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Saint Joseph Lead Company Annual Report -- 1947 America's Corporate Foundation; 1947; ProQuest Historical Annual Reports Pg- 0_1 For the Year 19 4 7 H Af, v'ARD UNIV, C,s. or B. A. B'KEiUBRARY COriPCRATION RECORDS DIVISION 84th Annual Report to Stockholders St. Joseph Lead Co. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. PROXIES FOR ANNUAL MEETING This Report is sent to Stockholders of the Company in advance of the solicitation by the Management of proxies for the Annual Meeting of Stockholders to be held on May 10, 1048. Proxies will be solicited commencing on April 2, 1948. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPANY Incorporated March 25, 1864, under the Laws of the State of New York BOARD OF TRUSTEES Clinton H. Crane Daniel K. Gatlin Irwin H. Cornell Andrew Fletcher James H. Grover Hendon Chubb Fxrmin V. Desloge C. Merrill Chapin, Jr. J. Howard Holmes Frederic E. Camp Arthur M. Anderson George I. Brigden H. DeWitt Smith Chairman 1911 President, Catlin Co., St Louis, Missouri 1912 Vice President and Sales Manager 1913 President . 1921 Chairman, St Louis Union Trust Company 1927 Chubb & Son, New York, N. Y. 1928 President, Smokey Oil Co., St Louis, Mo. 1928 Vice President 1933 St. Louis, Missouri 1936 Trustee, Stevens Institute of Technology 1937 Vice President, J. P. Morgan & Co. Incorporated 1944 Vice President and Treasurer 1945 Vice President, Newmont Mining Corporation 1948 EXECUTIVE OFFICERS Executive Offices, 250 Park Avenue, New York 17, N. Y. Clinton H. Crane Andrew Fletcher Felix Edgar Wormser Irwin H. Cornell C. Merrill Chapin, Jr. E. V. Peters Francis Cameron George I. Brigden Robert Bennett Charles Fleig James G. Colvin Chairman President Assistant to the President Vice President and Sales Manager Vice President Vice President Vice President Vice President and Treasurer Secretary Asst Treasurer and Asst Secretary Asst. Treasurer and Asst Secretary DIVISION MANAGERS MINES B. Franklin Murphy Southeast Missouri Rene J. Mechin Edwards-Balmat Ross Blake Kansas Explorations, Inc. SMELTEftS ? George F. Weaton Josephtown, Pennsylvania William T. Isbell Herculaneum, Missouri SOUTH AMERICA Russell T. Cornell TRANSFER OFFICE 250 Park Avenue New York 17, N. Y. REGISTRAR City Bank Farmers Trust Company New York 5, N. Y. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 84th Annual Report For the Year 1947 To the Stockholders of St, Joseph Lead Company The comparative earnings given below under Financial Information, show that your Company's net earnings for 1947 of over twelve million dollars, after Federal income taxes and all charges, but before payment of dividends to the Stockholders, are the highest in the Company's history. However, due to world wide increased prices, neither the Company, its employees, nor its Stockholders can purchase with present-day dollars what could be secured with pre-war dollars. These earnings of twelve millions are, in reality, no greater than the seven millions, which were approximately the Company's average annual earn ings for 1924 through 1929, which period was before the Company had pur chased the Desloge and National Lead mines in Southeast Missouri, or had invested an additional twenty-eight millions in the zinc industry, consisting principally of the purchase of New Jersey Zinc Company's stock and large expenditures at Josephtown, Pa. The reduced purchasing power of the dollar is apparent, when it is realized that the ultimate cost of increasing the Josephtown Zinc Smelter will be in the neighborhood of six and a half millions in comparison with an estimated 1946 cost of four and a half millions. The 1947 cost of opening the old Doe Run and the Hickory Nut properties in Southeast Missouri will be over one million in comparison with a 1946 estimate of about half a million. The Company must therefore maintain sizable cash reserves to replace buildings and machinery, for present high cost development work, and for equipping new properties to maintain ore reserves. The price of lead in 1947 reached an all-time high of 15 cents per pound New York on March 3, 1947, and remained at this figure during the rest of the year. Although it was believed that the high price would result in a lower ultimate demand due to substitution of other competitive commodities, as well as increased world-wide production, the constantly higher costs of other com modities, coupled with greatly increased mine and transportation costs, has resulted in a continued strong lead demand. At the present writing, it would appear that the available lead supply in 19^8 will approximate one million tons, 425.000 tons from newly-mined domestic ore, 400,000 tons from scrap, and 175.000 tons of imported lead or lead in concentrates, which will not be any greater than in 1947. The available supply for the consumer in 1948 may be less, as in 1947 stocks of unsold lead and lead in process in the hands of primary producers were reduced from 189,741 to 129,000 tons, which is probably the minimum stock that is practical under present conditions. The supply, of course, will also be less if the domestic price is not at a sufficiently high level to attract to our markets 175,000 tons of foreign production, and to encourage scrap dealers to turn their lead into the secondary lead market. In so far as zinc is concerned, the picture is more favorable for the con sumers, as it is believed that in 1948, even without a Government subsidy, the production from the domestic mines will approximate the 1947 output of 627,000 tons. The price increase in January 1948 to 12.00 cents per pound for Prime Western metal in St. Louis, in comparison with the 10.50 cent price in 1947, 2 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. should result in at least maintaining the 1947 imports of 72,000 tons of metal and 300,000 tons of zinc content in concentrates. The 