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PLAINTIFF'S EXHIBIT GF-1963 GAF Corporation Annual Report 1968 GAF 12398 Financial Highlights 600 30 25 I $ 1.50 1966 1967 SALES Table of Contents Front cover A view of Porrofino Italy (rom a transpar ency taken on GAF color shoe film (Anscocnrome*) Lstlsr to Stockholders Page i Financial Data Financial Review..................................... . . 3 Five-year Financial Summary.................. . 18 Consolidated Income and Retained Earnings Consolidated Balance Sheet . . 19 20 Financial Notes................................. Source and Use of Funds .............. Accountants' Opinion .................. 22 24 21 Review of Operations Chemicals Photo Products........................................... Business Systems................................... Building Products . . Industrial Products ... International ....................... .......... Corporate Staff Departments.................. Directors and Officers .. Products ........................... Sales and Distribution Offices 5 9 13 25 26 V GAF 12399 o I Jesse Werner. Charman of the Board and President To GAF Stockholders: in 1968 GAF Corporal or s consolidated "o: sales -cse 9 oer cen: cver me pre ceding year to S569.548 0C0 ara corcoi'daioc net income 'ose 12 oer cent to S2i.232.000 Not mcome per share of common stock was Si 3' .c ;5 ce' cer: over 1967 Tnese set new records for GAF Each of the five maior sa'es groups that make ud the company's operations cont'lDutec to this increase with record mdiv duai sales Equally gratifying is me rise in net income oesoite ever-increasmg coera'mg costs Earnmgs were a!so ad versely affected oy the to oer cent federal income tax surcharge enacted n July which reduced earrurgs by Si 5 million or 1*5 cents per share The year 1968 was a costly one from an ooeranons viewpoint Expenditures for raw materials services, and wages and salaries continued to escalate Secondly GAF is engaged in amomous plan! and marketing expansion programs rhat in volved added expenses for plant startups, tor new technical and sales personnel and most dramatically, for interest on borrowed money used to help finance tn-s internal growth Interest expense for GAF was S8.292 COO. or 31 percent higner n 1968 than in 1967 A third element of added costs that oeserves mention was a 60-day strike at the company s largest chemical piant, in Linden. N. J Achievement of improved earnings m the face of these oostacles was due to added sa'es volumes from the new products introduced in 1968 and new produc tion facilities that came on stream during the year, some price firming n all the comoany s five major sales groups, and the continuing cost-reduction orogram .nvoiving the consolidation of services and imorovements m operating efhciency Although the operating review that follows m later sections of this annual report gives details on the company's live maicr p :ouct groups, a few highlights of each snoula be noted The cnemical group s sales pedomancs = particularly noteworthy m view of the previously mentioned strike, continuing s .ggisnress m this market, and severe import competition n the dyestuff and pigment area The first hign-pressure acety lene chemical units ano the new Amiben herDiCice 'aciiitv a! tne new Texas City blant were successfully brought on stream While the photo products grouo showed the largest saies percentage gam of any for the year, much of tms was due to the stro-g growtn n oncto equipment products To permit acceleration m sales of GAF onoto-sensit zee materials additional manufacturing facilities are being cum a~c ciacec -n coerancn as rapidly as possible The company's largest single 1968 construction preier completed a: the very end of the year, cons sted of new coaling <ac- dies !o- me manufacture of sen sitized photographic materia s (born films a.nc caoersi at me Bingnam:cn, N Y photo plant Tnese new facilities wnl De jnaergom.c sianup activines `O' muen of the first naif of 1969 The busmess systems group also showee sa'es .morovement, notwitostanorng the effect on the company s British operations of ceva'uation of the Brmsn. pound late in 1967. Part of the growth came from an ncrease m sales of the Ga^ax* electrostatic copying machine paper ano toner system Builomg products rebounoed strongly in ootn saies and profits from a so-ewhat sluggish 1967 This was because of the ccnb nation of mere ncusmo starts oe"e' weatner conoit ens arc f rmer onces The industrial products C'ouo s improvement was oirectiy related fc the cetera, strength of the varied industries with which n supplied equally varied products GAF 12400 C'J -o 1 On specific capital improvements mentioned above, and otners jncen.vay 3Aspent a record total of S43 6 million in 1968 to improve anc expand operating ta;,.. dies m the United States and abroad. There are many examples of me success of the conso.ication effort .n ' 968 T-j most visible achievement was undoubtedly the company s year-long teiev.s or advertising program increased impact on consumers was achieved w;:rc_: ar equivalent increase in advertising expenditures by handling all GAP s consu-ieDroducts advertising as one package rather thar separate programs in addition to improved exposure of company products to the consum no puo'.c the 1968 advertising and public relations programs gave major empnasis to c-omotion of the new corporate name and identity Upon approval by snarenoioers a: the Annual Meeting on April 23, 1968, the name of the company was chargee from General Aniline & Film Corporation to GAF Corporation We oeiieve ccnsioerao-e progress is being made in familiarizing the financial and business communities and the general public with our new name, and in further explaining GAF s commitment to growth by exploitation of technology in a number of congener c major sales fields. in 1969. we Dian to intensify advertising and promotion of the GAF name to in dustrial and consumer users of our many products Tne GAF name ano logctype will be used increasingly as the dominating ano unifying theme for iaentif.cat.cn of all GAF product lines. This will offer a double advantage it will perm-t users of any GAF product to recognize other families of GAF products offering the same higr quality and reliability; it will also graphically snow tne varied ana growing marxets m which GAF products are sold GAF's five maior product imes ve usee m some of the fastest growing seg ments of the economy To give s' enciaers a concept of tne magnitude of this growth potential, each operations s-iew that follows carries ma'gmai quotations from leading industrial puDlicatiOr; me otner current reports There is : ttle COuOt that the fields m which we are eng; m3 provide GAF w.;n an opportunity to grow at a rate surpassing the average of the economy Turning to the immediate future, present indications are that, should the econ omy continue at current levels for 1959 GAF wil1 maintain nigh rates of growth in the sales and profits of all major product lines At the same time, we sha.i co-tmue to press our programs for internal growth by construction o' new `acn ties and introduction 0' new orooucts aro externa, growth oy vigorous ef'erts to imp appropriate acauisition ana merger oopc'xnit es GAF has been exceedingly fortunate in iheacc- s.t cos ras consummated a"c we are certain that the future will bnrg s' ii mere ecuai'y successful acquisitions On behalf of the Board of Direcics 1 w sn :c extend acoreciaton tc cur em ployees lor their devoted anc conscientious e"or:s ano to tne snarenoioers 'or their confidence and loyally iy order of the Board of Directors March 5, 1969 C/ Jesse Werner Chairman of the Board and Presice'i GAF 12401 Financial ^ Review ) GAF sales in 1968 totaled a record $569,548,000 and were $48,676,000. or 9 per cent, higher than 1967. All ot the company s sales groups contributed to this increase, as shown m the comparative figures below: 1968 $ Sales Per Cent of Total 1967 $ Sales Per Ceni Per Cent of Total Increase Chemicals 150,107,000 Photo Products 134,009.000 Business Systems 71,002,000 Building Products 168,203.000 Industrial Products 46.227,000 569.548.000 26.4 235 12.5 29.5 8.1 100.0 142.945,000 115,601.000 64.355.000 154,461,000 43,510,000 520,872.000 27 4 22 2 124 29 7 8.3 100.0 50 160 100 90 6.0 90 Net income in 1968 was a record $21,232,000. which was $2,271,000. or 12 per cent, higher than 1967. Earnings per share on common stock was $1.31. an in crease of 17 cents, or 15 per cent, per share. Dividends to both common and preferred shareholders totaled $9,112,841 dur ing 1968 and represented 43 per cent of net earnings. Four Quarterly cash div idends of 10 cents per share of common slock (totaling 40 cents), and 30 cents per share of preferred stock (totaling $1 2Z- were declared by the Board of Direc tors and disbursed to the shareholders Plant and equipment expenditures tota ed $43,578,000 m 1968, compared with $39.931.000 in 1967. Working capital at year-end amounted to $156,255,000 a decrease of $1,309,000 from 1967. A consolidated statement of the source and use of funds is shown on page 24. Shareholders' equity increased during the year from $273,314,000. or $14 06 per share of common slock, on December 31. 1967 to $286,449,000. or $14 90 per share of common stock, on December 31. 