Document V3ryGabLOwKo4EmvN95xv3xKg

80a. ANNUAL REPORT / The RUBEROID Co. / 1966 FINANCIAL HIGHLIGHTS 1966* Net Sales .................................................... $183,804,821 1965* S168.428.410 $ $Net Income ............................ . 8.496,459t 6,768,169 $Net Income Per Share........... 2.05' $ 1.65 $Cash Dividends ...................... 3.775.223 S 3.307.036 $Dividends Per Share............. .925 s .80 sWorking Capital................................... 45,147,127 $ 41,686.038 sStockholders' Equity ................. 81.187.512 80,592,749 $Equity Per Share.................... 19.54 s 19.65 Shares Outstanding at Year End ........................................ 4.153,262 4.102.388 * .4.i.`iusfei: for pooling of interests o' The Rubieroui Cn w jfh Amt.-.c-n Fe.'r Conponx nnd for the rwo*/or-one slot k split in 1966 tExc/js.-ip of special charze c( S4.800.000 equivalent to SI 16 oer shere Transfer Agent............................. The Bank of New York, New York Registrar .................The Chase Manhattan Bank, N.A.. New York General Counsel. ...............Austin. Burns. Smith & Walls, New York Auditors............................................ Price Waterhouse & Co.. New York Annual Meeting of Ruberoid stockholders *wl be held in me Holiday Inn |erse> Cm V J on Apr; 28 :96' AJi stockholders are cordially ms;ted to aliens A notice o! meeting, a pro*\ stammer.! Jf: a proxy solicited by the management will oe mailed ro each nolder o: capnal stock The sata herein are pub.ished solel> for the information of the Company s stockholders Vo statement in this bookie: is made for the purpose of inducing the purenese of an> securit> issued hs the Company THE PRESIDENT'S MESSAGE To Our Stockholders It is a special pleasure to report that 1966 was the best year tn the Com pany s BO year history. Ruberoid earned more, sold more and produced more than in any previous year. It is our strong feeling that the foundation has now been established for achieving some of the important goals we have been working toward in recent years Net income showed an advance for the third straight year and attained record levels, rising 26'1 over 1965 results. Sales reached a new high for the third successive year, increasing 9'- over the 1965 total. These significant advances are all the more encouraging for they dramatize Ruberoid's diversified strength in a year that experienced reduced business growth and a sluggishness in new housing construction activities. During 1966, Ruberoid achieved some key milestones in its long range plans. In addition to the steadily-increasing benefits we are realizing on our recent capital improvements, we continued to experience better sales cover age and deeper customer and industry penetration with our broadened prod uct lines of building materials, floor coverings and industrial products. The year's encouraging performance also gave our Board of Directors the opportunity to enact two increases in the quarterly wdend rate to our stockholders. Last year, an important step was taken with the ai isition of American Felt Company. This outstanding concern is a major md fully-diversified manufacturer of natural and synthetic fiber felts, in .ustrial fabrics, filter devices and custom-designed fabricated products Some of the more important considerations in the acquisition of this Company were the strengthening of our marketing capabilities in the in dustrial world and the opportunity to expand into areas related to American Felt's activities. As we view the coming year, we are both confident and optimistic about the future and its promise. At the outset, we will be challenged by the present economic circumstances However, as the year progresses ue have every expectation that it will turn out to be one where we will realize favorable results. The Company is in a strong financial position. We intend to pursue our policy of fully reviewing all possibilities for expansion and internal growth On behalf of our Directors and Officers. I acknowledge with gratitude the valuable contributions of our customers, stockholders and employees Without their support, the year's record achievements would never have been realized. Sincerely. January 23, 1967 E. J O'Leary Chairman and President 0 1 - ij j - 7 GAF 12356 OPERATIONS IN 1966 RUBEROID SALES AND HOUSING STARTS Company satt show an upward trtndvarsus dacl-ning housing starts UBCROlO SALS* IN millions mousing STARTS IN MILLIONS IN 1.71 IN TN2 1N3 IN4 IMS 0.33 t NO The financial statements for 1966 and 1965 shown in this report have been ad/usted to reflect the pool ing of interests of The Ruberoid Co. and those of its subsidiary. American Felt Company and also for the 2-for-l split of the Company's capital stock in December. SALES