Document aDDNN8aEo2XyG5ppOb3b19GM9

PLAINTIFF'S EXHIBIT CT-198 CERTAIN-TEED PRODUCTS CORPORATION ANNUAL REPORT 1966 CER1AINTEE0 CTD036466 CERTAINTEED The neu- Certain-teed symbol has been developed to unify the Company's marketing efforts. It further provides a strong family identification for the Com pany's expanding product lines and operations. FINANCIAL HIGHLIGHTS CTD036467 TO OUR SHAREHOLDERS Despite adverse business conditions in 1966 affecting the sale of many of our products and our total corporate profits, we continued to improve the foundations for the future development of our company. Our merger with Gustin-Bacon Manu facturing Company in July, 1966, has greatly improved our position as a manufac turer and marketer of fiber glass products, has provided us with several new products of substantial promise, and has opened new markets to our company with opportunities for the future. During the year new plants were completed, and new manufacturing capacity became available for several of our divisions; but, at about the same time, the decrease in the supply of funds for financing construction projects greatly curtailed the demand for many of our products. We believe this is a temporary condition, and there are indications that mortgage money is becoming more readily available. As this trend continues, the demand for our products should increase and we will be able to make profitable use of our increased manufacturing capacities. To provide a more effective organization for our enlarged operations in 1967, we have strengthened our management and realigned many of its functions. Looking ahead, wc arc planning for improvement in our manufacturing technology, we are exploiting to the fullest extent our marketing opportunities, and we are using our augmented facilities and personnel as efficiently as possible, while reduc ing costs and expenses without impairing the effectiveness of our operations. With any significant improvement in the availability of financing for building construction and water and sewer projects, the demand for which has presently been deferred, we would anticipate an improvement in our sales and earnings. During the past year Mr. N. W. Pearson, Mr. J. O. Biggs, Mr. M. S. Davis, Jr., and Mr. Harold McNabb were elected new members of the Board of Directors. Mr. Pearson is Vice President and Governor of T. Mellon & Sons, of Pittsburgh, Pennsylvania. Two of our Directors who had long and distinguished records of service, Mr. A. J. Hettinger, Jr. and Mr. William C. Baird, retired from the Board, and Mr. J. R. Johnston retired as a vice-president at the end of 1966 after many years of faithful service but continues as a Director. Mr. A. L. Gustin, Jr., who was elected a director at the time of the merger with Gustin-Bacon Manufacturing Company, died before he could assume the duties of that office. We wish to express our appreciation of the co-operation of our stockholders, cus tomers, and friends; and to commend the efforts of our employees, all of whom have contributed much in 1966, and whose continued co-operation is essential to our success in the future. Ardmore, Pennsylvania February 13, 1967 CTD036468 . />/%'-> j;" * V.1'V-'- ~!"vV"V'-~> - ;. ,V'-.':' i f'.jf'-y ity/l. !t f'lfttlff'f (if>t' fjj OPERATIONS IN 1966 CTD036469 Merger with Gustin-Bacon Manufacturing Company The financial statements for the year 1966 and the comparative figures shown for the year 1965 include the accounts of Gustin-Bacon Manufactur ing Company which was merged into the Company on July 1, 1966. Reference is made to the Notes to Financial Statements for information regarding the method of financial reporting, and a description of the Scries A Convertible Preferred Stock issued in connection with the merger. Sales and Earnings Net sales in 1966 were $165,372,708, as compared with $166,583,223 in 1965. Net earnings after taxes for the year 1966 were $4,185,056 or 90 cents per share of Common Stock, compared with $7,501,505 or $1.94 per share of Common Stock for 1965. Earn ings per share of Common Stock were computed after allowance for dividends on the Series A Con vertible Preferred Stock as if the merger had been in effect for the two years. A number of factors were present in 1966 which interfered with normal economic growth. The ex treme shortage of mortgage money brought housing starts to the lowest level in twenty years. The high cost of money caused the market for municipal bonds to fall sharply and many municipalities to defer bond offerings for sewer and water projects. pany during the past three years have been financed from retained earnings and short term bank loans. The uncertain conditions in the money market