Document mzwyRZ3gLVRjRVJDJ5Y0azBB

W iem ! Contents 1 Financial Highlights 2 Letter to Shareholders 5 Financial Review 11 Operations Review Insert The Ethyl Story 17 Products 18 Offices, Plants, Laboratories 20 Financial Statements 28 Officers, Directors, Subsidiaries Annual Meeting The annual meeting of Ethyl Corporation stockholders will be held in Richmond, Va,, on Thursday, May 23,1963. A formal notice of the meeting, together with a proxy statement and proxy form, has been mailed to stockholders. Stock Transfer Agents First and Merchants National Bank, Richmond, Va. General Counsel Hunton, .Williams, Gay, Powell & Gibson, Richmond, Va. Executive Offices 330 South Fourth Street, Richmond, Va. 100 Park Avenue, New York 17, N. Y. i i i j i >' i I t i * i l i ETHYL CORPORATION ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 1963 FINANCIAL HIGHLIGHTS Fiscal Year Ended March 31 Net Sales............................. Taxes on Income.................. Net Income.......................... Cash Flow............................. Net Income per Share of Common Stocks)............... Cash Dividends: Preferred Stock ...... Common Stock.................. Earnings Retained in Business Depreciation, Depletion and Amortization............... Capital Expenditures .... Total Assets.......................... Working Capital.................. Book Value per Share of Common Stock.................. 196311J $ 99,814,250 4,455,000 4,380,731 12,117,007 3.79 283,488 554,701 3,542,542 6,555,892 4,838,805 284,909,145 63,000,811 31.86N) 1962(2) $48,578,227 1,719,051 1,762,266 4,211,875 1.47 250,388 509,143 1,002,735 2,294,903 4,820,189 46,925,252 10,313,111 20.10 |1) 1963 figures include four months of combnieil operations. |2) 1962 figures include Albemarle operations only. (3) Based on the average number of shares outstanding in each year. (4) Includes addition to capital surplus of J9.37 per share resulting from sale of warrants. See Mote 10 in Notes to Financial Statements. ETC 16804 To Our Shareholders: The past fiscal year was a historic one for your Company. The Company began the year, its 76th, as Albemarle Paper Manufacturing Company. It ended the year as a company of greatly expanded size, engaged in both the chemical and the paper businesses, under a new name. The events that accomplished this transformation were, of course, the acquisition of Ethyl Corporation, its merger with Albemarle and the formation of a new organization. Developments leading to the acquisition of Ethyl go back several years when the Albemarle management became concerned by the inroads being made by plastics in the paper business. Because of this trend, it was decided to make a search for companies in the chemical and plastics field which might be acquired by Albemarle. In the course of this search it was learned that it might be possible to acquire Ethyl Corporation, owned jointly by General Motors Corporation and Standard Oil Company (New Jersey). This development opened up the opportunity to acquire a major chemical business with a base for entering into plastics. Ethyl is a major manufacturer of antiknock compounds for gasoline and has a growing business in other chemi cals. It also is a major producer of vinyl chloride monomer and has devoted considerable research to the development of polymers, basic materials in the manufacture of plastic products. Plans for the acquisition were approved at a special meeting of stockholders on November 12,1962. Ownership of all of the outstanding stock of Ethyl Corpora tion was acquired on November 30. The two companies were merged and the name of the combined company became Ethyl Corporation, incorporated in Virginia. Under the new organization, Ethyl, as the parent company, conducts the chemical operations, while paper production and converting operations are conducted by certain subsidiaries, principally Albemarle Paper Manufacturing Company. Members of the former Ethyl organization have remained with the Company and their knowledge and experience insure the continuation of efficient operation of chemical activities. The management of the Company represents a combination of executive personnel from both the former Albemarle and the former Ethyl organizations. Extensive financing was involved in carrying out the acquisition. Details of this financing are discussed under the heading "Acquisition of Ethyl Corporation and Long-Term Debt" in the Financial Review section of this report. The cash flow under the new capitalization of the Company is expected to provide ade- 2 ETC 16805 4 ^ * - 4 > Members of the Board of Directors (from left around table) are: Lewis F. Powell, Jr., Bruce C. Gottwald, Joseph A. Costello, Malcolm P. Murdock, Robert T. Marsh, Jr., George F. Kirby, B. B. Turner, Floyd D. Gottwald. Floyd D. Gottwald, Jr., William R. Perdue, Jr., S. Douglas Fleet, Frank A. Howard, S. Buford Scott, Edward L. Shea and Joseph M. Lowry. quately for debt retirement and to make available substantial sums for capital investment. The sale of warrants to purchase 400,000 shares of common stock of the Company at $27.50 per share was necessary in connection with the sale of $50,000,000 of 20-year subordinated notes. The warrants may be exercised at any time during the next 20 years. When exercised, they will cause some dilution of common stock equity, but this dilution is considered relatively small in the light of the increase in the per-share earnings of the presently outstanding shares that was accomplished by the acquisition of the chemical business. Upon full exercise of the warrants, $11,000,000 additional capital will be paid into the Company. In accordance with the plan adopted by the stockholders on November 12, 1962, restricted stock options have been issued to key personnel, including officers who are also stockholders and members of the board of directors. Up to March 31, 1963, options for the purchase of 134,500 shares of Class B Common Stock of the Company had been issued (out of 150,000 shares authorized under the Stock Option Plan approved by the stockholders). The options are exercisable over peri ods up to 10 years. Prices at which they may be exercised vary, depending on the market price at date of issue of option, the lowest being $56.50 per share. Upon full exercise of these outstanding options, $8,118,750 additional capital will be paid into the Company. Today, the combined Company makes a number and variety of chemical and paper products which are listed on page 17 of this report. It is expected that these products will be the basis for expansion and diversification for both chemi- 3 ETC 16806 mtu - cal and paper operations, while the Company continues to emphasize its antiknock compound and kraft paper businesses. Since the all-time high year of 1956, the profitability of the antiknock com pound business has been reduced as a result of decline in overall demand and de clining prices. As a result, the profits of the former Ethyl Corporation were, at the time of acquisition, considerably below those of previous years. This was a factor in the negotiation of the purchase price paid for that corporation. The decline in consumption of antiknock compounds now appears to have ended and an in crease in demand occurred in 1962. At the same time, competitive pressures con tinue to be vigorous. In the Company's paper business, product prices suffered one of their greatest declines during the last