1968 No new credit facilities were negotiated during 1968 The company continues to finance its needs through the use of the revolving cred t agreement arranged in 1967, from sale of short-term notes, and from internally generated funds. * GAF 12402 3 I 1 Chemicals "Sales oI textile chemicals m 1968 were about S300 million-a 13 per cent increase over 1967 . . Sates growth n specialty chemicals has averaged 5 per cent per year over the past decade, and protected growth m the nett dec ade is expected to average S'/j per cent a year . . . Sales ot cosmetics m 1968 were roughly S3 billion, and growth over the next ten years is ex pected fo range horn 8 to toper cent a year . . For pesticides, a recent prolect/on tor the decade 1965-75 pegs annual growth at 16 per cent; lor herbl ades. at 18 per cent... Heavy chemi cals showed an annual sates growth in the past ten years ot 5.4 per cent, and experts forecast growth averaging 7.8 per cent a year in the next decade " CHEMICAL WEEK "The chemical and allied products in dustry sold products worth S5I.4 billion m 1968, which was 8 per cent higher than last year. The prospect tor 1969 is the same rate ot growth with sales ot about SS6 billion." CHEMICAL 5 ENGINEERING NEWS "The total market lor crop-protection chemicals is approaching SI billion annually The largest suomarket is tor herDicioes tor corn and soybeans. In the United States, it amounts to about S250 million and has grown about 400 percent over the oast live years " THE JOURNAL OF COMMERCE -:=C : Zii c * -e 4 4 O^e of in* most exctn-g *na pronvsirg chemical markets is that for weeO Killers I ana oesMcides Taken at GAFs Linden N j cnemicai Diant >s this inieresi ng view o`. a whio ts synthes^mg new hero Cioa comDounos related to Arri'Oen, a lead nj pre-emergem ne/otcide for soy* oeans prcfoucec tor Rorer-Amchem me GAF chemical activities are conducted by two operating divisions the Dyestuff & Chemical Division and the Textile Chemical Division, While GAF's chemical operations moved ahead in 1968. the increase m sates volume would have been larger, had it not been for a 60-day strike shutdown m the first quarter at the Linden, N. J , plant Xigh-PraMur* Acetylene Derivatives--Sales of GAF's acetylene chemicals in creased to a record high again m 1968. Tms product line is being expanoed steadily to accommodate the continuing discovery of applications in many diverse inaustrles Construction of the new GAF acetylene derivatives plant at Texas City. Texas costing more than S20 million, was completed during 1968 and startup operations proceeded smoothly. This new facility represents a maior increase in capacity and a second source of supply completely independent of GAF s similar plant at Calvert City. Ky. Regular production has begun at Texas City on the polyvinylpyrrolidone (PVP) family of products: butynediol. propargyl alcohol, butanediol. butyrolactone and pyrrolidone. Vinylpyrrolidone and PVP startups are under way To meet steadily rising demand for PVP products, a new specialty products building, costing more than S3 million, was added at GAF's Calvert City plant. New products being made here initially are Polyclar* clarifying and flavor stabilizing agent for beer and wine: and Polectron* emulsion copolymers--for adhesives, special opacifiers and textile finishes Another new family of high-pressure acetylene derivatives that is expanamg rapidly is that of the vinyl ethers and me r polymers, copolymers and aerivatives used in cosmetics, industrial explosives latex paints, textile fmisnes. detergents ano adhesives To meet the needs of the expanding market, a S2.5 million expansion of Gantrez* polymer facilities at tne Calvert City plant was completed m 1968. The expansion more than doubled producticn capacity fer Gantrez AN polymer, a product used for tablet coatings and bincers for pharmaceuticals, stabilizers for detergents, adhesives and explosives, finishing agents tor Spandex fibers and film-formers in cosmetics Gantrez esters are oe-.g used n cesmeue formulations In addition to established uses for Gantrez M polyvinyl methyl ether such as ad hesives and coatings, new applications ceveiopeo m 1968 include epoxy resins mtegrateo circuits and computer memory disks The vinyl ether family was expanded m 1968 by introduction on a commerce, scale of ethyl vinyl ether and Gantrez B polyvinyl iscbutyi ether Gantrez B ether is being promoted for adhesives and coatings, as a tackifie' and plasticizer for synthetic rubber, and as a viscosity-inoex improver Other applications of vinyl ether products developed n 1968 by GAF's Com mercial Development Department induce a gelling agent for a nitrate explosive system and the use of dodecyl vinyl ether m polyvinyl chloride for mold ng and ex truding applications in packaging GAF s long chain vinyl ethers are used by manu facturers of PVC to improve processing ano imoart excellent coior and giass-nke dual ty to tne bottles Tms use was approved Dy tne Food and Drug Administration m 1968. GAF 12404 Specially Chamleala--The growing demand for Amiben, a leading herbicide for soybean cultivation, produced by GAF for Rorer-Amchem. Inc . which markets the product, necessitated construction pf a new Amiben facility at GAF s Texas City plant. Production at this SlO-million facility began in late 1968 Amiben facilities at the Linden. N. J. plant were also expanded in 1968 Rorer-Amchem is field testing several other agricultural chemicals synthesizec by GAF, one of them under the name Ethrel. On a preliminary basis. Ethrel was found to be an effective growth regulator for pineapple and other fru ts and vegetables. Use of GAF Uvinul* ultraviolet light absorbers increased significantly in 1968 because of new applications in plastics, cosmetics, and their acceptance for sun screen applications by pharmaceutical manufacturers Dyastuffs and Pigmonts--The first of five scheduled 10 per cent tariff reductions called for by the Kennedy Round of tariff negotiations went into effect in 1968. As a result, imports of synthetic organic dyes increased 43 per cent The second 10 per cent reduction went into effect in January 1969. Under the agreement, cuts m the U. S. tariff will eventually total 50 per cent of original rates while European na tions will not cut their tariffs by more than 20 per cent Major streamlining of dye product lines was undertaken during the year and many low-profit, slow-moving products were dropped from manufacture A study is under way now to determine how GAF should continue to participate in these markets--especially in view of the eventual adverse effect of the full 50 per cent tariff reductions Five new dyes for the synthetic fiber industry were introduced in 1968. and are expected to increase GAF's share of this rjcidly expanding market--three are for polyester and two for nylon GAF also mtrccuced three liouid dyes for paper anc two other paper dyes Surfactant*--All major surfactant product groups showed improved sales and profitaoility in 1968. Important new accounts were established for surfactants m the cosmetics, synthetic fibers, plastics and industrial compounding industries Five new products introduced in 1968 for use as detergents and as pesticide emulsifiers have been well accepted by industry Industrial Chemicals--GAF maintained its position as a major supplier in the Northeast of such heavy chemicals as chlorine, caustic sooa muriatic acid and sodium hypochlorite Construction continued in 1968 on the new nuit'-milhon dollar chlorine-caustic plant at Linoen, N J.. which will double present capacity wnen in production in the fall of 1969 Textile Chemical Division--Production and sales of this division m 1968 also increased to new highs Increasing demand for styrene-butadiene copolymer latices necessitated ex pansion of manufacturing and storage facilities m 1968 at the GAF polymer manu facturing plan! in Chattanooga. Tenn This project will oe completed late in 1969 Four new lances for the textile industry and one new latex for the paper industry were introduced in 1968 6 G*F 12405 I t *J 2 Photo Products The photographic industry is one ot me fastest growing sections ot the US. economy . Sales ot amateur photo graphic him. eoutpment. and photo l:msning are expected to grow 7.5 per cent per year trom St 9 billion in 1967 to $2.9 billion m 1972 . Sales ot Him to amateurs are estimated to grow 8 per cent annually, from S506 million in 1967 to S750 million in 1972 ... while sales o> eguipment should grow at 4 to 6 per cent a year, trom $728 million in 1967 to $890-980 million in 1972. Estimates tor sales ot X-ray him. eouipment, and chemicals indicate growth ot 8 per cent per year, trom Sts5 million in 1967 to *240 million in 1972 Approximately 80 per cent ot the X-ray market is medical and dental; the balance is industrial. "Use ot photographic methods in printing and publishing--the graphic arts-is expected to grow 10 to 12 per cent per year tor the next live years, or trom St AO million to a range ot $220250 million." ARTHUR D LITTLE. INC v m x- ' s' :: "-C" EGo PWEN' GAF photographic operations are conducted by two separate divisions created n 1968 the Consumer Photo Division and the Industrial Photo Division They are successors, m part, to the former Photo & Repro Division Consumer Photo Division--Sales of photographic equipment and sensitized materials increased markecly m 1968, reflecting consumer acceptance of new products and expanded distribution of all products through major retail chains, department stores, independent retailers, jewelry