as well as expectations of future investment as market conditions warrant gave rise to the decision to place a modest amount of debt on a long term basis. Ac cordingly, the Company entered into a loan agree ment with The Prudential Insurance Company for a $10 million loan of which $3.73 million repre sented refinancing of existing debt and $6.27 million represented new money to be borrowed in 1967. The loan bears interest at 5.55% and is due in an nual payments of $550,000 commencing April 1, 1970 with final payment due April 1, 1987. Working capital at the end of 1966 was $36,675,012, representing an increase of $883,997 over the balance at the end of 1965. Approximately $7.5 million was spent in 1966 for additional property, plant and equipment. Dividend Payments Total dividends paid on Common Stock during 1966 amounted to $2,530,847 or 80 cents per share, compared to $2,282,304 or 72% cents per share in 1965. Dividends on the Series A Convertible Pre ferred Stock, issued as of July 1, 1966 in connection with the merger of Gustin-Bacon Manufacturing Company into the Company, have been paid in the amount of $667,386, or 45 cents per share. A back-up of applications for Federal grants caused Looking Ahead a further slow-down in sewer and water projects. The conditions in the economy at the present ( Labor disputes at certain of the Company's locations time, both as to the private sector and public and also resulted in a curtailment of production and defense programs, are difficult to appraise. Some sales activities. encouraging signs are present relating to the mort These conditions developed during the same gage market and homebuilding, but it is too early period in which substantial new productive capacity to predict clearly what effect other factors in the began operations with its attendant start-up costs economy will have on the markets in which the and manufacturing overhead. A three-year program Company is engaged. In 'the meantime, manage increasing capacity in our Pipe Division, a new fiber ment is exerting every effort to increase sales volume glass plant in our Gustin-Bacon Division, and in and lower costs throughout the Company. New creased capacity in our Plastics Division are de capital expenditures arc being restricted to those pendent upon a growth in sales to recover increased investment opportunities offering profit under pres costs and generate profit. The decline in profits dur ent marketing conditions. The earnings base of the ing 1966 was thus accentuated by the combination Company has been increased substantially through of higher costs from new facilities and lower sales new manufacturing capacity, and a return to a volume from general economic conditions. normal growth pattern in our various markets holds Financial Position The capital improvement programs of the Com promise of progress for Certain-teed in the years ahead. 5 CTD036470 CONSTRUCTION MARKETS MARKETING The markets foi which Certain-lecd has geared itself, through internal development ami acquisition, are those in which progress can he expected in the years iumiodiatelv ahead I hough thev are intei- woven in terms ni specific products, these markets can he geneiafly defined in terms of Construction Markets liber (Mass Markets Pipe Markets Industrial Markets While the effects of a shortage of mortgage money in residential construction may continue to be felt in 1967, the overall outlook lor this market is impioved. Adding to the prospects for an upturn in home building is the opportunity for increased mar ket penetration from Certain-uvd's diversified range of building materials. This product mix includes both the staples of the industry--shingles, millwork. insulated sheath ing and acoustical products-- as well as the new materials which can lv- expected to add efficiency and design appeal to tin- residential building market --vinyl siding, vinyl plumbing pipe, fiber glass in sulation, and the new Hallniaik shingle, which adds texture and dimension to roofs. Constrvn tion materials arc maike.led nationally by Certain-lords Building Malciials Division in Ardmore, Pa and, in the Southwest, by Ceitaintccd\ Cameron Division, with headquarters at Waco. Texas. Products marketed by the Building Materials Division include roofings, sidi'ngs and sheathing, fiber glass insulations, acoustical ceil ing systems, piping for plumbing systems, and others. An one of the nation's largest building ma terials w holesalers, Camei on distributes Ccrtainteed's construction products to some 3,000 dealers in this area. The Cameron Division is also responsi ble for the production and marketing of Ideal millwork. one of the nalion's leading brands. Certain-teed's expanding line of building products 6 lias glowing market acceptance. Tor example, the trend to fiber glass house insulation is now exerting its full impact as evidenced by the fact that it has become the standard for insulating new' and existing houses. The acquisition in 1966 of the GustinBacon Manufacturing Company, a leading producer of fiber glass, was timely in that it will enable Cer tain-teed to gain a larger share of this important market. The Hallmark shingle was developed by Certainteed to fill an architectural need for a roofing with the life and fire resistance of an asphalt shingle and the texture, and dimension of hand split shakes. 