Document kaz3Bj2eKmGx0YQwrYKgo6qXq

r Psysc^k%c04frierir ,seph l PSr^s,o, ST. JOSEPH LEAD COMPANY St Joe's interests extend far beyond the fields of exploration and extraction, fields in which it has developed a leading competence. The Company' has become increasingly in volved with the uses of the varied products resulting from its mining and metallurgical operations, and in the further devel opment of their markets. Over its 104 year history, St. Joe, while solidifying its posi tion as the largest lead miner in the United States and sub stantially increasing its mineral assets, has added the capac ity for production of zinc metal, zinc oxide, sulfuric acid, cadmium, silver, copper concentrates, agricultural lime stone, iron ore pellets, high quality iron oxide, and bentonite. These product additions have greatly expanded the Com pany, have broadened its marketing capabilities, and have advanced the number of markets--some shown in this Report --in which St. Joe actively competes. St. Joe's market and product orientation continues to grow and will be an increasingly significant factor in its future. The 1967 expansion and introduc tion of automated controls and new equipment has changed a lot at St. Joe's Herculaneum Smelter but not the historic and spectacu lar view of molten lead metal shown at right. In the cover design are shown certain grades of St. Joe lead, zinc metal, zinc oxide, sulfuric acid and iron ore pellets. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. HIGHLIGHTS - OF OUR 104fli YEAR Sales of metals, etc. Federal and state income taxes . ' , .. Net Income / ,> Dividends paid Shares of capital stock outstanding December 31 Net earnings per average share Dividends per share . Ratio of current assets to current liabilities Number of employees (U.S.) Number of shareholders Shareholders' equity (book value) Shareholders' equity per share IS? ' I960 $129,036,565 $ 5,159,034 $ 21,634,733 $ 12,568,349 4,485,638 $4.82 $2.80 4.87 to 1 3,959 18,585 $133,792,532 $29.83 $145,109,767 $ 8,826,341 $ 22,717,454 $ 12,050,896 4,496,267 $4.99 $2.65 3.87 to 1 3,986 16,204 $125,171,922 $27.84 2 ... Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LETTER TO SHAREHOLDERS: St. Joseph Lead Company's sales for 1967 were $129,036,665. Net income was $21,634,733 and earnings per share totalled $4.82. Dividends of $12,568,349, the highest for any year in St. Joe history, were paid to shareholders. Quarterly dividend payments of 70 cents per share continued at the level established by the Company in December, 1966. Of significance to the Company's earnings were the reductions in the price of zinc in the Spring of 1967 and the continuing impact of a lower lead price, which was reduced to 14 cents a pound in late 1966. Dividends from St. Joe's foreign investments were lower than during 1966. A reduction in demand for domestic lead and zinc, largely attrib utable to reduced industrial activity in the United States, and to increasing competition from imports, was partially offset in the fourth quarter by the effect of extended work stoppages in the nonferrous industry. Our sales of copper concentrates and copper mattes, however, were restricted by these work stoppages. Start-up of the new facilities at the Herculaneum Smelter proved to be more difficult and slower than had been anticipated. Purchases and sales of lead from the U.S. Government stock piles, on which no profit can be earned, were significantly reduced in 1967 as Herculaneum's productive capacity increased. Taxes were lowered by the investment credits applied as a result of our expansion activities. St. Joe's 1967 earnings also reflect the contribution of the new, highly automated Fletcher mine and mill in Missouri which came on stream in February, and which has performed as expected. During 1967, construction work on the new Balmat, New York, mine shaft progressed satisfactorily. By year end we were down to 1,302 feet. At the Indian Creek mine in Missouri, the Goose Creek shaft reached its final depth of 1,180 feet. A new 250-ton-per-day sulfuric acid unit at the Josephtown Smelter was completed in December and will increase our acid production capacity by 15%. Approval for Aguilar's expansion program was granted by the Argentine authorities, and the new shaft at Santander in Peru was completed during the year. Meramec Mining Company's 1967 pro- Francis Cameron, Chairman Lawrason Riggs III, President Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 3 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ductlon of 1,806,138 gross tons of iron ore pellets estabItshed a record high. During 1967, St. Joe announced equal participation with Phelps Dodge Corporation in the formation of an Australian joint venture, St. Joseph Phelps Dodge Exploration Pty. Ltd., to participate in Investment opportunities and to conduct geological exploration of the Australian continent and surrounding islands. At the Board of Trustees' meeting in May, several major management changes were made. Andrew Fletcher, Chairman of the Board of Trustees since 1960, and a Trustee since 1921, retired as Chairman to become Honorary Chairman and Chairman of the Finance Committee. Francis Cameron, President of St. Joe, was elected Chairman of the Board and Lawrason Riggs,III, formerly Vice President, was elected President. At the same time, Robert H. Ramsey was elected Executive Vice President, John R. Englehorn, to the new position of Vice President-Marketing and Development, and D. Broward Craig, Vice President and Secretary. In September, Lawrence W. Casteel, formerly Assistant Division Manager of the Southeast Missouri Division, was appointed Division Manager, succeeding Elmer A. Jones, who retired after 41 years of outstanding service to St. Joe. Mr. Jones, also a Trustee of the Company, resigned from that position on January 5,1968 to accept the Chairmanship of the Lead-Zinc Producers Committee, headquartered in Washington, D.C. We are pleased that the operating management changes represented the advancement of St. Joe personnel to positions of greater responsibility. Other staff increases and changes were also made to broaden our sales and marketing management groups. Also during 1967, Wing L. Lew, formerly Managing Director of Cia. Minera Aguilar, was elected Executive Vice President of that organization and President of Cia. Minerales