fiscal year. Profits for the first two quarters compared favorably with previous years, but profits in the last two quarters suffered un expectedly from the price decline. Some firming of prices is already evident, and it is hoped that the chaotic price situation of last year will not be repeated. Efforts are constantly being made to upgrade the Company's paper production to provide improved profit margins. Besides the acquisition of Ethyl Corporation, the year was highlighted by Albemarle moving into its new office building in Richmond. The fiscal year ended March 31,1963, is made up of eight months of paper operations (April 1, 1962 to November 30, 1962) and four months of combined paper and chemical operations (December 1, 1962 to March 31, 1963). Earnings per share for the fiscal year, based on the number of Class A and Class B Common Shares outstanding, amounted to $3.79 per share, after 20? per share effect of non recurring expenses in connection with recapitalization. The Company is consider ing changing its annual accounting period to a calendar year basis. Management has received numerous requests from stockholders and others for earnings figures for the combined operation that may be used for comparison purposes and as an indication of annual earnings. Past earnings of the two com panies are not meaningful because of substantial changes in debt structures and capitalization made in connection with the acquisition on November 30, 1962. Earnings for the first quarter of 1963 were $2,753,000 or $2.26 per share. Historic ally, there is a seasonal variation in antiknock sales and such sales in the first quarter are less than 25 percent of annual sales. After adjustment for seasonal and other factors, it is estimated that the first quarter results would represent, on an annual basis, earnings of approximately $10 per share. We would like to express to employees, customers, suppliers and stock holders appreciation for their outstanding support during this eventful year. President 4 Chairman of the Board ETC 1680T Financial Review Sales and Marketing Net sales of the Company and its sub sidiaries for the fiscal year ended March 31, 1963, increased from last year's $48,578,227 to $99,814,250. The increase is at tributable to the inclusion of four months operations of the new chemical business (Ethyl Corporation, Delaware] acquired from General Motors and Standard Oil Company (New Jersey) on November 30, 1962. For several years prior to 1962, the over all consumption of antiknock compounds in the United States had been decreasing. From the peak year of 1956, until 1961, the total decline was about 10 percent and was due to a number of factors. Usage of antiknock compounds in aviation gasoline was reduced substantially by the shift to jet aircraft which do not use gasoline. Consumption also was affected by the in crease in the number of compact cars us ing lower octane motor fuel. The exten sive development of catalytic reformers in 1955 and subsequent years and the rela tively low operating rate of domestic re fineries also contributed to the decline. In addition, Ethyl's sales volume was ad versely affected by a decision not to join with a major foreign customer in con structing a joint production facility. Fiowever, there are indications that sub stantially all of the impact of these factors had been felt by 1962. Total domestic de mand for antiknock compounds increased that year and is expected to rise further during the next several years. While the demand is increasing, the antiknock compound market is growing more competitive, with established sup pliers stepping up sales efforts and new producers entering the field. In the face of this competition, Ethyl, the original and best-known marketer, continues to enjoy a strong basic position in the antiknock compound industry. The Company's reputation for providing cus tomer oil refiners with dependable ontime delivery of consistently high-quality products and its program of valued serv ices--presented by experienced represen tatives--strengthen this position. With the increased consumption of pe troleum products of all kinds and the more widespread use of additives in these products, Ethyl's sales of additives, other than antiknock compounds, to the petro leum industry increased five percent over the preceding year. Sales of vinyl chloride monomer, which is used in the manufacture of modern plastics, continued at a high rate. All of the coming year's production of caustic and chlorine, made in the new unit at Baton Rouge, is either committed for use in chemical manufacturing operations there or has been sold. Satisfactory prog ress was made in the sale of other chem icals made by the Company for use in rubber, plastics, chemical and other in dustries. In Canada, demand for antiknock com pounds was higher than during the pre ceding year. Ethyl Corporation of Can ada Limited, a wholly-owned subsidiary, which devotes its manufacturing activi ties to the production of antiknock com pounds, increased its 1962 sales dollar volume substantially. Overseas, chemical products were sold in 63 foreign countries and sales are in creasing. In the kraft paper industry, competition continues to be very keen, but there is now some indication of a trend toward improved prices. Not only have prices of the Company's kraft papers been under pressure most of the year, but the prices of converted products also have been hard 5 ETC 16808 hit. The latter include multiwall shipping sacks, shopping bags, corrugated shipping containers, waterproof and waxed papers, which have all been victims of a price de cline of unexpected severity and duration. Prices of blotting and absorbent special ties have held firm. The number of orders fer saturated papers is the largest in the Company's history and it is anticipated that this phase of the business will enjoy a good year. Interstate Bag Company, a subsidiary engaged in manufacturing shopping bags, increased unit and sales volume substan tially for the year, with earnings holding steady. New styles were added to the Carryall shopping bag product line. Sales and engineering staffs have been reinforced for dealing with new market conditions to provide technology to main tain leadership position in this highly competitive field. Earnings Earnings increased from $1,762,266 last year to $4,380,731, due to the inclusion of four months operations of the new chem ical business. The fiscal year ended March 31, 1963 is made up of eight months of paper operations (April 1,1962 to Novem ber 30,1962) and four months of combined operations (December 1, 1962 to March 31, 1963). This year's earnings were charged with the following nonrecurring expenses: Premium on Prepayment of $13,000,000 First Mortgage Bonds--Debt of Old Albemarle, Re financed .........................................................$292,500 Unamortized Balance of Mortgage and Deben ture Expense ................................................ 147,593 $440,093 In addition, there were charges represent ing expenses incurred in connection with the new financing which have been paid, but are being amortized from earnings over a period approximating the life of the indebtedness. During the last four months of the year, amortization of these charges was as follows: Financing Expenses.......................................$ 34,724 Appraisal and Other Expense.......................... 