'This product offers unusual appeal to the discrim inating home owner and builder. Similarly, polyvinylchloride pipe for residential plumbing is at the. base of an upward curve. PVC's light weight, ease and economy of installation should make vinyl pipe and fittings the builder's choice for drain, waste and vent lines in houses, apartments and mobile homes. In 1967, pressure-rated PVC pipe and fittings for domestic water supply will also lie made by Ccrtain-tccd. Vinyl siding, which has the visual attractiveness of wood siding, is maintenance-free and has ap pealed to the buyer because he can buy "more house" with money normally spent for periodic ex terior painting. In addition, Ccrtain-tecd markets other extruded plastic building materials, all of which offer favorable sales opportunities. CTD036471 *.lf--J1 avf *< /*.:i*' ' ?//. f/V` ;W fay 2* >'/f/y /* * > ''(vrt*<'i ?>/'; v';/ if V/;>V.`V*/ */? " /Asr , ; ' s. :vV . i :ij/, rtiHrSi < IV* Jh; ; . v: /'/-. './it,ii/, -;f,ii{/>,t .</. jhtitxt;..; :d`-vy ;; * Mf. f//* ' /*(/f/r/<. fy*T/7vCj.j. 7#k* iT/K>s V:- * CTD036472 FIBER GLASS MARKETS : */)*.&', t}XXf*S ' - j)}///; ; jJ; ;'V . 7?* f/W -'h'he C: 'fix*1, : . :'. iii addition to house insulation, theie arc growing markets for fibn glass products manufactured and marketed by Certain-teed's Guslin-Bacon Division. There is the non-tevidential construction market, encompassing office buildings, industrial plants, shopping centers and institutional structures such as schools. In these, buildings, fiber glass products are used in acoustical ceilings, industrial insulation for pipes, tanks and boilers, as well as liber glass ducts for heating-ventilating systems. l iber glass is a veisalile material, it plays a sigmlieant role in die automotive and appliance markets, whetc it is used as insulation and for acoustical purposes. As a textile fiber it is widely used as reinforcement for various plastics, signifi cantly for space vehicles, boat hulls, furniture, sporting goods and automotive parts. In all of these areas, Cerlain-teedN share of the market can be expected to rise as new applications arc developed by the company and its customers and as Certainteed increases its market penetration. Further op|>orlunities lie ahead in industrial and decorative tex tiles as the acceptance and use of fiber glass in lexl lie form increases. 8 INDUSTRIAL MARKETS 5*..i*\ sb\tfa^ .y^vy ji?//Xy\ n't*. >/1 ' i . 'bri* i/tjr {:..> >// h itfjUjni,'-/ ' ' . ....- /''. Certain-lord's marketing programs for its industnal prod nets serv e, among others, the transporta tion, automotive and petroleum industries. The Custin-Baron Division is a marketing leader in such components as air brake gaskets and other mechan ical accessories for railroad rolling stock of all kinds, Maxibrake salety brake devices for commercial overthe-road vehicles, organic liber products for sound deadening and cushioning in automobiles, as well as couplings and flange fittings for the petroleum and mining industries. In addition to these products, many industrial needs an* seivecl by fiber glass prod ucts. CTD036474 PIPE MARKER '. >T: <'K> ./Jr*'-! 'int -t\ttii\r you*\'/.gtC5?;',j>/, ... Only an overall view of the growth of urban America can provide an insis^l11 into the potential of these markets, especially for Certain-teed because of its existing position to servo them. Ccrtain-tccd's Pipe Division and Plastics Div ision are equipped to supply the industry's two fastest-growing products --asbestos-cement pipe and vinyl pipe and fittings. In larger sizes, asbestos-cement pipe can provide water mains for metropolitan areas or irrigate ex panses of farmland. In smaller dimensions, it can supply water under pressure to entire communities, with laterals leading to individual properties. This product can also carry storm waters and sewage to disposal areas. Ranging in diameter from three to thirty inches, asbestos-cement pipe is manufactured to meet the requirements of all these uses. Its growth prospects arc in direct proportion to the nation's active program for expanding water supplies and waste disposal facilities. Vinyl pipe, meanwhile, complements the applica tions of asbestos-cement for the smaller diameters and is expected to enjoy accelerated growth in the next five years. To accommodate this anticipated growth, the Plastics Division has installed additional facilities for increased production capacity. The characteristics of vinyl pipe--it is non-corrosive, light in weight, and easier and more economical to handle--justify this growth anticipation. 