stores, and mail order retailed Manufacturing activity at the Portland. Oregon consume' products plant in creased by more than 20 per cent in 1968 Construction at Portland--to house office and engineering facilities--freed areas for expansion of plant operations. A glass lens-grinoing facility was established and manufacturing facilities were expandec for metal stamping and for plastic injection molding. Some of the new consumer photo products introduced during the year me ude Three GAF 35mm slide projectors with broad market appeal in several price ranges. These projectors will accept a unique new GAF Slide-Seeker " random access attachment selling for less than S40 The unique portable GAF Sawyer s proiector/viewer. which costs less than S30 As a viewer--slides can be viewed by several persons m a lighted room, as a pro jector--it fills a 40 x 40 inch screen with a brilliant image. The GAF Sawyer's Miraview'" protection viewer, which is designed for preview ing and editing slides. Three new models of GAF Super-8 movie cameras to cover a price range trom S40 to S250 GAF Sawyer s 550RF slide projector and GAF Sawyer s Rotomattc* 707AQZ 35mm slide projedtor were two new models added to existing lines in 1968 GAF's popular line of film has been expanded or improved as follows GAF*D/500 film, the fastest coior s ;e film commercially available, previously sold only in 35mm size, is now offered 120 roll-film size. The GAF 126 cartridges, previously available only in 12-exoos. -a cartridges, are now also offered m the 20-exposure cartridge size and an in:-eved. finer grain black-and-white film was introduced Sales of GAF View^Master viewers and packets increased again in 1968, largely as a result of timely releases such as the space program-oriented packets. Apollo Project and Man-on-Moon, and the television-oriented Mod Squad and Laugh-In. A single distribution subsidiary, Lenco Poolo Products, inc.. was created in 1968 by amalgamation of the former marketing subsidiaries Lenco. Inc , Lenco-West: Gem-Klein Photo Corp and H A Borm anc Co Headquartered m New York Lenco opened new regional distribution centers in Denver Cleveland Boston arc Atlanta. Saies of Lenco Photo Procucts also increased m 1968 Lenco sells--m addition to GAF product lines--Ricoh camera eouipment. and Mercury tape recorders ana phonographs--as well as items marketed under its own Gcldcrest* brand name Ampex tape recorders are being test marveled in two regions Lenco achievec a marketing first n `968 by its appo.ntment as exclusive dis tributor of Wait Disney 8mm home movies These films were neve' oefore avaiiapie to the home market Industrial Photo Division--This division manufactures anc markets a product line that includes (1) professional photo products for portrait, commercial and indus trial pnotography, (2) graphic photo products for use in printing arc graphic arts processes and (3) X-ray film for medical and industrial applications There were significant increases in sales volume in GAF s industrial X-ray and professional onclo p-oaucts m 1968 A Si6 million dollar expansion prciec: was virtually completed at GAF's Bing hamton. N Y film plant by the end of 1968 "he new construction inc udes photo graphic paper coating and finishing facilities, designed for highest duality colO' GAF 12406 12407 A luily automated corcoi room lor one o' me modern tiim-coating machines ai GAP's onotcgraohic manulactunrg oiant at B.nghanton N Y. These electronic "nerve centers centre! operations wnicn acp y me sensitized tayer ot color or olacx-and*h:ie emuis on to tne Mm case suooort :mshea resjlts GAP s lop-qual.ty film orooects sole arounc the world. > and olack-ana-white pnoto -mints. an experimental tilrn ccacng lappratory arc pilot plant for evaluation of film emulsions, and a serni-works facility 'or manu facturing specially sensitized materials ah these facilities Pecan startup early 1969. New products added to the professional line ir 1968 includec a sheet furm fpr the studio photographer, suitable for tungsten light use: a premium enlarging paper for black-and-white prints made from color negatives: a new high-speed reversal black-and-white movie film; ana improved Multigran" Atlura* anc Cyko* papers with greater versatility m modem process.ng maennes Sales of graphic photo prooucts were strengthened m 1968 oy introduction of Anscoime'" film for use in automatic processors in the lithographic fie a GAP atso introduced the companion chemistry system for this film. GAF-X* high-speed medical X-ray film on a poiyester base, introduced n 1956 replaced both acetate-base film and polyesier-oase Supreme* Gafstar* f im Tne new GAF-X film is for 90-second automatic processors. Another 90-secona mea cal X-ray film, Fmex* II medium-speed film--was introduced with its companion system. Liquimat II* chemicals. Another product introduced by the division in 1968 was a new instrumentation film for computer data processing, one suitable for extremes rapid processing of images from the face of the electronic display tube. Contracts for an improved aerial film and allied products awarded to GAF by the U.S. Government in 1968 were in excess of S5 million. A program was started to market cellulose acetate film manufactured at me Brnghamton photo plant to converters for varied uses, suen as protective sleeves anc sheets for display materials 3 Business Systems Eiect'ostatics continues !o grow ac cy to 10 20 percent annually . . . By "970 oolia' estimates on copying ecu.cmem and materials oomr to SI.2 lc S' S Ou'ion " MODERN OFFICE PROCEDURES jA-ci "* : cc* SG iZ j`\*s' GAF s Office Systems Divisior was estabiisnec n 1S68 The new divsion caiers to the fas;-growmg neecs of tne information excios cn--.n ousmess a_c maustry m education, m science arc tecnnomgy it incorporates n-ary cf the orocuc: imes of GAF s former Photo & Repro Division comcnmc -.v tn ren operations of me GAF subsidiary. Shelby Business Forms ire Convenience Office Copier*-The Galax' 5C0 eiectrcstanc copie' -as beer wicely accepted m the J S. and overseas since its .rttrocuct or in 1967 For example, an aircraft manufacturer tne Douglas Dwison o' McDonnell Douglas is operating 280 Gatax copiers throughout a 1 p ants for a compmec out put of approximately 1 7 million copies a year Improvements in the Gatax 500 m 1968 mcioce a oet'er coticai system and greater speed Gatax paper and toners nave oeen improved and the ime expanded for use in other electrostatic equipment Significant progress was made m '968 m estaoiishing a mar<et>ng c'ganizanc" for me Ga`ax 500 copier system and a rational cistnbut.on network of tra red GAreoresentatives anc independent dealers The Gatax 600 cooier capab'e of procucmg up fc 15 cbP'es aotp.-atica'fy `;m each origina1 was previeweo for the trace m tare 1968 'ms coder wi' pe reacy for wide distribution here and abroad m 969. GAF 12408 I 'Ouzo, the most widely used system n engineering, nas not reached the limits of its potential.'' REPROGRAPHICS The audio-visual market has grown at a rate better man the gross national product end has an excellent growth potential." U.S. INDUSTRIAL OUTLOOK 1969 *Shipments of business forms in 1966 are estimated at S960 million. By 1970, they can oe expected to reach Si 2 pillion." BUSINESS FORMS REPORTER The GAF eiecyosiaiic ottce copier shown he'e reauireo ne use of an atr strip to oemonstrate the machine's aodiry to make, automatically, copies of oscillograph recaro>rgs up to 460 'eet m length it also maes 500 copies of letters.ze originals Diazo Reproduction Systems--GAF sales of diazo reproduction eauiomert ano materials increased in 1968 This required a substantial r.se m oaDe'-coatmc capacity for standard diazo Droaucts. obtained by mooificaticr c` coating ecuoment at company plants m Detroit, Mich. ano Arlington Texas Two diazo maenmes were introduced to the market early n 1968 the PM " 920 copier, reoroOucirg originals up to 43 inches wide at oaDer speeds up to o fee: a minute, and the OM" 300 wmteprmter, a 19-inch high-speed maenme These new machines supoiement more than 20 others m the GAF hne of d.azo reprocLCtion equipment GAF offers users of reprographic equipment more thar 70 c.azo paper anc chemical products, including a new, improved blacknne cape' ana a new oiueime oiazo paper usaole unde' marginal conditions of reproduction Audio-Visual Alda--Many GAF products are availaoie for these whe nancie groups in training, instruction, education, sales or reporting. One of tne mesi use ful is Proiecto-Viewfoil* diazo film used for making overheac proiection trans parencies in color Using its Projecto-Viewfoil film, GAF works with educators ano artists m the preparation of visual-aid package programs for the overheac projector and mar kets them to educational institutions. In 1968. those programs having a large num ber of transparencies were divided into smaller sets, to make their purenase easier for the average instructor or school. The 30 programs currently offered have been divided into 115 packaged sets. Sixteen new programs were introduced in 1968. They covered suen varied sub jects as: Understanding Growth and Social Development (a 72-transparency sexeducation program) Learning About Communism: Asian Studies: anc Funda mentals of Coior Information Storage and Retrieval-sciufion to the constantly growing o'odlem of procurement, storage and use : rfcrmation is :argeiy dependent on use of