Document daK9o6zB6VLeRwLrKpXnq058G

jcoa -ymtM ,:;3r* ^;t;.v; '* :'j-,:j;* -v.. <+'$*:' , j.. \ i * :. PLAINTIFF'S EXHIBIT BEA-68 Koppers 1962 revenue dollars Chemicals & Dyestuffs Oivision $19.7 million ORIGIN i 305.7 million dollars DISTRIBUTION Metal Products Division $37.2 million Wood Preserving Division $51.9 million Plastics Division $52.4*million Engineering & Construction Division $61.7 million Tar Products Division $77.2 million Other Sales & Revenues $5.6 million Wages and Salaries $32.6 million Materials Supplies and Services $190.3 million XOPPEHS COMPANY INC. ANNUM REPORT 1062 contentis Inside Front Cover The Year In Brief Page 2 Letter to Stockholders Page S Executive Changes Page 6 Division Highlights Page 14 National Advertising Page IS Directors of Koppers Company. Inc. Page 19 Officers of Koppers Company, Inc. Page 20 Report of Certified Public Accountants Page 21 Consolidated Statement of Income and Earnings Retained in the Business Pages 22, 23 Consolidated Balance Sheet Page 24 Notes to Financial Statements Page 25 Five-Year Financial Highlights annua! meeting The next Annual Meeting of the Stockholders of the Company will he held on March 25, 1963 at the Penn*5heraton Hotel iUrban Room. 17th Floor;, Pittsburgh. Pa. The Management will solicit proxies for this meeting. A notice of the meeting, a proxy statement, and a form of proxy will be mailed to the Common Stockholders in connection with thi* solicitation in the latter part of February, 1963. Two products oj the Plastics Division are used in the presentation ot this Report: Durethbm: PnLYF.THYLE.vE Film was *moioved by the Bemis Bro. Bag Company in producing the dip-close envelope used in mailing this Report. The text of the Report is printed on ;iu: Oxford Pauer Oompanv*? Polar OtI--t Fn.wi'd. witirii is coated with the Division*' Dylkx tw- >TYnENEBL'T.\iiENE L\tky i C. Foy. Chairman F. L. Byrom. President to our stockholders January 28. 1963 1962 In Review: Total Company sales during 1962 were 3301.1 million. 10 per cent higher than the 1961 sales volume of 3273.4 million. As shown in the table on the oppo site page, all of the Company's six Operating Divisions shared to some extent in the in crease. Net income for the year just completed was 37.825.000. compared to $6,721,000 in 1961. After provision for payment of preferred dividends, net income in 1962 was equiva lent to 33.21 per share of common stock outstanding at the year end, compared to 32.67 per share earned in 1961. Earnings during the past year benefited more than usually by profits realized from nonrecurring capital gains. The principal item of this nature in 1962 was a profit, equiv alent to 34 cents per share, on the sale of the Thomas Flexible Coupling Company. A discussion of this transaction is presented below. The Company's backlog of work on December 31. 1962 was 3123 million compared to 3140 million at the end of 1961. Backlog of the Manufacturing Divisions, taken as a whole, was slightly higher than last year. However, relatively little engineering and con struction work, in those areas in which we specialize, was placed by the domestic steel industry during the year. And. while our Engineering and Construction Division held its position in the market in 1962. construction backlog at the year end was below the level of the previous year. Timber Laminatinc Firm Merced With Koppers Division In July, the operations of the Wood Preserving Division were expanded when one of the nation's leading laminators of forest products--Unit Structures. Inc. of Peshtigo. Wiscon sin--joined that Division. The resources of the Koppers organization, combined with Unit Structures' capable management and work force, should enable us to greatly expand the future markets for the use of laminated wood products. Max C. Hanisch. formerly President of Unit Structures, joined Koppers Wood Preserv ing Division as a Vice President and in that capacity continues to manage Unit operations. Couplinc Operation Sold To Chain Belt Company The Thomas Flexible Coupling Company I Warren. Pa.), acquired by Koppers in 1961. was sold last September to the Chain Belt Company of Milwaukee, Wisconsin. Our acquisition of the Thomas firm had been challenged by the Justice Department as a civil violation of the Clayton Antitrust Act and. facing a costly and uncertain appeal to the United States Supreme Court to defend our right to retain Thomas, we decided that it was in the best interests of our stockholders to accept an attractive offer from the Chain Belt Company. We wish to commend the management and employees of the Thomas firm for their loval and industrious service during the period of their association with Koppers. The Chain Belt Company has agreed to keep the Thomas operation in Warren. Pa., and we are pleased that the interests of the Thomas employees and the community of Warren will thus be protected. Lonc Strike Settled At Kobuta Plant A major strike, which continued for 191 days, was experienced during the year at the Kobuta. Pa. plant of the Plastics Division. A number of inefficient work practices and restrictive contract provisions had made the Kobuta plant unable to compete effectively in the verv competitive plastics industry, and Division management sought to eliminate certain of these cost-increasing practices tlurinu contract negotiations. Under the terms of the settlement, reached early in November. Ko'outa employees received a wage increase as well as improvements in fringe benefits while the local management gained more flexibility in operating the plant, which can now be operated on a more effi cient basis. Organizational Changes During 1962 two major organizational changes were put into effect to streamline the Company's existing operations, while at the same time laying the ground work for future growth along orderly and profitable lines. In June two Koppers Divisions which strongly com plement each other--Gas and Coke, and Tar Products --were consolidated into one operating unit, which retains the name of the Tar Products Division. Al though all of the activities of the formerly separate Divisions have been pursued aggressively since the merger, substantial cost savings have already become apparent as a result of the consolidation. A Corporate Growth Planning Group was estab lished during the year, as a- part of the Office of the President, to provide better over-all coordination of the planning work performed by the Company's vari ous operating units, and to guide the future course of the Company's growth. We felt it was important to the Company's future weil-being to centralize basic respon sibility for planning at this time, especially in view of the problems and opportunities posed by the tech nological changes which are occurring at an accelerat ing pace, and the economic and social adjustments that are taking place in the United States and abroad. This Group will identify specific growth markets which offer a potentially profitable opportunity for Koppers participation, and will explore possible ways for the Company to enter such markets. The President serves as Chairman of this Group, assisted on a full time basis by three other experienced Company officers. Capital Investments: Expenditures for acquisitions, investments, new plant construction, and expansion and modernization of existing plant facilities totaled 313.1 million in 1962. This figure is about 35 million less than the Com pany had programed to invest during the year. This lower rate of investment does not represent any delib erate cut-back from planned levels, but instead is a reflection of cost savings on existing projects, delays caused by the extended strike at our Kobuta plastics plant, and revisions and improvements to existing pro ductive facilities which raised present capacity and postponed the need for certain additional programed investments. In addition to the Unit Structures acquisition, cov ered above, significant expenditures in 1962 included: SI completion of a new Dylite foam polystyrene plant at Kobuta, Pa., which increases by some 60 per cent our capacity to make this popular, versatile plastic--now experiencing rapid growth in packag ing, insulation, toy, and flotation applications, adaptation of a wood preserving plant at Oroville, California, to permit the treating of wood by the net sales by divisions Divisions Tar Products**................................ Plastics......................................... Chemicals & Oyestuffs................... ..Chemical......................................... Wood Preserving............................ Metal Products............................... Total Manufacturing...................... Engineering & Construction......... Other Sales................................... TOTAL................................. 