10 CTD036475 DIVISIONS Pipe Division Asbestos-Cement Pipe for: Water systems Sewer systems I rrigation Building sewer lines Gustin-Bacon Division Fiber Glass Products for: Commercial and industrial insulations Building insulations Snap*On pipe covering Acoustical products Heating and ventilating ducts Plastic reinforcements Organic Fiber Products Railroad and Industrial Mechanical Products Plastics Division Plastic Pipe for: Water and gas service Irrigation Electrical conduit Processing and oil lines Housing drain waste and vent lines Plastic Building Products Plastic Industrial Products Building Materials Division Roofings, Sidings and Sheathings Fiber Glass Insulations Acoustical Ceiling Systems Vinyl building Products Architectural Products Wm. Cameron & Co. Division "Ideal" Millwork Wholesale Building Materials 11 CTD036476 Certain-teed Pro/Iucl.\ (.m finrtil inn anti Snhsidnirn'.s CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS Years ended December 31, 1966 and 1965 NET SALES ................................................................................................. COSTS AND EXPENSES: Cost of goods sold............................................................................... Selling and administrative.................................................................... OTHER DEDUCTIONS NET OF OTHER INCOME . . . FEDERAL INCOME TAXES (net of investment credit of $710,000 in 1966 and $754,000 in 1965)........................................ NET INCOME........................................................................................... RETAINED EARNINGS AT BEGINNING OF YEAR (in- eluding in 1965 $16,234,725 of pooled company)--Note 1 . . DEDUCT: Dividends: Preferred stock..................................................................................... Common stock..................................................................................... Distribution of earnings of pooled company prior to merger Cost of pooled company treasury stock over par value . RETAINED EARNINGS AT END OF YEAR............................ 1966 $165,372,708 136,890,060 21,907,973 158,798,033 6,574,675 88,619 6,486,056 2,301,000 4,185,056 52,715,797 56,900,853 667,386 2,530,847 444,924 3,643,157 -- 3,643,157 $ 53,257,696 1965* $166,583,223 133,601,285 20,064,958 153,666,243 12,916,980 (118,676) 13,035,656 5,534,151 7,501,505 48,544,033 56,045,538 -- 2,282,304 894,348 3,176,652 133,424 3,310,076 $ 52,735,462 *Includes the accounts of Gustin-Bacon Manufacturing Company for its fiscal year ended September 30, 1965 (see Note I). Depreciation of plant and equipment and amortization of intangible assets, respectively, amounted to $5,168266 and $531,426 in 1966, and $4,140,676 and $531,465 in 1965. The accompanying Notes to Financial Statements are an integral part of this statement. 12 CTD036477 CONSOLIDATED STATEMENT OF FUNDS Years ended December 31, 1966 and 1965 SOURCES OF FUNDS: Net income................................................................................................. Depreciation of fixed assets and amortization of intangible assets Deferred Federal income taxes......................................................... Decrease in noncurrent receivables................................................... Common stock issued under stork option plans............................. Decrease in other assets and deferred charges............................. Decrease in working capital............................................................... Other, net................................................................................................. 1966 $4,185,056 5,699,692 838,800 701,499 10,322 1,318,701 -- 905,525 $13,659,595 1965- $7,501,505 4,672,141 -- 51,394,172 114,494 2,274,194 4,614,882 (247,987) $70,323,401 APPLICATION OF FUNDS: Increase in property, plant and equipment, net . . . . Decrease in noncurrent notes and contract payable . . Decrease in deferred Federal income taxes....................... Dividends........................................... .................................. Purchase of common stock for treasury............................. Increase in working capital . . ........................................ *Changes in funds for 1965 include Gustin-Bacon Manufacturing Company for its fiscal year ended September 30, 1965 (see Note 1). $6,904,608 2,227,833 3,643,157 883,997 $13,659,595 $14,600,571 49,978,819 1,910,829 3,176,652 656,530 $70,323,401 13 CTD036478 Ccrtaiu-h' <i l'i(i(iiuL\ ('.infiltration and Suhsulinritw CONSOLIDATED BALANCE SHEET at December 31, 1966 and 1965 ASSETS CURRENT ASSETS: Cash........................................................................................................... Marketable securities, at cost (approximate market) .... Accounts and notes receivable, less allowance for uncollectibles of $900,545 in 1966 and $752,569 in 1965 . Inventories, including raw materials and supplies of $8,745,664 in 1966 and $8,089,262 in 1965--at lower of cost or market............................................................................... Total current assets.................................................................... ACCOUNTS AND NOTES RECEIVABLE.................................. PROPERTY, PLANT AND EQUIPMENT, at cost, less de preciation of $36,398,907 in 1966 and $31,716,827 in 1965 . . OTHER ASSETS AND DEFERRED CHARGES....................... INTANGIBLE ASSETS, at amortized cost........................................ ( 1966 $4,194,832 -- 21,513,874 28,758,954 54,467,660 1,738,907 64,214,911 4,049,613 4,234,598 $128,705,689 1966* $6,436,843 494,177 22,565,127 24,214,940 53,711,087 2,440,406 60,641,858 5,247,548 4,912,201 $126,953,100 *lncludes the accounts of Gustin-Bacon Manufacturing Company at September 30, 1965 (see Note 1). The accompanying Notes to Financial Statements are an integral part of this statement. 14 CTD036479 LIABILITIES CURRENT LIABILITIES: Accounts payable and accrued expenses........................................ Dividends payable................................................................................... Notes payable--banks.......................................................................... Current installments on notes and contract payable--Note 2 Federal income taxes, less U. S. Government securities of $1,979,682 in 1965 ..................................................................... Total current liabilities......................................................... NOTES AND CONTRACT PAYABLE--Note 2....................... DEFERRED FEDERAL INCOME TAXES................................... OTHER NONCURRENT AND DEFERRED ITEMS . . . STOCKHOLDERS' EQUITY--Notes 1, 3, 4 and 5: Preferred Stock, $1 par value, authorized 2,000,000 shares; 1,517,080 shares designated as Series A Convertible, issued in 1966---1,483,080 shares (Liquidation preference $37,077,000)......................................................................................... Common Stock, $1 par value, authorized 7,500,000 shares, issued 3,383,169 shares in 1966 and 3,382,439 shares in 1965 Capital in excess of par value............................................................... Retained earnings................................................................................... Less: Common Stock held in treasury, at cost--201,685 shares Total stockholders' equity....................................................... 1966 $11,997,644 -- 4,000,000 864,385 930,619 17,792,648 7,948,812 3,257,430 2,397,485 1,483,080 3,383,169 41,281,233 53,257,696 (2,095,864) 97,309,314 $128,705,689 196.7* $14,151,214 222,462 -- 877,452 2,520,063 17,771,191 8,351,645 2,374,430 1,679,076 1,483,080 3,382,439 41,271,641 52,735,462 (2,095,864) 96,776,758 $126,953,100 15 CTD036480 NOTES TO FINANCIAL STATEMENTS at December 31, 1966 The financial statements at December 31, 1965 and for the year then ended, restated to include the financial statements (as reclassified) of GustinBacon Manufacturing Company as at and for the year ended September 30, 1965 (see Note 1), are shown for comparative purposes only. Reference should be made to the previously issued 1965 An nual Reports of the Company and of Gustin-Bacon for their respective consolidated financial statements and the related Accountants' Reports and notes pertaining thereto. 1. Effective July 1, 1966, Gustin-Bacon Manufac turing Company was merged into the Company on the basis of exchanging each outstanding share of Gustin-Bacon Common Stock (1,483,080 shares) for one share of Scries A Convertible Preferred Stock of the Company, and its accounts are included in the financial statements on a pooling of interests basis. As a result of the merger, capital in excess of par value increased $4,890,466 and retained earnings as at January 1, 1966, have been decreased to include the net income of $202,797 less dividends of $222,462 of the merged company for the three months ended December 31, 1965. 