microfilm. GAF's microfilm products ' s available in rolls ano sheets, inducing standard, tonal anc high-soeed micro m Two new Oiazo microfilms were intro duced in 1968 with good tonal sea e excellent reprinting cuality ana wide ex posure latitude At Johnson City, N Y a multi-million dollar excans'or comp,e:ed m 1968 di vides new facilities for ccat.ng anc convening aiazo fnm procucts suen as micro film and Projeclp-Viewfoii fnm In the new iy a.r-ccnc>tior-,ed ousi-free build..ng new facilities .ncude sophist-calec f m-coat.ng eauiomen ano mgr-soeed Vn slitting and rewinding eduicmen: Business Forms and Sales Aids-GAF sa es .nc-easeo m me cusmess forms a~d sales aids marxet despite miense ccmcei'c' To meet tne co--oe: ncr GAr s subsidiary. Shelby Business For-s me -c-easec `ie:o sa-es act.vty anc m;ens tied advertising ana promotm-a P'ograms Me-ketmg strategy emoi-asiced further penetration into tne 'eiat ve'y new rr.arxe' for e ect'cr c data P'ocessmc forms Dictation-Transcriber Instrument --A urn cue c ctat on-transc'oe- nstrumen; manufactured ana marketed unde' license oy Sawyer s orm' lo its merger Tito GAF was test marxeted m the latter halt of "960 Tnrs program .s progressing arc is expected to be oroadened m 1969 tc maxe me new GA- c c:at ng machine available m maicr cties 4 Building # products we're oh me threshold of c/?e of the greatest >t not me glares*, nousmgreat estate booms m our entire history we re on our way ..towara tne i 6 rri!>,on plus /eve' fnoh-tarm nousmg starts) and men on to a "normal" r.S to 2 0 rnithon a year record " SYLVIA PORTER. New York Post syndicated columnist 'Housing starts >n 1969 Win total about i 55 million units, up from 1 4$ million ,a 1968 Sales or about 350.000 mobile comes m 1969 will bring me total close tc 2 miiuon. Hous-ng starts at the be ginning oi 1969 wn oe at about the 1 5 r.i.'iicn rare, rising to 1.6 million py ndyea.'" P W. OOOGB CONSTRUCTION REPORTS A 5 Der cent sales increase is seen is' vinyi asbestos Me m 1969. to raise smcments at tne manufacturers' level to $125 million. Sneet vinyl sales sr.cu'C increase by 7 oe' cent to 1340 i- 'i.on Over tne flex: live years. rased on industry trends m tne resi dential and commercial marnets. it is ve-y mat vinyl asoestos tile will inc-ease '0 oe' cent oer year , . . Sales O' sneet vmyi I'oo'.ng should increase a' me 'ale oI 3 oer cent per year over me /rex' nve years " fLOOPING MAGAZINE e "3 v.ew ol 9xl2-toot '- ;-- ", e: i- - s meet < flfi e-noossed floor c -as -s' seen nsDeceo a- Oai= s wruienaii Pa par: fla:. 'z- a:: r; anc s-.oo nj `e A* -~ns - at-:-r:= 3"J'3' MOD osycneae1 c oaflen colors GA-'s building products operations registered 9 per cent highe' sales r 1953 than the year before These cperafons are earned out tnrojcn two GAP Div s o^s --Building Products and Floor Products Principal marKets ter GAF ou'io^g orocucts are residential construction, remodeling ano renaon tar-on w ;n uc:rercs being forecast m each category Building Product* Division--Sales volume of this aivision was substantially higner in 1968 than in 1967, reflecting increased housing starts and greater empnas.s on improvements in products, distribution and marketing A program to further automate Drocucticn operations on manufacture; ~achmes lor asphalt rooting is approaching completion m three plants w:m four more scheduleo by mid-1979 This program will substantially increase tne e`f cie-cy c* manufacturing operaticns ana improve working conditions ai the plants The two newest prooucts m commercial development--a permanently l.n.s'ed laminated mineral siding that resembles wcoo-shake shingles for exterior wa'fs-- and Timberlme'- asphalt roof snmgle. which simulates wood snmgies--rave peen extremely well received in markets m which they nave been mtrocucec Accor dingly, additional manufacturing capacity for these products, being installed n 1969, will permit broaoer marketing ot them _at*onany Field tests have been run successfully on a new brccuct. a cartai ouikheac sneet `or erosion control or land development arc reclamation ,n coasta. ana .niand waterways There is growing cemand `or this proouct, espec ally m Fiorioa and the Gulf Coast. Floor Product* Divition--Higher saies volumes in Doth floor tiie arc sneet vmyi products were registered m '968 The nationwide network pt distrioutc-; stockirg ano mercnanaistng GAF floor products was expanoed and strengt- c n 1968 i-ow maxing ihese prcaucts more widety available from fiocr-ccve- esa ers throughout tne nation. New product irtroouci.ons n '96c 'ere; ~o these o'-ncipai fasnior Irenes (1) hign-fasniorr coiors n ootn sneet . 3~o `icpr me win stronger ano Dome- colors than before. f2) noexea-m-ree . v "yi-asbestos ti.e Ten new sneet vm/1 pat'ern mes we'e --rod_:ed -n 1958 as cart of GAF s continuing program tc .ncove mmeve' anc cofts `cr aea'ers A.n outstanding introduction m 1968 was uuran1 Rege'Cy * c.ers ncc ng A flew series of embossed sneet Vinyl sola unaer tne trade-na'x Foamcra't mi-ocuced -n I96e s designed to meet re recuiremems r ne '?s ce-t a' lo.smg constructio-' Many new oaiterns anc ne.v ccicrs we'e accec 'c me s"ee' v -yi o'oouc: imes m `968. among wn.ch were 'oj' pane" :'m:s -n co.c's anc includ.ng the "Moo pattern n Scitreo* . Me--eCa'-o and Montego m Foamcratt vinyl ana ten new co>crs nAr"rds `.^cey 'co- "c Four new viny.-ascestos floe 'd'cc-rs .-.e'e ---;c-cec * 1968 in an important new aeve'ccmem n the '.nous:'.. -- ': 3=?-"e co --mi.ee st^e leaae'Sh o --GAF is culling tile m registry wilh ar e~cessed des d" tnLS Cdncaaimg tne seams that a-e v.sibie m most ficor :.-e nsta. a: ons Tne inoexec-m-register patented design Casacianca, anc sevsra1 otrer regste'ec oesgn patterns have been wei. accepted Among other new vmyi-asoestos f cor ;. e cesg~s rntrccLcea n 1968 were Royal Travertine patterned v.,n t-ans _ce--e c adds a natural narpielike appearance Fartasy a new cars'" ns < cc C'S and Wircsor Brick ' a reg stered tile pattern GAF rea ized a sjDstan,t,ai .ncease " sa es volume to tne noo; e "one indus try m 1968 Because p< tre fast-gro.1. " potent,a1 ot this meust'y GA- estab lished as pan o` me F'opr Prcc.cts G .,s.cr a Construction Sys'ems Unit Tffs un.t marxets tc me mcci.e home ndust"/ a'i GAF related products memo ^g `loot oroaucts wa'ipoarc msulatiCn siding : ng anc roefng memprane GAF 12413 I 5 Industrial Products Production ot cars in 1968 reached 8 8 million units, trucks, 1 9 millionclose to a record year. . Expected shipments ot cars in 1969 are 8 9 mil lion. trucks about 2.0 million. ' AUTOMOTIVE NEWS "Consumption oI UPers tor nitration use continues well beyond me 20-milhon pound marx." TEXTILE ORGANON "Supporting research in the Held, the government will spend more than $70 million in water-pollution-control re search. . . Municipal water pollution problems will be attacked in an S8 to S10 billion program through 1973." CHEMICAL WEEK "Federal lunds allocated to air pollu tion research, development and dem onstrations will grow by more than 17 per cent, or $7 7 million, to over $S3 million. according to the 1970 budget established tor the Department ot Health. Education and Welfare " CLEAN AIR AND WATER NEWS Sales of GAF's new Industrial Proflucts Division were higner m 7968 than the year before, reflecting the growth of the markets in which the division s products are sold for such uses as automotive insulation and filtration ecuipment for many industries, as well as for control devices for air ano water pollution GAF's Industrial Products Division was established m Way 1968 by consolida tion of the following groups: (1) the marketing and manufacturing functions of the former subsidiaries. American Felt Co and Drycor Felt Co.; (2) the autcmotve asbestos, insulation and/ocfing granules product lines of GAF s former Building and Industrial Products Division: and (3) the contract sales grouo !c precis-cn machine parts of the former Photo & Repro Division. The division is organized into It)* following groups: (t) the Felt Asoestos Pa per and Millboard Group whicn is a major supplier of wooi and syntnetic tens fcr filtration, polishing, and apparel and industrial uses; (2) the Automotive Products Group, which supplies sound and vibration damping packages to the principal autompbile manufacturers: (3) the Insulation & Construction Group, which pro duces Caisilite* insulations: asbestos-cement products for cooling towers, baffles, and industrial siding; pipeline felt. T/NA 100* weatherproof tacketmg for pipe covering; and other commercial and domestic insulation products. (4) the Mineral Products Group, which produces granules, fillers ano asbestos fibers, and (5) the Contract Sales Grouo, which offers contract manufacturing facilities for precision machine pans. A new GAF manufacturing technique to reorient industrial felt fibers in three dimensions into seamless curvilinear forms such as cylinders and cones promises wide use in the nation s rockets and missiles propulsion systems. These felt products are used as base materials for reinforced plastics designed to resist the high temperatures and erosion confronting missiles and rockets. Additions, space application of GAF felt proc.t's occur in nose cones missile launching pads, ano astronaut space suits Automotive Folti--The automotive - bjSIry acceotec a new concept in an oh fi,tration cpmponent m 1968 This component. first used by Ford Motor Co . pe'mns uniform and