15,493 Note Discount................................................ 194,784 Total............................................................ $245,001 6 Total Assets Year ended March 31 Milieu of OoiUts 300 ----------- Working Capital Year ended March 32 Milieu of Ooltsrt --:-------- SO 55 50 45 40 35 30 25 20 15 10 1954 55 56 57 58 59 60 61 H 63 5 0 On an annual basis, these items will in volve charges against earnings of approx imately $735,000 (which are deductible for taxes), but will not require any future cash expenditure. Convertible Debentures, Capital Stock and Dividends During the year, $2,522,300 principal amount of debentures were converted into 157,688 shares of Class B Common Stock, thus bringing the total outstanding Class A and Class B Common Stock to 1,187,362 shares at March 31, 1963. Warrants to purchase 400,000 shares of Class B Common Stock of the Company were sold to the purchasers of the $50 mil lion face amount of Subordinated Notes due 1979-1982. In accordance with the plan adopted by the stockholders on November 12, 1962, restricted stock options to purchase 134,500 shares (of a total authorized of 150,000) of Class B Common Stock of the Company were issued to key personnel up to March 31,1963. Cash dividends totaled $838,189 for the year--50$ per share on Class A and Class B Common Stock and $6 per share on the Cumulative Preferred. As required by the Sinking Fund, $205,900 par value of Preferred Stock was re tired during the year. The Treasury Stock (1,018 shares) as shown in the March 31, 1963 balance sheet will be used to satisfy, in part, the 1963 Sinking Fund require ments. Acquisition of Ethyl Corporation and Long-Term Debt On November 30, 1962, culminating some months of negotiation, the chemical busi ness was acquired by Albemarle Paper Manufacturing Company by the purchase of all of the outstanding shares of Ethyl Corporation (a Delaware corporation) cap ital stock for a price of $116,366,264 and by the assumption of substantial liabilities. On the same day, the former Ethyl Corpo ration was merged into Albemarle Paper Manufacturing Company and the name of the surviving corporation was changed to Ethyl Corporation (a Virginia corpora tion). A total of $200 million was borrowed to finance the acquisition, to refinance cer tain of the debts of the combined cornpanies and to provide additional working capital. The following table shows the items for which the debt was incurred: Paid to Genera! Motors and Standard Oil Company (N. i.)................. SI 16,366,264 Payment of Bank Loan which was Assumed on Purchase of Chemical Business . . . 43,000,000 Payment of Albemarle Mortgage Debt. . 13,000,000 Increase in Working Capital...................... 27,633,736 Total New Debt.............................. 200,000,000 Debt of Canadian Subsidiary Assumed on Purchase of Chemical Business.... 7,361,074 Total Debt at November 30, 1962 . 207,361,074 Less: Current Year Prepayments...................... Portion of Debt Due Within a Year, In cluded in Current Liabilities .... 2,079,924 8,905.831 Long Term Debt at March 31, 1963 . 3196,375,319 The $43 million bank loan shown above was obtained in November 1962, to permit the payment to the former stockholders of Ethyl of the entire earned surplus of the j Summary of Long-Term Debt | 5Vi% Bank Loan--One $8,000,000 Annually 1983-1964 ......................$ 16,000,000 , The Chase Manhattan Bank 544% Senior Notea--Due $8,000,000 Annually 1965-1978 ................. 114,000,000 The Prudential Insurance Company of America The Equitable Life Assurance Society of the United States i The Northwestern Mutual Life Insurance Company j New York Life Insurance Company , 544% Subordinated Notes--One Annually to 1967 ................................... i (Amounts of Required Annual Payments are Based on Earnings) 20,000,000 j j General Motors Corporation I | Standard Oil Company (New Jersey) I 544% Subordinated Nates with Warrants--One 1979-1962 ................. Privately Placed with Various Investors 50,000,000 j New Debt Incurred.................................................... .... 200,000,000 Debt AssnaMd ! i 344% Guaranteed Notes--One 1963-1970 ....................................... 7,361,074 Three Canadian Banks This debt is owed by the Canadian subsidiary and is guaranteed by the parent company | Total Debt at November 30, 1962 ........................................... 207,361,074 j Current Year Prepayments on 544% Subordinated Notes due 1967 and 344% Guaranteed Notes......................................................................... 2,079,924 Total Debt at March 31, 1963 .................................................... $205,281,150 corporation as of October 31, 1962, prior to the sale of its capital stock to Albe marle on November 30, 1962. As shown in the table above, $200,000,000 of new debt was incurred, and $7,361,074 of existing debt was assumed. The sepa rate borrowings which constitute the total debt together with the names of the lend ers are shown in an accompanying box en titled "Summary of Long-Term Debt". Warrants to purchase 400,000 shares of Class B Common Stock of the Company at $27.50 per share were issued with the $50 million face amount of 5'/% Subordinated Notes Due 1979-1982. The proceeds of sale of the units were allocated as follows: Each Si,OOO Unit Notes.............................. . $ 777.48 Warrants for 8 Shares . 222.52 Total Proceeds . . . $1,000.00 TotaJ Units $50,000,000 $38,873,934 11,126,066 $50,000,000 The proceeds of sale of the Warrants of $11,126,066 were added to the capital of the Company and a like amount was re corded as discount on the sale of the notes. The discount will be amortized over the twenty-year period of the notes and is deductible for income tax purposes, there by resulting in an average reduction in income taxes of approximately $300,000 per year. The cost of the assets acquired in the merger with Ethyl is made up of the fol lowing: Amount Paid for Stock..................................$116,366,264 Liabilities Assumed................................... 73,585,552 Total Cost.......................................... $189,951,816 The assets were appraised by The Ameri can Appraisal Company and C. F. Braun & Co. On the basis of the appraisal, the total cost as of November 30, 1962 was allocated as shown below: Cost Allocated to Assets Property, Plant t Equipment.....................$123,582,800 Inventories ................................................ 20,326,877 Stock of Affiliates................................... 6,019,720 Patents, Contracts & Otherintangibles . 9,633,943 Cash and Cash Items.............................. 30,388,476 $189,951,816 8 ETc lean The new secondary headbox installed on the No. 4 kraft paper machine at the Roanoke Rapids, N.C., mill increases flexibility and production capacity. Depreciation is based on the estimated lives of the assets as determined by the appraisers. To conserve cash and add to the Company's cash flow in the early years, depreciation on the fixed assets is taken on accelerated methods for Federal income tax purposes only. Income has been charged with the deferred income tax. The paper manufacturing business and assets of the Company were transferred to a subsidiary, Halifax Paper Company, Inc., which in turn, changed its name to Albe marle Paper Manufacturing Company. Cash Flow, Source and Disposition of Funds, and Working Capital The following tabulation shows the source and disposition of funds for the year and also gives a brief breakdown of the cost of the Ethyl (Delaware) stock. Source of Fundi Net Earnings.......................................