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MINING AND MINERALS FIRS1 QUARTER 1977 NET SAL IS EARNINGS BEFORE INCOME TAXES 144 8 million 812 0 million r ASBESTOS FIBER 1 CURRENT YEARS OPERATING f CAPACITY RATE 11976/CURRENT I i t S173 million 9S*/9S% (ji r S'imiikI major business aiea in Min ng and Minerals Our first quarte' sales an up aP nit 11 percent from 1976. fend our earnings are up 14 percent from 1976 We consider 1'n*. tu be a very strong perfemanco b< cause we wore restricted in term* ot our ati hty to nip asbestos liber in late January anr early Fobruary because ot the weather Thus three results were achieved wi'hout quit .* getting out the full tonnage in January and f c!/u Uy Oic asbestos libei capacity, a jam at current prices, is S173 million We re operat ing at 95 percent ot capacity, whict tor the mining operation, is practical operating capacity ASBESTOS FIBER DEMAND PRODUCT t INC MARKET OUTLOOK Athmlo* Fib** Strong ROOFING PRODUCTS FIRST QUARTER 1977 NET SALES EARNINGS BEFORE INCOME TAXES 640* million SI0-2I million The outlook tor asbestos fiber is strong now, and we expect it to continue strong throughout 1977. and into 1978. In the past we have been pricing our asbestos liber in Canadian d- .liars Beginning July l.we will price in U S dollars. Hoot ng Products ordinarily has a weak first quarler This quarter was no e< :eption it was a little weaker than we had anticipated in that we did have some ollects from the weather on industrial and commercial construction. Weather did not signili ( a'ltiy attect however the residential rooting s.-los f ROOFING PRODUCTS I CURRENT TEAM'S I capacit- OPERATING rate I |1976.`CUMRENT i | 171* ma m* 4 91V9UX at at - I..t 7 t . K. pt ' -r:l ; r.-jpar it, in the V*.! quart*" ir ' '.l." : hoi ) .Hi' inventor * > onw*. Tins had adverse f**teci m terms ol absorption c. fixed costs Our U S capacity in the rojting area is S218 million We are now operating al a 90 percent r ite rooting products DEMAND PRODUCT LINE MARKET OU LOOK HitKlmh*! iinjfiy f tbf Gifts; Strong Non Revet nitial Mc<torU The j(.i eptance ol ou- fitter gl.ss shing'is is very strong, and we will prooably . ; in :'.- tti.ir V) percent o' our residential rou'mg output in the form of fiber glass .11:.'ji* . Mir. y<',r Oiu overall uuilook or marke' demand in the residential roofing area r. .tonq Tt.< non residential moling . ieii whip t is commercial arid industrial built-up roof-ng has a moderate demand, whict we think will probably hold at about that level for tin-11.t of Itii! y mu PIPE PR TDUCTS AND SVSTEMS FIRST OUARTIR 1f>77 NET SALES EARNINCS BEFORE INCOME TAXES M6 7 motion M.7 rn llion Pipe Pioi'uots and Systems is the business area that is most gratifying to us it has been a problem area for the past several years, and now we have a significant turn.Hound m ol pipe business Our fust quarter sales are up seven percent over 1976, and riur. opr-ratih'i earnings are up significantly. Oi an operating basis, in the first quarter ol 1976. we had an operating loss of SI.6 million botore taxes. So we're looking at a turnaround m th; lust quarter of 1977 ol more ihar $6 million, before lax, operating earnings The ire ids in April ano through May indicate that the first quarter is not a fluke, and we expect to have a good year in pipe PIPE PRODUCTS ANO iVSUVS CURRENT TEARS CAPACITY (iPIMAtlNC R/.TF n i;t tuHHiM r At US tit? Mill... SS 70. pvt US trot mill.i pin'Six. ...... '. ,.asjs ` ;. ."V. on avi.-orgi: if. IT.'1. On' Ub l'7C tup. n .11 on and v am Ope-vt-'.g it 99 pr-'-.w 11/ capacty >n P7C pip" s~*&*r* acjjwagi ggigf )i V) INDUSTRIAL AND OTHER PROOUCTS PlRST OUARTER 1977 NET | SALES EARNIhGS BEFORE INCOME TAXES J $361 million l $4.3 million Our Industrial and Othei Products business, which includes specialty glass fiber mats, railroad composition brake shoes, and sea ing components, has net sa;es and earnings dovin.somewhat in the first quarter, as compared to the first quarter of 1976 That is due, however, almost entirely to the iact that the first quarter ol 197t had a nonrecurring contract closing in out (ierman engineering subsidiary, which involved a Mqmtii.an! t.i-le ot equipment and te .hnuloy to other companies On an operating ti.i'.r. iixli >q tti.it. our 1 `<77 tio.t gi arter e. s, hst,.