effective filtering for 6 ;t3C miles before an oil ano fi!ter change is needed This product required an expansion program at the Newburgh. N. V fe1; production plant In 1968, several sound and vibration control products were developed for the automotive industry--lor use in upper body, dashpoard and floor areas of many 1969 cars ano trucks A new flat dasnboard sound contro: package has been adopted for various 1968-69 automotive mocels in suoseauent years this pack age is expected to oe extenoed to additional ma<es anc models A new filtration system has been developed tor introduction to the pamt, chemi cal and food processing industries--employing a replaceable fe t fiite' bag. which is encased m a pressure vessel Other Product*--m GAF's Calsiiite calcium silicate line, which 'S an improves thermal insulation in sectional design for easy installation, a new product Caisc ie S S. insulation, inhibited against stress corrosion cf sta mess steel, was we: re ceived oy the market m 1968 Nine new colors of roofing granules were introduced m i960 One color "Accent Tone," improves color styling capabilities when used with granules of other colors Two small sales lines of the division were eliminated during the yea' One involved the sale o' tne company's cmy mica plant at Hartwe'l. Ga.: tne other *as the sale o` a line o' microdensitometers tor precision analysis GAF 12414 . International ^ $ Operations t GAF's sales outside the United States from exports anc foreign subsidiaries con tributed to the results shown for each of the company s five operating groups Sales from international operations m 1968 were S61.24C.000 compared with S58 105.000 in 1967 an mcrease of 5 4 per cent Tne 1968 results were sharply affected by the 1967 devaluation of the pound sterling EUROPEAN SUBSIDIARIES In the United Kingdom. GAP subsidiaries were merged into a single company GAP (Great Britain) Ltd., whicn functions through four divisions: ft) the Repro graphic Products Division; (2) tne Photo Products Division; (3) the Chemical Products Division, established early in 1968 to distribute chemicals and dyestuffs and (4) a Floor Products Division, established m London, at mio-year 1968 to market GAP's vinyl-asbestos floor tiles and vinyl sheet flooring in the United Kingdom. A new GAP film processing laboratory was installed in London m 1968 in the Netherlands, photo and reprographic product sales by GAP (Neoeriand) N. V. ended the year at an all-time high. The company, headquartered m Delft, functions through two divisions, the Reprographic Division and the Photo Products Division. Marketing responsibility for all GAF reprographic products m the Euro pean Common Market was assigned to this subsidiary in 1968. Introduce Copier--The Gafax* 500 cocer was introduced in many countries of Europe in 1968 with excellent customer acceptance Facilities for coating sensi tized materials, including GAF electrostatic copy paper, were expanded and a plant for producing photographic processing chemicals was installed at Delft. Marketing for all GAF consumer photo products m Europe is the responsibility of GAF (Belgium) N V., headauartered at Smt-Niklaas New introductions to the market in 1968 were GAF slide projectors, film and new items in the View^Master and PanajVue photograpmc lines. A film processing laboratory was established m Belgium for customer film service. Const'uction at Smt-Niklaas is nearmg como'enon on expanded manufacturing capac 'y for GAF slide protectors. GAF (Deutschland) G.m.b.H. began c.rect marketing of dyes and chemicals throughout West Germany and Easte'- Europe in 1968 With headquarters at Hamburg, sales and warehouse locations nave been established throughout West Germany Consumer photo product marketing, headquartered in Cologne, has increased sales and expanded its organization. GAF (France) Sari, with headquarters m Pans, achieved improved consumer sales despite disturbed economic conditions early in 1968 Late m the year a new warehouse and service center was acqu red to improve service to customers In Sweden. GAF Svenska AB. headauartered at Stockholm, was enlarged from a GAF marketing suosidiary handling consume' photo products to include 'eprographic equipment and supplies Gafax 50C copiers and cnermcal products. Other new marketing subsidiaries estabi'sned m 1968 were GAF (Norge) A/S in Oslo, Norway and GAF (Ireland) Ltd., in Dublin CANADIAN OPERATIONS GAF (Canada) Ltc in Toronto, continues to expand GAF s photographic busi ness with the result that sales m Canada are at an all-time high in June. 1968. GAF acpuired Camsales Limned and International Camera Imports L-mited Camsales formerly marketed GAF Sawyer s* photographic products throughout Can ada With this acduisition a customer sennce center was obtained in Vancouver, B. C and an additional warehouse was put into operation in Montreal Three major locations now insure better photo custome' service m Canada for all GAF photo products. GAF 12415 '5 Corporate Staff Departments GAF $ :ravei ng ccroora:e exn.oii 15 Corcorate staff departments provice servces to ail c.visions anc un is ,n me j S and overseas They include Legai: Patent Financial (offices cf Centro ier Trea surer, ano information Systems) DiStriouton anc Tra'ric. Personne Relations MarKeii.no Services: Advertising ano Dromotion Puolic Reiaiicns Corocrate E-c neenng Research anc Development Process E-g-neemg arc Environigr-j Engineering: industrial Engineering. Pianmng anc Econom c Evaiuaton, MarksResearch, Market Development, arc General Deveicorren: Advertising and Promotion--GAF nas oegun tc use teievis-cn as a ma.pr acvertismg meo-urr m its new role as an important manufacturer arc marxete' c' consumer prooucts The company was able to Duy. on an eco^cmica- pass a network package of spot commercials featuring GAF photo prccucts a~d `;cttcovering products There were, in i960, 136 spot commercials on prime-audience prog-ams su:r as- Waiter Cronkite and the News: Campaign 1968. National Footoall League games: National hockey League games, anc Thursday ana Friday Nicr: Mcves Research data -noicate that GAF commercials nao a cumulative total o` i l on; cviewmgs A special print media corporate advertising program ran >n 22 leading cene-s financial and business duplications to carry the corporate story and announce he change of corporate name In adaition, more than 200 advertisements create: au'ing the year appeared m aporoximately 300 business and orotessionai cu: cations to promote GAF prooucts ano orcouct lines Distribution--Maior cost savings ac: ad m 1968 as a result of the o.-ocraimprovement o' GAF s attribution &- .kies in Chicago seven separate lease: facilities were consolidated into fou ccanons Other consoiiaaticns are u-c?r way m or near Boston, Mass .Wasnirc :~ C C , Charlotte, N C anc S: lc.-.s V: Purchasing--GAF s centralized purchasing oy a Corporate Purchases Oecs-ment, showed further results m 1968 Purcnas.ng economies are be me rea- :a: : value engineering ana use of lower-cost ma'e'-ais .v-mout sacnfice ct :.a Costly double inventories nave oeen el mmaiec -vnerever pract.cac e ! Public Relations--During 1958, a mgr c- p- 3A- s oroac pupnc -e a; :~s 1 gram was me extensive internal anc externa- ccm.-^-ucaiicr's act . ' ss " rection with me cnange of the company s -ame to GAF Corporation me ran tne gamut of public relations teen--cue: -- :e 1 me stcr, of GA-; ~3~ cnange. aive'Sification grewtn and fj'ure 're sa^e story is oe ng presa'-e: : traveling corporate exhipits, which wili nave ceer c-spiayec r me c.-.s brokerage o'tices m me East anc Midwest cy me e_c o' 1969 See: a e_:~as5 was also piacec on financial stockholoer ccmmjh'ty anc mecia re a: :"= ernmental ano urpan affairs ana emo oyee commim-cai ons New Departments Organized-To coorcmate the program for rec_c' " - --e^ atmg ccsts a Corporate Industrial Engineering Department was esta: ; e1968 Tne ceoartmem serves as internal consu tan! to operamg cwis J departments o- improvement of efficiency at ail plants ano 'ecurz~ operation Some areas of activ.ty incude materials handling ma "te'a -r _ nousmg ana sn oping, plant layout arc new piant site selection p-ar- --laDor economy GAF 12416 < I# > t 1"'creased emphas.s das teen placed on environmental neatm cent i ons a: an OAF plant locations bv establishment ot a Corporate Environment. Encneer.-c Department ,n 1968 This department nas been charged with -esconsip .ty for coordination and improvement ot air and water oollution control ano soi.c waste disposal at ail plants. Expenditures tor control of plant effluents are expected to increase over the next few years To integrate tne computer into company operations in the most effective man ner. an electronic cata processing activities were |Oined m 1968 as an independent function m a newly created information Systems Department The new depart ment controls operations of the company S eight computer centers Commercial Development, Research and Development-The Commercial De velopment Department was involved in proposing, promoting or conducting mar ket development programs tor at least nine product lines marketed .n 1968 or aoout to reacn commercialization. Some of these new products have seen re ported under the various operating divisions. GAF continues to emphasize the importance of research and development activity Total exoenoitures m 1968 were Sl2.29l.000 At the end ot tne yea1, more than 360 scientists and engineers were engaged in GAF research in tne U S and overseas. The resuits of their activity have Deen reoorted m the form of new product developments m sections aealmg with the various operating divisions Personnel--GAF emoloyed 20'77 people at the end of the year. 800 mote than, a year ago. Thirty-one labO' and 16 retirement agreements were negotiated during tne year. There were three work stoppages 'r ' 968 The longest 60 days, occurred at the cinden, N J dyes'J` and enemies' : art!, another. 