1962 52.423 19.750 -- 51.907 37.153 5233.404 51,630 1.064 5301.148 1961 5 76.779 51.617 17.787 _ 42.082 34,348 5222.613 49.865 965 5273.443 1960 5 83,143 52.652 15.617 -- 47.166 31.092 5229.670 72.105 764 5302.539 1959 5 72,286 50,537 16.562 -- 45.360 23.470 5213,715 27.381 532 5241.728 1958 5 73.059 43,248 14,466 -- 41,610 25.207 5197.590 61.659 598 5259.847 1957 5 78.190 43,376 13.914 -- 5X029 35.939 5224.448 102.125 69 5327.142 1356 $ 78,097 -- -- 70.492 49.204 3X128 5230.921 74.947 556 5306.424 1955 5 72.086 -- -- 56.620 38.362 22.907 5189.975 37.907 591 5228.473 1954 5 59.527 -- -- 3X151 22.567 21.112 5151.357 35.650 556 5137.553 1953 5 70,292 -- -- 43.696 38.251 34.493 5136.732 78.089 39 5265.410 Sale* of the International Division art included in the appropriate divisions above. Sales lor 1959 and prior years have oeen restated to include two wnolly*owned foreign subsidiaries. Includes (he former Cas L Ca*e Division, consolidated with Tar Products in June. 1952. revolutionary new Cellon process, which imparts permanence to wood but does not chance its appear ance or valuable natural characteristics, improvement and modernization of the Petrolia. Pa. plant of our Chemicals and Dyestuffs Division, work on a new styrene-butadiene latex plant at Kobuta, Pa., completion of. facilities to increase production of highest quality tar acids at the Follansbee. West Virginia plant of the Tar Products Division, and completion of a large new ethylene and polyethylene plant to be owned and operated by an Argentine affiliate of Koppers -- Industrias Petroquimicas Argentinas Koppers. S.A. nanciai Matters: The Company's financial position ntinued strong throughout the year. Term debt at e 1962 year end totaled 329.7 million: the ratio' of rm debt to total capitalization is 15.9 per cent Durg 1962. short-term bank borrowings were utilized on veral occasions to meet temporary cash demands. .) facilitate such needs, we have arranged to continue 1963 lines of credit in the total amount of 315 milin with the same group of' banks included in our ink Credit Agreement. Cash flow from operations in 1962--consisting of t income, depreciation and depletion, and deferred cderal income taxes--totaled -322.3 million or 39.64 r share of common stock, up from 33.13 per share 1961. The ratio of current assets to current liabilities at ar end was 3.4 to 1. Inventories at December 31. '62 amounted to 348.0 million, a reduction of 32.6 illion from the level at the beginning of the year. Distribution of Sales of the Five Manufacturing Divisions to Consuming Industries Chemicals, Plastics. Rubber, & Oye............ Construction Materials................................. Industrial Machinery.................................... Utilities.............................................. .......... Hifhways...................................................... Railroads....................................................... Iron and Steel.............................................. Aluminum..................................................... Defense......................................................... Consumer Products.................................... . Miscellaneous............................................. TOTAL................................................. Percent 1962 1961 33.Cn U.9 12.5 5.9 5.9 5.1 3.6 2.5 1.3 1.0 9.3 40.5*5 11,2 11.7 6.4 5.3 5.5 3.1 2.6 1.3 1.5 10.9 jco.on 100.0*5 During the year dividends amounting to 3600.000. or 34.00 per share, were paid to preferred stockholders. Common stockholders received total dividend pay ments of S4.5 million, or 32.00 per share. Two positive actions were taken by the Federal Government during 1962 to accelerate the growth of the national economy: the 7 per cent tax credit on investments in certain new property provided by 'the Revenue Act of 1962, and the new Guideline deprecia tion schedules approved by the Internal Revenue Serv ice to permit a more rapid recovery of investments in plants and equipment. The purpose of the Federal Government in taking these actions was to make funds available for the purchase of new and more efficient capital equipment and thus reduce costs, provide new jobs, and stimulate the country's economy. We have taken full advantage of the new Guideline depreciation schedules, and the 7 per cent investment credit, to reduce our income tax payments. The total cash gain to the Company as a result of the lower tax payments made possible by these two measures was 32,445,000. However, the only part of this saving reflected in 1962 income was S247,000. or 11 cents per share of common stock, which represents the permanent savings portion of the investment credit. Company Units Report Directly to Stockholders on 1962 Operations: This year, we have asked the Gen eral Managers of our Operating Divisions, and our Director of Research, to report personally to our stock holders on the 1962 activities of their respective units. Comments of our operating management appear on Pages 6 through 13 of this Report. We hope you will find their remarks interesting. Outlook for 1963: In 1963. we look for further im provement in the Company's sales volume, over the 1962 level. Our 1963 operations are expected to be satisfactory. In line with most published economic forecasts, we expect our performance in the latter part of the year to be better than in the early months. For the Board of Directors, FuKl) C. Foy. Chairman F. L. Bviiom. President 'V. P. Arnold D. L. Eynon, Jit. I'. W, 3u;:imo i. executive changes With the transfer in 1962 of three key executives into the Corporate Growth Planning Group, and the merger of two Divi sions. a number of executive changes were put into effect to utilize as effectively as possible the Company's management talent in both operational and growth planning activities. F. L. Byrom, President, appointed three Company officers, with diverse experience in a number of indus trial fields, to help guide the future course of the Company's growth as members of the Planning Group: Walter P. Arnold, Executive Vice President and a Director of the Company. Mr. Arnold, elected an Executive Vice President in 1958. was former ly General Manager of the Wood Preserving Division. David L. Eynon, Jr., Vice President. Mr. Evnon was formerly General Manager of the Plastics Division. Paul W. Bachman, Vice President. Dr. Bachman was formerly Director of Research of Koppers. R. R. Holmes J. E. Spears C. E. Brown f M J. H. Redmond - C. H. Pottencer M. C. Hanisch N Robert R. Holmes. Executive Vice President, was named General Manager of the Plastics Division. With Koppers since 1923. Mr. Holmes most recently served as Comptroller of the Company and. from 1955 to 1953. was General Manager of the Tar Products Divi sion. He was elected an Executive Vice President in 1953. The management of the Plastics Division was fur ther strengthened by the appointment of Chester E. Brown. Vice President, as Assistant General Manager of the Division. Mr. Brown has been with Koppers since 1949 and has held a number of production and marketing positions of increasing responsibility. Prior to his new appointment, Mr. Brown was General Manager of the Tar Products Division. John H. Redmond. Vice President, who was for merly Marketing Manager of the Tar Products Divi sion. was named General Manager of that Division. John E. Spears. Vice President, was appointed Comptroller. Mr. Spears had previously been General Manager of the Gas and Coke Division. Since joining Koppers in 1929. Mr. Spears has had extensive experi ence in the areas of finance and control. C.arl H. Pottenger was named to succeed Dr. Bach man as Vice President and Director of Research. Mr. Pottenger joined Koppers in 1913 and. until his tieu appointment, was Vice President ami Assistant General Manager of the Plastics Division. R. G. Wilson f W. A. Anderson Upon the merger of Unit Structures. Inc. with the Wood Preserving Division. Unit Structures' President Max C. Hanisch was named a Vice President of Kop pers. and Manager of the Unit Structures Department. Mr. Hanisch was one of the founders of the Unit Structures operation, and helped Unit to achieve its present position as one of the nation's leading pro ducers of glue laminated products. Other major appointments during the year were: Robert G. Wilson as Vice President and Assistant General Manager of the Engineering and Con struction Division. Mr. Wilson was formerlv Assistant to the General Manager. William A. Anderson as a Vice President in the Engineering and Construction Division. Mr. Anderson is Koppers representative on the tech nical and management advisory contract with Acerias Paz del Rio. S.A.