`doiy in term:, fit sales and earnings INDUS ' RIAL ANU Ol HtH PHODU' 1$ CURRENT \ CAR'S CAPACITY OH RATINO ATE (197$ CURRENT) ScKuiki - US million Aaiitood Broli* Shew -121 mittton faomg Compontnu S4E> mrflton W%/75% INDUSTRIAL AND OT HI R PRODUC t S DIMAND PRODUCT LINE MARK!T outlook Schulltf Good Ruliotd 6r*kt Shorn Sfrcng SntlMig Compontnu Strong Our maicr business m that area is Schuller Company, in Germany, with a capacity ot $.tn million Ttiat company produces the glass mat that goes into the flooring market, the wallcovering market, and the roofing market in Europe. It is operating at 95 percent of capacity Our ran oad brake shoe business, with i capacity of $21 million, is operating at essentially 100 p ircent of capacity Our sealing components business, wim a capacity ot $45 million, is operating at 75 percent of capacity For that particular type of business, 75 percent operating capacity is satisfactory, and it repiesents a good, profitable lev tI ot o[>erutions Our outloc'. tor the Schuller business in Germany is good. We expect it to remain that way lor the est ot the year. The railroad brake shoes and sealing components businesses are beth strong, and we expect th,m tq continue strong throughout the rest ot this year I'll turn the neeting back to John t/cK>i ney Thank you MC MNNf ' And now we II answr r an, que1 t ons that anyone has I Quaatlon* i Answer*: CHAIR I thru Hi--- - , .1 bji-shon u : he center here The question relates 'O the Outlook ! (...mu. .1 .1 r>i 1 tt . : i>. 'I- Clin.,lie generally MC KINNEY. Tn.- . - -..tm Canada who I heard last week, as 1 said before think ! ` , !.i 1'. < ` (..S'-: r- mat i* ha: not begun to recover, anc they dec not [ .one :: .- : t, Ieo-:t S three r'-te'h-'j to h-ghf;' costs an'! low* ' ..i--,. ti ;h-< but d I.o.. 1 the same kind of bind ";,r ha' ' w.o'J sav b. e tna 1 talked K. ,-f, C HAIR ' :< n> 1.-. s>. tr 1,, to. ........... .. nt is hostile f." H , N Y : t ' - ' ' r .S'-Siv! n ` - to industry 1 ib-e t foot 'S,,- !'' ; s " i he.,- t; sa..' .. >.b.V VMS ; It:.-' had observed that in ou' [.lants a .'..inada h.1^.-hi(:h< ' production costs c id If /. ; 1 I rod. Chely QUESTION Would yo / explain why in a rel; lively good ye ir tor this mau; by like 1975 , . : 11. n-l.i'* I ;r : 1;,. r nvnXfV, a! a do,ir'.i!'> Vf KiNNEY '/;!! '< * .!* not a good year I'jt tnut.icioal spchdifirj which affects water I - 1- : ' n. I he, a. trie reason wtiy our asbestos 1 ement pi(;<- business in ' ...( 1' <! v,' <f ! iV s' had riot been good tor a couple o' vears Now that municipal begun ag-nn tha! is the mam reason why the asbestos-cement pipe rat-r.g higher capacity utm/ation and we a-e maEing better earnings , n MiCK , . j us!. F'VC pipr- ple,.s<-"' V.C MNNf Y t'V` . P.j. we had operate 1 at vi'tuali, UK) percent capacity in 1976 : :: ,* ;<fi .J* 1 *>'; {>'' ..' r apan'v The probbT-i in 19/6 with the PVC business was that !*.. ; /.-I -f * r : 1 ; `ins.; b'n yn.i' |:n< i s .vi n1 on .rot 1 id how ttu. prise level;, an* , It th.* 1' .ifMt'i j* f ,i,'i-ii- j .in.e-; riaixe-t! y V'-- w t.,! 1 hi y were `srflier ir 1976 CHAIR: In 1h.it regard J..tin could you give us an idea what t ne current selling prices are t. IVL ,tt -) would vou to indicate what your break even is on a price per ton bat, is'' MC KINNEY Wei ir t m . say wha' i 'e"iember o( it. anc (her f red can tie more specific 1 ,t i,.ii, v,a-, ea` m earl, 1976 ttu; seilm ) pn :e was in the range of 32 cents a : ..... . .1 r< .