47 days, took place at the Oetroit oaper coating plant- a brief w coat strike occurreo at the Kansas City. Mo building products Piant Desoite these .vork stoppages, overall employee relations continued to be excellent in 1969. 27 tabor arc 13 pension agreements are scheduled lor negotiation Organizational Changaa--Mr Edwin P Cowherd id nec GAF m March 1968 as Vice President and nas the resportsioility lor GAF s cnemica' operations Mr, R Power Fraser was e'ectea Vice President n jar.o *955 w :r responsi bility tcf tne moust'ai Products Division He hao ceen V ce Fres cer-,; Marketing and Saies. for the former suDsiciary Amer can Fen Co Mr Herbert L Abrons was elected Carpo'ate Secretary on September t. 1968 He continues to serve as Corporation Counsel Mr C Joseph Hyland, who had Been Corporate Secretary since 1951. rente after 26 years with GAF The Board ot Directors expressed its appreciation for Mr Hylana s long and tanhlul service At the Deainning o' February 1969. Dr Cnns C Scnu'ze formerly a Senior Vice President ot GAF a'd Mr Alvin Zises resigned as directors of tne corporation Tne Board expressed deep appreciation to ocr lor men services :c the company Dr Howard S Turner president of Turner Construcncn Company was electee a director m February. 1969. GAF12417 GAF Corporation and Certs.; dated Sue; r,;r-es Five-Year Financial Summary (Dollars m thousands except per snare figures) Operating Remits: Net Sales Income' Before income Taxes And Other Charges Net income Per Common Snare (a) Dividends Paid: Preferred Capital Stock of Acquired Companies Common (b) Per Common Share (b) Capital Expenditures Wages and Salaries Including Employee Benefits 1968 S569.548 38.567 21.232 1 31 3.775 _ 5.333 40 43.578 156.012 Year Ended December 31 1967 1966 1965 $520,872 $484,062 $416,677 33.441 18,961 1.14 2,686 797 5.337 40 39.931 151.751 45,289 18,725 1.13 3.147 4 786 40 ; 572 137,006 39.123 19.538 1.20 2,768 3.590 .30 43.979 121 876 1964 S362.840 32.184 15.656 .92 - 2.593 - - 16,567 I < 108.57' Financial Condition: Current Assets Current Liabilities Working Capital Property Plant & Equipment (Net) Total Assets Long-term Debt Shareholders' Equity Numper o* Employees 1968 267.153 110.898 156.255 237.530 535,444 103.439 286.449 20.177 1967 230 327 72.763 157.564 212.623 473.522 96,192 273.314 19.377 Decambar 31 1966 237.809 53.100 184.709 183.365 441.645 78.095 261,960 18,477 1965 204.753 46,956 157,802 161 487 375.011 34 050 249.904 15.911 1964 37.192 5? 972 128 665 333 933 27 395 234 793 14 065 (a) 3aseo on average number of common snares outstanding a'ter recognition of preferred dividend requ rerre (b) Represents dividenas paid by GAF since commencement of quarterly dividends on commo" stoex n seed' 1965 Gap 18 l24l8 -------- ---------------------------- --------------------- -------- GAF Corporation 3-C Con jt : v o . * : .J -35. Consolidated $ Income and Retained Earnings Year Ended December 31 1968 1967 Net sales Other income--net Coat and Expanses; Cost of products sola Distnoution and selling expenses Research and development expenses Administrative anc general expenses Interest on borrowed capital Income before Taxes $569,547,597 1.911.244 571.458.841 398.695 046 93,832.175 12.290,972 19,781,762 B.291.676 532 891 631 38.567 213 Provision for Fsderal and Foreign Income Taxes (Note 5): Current income taxes DeferreO income taxes Deferred investment tax credit 15,206.208 384,214 1.744 292 17 334.7M Net Income 21.232.496 Retained Earnings, beginning of year 208.975.251 Cash Dividends: Preferred stock--1968, SI 20 per share: 1967.$.86'/3 per share Common stock--1968 and 1967, S 40 per share To shareholders of acquired companies prior to pooling (3 774.590) (5 338.251) - Retirement of Cepital Slock held in treasury - Retained Earnings, end ot year (Note 6) $221 094 906 Net Income per Share ol Common Stock (Note A) Pro Forma Net Income per Share of Common Stock (Note B) Si 31 SI 23 $520,871 770 2.398.654 523.270.424 368.503.548 82.720.025 12.367,769 20.248,029 6.340.168 490.179.539 33.090.885 10.992.891 2.828.791 307 841 14.129,523 18.961.362 198.993.633 (2.685.754) (5.336.824) ( 797.499) ( 159 667) S208 975.251 si 14 Si 10 Note A--Based on average number ot common shares Outstanding during each year after recognition ot preferred dividend requirements. Note 8--Based on assumption that the outstanding preferred snares and 5Vi% convertible subdrdmated nates were converted into common snares at the conversion ratio in effect at the end of eacn year, reflecting the snares issuable on conversion and eliminating the preferred oivioertd and convertiDle note interest requirements The Notes to Consolidated Financial Statements are an integral part of this statement GAF 12419 9 GAF Corporation and Consolidated Subsidiaries Consolidated Balance Sheet *# Assets Currant Aaaats: Cash Marketable securities, at cost which approximates market Accounts receivable, less allowance for doubtful accounts--1968, $2,044,444; 1967, S2.014.500 Inventories, at the lower of cost (principally average) or market (Note 2) Prepaid expenses Future Federal income tax benefits (Note 5) December 31 1968 1967 $ 20,804,648 372,650 $ 14,412.198 73.428 102,858,637 136.932,483 3,992,000 2 192.674 267.153.092 90,617,278 120.956,191 4,268.165 - 230.327.260 Other Investment* and Advances, at cost (Note 3) 779.574 I .1.971.640 Property, Plant and Equipment, at cost: Land, land improvements and mineral properties Buildings and building equipment Machinery and equipment Construction in progress Less accumulated depreciation, amortization and depletion 12,933 402 100.'28.078 268 812.035 36.298 113 418.171.628 180,641,94C 237,529 638 11,990.803 93,7; 1.728 238.286.078 35.306 312 379 294,921 166.671 782 212.623 ^39 Goodwill, Patents, Trade-marks, etc. (Note 1) 29 981 589 $535.443 943 29 599 6^2 S4?3 521 geo The Notes to Ccnsoi oa:ec finance J20 GAF 12420 Liabilities Currant Debilities: Notes payable Current portion ot long-term debt Accounts payable Accrued taxes, wages, etc Federal and foreign income taxes Deferred income (Note 5) Long-term Debt Lata Currant Portion Abova (Note 6] Obligation Under Long-term Loom (Note 10) Deterred Income Taxes (Note 5) Other Liabilities Deterred Investment Tax Credit (Note 5) December 31 1968 1967 $ 41,650,085 4.623.600 31.972.600 13.314.265 15.338,026 4 000.000 110.898.576 103.438.600 4.175.000 21 373.485 3.041.523 6.067 913 S 20.337.297 5.656.151 25.563,574 12,781,837 8.045.380 379.321 72.763.560 96 191.900 4 395.000 19.606.353 2 927 863 4.323,621 Shareholders' Equity Preferred stock, $1 par value, authorized 6.000,000 snares. SI 20 convertible series issued and outstanding--1968. 3.155.682 snares. 1967. 3.117,922 shares at assigned va ue of St 25 per snare (liquidation value 1958. S86.786 755! (Note 7) 3,944.853 Common stock, SI par value, authorized 25,000.000 shares, issued and outstanding-- 1968, 13.360.933 5 shares, 1967. 13,342.060 5 shares (Note 7) '3.360.934 Paid-m surplus (Note 8) Retained earnings (Note 6) 48 048.153 221 094.906 286 448 846 $535.443,943 3.897.402 13.342.061 47.098.869 208.975.251 273.313.583 S473.521.880 anotihis statement GAF 12421 9" I Notes to Consolidated Financial Statements Note 1 Principles of Consolidation-In the accompanying financial statements the accounts of all significant subsiaiaries have been oonsolidateo. The accounts of consolidated foreign sub sidiaries. which are not material in relation to the consolidated accounts.have been translated into U. S collars at appropriate rates of exchange The cost of investments in ano advances to subsidiaries at Decemoer 31. 1968 was S3.096.122 in excess of the Com pany's equity m their net assets In consolidation this net amount was mctuded in accounts as follows Goodwill. Patents, Trade-marks, etc. . .... S10.785.199 Retained Earnings (undistributed net income since acquisition)......................................... 7.689.077 Not* 2 Inventories--Inventories consisted of the following- Decemoer 31 1968 1967 Finished goods..................... $ 67.988.468 S 55,730,740 Work in process..................... 31.998.B71 29.470.092 Raw malenais and supplies . 36.945,144 35.755.359 Total ........................SI 36 932.483 Si20.956.191 Note 3 Other Investments and Advances--The Company owns 49% of the corrnon slock of Chemical Developments of Canada. Limited The remamirg 51% is owned by Domtar. Ltd The Comoany s ecuity m the net assets of Chemical Develop ments of Canada. Limited at December 31,1968 was $943,191 in excess of its investment in that company Note 4 Depreciation, Amortization and Depletion Policy--It is the policy of the Companies to provide for depreciation ar: amortization of plant properties generally at stra ght-ine rates based on tne estimated service lives of the property Depietoof mineral properties is provided at fixec rates per ton ci materials produced. Depreciation amortization ano decie. tion charged to cost and expenses for 1968 ano 1 amounted to Si 7.884,763 and $17,023 555. respectively Note 5 Incoma Taxea--For mcometax purposes oniy.meComoan.es use accelerated depreciation methods and the shcrte' Guideline ' lives as permitted by the U. S. Treasury Depart ment The resulting reductions in the provisions for curreincome taxes have no effect on net income, however, si-ce amounts equivalent to such reductions are provided for {re ferred income taxes. Effective January 1. 