--a steel firm head quartered at Bogota. Colombia. William P. Raines, formerly Manager of Advertis ing .nnl Public Relations, as Manager of the Public ami Cominnnily Relations Department, succeeding Ralpii Winslow, wiio retired in 1962. W. P. Raines T. C. Keeunc. Jr. chemicals and dyestuffs division I am pleased to report that sales of the Chemicals and Dye stuffs Division in 1962 improved 11 per cent over 1961, and reached the highest level in our five-year history. This fine record was the result of a successful effort on our part to move most of our product lines in greater volume, particularly the standard established lines. In addition, some of our newer lines showed increased activity. For example, sales of our Amacron dyes, as well as our dyes for nontextile applications such as plastics and other purposes, were encouraging. I should also point out that both of our plants contributed to the Division's improved 1962 performance. In keeping with our insistence on greater operating efficiencies we completed the replacement and reloca tion of manufacturing facilities, at our Lock Haven. Pa. plant, for the production of two important inter mediates in the manufacture of dyestuffs. During 1962 we also undertook the improvement and modernization of our resorcinol producing facilities, to be completed early in 1963 at our Penacol plant (Petrolia; Pa.). Continued progress was made during 1962 in the testing of dyestuffs for coloring anodized aluminum in a wide range of shades. A major aluminum producer was.licensed to use the Division's Alofast process, and negotiations with several more aluminum firms are currently in progress. In 1962. our Division introduced its unique SpERS\L method for dyeing polyester/cotton fibers. This simplified "one-bath'' method makes it possible, for the first time, to dye polyester cotton libers in one oper ation. rather than separately, and cuts in half the time required for dyeing these mixed fibers. Another innovation made during the year was the adoption of a new method of transporting sodium sul- a dry bulk transporter or trailer, which will cut han dling costs and provide better service. On the negative side of the ledger, as far as this Division's operations are concerned, was the passage of the Trade Expansion Act of 1962 by the Congress. As a result of this action, we may be faced with even greater competition from foreign imports of dyestuffs and chemicals. yice President and General Manager (. A. Denny engineering and construction division Divisional sales in 1962 increased to -S61.7 million compared to S49.9 million in 1961. The increase in sales was due primarily to work performed during 1962 on contracts that were in our backlog at the be ginning of the year. Relatively few major new con struction contracts were placed by domestic steel firms in 1962 and, while we more than held our position in the market for construction services, we are entering 1963 with a backlog below that at the start of 1962. During 1962. we secured new contracts totalinc about S35.R million. Some of the largest of these were a coke oven contract with the Ford Motor Companv: a contract to build a basic oxygen furnace plant for the Wisconsin Steel Division of International Har vester Company: and a contract with Empresa Nacional Siderurgica. S.A. to design and furnish equip ment for a new blast furnace at Aviles. Spain. Another important contract, involving engineering and equip ment for a new blast furnace, came from Cosider S.p.A. at Bagnoli. Italy. Construction of the Strategic-Udv kiln and furnace smelter plant at Matanzas. Venezuela, is progressing on schedule and production will start early in 1963. We have every confidence that this commercial iron plant will demonstrate the economic feasibility of the Strategic-L'dv process for smelting iron. Koppers then will he in a verv good position to secure plant construction work based on this process, particularly in foreiun areas where the numerous inquiries sent to us cite a need for small tonnages of metal employing entirely native raw materials. Operation began on our first commercial installation of a system for the direct injection of raw coal into the This patented coat feeder---the heart of Konncrs new Coni Injection System--is now operating at a large steei niant. blast furnace. The system, installed for National Steel Corporation at Weirton, West Virginia, will enable them to replace with raw coal an appreciable percent age of the coke normally fed to the blast furnace. As a supplementary fuel, coal has distinct economic advan tages over oil or gas and, in general, can be used in greater proportions. The steel industry is watching this first commercial installation with great interest. Excellent progress was made in 1962 on the fully integrated steel plant that Koppers, together with Westinghouse and Blaw-Knox, is erecting at Eregli, Turkey. Most of the required piling has been driven and con siderable progress has been made in pouring founda tions. Approximately 25 per cent of the material and equipment required for the plant has been delivered to the job site. Cooperation of Turkish and other sub contractors has been excellent, construction work :s on schedule, and it is anticipated that the plant--with an annual capacity of 4-70.000 metric tons of ingots-- will be completed early in 1965 as planned. A major revolution is taking place in the production and processing methods within the steel industry. A prime example is the new steelmaking method called the basic oxygen furnace process. It offers both lower capital cost and lower operating cost for producing a ton of steel, compared to the traditional open hearth process. Most of the major U. S. companies are now building such plants, or planning them as part of their modernization programs. We are established in this field through the success of the oxygen furnace oiant completed in 1961 for Jones & Lauanlin Steel in Cleve land. which holds a number of tonnage production rate records. We are presently engineering the world's largest oxygen furnace for Cosider S.p.A.. which will be capable of producing heats of 300 metric tons. Our position in this field was further solidified by the award to Koppers. late in 1962. of a major contract to design and build a 1,000,000 ton-per-vear oxygen furnace plant for International Harvester. Start-up of this plant is scheduled for the third quarter of 1964. We might emphasize that both the oxygen furnace plant built for J&L Steel, and the new International Harvester job, represent "tum-key'' contracts--where Koppers is responsible for the performance of all de sign. engineering, procurement, and construction serv ices necessary to bring the plant to final completion. During 1962 there was a reawakening of interest in the continuous casting of large slabs among major American steel producers. This was due principally to the coming into production of the first large European slab machine at Dillingen, in the Saar. Koppers has been offering substantial ly similar machinery to the American market since 1956. A related but separate field is the continuous casting of small steel billets, from 2" to 6" square. In April, at Pre mier Steel Mills, Ltd. in Edmonton, Alberta, operations were started on an entirely new type of billet casting machine Twin-strand continuous which was developed, de casting at Premier Steel signed and built by Kop pers. The rapid attainment by this machine of full operational status, together with product quality im provement. increased yields, and increased produc tivity in subsequent rolling operations, have greatly impressed a number of other billet and bar producers We have several proposed projects for similar ma chines that are approaching definite contract status, and are receiving many further requests for price quotations. Vice Presitleni (ionorni tfnnnecr OgygBSOgy H16HUBHTS G. W. Naylor H international division i am happy to report that in 1962. the sixth year since the International Division was formed, we have continued to maintain a high rate of growth. In these six years we believe that we have estab lished a sound foundation permitting still further ex pansion into additional world markets. Earlv in the year, a Marketing Department was added to the Division to aid in new market develop ment. selling and merchandising. Division planning, and sales and marketing management assistance to subsidiaries and affiliates. Product sales for 1962 remained at about the same level as the previous year, despite extremely severe price competition. Construction of new ethylene/pqlvethylene plant facilities for Koppers Argentine affiliate--Industrias Petroquimicas Argentinas Koppers, S.A. (IPAKO) -- was completed, and the new plant is currently in an initial start-up phase. During construction last year another program, to further increase IPAKO's ethylene/polvethylene capacity, was started. As a part of the program to develop the plastics mar ket in Argentina, a new consumer products company, to produce large and unusual articles principally from materials furnished by IPAKO, was formed in Argen tina by our local subsidiary. In Brazil, record amounts of material were sold by our affiliates--Estireno and Plasticos--and this in turn made necessary the further expansion of facilities. Also in Brazil, our new construction subsidiary, Setal Koppers, experienced a substantial growth and excel lent progress in the first year of operation, despite unfavorable national conditions reported in the news. This subsidiary is presently working on important con tracts in the steel, petroleum, chemical and industrial fields. In the Philippines, under the new Administration which took office in January of 1962. a Presidential Committee was established which is now giving new direction and support to the integrated iron and steel project. Steps were taken to make the steel plant entire ly a private enterprise. Financing plans are well ad vanced. and a final report is presently being reviewed bv the Export-Import Bank. Meanwhile, engineering work has been proceeding