AND INCOME Net sales in 1966 aggregated S183.804.821. to mark the third successive year of record perform ances for the Company. This signified a 9' i. advance over the 1965 total of $168,428,410. Net income in 1966 attained the highest level in the Company's 80 year history. These earnings rose 26*^ to S8.496.459. equal to $2.05 a share on the 4,140,296 average shares outstanding. These totals are exclusive of a special charge of $4,800,000 or $1.16 a share set up as a reserve against a possible loss on the bearer promissory notes relating to the Cabot Titania Corporation. FINANCIAL CONDITION The Company again ended the year in a strong financial position. Working capital at the year-end amounted to $45,147,127. an B'i rise over the 1965 total of $41,686,038. Current assets :o current liabilities showed a 3.2 to 1 ratio. This corresponds to the 1965 proportion of 4.0 to 1. At the end of 1966, cash and marketable securi ties amounted to S14.615.314, as opposed to the year-earlier $5,267,571. At 1966 s close, stockholder equity was $81,187,512 orSl9.54 a share as opposed to the 1965 amount of S80.592.749 or S19.65 per share. On October 31. 1966, our Company secured more than 99 per cent of the 192.750 outstanding com mon shares of American Felt Company through an exchange offer for an equal number of shares of Ruberoid's capital stock. The financial statements of this company, which is operated as a subsidiary, have been pooled with those of Ruberoid in this report for the years of 1966 and 1965. Two significant changes were made with regard to our investment in Cabot Titania Corporation at Ashtabula. Ohio. Early in the year. Ruberoid exchanged its equity holdings of 20,000 shares of 5'i cumulative con vertible voting preferred stock and $2,650.000 in notes receivable of this concern for a 5ljr' subor dinated bearer promissory note in amount of S4 650,000 due January 3. 1973. Subsequent to this, an GAF 12357 additional S150.000 of the same class of notes was received in exchange for a cash advance of a simiJar amount. As this report wen! to press. Ruberotd approved in principle an agreement with Cabot Corporation, the parent of this concern, whereby the Cabot Titania 51-'- bearer notes would be replaced bysubordinated bearer notes of Cabot Corporation having special extended payment terms. This was undertaken to induce Cabot to guarantee a five year supply contract of Cabot Titania to furnish in creased quantities of titanium tetrachloride to a ma/or customer, and to advance further operating capital to Cabot Titania. The Company is providing a reserve m 1966 of S4,800.000 against the bearer notes receivable, which is reflected as a special charge after net income. These transactions are explained in greater detail in Note 2 to the Consolidated Financial Statements on Page 10. DIVIDENDS Our Board of Directors voted two increases in dividend payments during the year. Dividends per share in 1966 totaled 92'- cents, adjusted for the 2-for-l stock split, which compares with the 1965 adtusted amount of 80 cents. Dividends are nowbeing paid at the rate of 25 cents per share per quarter. In adopting these increases our Board took into consideration 1965's sharp sales and earnings rise plus the expectations of record sales and earnings during 1966. These payments also marked the Com pany s 78th uninterrupted year of cash dividend payments. PLANT A EQUIPMENT Our capital expenditure program, that has totaled over S40 million for the past five years, continued according to our intended pian of bringing our plant and equipment to Us proper capacity and to a higher level of efficiency, as well as to improving our prod uct quality and customer service. In 1966 these expenditures totaled $5,208,471. The chief outlays were for substantial production innovations at our Gloucester City. \. [ and Erie. Penna facilities for the manufacture of new types of flooring felts, and, for the first stages of an ex pansion program ai our Fullerton. Penna sheet vinyl flooring plant. The net value of property pia.ct and equipment at the end of the year aggregated S59 67m.J83 as compared with the 1965 year - end amount of S00.122.711. Expenditures lor repairs and main tenance amounled to S10 07.1.199 in 1966 This compares with S8.976.649 expended in the precious war ANNUAL A SPECIAL MEETINGS OF STOCKHOLDERS The Company held two meetings for its stock holders during the year. These were the Annual Meeting on April 29 and a Special Meeting on December 14. Both these meetings were underlined by a largerthan-usuai attendance and a participation of ap proximately 93 per cent of the outstanding shares of capital stock. At the December 14 meeting, stockholders gave their approval lo an increase in the Company's au thorized