1968 the Corr. pames have also recognized the tax effects of other -terns :i expense which enter into the determination of pre-tax ac counting income but which are not currently oeduciib'e `:: income tax purposes: this change in praclice anc othe'actustments resulted in an increase m net income for 1963 ci $646,000. In December 1966 'e Company sold, as a production c=>. ^ ment. a portion of ; interest in certain asbestos deposits -y $4,000,000. The z-pceeds of this sale, and the tax ejects thereof ($1.626 0C: nave been ceferred and will be refiecec in income as the asoestos is mined, processed arc sc: which is expected to be m 1969 The investment tax credit available under me Revenue 4c: z`1962 is being deferred and reflected n income -arac-v the estimated service lives of me respective assets Note 6 Long-term Debt end Dividend Restrictione--Long-term debt represents tne balance of unsecu-ed loans as follows Decembe' 1968 57>% S nking Func Debentures due December 1 1991 with annual sinking fund payments of S2.500.000 beginning Decemoer 1 1972 ...................................................... 6%% notes oayaDie to banks under credit agreement dated October 9.1967 ............... 4'/ % notes due June 30. 1972 with quarterly installments ranging from $750 000 beginning September 30. 1969 to $1 000.000 beginning September 30.1971 ............. 3'/2 % notes due March 1. 1972 with annual prepayments ol $1.250.000 on March 1. 1969 through 1971 and balance of $5,250,000 payable March 1, 1972 .................................. 5'/2% Convertible Subordinate Notes due April 1 1983 with annual prepayments of S200.000 on April 1, 1972 through 1982 ana balance of $1,800,000 payable April 1, 1983 (Note 7) ........................................................................................................... Other notes, whicn bear interest a: 4Va% to 6*/s% ana mature a: various dates to 1985 . Total............................................. ...................................... Less ponion aue within one year....................................... Rema nder................. ........................ .......................... S 50.000 000 28.500 000 10 000 000 9 000 000 s 5:::ojoo 6 see :oc ;:c ooc -c 250 OOC 4 000.ooc 6 562.200 108 062 200 4 623 600 St 03 439 60c : :x :cc I ' '.'it -^ 3- 90C 22 GAF 12422 Under the terms of a revolving crecit agreement dated Octoper 9. 195' the Comoany may sorrow ud to a maximum cf S75.0CC 000 on 90-cay notes On April 30. 1970 tne then out standing notes are repayaDie and the Company may reSorrow up to Sr5.000.000 on Term Loans cayaoie quarterly to May l 1974 At Decemoer 31. 1968 the Company had borrowed S39.750 000 under this agreement, S28,500,000 of which >s classified as long-term debt since it is the present intention of the Company to convert these notes to Term Loans The remaining S11.250,000 is Classified as current notes payable. Oivicencs are restricted under the provisions of the indenture reiatmg to the sinking fund debentures and of certain loan agreements Under the most restrictive of these provisions, approximately Si80.000.000 of the consolidated retained earnmgs at December 31, 1968 was not available for dividends. Mote f Capital Stock--The J1.20 convertible preferred stock, div idends on which are cumulative, is convertible at any time into common stock at the rate of 1'/ shares of common stock for eacn share of preferred In 1968, 195 shares of such pre`e"eo stock were converted into 243 shares of common stock At any time after June 1, 1972 the Company may re deem the preferred stock at specified prices ranging from $30 00 to S27.50 per share j'-ce' me provisions of the Comoany's stock option plan, esters to ourcnase shares of common slock may be granted ; <ey employees during a ten-year period ending March 31 '375 The prices at whicn options may be granted may not ess than 100% ot the tair market value of the shares on date the option is granted The options are exercisable for ' .5 ea-s from cafe o' grant At January 1, 1968 there were C'S outstanamg for 235.000 shares During 1968 options 'f "6 750 snares were granted for an aggregate ootion : :e : S4 134.250. options for 5 000 snares were exercised " =" segregate ootion price of $114,050, ana options for -' -3- sna'es were te'mmatea At Decemoer 31. 1968 : :'S we-e outstanding with respect to 369 750 snares ' = "7 a" aggregate ootion price of S9.917.866 and 205.25C -'--1 -.e'e reserved lor the granting of aadilional options - 'o the above, 23.665 snares of the $1 20 conven es - e'e-ec stock were reserved at December 31 1968 for - - ; assumed by the Company as a result of the Ruberoid 967. Tne options for all of tnese shares were exer-_____ a"Ral caie ,or an aggregate option price 0! $418,193 __ ^ ccnons for 38.155 shares were exercised `or an option DnCe of $667,546 and ootions tor 2.400 - - 'e'e '.e-mirateo 3i >963 the following numOer ot shares of the -apital stock were reserved for issuance as S' 20 Convertible Preferred Slock Reserved for exercise of stoc* opticns 23 66 Common Stock Reserved for conversion cf SI 20 convert b'e pre'emed stock, including 29.581 snares for siock options ... ........................... Reserved `or exercise 0' stock options Reserved for conversion of 5'/*% convertio e suboremated notes Cue Aonl 1 1983 convert.oie at any time poor to Apr.! 2. 1976 a: the current conversion rate of S29 1404 per snare.................................................. Total .................................................. 3 974 434 575 ooc 131*256 4 686 '00 Note B Paid-In Surplue--Changes m paid-in surplus dunng 1968 were as follows: Balance. December 31,1967 ................... S47.098.369 Excess of option price over assigned or par values of preferred and common stock issued for options exercised .. Excess oI market value over par value of 13,630 shares of common stock issueo 728.903 under the Company s incentive com pensation plan.................................... 245.340 Other........................................................... (24 959) Balance, December 31. 1968 ................. S48 048.153 Note Retirement Plan*-The Company and its subsidiaries have several pension ; ans covering substantially all employees. The total pens1:- cost which was fundee, amounted to S3.778.208 for 1963 ana S5.C12 373 for 1967 and includes, as to certain of the oians amcrt.cation of pr or serv.ee cost over penoos ranging from ten to forty years Note 10 Commitments and Contingent Liabilities--Unoer the terms of a long-term lease 00 icatio" ccve-.no 35. s% to 4'. % C ty of AnnaDOiiS. Missouri inpustnai -evenue bones. an annua1 renta1 of approximately S385 000 s cayac e u-n:.' Septemoer 30 1983 to cove: bond onrc.cai arc interest At December 3V 1968 the Companies were ooi gatec unoer other 'ongterm leases as `ohows Leases Expiring in Aggregale Annual Renta' 2-5 Years 6-10 Years 11-20 Years SI.008 000 382.000 1.844 C0C Over 20 Years 79 000 At December 31. 1968 the Companies had commitments of approximately $5 700.000 for the acquisition of oroperty. Diant and equipment At Decembe' 31 1968 there were certain civ.i lawsuits ana c-aims oenqmg agamsl the Companies In the opinion of management tne - t,male q-sposit.or of these mailers wli not materially affect the Companies consolioaied financial position. GAF "12423 GAF Corporation and Consolidated Subsidiaries Consolidated Source and Use of Funds Fund* Provided by: Net income Depreciation, amortization and oeptetion Deferred income taxes (non-current portion) Deferred investment tax credit Proceeds from long-term borrowing . Reduction of other investments and advances Proceeds from stock options exercised Other-net Yaar Ended Dacambar 31 IMS 1M7 S 21.232,496 17,884.763 1.767,132 1.744.292 12.000,000 1.192,066 781.596 329,239 S 18.961.362 17.023.555 2.828.79! 307,841 23.028.385 593.717 805.72B 323.873 56.931.584 63.873.252 Funda Used lor: Capital expenditures Reduction of long-term debt Dividend payments Purchase of minority interests Purchase of subsidiaries (less working capital of such subsidiaries) 43.578.007 4.753.300 9.112.841 605.098 191.522 58.240.768 39.931,340 7.415.000 8.820.077 30.416.415 4.435.633 91.018.465 Decrease In Working Capital Working Capital, baginning ol yaar 1.309,184 157.563.700 27 145.213 184.708.913 1 Working Capital, and ol yaar S156.254.516 SI 57.563.700 Accountants' Opinion To chi Stockholders and Boerd of Directors of GAT Corporation; w# have examined the consolidated balance sheet of GAT corporator and its consolidated subsidiaries as of December 31, 1963 and the related statements of consolidated income and retained earnings and of consoli dated source and use of funds for the year than ended. Our examination was made in accordance with generally accepted auditing standards, and ac cordingly included aucn teats of the accounting records and such other auditing proceduree as we considered necessary ir the circumstances. In our opinion, the accompanying consolidated balance sheet and statement of consolidated income and retained earnings present fairly the financial position of the companies et December 31. 