under an interim contract. Proposals were brought to an advanced stage of nesotiation for integrated steel plants in Nigeria and Morocco, a sinter plant in Spain, and chemical plants in India. Blaw-Knox Associates--consisting of Blaw-Knox. Koppers International. Westinghouse Electric Inter national and the International Investment Companv-- was formed in 1962 and successfully carried out a feasibility study in Korea for an integrated iron and steel plant of 300,000 tons annual capacity. As a result of the study an agreement was signed by Blaw-Knox Associates with the Korean Government and the Korea Steel Company for the construction of this plant, when a suitable financing plan can be arranged. The three South American steel firms which Koppers assists through technical and management advisory contracts had generally successful years in 1962. The Colombian steel plant, Acerias Paz del Rio, S.A., set new production records during the year. In Chile the steel firm of Compania de Acero del Pacifico, S.A.. enjoyed a record volume of domestic sales, with earn ings at an all-time high. The new integrated steel plant in Venezuela, operated by Corporacion Venezolana de Guayana. began production in 1962. and all major units at this plant are expected to operate by mid-1963. ~ A management and technical assistance agreement was entered into with the Egyptian General Organiza tion for Metallurgical Industries. Its purpose is to bring the U.A.R. integrated steel plant at Helwan and smaller plants at Cairo and Alexandria up to designed operating capacity, and to assist in further expansion projects. This contract is expected to lead to consider able engineering and-construction work in various fields. Vice PrmitlfHt nml General Mannscr metal products division Business nib eood for the Metal Products Division in l62. Sales in creased for the fourth consecutive year. The total vol ume of $37.2 million tens greater than in any year since 1943. New orders were at the Inchest level since 1951. Prices were not increased on any product line, and negotiated contracts were taken under extremely com petitive conditions. All product lines were subjected to intensive re-engi neering programs which, together with research and development activities, made many new features avail able to our customers. Increased wage costs were offset by further cost reduction programs and by the installation of modern equipment. Overhead personnel were reduced in number hut continued to be upgraded in quality of performance. Two product lines ucre sold during the year. In ad dition to the Thomas Flexible Coupling Compnnv. covered earlier in this Report, the Aeroturn reverse jet dust filter business was sold to Buffalo Forge Com pany. because of the hicii cost of servicing a market with which the Division had little other contact. Product Achievements: Orders and sales of piston rings were the highest since the Korean War. Orders for seals were the highest in six years. Orders for Hooper eorrueated box machinery, and Swift corrugating machinery, were the highest in his tory. The Hooper-Swift Glu-Lok printer-slotter-foldergluer. installed at a plant of a major manufacturer of corrugated boxes in September of 1961. has proven to be eminently successful. A significant volume of new business has been received as a result of this success. lilies of fans were the hiuhe.-t in nine vi-ars. Orders have been received tor a uiant 23-foot diameter fan designed for use in modern cooiing towers. Blades arc of extruded aluminum with a ductile iron hub pro tected by the Company's BitumvsTh: eoatim:. Orders for precipitators were the highest in six years. Two highly successful installations of our SlLENTwall construction have recently received a great deal of attention in the architectural and educational fields. These sound-attenuating automatic folding walls are used to divide large indoor spaces, such as auditori ums. into several smaller soundproof areas. In applica tions such as school auditoriums, which are used onlv about 10 per cent of the school day. Sile.ntwall can increase room utilization to as much as 100 per cent Increating a number of classrooms which can be used simultaneously with no distracting noise. The outlook for 1963 remains promising. It is antici pated that the Metal Products Division will continue its improving performance. B- Ccmmimcs Picc President and General \fanascr plastics division The physical volume of Divi sion sales in 1962 was more than 12 per cent higher than in 1961. However, due to continued and persistent price erosion in many of the areas of our business, dollar sales increased only moderately. In Julv we completed an enlargement of our Dylite expandable polystyrene plant at Kohuta. This expan sion increases, bv about 60 per cent, our ahililv to produce this versatile, lightweight plastic. Demand is increasing for DyL'.ti: in applications such as packag ing. low-temperature insulation, flotation items, and as a construction material. Start-up of the new Dylite plant was accomplished smoothly and within the planned time schedule, even though a strike was then underway at the Kobuta plant. Our Kobuta plant was on strike for 191 days. Dur ing this period the plant was operated bv supervisory personnel, and all customer requirements were sup plied. As a result of the >lriKc. cnmpit-liou of liio expansion R. It. Ihu.Mt.s of styrene-butadiene latex facilities scheduled for 1962 has been delayed until the second quarter of 1963. This expansion will double our capacity to produce latices. used primarily for textiles, rug backings, paint, and paper coatings. At the Kobuta plant we developed a new high-im pact polystyrene specifically for the cleanser container market. This new product. Dylene 401, makes it pos sible to vacuum form containers with thinner walls than previous ly possible, and thus achieves material savings as well as lower shipping weight. Purex Corpo ration, Ltd. is now marketing Dutch Cleanser in a container thermoformed from the new Dylene -101. and has referred to this container as "The first major cleanser packaging development in 40 years." As a result of technological improvements at our Port Arthur. Texas, low-density polyethylene plant, we have upgraded the quality of our film-grade resin for packaging use, and increased plant capacity. The first full year's operation of the Sinclair-Koppers styrene monomer plant at Houston, Texas-- owned jointly by Koppers and Sinclair Oil Corpora tion--was completed in 1962. Production at this new plant was higher than we had expected it to be at this stage, and averaged nearly 90 per cent of designed capacity. Styrene monomer is a raw material for the synthetic rubber industry, and for production of poly styrene, expandable polystyrene, and latex products. I. H. Redmond Ul Executive Vice President and General Manager tap products division Sales of the Tar Prod ucts Division increased in 1962. Record sales volumes were realized on a number of product lines, including road materials, carbon pitch, chlorinated products, and antioxidants. High sales levels were also attained for creosote, and coal-tar pitch and tar impregnated felt for built-up roofs. In the industrial coatings field, however, the past vear was marked by slowness in the release of major pipeline projects by the Federal Power Commission. The Commission's December 1. 1962 backlog of 9,771 miles of pipelines, involving 70 major unreleased projects, was at or near an all-time high of nearly a billion dollars. Although the Division's 1962 sales volume was aratifvini. pronounced price weakness was evident in a number of important product lines. Excessive domes tic and world capacity brought about lower prices in products such as naphthalene, phthalic anhydride, and phenol. And the Division experienced mounting pres sures from competitive products such as asphalt roof ing and paving materials. We are meeting the challenge presented by this price erosion with a specific three-point program to further improve our efficiency and reduce costs: ill Reduction of inventory and operating capital rcauircments to the minimum effective level. In 1962 we reduced our working capital requirements signifi cantly through intensive inventory control measures and close attention to accounts receivable. 