capita! stock to 10 million shares from the previous 3 million and a 2-for-l split of the out standing capital stock. ORGANIZATION Board of Dirac tors During the war. two new Directors were elected to the Ruber- ;d Board The new members are Archie E. Aii>right. Executive Vice President of Stauffer Chemical Company and Samuel H. Wol cott. ]r., Pres dent of Consolidated Investment Trust, headquartered at Boston Mr Wolcott had served as Chairman of the Board of American Felt Company prior to its acquisition by the Company on October 31. These new Directors fill the vacancies created bv the retirements of LeRoy A. Petersen and William J. Van Akin. The Company wishes to express its deep appreciation tor being the beneficiary of the countless contributions and invaluable counsel that were advanced by these gentlemen during their tenure of service Executive Chances IVm. Howard Lehmberg w as elected a Vice Presi dent of the Company He also serves as President of American Felt Company, a post he has heid since 1956 Paul W Garrett was elected Assistant Secretary. He also serves as Staff Legal Counsel. Prior to join ing Ruberoid in 1963. he was Assis'ta-nt Secretary for Sandura Company. GAF 12358 v*. Remodeling and Redecorating' BUILDING MATERIALS During 1966 the inherent strength our Company enioys in the home remodeling and replacement markets was emphatically demonstrated by the sales growth of Ruberoid s line of building products in the face of a sharp drop in housing starts. Historically when new housing starts decline, repair expenditures show an increase thus assuring a relative degree of stability to Ruberoid's sales. This was amply demonstrated last year. Although the light money situation of 1966 prompted a de cline in new housing starts, financial institutions made ample money available for home improve ment loans. Over the past three decades, Ruberoid has weld ed a strong association with the home improvement contractor and specialist. As in the past, our Com pany devoted a considerable portion of its energies to the needs of these contractors and specialists. Some of these centered on the manufacture of spe cialty items for their exclusive use, specialized sales promotional features and publications offer ing technical and administrative guidance. FLOOR COVERINGS One of the most impressive features of our 1966 performance was the sales growth of the Company's resilient floor tile and sheet vinyl floor coverings among consumers, builders, architects and decora tors While both these product lines are used in new construction, a large proportion found its way into remodeling and decorating programs. This grow th is credited to several factors. These principall> are the increasing levels of income, the higher rales of family formation, the multiplication of households, the economical purchase price, the ease of installation and the low cost of maintenance. In addition to residences, more resilient floor cov erings are being applied in hotels, motels, mobile homes, offices, public buildings, hospitals, educa tional institutions, manufacturing establishments, stores and libraries. Perhaps the most significant change was noted in the increased floor tile sales to the "do-it-yourseif trade. This strong showing is affirmed by a recen! surve\. underlaken by a leading national consumer publication, revealing that 54'. of con sumer sales of resilient floor coverings, mainly floor tiles, are ultimately applied by the customers themselves. DIVERSIFICATION OF MARKETS On facing page The swirling stone pattern of Carmel -- the premiere introduction in Ruberoid's new Luran "100 plus " Aimed sheet vinyl flooring-serves as the focal point for its impressive surroundings Shown below is Stone Mosaic, a new vinyl-asbestos floor tile that cap tures the appearance of time-weathered broken stone set into an am s' - random pattern. GAF 12360 Let'l The deep sfiadowhnes of fluco. Ruberoid's new siding, accent the product's natural wood-grain texture Riahi T/.N'A 200. revolutionary roofing membrane, serves as the attractive cover for this unusually comou-ea building Spearheading the sheet vinyi flooring line is a new Luran* "100 plus'' Airtred* that offers a thicker wearing surface plus heavier properties of foamed interlayers and asbestos backing. Airtred can be used in any specialized commercial situa tion where style, underfoot comfort, quietness and ease of maintenance are primary considerations. in the marketing of vinyl asbestos floor tile, our Company continued to note sizable advances. Be cause style is the key factor in this growth, the Com pany placed greater emphasis on the natural look" in both its embossed and smooth surface patterns. Since its introduction in the early 1950 s. vinyl as bestos