1968 and the results of their operations for tha year then ended, in conformity with genera.-y accepted eccounting principles applied or. e basis consistent with that c* the preceding year- and the accompanying statement of consolidated sotrce and use of funds presents fairly the information shown therein. February 11, 1969 24 GAF 12424 GAF Corporation Directors and Officers DIRECTORS 'Mete* Warner, Chairman T. Roland Berner "Mohn B. Bridgwood 'John A. Coleman Philip B. Dalton 'Francis A. Gibbons 'Bailey K. Howard "Wm. Peyton Marin E. J. O'Leary 'Donald L. Sanders Howard S. Turner 'Sumner H. Williams lABfnt*' O* Commintc tRBliftTBD* BoB'5 Stocit Option Committ#* CORPORATE OFFICERS Jesse Wemer Philip B. Dalton Donald L. Sanders E. J. O'Leary James M. Ctoney Edwin R. Cowherd Thomas A. Dent Thomas H. Oermody R. Power Fraser Frederick Grosser Jullen 0. Heppes Juliette M. Moran Frederick K. Sweeney Frank P. Sottile Herbert L. Abrons John F. Helntx moiikmi Tht Ch*a* Manhattan Bans t Cftasa Manhattan Piau Haw York N V 13015 Comftrciii TYutt Co<nony of Nbw jtrtay 15 EAcnang# P c J*r*y City. N J 37302 THAMFCR AOKNTI Fifjt National City Bnk 55 Win St-ea: N*w York N Y 10CT 5 Tha Ccnporarion Trcst Co 15 Excnanga P act J*r*ay City. N J 0730? President Executive Vice President Executive Vice President Senior Vice President Vice President Vice President Vice President Vice President Vice President Vice President Vice President Vice President Vice President Treasurer Secretary and Counsel Controller GAF 12425 Directory of Products 26 CHEMICALS Surfactant*--nomomc. anicmc. cationic, and an-ipnotenc surface-active agents for use as detergents, emulsifiers, disoersants. and wetting agents Specialty Chemical*-processing and formulating agents including bactericides and fungi cides, finishing agents, adhesive additives, sequestrants, anti-static agents, lubricants, ana solvents tor use in various industries Hlgh-Pr***ur* Acetylene Derivative*--monomers polymers, copolymers, solvents organic intermediates, and other Chemicals derived from acetylene for use in cosmetic, petroleum pharmaceutical, plastic, textile, adhesive, and a variety of other industries Industrial Organic Ch*mleal-aromatic derivatives complex cyclic compounds, and a.iphatic compounds (including lormalcehyde chlorine chloride, and methyiammes) for use as intermediates m the dye. pharmaceutical, and chemical processing industries Heavy Chemical*--emerme. caustic sooa. muriatic acid, ethylene oxide, and giyco's Iron Powdar*--microscopic-size spheres of iron used m VHF and UHF circuitry trans mitters. receivers, radar, and in powder metallurgy Ultraviolet Ab*orbers-- ultraviolet-screening agents for plastics, textiles, pigments, rucoer. adhesives, and cosmetics Dyestufl*--acid, azo, azoic, basic, condensation, chrome, direct, disperse, mordant metaiized. sulfur, vat. and vat-ester dyes, fluorescent brighteners; oil-, spirit-, and water-soluoie dyes Pigment*--azo, benzidine BON. carbazoie. carbon, chrome, diamsidme. molybdate napnthol. mtroso. oxide. PMA. pnthalocyamne. PTA. and pyrazolone pigments; lanes, dispersed powder, toners, dispensed pastes, and presscakes Textile Chemical*--textile auxiliaries flame retardants, carpet antistats, rubber lalices fo' rug backing, fabric coatings ano paper coatings. GafcoteTM latex foam backing tor orapery fabrics PHOTO PRODUCTS Consumer Product*--color films, black-and-white films, papers, and chemicals: still and motion picture cameras. Anscorama:", Anscomatic*. ana Sawyer's* brands slide pro tectors. motion-picture protectors and accessories, slide viewers. Pana^Vue scenic color slides. View^Master stereo viewers and picture reels, and Tru-Vue photographic toys Professional Product*--color films, black-and-white films, papers, and chemicals for portrait, photofinisher. press, industrial. aerial, and motion-picture uses, photorecording films, paper and chemicals: automatic processors for films and papers X-ray Products--medical and industrial X-ray films chemicals, and accessories, radiologic teaching aids Qraphlc Art* Product*--films, papers, and chem cais lor offset printing, photol.thography photoengraving, rotogravure, and silkscreen onr: -g BUSINESS SYSTEMS Busina** Machine*--electrostatic copiers, papers loners, and supplies: dictating ma chines and accessories Dlaxo Reproduction Products--diazo copying machines and sensitized materials toreng.neenng and business systems Audio-Visual Product*--overhead protection transparency senes tor pre-school through college instruction, custom transparency production service materials and supplies Micrographic Products--microfilm equipment and film ShelbyTM Business Form*--custom designed and printed data-processmg torms. sates books, manifold-order books, single copy forms Uniset " forms voucher and receipt books. Card Set'" torms and forms for autographic register and similar items BUILDING PRODUCTS * Floor Product*--asphalt and vinyl-asbestos resilient floor rues; achesives cove bases sheet-vinyl floor coverings tor residential and commerc-ai uses Building Material*--asphalt roof shingles, asphalt roil roofing and siding. a$phan as bestos. or tar built-up roofing felts asphalt protective coatings ana cements. T/NA 200* roofing membrane, mineral fiber board, roof shingles, sidings, building and specially boards, mineral fiber canal bulkheads, building and root insulations, gypsum pjicmg board; lath and plasters INDUSTRIAL PRODUCTS Fall Product*--wool and synthetic fiber felts and filter devices for air. IiquiG and gas fixa tion, sealing arc lubricating devices; plate-giass and metal-poiisnmg felts piano fens wool fens for apparel ano interior design; felts for automotive, industrial, and aerospace applications, nonwoven paper-makers teits for paper, asbestos cement pipe, and *a||"ca': manufacture Aaboatoa, Automotive, and Insulation Product*--asbestos fibers, automotive acous'^a products, unsaturated feus asbestos and organic insulating tells and boards, asoest-s papers. Caisilite* molded high-pressure pipe coverings and industrial insulations e'ectr ca insulating tapes, mineral granules for roohng anc other uses and men fillers Precltlon Analytic*! Equlpm*nt-contract manufacture of precision parts and assemblies 9) GAF 12426 ~T- GAF CORPORATION i 40 West 51 Street, New York N Y 10020 OPERATING DIVISIONS Building Product! Consumer Photo Oyostuff A Chemical Floor Product* Textile Chemical Diviiion 122$ Chestnut Street Chattanooga, Tenn. 37402 Industrial Photo Industrial Products Oftice Systems International Operation* 11 SO Avenue ol the Americas New York. N. Y. 10036 PLANTS', RESEARCH LABORATORIES" PRINCIPAL SALES AND DISTRIBUTION OFFICES- NORTHEAST A MIOOLE ATLANTIC Connecticut Greenwich*?* Hartford* ficcxviiie* Stafforaviiie' Maryland Baltimore** Cleverly' Hagerstown*1 Massachusetts FranKim** M'His** Westwood* New Jersey Bound Brook** Souin Bound Brook*' Gloucester City * Lrcen'* Newark* Paterson' Union* Hw York B>ngnamion*t Buflalo* Caledonia** Deimar* Johnson City't Newburgh* New York City* Rensselaer *? Syracuse* Vans Gate*f* Vestai't* Woodside* Pannsylvsnla Blue Ridge Summit* Delta* Easton* Ene** (2 plants) Monroeville* Pad* Phi aaeipn>a* Pittsburgh* Reading* Posiyn* Whitehall*** Rhode Island Westerly* Vermont Hyae Pane* MIDWEST Illinois Chicago** jo'rer ** (2 plants) Meuose Pa^* Peoria* Indiana Indianapolis' Soutn Bend* Iowa Des Mo-res* Michigan Detroit** <2 Plants. Harpe' Woods* Minnesota Minneapolis** MiMOuri AnnaooiiS* Kansas City** Maryland heights* St LOUIS** Ohio Cincinnati* Cleveland* CclumOus* Elyria' Shelby* Toledo* Youngstown* Wlaconain Milwaukee* Pembme* Wauwatosa* SOUTH & SOUTHWEST Alabama Hjntsvilie** Mobile** Florida Onanoo' Tamoa** Georgia At'anta* Daton ** Fairmcuhl' Savannah'* Kentucky Caiven City *T Louisiana New Oneans* North Carolina Chanotte* South Carolina Greenvilte* Tenneaeae Cratianccga"* Knoxville* Nasnvnie* Tm Arirgton** Dallas'* Houston'* re*as C iy" WEST a NORTHWEST California ua Haora'* Long Beacn** Los Angeles* South San ^ancisco* Colorado Denver** Oregon Portland* Progress* Washington Seattle* 27 GAF 12427 domestic subsidiaries Shelby Business Forms. Inc Shelby Ohio 44875 Lenco Pholo Products. Inc 140 West Slst Street New York, N Y 10020 INTERNATIONAL OPERATIONS MANUFACTURING AND MARKETING SUBSIDIARIES GAF (Canadai Ltd Cooksvilie. Ontanc. Canada GAF (Belgium! N V Sint-Niklaas Belgium GAF (Great Brnai'-I L'mited Londcn SW1. England GAF (Nederland) N V Dell:, Holland MARKETING SUBSIDIARIES GAF Svenska AB Stockholm. Sweden GAF (France) S.a.r I. Paris 10. France GAF (Deutschland) G.m.b H. Cologne. Germany GAC (Ireland) Limited Dublin 2 Ireland GAF (Norge) A/S Oslo. Norway AFFILIATE Chemical Developments o' Canada. Limned Point Claire Quebec Canada (49% owned by GAF) GAF FILM-PROCESSING LABORATORIES* AND PHOTO-EOUIPMENT REPAIR STATIONS' Bmghamto'' NY*1 Long island City. N Y * Union. N J * Hollywood Calif1 Chicago "it Lonaon England* Smi-Ntkiaas. Belgium* GAF authorized Mm-process rg laoc-atcnes anc eratals are located througnoj: me wond h '"P z g-ne-is n *r.e c* ** **g n*s used n r s fecc*' '~e dyes c g^'ene's ana :e*:a * cne--.ca.$ " me cace' are z'zz.z's 2' **e Dyes:-`f 4 Che'n'Cai D-v.- GAF 12428 I I o c>