Santander. John E. Loser was appointed Managing Director of Aguilar. At St. Joe's Board of Trustees' meeting on February 20,1968, Mr. Lew was also elected a Trustee of St. Joseph Lead Company as successor to Mr. Jones. It is with sincere regret that we report the death on February 18,1968 of James G. Colvin, Vice President and Treasurer of the Company. He had served St. Joe with distinction for a period of 39 years, St. Joe employees contributed to the success of the year's operations with a high degree of competence, loyalty, and support of the Company's objectives. Work schedules were uninterrupted during the year, and new agreements were negotiated with unions representing employees of the Southeast Missouri Division and the Balmat-Edwards Division in Upstate New York. The number of St. Joe shareholders increased in 1967 to 18,585 from 16,204 at the beginning of the year. This increase and the frequent and constructive contacts with the Company initiated by many shareholders during the year have been most gratifying. St. Joe gained strength during the twelve months of 1967, completing several major projects and continuing satisfactory progress on others. The additions to productive capacity and improvements in operating efficiency will have increasing impact in 1968 as the levels of generai industrial activity show continued gains. Several new projects were initiated during 1967 and we expect these to be brought well along during the coming months, In view of the economic outlook and our continuing efforts in several areas of corporate development, we are confident that St. Joe is well equipped for 1968. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. REVIEW OF OPERATIONS Lead Mining The new Fletcher mine and mill, lo cated in Southeast Missouri, processed 509,163 tons of ore in 1967. With the contribution of this higher grade ore, total St. Joe lead concentrate production rose to 224,233 tons from 189,225 tons in 1966. The mine and mill were dedicated in June by the Board of Trustees which held that Lead is a vital ingredient in much high month's meeting in Bonne Terre, Missouri. quality industrial and optical glass. The lead used in the color TV tube manufac tured by Corning Glass Works in Corning, N.Y., originated in St. Joe's Missouri mines. The metal is also used in decorative crystal to obtain brilliance. Shown below is the first completely lead-clad building Performance of the highly automated Fletcher mill has been excellent, even though its produc tion was held below capacity because a high in ventory of concentrates accumulated at the Her culaneum Smelter early in the year. Construction of a copper circuit was started during 1967 to in the U.S. The Center for the Performing permit the production of copper concentrates in Arts in Chicago's Marina City houses a addition to the lead and zinc concentrates now theatre as well as a TV station. The limber being produced. ( ness of sheet lead, its sound attenutation < capabilities and its durability account for The new 12Vz foot diameter Goose Creek widening use in new building designs. shaft, started in 1966 to provide access to ore re serves to the north of the existing Indian Creek mine, was bottomed at 1,180 feet by year end and the surface facilities associated with this new Y mine were completed. First production results from the mine are expected by the third quarter ?*i ( of 1968. The 33-mile railroad line extension from Keys- ville to Buick, Missouri, was completed by the St. Louis-San Francisco Railway Company, in mid 3: year. Because of these new facilities, St Joe no | longer needs to truck concentrates from Virbur9' num and the railroad extension will materially reduce the mileage involved in trucking Fletcher concentrates. Operations at the Federal, Virburnum and In- i . \ .. i . . " ' ' . ' - .. ' . , ' '. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 7 dian Creek mines and mills continued to be highly satisfactory throughout the year. Produc tion objectives at these properties were adjusted to reflect the addition of the Fletcher facility to the Company's lead mining capacity. During 1967, the Southeast Missouri Division actively continued its reforestation program and by year end had planted more than a quarter of a million trees in the various areas comprising its Missouri operations. This Division and its em ployees also continued the active support of community affairs that has long characterized St. Joe's employee-community relations. Lead Metal Production The expansion program, doubling the capacity of the Herculaneum Smel ter, was completed in early 1967 after a conver sion shutdown period that extended into the opening weeks of the year. Herculaneum produc tion from Company concentrates totalled 120,207 tons of finished lead metal in 1967. This substan tially exceeded the 1966 output of 90,729 tons, despite unexpected difficulties in operating auto mated control systems for the sintering and fur nace processes Equipment failures were disap pointingly common during the year, but the fre quency of these malfunctions was reduced by the end of the year and smelter production ap proached capacity output during the closing months of 1967. Purchases of United States Government stock pile lead, on which no profit can be realized, were reduced to 5,714 tons in 1967 as smelter produc tion increased. As a result, total pig lead sales dropped to 160,115 tons from the 175,762 tons sold in 1966. Gross profit from lead metal sales, I ! 8 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The lead loaded curtain dividing Akron, Ohio's Firestone High School gymnasitim permits smaller class size and the establishment of more teaching stations without reducing the advantages of the school's large athletic facility. The curtain provides an effective, yet movable, sound barrier. