 RESEARCH FOR PROFIT JUST COMPLETED in Tigard, is GeorgiaPacific'S new gypsum research laboratory, Waking that Portland suburb one of the na tion's gypsum "capitals." New product de velopment, quality control and manufac turing improvements are part of the lab's work. Manager of research and develop ment is C. W. (Bill) Lehnert, and technics director is John B. Moss. Portland archi tect L. C. Gilham designed the two-buildin; facility. Builder was P&C Construction Cc of Portland. SGP 0015054