12) Streamlining and consolidation of our organi zation and procedures. We are consolidating three Houston, .Texas, facilities at one deep water location. We also sold our Kearny, New Jersey, facilities for the production of packaged moth prevention products, the only consumer-type product in our line and thus difficult to market on an efficient basis. Also, continued progress was made in applying electronic data process ing techniques to the handling of the essential informa tion needed for the conduct of our business. This progress has resulted in economies, particularly at field locations. (3) Modernization of our plant and transportation equipment to produce and deliver increased volumes of higher quality products at competitive prices. In line with this program, a number of capital im provements were undertaken in 1962. Tar acid production facilities at our major chemical plant (Follansbee. West Virginia) were improved and expanded. This expansion was substantially com pleted by the end of the year, and we are now prepared to supply increased volumes of more closely fraction ated. highest quaiitv coal-tar derivatives such as phe nols. xvlcnols. crcsols and crcsylic acids to the ever growing chemical and plastics industries. New facilities were completed at our Wyandotte. Michigan, chemical plant for the production of KoPOX resins used in epoxy molding powders and encap sulating compounds for the electrical industry. Other capital funds were used to improve the quality and physical form of our industrial coal-tar pitches, to modernize tar distillation equipment, provide better and more economical terminal facilities, and modify existing facilities for the production of industrial refined naphthalene at the Follansbee plant--to enable us to produce both crude and refined naphthalene competitive in quality and price with any now being marketed. A major new product -- Bitumagic cold-applied roofing--was introduced by the Division in 1962. Bitumagic is a coal-tar pitch impregnated glass mat to which is applied a specially compounded water proof pitch adhesive. The product (frequently de scribed as "band-aid" roofing) is easy to apply, ad heres to any clean surface, has factory controlled uni formity and is applied cold, thus eliminating fumes. It has been well received in limited marketing done to date and gives promise of opening new market areas rather than replacing existing business. Plans are also well advanced for expanding our line of cold-applied coatings to include, for the first time, colored coatings: as welt as improved chemically cured coatings based partially on materials produced at the Wyandotte plant. IVcr President and General Manazer wood preserving division in jui> we ac- quired Unit Structures. Inc. of Peshtigo. Wisconsin, a company engaged in the manufacture of wood lami nated structures. This is a part of the Division's longrange program to diversify through acquisition and expansion into fields showing a long-term growth trend. Unit Structures has been a leader in the wood laminating field over an extended period of years and has an outstanding organization. Unit operates plants at Peshtigo: Magnolia, Arkansas: and Morrisville. North Carolina. AH locations manufacture laminated structural arches, beams, roof decking, roof trusses, and specialty laminated products for use in commer cial and industrial buildings, schools and churches. Major efforts during the year were directed toward developing increased customer acceptance of our new Cellon process. Operations at our first commercial Cellon plant located at Oroville. California, bestan about the middle of the year. This plant has remained busy continuously and currently has a sizable backlog. Customer acceptance to date has been satisfactory and wc are sufficiently encouraged to plan additional Cel lon capacity for installation duriiiu 1963. These new installations will likelv he made in the southeastern part of the United States. Also, negotiations are cur rently underway with prospective licensees for the use of this process. It is expected that the Cellon process will result in both an improved method for treating products currently in use, and a means for substan tially broadening the market for treated forest prod ucts. Sales of Non-Com fire-protected wood in 1962 in creased substantially over the preceding year. NonCom sales were up in three categories: sales of NonCom chemical salts to our licensee treaters: sales of Non-Com wood from our own treating plants: and, most significantly, in the sale of our "Treatment Serv ice Only" to wholesalers, distributors, and dealers who supply their own wood for Non-Com treatment in our plants. An over-all SO per cent increase in the number of orders booked during the year testifies to the rapidly growing recognition of Non-Com lumber and ply wood as an ideal construction material--for schools, churches, public buildings, and commercial and indus trial structures. Lumber and plywood manufacturers, too. arc becoming more aware of the value of NonCoM treated wood. This wood helps lumber firms to Douclas Chymes. Jr. !I yiiiM 11 recapture lost markets, particularly for studs in tire resistive walls and partitions in high-rise apartment and oifice buildings, and roof decking for commercial and industrial buildings. The growing market for Non-Com treated wood will be iurther developed in 1963 by continuing pro motional and educational work with building code oiTicials. insurance underwriters, and architects and engineers. In line with our long-range plan for consolidates operations to fit the changing character of our mar kets. one additional plant was closed during the vear and its activities consolidated with those of other plants. Additionally, our plant at Houston. Texas, was moved to another location in the same area, one which will be substantially more suitable for our operations than was the former site. We also disposed of three parcels of real estate which had formerly been plant sites. Our sales of Woi.MAN salts continue to improve, and during the year two new licensees were added. We now have fiftv-one licensees using this product. While sales of our major products in the railroad field declined during the year, improvement is ex pected in 1963. Sales to public utilities and in the general construction field rhuwed substantial improve ment. and we expect these sales to remain at the cur rent level during the next year. Yice President and General Manager Carl H. Pottencer research department During 1962 a num ber of significant technological advances were made by scientists at the Company's Monroeville and Verona Research Centers. As augmented and put into practice by the engineers and scientists of the various Operat ing Divisions, these findings offer an opportunity for profitable product sales during 1963 and subsequent years. Patents: During 1962. 35 U. S. patents were granted to Koppers inventors. Seventy-two new applications were made in the United States, 31 in Canada, and 226 in other foreign countries. This patent activity covers inventions made by all units of the Company. Exploratory Research: The work on the Koppers Hy drate Process for removal of salt from sea water con tinued during the year with partial support from the Office of Saline Water, U. S. Department of the Inte rior. The construction of a 10.000 gallon-per-dav pilot plant is the subject of current negotiation with the Saline Water agency. Significant progress during 1962 in several problem areas has made such a move feasible. Work on other U. S. Government research problems continues. We are aggressively seeking to participate in those Government-sponsored contract research pro grams which will broaden our research capabilities, or which promise to open new fields of profitable activity for the Company. Chemicals and Dyestuffs Division: The leading position of Koppers as a supplier of ingredients for adhesives used to bond rubber to textile cords, in the manufac ture of rubber tires, was further strengthened during the year. Significant progress was made on improving our resorcinol resins to provide better adhesion be tween butyl rubbers and other new types of rubber stock, and the new polyester and high-tensile rayon cords. This type of research is aimed at insuring that, as quality demands become more stringent, our prod uct is continually improved to meet such requirements. The Division's line of Penacolite adhesives, used in wood laminations, was modified to lessen odor, and to make possible the lower-cnst lamination of some species of wood. Additional colors wore added during the year to the 12 Company's line of Amacron dyestuffs for polyester fibers. New vat dyes for cotton fabrics were made available during the year, and the Division's line of Alofast colors for the dyeing of anodized aluminum was further broadened. Plastics Division: Joint work with the Plastics Division has resulted in the commercialization of five new lowdensity polyethylene resins at the Division's plant at Port Arthur, Texas. These efforts have also eliminated a costly step in the manufacture of high-clarity film resins for packaging use. To improve the Division's process for making Super Dylan high-density polyethylene, a new catalyst sys tem has been introduced which permits the production of the stiffer and stronger resins needed by the bottle industry. Significant improvements in plant operation have been the result of joint study by Research Depart ment and Plastics Division personnel. Catalyst require ment per pound of product has been reduced, while product quality and plant output have been signifi cantly increased. During 1962 a new process for the manufacture of the foam plastic, Dylite expandable polystyrene, has been developed. This process will provide material more suited to the demands of our customers in this growing area of the Company's business. Improvement in specialty grades of expandable polystyrene such as self-extinguishing, solvent-resistant, and extrudable grades is the subject of current research programs. Several