$ Depreciation and Other Charges not Re quiring Cash Outlay.......................... 4,380,731 7,736,276 Total Cash Flow.......................... 12,117,007 Sale of Notes and Warrants.................. 200,000,000 $212,117,007 Disposition ef Funds Assets Acquired in Ethyl (Del.) Merger: Property, Plant and Equipment . . $123,582,800 Other Assets................................... 35,783,464 Loan Assumed................................... (43,000,000) Total Cost of Ethyl Corporation (Del.) Stock.............................. 116,366,264 Payment of Debt (includes $43,000,000 assumed in merger)...................... 58,079,924 Property, Plant and Equipment--New . 4,838,805 Dividends ........................................... 838,189 Increase in Working Capital and Other Uses of Funds................................... 31,993,825 $212,117,007 It is estimated that on an annual basis de preciation, depletion and amortization for the calendar year 1963 will be approxi mately $15,500,000. At March 31, 1963, working capital amounted to $63,000,811. The ratio of cur rent assets to liabilities was $2.75 to $1.00. 9 ETC 16812 Operations Review Manufacturing The major efforts in chemicals manufac turing during the year have been directed at improving the operating efficiency of the various plants. This program, a con tinuation of a similar one in effect for many years, improved the utilization of manpower, materials and facilities and is designed to offset increases in the cost of manhours, certain raw materials, taxes and other operating expenses. A new caustic-chlorine production unit at the Baton Rouge plant, which partially utilizes some unused facilities not needed for sodium production, was completed and went into operation in January of this year. Facilities for the production of anti oxidants and aluminum alkyls were ex panded during the year, and new facilities for the production of two missile propel lant components were built. In the manufacture of both pulp and paper, new records, both in quantity of production and in lower costs, were set during the year. A new secondary headbox was installed on the Number Four paper machine at the Roanoke Rapids, N. C., plant and facilities for heating the water in the wire pit of this machine were completed. This work, to gether with other improvements in the dry ing capacity of the machine, increased its production capabilities on certain grades of paper by about 25 percent. At the same time, the work made possible greater flexi bility in handling quality grades. A semi-commercial unit for the produc tion of cast coated bleached paper board, using a process developed and patented by Albemarle, was installed at the Rich- Vinyl chJoride produced in these facilities at the Baton Rouge p/ant -- and at the Houston pJant -- is so/d in tank-car quantities for conversion into polyvinyl chloride, one of the most widely used modern plastics. Sa/t brine is decomposed into chlorine and caus tic cell liquor in electrolytic ceils in a new pro duction unit at the Baton Aouge plant. mond division. Production on this unit is progressing satisfactorily. Production of waterproof, absorbent, filter and saturated papers showed no significant change from the preceding year. The first portion of the new Albemarle Container division plant at Odenton, Md., was completed and occupied last summer. The fine layout of this plant--one of the best in the corrugated container field in the Baltimore area -- offers a number of advantages. At the Raymond Bag division, develop ment of a special-purpose bag, incorporat ing use of plastic coated paper and an inner ply of free plastic films, progressed satisfactorily. In addition, work is going forward on the development of our own plastic films. At Interstate Bag Company, contemplated additions in machinery and warehousing during the coming year are expected to improve efficiency in the manufacture and distribution of shopping bags and help 11 ETC 16814 meet the increasing challenges of compe tition and softening prices. Pulpwood Supply and Forest Management Nearly 450,000 cords of pulpwood were purchased to satisfy mill requirements during the year. Of this total, 28 percent, or 125,000 cords, was in the form of chips made from residue at sawmills. The purchase of pulpwood by weight, initiated at the Roanoke Rapids, N. C., mill last year for all truck-delivered pulpwood, benefits both buyer and seller and is being expanded. As part of this program, two of the Company's 13 mechanized pulpwood buying yards were equipped with scales. Wood transportation costs continue to rise as a result of increasing railroad freight rates and because increasing mill demands make it necessary to buy pulp wood at greater distances from the mill. To combat these rising costs, efforts are being made to increase the amount of truck-delivered pulpwood. Tree planting and seeding continued on Company woodland, with about 1,600 acres reforested during the year. A helicopter was again used in seeding operations. Through a planned cutting program, over 10 percent of round pulpwood require ments was supplied from the 200,000 acres of woodland owned or held under long-term lease by the Company. While Company woodlands are capable of sup plying a much greater percent of raw mate rial needs, an excess of growth volume over cut volume is being allowed to ac cumulate to increase growing stock and provide for additional growth potential in the future. Since it will be several years before genetically superior seed orchards will be in volume production, an interim program has been initiated to provide improved pine seedlings for reforests?;'m of Com pany woodlands and for distribute'.. to private tree farmers in the Company's wood procurement area. Employee and Public Relations The Company has enjoyed good employee and labor relations and there have been The first portion of the new Albemarle Container Division plant at Odenton. Md., was completed during the year. It includes an efficient layout offering a number of production advantages. 12 ETC 16815 H no work stoppages during the year. Wages, salaries and benefit plans compare favor ably with patterns prevailing in the respec tive industries and areas in which the Company operates. Safety records at all locations continue to be gratifyingly good. At the end of the year, the total number of employees of Ethyl Corporation and its wholly-owned subsidiaries was 6,444. As in the past, public relations also have been good. An open house for employees, their families and the public was held at the new office building in Richmond. Floyd D. Gottwald spoke on "Albemarle, from Pines to Packaging, 75 years of Papermak ing Progress" at the dinner in Richmond presented by the Newcomen Society in North America in honor of Albemarle's 75th anniversary. The Ethyl manufactur With the Chemical Trader, the Company pioneered in tank-ship delivery of bulk quantities of anti knock compounds to overseas refiners. ing center at Baton Rouge commemorated a quarter century of operations with an open house for employees and members of their families and was in turn honored Research and Development by the citizens of the Baton Rouge area Pursuant to a