floor tile has steadily risen m popular ac ceptance to a position where today it surpasses as phalt tile by wide margins. INew Construction Despite occasional dips, new construction activ ity, for both residential and non-residential struc tures has increased steadily since the end of World War il. As the nation s population centers continue to increase and enlarge, a corresponding need de velops for residences, educational facilities, hospi tals. public utility buildings, shopping centers, re ligious institutions, office buildings, governmental agencies and manufacturing establishments Although a sharp slowdown in the rate of hous ing starts developed in late 1966. all other segments of construction for commercial, institutional, public and industrial structures as well as urban rem ival programs reflected favorable advances Ruberoid :s well equipped to capitalize on the more than S50 billion new construction market through its nnl'onwide sales force, its spread o; plants and a si ig distribution network Now makir.. is entry in the Northeast and Mid dle Atlantic S' es is a new siding. RUCO1. which is a product of r iieroid's research. This new siding which is unlih any other stdewali product offers a built-in resistance to chipping, peeling, buckling warping, decay, termites and most important, fire RUCCT which protects a deep wood-te\tured de sign has a factory-applied finish in a distinctive ar ray of colors to blend with any decorating scheme Industrial Produets The Company-made deeper inroads into indus trial markets duriqg 1966 when it addec to us estab lished industrial product line the products oi Aneticarr Felt Company.-a leading manufacturer oi wool and'synthetic liber fells and fabricator of customdesigned specialty products. Ruberoid's product ime ser\ es among others, the avitffmotive. utility, chemical, gasketing, electrical petrochemical, petroleum and packaging industries Cojjipnsing this product array are automotive scrood-deadening and insuiation felts ami boards asbAstos papers and pipe coverings, molded h'eh temperature insulations. flat and corrugated nsbes- GAF 12361 tos cement sheets i I i irn , 1 i insulating tapes. high purity miui .liui met: f11|i: s M.nui .h.:i\ i11< s [>! American Felt Company cenl i or AFCO" in it: s; n.i I fabrics for filtration, glass poii.shinc ami aiilnmmive applications, uool felts nr clothing. footwear, fashion and interior design: and sv nlhetu fiber fidls for use in the manufacture of paper asbestos irmenl pipe and wallboard products. \meru jn Kelt s products serve a broad cross sec tion of the economy incorporating the \ ersatile fea tures of uool and synthetic fibers in materials and fabricated products designed to meet specific cus tomer requirements Wool felt is une of the oldest fabrics known to man. Because it is nun-aging and highly resilient with predictable permanent set. it servps important scientific, industrial and artistic uses Synthetic fiber felts, pioneered by American Felt, represent the most advanced fiber technology and proside materials with greater strength, chemical resistance, temperature resistance and biological stability, to meet the increasing demands of modern industry Through continuing research and devel opment. markets for AFCO products are continu ally expanding, finding new uses ranging from ther mal-ballistic liners for astronaut's space suits to widely used industrial products such as micronrated filter bags and cartridges. -s . vi-.-wi: I Cdnipg.r. Vrcwi-'u;* n nous.'r.'G.' r rcrfrrcJiZcs. ufi/izmg syn- ?;b*-rs a: ri-jhr. end -in*: ,\ooi felts tor piano horn* nr.'o;'.. h.'LTi.'i!;:; .\mrnccjn Fu/i Company's diver- s *:> c nrociuc: iinc RUBEROID FINANCIAL STATE MENTS CONSOLIDATED INCOME AND INCOME RETAINED IN THE BUSINESS Revenues: Net sales..................................................................................... Other income, net.................................................................... Costs and Expenses: Cost of goods sold.................................................................... Selling and administrative..................................................... Interest ................................ ..................................................... Depreciation and depletion................................................... Federal income taxes (Note 6)............................................... Net Income for the Year.............................................................. Special Charge: Provision for possible loss on Cabot Titania Corpora tion bearer notes (Note 2)............................................... Net Income for the Year Less Special Charge.......................... Income Retained in the Business at Beginning of the Year: The RUBEROID Co..................................................................... American Felt Company........................................................ Cash Dividends Paid: Ruberoid capital stock--S.925 per share in 1966 and $.80 per share in 1965 (annual rate adjusted for stock split] American Felt common stock (prior to acquisition)......... Income Retained in the Business at End of the Year 1966 1965 (See Note 1 on page 10) $183,804,821 274.895 184.079,716 139,158,462 22,080,055 1.389.943 5.674,797 7.280.000 175.583.257 8,496,459 $168,428,410 347.865 168,776.275 132,849.138 19,299.409 912,598 4,949,961 3.997,000 162,008,106 6,768,169 4.800.000 3.696,459 39.997,976 4,521.211 6,768.169 36,928.189 4,129,865 (3.574.004) ( 201.219) $44,440,423 (2.971.671) ( 335.365) $ 44.519,187 GAF 12363 CONSOLIDATED FINANCIAL POSITION AT DECEMBER 31 Current Asset*: Cash ........................................................................................... Marketable securities, at cost (which approximates market value)........................................................................ Receivables, less allowances for doubtful accounts of S581.000 in 1966 and $586,000 in 1965 ......................... Inventories, at lower of average cost or market: Raw materials and supplies............................................... Finished products and work in process......................... Prepaid expenses .................................................................. Total current assets ................................................... Less--Current Liabilities: Accounts payable.................................................................... Current portion of long-term debt........................................ Accrued expenses.................................................................... Federal income taxes............................................................. Deferred income from sale of production payment, net of federal income taxes (Note 5).......................................... Total current liabilities............................................... Working Capital............................................................................ Investment and Advances: Cabot Titania Corporation (Note 2).................................... Advance on raw material supply contract....................... Property, Plant and Equipment, at cost, less accumulated depreciation and depletion of $57,427,489 through 1966 and $53,079,783 through 1965 (Note 3) ......................... Working Capital and Other Assets: Less: Notes payable [Note 4)....................................................... Obligation under long-term lease (Note 3) Preferred stock of subsidiary . . ................. Reserve for bonded roofs................................................... Deferred federal income taxes (Note 6) Stockholders' Equity................................................................ Represented by: Capital stock--authorized 10.000.000 shares of $1 par value--issued 4.214.638 shares [Notes 7 and 9)........ Income retained in the business...................................... Less --r Capital stock held in the treasury, at cost -- 61,376 shares (1966) and 112.250 shares (1965) (Notes 7 and 9) . .................................... 1966 ms (See Noi* 1I on page 10| $10,555,520 $ 5.178.366 4,059.794 89.205 24.149.201 26.562.766 9.733.607 16.389.993 1.204.509 66,092.624 9,300.308 13.409.432 1.098.945 55,639,022 5,730.141 1,570.000 4.689.195 6.749,761 2,206.400 20.945.497 45,147.127 1,500.000 6.753.479 1.755.267 3.596.986 1,847,252 13,952.984 41,686,038 4,300,000 59.656.385 106.303.512 13.885.000 4.605.000 447.400 1.030.000 5.148.600 25.116.000 $81,187,512 $37,602,363 44.440.423 82.042,786 855.274 S81.187.512 60.122.711 106.108.749 15.225.000 4.005.000 452.400 1.200.000 3.833.600 25.516.000 $80,592,749 $37,638,057 44.519.187 82,157,244 1.564.495 $80,592,749 ^ GAF 12364 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1-POOLING OF AMERICAN FELT COMPANY AND PRINCIPLES OF CONSOLIDATION: Effective October 31. 1966 the Company acquired 99ri of the common stock of American Felt Company in exchange for capital stock of The Ruberoid Co. This transaction was treated as a pooling of interests for accounting purposes. Accord ingly. the consolidated financial statements for 1966 and 1965 reflect the accounts of American Felt Company and its wholly owned subsidiary. Drycor Felt Company. NOTE 2-INVESTMENT IN AND ADVANCES TO CABOT TITANIA CORPORATION: The Company's investment in Cabot Titania Corporation (Titania) at December 31, 1965 consisted of S2.000.000 of 5C cumulative converti ble voting preferred stock (20.000 shares) and S2.300.000 of o1';'' notes receivable due in 1973. On March 31. 