1947 exports of zinc from the United States were 117,000 tons, and a considerable tonnage was also sold to the U. S. Government for defense stockpiling purposes. Although two high operating cost zinc smelters were permanently shut down in 1947, the increased facilities at Josephtown, coupled with improved output from other domestic smelters, should result in a 1948 smelter output, approximating the 1947 tonnage of 848,027. As Stockholders often ask for information on ore reserves, especially be cause of the negligible dollar value at which the Company's metal resources are carried on the Balance Sheet, a comment as to the difference between "ore reserve" and "mineral resource" may be helpful. An ore reserve is mineral of which there is tangible knowledge, through underground development, drilling or geological deduction, and to which can be attached a definite economic value. In other words, it is but the known portion of the resources in any given metal. The occurrence of an orebody, and this is particularly true of most lead and zinc deposits, makes it impossible to forecast their extending much beyond the limits of the development work which has been accomplished, and economic considerations dictate the amount of such work. By far the most important consideration is the cost-price ratio, for it is obvious that a mine has no ore reserve if its costs of production exceed the price received for the metals pro duced. Every change in metal price or production cost changes the ore reserve estimate of a mine, as what may be ore today may, or may not be, ore tomorrow. The underlying reason for the so-called "have-not" theory which is now so often applied to the United States, is because during the depression years of the '30s, most companies curtailed their exploration and development work, and during the war operated their mines, as did your Company in Southeast Missouri, be yond their economic limits, with curtailed development Therefore, the known "ore reserve" picture is an unfavorable one, but this does not mean that there do not exist unknown tonnages of "ore resources," which will probably be found and made available, especially with the stimulus of strong demand and resultant high metal prices. In 1913, it was estimated that the Lead Belt of Missouri had a 20-year life; after 34 years, your Management still views, with confidence, the outlook for production from this district. Moreover, the probable post-war higher prices, and the expected higher output per man with the improved equip ment now being installed, will permit of mining lower grade ore, which could not be considered as an "ore reserve" on the cost-price ratio existing in 1913. Although the termination of the Premium Price Plan resulted in closing down two mines of your subsidiary Company, Kansas Explorations, Inc., your Management has continued to express its feeling against any proposal for the reinstating of any kind of Government subsidy plan. We believe that the ul timate result of any subsidy will be decreased efficiency and a lower output of lead and zinc, and we foresee again under any such procedure, lead allocation, price regulation, and general inefficiency. The American way of life, American ingenuity, and the high standard of living in the United States, we are confident, are the result of competition between our peoples under free market conditions, regulated by the law of supply and demand. 3 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. FINANCIAL INFORMATION The Consolidated Net Income for the year 1947 was $12,537,760.84 after deducting Federal and State income taxes in the amount of $4,479,658.67, which compares with a net for the previous year of $5,807,131.34 and taxes of $1,923,372.78. The Comparative Consolidated Earnings, which do not include the sepa rately shown earnings of Campania Minera Aguilar, S. A., except to the extent of the dividend received in 1947 amounting to $294,339.62 for the ten-year period ended December 31,1947 are listed below: Year Income after Interest but before Other Deductions Provision for Federal i Depreciation Income Taxes Net Income before Depletion Provision* for Depletion 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 $2,873,815.43 7,586,972.10 8,287,597.10 9,070,705.65 12,633,212.55 7,940,997.33 9,020,627.47 8,218,851.51 8,476,388.12 17,949,922.42 $1,059,034.49 1,058,924.04 1,064,639.12 994,436.94 939,993.43 1,269,271.24 1,150,143.72 1,871,209.83 451,421.27 753,860.91 $ 173,922.80 672,485.97 1,305,670.04 2,740,699.45 5,499,604.80 1,643,240.12 2,221,526.42 1,127,522.52 1,880,824.75 4,389,343.50 $1,640,858.14 5,855,562.09 5,917,287.94 5,335,569.26 6,193,614.32 5,028,485.97 5,648,957.33 5,220,119.16 6,144,142.10 12,806,718.01 $309,601.68 562,654.53 805,346.24 442,114.08 537,988.71 994,512.07 495,601.93 390,304.45 337,010.76 268,957.17 * Includes the abandonment of Block "P" property in 1943. f Includes amortization of war facilities, $257,576.14 in 1943; $392,938.00 in 1944 and $1,225,915.61 in 1945. The Consolidated Balance Sheets as of December 31, 1947 and December 31, 1946 for St Joseph Lead Company and Domestic Subsidiaries, and the Summaries of Consolidated Net Income and Earned Surplus for the years ended on those dates are submitted as part of this report All subsidiaries of the St Joseph Lead Company are included in these statements, with the exception of Compania Minera Aguilar, S. A., an Argentine corporation, which statements are shown separately. Comparative capital expenditures by St Joseph Lead Company and con solidated subsidiaries for improvements and additions to plant and equipment amounted to: Southeast Missouri Edwards and Balmat Josephtown Kansas Explorations, Inc. 1947 $ 805,661.59 299,609.61 5,516,359.49 1946 $ 66,194.58 54,374.67 699,644.52 1945 $ 10,413.80 197,357.76 3,096.20 Total $6,621,630.69 $820,213.77 $210,867.76 No final determination has