long-range plan to broaden with a dinner and a plaque saluting the and diversify its products, a substantial Company for "25 years of outstanding research and development program is con community service." ducted by the Company. i i. i Kraft papers produced in mills at Aoanoke Rapids, N.C. and Richmond, Va., are used in a variety of household and industrial products. ( I i 13 ETC 16816 Chemical research and development were directed to established lines of busi ness during the year and to a number of new areas, in which significant progress was made. Successful work was done on monomers and polymers which have endproduct applications in plastics and other uses; on new additives for petroleum products; on a catalyst for the removal of potential smog-forming materials from automobile exhaust gases; and on com pounds and techniques for use in vapor plating aluminum and other metals. The catalyst has been accepted for fleet and service-life testing by the State of Cali fornia. Several unique new antioxidants--prod ucts of Ethyl's patented orthoalkylation process--and a number of new aluminum alkyls were supplied to petroleum, plas tics, rubber and chemical companies. Suc cessful research and process development work was carried out on several products in which potential customers foresee largevolume requirements. Development of processes for the manu facture of additional chlorinated hydro carbon products advanced significantly Company-owned woodlands are carefully man aged to increase growing stock and help supply pulpwood for future mill requirements. during the year, and these processes are approaching commercialization. Under Advanced Research Projects Agency, Air Force, Army and Navy con tracts, the Company continued research programs and the supply of development quantities of missile fuel components. Facilities were established for supplying development quantities of ingredients for the Polaris missile propellant and con tracts have been obtained for expanded effort in 1963 on research and develop ment for propellant ingredients. Other contract research investigations under way involve: defoliation of jungle vegetation for the Army, air pollution studies for the Public Health Service, fun damental chemical studies for the Atomic Energy Commission, organo-metallicpolymer studies for the Air Force and aviation oil tests for the Navy. Although the commercial feasibility and the extent of the market for the foregoing products remain subject to various con tingencies, management believes that sev eral products of its extensive research and development will make significant contri butions to the earnings of the Company. In paper and packaging, the attainment of a commercial status for the laboratorydeveloped line of saturated and coated papers was one of the significant contribu tions of paper research. Increased emphasis on the development of specialized kraft paper grades during the year resulted in the production and sale of several new grades of kraft paper. Additional programs related to pulp, paper and packaging processes and prod ucts were initiated. Plans have been made to transfer several projects of a purely chemical nature to chemical research and development and to further strengthen the paper, plastics and packaging research and development program. There were assigned to the Company in the past year 119 U. S. patents and 69 in foreign countries. Patents in force at year end totalled approximately 700 in the U. S. and more than 500 abroad. 14 ETC 16811 THE ETHYL STORY Until recently, ethyl corporation, a major chemical com pany, WAS KNOWN primarily as an outstanding manufacturer AND MARKETER OF ANTIKNOCK COMPOUNDS FOR GASOLINE. THE MAJOR PORTION OF ETHYL'S SALES AND PROFITS CONTINUES TO BE DERIVED FROM ANTIKNOCK COMPOUNDS AND OTHER ADDITIVES FOR PETROLEUM PRODUCTS, AND SUBSTANTIAL ACTIVITIES ARE DIRECTED TOWARD EXPANDING ITS POSITION IN THESE MARKETS. IN RECENT YEARS, HOWEVER, ETHYL HAS BROADENED ITS FIELDS OF INTEREST AND HAS BEGUN TO PRODUCE OTHER ADDITIVES FOR PETROLEUM PRODUCTS, VARIOUS OTHER CHEMICALS AND ESSENTIAL INTERMEDIATES FOR PLASTICS. ITS DIVERSIFICATION PROGRAM IS RECEIVING INCREASED ATTENTION AND IS DIRECTED TOWARD DEVEL OPING NEW CHEMICALS FOR INDUSTRY, CONSUMER PRODUCTS AND NATIONAL DEFENSE. How "Ethyl" Antiknock Compounds Are Used "Ethyl" antiknock compounds are used by oil refiners throughout the world to improve the octane quality of gasoline and thereby increase its ability to produce power in internal combustion engines. If octane qual ity is low, gasoline burns too fast, or explodes, and a condition called knock results. Knock wastes energy, causes engine overheating, cuts power, limits performance, reduces mileage, and can lead to serious engine damage. By helping gasoline to burn smoothly and evenly, antiknock compounds provide maximum automotive power and performance, and save motorists page two j ETC 16819 i CHEMICAL COMMANUFACTURER GASOLINE. THE DNTINUES TO BE t ADDITIVES FOR IS ARE DIRECTED TS. 2NED ITS FIELDS ADDITIVES FOR AND ESSENTIAL DN PROGRAM IS TOWARD DEVELPRODUCTS AND . compounds are s throughout the he octane quality areby increase its power in internal s. If octane qual3 burns too fast, condition called ating, cuts power, :S engine damage, nock compounds id save motorists almost $2 billion on their annual gasoline bill. By increasing the octane quality of gasoline, the compounds help oil companies to operate their refineries with greater flexibility and economy. They also help conserve an estimated 250 million barrels of petroleum each year by making it pos sible to produce more gasoline from every barrel of crude oil. Because the hydrocarbon composition of modern gasoline varies widely --depending upon the crude oil used, the refining processes employed and the final blend of gasoline components--and because of the varying re quirements of many late model automobiles, no one antiknock compound is necessarily the best. Accordingly, Ethyl pioneered in, and now offers, a number of antiknock compound formulations. Ethyl draws on its 40 years' experience to help refiners select the anti knocks best suited to their particular refining and marketing needs. Engaged in Far-Reaching Operations Serving the petroleum and chemical industries throughout the United States and Canada and in many for eign countries, Ethyl engages in sub stantial activities in this country and abroad. Administrative offices for chemical operations are situated in New York City. Experienced Ethyl representatives handle product marketing and work closely with customers to help them achieve best results with Ethyl's products. Ethyl's chemical products are manufactured in modern plants in Baton Rouge, La.; Houston, Texas; Pittsburg, Calif.; and Orangeburg, S. C.; and by a wholly-owned subsidiary, Ethyl Corporation of Canada Limited, in Sarnia, Ontario. The plant in Baton Rouge is the largest facility in the world for the manu facture of antiknock compounds, and also produces other chemicals. A multi-million-dollar laboratory on the plant is headquarters for the Com pany's research and development program. The plant also is a center for engineering, purchasing, traffic, accounting, electronic computations and patents. Modern, well-equipped research laboratories in Detroit concentrate on page three ETC 16820 projects and products related to the oil, automotive, aviation and farm machinery