> i .dj::1 : net. Towa'd `he er-t -he >-.if t th-e* 1' was op toward v.:l;-6i- CHAIH Tlii' (junt.lion relates to what your current pricing strategy is in various product inn,", .mil t>i- g..' ttleman indicated that in rrany ol these products you have not been a juit t- leader Wiii trial situation change0 Anc! what spec ilir.ally are you doing in tern.', ol current pricing struc tures tor the vanou p'Oducts tna you re dealing with in term', ol increases0 MC KINNEY: A:, explained to one ol these g'oups once before, the prices that you read in If it? newspiipi rs and what the actual prices are to the customer are two different things. because in many ol the building matonals businesses, there are a senes ot discounts which am tacked onto the list price, and what you havn to look at is the discounting artery In many ol our businesses, pricing is an extremely complicated mailer. ho< ausc ol Ihn number ol pricing districts, the historical discounting system, and the complexdy ot the product lines What our po ir.y with our people is we want them paying mom attention to how they ie running then pi icing, their discounting and all ol that so trial our actual price realization -- and by that I mean Ihe added dollars winch we yet trom price increases, or eliminat.on ot discounts, however you wanl to look at it -- is improved I ti r-e talked to some of our district managers who agree that, at times, we have probah'y because ol the compi.cation ot the situation, been out there mee ir.g ouf own lowered p i :< What we re trying to do is to get people to be more sensitive t d it. to be caretul atioui <t, and we have prov tied them with some comparisons which show them what the importance is ot really raying attention to pricing We are not talking about great increases in our prices. Whz we're talking about is realizing, in tact, for our products, the same general level ot puces thit oji competitors are getting tor comparable products. And we're just not convinced we've been doing that in the past. CHAIR: Is the performance tor the first quarter a reflection to some degree of that? MC KINNEY: Yes Up tt.rough the first four months, we were virtually on-plan In realizing added dollars Iron price improvements. And that was before we started doing all ol !he r.omp:aimng abou' pricing And now we're doing a littl j bit better than plan. We are improving QUESTION: Could vou update us on your discussions with the Quebec government con cerning the Joftrey Mine0 Has there been anything lurthoi between you and them? MC KINNEY: We have not had any additiona discussion since tale January with the government ot Qu* bee We have noted the various statements which they have made in the meantime We believe that Ihe attitude toward the asbestos industry in Quebec is relaxing They seen to be more interested now in ether industries They will be announc ing as we understand it, within the next lew week?, what their policy with respect to the asbestos industry will be. We do not anticipate that it will have a significantly adverse etiec i on out busm sses CHAIR Tne guest" m relates to the govemmeri s c- ncem about windfall protits Is there .in, w.iy you conic ndicale or nave a loei fi.r a iat nayr tude 'it price increase would fie H. '' I 1J j i ! J : ) justified. based on the supply/demand relationships, arid at the same time, avoiding what the government considers windfall profits? MC KINNEY: I dor'l trunk we re going to have any pr c.e increases which are based :r , r.n the far t Mat there is an increasing demand Our pricing, obviously, is going to t it.r'*.! to g;vi ur- an adequate return on trie S2O0 nri lion capital program wnic.n we hi.' cnder'u-on QUESTION I was scnoc-nnc) whether. m cift*-;fat we tou'd review the world supply' d_*rr* ') bo ance m jsbestos. and in padtcuu- ' whether ,y.> could review you' perception '< wt a! k.ri.; nf a pr *ir v me Russians wiM lot: w m tega'C to asbestos sales on the tree r ' t/:. k IN NT v f r i ... n i- r ; < 1 ' hi;'-' '..ms t;. .<!' in the Free World market any mi a-- hue' fi.m ti"-, ii.i.'i' tii-en don i m Hi" t#. 