1966 the Company exchanged its pre ferred stock interest and option and notes receivable of S2.650.000 for a Titania Shs'c subordinated bearer promissory note in the amount of $4.650.000 due Jan uary 3. 1973. Subsequent advances amounting to SI50.000 were made to Titania for two additional notes under these same terms to bring the total to S-l.800.000. Titania s financial position at September 30. 1966. the close of its fiscal year, was as follows: Working capital and prepayments......... S2.330.006 Property, plant and equipment, less accu mulated depreciation of $4,268,195 ........ 22.520.106 Working capital and other assets............... 24.850.114 Less. Long-term notes payable to banks......... Subordinated bearer promissory notes . . Accrued interest on subordinated bearer promissory notes................................. 12.000.000 14.450,000 1.108.807 27.558,807 Net deficit .................................................... S2.708.693 No principal or interest is payable on the subordinated notes as long as any amounts are owing on the bank debt. Titania produces and sells titanium tetrachloride and titanium dioxide. The tetrachloride plant is operating satisfactorily while the oxide plant, which is using a new chloride process, has experienced certain technical and production difficulties since it became operational in January 1965 Although further losses are anticipated in 1967. Cabot Corporation (Cabot), which now owns 100' of the stock of Titania and has invested $19,650.000 m this project as of September 30. 1966. has protided working capital as needed and its management has indicated that an active development program will be continued to improve the quality and quantity of production. The Company is contingently liable as a guarantor of notes payable of Titania in the amount of $2,500,000. On March 10. 1967, in order to induce Cabot to guarantee a five year supply contract to furnish in creased quantities of titanium tetrachloride to a major customer and to advance further operating capital to Titania. the Company approved m principle an agree ment with Cabot whereby the 5Vale bearer notes of Titania due January 3,'1973 will be replaced by sub ordinated bearer notes of Cabot. The terms of the new arrangement provide for repayments beginning January 3. 1973 measured by the Company s purchases of tita nium dioxide from Titania. Repayment is also contin gent upon Cabot continuing to control and operate the titanium dioxide plant of Titania. As of December 31. 1966. the Company provided a reserve of S4.800.000 against its bearer notes receivable. NOTE J-PROPERTY, PLANT AND EQUIPMENT: On Octo ber 1. 1963 the Company entered into an agreement with the City of Annapolis, Missouri to lease, for a period of twenty years ending on September 30. 1983. a roofing granule plant located in Annapolis. The City raised the funds for construction of this facility through the issu ance of 20-year Industrial Revenue Bonds, with inter est rates of 3"'..r'< to 414ri. The bonds mature in annual instalments from 1966 through 1983. Construction of the plant was completed in September 1965 Annual rentals under the lease are approximately $385,000, plus certain other costs and expenses. The lease is noncancellable and is renewable, at the Com pany's option, for fifteen five-year periods at reduced rentals. The Company has an option to purchase the plant and property at any time after August 1. 1973 for an amount sufficient to redeem all outstanding industrial Revenue Bonds. The Company has treated this transaction as an in stalment purchase of the facilities and has recorded the property, plant and equipment so acquired at the amount of the related liability for the Industrial Revenue Bonds. The portion of this indebtedness due in 1967. amount ing to S200.000, has been included in current liabilities in the Statement of Consolidated Financial Position at December 31, 1966. NOTE 4-NOTES PAYABLE: Notes payable at December 31, 1966 consist o: Notes payable to b.mks......................... $14,200,000 60 note payable due in semiannual instal ments of $85,000 to April 1. 1974 (as sumed in connection with acquisition of Sandura Company) ............................. 1.055.000 15.255.000 Less--Portion due within one year, shown in current liabilities . 1.370.000 SI 3.885.000 The notes payable to banks are payable in quarterly instalments through June 30. 