industries. Gasoline testing laboratories in Yonkers, N. Y.; Tulsa, Okla.; Houston, Texas; Kansas City, Mo.; and Long Beach, Calif., provide a customer and industry service. Antiknock compounds and other Ethyl products are shipped by rail, tank truck, ship, and on occasion by air. The Company operates a fleet of almost 1,200 specially-designed railroad tank cars to assure customers of an uninterrupted supply of products and of prompt delivery. For antiknock compound shipments overseas, Ethyl pioneered in the development of a unique, large-volume, shipping-tank, sea-land service and in bulk delivery in a tanker, the Chemical Trader. Ethyl Corporation of Canada Limited is headquartered in Toronto, and, in addition to operating the only antiknock compound manufacturing plant in Canada, maintains offices and representatives near major refining centers. Ethyl's Export Division, headquartered in New York, sells Ethyl prod ucts in 63 countries around the world. Company History Starts Before World War I Ethyl was incorporated in 1924, but its history goes back to the years just before World War I when Charles F. Kettering, the late inven tive genius who became the first president of the Company, recog nized knock as a barrier to more efficient automobile engines. Mr. Kettering knew that, by increasing compression ratio, engines could be made to squeeze more power out of gasoline. The trouble, though, was that even the best fuels then available could stand no further squeezing. When subjected to higher temperatures and pressures inside an engine, they ignited in the spontaneous, uncontrolled, power-sapping and poten tially damaging explosion known as knock. Knock studies got under way in earnest in "Boss Ket's" research labora tory in Dayton, Ohio, in 1916, when he assigned the job to young Thomas Midgley, Jr. A mechanical engineer by education and training, Midgley became one of the outstanding chemists of his generation. He served as an page four ETC 16821 officer of the Company from its founding in 1924 until his death 20 years later. Early in their research, Midgley and his co-workers established that it is the fuel and not the engine that knocks. But finding a way to prevent the knock was something else again. After years of painstaking research, they discovered the antiknock properties of tetraethyl lead on December 9,1921. One teaspoonful or less in a gallon of gasoline, they found, was sufficient to prevent knock. Four teen months later, after problems relating to the manufacture, distribution and use of the magic chemical had been successfully met, gasoline contain ing TEL antiknock compound was ready for public sale. When "Ethyl" gasoline first went on sale 40 years ago this February, it was available at one pump at one service station of one oil company in one city -- Dayton, Ohio. Today, lead alkyl antiknock compounds are used in more than 98 percent of all gasoline sold in the United States and in billions of gallons more sold in the rest of the world. Leaded gasoline is available at 200,000 service stations in this country and thousands of others around the globe. Company Contributes to Fuel and Engine Progress Besides manufacturing and market ing quality products, Ethyl provides its customers with an extensive service program. The Company also serves as liaison between the oil and automotive industries in their con tinuing efforts to provide better fuels and engines. Through close working ( relationships with oil refiners and engine manufacturers, the Company has been able to help fuel and engine developments to advance in step with each other. Ethyl's automotive research scientists in Detroit work closely with tech nical people of the various automobile companies. Motorists and other consumers of gasoline and petroleum products have benefitted from this association in terms of more powerful and economical engines for passen ger cars, trucks, buses, tractors, boats and airplanes. page five Farmers, for whom Ethyl engineers helped create the modern, gasolinepowered tractor in the mid-1930s, are one of the beneficiaries. In the early '30s, tractors were bulky and cumbersome. Most of .hem burned kerosene, were low in horsepower and inefficient, and saddled farmers with high repair and maintainance bills. After several years of missionary work in the field, Ethyl engineers suc ceeded in bringing about the conversion of farm tractors from lowcompression, distillate-burning affairs to economical, high-compression, gasoline-powered workhorses. Ethyl's interest in farm mechanization continues. In a cooperative pro gram with a leading farm equipment manufacturer a few years ago, Ethyl's research engineers helped create an experimental engine of 12 to 1 com pression ratio (in comparison the average compression ratio of current model automobiles is about 9.2 to 1) and demonstrated the economy and practicability of the engine. While not yet commercially available, this "Tractor of Tomorrow" points the way to new gains that lie ahead. In its postwar development of markets outside the United States, Ethyl, through its products and services, has been instrumental in bringing about substantial improvements in gasoline quality. The average octane rating of motor fuels in most countries in the Free World has risen considerably in recent years and in some nations now compares favorably to gasolines sold in this country. As a result, motorists in those lands are experiencing better engine performance and greater fuel economy. Manufacturing Know-How Leads to Growth The manufacture of antiknock com pounds is a complex, highly techni cal process that requires and brings together large quantities of such basic chemicals as chlorine, ethyl chloride, methyl chloride, sodium and ethylene dichloride. Ethyl has been a leading producer of most of these products for many years. Manufacturing know-how gained in the production of these products --and of antiknock compounds--has enabled the Company to broaden its page six modern, gasolinedaries. In the early 1 burned kerosene, farmers with high thyl engineers sucactors from lowhigh-compression, a cooperative proyears ago, Ethyl's le of 12 to 1 comi ratio of current the economy and lly available, this t lie ahead, ited States, Ethyl, . in bringing about ;e octane rating of m considerably in ably to gasolines : are experiencing tads to Growth f antiknock com:x, highly techniquires and brings antities of such > chlorine, ethyl .hloride, sodium )ride. oducts for many of these products ly to broaden its ! operations in the fields of chlorinated hydrocarbons, organometallies and | electro-chemistry. J Besides antiknock compounds containing tetramethyl lead and physical and chemical combinations of tetraethyl and tetramethyl lead, Ethyl's * newer organometallic products include aluminum alkyls and alkyl alumi num halides. These chemicals are used as components of catalysts impor- r tant to petrochemical and plastics manufacturing, and they also have potentials as intermediates in the production of other chemicals and as pyrophoric [self-igniting] fuels for the military. As a leading producer of metallic sodium, Ethyl has in recent years provided technical assistance in exploring the use of this element as a potential heat transfer agent in nuclear power plants and in other modern technical applications. Ethyl's experience in the complex field of chlorinated hydrocarbons manufacturing enabled it to go into the production of vinyl chloride mono mer a few years ago and to become a major supplier of this widely used chemical. From the Ethyl plants at Baton Rouge, La., and Houston, Texas, t vinyl chloride monomer is shipped in tank car quantities for subsequent processing into polyvinyl chloride, one of the most popular and versatile I modern plastics. Polyvinyl chloride--the finished plastic--is fabricated into floor coverings, upholstery and curtain material, phonograph records, pipe, electric wire insulation, garden hose and a variety of other household and industrial products. Closely related chemically to vinyl chloride monomer is an even newer Ethyl product, vinylidene chloride monomer. This chemical is processed into polyvinylidene chloride, a plastic used for automobile seat covers, outdoor furniture coverings, and as a coating for paper and paper board in modern packaging. 