been obtained in the "Portal-to-Fortal" cases wnica were......... ...... mear* <9 .1 in 4j.Av*iltio? ana_____* rou___u1e___a_1 q^>4AH/,4/tf0lAu,AuAuAu xui cue^ ouuuieasi avaissuwa* Division, $1,350,000 for Edwards and Balmat, and $2,304,000 for Kansas Ex plorations. However, as the Stockholders have been previously advised, it is believed that the Company's financial liability in' these cases is negligible, with the exception of the necessary legal and auditing expense. In the audit of the books by Messrs, Haskins & Sells, verification of inven tories was again made by physical tests of the quantities shown by the records as being on hand. ' -4 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. OPERATING INFORMATION head Southeast Missouri In order to permit effective handling of lower grade ore, and to offset the lack of adequate development work during the war years, changes were made during 1947, which should result in improved operating efficiency, and which with the large expenditures being made for new and additional equipment, coupled with greatly increased development work, should help to assure con tinued Lead Belt operation in future years. The Desloge mill is now operating solely on tailings, and the underground Desloge employees have been largely placed on development work. Under the prevailing 15-cent per pound lead price, tailings resulting from operations in the early years of the District can be profitably handled. The lead thereby produced, and the profit obtained, will offset to a great extent the lower production and higher costs caused by the necessary increase in development work. The Desloge ore will be milled either at Federal or Leadwood after the underground main line haulage has been rearranged and new locomotives and larger cars have been procured The whole sale and retail stores, and dairy business are being sold, so that all activities can be confined to mining, milling, smelting, and related operations,* this change will result in no hardship to the Lead Belt community, as adequate competition now exists among the merchants, nor will it result in any substantial loss of earnings. Since March 5, 1947, a so-called "lead bonus" has been paid to all Southeast Missouri employees of 25 cents per shift worked for each one cent increase in the lead price above 12 cents per pound New York. A renewal of the contract with the local Union was signed in July, in which the best interests of both parties have been furthered. The improved employee-company-com munity relationship is gratifying. The shortage of electric power in the St Louis area permitted of only two runs on the Herculaneum zinc furnace, and although mechanical difficulties are still being encountered, it is believed that the process is a forward step in the art of recovering lead and zinc from smelter slag. It is also quite possible that this process may have applications to other fields. At Herculaneum, 61,548 tons of lead were smelted in 1947, with a satisfactory lead recovery, and with reasonable costs under the prevailing difficult conditions; the balance of your Company's lead concentrates was smelted under a toll contract with American Smelting and Refining Company. Ten-Year Comparative Lead Sales and Stocks in Tons Year Lead Sales St Joe Production Purchased Lead Sold. Total Lead Sales :5*Pig Lead Equivalent of Stocks 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 97,865 172,481 178,111 155,475 178,561 157,659 155,806 139,934 131,664 108,440 50,782 39,347 60,199 60,241 67,152 45,242 46,799 48,483 33,872 53,438 , 148,647 211,828 238,310 215,716 245,713 202,901 202,605 188,417 165,536 161,878 79,775 46,173 30,737 20,767 15,896 23,716 16,683 25,824 10,048 11,546 * Includes purchased lead and estimated recoverable lead in concentrates together with other lead stocks in process of refining at smelters. 5' Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. OPERATING INFORMATION Zinc Baimat and Edwards A slight improvement in the available manpower during the year, coupled with increased efficiency, resulted in a production of 60,999 tons of zinc con centrates in comparison with 59,039 tons for 1946 and 45,741 tons for 1945. The alterations to the crushing plant were completed in December, and the year's progress in development work and shaft sinking has been very satisfac tory. Labor relations at this Division are excellent. Josephtown The completion of the increased smelting capacity, whereby 500 tons of concentrates can be smelted instead of 300 per day, has been retarded by delays in the receipt of the new equipment and shortages of erection labor; however, full production should be possible during the second half of 1948. Comment has already been made in this report as to the increase in the cost from the estimated $4,500,000 to probably $6,500,000. The slab zinc equivalent of smelter production, including production from purchased concentrate and dross, amounted to 60,982 in 1947, in comparison with 50,874 tons in 1946 and 53,073 tons in 1945. The Josephtown wage and salary incentive plan resulted in greater operating efficiency, and in 7.78 c/o increased earnings for the employees. The attitude of the employees towards the Management is most satisfactory, and it is believed that your Company has at Josephtown one of the most efficient zinc smelting units in the United States. The procedure of charging out first the highest cost concentrates, was con tinued in determining the 1947 cost of producing zinc metal and zinc oxide, with the result that the inventory value of the 41,937 tons of zinc concentrates is approximately $28.10 per ton. It will probably be necessary to increase the inventory to aproximately 50,000 tons, or about three months' supply, as the monthly smelting rate will approximate 15,000 tons. This appropriate and conservative method of cost accounting will be continued. The market value of concentrates