1972 and bear interest at the rate of 4per annum until June 30 1969 and 47rr thereafter. The quarterly instalments mature in amounts ranging from S250.000 to SI .000.000 during the final year. The loan agreement contains certain restrictive provisions none of which are significant under present conditions. NOTE S-SALE OF PRODUCTION PAYMENT: In Decem ber 1966 the Company sold as a production payment, a portion of its interest in certain asbestos deposits for S3.500.000 Income net of federal income taxes from the sale of this payment has been deferred and will be re flected in income as the asbestos is mined, processed and sold. NOTE S-FEDERAL INCOME TAXES: Investment credits of $316,000 in 1966 and $1,020,000 in 1965 have been re flected as a reduction of the provision for federal income taxes. Depreciation has been recorded for financial state ment purposes under straight-line methods, whereas for federal income tax purposes the Company has used 10 GAF 12365 j i -3- ^ ' i t t accelerated methods and guideline lives. Estimated amounts of federal income taxes deferred to future years as a result of this practice have been charged to the pro vision for federal income taxes (SI.315.000 in 1966 and Si.004.000 in 1965) and credited to deferred federal in come taxes. NOTE 7-CAPITAL STOCK: Pursuant to action by the stockholders on December 14, 1966. the authorized capi tal stock of the Company was increased from 3.000.000 shares to 10.000.000 shares and each issued share of the capital stock was split into two shares. NOTE -EMPLOYEES' RETIREMENT PLAN: The Com pany has pension plans on a contributory and non-con tributory basis covering substantially all its employees. The total pension expense for past and future service benefits for 1966 and 1965 was approximately $1,228,000 and $1,158,000. respectively. The Company's policy is to fund pension costs accrued. As a result of certain amendments to the plans in 1965 and 1966. there are unfunded past service costs of approximately $4,000,000 at December 31. 1966 which are being amortized over 10 to 30 years. NOTE 9--STOCK OPTION PLAN: The Company's incen tive stock option plan for officers and key employ ees. as amended in 1965. provides for the granting of options to purchase capital stock, with the stipula tion that no one employee be granted an option for more than 20.000 shares. Prior to January 1.1965. option prices had to be not less than 95^ of fair market prices at the dates the options were granted and options had to be exercised within ten years from the date of grant. All options granted subsequent to December 31. 1964 must be at not less than 100^ of fair market prices and the options must be exercised within five years from the date of grant. The optionee may exercise up to 40r> of the shares subject to option m each of the first two years following the date of grant and the remainder at any time thereafter. Options become cumulative, if not ex ercised. for the duration of the option period. Particulars relating to shares of capital stock issuable under options granted under the plan after adjusting for the two-for-one stock split are as follows: Option dot# ond trie# pot iioreitod or Iffniiutarf during IN* SHorot trndor OptlO* Dtctmlwf 31. IN* Sfrarot orcioodlo Pocomboc 31. tttt June 1957--$14.25 Feb. 1958-- 17.13 Feb. 1959-- 20.00 Jan. 1960-- 19.38 Oct. 1960-- 15.88 Apr. 1962-- 17.75 May 1963-- 13.50 Jan. 1966-- 18.38 12.534 1.300 12.050 7.250 2.280 16.060 2.000 53.474* 8.640 4.800 7.300 18.450 18.950 5.720 18.320 41.600 123.780 8.640 4.800 7,300 18.450 18.950 5.720 18.320 15.800 97.980 `Includes 2.600 shares under options terminated during the year. The above option prices represent 95^ of the market price of the stock on the dates the options were granted except for the 1966 grant which is at lOO'c of the mar ket price. At December 31. 1966 there were 147.450 shares available under the plan for the granting of addi tional options. Options covering 50.874 shares were exercised during the year and such shares were issued from the treasury. The net result of these transactions was credited to the capital stock account. 5`Vr'C'' A I XLl^VJtV rlJCj Vlxll YY -- iXnt7cUto mlooooo an IK] all dollar nouacs ixcept thosi mm SHARE ARC EXPRESSED IN THOUSANDS ISM 1<U* IN*' NT SALES $120,972 117,393 131,415 168,428 183,805 MATERIALS AMD OTHER COSTS - NET $ 80.021 77,008 66,778 110,512 117,574 WAGES AMD SALARIES $ 31.374 30.247 32.576 42,201 44,780 INCOME REFORC TAXES $ 6,265 6.476 8.220 10,765 15,776 federal income taxes $ 2.541 2,714 3,121 3,997 7,280 / AMOUNT $ 3,724 3.762** 5.099 6,768 8,496 NET INCOME C PER SHARE $ .98 1.01** 1.38 1.65 2.05 \ V. TO SALES 3.1 3.2 3.9 4.0 4.6 ( AMOUNT OIVIOENDS < [ PER SHARE $ 3,796 $ 1.00 2,977 .80 2,963 .80 3,307 .80 3,775 .925 AVERAGE NO. OF SHARESt 3,796,192 3,721,600 3,702,786 4,096,402 4,140,296 ( AMOUNT STOCKHOLDERS' EQUITY < ) RER SHARE $ 68,851 $ 18.47 68,689 18.56 70,877 19.14 80,593 19.65 81.188 19.54 FRORERTY. PLANT AND EQUIPMENT $ 42.245 42,324 43,047 60,123 59,656 depreciation AND DEPLETION $ 3,312 3.662 3,841 4,950 5,675 CURRENT ASSETS $ 37,429 39.641 46,630 55,639 66,093 CURRENT LIABILITIES $ 12,055 8.894 11.800 13.953 20.946 WORKINQ CAPITAL $ 25,374 30,747 34,830 41,686 45,147 ' AHerC8e numb*r f shores outstanding during year adrusted for two-for-one stock split in 1966. . 