9 Ethyl's effective antioxidants--products of the Company-developed orthoalkylation process--have applications not only in fuels and lubricants i but also in rubber, plastics, resins, paints and chemicals. "Ethyl" Anti oxidant 702, already widely used in the oil industry, recently received interim Food and Drug Administration approval as an "antioxidant in the manufacture of resin used in food packaging." Resins are made into trans parent film in which fruits, vegetables, meats, bakery products and other edibles are wrapped. Besides a variety of antiknock compounds for gasoline, Ethyl markets f page seven ETC 16824 many other additives for motor fuel: "Ethyl" Metal Deactivator, to prevent chemical changes caused by certain metals encountered in gasoline storage tanks and fuel systems: "Ethyl" Ignition Control Compounds, to control spark plug fouling and surface ignition; "Ethyl" Multi-Purpose Additive, to improve anti-icing, anti-corrosion and detergent qualities; "Ethyl" Antioxidants, to inhibit oxidation and to control gum formation; and "Ethyl" Oil Soluble Dyes, to provide distinctive coloring. Further Diversification Planned for the Future Ethyl is proud of its contributions to progress in the oil, automotive, chemical and related,industries and to national defense througLV.s re search and its manufacture and mar keting of chemical products, and through its program of personalized customer service. From a oneproduct company, it is "changing to serve a changing world," with an ac tive program of research and diversification. As the Company moves ahead in a new era under new ownership, it intends to continue with its established products and services. At the same time, Ethyl plans to intensify its diversification program to create additional worthwhile business. The Company looks forward to extending its investi gations into fields and products which can be produced by the new com pany formed by the merger of Ethyl and Albemarle Paper Manufacturing Company. The combined Company will benefit from the knowledge and experience of the people in both of its component organizations. The alliance will pro vide new opportunities for growth in the future. *** page eight ETC 16825 1 I 4 4 l t Modern research laboratories in Detroit, above, concentrate on products related to the oil, automotive, aviation and farm machinery industries.... The new Albemarle building in Richmond, Va., below, pro vides comfortable, attractive offices and adequate room for expansion. ft ! 1 0 f) 15 ETC 16826 f. Tn *--T~~r . J-Metbyl-S-tert-batyiphenol Bncrifie Kraft ; Tnmethyl Phosphate Masking Kraft * .Caustic Soda (50*/ Sodium : Flame Resistant Kraft "Ethyl" Antiknock Compoands F. TEL-Motor Mix L - - Hydroxide Solution) . Booming Kraft TEL-Avietion Mix * 'Ethyl" Antioxidant 702 - Mill Wraps ' TEL-"Motor S3 Mix" "Ethyl" Antioxidant 703 -Craped Kraft TML-Molor Mix "Bthyr Antioxidant 736 Saturating Kraft "MLA"-Motor Mix Interleaving Kraft *TELML"-Motor Mix "Ethyl" Ignition Control Compounds Cfcesriesls AvellaHs tn Coin Wraps Coating Kraft . ICC 1. JGC3, BX 4 Potato Sack Kraft . . "Ethyl" Multi-Purpose Additive* . MPA. MPA 9. MPA-D Antioxidant 713 . Antioxidant 720 . Water Repellent Kraft Textile Wraps "Ethyl" Antioxidant* Ts . 2A-Diisopropyiphenal Fusee Kraft ' J1 ^ ^781, 7U, W. 733 Ortho-ethyianiUne ^ Record Sleeve Kraft : ^ - % - "Ethyl" Diesel ignition improver ifi-Diethyianiline Ahiha-Sodio Sodium Acetate "Ethyf" Combustion Improvar 2 . Sandpaper Backing Kraft Tile Backing Kraft Methyl Aluminum Sesqaibratnide Rlotting Paper 1' : "Ethyl" OSJ Soluble Dyes " Triethyi Boron _ ^ - Fiber Paper i. ' "Ethyl" Antiwear Additive 38 -. Diethyl Zinc Craped Tape ,, , "Ethyl" Antirust Additive 1 Ferrocene Cover Paper ^ Gasket Paper -S'- % ~%r - ft Diethyl Aluminum Chloride _ Ethyl Aluminum Diddoride Ethyl Aluminum Sesquichloride Methyl Aluminum Sesquichloride Triethyl Aluminum Triethyl Aluminum-Diethyl -- Alumiman Hydride Mixtures - Triisobatyl Ainmimns * Tri-n-Propyl Aiamimm -/ Trimethyl Ahuninum -* Triethyl-Trimethyl.' * -1, Aluminum Mixtures ` - Sodium ' . :; Ethyl Chloride ' > 7 Ethylene Dichloride Vinyl Chloride Vinylidene Chloride Methyl Chloride Hydropolyiner Oil Ortho-uopropylphenol ,~ Ortho-tort-butylphenol .2,6-Di-tert-butytpbenol - Unbleached Senate Palp Kraft User Beard = Grocery Bag Kraft Shipping Sack Kraft -Kraft Wrapping Paper Asphalting Kraft Fail ixtmmating Kraft Variety Sag Kraft Consent Bog Kraft Shipping Sag Kraft : ~ . Coal Sack Kraft Wet Strength Kraft Extensible Kraft - Butchers Kraft Waxing Kraft -Craping Kraft Kraft Tire Wraps Colored Kraft Printed Kraft ::.File Folder Stock : WaSet Kraft - Gamming Kraft : ; . - ri. - A' ? ' - -J `-*t * ( .... te,. ^ Anhalt Laminated Kraft Asphalt Saturated Kraft Wax Laminated Kraft Wax Coated Kraft Wax Saturated Kraft " Fiberglas Reinforced Kraft Slings for Pork lift Trucks Air Fiber Papers . OH Filter Papers J _ Core Stock ' Resin Impregnated Papers \ Sikcone Coated Papers 7 Pofyvmyiidene Coated Kraft Cast Coated Board Mnitiwali Shipping Sacks . Corrugated Shipping Containers Handle Shopping Bags - ssg*SfcK6 -*27 -ii"# ET^ 16828 t ETC 16829 Ethyl Corporation and Subsidiaries Legend o Executive Offices 5 Chemical Manufacturing Plants Paper Division Manufacturing Plants o Research Laboratories o Gasoline Testing Laboratories Storage Terminals T Regional Offices District Offices T Paper Sales Offices V Ethyl Representatives Also Sales and Service Representatives and Distributors covering foreign countries Consolidated Balance Sheets March 31,1963 and 1962 Assets Current Assets: Cash.............................................................. Short-term securities..................................... Accounts receivable..................................... Inventories.................. ... ............................. Prepaid expenses............................................ Total Current Assets.................. 1963 1962 $ 10,448,315 30,335,051 24,275,496 32,229,961 1,784,548 99,073,371 $ 2,156,086 -- 6,343,733 5,546,890 761,036 14,807,745 Investments in affiliated companies.................. 7,177,722 Property, plant and equipment.......................... Less: Accumulated depreciation and depletion . Net Property, Plant and Equipment 174,871,590 23,912,460 150,959,130 2,155,315 47,635,368 18,413.396 29,221,972 Deferred charges and other assets.................. 14,703,281 Patents, contracts and other intangibles .... 12,995,641 $284,909,145 ! 