1 t As a rrv lift of lai I. we would anticipate tti.it it niigh- lessen inlov. at a given (true, the need 1fn< ha'-d dollars As I understand it. and a lot of these t qures are very difficult t i come b; - arid you can gel different rr j on:, fit'l l differer-t pi opie -- me Russian have gen-trail- speaking, sold about a r i i r i' amount ot tiijc m the Free World 'hey have'some difficulties in doing this < ' f"i, . tti.it the quality ot then materia1 ts variable Thei reliability from the point vii v. i f ,i i u'.t'.iiier being able fo rely on thr e continuing to supply them is Question a-i'e and so man, buyers are reluctant, with the presen situation on asbestos libet. to in- a; wdti the Russi ms Also what the Russians have chara:terislically done, it they ifi-d ti ed dr.ii.f. ir. to continue- to sell the fiber, and cut c'f the Eastern European a- .......... . We have t ad n. quests bom Eastern Europeans to sell them liber. Russia also r ti.i- mi i,i|. i r ,.inr png country from I fie po nl ot vie w of production of asbestos i .......... pro t.i'An i it *. our belief that then own cons jmptior ot asbestos cement t.i' !;, tt. w' i require .-! o' the liber which they car supply They do have several sizable mines winch are toward the end ot their lile spans QUESTION I funk tti.r v,as just me tusi pan i! the question I d also like to look at it in t'-imr, 1,1 trie content o' the f ree Wotld - whether Manat.eri fit has any figures in terms c' total tonnages, the r share ot market, and where they dunk Free World demand is likely to go MC KINNEY: Do you mean -- are you askir.g il the free World supply is going to i' 'east ' QUESTION On t'Otr I- dd o' me rj.-,n - how do w the dema'-d ' m,, F-ree V. ct ijev; i'll:'a:1 mi trie eso" , 1 e >- v! K.s a''d , w" ........ ,. see if . ' f hca-.' - .11 i-`. s..: ; 'he e !k-< " . i" ! to '.r,Tik ,................ . ' . : ; - ' ; . " t .1',' A *f ' .t `, , t 'u'.' P^ t; , get V : MSNE'r .. . " S; t> n; m C"".- ,,r 1 ' a re e 'etu" O' ,t | gr,-i t mow WJ i I U / government had at one time exhibited some interest in it lekes more thari 16 ol capital |.. Iimikj m one dollar ol sale-!, and on today's once strut.lure there is no way that such a ; | ; w ild be viable A! the present time -ve certan ly could not afford to briny in a tari'ial new Ittmn on odav s price structu e And w( don t think there are gr mg to be any new mine'. brought in. m trie near future F s to the demand, we think the demand will rmilnue. particularly in the developing countries, tor asbestos cement products iri particular i think the consumption will largely be matched lo wtiat is available in the way nt fiber QUESTIONS REGARD NG INTERNATIONAL ASBESTOS LEGISLATION: MC KINNEY: In the Scandinavian countries. O' in Sweden in particular, one lorm of antie`,t i1, neinent has been banned as a product I have not seen the final thing Irom the tv in n.eid . tint it *.n certainly less than a oan on the major uses There are certain mmer j:.e;, of asbestot frt>er where Ihe fiber is not locked into the finished product It's a sort cl a <)if mo ot loose't>ber. where it's improbable to s jpposc that the user ot the titer wtii uv- it vilely B, using it safely I mean nr t creating mor* Itian a certain amount of d.j-.t V\>- hew stopped selling to Such custorr ers Theft are quite a number ot uses ' wru! t i h.m- caul we lust r,imply won't sell ini product Wt ve also taken the position u .it we wir t sell lo an, customer who won't utr it salel/ On the other hand, we believe tt .i' . i '.e ;a uh.; emotion in the Nethenandr -- and t tere is some among the trade unions ,e Fiance -- is unwarranted We feel th it the present US. standard of two fibers per cc is safe, and we believe this based upon t <perience in some of our plants that have been n operation for 20 years If the dust levels were too high, and they were higher than th*- present standard, wn should have begun to see some ev d<-nce of asbestos-related