delivered to Josephtown on the basis of a 10.50 cents per pound zinc price for Prime Western metal at St. Louis, is in the neighborhood of $67.25 per ton of concentrates. In addition to the Company-owned concen trates, there is stored at Josephtown 23,926 tons of concentrates owned by the Metals Reserve Corporation, an agency of the U. S, Government Joplin Area Following the suspension of the Premium Price Plan under which the U, S. Government had paid large subsidies for the lead and zinc production from this marginal mine area, the Jasper Mine of the Kansas Explorations, Inc., a 100%-owned subsidiary, was immediately shut down. Although the Ritz Mine continued to operate, this property was also shut down in October 1947, as the prevailing market price for zinc concentrates did not permit of profitable opera tions. The Buckingham Mine and the Snapp Mill still continue to show a small profit, but unless something unforeseen Occurs, all production from this sub sidiary will cease in 1948. 6 Reproduced with permission of the copyright owner. < Further reproduction prohibited without permission. EXPLORATION A policy of drilling and exploration in areas contiguous to our Southeast Missouri and the Edwards-Balmat properties was energetically pursued. Your Company also continued during 1947 diamond drilling in Washington County, Missouri, and in certain areas in Wisconsin, but with rather negative results. The following comments are made in connection with the work being done outside of the United States: French Morocco Together with the Newmont Mining Corporation, we exercised our option to purchase additional shares of Societe des Mines de Zellidja, which brings your Company's investment to a total cost of $289,334. The Societe Nord Africaine du Plomb, which is owned 51% by Zellidja, 32% by Newmont, and 17% by St Joseph Lead Company, has acquired an option on additional pros pective ground from Zellidja, which may increase the attractiveness of the entire Moroccan venture for the American interests* Drilling in the Sidi Amar area by Nord Africaine has been continued and has resulted in outlining an area of low grade lead mineralization. Canada The 1947 surface prospecting and drilling of the original claims held by the Mistassini Lead Corporation in the Province of Quebec, which company is controlled jointly by Dome Mines Limited and your Company, failed to dis close mineralization warranting further development at this time. Work on these claims has accordingly been discontinued. An option has been secured by the Mistassini Lead Corporation on a group of claims in the Bachelor Lake area of Quebec, and these claims will be investigated during the summer of 1948 with funds which remain in the Mistassini Company's treasury. Australia In 1947, your Company acquired a 10% interest with the Zinc Corporation of Australia and Newmont Mining in a syndicate which has been active in investigating base metal prospects in Australia. DIVIDENDS Quarterly dividends of seventy-five cents per share were paid on the tenth day of March, June, September and December, 1947, making a total of three dollars per share for the year. These dividend distributions aggregating $5,926,368.00, were paid entirely out of the surplus earnings of the Company accumulated after February 28, 1913 and are, therefore, subject to Federal income taxes. The following is a record of dividends for the years 1938 through 1947: Year 1938 1939 1940 1941 1942 Amount $1,955,680.00 3,911,360.00 4,400,280.00 3,911,360.00 3,911,360,00 Per Share $1.00 2.00 2.25 2.00 2.00 7 Year 1943 1944 1945 1946 1947 Amount $3,911,360.00 3,950,912.00 3,950,912.00 3,950,912.00 5,926,368.00 Per Share $2.00 2.00 2.00 2.00 3.00 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. COMPANIA MINERA AGUILAR, S. A. The net income for the year 1947 after depreciation but before depletion and Argentine taxes, was $2,387,624.30, in comparison with $1,071,203.34 for 1946. The net income after all charges was $988,973.31, in comparison with $29,099.53 for the previous year. The larger earnings are primarily due to the January 1, 1947 increase in the maximum allowable Argentine sales price for lead to approximately 11.3 cents per pound from the 6.3 cents per pound basis which prevailed during 1946. The Comparative Earnings for the ten-year period ended December 31, 1947 are as follows: Year Income After Interest but before Other Deductions -----------Provi sion for---------- fArgentine Depreciation Income Taxes Net Income before Depletion, Etc. -----------Provision for Depletion------ On Cost On Appreciation 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 $ 807,923.50 930,981.17 867,790.12 938,733.60 809,173.70 1,615,227.31 1,189,937.85 1,119,110.98 1,180,941.42 2,612,856.92 $149,105.03 175,793.81 193,667.52 207,305.29 216,780.14 208,628.83 202,825.17 199,598.18 208,249.33 225,232.62 $ 21,954.42 39,642.36 35,125.21 33,181.40 28,225.49 271,233.57 113,043.48 164,052.66 195,507.84 594,345.28 $ 636,864.05 715,545.00 638,997.39 698,246.91 564,168.07 1,135,364.91 874,069.20 755,460.14 777,184.25 1,793,279.02 $ 73,477.08 100,082.61 121,188.16 127,786.09 80,718.97 76,739.33 82,025.88 71,997.80 74,152.51 79,725.30 $ 671,733.70 915,337.33 1,108,320.38 1,168,708.13 738,240.88 697,442.49 745,489,12 654,349.27 673,932.21 724,580.41 fPaid under protest and a claim for refund filed wherein depletion is based on the 1935 appreciated value of the proven ore reserves instead of on cost thereof. At the Aguilar Mine expenditures, amounting to $263,845.68, were capitalized in 1947 and were mainly for additional housing, plus the expense of completing the new road to Tres Cruces. This figure compares with $178,398.66 in 1946 and $165,330.84 in 1945s. During 1947, the mine again operated at approximately 60% of capacity due to the continued inability of the railroad to provide adequate facilities for handling