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reprdduction prohibited without permission. I Dispersion strengthened lead, DSL, currently undergoing applications testing, has been fabricated into a variety of industrial parts and architectural shapes. The threaded pipe connections, tubing, embossed sheet and punched component shown at the left highlight some of the unique characteristics of this new St. Joe alloy and illustrate its potential. Lead anti-vibration pads serve as an integral part of the construction of a public school being built above an operating railroad yard in New York City. The lead pads, installed under each supporting steel member, will substantially reduce classroom noise and disturbance caused by vibration and sound transmission. ) however, exceeded the 1966 level, reflecting the greater percentage of sales from Company pro duction. Plans for building a sulfuric acid plant at Her culaneum were completed at the end of the year, and construction is expected to begin before the middle of 1968. The plant, utilizing the sulfur di oxide gas from the sintering of iead concentrates, will have a capacity of 300 tons of acid per day. Evaluation and further development of new lead alloys continued during 1967. Dispersion strengthened lead, DSL, a high strength, creep resistant alloy, was introduced as a new develop mental product at the Design Engineering Show in New York City in May. Market development activities were accelerated and the product is being evaluated for a wide variety of uses includ ing lead-acid battery grids, sound attenuation structures, electrochemical devices, chemical plant construction, ammunition, and other appli cations involving specialty components. During 1968, the Company plans an intensified effort to identify and develop uses for this unusual ma terial. A market evaluation program will be launched this spring to secure data on which future production plans may be based. The Herculaneum Smelter's output of highquality chemical and corroding lead and various lead alloys is sold in the form of 5-pound linked ingots and 100-pound pigs, as well as 1,000- and 2,000-pound ingots. The metal continued to be in demand for standard iead acid batteries, anti knock gasoline additives, cable coverings, am munition, roofing, industrial and decorative glass, radiation shields, pigments, soundproofing ma terials, and a variety of other products. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 11 Zinc Mining Operations were uninterrupted at the Balmat-Edwards Division's New York State zinc mines, and the St, Joe zinc concentrate pro duction totalled 147,361 tons, as compared to the 1966 output of 147,860 tons. The Number 4 Balmat concrete lined shaft with an 18-foot inside diameter reached a depth of 1,302 feet at year end--only slightly behind schedule. Excavation of mining level stations proceeded as planned, and galvanized shaft steel sets--galvanized with St. Joe zinc--have been in stalled to a depth of 1,201 feet. Shaft sinking will continue to 3,100 feet, the deepest hoisting level. The use of galvanized steel in the shaft, the first such application in the United States, will reduce maintenance costs. Continuing geologic investigations substanti ate earlier estimates of the new Number 4 ore body's potential, and the mine is expected to be in production in 1970. Almost one million tons of ore per year will be hoisted from the new shaft. The Balmat-Edwards Division shipped all its zinc concentrate output to the Josephtown Smelter. Zinc Production After curtailing its slab zinc production schedule in the early part of 1967, as previously announced, the Josephtown Smelter in Pennsylvania had a total zinc equivalent out put for the year approximating 1966 tonnage. Schedules were adjusted upward late in the year as demand improved. Slab zinc production equaled 188,470 tons, down from the 193,301 tons produced in 1966, but zinc oxide production was somewhat increased. Reduced automobile production was a major Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. f Demand for galvanized steel has been increasing. The highway guardrail shown dividing the picture below dramatically demonstrates the advantages of the protective zinc skin which eliminates the need for painting and extends for years the structural integrity and effective life of steel. / Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 13 factor in the lowering of slab zinc sales, although the amount of zinc in each 1967 car manufac tured averaged 102 pounds, an increase over the 1966 level. The hot dip galvanizing industry showed sub stantial expansion during the year, adding a num ber of new plants and completing additions to existing facilities. The increasing demand for gal vanizing as a protective coating continued the trend of the past several years, and the industry's new facilities are capable of zinc coating much larger structural steel products as well as steel sheet. St. Joe's many types of zinc oxide continued to be more widely used in the rubber, photocopy, pharmaceutical, and paint industries. Blisterresistant zinc oxide, a new St, Joe product for use in paints, is being tested and is expected to increase future zinc oxide sales. Research and development work on several other zinc and zinc oxide products is continuing and will serve as the basis for the Company's entry into new markets in the future. St. Joe is also substantially broadening its technical service to provide a greater degree of support and guidance to current and potential customers. St. Joe's technical service work has been particularly effective due to coordination with the efforts of the St. Joe research groups located in Pennsylvania. Foreign Operations Compania Minera Aguilar, S. A., in Argentina, mined and milled approxi mately the same tonnage as in 1966. Lead con centrate production was increased, largely due to the higher lead content of the ore mined, while St. Joe zinc was used to make the photo en graving plate being developed, right, at The New York Times. St, Joe is currently in volved in research and testing aimed at develop ment of lighter weight plates which will not sacrifice the quality and cost advantage of zinc. 14 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission zinc concentrate production remained close to the 1966 level. With the Argentine authorities' approval of the previously proposed expansion of Aguilar's pro ductive capacity, construction of the new faciljr ties began at both mine and mill. Over $7 million will be spent in construction and new equipment. The program is scheduled for completion dur ing 1968. The additional lead and zinc concen trates produced will be smelted and used to con tribute to Argentina's expected future economic growth. The zinc plants of Compania Metalurgica Austral and Compania Sulfacid, S. A., in which Aguilar has investments, continued to have