disease At those two plnnts. which have now been in operation for 20 years, we have no disease which can be atfibuted to asbestos. CHAIR: Is there any emchon in the United Stales that might rTove to attempt banning ar y particular products' Are there any products that you're dealing with now that are potentially vulnerable to < motion or otherwise harming them? MC KINNEY: Well. yes. tc the same extent that it has been to: about t2 years, there's a segment ot thinking that 1 you don't know exactly what's sate, if there's any danger at ai: don t do it On the other hand, we do not think that is g )ing to result in any ban in the United States Wo do thirk, based upon the kind ot data that we have out of our actual experience with employees, and rather than the experience that people have with over doses on rats, that reason will prevail CHAIR: John, you have a q jestion QUESTION: Before the lunch, wo were chatting about 'he ITC complaint, and one ot the statements that the indus ry was hard to enter tiecaune o` the technology required the the mioa how and you mjicated that there weie olh-if constraints that were probably men- formidable than the actual patent protection, or ihe technology alone Could you ; 'ito those m a liitle tat' iort beta'1'' in MC KINNF.Y: There are no patents which would prevent anyone from manufacturing titier glass irv.uia'ion in the United States And assur mig they coulc learn how to produce the 'tjm glass formulations and do all ol the right things -- there are no patents trial would ;.n vent them liom com.rating That is not the problem. The problem is thal it is a very ilitfici.lt technology, it is, to begin with, a highly capital-intensive process And there have ...... .. numerous hi J companies that have taken a look at it To stiow you. really. wtm1 ttn- (utility ol what tie/ re talking about is. in about 19S0, Owens Corning Fiberqlas was s n fi inn -ugh an antitrust decree, to license anyone who asked for a license Pitts r, irr.n put., t.iav, was i, <e ol the companies th it was licenser. In make insulations, and s, uai e textiles They're still in the texhle busir ess. but they niver made it in the insula mi tie!:.! And they never made it in the insulatic n ueld simply tiecause it is too ditticult a rn-nj in .can. to ilo, eves though thev were heini tauqht how CHAIR Wlm' is the rtolla ot cap'! il investment eisus a tl 'liar ol sales relationships MC KINNEY: Well, once 'Ou gel mto it it's less than one-to-one -- and I perhaps should n..' have i.secl "capital' in that sense One ot tl e most diffir.u I things to dr.' is that you t, .i.. t a on at ili a! 'i training You have in unrig a large n nnber ol people pt a very soph.- tn aleii level o! tra mng and technical kn -wledge in Older to opetate a glas:. tiLrrrr nia'-uta' iinmg process And d ir. not something that you can alt ird to miss on. because a you guild a glass tank. it s got to operate 24 hou-s a day. sever, days a week tor years it you oner.* shut it down, you have to rebuild it. Jo just to melt the glass is technically a tremendous undertaking d you have not been in it before CHAIR: Is there any way o determine, or to guess, what the time span is trom ground tiii.,in h; to start up'1 is there a long lead-time to start up new cap tcity? MC KINNEY: II someone started trom scratch today, without having any employees whatever who were previc usly trained in melting and hbenzing glass, and they started out in build or to acquire the knowledge, design the plant, and do all of that, you're talk i-'tj about years and ye its And the probability ot failure is verv. very high CHAIR Is them any possit ildy ot a wmdlall profits ta. or sortie kind ot prevention device stimulated by ttie g<ivernm jnP MC KINNEY: i suppose yo j re never sate in predicting wh it the government will do. but at the present time, horn our point ot view, the ta'k ot wmdl ill profits with respect to liber giass msuiaton is ridiculous CHAIR This gentleman pi mts out the proposed legis.aticn meve last year I believe in C.cingn s- tn,.! was gnmg to investigate the p'ODiem u( a ibestos What s the status ol t ,a.ed legislation MC KINNEY In.