incoming supplies of diesel oil, timber, etc., and outgoing concentrate production. At full capacity, approximately 100,000 metric tons of lead and zinc concentrates would be available for rail transport from Tres Cruces; in 1947 only 35,051 metric tons were shipped, in comparison with 43,745 in 1946, 37,075 in 1945, and 71,788 in 1944. The cumulative effect of the social welfare laws and regulations enacted in Argentina has been to create for the employer an obligation which in effect has increased payroll expense by 60%. This additional cost, plus the ad justments in wages and salaries due to higher living expenses, brought the 1947 production cost to over 100% more than those prevailing in the pre-war year of 1939. The 1947 improvement in the time lost from accidents and absenteeism has been gratifying, as is the better employee-management labor rela tionship. Increases in operating efficiency and recoveries were obtained in 1947. The following statement shows the production, sales and unsold stocks for the ten-year period: Year Production Lead Concentrates (in metric tons) Sales Stocks at End of Year Production Zinc Concentrates (in metric tons) Sales 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 29,704 36,728 36,866 27,867 33,832 21,584 23,237 22,022 22,031 24,141 28,816 33,307 *35,778 31,193 23,093 23,309 18,156 29,062 23,968 24,169 1,873 5,294 6,382 3,056 13,795 12,070 17,151 **5,850 3,913 3,885 29,478 42,250 65,112 65,939 55,121 38,283 38,512 25,862 29,601 25,860 4,467 26,179 36,182 116,021 17,922 83,420 38,556 4,090 19,993 6,704 *>' Does not include 5,000 metric tons of lead concentrates sold for post war delivery. **After inventory adjustment. Stocks at End of Year 33,149 49,220 78,150 28,068 65,267 20,130 20,086 **28,263 37,871 57,027 The long delayed delivery of the structural steel and equipment purchased in the United States has adversely affected completion of the sulphuric acid plant at Borghi, Argentina, of the Sulfacid S. A. Industrial, Financiera and Comercial Company, in which Aguilar has a 50% ownership. Commencement of operations is not expected before the early months of 1949. It is probable that the ultimate cost of this plant will approximate $4,250,000, including a newly proposed super-phosphate fertilizer unit, in comparison with an original estimate of $2,250,000. 8 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. A similar delay is being experienced in the construction of the Comodoro Rivadavia zinc smelter, of the Compania Metalurgica Austral, in which Aguilar has a 37.5% ownership, and an investment of approximately $729,000.00. Due to the sale of the British-owned railroads to the Argentine Government, it is quite possible that Aguilar will ultimately have the Argentine Government as an associate with a 37.5% ownership, instead of Cia. Ferrocarrilera de Fetroleo, who own the adjoining oil refinery, and who have undertaken the construction and supervision of the zinc smelter. In order to facilitate the trans port of zinc containing sinter from Borghi to Comodoro Rivadavia, a vessel of the LST type was pur chased and re-conditioned in the United States, and is now en route with some 1,800 tons of structural materials and equipment. It is hoped that this plant will be in operation during the latter half of 1949. It is believed that the cost will not exceed the original estimate of $2,000,000 for the smelter and vessel by as great a percentage as in the case of the Borghi acid plant The Balance Sheets as of December 31, 1947 and December 31, 1946 of Compania Minera Aguilar, S. A., and the Summaries of Net Income and Unappropriated Earned Surplus for the years ended on those dates are submitted as part of this report STOCKHOLDERS The number of St Joseph Lead Company stockholders of record on December 31st of each year since 1938 and a classification of their holdings are as follows: Year 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 Total 6,463 6,586 6,697 6,858 7,065 7,530 7,432 7,434 7,581 7,885 19 or Less 1,719 1,695 1,772 1,751 1,697 1,848 1,812 1,756 1,778 1,834 20-99 2,213 2,260 2,263 2,393 2,547 2,758 2,797 ' 2,772 2,865 3,021 100-199 1,227 1,337 1,371 1,417 1,528 1,634 1,586 1,639 1,641 1,735 200-Over 1,304 1,294 1,291 1,297 1,293 1,290 1,237 1,267 1,297 1,295 The continued success of the St Joseph Lead Company depends upon the teamwork of the three parties of our Company--management, employees and stockholders. The accomplishments of the past have been great and they may even be greater in the future. We take this opportunity of again expressing appreciation for the loyalty and cooperation of the employees, and for the support of the stockholders. CLINTON H. CRANE, Chairman, Board of Trustees ANDREW FLETCHER, President New York, March 15, 1948. 9 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPANY AND DOMESTIC SUBSIDIARIES Consolidated Balance Sheets, December 31,1947 and 1946 ASSETS Current and Working Assets: December 31, 1947 December 31, 1946 Cash on hand and in banks......................... ............. U, S. Treasury certificates and notes (at cost) , ... ...... . Accounts receivable -- trade (less reserve -- 1947, $14,548.52; 1946, $15,688.11) ............................ Due from Compania Minera Aguilar, S. A.......................... Due from affiliates of Compania Minera Aguilar, S. A. U. S. Government--claims for income tax refunds . Other accounts receivable .................................. Inventories (valuation not in excess of market): Finished lead, zinc, etc. (at cost, exclusive of de preciation and depletion)................................. . Lead, zinc, etc., in process (at cost, exclusive of depreciation and depletion)........... .... Purchased lead and zinc concentrates, etc. (at cost) Materials and supplies (at cost, less reserve for slow-moving items -- 1947, $94,569.26; 1946, $98,878.40) ......................................................... $ 7,117,793.25 10,000,000.00 3,878,584.33 138,349.28 1,958,785.91 627,750.70 381,685.16 919,718.93 1,743,175.79 390,034.75 3,735,374.32 $30,891,252.42 $ 7,305,977.01 8,000,000.00 3,921,474.29 ------ ,--_ 642,320.02 256,478.70 504,276.26 1,411,602.67 658,723.83 3,800,501.37 $26,501,354.15 Investments: Compania Minera Aguilar, S. A. (100% owned not consolidated) . ,. . . > 1.00 Mine La Motte Corporation (at cost-- 50% owned) . .,. 