satis factory production levels during 1967. With the expansion of the mining facilities at Aguilar, Sul facid will proceed with plans for increasing its electrolytic zinc plant capacity. Compania Mine rales Santander, Inc., operat ing in Peru, proceeded with development of its underground mine. Successful completion of fhe shaft, started in 1966, will permit development of the ore body during 1968 as scheduled. The open pit mine will be gradually phased out in the fourth quarter of 1968. Zinc concentrate tonnage increased slightly over that of 1966, but produc tion of lead concentrates decreased due to the reduced grade of lead in ore mined from the open pit. Exploration activities in both Argentina and Peru continued at an accelerated rate in 1967. The 1967 investment in the newly formed Aus tralian joint venture, St. Joseph Phelps Dodge Exploration Pty. Ltd., developed the early stages of its exploration program. Desmond O'Driscoll, J, Ellis Walrond, Paint Chemist at St. Joe's research facility studies paint test samples, some of which contain the Company's new blister resistant (St. Joe 50-BR) zinc oxide developed to reduce the blistering tendencies of outdoor oil paints while maintaining the tint retention and durability provided by zinc oxide. 16 . * Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. I Si Joe zinc oxide was a prime material In the manufacture of this improved automobile tire undergoing safety testing, below, on Uniroyal's dynamic force machine in Detroit. St. Joe produces mqre ' than 30 types of zinc oxide in addition to a variety of custom grades. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 17 formerly Assistant Director of Australia's Bureau of Mineral Resources, was appointed Managing Director, and John F. Ivanac, Chief Geologist of the organization, will supervise its broad mineral exploration program. The joint venture company was incorporated on June 15, 1967, and has its headquarters in Canberra, capital of Australia. Meramec Mining Company Production of ironore pellets by Meramec Mining Company, St. Joe's joint venture with Bethlehem Steel, in creased and totalled 1,806,138 gross tons in 1967, the greatest annual tonnage yet produced from the Pea Ridge mine. Installation of the new underground crushing facility continued on schedule and completion is anticipated in the first quarter of 1969. Mining methods were somewhat modified dur ing 1967 to permit greater extraction of ore at the western extremity of the ore body by removal of supporting pillars. These operations have proved to be successful and were reflected in the mine's reduced operating costs during the year. The Company completed the research pro gram relating to the treatment of high grade hematite ore found at the Pea Ridge mine, and at year end was reviewing the economic aspects of modifying Meramec's concentrating plant to accommodate this ore. Late in 1967 the first commercial test shipment of Meramec Iron Oxide was made. This highgrade powder has a variety of industrial uses, and the quantities planned for processing and sale in 1968 will provide additions to Meramec's income. St, Joe zinc, mined at the Balmat-Edwards Division, is also widely used In die casting parts and assemblies shown at right, which were produced by AllenStevens Corporation. Zinc die castings, rugged and corrosion resistant, form many of the intricate and familiar components found in automobiles, appliances and industrial machinery. Below, Mrs. Leona M. Fisher, St. Joe Accounting Department employee, wears a 100% American Viscose rayon suit by Ginori Sportswear. St. Joe zinc waffle slabs in the background are cast at the Josephtown Smelter specifically for rayon manufacturers who use substantial quantities of the metal in fiber production. ? 18 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ' : ' fh' ': . if ' 1 . ' Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPANY and Consolidated Subsidiaries CONSOLIDATED BALANCE SHEET DECEMBER 31, 1967 AND 1966 ASSETS . v ' ' . Current Assets: Cash ........................ ................. Marketable securities (at cost) Accounts receivable--trade ... Other accounts receivable .... Inventories (Note 1): "?. Lead, zinc, etc. ........... Materials and supplies ,-- Total Current Assets. Investments and Advances (at cost or below): Fifty-percent owned companies (Note 2) .. Subsidiaries not consolidated (Note 3) ... Other securities, loans, etc. ......................... Total Investments and Advances Property, Plant and Equipment (Note 4):............ Less accumulated depreciation and depletion Property, Plant and Equipment-Net Other Assets: Securities on depositlwith Governmental agencies .................................................... Cash and marketable securities-- Fire Insurance Fund (see contra) -- Total Other Assets ............................ Deferred Charges: Deferred shaft sinking and development expenditures .................. -- Other deferred charges............................. Total Deferred Charges ................... Total ............ ..... i................ 1967 $ 3,105,082 23,249,984 16,344,966 1,613,498 17,288,565 7,631,663 69,233,758 14,489,542 1,299,072 57,786 15,846,400 175,503,841 103,708,519 71,795,322 962,666 419,694 1,382 360 9,166,879 1,975,562 ....11,142,441 $169,400,281 1966 $ 4,366,160 26,584,285 15,201,512 1,511,856 13,806,052 7,344,787 68,814,652 14,954,496 1,929,608 58,731 16,942,835 168,175,847 100,224,325 67,951,522 963,048 370,544 1,333,592 7,802,679 1,643,062 9,445~741 $164,488,342 See Notes to Financial Statements. 20 ' ", ' Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities----Long-term debt due within one year (Note 5) .. Federal income taxes....................................... Total Current Liabilities Long-Term Debt (Note 5) 1967 $ 8,696,316 1,000,000 4,531,756 14,228,072 14,666,669 1966 $ 11,696,407 1,000,000 5,071,964 17,768,371 15,666,669 Deferred Federal Income Taxes--related to accelerated amortization and depreciation 5,490,853 4,666,134 Reserves: Injury claims and workmen's liability insurance Employees life insurance and retirement----Fire insurance (see contra).............................. Total Reserves ................................................ 