grades of our Dylex styrene-butadiene iatices were improved during the year. An improved high-solids latex for use in rugs and upholstery fabrics was commercialized in 1962. Conclusion of long-term weathering tests of other latex formulations, used in the production of paint, have indicated that these new Iatices will be available for commercial sale in 1963. These improved Iatices provide better adhesion and higher impact strength when used in primers for indus trial and automotive coatings; and better weathering characteristics when employed as outdoor paints. A new high-impact polystyrene of excellent strength and processability is being scaled up for commercial production. Results of laboratory and computer studies of the polymerization of our general purpose polystyrene. Dylene 8, have demonstrated an improved production cycle. Further laboratory and mathematical studies are directed to the study of factors causing variations of quality. It is expected that this work will permit us to better serve the demands of customers for this product, which has higher tensile strength and heat resistance than any competitive general purpose polystyrene. Tar Products Division: Novel and superior protective coating formulations, made with the Company's new Kopox epoxy resins, have been prepared for baked enamel finishes on appliances and other products. In the field of antioxidants, new types are being developed to meet the special stabilization require ments of the newer synthetic rubbers and polymers. Wood Preserving Division: An interesting example of the solution of a problem by analogy of chemical struc ture is provided by the development of a repellant Woodpeckers can cause severe pole damage. which protects utility poles against the attack of wood peckers. The depredations of these "feathered friends" are responsible for damage to poles amounting annual ly to millions of dollars. Through knowledge of the structure of certain chemical compounds, present in a few species of wood not subject to woodpeckers' attack, a repellant grease was developed and introduced com mercially in 1962. This grease has demonstrated excel'lent results when applied to poles in areas of severe incidence of damage by these birds, without harming the birds in any way. . Research continued during the year on treatments to eliminate the tendency of wood to swell or contract with changes in atmospheric humidity. Vice President unit Director oi Research ueepQRAiE niiraiiSM highubhts On these two pages selected product stories from Koppers 1962 Corporate Advertising Campaign are presented, in condensed form, to inform stock holders about some of the newer and more interesting applications of Koppers products. In most instances, a more complete story was told than in the versions reprinted here. These inquiry-pulling advertise ments were directed primarily to busi ness executives in 1962, through the pages of Business Week, Forbes, Fortune. Wall Street Journal and U.5. News & World Report. If you would like more information about any of the products described on these pages, a coupon is included for your convenience on Page 17. Most school auditoriums are used only about 10% of the school day. In Boul der City, Nevada, designers of the high school wanted to make better use of their new auditorium's facilities. They installed Silentwall, a new sound-retarding automatic folding wall made by Koppers. Silentwall is moved by small electric motors to divide a large space quickly and easily into smaller, quiet rooms for group or team teaching. Now Boulder City can use its auditorium nearly 100% of the time, thanks to this development. These 67 new homes in the San Diego area are designed for retired people-- and to make them more fire-safe, NonCom* fire-protected lumber was spec ified for all rafters, spacers and ex posed ceiling beams. Non-Com wood is pressure-impregnated with chemi cals that, if exposed to temperatures approaching the ignition point of wood, produce carbon and water vapor that choke off any flame and prevent fire spread. Kp|N'fs Trademark 3 26 roofs 26 years old and still going strong Back in 1936. the builders of the Eerthold S. Pollack Hospital. Jersey City, N. J., decided to protect their building investment with Koppers coal tar pitch built-up roofing. Even though the Kop pers roofs on the 26 separate levels of this hospital have outlived their 20year guarantee, they still remain water tight and maintenance free. Each roof is made of alternate layers of coal tar pitch and felt, topped with gravel. Unlike other roofing materials, coal tar pitch has a tight molecular structure which permanently resists water penetration. And coal tar pitch permanently retains its characteristic "cold flow." healing hairline cracks or alligatoring that result from sudden temperature changes. Roofing troubles thus stop before they start. Some Koppers built-up roofs are water-cooled, and have been constantly flooded for more than 20 years with out deterioration or leakage. Because coal tar pitch resists weath ering, wind and hail so well. Koppers 20-year bond has j ust been increased to 25 years--even on water-cooled roofs! 4DYLITE cuts packaging costs 20% at Motorola When packaging engineers at Motor ola changed to interior packing made of Dylite expandable polystyrene, they lowered their packaging costs 20%. This rigid foam plastic protects against shock and abrasion, and re duces shipping damage. Motorola no longer takes time fold ing, then hand packing bulky pieces of wadding to wedge the products in place. Easv-to-pack comer pads of DrLITE protect clock radios and portable television sets. Dylite travs and in serts brace transistor radios inside the set-up boxes. This Koppers foam plas tic is extremely lightweight and can be molded in almost any size or shape at low cost. 5 New plastic package for Dutch Cleanser The Purex Corporation. Ltd., makers of Dutch Cleanser, recently introduced what has been called "the first major cleanser packaging development in 40 years." Their new bright yellow, semi rigid package is thermoformed from sheets of pigmented high-impact Dy lene 401 polystyrene, a formulation developed by Koppers specifically for this package. Dylene was chosen for this unique container because Purex wanted a package that would not scratch sur faces. leave rust rings, or become sog gy in wet hands of the housewife. This Dylene package is a favorite among housewives because of its attractive appearance and obvious advantages over the metal-ended paperboard con tainers. Distributors like its compact design because the package occupies 6%% less shelf space and stacks by the use of a recessed nesting device. Adaptable to low-cost mass produc tion methods and almost unlimited design possibilities, Dylene poly styrene is ideal for packaging uses. 15 1962 ARCHITECTURAL ADVERTISING HIGHUGHTS On these two pages another of Koppers 1962 national advertising campaigns is illustrated in brief form. _ Because so many Koppers products are used in the building industry, a highly specialized advertising cam paign was initiated during 1962 to promote these products to leading architects and engineers. The six-page "Design Ideas" folder shown here was bound into regu! tr issues of Archi tectural Forum. Architectural Record and Encineerinc News- Record. In these folders, readers are pro vided detailed information--including job specifications and working draw ings--on new and interesting applica tions of Koppers building products. A few of the product stories (without the details or drawings) are presented here in condensed form. If you would like more information about the products featured in these stories, please check the inquiry cou pon on page IT. BWood fights fire at this new campus In this award-winning 36-building campus, more than 200,000 board feet of Non-Com* fire-protected lumber and plywood were installed. Foothill Junior College uses wood extensively --wood pressure-treated with Koppers chemicals that resist rot and termites, and provide automatic protection against fire. At temperatures below the ignition point of wood, the chemicals produce carbon and water vapor that choke off any flame and prevent the spread of fire. This protection is per manent--safe from any mechanical failure or human error. `^Coppers Trademark A' \: 7 The bank shown above sits in water--and it's waterproof A 26-foot-wide moat surrounds this Birmingham Federal Savings and Loan Association branch office in Vestavia Hills. Alabama. The 3.100-square-foot flat roof extends 13 feet out over the moat and supports an opaque sun screen that circles the glass and alumi num walls. The roof and the moat were both waterproofed with the same basic material--coal tar pitch. The roof is a five-ply Koppers builtup roof--constructed of alternate lay ers of coal tar pitch and felt, and topped with gravel. It has Koppers 25year guarantee of trouble-free service. Unlike other roofing materials, coal tar pitch has a molecular structure that permanently resists oxidation and the penetration of water and water vapor. Also coal tar pitch's unique property of "cold flow'' actually seals hairline cracks and stops trouble