100,000.00 The New Jersey Zinc Company (at cost, less non-taxable dividends -- 9.9% owned) 11,392,641.00 Sundry securities, loans, etc. (at cost, less reserve, $200,000.00) .................................... . 486,338.54 $ 1.00 100,000.00 11,392,641.00 11,978,980.54 112,761.04 11,605,403.04 Capital Assets (Note 1): Ore reserves and mineral rights: Appraised value as of March 1, 1913 Less reserve for depletion . 113,5G0,000,00 13,500,000.00 Appreciation arising from revaluation subsequent to March 1, 1913 ................................ .. Less reserve for depletion. 3,500,000.00 3,500,000.00 ------------ - $13,500,000.00 13,500,000.00 $ 3,500,000.00 3,500,000.00 *------ Additions subsequent to March 1, 1913 (at cost) Less reserve for depletion . . 20,442,961.20 $20,147,960.31 17,867,668.78 2,575,292.42 17,598,711.61 2,549,248.70 Shafts and underground equipment (at cost) Less reserve for depreciation. ,, 4,804,744.13 4,223,732.51 $ 4,673,069.35 581,011.62 4,180,023.16 493,046.19 Land, buildings, plant and equipment (at cost) Less reserve for depreciation 24,509,797.68 $19,127,960.40 15,928,094.59 8,581,703.09 15,648,660.02 3,479,300.38 Total capital assets, net $11,738,007.13 $ 6,521,595.27 Miscellaneous. Assets--U, S. Treasury, State and Municipal securities on deposit with Federal and State departments (at amortized cost; market quotation value--1947, $675,447.00; 1946, $212,144.00) .. 673,501.54 185,565.19 Deferred Charges--Prepaid insurance, taxes, etc. . 180,627.30 102,054.14 Total .. . , .. $55,462,368.93 $44,915,971.79 Notes: ' (1) The net value of the capital assets as shown in the above consolidated balance sheets does not indicate the present value of the companies' property, plant and equipment, as such value could be arrived at only by current estimates which would vary from time to time depending on the price of metals, rate of production, cost of labor, and other factors. (2) Suits have been filed against the Company and one subsidiary for so-called "portal to portal" wages. No provision has been made in the above balance sheets with respect to these suits. 10 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPANY AND DOMESTIC SUBSIDIARIES Consolidated Balance Sheets, December 31,1947 and 1946 LIABILITIES Current Liabilities; Accounts payable . Due to Compania Msnera Aguilar, S. A. Wages payable . . Accrued taxes: Federal income .. Other . . December 31, 1947 December 31, 1946 $ 4,291,976.25 ------333,372.34 $ 3,033,080.80 3,860.05 339,798.53 4,474,521.35 1,921,490.12 288,013.05 $ 9,387.882.99 212,993.27 $ 5,511,222.77 Reserves: Injury claims and workmen's liability insurance , Employees' life insurance and retirement Deferred prospecting, development and exploration Contingencies , ... $ 269,791.45 366,780.99 483.000.00 . 800.000.00 $ 1,919,572.44 235,679.95 342,548.41 483.000.00 800.000.00 1,861,228.36 Capital Stock and Surplus: Capital Stock: Authorized, 2,500,000 shares of $10.00 each Issued, 1,996,840.85 shares . . . Less in treasury, 21,384.35 shares .. $25,000,000.00 $19,968,408.50 213,843.50 $25,000,000.00 $19,968,408.50 213,843.50 Outstanding, 1,975,456.5 shares , 19,754,565.00 19,754,565.00 Surplus: Earned . ,. . $24,022,132.50 $17,410,739.66 Capital--Excess of market value over par value of treasury capital stock issued for minority in terest in a dissolved subsidiary 378,216.00 24,400,348.50 378,216.00 17,788,955.66 Total Capital Stock and Surplus $44,154,913.50 $37,543,520.66 Total .. $55,462,368.93 $44,915,971.79 Notes Continued: (3) St. Joseph Lead Company and Compania Miners Aguilar. S. A. were contingently liable at December 31, 1947 to refund to customers the sales price, $189,562.00 of concentrates paid for by the customers and stored in Argentina, in the event any future Argentine law should prevent shipment thereof, and were similarly con tingently liable at December 31, 1946 in the amount of $354,421.24. St. Joseph Lead Company was also contingently liable with respect to the liability of $233,900.00 appearing on the accompanying balance sheets of Compania Minera Aguilar, S. A. 11 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPANY AM) DOMESTIC SUBSIDIARIES Summaries of Consolidated Net Income For the Years Ended December 31,1947 and 1946 Net Sales ,. Cost of Sales (exclusive of depreciation and depletion) ' Year ended December 31, 1947 1946 . - $76,609,998.94 $49,494,514.84 ... 58,920,847.43 40,683,67137 Gross Profit from Operations before Depreciation and Depletion . $17,689,151.51 $ 8,810,843.47 Selling, General and Administrative Expenses 1,010,899.19 852,817.50 Net Profit from Operations before Depreciation and Depletion , . $16,678,252.32 $ 7,958,025.97 Other Income: Dividends on The New Jersey Zinc Company stock (Note 1) , . . ... Dividends on Compania Minera Aguilar, S. A. stock Other dividends, interest, etc., less charges . . $ 877,500.00 294,339.62 190,145.65 $ 326,391.00 1,361,985.27 234,519.18 560,910.18 $18,040,237.59 $ 8,518,936.15 Deduct Provisions for: Depreciation .. Depletion . . . , .: $ 753,860.91 268,957.17 $ 451,421.27 1,022,818.08 337,010.76 788,432.03 $17,017,419.51 $ 7,730,504.12 Provision for Taxes on Income: Federal normal income and surtax . State income taxes . . ... $4,389,343.50 90,315.17 $1,880,824.75 4,479,658.67 42,548.03 1,923,372.78 Net Income for the Year . $12,537,760.84 $ 5,807,131.34 Summaries of Consolidated Earned Surplus For the Years Ended December 31,1947 and 1946 Earned Surplus at Beginning of the Year Add--Net Income for the Year , .. Total . ." Deduct--Cash Dividends paid during the Year Earned Surplus at End of the Year . V'. , Year ended December 31, 1947 1946 . $17,410,739.66 12,537,760.84 $15,554,520.32 5,807,131.34 . $29,948,500.50 $21,361,651.66 5,926,368.00 3,950,912.00 $24,022,132.50 $17,410,739.66 Note: (1) After deducting in 1946 the non-taxable portion of the 1945 and 1946 distributions amounting to $54,888.60 and $203,720.40 respectively, which have been credited to the investment account. 