'usted for pooling of interests of The Ruberoid Co tvith American Feit Company *c usive of special charges of S576.919, equivalent to J.13 per share .n 1963 and U.BOO.OOO. equivalent to S1.16 per share m 1966. GAF 12366 CONSOLIDATED STATEMENT OF SOURCE AND APPLICATION OF FUNDS-1960 Additions to Working Capital: Net income for the year........................................................................................... Charges to income for depreciation and depletion, not requiring a cash outlay .................................................................................................................... Increase in deferred federal income taxes......................................................... Sales of capital stock held in treasury to officers and employees under stock option plan.............................................................................................................. $8,496,459 5,674,797 1,315,000 799,053 16,285,309 Deductions from Working Capital: Net additions to property, plant and equipment................................................. Cash dividends.......................................................................................................... Decrease in long-term notes payable.................................................................... Advance on raw material supply contract........................................................... Increase in advances to Cabot Titania Corporation (Note 2)......................... Reduction in obligation under long-term lease................................................... Other........................................................................................................................... Increase in Working Capital....................................................................................... 5,208,471 3,775,223 1.340,000 1,500,000 500,000 200,000 300.526 12,824,220 $3,461,089 PRICE WATERHOUSE & CO. SS BROAD STREET, NEW YORK, NEW YORK To the Board of Directors and Stockholders of The RUBEROID Co. In our opinion, the accompanying statement of consolidated financial position, the related statement of consolidated income and income retained in the business and the consoli dated statement of source and application of funds present fairly the financial position of The RUBEROID Co. and its subsidiary at December 31, 1966. the results of their opera tions and the supplementary information on funds for the year, in conformity with gen erally accepted accounting principles applied on a basis consistent with that of the preced ing year. Our examination of these statements 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. January 23.1967, except as to Note 2, which is as of March 10, 1967. 12 GAF 12367 c t -?7 - - OFFICERS E.J O'Leary Chairman of the Board and President Thomas H. Dermody Senior Vice President-Finance Seymour Milstein Senior Vice President Corporate Development Frederick K. Sweeney Senior Vice President Croup Divisions J. Stokes Clement Vice President-Genera/ Manager Sandura Division Thomas A. Dent Vice President-Operations Leonard B. Farrell Vice President-Industrial and Public Relations Richard N. Funkhouser Wee President-Genero/ Manager Roofing Granule Division Joseph C Hall Vrce President-Genera/ Manager Building Products Division Julien 0 Heppes Vice Pres.dent-Genera/ Manager Fioor Tn'e Division Wm Howard Lehmberg Vice President & President. American Felt Company Warren Darrell .^ssistont Vice President Operations Oscar A. Maggia Secretary-Treasurer Robert N. Eftlinger Comptroller Paul W. Garrett Assistant Secretary Lauren M. Richmond Assistant Comptroller BOARD OF DIRECTORS Archie E. Albright Executive Vice President. Stouffer Chemical Company Thomas H. Dermody* Senior Vice President. Finance The Auberoid Co. Elmer N. Funkhouser. Jr.+ Vice Pres & CenJ Mgr. international Operations. American Can Company Harry C. Hachmeister Long Beach. Californio Gavin K. Mac Bain* Chairman of Board. Bristol-Myers Company v Seymour Milstein* Senior Vice President. Corporate Development. The Auberoid Co. E. J. O'Leary- Chairman of Board and President. The Auberoid Co. Lyle L. Shepard^ Executive Vice President Cities Service Compony Frederick K. Sweeney Senior V'ice President. Group Divisions. The Auberoid Co. Barton K. Wickstrum President. General Time Corporation Chairman of the Executive Committee Member of Executive Committee Samuel H. Wolcott. Jr. President, Consolidated Investment Trust GAF 12368