576,663 225,798 419,694 1,222,155 607,012 237,690 370,544 1,215,246 Shareholders' Equity (Note 6): Capital stock, par value $10 per share: Authorized--10,000,000 shares Outstanding--1967, 4,485,638 shares; 1966,4,496,267 shares (after deducting shares in treasury; 1967, 108,565.35; 1966,97,936.35 shares) ...................... Other Capital--representing principally excess of amount of stock dividends over par value of capital stock............ Retained Earnings ........................................ Total Shareholders' Equity...................... Total ................... .......................... 44,856,380 44,962,670 20,675,895 68,260,257 133,792,532 $169,400,281 21,015,379 59,193,873 125,171,922 $164,488,342 See Notes to Financial Statements. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST, JOSEPH LEAD COMPANY and Consolidated Subsidiaries STATEMENT OF CONSOLIDATED INCOME FOR THE YEARS ENDED DECEMBER 31, 1967 AND 1966 Net Sales ... cost of Sales Other Income: Dividends from: Foreign investments ,,................. Domestic investments .................... Interest .............................................. Royalty, Meramec Mining Company Sundry--net .......... ........................... Total............................... 1967 $129,036,565 98,770,092 30,266,473 1966 $145,109,767 112,595,456 32,514,311 4,488,185 35,000 1,188,680 1,250,000 710,707 37,939,045 5,393,778 166,553 1,953,295 1,250,000 527,264 41,805,201 Deduct; Selling and administrative expenses................ Research expenses............................................. Shaft sinking and development expenses -- Other exploration and development expenses Depreciation ....................................................... Depletion ................ ............................................ Interest on indebtedness.................................. Total Deductions 3,310,558 842,667 555,007 192,945 5,089,118 429,358 725,625 11,145,278 2,954,896 777,246 760,767 487,884 4,010,790 415,917 853,906 10,261,406 Income Before Income Taxes.............. Federal and State Income Taxes........ Net Income for the Yealr ....................... Per Share--based upon average shares outstanding during the year.............. 26,793,767 5,159,034 $ 21,634,733 $4.82 31,543,795 8,826,341 $ 22,717,454 $4.99 STATEMENT OF CONSOLIDATED RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31,1967 AND 1966 Retained Earnings at Beginning of the Year -- Net Income for the Year...................................... Total ................................................. Dividends Paid: Cash (1967, $2.80 per share; 1966, $2.65 per share) ....................................................... Retained Earnings at End of the Year................ 1967 $ 59,193,873 21,634,733 80,828,606 1966 $ 48,527,315 22,717,454 71,244,769 12,568,349 $ 68,260,257 12,050,896 $ 59,193,873 See Notes to Financial Statements. 22 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. NOTES TO FINANCIAL STATEMENTS 1. Inventories Inventories of lead, zinc, etc, (finished, In process, and concentrates) are valued at cost (not in excess of market), deter mined substantially on the last-in, flrstout (LIFO) method. Materials and sup plies are valued at average cost. 2. Fifty-Percent Owned Companies Meramec Mining Company (50% owned by Bethlehem Steel Corporation) is a "cost company" which has no net income or loss. For financial accounting purposes, depreciation is provided in the accounts of the Company on its share of the depreciable property of Meramec Mining Company over twenty years, but for Federal income tax pur poses on the declining balance method over ten years. Depreciation was pro vided in 1967, in the amounts of $902,001 and $1,733,575, for book and tax pur poses respectively, and deferred U.S. income taxes of $399,155, based on current tax rates, applied to the differ ence in the depreciation amounts, were charged against income. The Compahy's equity in the net as sets of Mine La Motte Corporation (50% owned by National Lead Company) at December 31, 1967, was $214,651 and its equity in the corporation's net loss for the year then ended, was $2,423. 3. Subsidiaries not Consolidated A balance sheet of Compania Minera Aguilar, S.A. (99.9% owned) as of De cember 31, 1967 and a related state ment of income for the year then ended, both in summary form and stated in Argentine pesos, follow: BALANCE SHEET Argentine Pesos* Current Assets............. .. Investments (at cost) . . Capital Assets............ . Deferred Charges ........ Total Assets ............ 3,052,356,392 201,160,072 2,635,028,544 8,144,145 5,896,689,153 Current Liabilities............ Reserves .......... . --.... . Unearned Interest . . 880,263,462 1,245,366,226 1,277,778 Shareholders' Equity :.. . 3,769,781,687 Total Liabilities and > Shareholders' Equity . 5,896,689,153 STATEMENT OF INCOME Argentine Pesos* Gross Profit from Sales........ 2,607,501,928 Other Income ....... 374,692,644 Total ........................ 2,982,194,572 Expenses, Other Taxes, Depreciation, Depletion and other Deductions...... Argentine Income and Emergency Taxes, Net...... Special Appropriation for Replacement of Capital Assets................ 547,747,124 636,280,579 116,477,812 Total ... .................... 1,300,505,515 Net Income for the Year....... 1,681,689,057 *The quoted free rate of exchange for a peso was approximately $.0029 at December 31,1967. The above financial statements are in conformity with accounting principles generally accepted in Argentina, which differ in respect to the accounting for capital assets and related depletion and depreciation and for special appropria tions out of income for the replacement of capital assets, from that generally ac cepted in the United States of America. The equity of the Company in the net income of the Argentine subsidiary, ex ceeded dividends received by 221,777, 026 pesos. Dividends received are re corded as they are converted into U.S. dollars or U.S. dollar bonds of the Argentine government. The net assets of Compania Minerales Santander, Inc. (wholly owned) and its liability to the Company on debentures totaled $5,032,123 at December 31,1967 and its net income for the year then ended was $598,492. 