12 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS 1 EAST 44th STREET NEW YORK ACCOUNTANTS5 CERTIFICATE To the Stockholders of St* Joseph Teat! Company: We have examined the consolidated balance sheet of St Joseph Lead Company (incorporated in New York) and its wholly-owned domestic sub sidiary companies as of December 31, 1947 and the related summaries of consolidated net income and earned surplus for the year ended that date. Our examination was made in accordance with generally accepted auditing stand ards and included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying consolidated balance sheet and sum maries of consolidated net income and earned surplus, with the footnotes thereon, present fairly the financial condition of St Joseph Lead Company and its wholly-owned domestic subsidiary companies at December 31, 1947 and the results of their operations for the year ended that date, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. New York, February 28, 1948. HASKINS & SELLS 13 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. COMPAMA MMERA: AGUILAR, S. A. Balance Sheets, December 31,1947 and 1946 ASSETS Current and Working Assets: December 31, 1947 December 31, 1946 Cash on hand and in banks ................... $ 1,009,014.78 $ 1,-117,285.63 Argentine Government securities -- at lower of cost or market quotation value . 2,278,521.28 2,520,744.79 Accounts receivable -- trade .... , 419,659.40 338,377.61 Due from St. Joseph Lead Company , ---- 3,860.05 Due from affiliated companies . 1,543.40 Other accounts receivable, etc. , 27,094.80 38,273.06 Inventories: Lead and zinc concentrates (at cost exclusive of depreciation and depletion -- valuation not in ex cess of market) ., , , Silver, at estimated value (Note 4) Materials and supplies (at cost) 482,909.30 476,136.32 1,078,002.67 ? 5,772,881.95 304.255.37 141.458.37 888,195.44 $ 5,352,450.32 Investments in Affiliates (Note 5): Capital Stocks: Sulfacid S. A. Industrial (at cost -- 50% owned) Compania Metalurgica Austral-Argentina, S. Comercial (at cost -- 37.5% owned) $ A. 1,104,846,54 729,402.75 Capital stock subscriptions -- part paid . ------- Advances ........................................................... ......... $ 1,834,249.29 ------- ----36,250.76 60,541.39 96,792.15 Capital Assets (Note 1): Ore reserves and mineral rights: Cost, including exploration and development prior to the commencement of operations $ 1,517,391.03 Less reserve for depletion 1,011,892.50 $ 1,517,391.03 505,498.53 932,167.20 585,223.83 Appreciation arising from valuation in 1935 Less reserve for depletion $13,790,750.50 $13,790,750.50 9,233,649.89 4,557,100.61 8,509,069.48 5,281,681.02 Total ore reserves and mineral rights, net $ 5,062,599.14 $ 5,866,904.85 Land, buildings, plant and equipment (at cost) $ 3,191,278.78 $ 3,017,705.54 Less reserve for depreciation 2,165,090.38 1,026,188.40 1,990,079.12 1,027,626.42 Total capital assets, net Deferred Charges $ 6,088,787.54 5,220.51 $ 6,894,531.27 10,621.19 Total $13,701,139.29 $12,354,394.93 Notes? , (1) The net value of the capital assets as shown in the above balance sheets does not indicate the present value of the Company's property, plant and equipment, as such value could be arrived at only by current esti mates which would vary from time to time depending on the price of metals, rate of production, cost of labor, and other factors. (2) Current assets, current liabilities, deferred charges and credits and reserves are stated in the above bal ance sheets in U. S. dollars at the closing quoted rate of exchange at December 31, 1947 and 1946, respectively (except in a few instances where original dollar values applicable to foreign transactions are used). Investments in affiliates, capital assets and related reserves and capital stock and capital surplus accounts reflect the approxi mate dollar equivalents at the rates prevailing at the dates of the transactions of which the balances in these acounts consist, 14 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. COMPAMA MEVERA AGUILAR, S. A. Balance Sheets, December 31,1947 and 1946 LIABILITIES Current Liabilities: Accounts payable -- trade ,$ Due to St, Joseph Lead Company............... Wages payable .................... Accrued Argentine income and other taxes ,,, . Proceeds from sales of concentrates for future export . . Estimated expenses on concentrates held for future delivery .. .... , Other accounts payable ,, December 31, 1947 127,352.96 138,349.28 78,687.96 522,706.41 233,900.00 $ 220,367.35 25,259.60 $ 1,346,623.56 December 31, 1946 77,111.77 61,340.32 147,676.38 233,900.00 247,392.13 51,481.80 $ 818,902.40 Deferred Credits . ... Reserves: Employees' compensation under Argentine social laws Accidents ................ . Other expenses .... $ 131,337.22 55,508.41 57,456.94 83,964.84 $ 244,302.57 98,511.25 52,838.63 32,540.14 19,987.88 183,890.02 Capital Stock and Surplus: Capital Stock: Authorized and issued--500,000 shares of a nominal value of $80 Argentine paper each $11,349,803.33 Less in treasury, 35,000 shares . , . 690,931.52 $11,349,803.33 690,931.52 Outstanding, 465,000 shares . 