2. Notes and contract payable, exclusive of cur rent installments, consist of: 434% Note payable to bank, due in equal annual installments of $562,500 through 1970 .................................................$1,687,500 5.55% Note payable to insurance com pany, due April 1, 1987 ....................... 3,730,000 Contract payable, due in equal annual installments of $206,650 through 1972 2% to 6% Mortgages payable, due in equal monthly installments through 1981 ............................................................... 1,033,250 1,121,920 Other............................................................... 376,142 $7,948,812 Under the provisions of the note agreement with an insurance company, an additional $6,270,000 is to be borrowed by April 28, 1967 under the same terms as the present loan. Amounts borrowed are payable in annual installments of $550,000 com mencing April 1, 1970, and the balance on April 1, 1987. The agreement also provides, among other things, for prepayment options,' the maintenance of consolidated working capital of not less than $25,000,000, and certain limitations on the declara 16 tion of dividends. At December 31, 1966, con solidated Retained Earnings of approximately $11,450,000 were not restricted as to the payment of common dividends. 3. In connection with the merger (see Note 1) the Certificate of Incorporation was amended and restated to eliminate the Company's 4Cumula tive Prior Preference Stock as an authorized class of capital stock and to create a new class of 2,000,000 shares of Preferred Stock with a par value of $1 a share. In effecting the merger, 1,517,080 shares of the initial series of the new class of Preferred Stock were designated Series A Convertible Preferred Stock, of which 1,483,080 shares were issued and 34,000 shares were reserved for outstanding commitments of Gustin-Bacon to holders of stock options (24,000 shares) and to selling stockholders of a prior acquisi tion (10,000 shares). Dividends on Series A Con vertible Preferred Stock are cumulative at the an nual rate of 90<f per share payable quarterly. Each share is entitled to one vote, has a liquidating value of $25 per share plus accrued and unpaid dividends, is convertible into one share of common stock and may be called by the Company after June 30, 1971 (subject to the conversion rights of the holders) at a price of $25 per share. At December 31, 1966, there were outstanding transferable Stock Purchase Warrants for 170,000 shares of Common Stock exercisable prior to June 22, 1972, at per share prices ranging from $16,625 to $23.05. The foregoing includes a warrant for 20,000 shares at $23.05 per share issued in 1966 in connection with the cancellation of a contract. The Company has reserved a sufficient number of shares of treasury stock for issuance against the aforemen tioned warrants. 4. Pursuant to stock option plans for officers and key employees adopted in 1960 and 1964, options for 25,574 shares of Common Stock were outstand ing at December 31, 1966 at per share prices rang ing from $13.75 to $20.50. During the current year options for 5,600 shares were granted, options for 730 shares were exercised and options for 525 shares lapsed. No further op tions may be granted under the 1960 Plan; addi tional options for 4,400 shares may be granted under the 1964 Plan. Shares issued in connection with options exercised during the year resulted in an in crease of $9,592 in capital in excess of par value. CTD036481 With respect to the obligations of Gustin-Bacon for restricted stock options assumed by the Com pany, options for the purchase of 23,000 shares of Scries A Convertible Preferred Stock at per share prices ranging from $17.8750 to $20.8125 were out standing at December 31, 1966. No options were exercised during the year and options for 3,500 shares lapsed. No further options will be granted under this plan. 5. The Company is one of several defendants in a suit for alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, arid also in two suits for alleged violations of the Se curities Exchange Act of 1934. The Company is also the defendant in a suit by a builder under the former home building program, for alleged breach of contract. The Company denies liability in all of these suits and is taking all possible measures to defend them. Based on opinions of counsel, the Management believes that the disposition of all pending litigation will not have a significant ad verse effect on the Company's financial position. The Company is contingently obligated to reim burse the purchaser of certain