4. Property, Plant and Equipment All properties are stated at cost ex cept for $17,000,000 of mining proper ties and mineral rights stated at ap praised values, for which full allowances for depletion have been provided. The net amount of property, plant and equip ment as shown in the consolidated bal ance sheet does not indicate the pres ent value of these assets, 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, 23 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST, JOSEPH LEAD COMPANY and Consolidated Subsidiaries NOTES TO FINANCIAL STATEMENTS rate of production, cost of labor, and other factors. 5. Long-Term Debt Long-term debt at December 31,1967, exclusive of amounts due within one year, comprises 4V2 % Notes Payable to Bethlehem Steel Corporation, aggre gating $14,666,669 due March 31,1984. Under its Credit Agreement with Beth lehem Steel Corporation, the Company has assigned royalties to be received from Meramec Mining Company, up to $1,000,000 annually, as collateral secu rity for the Notes. 6. Stock Option Incentive Plan Under the Company's Plans adopted in 1958 and 1967, options have been granted to officers and other key em ployees under 60 years of age to pur chase shares of the common stock of the Company at a price not less than the fair market value on the date the options are granted. The options are exercisable in equal annual instalments and any part of an option not exercised at the end of five years from the date of the grant becomes void and available for future grants. During the year 1967, options for 1,721 shares were exercised. Other Capital was increased by $44,028 rep resenting the excess of the aggregate option price over the par value of the shares issued. ' Outstanding options at December 31, 1967 adjusted to reflect the three-for- two stock split in 1964 are as follows: Date of Grant January 10,1964.......... . July 8, 1965 ................ . September 14,1966 .... . No. of Shares 42,095 32,350 42,200 116,645 Option Price $35.58 41.25 37.63 At December 31, 1967, there were 200,000 shares available for future grants. In 1967, Other Capital was reduced by $383,512 representing principally the excess of cost over par value of 12,350 shares of treasury stock acquired for future issuance under the Stock OptionIncentive Plan. 7. Retirement and Pension Plans The Company and its subsidiaries have several pension plans covering substantially all of their employees, in cluding certain employees in foreign countries. The total pension expense for the year was $1,806,315. The Com pany's policy is to fund pension cost accrued. The plans are non-contributory and all past service costs have been funded. At December 31,1967, deferred past service costs were $1,525,777 which amount is to be amortized over the period as allowed by the Internal Revenue Code. The actuarially com puted value of the vested benefits for the plans does not exceed the total of the pension fund. 8. Income Sales and cost of sales for the year ended December 31, 1967 include $1,448,064 for lead and zinc sold from the Government stockpile on which, by law, no profit was realized. 24 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ACCOUNTANTS' OPINION HASKINS 8s SELLS CERTIFIED PUBLIC ACCOUNTANTS TWO BROADWAY NEW YORK 10004 To the Shareholders of St, Joseph Lead Company: We have examined the consolidated balance sheet of St, Joseph Lead Company and its consolidated subsidiaries as of December 31, 1967 and the related statements of consolidated income and consolidated retained earn ings 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 con sidered necessary in the circumstances. In our opinion, the accompanying consolidated balance sheet and state ments of consolidated income and retained earnings present fairly the finan cial position of St. Joseph Lead Company and its consolidated subsidiaries at December 31,1967 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. HASKINS & SELLS February 21,1968 i Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 25 ST. JOSEPH LEAD COMPANY and Consolidated Subsidiaries COMPARATIVE FINANCIAL REVIEW 1958-1967 Average Metal Prices (Cents per pound) Lead, New York........ ........................ Zinc, St. Louis ..................... ................ 1967 14.000 13.800 Sales .................................................... Cost of Sales ..................... .................. Gross profit from sales $129,036,565 98,770,092 30,266,473 Other Income; Dividends ........ .................................. Interest and other (net) --............ Royalty--Meramec Mining Company Total Deduct: Selling, administrative and research, etc.................................... Strike and shutdown expense ..... Shaft sinking, development and exploration ..................................... Depreciation and depletion............... Interest on indebtedness................... U.S. and foreign income taxes........ Total Deductions 4,523,185 1,899,387 1,250,000 37,939,045 4,153,225 -- 747,952 5,518,476 725,625 5,159,034 16,304,312 Net Income Before Extraordinary Items Extraordinary Items............ ................. 21,634,733 -- Net Income .............................. .............. $ 21,634,733 1966 15.100 14.500 1965 16.000 14.500 $145,109,767 112,595,456 32,514,311 $136,156,901 96,979,226 39,177,675 5,560,331 2,480,559 1,250,000 41,805,201 1,982,553 2,300,335 1,250,000 44,710,563 3,732,142 _ 1,248,651 4,426,707 853,906 8,826,341 19,087,747 22,717,454 -- $ 22,717,454 3,478,610 -- 595,396 4,860,834 1,121,922 11,887,303 21,944,065 22,766,498 14,610 $ 22,781,108 (l)Adjusted to reflect the 10% stock dividend paid December 21, 1962, and the three-for-two stock split effected September 30,1964. <211967 and 1966 stated at average shares outstand ing during the year; prior years at shares outstand ing at end of the year. 26 Per Share Outstanding'11 $4.82',) Percent Gross Profits from Sales Applicable to; Lead................................................... Zinc ...................................................... Iron ................................................... 40 48 12 Total Assets....................... ...................... Current Assets....................................... Current Liabilities.......... ........................ Current Ratio (to 1)................................. ' : : ' ; .. .Y : , Shareholders' Equity; Amount .........................