before it starts. Many. Koppers built-up roofs are more than 30 years old and still in excellent condition. Coal tar pitch also protects against water penetration at the base of the building wall facing the moat. 8 Now, a building can be cool and quiet Aircoustat'* sound traps were de signed into the Time-Life Building to .sound-condition the olfice areas--now air conditioning noise is silenced and the building is both cool and quiet. With these Aircoustat sound traps, architects and engineers can design sound conditioning into air condition ing systems: Koppers guarantees noise reduction and predictable pressure drop. Ideally suited for both small and large systems, these sound traps install in the ductwork where space require ments are critical. EXPONENTIAL OlFFUSEB 9Unit Structures laminated arches span 215 feet The gymnasium and the auditorium of the new Thomas Jefferson High School in Port Arthur, Texas, contain clear span diagonal arches 215 feet long and 41 feet high. Each of the 150-footsquare buildings also has 20 secondary' arches decreasing in span from 150 feet at the perimeter to 30 feet near the crown. All the arches and purlins are lami nated Southern Pine. The main diag onals and perimeter arches were glued with a waterproof adhesive that makes a bond as strong as the wood it joins and will never weaken with age or exposure to weather or strain. Before the architects completed their plans for laminated wood arch con struction, they investigated other basic structural systems to determine lowest cost . . . from comparative weights which would affect foundations, to the final finish requirements. This com parison showed that the glued lami nated arch construction was the most economical. All laminated members were fabricated by the Unit Structures Department of Koppers Wood Pre serving Division. To: Fred C. Foy, Chairman Koppers Company, Inc., Room 1435 Koppers Building Pittsburgh 19, Pa. Please send additional information about: SILENTWALL 1 sound-retarding folding waiia 2 NON-COM fire-protected wood 3 KOPPERS built-up roofing 4 DYUTE expandable polystyrene 5 DYLENE polystyrene 6 NON-COM fire-protected wood 7 KOPPERS built-up roofing 8 AIRCOUSTAT sound traps 8 UNIT STRUCTURES Laminated Wood r-o Name Address City Zone State It would also be helpful to have the following information, if applicable: Name of Company Job Title Walter P. Arnold Executive Vice President Koppers Company, Inc. Joseph Becker Former Vice President Koppers Company, Inc. Stanley N. Brown Former Vice President Koppers Company, Inc. Fletcher L Bykom President Koppers Company, Inc. Fred C. Foy Chairman of the Board Koppers Company, Inc. Arthur W. Knight Director Courtaulds, Ltd. (London) Rookrt H. McClintic Chairman of the Board Cordon Lubricating Company Richaro K. Mellon Chairman of the Board Mellon National Bank & Trust Company W. F. Munnikhuysen Former Chairman of the Board Koppers Company, Inc. Lv wrench N. Mltikw Fortner President Mellon National Bank Oi Ti ti*i (amtpunv UottKUT S. OeLMAN (.hntrmnn and President \.tioiaU.a*h Resistor Company Arthur B. VanBuskirk f'f'cc President and Cot cniar T. Mellon & Sons J. Albert Woods Chairman oi the Board CourtauM* North America l; OFHGEHS Of SCOPPE11S COMPANY, W Fred C. Foy. Chairman oj the Board Fletcher L. Byrom. President Walter P. Arnold. Executive Pice President Robert R. Holmes. Executive Vice President Georce M. Walker. Executive Vice President company vice presidents Chester E. Brown. Assistant General Manager, Plastics Division Harry B. Cummings. General Manager, Metal Products Division Fred Denic, International Division H. A. Denny, General Manager, Engineering and Construction Division David L. Eynon, Jr., Corporate Growth Planning Group Douclas Grymes, Jr.. General Manager, Wood Preserving Division T. C. Keelinc. Jr.. General Manager, Chemicals and Dyestuffs Division Georce W. Naylor. General Manager, International Division John H. Redmond. General Manager, Tar Products Division John E. Spears, Comptroller divisional and departmental vice presidents W. A. Anderson Engineering and Construction Div. Paul W. Bachman Corporate Growth Planning Group John M. Crimmins, General Counsel Law Department Robert T. Eakin Engineering and Construction Div. J. A. Hacan Engineering and Construction Div. J. F. Haley, Manager Traffic and Transportation Dept. Max C. Hanisch Wood Preserving Division J. A. Hartzell Engineering and Construction Div. J. D. Jones. Manager Industrial Relations Department Nicholas Kay Metal Products Division Donald MacArthur Washington Office J. C. Macon, Jr. Tar Products Division P. V. Martin Engineering and Construction Div. Paul C. McConnauchey Tar Products Division E. J. McGehee Wood Preserving Division J. M. Orris Engineering and Construction Div. J. W. Pool. Jr. Plastics Division Carl H. Pottencer. Director of Research J. D. Rice. Manager Procurement Department Fred W. Rys Engineering and Construction Div. J. L. Tunstead. Manager Marketing Department Frank B. Varca International Division James M. Veeder, Manager Finance Department R. G. Wilson Engineering and Construction Div. other officers John M. Crimmins. Secretary William P. R kinks. Manager Public and Community Relations Dept. E. B. Shuck, Treasurer FINANCIAL STATEMENTS HOPPERS COMPANY, INC. ; report of certified public accountants | The Board of Directors and Stockholders Koppers Company, Inc. We have examined the accompanying consolidated balance sheet of Koppers Company, Inc. and consolidated subsidiaries at December 31. > 1962 and the related consolidated statement of income and earnings retained in the business 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, the statements mentioned above present fairly the consolidated financial position of Koppers Company, Inc. and consoli' dated subsidiaries at December 31. 1962 and the consolidated results j 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. . Arthur Younc St Company Pittsburgh. Pennsylvania Januarv 22. 1963 MJJM m w ;il transfer agents Mellon National Bank and Trust Company, Mellon Square. Pittsburgh 30, Pa. Bankers Trust Company. 16 Wall Street. New York 15. N. Y. Harris Trust and Savings Bank, 111 W. Monroe Street. Chicago 90. III. Stock registrars Pittsburgh National Bank. P. o: Box 746. Pittsburgh 30. Pa. Morsan Guarantv Trust Company of New York. 140 Broadway. New York 15. N. Y. Continentar Illinois National Bank and Trust Company of Chicago. 231 South LaSalle Street. Chicago 90. 111. dividend disbursing agent Mellon National Bank and Trust Company. Mellon Souare. Pittsburgh 30. Pa. gonsoudaihi iuesssmsisEg consolidated statement of income and earnings retained In the business 1961 Years ended December 31, 1962 and 1961 (See accompanying notes) Net sales.................................................................................. Operating expenses (Note 2): Cost of sales.................................................................... Depreciation and depletion ..................................... Taxes, other than income taxes ............................. Selling, research, general and administrative expenses Operating proiit..................... ..................... Other income: Dividends (Note 1), interest and miscellaneous .... Profit on sales of capital assets: Operating plants................................................. Other, principally timber properties ................. Adjustments (Note 5) . ....................................... Property damage due to hurricane ................. Interest expense........................................................................ Income before provision for income taxes ..................... Provision for income taxes: Federal (Note 6) . .. ................................... State and foreign ............................... Net income for the year ........................... Earnings retained in the business at beginning of period .. . Cash dividends paid: On preferred stock, S4.00 per share On common stock, S2.00 per share ............ Earnings retained in the business at end of period I Note 4) -.I,! V ` 4,547,643'^ 'V-.>:yl5;062,027^ ;-:t;->1^38~98f;^j ;^j|13323,p#% m :*ii __________m . '":!;- S,997,61 i 8 ............. .^69,271,0301^ V- 77,096^56^: 600,000/;$ 4.543.409 v;-i 5.143.409 V|! 3 71.953.047 S273.442.712 207,258,662 12355,236 5,434.498 35.144.461 260,192.857 13.249.855 556,800 1,151,927 (705,841) ,1 002,886 14,252,741 1,300,275 12,952,466 5,490,000 741,327 6.231.327 6,721,139 67,744,622 74.465,761 600.000 4.594.731 5.194.731 3 69.271.030 21 consolidated balance sheet assets December 31,1962 and 1961 (See accompanying notes) Current assets: Cash....................................................................................................... Accounts receivable less allowance of $446,639 for doubtful accounts.......... wftw;32,136878^ Inventories (Note 3): Product inventories including work in process . . . Raw materials and supplies........................................................................ Prepaid insuranc.cee,, etc........................................................................................... Total current assets .............................................................................. :-..vHli338,120^ 1961 S 9,164.963 49,372.565 39,603.410 11,031,215 1.945.392T 111,117.545 Investments and other assets: Investments in and advances to non-consolidated subsidiaries and 50% owned companies, at cost (Note 1) ......................................................'*13;155^299.^ Other investments, at cost less allowance of $725,000 for decline in value .2,446,744 [-i>: Notes and accounts receivable due after one year ............... ..................... ' :i6,757,848;*H;.;| *;.-r -t * v.22^5g;89lHy Fixed assets, at cost: ' ` ' Buildings and equipment............................................................................................ 214,716i^40.'fo Less accumulated depreciation.................................................................... ... - (135^26300^^ " yni.c-t ` - 79,190034 ;;5; Standing timber and timberlands, less accumulated depletion.......................... ; v,2j299,608,');; Land ................................................................................................................................. 6^3^459^ Intangible assets, less amortization ..........................................................................::!J',!;'f423lP97,f(5!5 m Deferred charges . 13,148,739 2.996.600 5.984.955 22,1302294 209,870,872 127,495.331 82,375,541 3,338,96 6,690,07 671,86 93,076,44 508.10 $222,363,897' $226.332.3.' consolidated balance sheet ) s I I 1 r i 9 ) 3 2 II 0 .i '6 -8 ; :s i o 4 liabilities December 31,1962 and 1961 (See accompanying notes) Current liabilities: Federal income tax ........................................... Other accrued taxes........................................... Accounts payable and accruals other than taxes Advance payments received on contracts........ Term debt due within one year........................ Total current liabilities.............................. Term debt due after one year: First Mortgage Bonds, 3% Series, due October 1,1964-- semi-annual sinking fund requirements of $182,500 on September 27, - 1963 and $488,750 on March 29,1964 ............................................... Notes payable to banks due October 1, 1964 (Note 4)........................... Purchase contract liability, $351,773 due annually, interest at 3% Deferred compensation..................................................................... Deferred income taxes, principally on foreign earnings (Note 1) Total liabilities 29,664-,520,7^ -- ; ;y.i.'vxjn, vlr; .;.-740^89;^ ^rri;1,906^1^(1 ;,fo ';6516ffl5iai stockholders'equity Cumulative Preferred Stock, $100 par value: Authorized 300,000 shares; issued 150,000 shares. 4% Series Common Stock, $10 par value (Note 7): Authorized 3,000,000 shares; issued 2,317,594 shares.......... Capital in excess of par value............................................. Earnings retained in the business (Note 4) Less Common Stock held in treasury, at cost (69,762 shares at December 31, 1962) ., Common stockholders' equity ............................. Total preferred and common stockholders' equity :f-^,'2,819;8?3'@ .;t;i42,046;93^ ''T57,046;936':%-j $222363,897 ky 23 ism $ 4,449,915 2,491,787 23,524,469 6,117,750 759,106 37,343.027 12,880,000 17,000,000 1,150,647 31,030,647 657,910 1,525,890 70,557,474 15,000,000 23,175,940 49,771,399 69,271,030 142,218,369 943,459 141.274.910 156.274.910 $226,832,384 notes to consolidated financial statements note 1. Principles of consolidation and investments in affiliates The consolidated statements include the accounts of the Company and all of its wholly-owned subsidiaries. Provi sion has been made for estimated income taxes payable upon eventual transfer of earnings of consolidated foreign subsidiaries to the parent company. Based upon the latest available financial statements, in some instances as yet unaudited, the Companies' equity in the net assets of non-consolidated subsidiaries and fiftypercent owned companies at December 31, 1962, exceeds the carrying value of the Companies' investment therein by $95,000. The Companies' equity in the net income of these companies for 1962 after significant deductions for foreign exchange losses amounted to $65,000. During the year dividends of $602,054 were received and taken into consolidated income. note 2. Pension plans The Companies' contributions under their several trusteed pension plans amounted to $3,000,000 in 1962. The un funded past service cost at December 31, 1962 was esti mated at $13,100,000. note 3. Inventories Inventories aggregating $4,538,186 are stated at cost on a last-in, first-out basis which is less than current replace ment cost. All other inventories are stated at the lower of average cost or market. note 4. Notes payable to banks, In its Bank Credit Agreement the Company has agreed not to pay cash dividends on common stock except from consolidated income after December 31, 1958, plus $7,500,000 and to maintain consolidated net current assets of at least $50,000,000. At December 31, 1962 $57,982,017 of consolidated earnings retained in the busi ness was not available for cash dividends on common stock under these provisions. Interest on the notes is 14 of 1% above the "prime rate" in effect at the begin ning of each fiscal quarter and at December 31, 1962 was 4?4%. note 5. Adjustments At January 1, 1962 the Federal tax basis of the Com pany's depreciable assets exceeded their book basis by $4,115,000. This was principally due to taking more depreciation for book purposes than for tax purposes in prior years. During 1962 the Company realized the income tax benefit ($2,139,800) of this excess by adopting "guide line depreciation" for Federal tax purposes. Also during 1962, the Company made a special provision of $1,450,000 for obsolescence of buildings and equipment, and a pro vision of $725,000 for decline in value of investments.These three items are shown in the accompanying income statement as a net charge to income of $35,200. note 6. Investment credit The Company's investment credit under the 1962 Internal Revenue Act amounted to $514,000. Of the credit, 48%, which was immaterial in relation to net income, was re flected in income as a reduction of Federal income tax expense and the balance was credited to deferred income taxes. note 7. Stock option plan During 1962, under the Company's restricted stock option plan for officers and key employees, options to purchase 2,000 shares were granted at a price of $34 per share, options on 2JS00 shares were terminated and 3,080 shares were issued from treasury stock on exercise of options at prices ranging from $32.50 to $36.50 per share. At Decem ber 31, 1962, options covering 128,400 shares were out standing and are exercisable over a period of seven years from dates of grants at prices ranging from $32.50 to $63.50. At December 31, 1962, options on 18,520 shares were available for future grants under the plan. The $33,557 excess of cost of treasury stock over the proceeds received upon exercise of options during the year was charged to capital in excess of par value. note 8. Commitmtnti and contingencies The 1963 rentals on properties operated by the Com panies under long-term leases will amount to approxi mately $1,850,000. In addition, the Companies are re quired to pay taxes, insurance, repairs and maintenance and alterations under certain of tlte leases. live year financial highlights (All figures in thousands, except per-share information and number of stockholders.) Revenue from sales and other income. . Income before income taxes................ Income taxes......................................... Net income ........................................... Earnings per share of common stock outstanding at year end.................... Dividends declared and paid, per share of common stock............................... Total of all taxes................................... Taxes per share of common stock .... Number of shares of common stock outstanding at year end.................... Number of stockholders at year end . .. Earnings retained in the business........ Gross addition to fixed assets and investments ....................................... Net book value of land, buildings, equipment and timberlands............ Term debt due after one year.............. Wages, salaries and pension expense.. Materials, supplies and services.......... Working capital at year end................. Book value per share of common stock ^ fold out for financial statements at year end ....................................... 1961 1960 1959* 1958* 274,446 303,728 S242.930 $261,621 12,952 14,754 $11,958 $12,491 6,231 $7,280 $6,126 5,634 6,721 $7,474 $5,832 S6,8S7 2.67 $3.06 $2.28 $2.73 2.00 $1.90 $1.60 11,666 S12.857 $10,514 5.08 $5.72 $4.58 $2.05 9,871 4.30 2,296 16,394 1,526 2,247 16,943 S2,529 2,294 16,901 $1,562 2,293 16,571 $1,556 21,268 19,498 $11,504 9,165 92,405 93,654 $89,157 91,287 31,031 23,497 $20,924 27,430 83,301 85,796 $70,949 78,778 159,102 $184,509 $142,479 153,583 73,775 73,200 $78,159 80,275 61.52 $61.38 $59.79 $59.12 1959 and 1958 figures restated to include accounts of two wholly-owned foreign subsidiaries. 25 KOPPEHS COMPANY- INC. ANNUAL REPORT 1962