installment notes re ceivable for credit losses up to a maximum of $3,000,000 which may be incurred prior to January 1, 1975, and for losses arising from risks against which the Company is carrying insurance. The Company has not been called upon to make any payments for credit losses since incurring this con tingent obligation in 1965. At December 31, 1966, the unfunded cost of past service benefits under existing pension plans, in cluding those assumed as a result of the merger with Gustin-Bacon Manufacturing Company, amounted to approximately $2,000,000. Federal income tax returns of certain prior years of the Company and a subsidiary (since liquidated) are being examined by the Internal Revenue Ser vice. The examining agent has discussed with the Company matters which cumulatively could involve, possible assessments material in amount; however, since no formal report has been received by the Company, it is impossible to know what the agent's final position on those matters will be and, there fore, the total amounts of additional claims which might be asserted are presently unascertainable. Should the matters so far discussed be incorporated finally in the agent's report, the Company intends to vigorously contest them, since it believes, from such information as is available to the Company, that they are substantially without merit and should have no material effect on the financial position of the Company. ACCOUNTANTS' REPORT To the Board of Directors Certain-teed Products Corporation Ardmore, Pennsylvania We have examined the consolidated balance sheet of Certain-teed Products Corporation and subsidiaries as at December 31, 1966, and the related consolidated statement of income and retained earnings for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, subject to the effect, if any, of the outcome of the tax matter described in the fourth para graph of Note 5, the accompanying consolidated balance sheet and consolidated statement of income and retained earnings, together with the notes to financial statements, present fairly the consolidated financial position of Certain-teed Products Corporation and subsidiaries at December 31, 1966, and the consoli dated results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year, and the accompanying consolidated statement of funds for the year ended December 31, 1966, presents fairly the information shown therein. New York, N. Y. January 25, 1967 CTD036482 17 ORGANIZATION Board of Directors Rawson G. Lizars, Chniunau Ralph M. Bateman J. O. Biggs Donald N. Clausen M. S. Davis, Jr. John R. Johnston I. S. Kanipmann, Jr. Harold McNabb Malcolm Meyer N. \V. Pearson Ronald G. Soothill Executive Committee Rawson G. Lizars, Chairman Malcolm Meyer J. O. Biggs N. W. Pearson Transfer Agent Bankers Trust Company, New York General Counsel Clausen, Hirsh, Miller and Gorman, Chicago Officers Rawson G. Lizars. Chairman of the Board Malcolm Me.)it, President J O. BU^s. Executive I'kt President K. A. Dicfenbach. \ `icc President - Finance B F. Lcaman, Jr., f 'ice President - Marketing M. S. Davis. Jr., I 'ice President - Pipe Division M. C. Hoven. l ice President - Building Materials Division llarolcl McNabb, f ice President - Cameron Division Keith Swinehart, I'icc President - Plastics Division Norman }. Mucger, Treasurer James L. Strickland, Ass't 1'reasurei and Ass'/ Secretary Joseph V. Mannino, Comptroller Charles E. DeLong, Secretary Tom Warren, Ass't Secretary (Mrs.) M. C. Latimer, Ass't Secretary Registrar The Chase Manhattan Bank, New York Auditors S. D. Leidesdorf &. Co., New York 18 CTD036483 LOCATIONS tt Executive Offices Ardmore. Pennsylvania Research Laboratories Ambler. Pennsylvania Kansas City, Kansas Savannah, Georgia Sales Offices Albany, Mew York Ambler, Pennsylvania Anaheim, California Atlanta, Georgia Bryn Mawr, Pennsylvania Buffalo, New York Chicago, Illinois Chicago Heights, Illinois Cleveland, Ohio Compton, California Dallas, Texas Denver, Colorado Detroit, Michigan East St. Louis, Illinois Houston, Texas Kansas City, Missouri Kirkwood, Missouri McPherson, Kansas New York, New York Oakland, California Phoenix, Arizona Richmond, California San Francisco, California Savannah, Georgia Seattle, Washington Washington, District of Columbia Westfield, New Jersey Plants Ambler, Pennsylvania Berlin, New Jersey Buffalo, New York Chicago Heights, Illinois Dallas, Texas East St. Louis, Illinois Hillsboro, Texas Kansas City, Kansas Kansas City, Missouri McPherson, Kansas Mountaintop, Pennsylvania Richmond, California Riverside, California Santa Clara, California Savannah, Georgia St. Louis, Missouri Tacoma, Washington Vega Alta, Puerto Rico Waco, Texas York, Pennsylvania 19 CTD036484