-- Per share outstanding at end of year"1 $169,400,281 69,233,758 14,228,072 4.87 $133,792,532 $29.83 $4.99u> $4.98 36 52 12 $164,488,342 68,814,652 17,768,371 3.87 50 43 7 $158,733,300 74,347,349 17,129,015 4.34 $125,171,922 $27.84 $117,290,252 $25.66 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 1964 13.596 13.568 1963 11.137 11.997 $109,509,039 83,481,096 26,027,943 $ 75,598,525 57,932,666 17,665,859 1962 9.631 11.625 $ 67,981,883 58,106,248 9,875,635 1961 10.871 11.542 1960 11.948 12.946 $ 71,008,301 58,063,668 12,944,633 $ 79,970,908 69,062,502 10,908,406 1959 12.211 11.448 $ 86,611,677 72,804,292 13,807,385 1958 12.109 10.309 $ 76,075,865 67,370,230 8,705,635 4,455,494 1,779,855 1,250,000 33,513,292 2,613,188 781,304 1,250,000 22,310,351 3,588,027 952,053 729,166 15,144,881 1,634,422 2,493,264 -- 17,072,319 1,991,830 551,587 - 13,451,823 2,276,864 732,196 -- 16,816,445 2,762,943 321,775 -- 11,790,353 3,209,101 -- 718,666 4,551,255 1,378,073 5,744,418 15,601,513 17,911,779 2,332,715 2,657,207 1,566,461 1,657,847 3,897,981 975,111 1,651,971 12,406,578 9,903,773 -- $ 20,244,494 $ 9,903,773 $4.44 $2.18 2,542,330 1,844,107 2,770,751 3,538,848 1,142,997 518,216 12,357,249 2,787,632 1,532,241 $ 4,319,873 $.96 2,272,135 ' -- 2,304,202 3,180,607 1,136,735 1,846,444 10,740,123 6,332,196 -- 2,322,476 - 2,880,829 3,766,920 1,172,042 337,488 10,479,755 2,972,068 $ 6,332,196 $ 2,972,068 $1.41 $.66 2,355,219 316,272 1,850,551 3,334,648 1,154,307 1,542,372 10,553,369 6,263,076 -- $ 6,263,076 $1.40 2,310,268 -- 1,522,462 2,754,733 513,973 702,037 7,803,473 3,986,880 -- $ 3,986,880 $.89 41 29 6 26 26 42 33 59 71 94 74 74 58 67 $153,707,601 70,071,803 14,222,293 4.93 $123,611,533 45,422,385 11,352,128 4.00 $117,897,308 46,823,524 8,753,333 5.35 $120,298,163 54,787,270 11,276,912 4.86 $116,545,876 45,178,167 7,485,650 6.04 $117,549,738 50,098,983 7,456,767 6.72 $107,679,085 45,791,438 5,786,183 7.91 $104,778,131 $22.98 $ 91,795,960 $20.21 $ 84,578,891 $18.86 $ 82,967,539 : $ 79,349,540 $18.50 $17.70 $ 79,064,194 $17.64 $ 75,517,340 $16.85 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST. JOSEPH LEAD COMPANY and Consolidated Subsidiaries WORKING CAPITAL ANALYSIS AND GENERAL STATISTICS 1958-1967 WORKING CAPITAL 1967 1966 1965 Source Earnings ......................................... .. Provision for Depreciation and Depletion..................................... Long-term Borrowings........................... Sale of Investments............................... Other, Net ........................................... ... Total $ 21,634,733 5,518,476 -- -- -- $ 27,153,209 $ 22,717,454 4,426,707 -- 4,000 1,066,522 $ 28,214,683 $ 22,781,108 4,860,834 -- 5,724,028 551,519 $ 33,917,489 Use Dividends Paid: Shares outstanding at end of year,. Per share .............................................. Amount .........................--.............. Capital Expenditures ............................ Investments........ .................................... Repayment of Debt.......... ...................... Purchase of Company stock for stock options ................................. Other, Net............................................... Total Working Capital at End of Year 4,485,638 $2.80 $ 12,568,349 8,316,355 484,871 1,000,000 507,813 316,417 $ 23,193,805 $ 55,005,686 4,496,267 $2.65 $ 12,050,896 15,711,952 217,411 3,550,000 2,856,476 -- $ 34,386,735 $ 51,046,282 4,570,565 $2.30 $ 10,503,786 10,265,587 607,863 11,171,429 -- $ 32,548,665 $ 57,218,334 GENERAL STATISTICS Number of Shareholders ................. .... United States Employees: Number............................................... Salary and wage costs..................... Pension and Retirement Plans: Members ............................................. Contributions ............ ........................ Pensioners ............................... .......... Pension Payments........ .................... Deferred Profit Sharing Plan: Eligible employees ............................. Contributions ............ .................. ..... 18,585 3,959 $ 32,038,839 2,796 $ 1,967,573 1,097 $ 700,907 758 $ 649,042 16,204 3,986 $ 30,098,896 2,910 $ 1,154,212 1,081 $ 624,676 675 $ 679,585 11,792 3,820 $ 27,900,722 2,911 $ 2,384,779 1,047 $ 606,841 666 $ 636,135 28 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 1964 1963 1962 1961 1960 1959 1958 $ 20,244,494 4,551,255 18,000,000 197,213 1,773,262 $ 44,766,224 $ 9,903,773 3,897,981 $ 13,801,754 $ 4,319,873 3,538,848 3,000,000 $ 10,858,721 $ 6,332,196 3,180,607 8,549,758 179,429 $15,241,990 $ 2,972,068 3,766,920 $ 6,738,988 $ 6,263,076 3,334,648 5,000,000 1,509,628 $ 16,107,352 $ 3,986,880 2,754,733 15,000,000 1,108,897 $ 22,850,510 4,560,078 $1.66 $ 7,588,828 8,314,200 2,376,800 4,707,143 3,028,217 $1.25 $ 3,763,404 3,186,963 5,866,947 4,290,476 2,989,382 $1.00 $ 2,717,622 3,750,014 4,634,987 4,290,476 2,717,322 $1.00 $ 2,717,247 2,445,243 3,554,516 3,707,143 2,717,222 $1.00 $ 2,717,222 5,912,656 1,891,994 850,000 2,716,222 $1.00 $ 2,716,222 9,283,290 620,879 850,000 2,716,222 $1.00 $ 2,716,222 11,830,509 1,857,468 $ 22,986,971 $ 55,849,510 693,897 $.17,801,687 $ 34,070,257 905,790 $ 16,298,889 $ 38,070,190 $ 12,424,149 $43,510,358 316,815 $ 11,688,687 $ 37,692,517 $ 13,470,391 $ 42,642,216 $ 16,404,199 $ 40,005,255 9,107 3,769 $ 24,926,760 2,788 $ 1,314,415 1,023 $ 537,621 669 $ 590,768 8,772 3,621 $ 20,813,527 2,628 $ 814,733 937 $ 496,194 687 $ 297,113 8,986 3,774 $ 19,781,411 2,777 $ 939,017 920 $ 457,701 683 9,740 3,871 $ 22,598,389 2,789 $ 944,152 886 $ 434,517 702 $ 1&9;966 10,651 4,171 $ 24,803,687 2,690 $ 1,049,557 819 $ 355,782 698 11,812 4,263 $ 22,670,522 2,622 $ 780,000 822 $ 331,550 682 $ 187,892 13,315 4,581 $ 23,755,404 2,448 $ 826,198 780 $ 303,019 693 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UNITED STATES LEAD STATISTICS IN SHORT TONS Current Supply: Recoverable U. S. mine production ....................... From U. S. stockpile ...................................................... From scrap .................................................................... Imports of concentrates and bullion (lead content) .. Metal imports (net) .................................... -- ........... Total Lead Equivalent Available............. Consumption: Batteries .................................. Gasoline anti-knock additives . Cables .................... .................. Construction............ ............... Pigments.................... ............ Other uses................................ Total Consumption 1967 (Estimated) 315,000 15,000 575,000 125,000 357,000 1,387,000 463,000 253,000 65,000 96,000 104,000 279,000 1,260,000 1966 (Final) 327,000 72,000 573,000 147,000 280,000 1,399,000 472,000 247,000 66,000 114,000 120,000 305,000 1,324,000 UNITED STATES ZINC STATISTICS IN SHORT TONS Current Supply: Recoverable U. S. mine production............................ Less-used to, make pigments ................................ ... Recoverable domestic zinc available to metal smelters.................................................................. From U. S. stockpile ........ .......................................... From scrap.................................................................... Imports of concentrates (recoverable zinc content) .. Imports of slab zinc...................................................... Total Zinc Equivalent Available.............. 1967 (Estimated) 550.000 90.000 460.000 13.000 70.000 500.000 280.000 1,323,000 1966 (Final) 573.000 97.000 476.000 43.000 72.000 521.000 277,000 1,389,000 Consumption: Galvanizing................. --................ ..................... Zinc-base alloys............................ ............................ Brass .......................... ................................................... Rolled zinc...................................................................... Oxides...................... ......................................... ............ Other ...................................... ................................... Total Consumption.................................. Exports ...................... ................................................... Total Zinc Metal Consumed and Exported 454.000 522.000 135.000 45.000 32.000 35.000 1.223.000 17.000 1.240.000 496.000 606.000 186,000 53.000 28.000 41,000 1.410.000 1,000 1.411.000 30 /\ Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ST, JOSEPH LEAD COMPANY LEAD STATISTICS IN SHORT TONS Year 1958 . 1959 . 1960 . 1961 . 1962 , 1963 . 1964 . 1965 . 1966 . 1967 . . Lead Concentrates Produced from Company's Mines 149,624 143,167 147,879 139,817 86,375 113,801 170,704 189,962 189,225 224,233 Net Lead Raw Materials Purchased 25,102 8,300 13,656 4,927 4,453 2,773 3,528 4,086 4,796 4,489 Pig Lead Production 116,799 101,478 98,447 116,148 77,156 81,319 117,643 133,601 118,354 124,480 Pig Lead Purchased 51,569 50,306 33,209 17 10,357 8,724 9,135 69,201 18,996 Pig Lead Sales Including 1958-1960 Sales Under Agency Contracts 139,131 164,084 131,852 108,447 112,857 96,692 125,177 142,243 175,762 160,115 ST. JOSEPH LEAD COMPANY ZINC STATISTICS IN SHORT TONS Year 1958 ... 1959 ... 1960 ... 1961 .. . 1962 ... 1963 . .. 1964 . . . 1965 . .. 1966 ... 1967 ... Zinc Concentrates Produced from Company's Mines 99,523 81,292 128,762 111,598 104,080 99,914 117,473 140,284 147,860 147,361 Net Zinc Raw Materials Purchased 110,182 121,611 166,613 123,882 170,281 153,053 214,772 229,958 250,413 231,283 Slab Zinc Equivalent of Smelter Production 122,774 128,670 148,788 141,209 153,968 174,089 193,444 202,657 216,910 212,338 Purchased Zinc 46,453 44,334 26,730 8,511 4,709 6,726 15,538 21,058 9,874 1,118 Slab Zinc Equivalent of Sales 174,083 179,478 158,276 162,005 152,258 178,515 211,731 221,329 214,189 208,150 Sulphuric Acid Sales 171,938 176,607 186,722 194,327 189,866 211,930 243,920 237,305 252,987 229,678 IRON ORE PELLET STATISTICS IN LONG TONS (ST. JOE SHARE) Year 1964 1965 1966 1967 Production 407,814 791,439 869,239 903,069 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 31 ST, JOSEPH LEAD COMPANY BOARD OF TRUSTEES (Year Elected) EXECUTIVE OFFICERS MANAGER OF EXPLORATIONS UNITED STATES DIVISION MANAGERS Cia. Mlnera Aguilar, $. A,, Argentina Cia. Minerales Santander, Inc,, Peru Meramec Mining Company General Counsel Transfer Agent Auditors Registrar 32 Incorporated March 25,1864, under the laws of the State of New York Executive Office 250 Park Avenue, New York, N, Y, 10017 David R. Calhoun, Chairman and President, St. Louis Union Trust Company, Si. Louis, Missouri (1957) Francis Cameron*, Chairman of the Board (1953) Eli Whitney Debevolse*, Partner, Debevolse, Plimpton, Lyons & Gates, New York, N.Y. (1954) Bernard F. Desloge, President, Minerva Oil Company, St. Louis, Missouri (1953) Warren E. Fenzi, Executive Vice President, Phelps Dodge Corporation, New York, N. Y. (1967) Andrew Fletcher, Honorary Chairman and Chairman of the Finance Committee (1921) Elmer A. Jonest, Division Manager(l963) Wing L. Lewi, Executive Vice President, Cia. Miners Aguilar, S.A., Argentina (I960) Plato Malozemoff*. President and Chairman, Newmont Mining Corporation, New York, N. Y. (1961) J. Wesley Me Afee, Chairman, Union Electric Company, St. Louis, Missouri (1954) Joseph Pursglove, Jr,, Vice President, Consolidation Coal Co., Pittsburgh, Pa. (1959) Robert H. Ramsey*, Executive Vice President (1964) Lawrason Riggs III*, President (1963) Guido F. Verbeck, Jr., Senior Vice President, Morgan Guaranty Trust Company of New York, New York, N. Y. (1961) Member of Executive Committee fResIgned January 5,1968 ^Elected February 20,1968 Francis Cameron Chairman ! Lawrason Riggs III President Robert H. Ramsey Executive Vice President Malcolm Bonynge Vice President James G. Colvin* Wee President & Treasurer Died February 18,1968 , D. Broward Craig Vice President & Secretary John R. Englehorn Vice President Marketing & Development Edward P. Merrell Assistant Treasurer William L. Murphy, Jr. Comptroller & Assistant Secretary Frank J. Reidy Assistant Comptroller Norman H, Donald, Jr. Mines Lawrence W. Casteel, Southeast Missouri Mark E. Riley, Balmat-Edwards, New York Smelters John W. Sherman, Herculaneum, Missouri Charles D. Henderson, Josephtown, Pennsylvania Wing L. Lew, Executive Vice President John E. Loser, Managing Director Clinton L. Miller, Vice President & General Manager Robert G. Peels, Manager Debevolse, Plimpton, Lyons & Gates, 320 Park Avenue, New York, N.Y. 10022 Bankers Trust Company, 16 Wall Street, New York, N. Y. 10015 Haskins & Sells, Two Broadway, New York, N. Y. 10004 The First National City Bank, 55 Wall Street, New York, N. Y. 10005 Annual Meeting Notice st. Joe's 1968 Annual Meeting will be held at 2:00 p,M, Monday, May 13, 1968, at the Barbizon Plaza Hotel, New York City. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 4SSEE* ST* J0SEpH LEAD COMPANY 250 PARK AVENUE' NEW YORK, N. Y. 10017 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.