-u- was . ons-d-ration ol spe.'e cm iper satmi. tor persons suttenng ,i* .,. : sim'.i. tna' !; w m, .. U m- ; m the last Congress and , .. ..... ,, , e m ,, ]|. -a, |ge e are a numbs-' ot prut, ' t a' v.'.s ! la- a r u I -1 jit ! ([,e ot r.ompensa > in. i plan Out idea 11 prop'sang iri.tt lo the .jnirn people i< It e Inst plan* was that the : ' ' me'hi, 1 " .r ", `.'..iu;;!1 'I'CIJ,)' V, [' * ninn I, rr . i . I m ' ">i. t. '' .i i!'. a":: >, tru'j Pivt, -:s in o . , p.,i.r.|iC gc-!t- no'hing. ana another is ' sva.ded great!, and the/ ve ti'illi yd trip wiMn disease t n.. d. licult, come:., ir- dial them have been several group:, over the last 40 years. who ,,<> res; onsihie tor the s-tuation rhal we have The governm. r.r undertook !< set standards if CKO and the standard!, were neither adequate n ,r were ir e,1'11 " ' I S- hi" e.,v( .rimer | has vane res;. insiriility lor tt-e [population . ' people !h,d r'.i, Sa.e lola, v. ho na.e .I'.lua.iy been harmed Industry obviously, is responsible .".I. e {,r- J s : III. e...V efiyttnii'nes: T 11 e indlC.l | f.|li"J`,iii!i i\ resj.''isd ,:'- i. l* e (- r | is: Mud until to year i I.de that people were tieing ..vers-ip <se') S. '."n .'is an responsible Hu! ol the things and we re pertiaps most ' .'d I" nne tfie tobacco ind..' tr is moc responsible than anybody I'.' ..'si: ! rh" must Piling form ol the di .ease There has never been an asbestos .vr>*< yet -who tias ht-d lung cancer, who d d tot smoke cigarettes You can say tor prat heal purpose1 tad Ira smoking ugareltfs. no asbestos worker, regardless ot < ;.< si >. (j.-ts Inn;; raucer One o' the ficjhts with respect to this compensation tall is I'i i1 to!.......... .. v.t.a! tt a! f-'da : n shun in paying tor If e .<unpetisalio11 And obvious"/, you know ,n 1 lie lotmsf.o lot Oy is a fairly strong one QUESTION Id like I- pet bar k P. the pipe a e.i In She first 'Juarler. yrujr year to year ns;.ruv Mien! in earning . in the pipe area was sb 2 million To y.hal extent was Itie, trom Pi.- ,r.l ,! s cement pipe area, arid If. what < .lent wat it Iron PVC pipe'' Also, it you i "id'i t reak down that improvement in terms ol improve men' in the price/cost relation r ; v* rsu:, improvement in operating rales PUNDSACK: We I! v.e ba ) improvement in pi of it anility in Doth P JC pipe and in asbestos (ei'n .it pipe m tern-;, of the total earnings turna'Ound. appro* mately 30 percent came inn.e ashes''.', eiect pipe area appro, uiialely 70 percent trom the PVC pipe area CHAIR. There was a'ctfe. pod ;! that I think Fred PUNDSACK I (..in ! give y ei the bruavdown oil tim top ol my tie id between the improve meet trom lire operating ales and from impro/ed price levels There was certainly in I* < case ot the AC pipe a signdicant improvement becaus-1 ot the improvement in t pending rates QUESTION: I just wanted o gel a better '.,.'.ng 'c* now r ucf r blent. a .myovemv! s I", trie PVC pipe area An- V0u t 'ett, ma,-n jcceptats > ie-.y-is m crice7 PUNDSACK. ''1h.ni. rrit-m i some imtirovernent tilt ahead .n th PVC pipe area CHAIR : s arv w I .i. S . . i.i d . .tl n..w !! . o t * K> V.. 'n.mk you vi-ry rimr r t. .i ., .! : w ; r - " V .n.v:;..m> , t.fr | resenlation Thank von io V jn I 6 :t l The foliowing is a list of documents that were submitted to Davis, Folk in response to the Abrams litigation; copies of these documents were not retained by the Legal Department: 1. I'onn 10-K'i; for the years 19",5 through 1979. . I 9 /'i ilohiin-Manvi 1 It* Investor Reference Hook. j. .luhiis-Manv i ) le Annual Report; for the years 1979 through 1979. 4. Quarterly Reports of Johns-Menvi1le for the years 1975 through 1979 - excluding the second quarter of 1977 and the first quarter of 1978 - these cinnot be located within Johns-Munville.