10,658,871.81 10,658,871.81 Surplus: Capital surplus arising from 1935 valuation of ore reserves (remainder after transfer of $13,387,254.16 to stated value of capital stock) , Appropriated earned surplus: For acquisition of capital stock held in treasury $ To statutory reserve . . Earned surplus (^deficit) (after charging deficits aggregating $1,987,450.83 against capital surplus arising from reduction in stated value of capital stock -- Note 6) . , , , 690,931.52 16,789.99 256,158.66 403,496.34 $ 690,931.52 16,208.00 963,880.17 *437,893.04 403,496.34 269,246.48 Total Capital Stock and Surplus $12,026,248.32 $11,331,614.63 Total . , . . $13,701,139.29 $12,354,394.93 Notes Continued: (3) Compania Miners Aguilar, S. A. and St. Joseph Lead Company were contingently liable at December 31, 1947, to refund to customers the sales price, $i89,562.00, of concentrates paid for by the customers and stored in Argentina, in the event any future Argentine law should prevent shipment thereof, and were simi larly contingently liable at December 31, 1946 in the amount of $354,421.24. ^ (4) The export of silver ingots is not at present permitted by Argentine regulations. The amount of the silver inventory which may be absorbed locally is not known. (5) Reference is made to the accompanying President's letter for a statement of the Company's proposed expenditures in connection with investments in affiliates. ^t (6) The net deficit since beginning operations, $1,023,570.66 (aggregate deficits transferred to capital sur plus, $1,987,450.83, less surplus at December 31,1947, $963,880.17) represents aggregate net profits of $8,210,079.23 (after deducting depletion computed on cost) against which has been charged depletion computed on appre ciation, aggregating $9,233,649.89. 15 1 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CGMPANIA MINERA AGUILAR, S. A. Summaries of Net Income For the Years Ended December 31,1947 and 1946 Net Sales .............................. ......................................................... Year ended December 31, 1947 1946 $ 4,184,605.91 $ 2,762,039.70 Cost of Sales (exclusive of depreciation and depletion) . . , 1,427,884.15 1,320,756.46 Gross Profit from Operations before Depreciation and Depletion $ 2,756,721.76 $ 1,441,283.24 Deduct: Selling, general and administrative expenses Taxes, other than taxes on income ,. . '' 1 $ 154,239.67 48,835.37 $ 128,091.30 203,075.04 44,755.43 172,846.73 Net Profit from Operations before Depreciation and Depletion Other Income (net of charges--1947, $11,227.07; 1946, $73,163.21) $ 2,553,646.72 59,210.20 $ 1,268,436.51 11,016.16 $ 2,612,856.92 $ 1,279,452.67 Provision for: Depreciation ... Depletion computed on cost . Depletion computed on appreciation of ore reserves , . Compensation payable to employees under Argentine social laws--see Note 2 . $ 225,232.62 79,725.30 724,580.41 ------ $ 208,249.33 74,152.51 673,932.21 1,029,538.33 98,511.25 1,054,845.30 $ 1,583,318.59 Provision for Argentine Income and Excess Profits Taxes--see Note 3 594,345.28 $ 224,607.37 195,507.84 Net Income for the Year $ 988,973.31 $ 29,099.53 Summaries of Unappropriated Earned Surplus For the Years Ended December 31,1947 and 1946 Surplus (*deficit) at Beginning of the Year Add--Net Income for the Year . Total......................... Year ended December 31, 1947 1946 . $* 437,893.04 $* 466,410.31 . . '. 988,973.31 29,099.53 ' . . $ 551,080.27 $* 437,310.78 Deduct: ,< Cash dividends paid during the year . Earned surplus appropriated to statutory reserve . . . . . $ 294,339.62 . . 581.99 $ 582.26 Total ........... ................................................................ ..... $ 294,921.61 $ 582.26 Surplus ('deficit) at End of the Year (after charging deficits aggregating $1,987,450.83 against capital surplus) .............................................................. $ 256,158.66 $* 437,893.04 Notes: (1) The results of operations are stated in the above summaries in U. S. dollars at the approximate average free rate of exchange for the year, except as to provisions for depreciation and depletion, which have been converted on the basis of the rates of exchange at which the balances in the related asset accounts are stated. (2) In 1947 provision for compensation payable to employees under Argentine social laws, in the amount of $44,546.35, was charged mainly to cost of production. (3) Argentine income taxes are being paid under protest and claims for refund filed wherein depletion is based on the 1935 appreciated value of proven ore reserves instead of on cost thereof. : "' 16'` " ' . Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS 1 EAST 44TH STREET NEW YORK ACCOUNTANTS9 CERTIFICATE Si. Joseph Lead Company: We have examined the balance sheet of Compania Miners Aguilar, S. A. (incorporated and doing business in Argentina) as of December 31, 1947 and the related summaries of net income and unappropriated earned surplus for the year ended that date. Our examination was made in accordance with gen erally accepted auditing standards and included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. It has been the consistent practice of the Company to record depletion of ore reserves and mineral rights on the basis of tons of ore mined as used in the Company's reports for tax and other purposes to the Argentine Government rather than on the more generally accepted basis of tons of products sold. In our opinion, the accompanying balance sheet and summaries of net income and unappropriated earned surplus, with the footnotes thereon, present fairly the financial condition of Compania Minera Aguilar, S. A. at December 31, 1947 and the results of its operations for the year ended that date, in con formity with generally accepted accounting principles (except as described in the preceding paragraph) applied on a basis consistent with that of the pre ceding year. New York, February 28, 1948. HASKINS & SELLS ."m,- .... .f; v M <-: Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPANY mm ANNUAL REPORT TO STOCIUSOLDERS FOR THE YEAR 1947 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.