740,220 _ $ 46,925,252 20 The accompanying notes are J ETC 16831 Ethyl Corporation and Subsidiaries Liabilities Current Liabilities: Accounts payable and accrued expenses . . . Long-term debt -- current portion...................... United States and Canadian income taxes . . . Total Current Liabilities.................. 1963 $ 16,375,126 8,905,831 10,791,603 36,072,560 1962 $ 3,444,387 -- 1,050,247 4,494,634 Long-term debt....................................................... Provisions for deferred income taxes and employee benefits........................................................... 196,375,319 9,939,474 15,522,300 2,105,997 Stockholders' Equity Capital Stock: 6% Cumulative Preferred, par $100 per share . , Glass A Common, par $5 per share................... Class B Common, par $5 per share................... Capital surplus....................................................... Retained earnings................................................ 4,792,000 745,180 5,191,630 17,118,590 14,778,157 42,625,557 Less, Preferred stock in treasury -- 1,018 shares in 1963 and 2,171 in 1962 (at cost)................................. Total Stockholders' Equity............... 103,765 42,521,792 $264,909,145 4,325,500 745,180 4,403,190 4,315,050 11,235,615 25,024,535 222,214 24,802,321 $ 46,925,252 ire an inlegral part of these balance sheets. 21 ETC 16832 Consolidated Statements of Income and Surplus Fiscal Years Ended March 31.196,, and 1962 Statements of Income Income: Net sales....................................................... Miscellaneous income, net............................. Costs and expenses: Cost of goods sold........................................ Selling and general expenses.......................... Interest and financing costs, long-term debt . United States and Canadian income taxes . . Net Income..................................... Statements of Capital Surplus Balance at beginning of year.............................. Proceeds of warrants sold with 5V% notes due 1979 to 1982 .................................................... Excess of conversion price over par value of debentures converted into common stock . . Excess of cost over par value of preferred stock cancelled....................................................... Excess of fair value over par value of shares issued in common stock dividend................... Balance at end of year..................................... 1963 $ 99,814,250 1,007,782 100,822,032 72,902,380 13,937,045 5,146,876 4,455,000 96,441,301 $ 4,380,731 $ 4,315,050 11,126,066 1,681,608 (4.134) -- $ 17,118,590 1962 $ 48,578,227 583,431 49,161,658 40,078,363 4,787,774 814,204 1,719,051 47,399,392 $ 1,762,266 $ 3,251,176 ' --- 47,460 (2,052) 1,018,466 $ 4,315,050 Statements of Retained Earnings Balance at beginning of year.............................. Add: Net income for the year.......................... Deduct: Cash Dividends Preferred Stock--$6.00 per share............... Common Stock--$.50 per share............... Common Stock dividend (5%) 48,563 shares . Balance at end of year..................................... $ 11,235,615 4,380,731 15,616,346 283,488 554,701 -- 838,189 $ 14,778,157 $ 11,494,159 1,762,266 13,256,425 250,388 509,143 1,261,279 2,020,810 $ 11,235,615 The accompanying notes are an Integra) part of these statements. 22 ETC 16833 * * * Notes to Financial Statements Ethyl Corporation and Subsidiaries 1. Acquisition of Ethyl Corporation mately $3,660,000. Dividends received ex i > Ethyl Corporation (Virginia), formerly ceeded the Company's equity in the net income of these companies by approxi Albemarle Paper Manufacturing Com mately $77,000 in the year ended March pany, purchased all of the outstanding 31,1963; no dividends were received from stock of Ethyl Corporation (Delaware) on Halifax Timber Company in the preceding November 30, 1962. The allocation of the year, earnings of that company having purchase price to the acquired corpora been insignificant. tion's assets has been based on an inde pendent appraisal of such assets. The accompanying financial statements 4. Property, Plant & Equipment at March 31, 1963 include the assets and Property, plant and equipment is stated liabilities of the acquired corporation and at cost as follows: the results of its operations for the four months then ended. The statements for the previous fiscal year have been reclas sified in certain respects to conform with Land .........................................................$ 10,775,436 Timberlands and standing timber . . . 4,097,231 Buildings.................................................... 25,429,731 Machinery and equipment...................... 134,569,192 $174,871,590 the presentation for the year ended March 31, 1963. 5. Deferred Charges & Other Assets __ *i 2. inventories Deferred charges at March 31, 1963 in clude unamortized discount on long term Inventories are stated at the lower of cost debt of $10,931,281 (see Note 10) and other or market, with cost being determined on deferred financing expenses of $2,209,551. the last-in, first-out basis with respect to approximately $21,100,000 of the inven tory and generally on an average cost 6. Patents, Contracts & Other Intangibles basis with respect to the remainder. Inventories at March 31,1963 include: Patents and contracts with an unamor tized cost basis of $7,585,277 are being Finished goods........................................... $11,202,288 Raw materials and work in process . . . 17,122,480 Stores, supplies, etc................................... 3,905,193 $32,229,961 amortized over their respective lives. Other intangibles are stated at cost of $5,410,364. * 3. Investments in Affiliated Companies 7 Long-Term Debt i Investments in unconsolidated affiliates are stated at cost and represent the Com pany's investments in and advances to Long-term debt as of March 31, 1963 in cludes: Maturing Ethyl-Dow Chemical Co., a 50%-owned on or before Maturing after company acquired on November 30,1962, March 31, 1964 March 31, 1964 Totals and Halifax Timber Company, a wholly- 5W% Notes payable to bank, due 1963 and 1964 $8,000,000 $ 8,000,000 $ 16,000,000 owned subsidiary organized to hold tim ber and timberlands. The Company's 5%% Senior notes, due 1965 to 1978 . . . 594% Subordinated notes, due 1967 .... 594% Subordinated notes, due 1979 to 1982 -- 218,777 -- 114,000,000 19,562,449 50,000,000 114,000,000 19,781,226 50,000,000 equity in the net assets of such affiliated 394% Guaranteed notes, due 1963 to 1970 . 687,054 4,812,870 5,499,924 companies at March 31, 1963 is approxi- $8,905,831 $196,375,319 $205,281,150 I * 23 ETC 16834 Under the terms of the loan agreements re lating to the Subordinated notes due 1967, the Company is required to make prepay ments in amounts equal to cash dividends and preferred stock sinking fund contri butions and additional amounts, contin gent on earnings, which may bring aggre gate prepayments up to $4,000,000 per annum. 8. Provision for Deferred Income Taxes Depreciation deductions for income tax purposes are based on accelerated meth ods and exceed book provisions. In ad dition, certain expenditures which are properly chargeable against income in subsequent periods are deductible for in come tax purposes when incurred. Re sultant tax savings are deferred to sub sequent periods when amounts chargeable against book income will exceed amounts deductible for tax purposes. 9. Capita] Stock The Class A Common Stock is the Com pany's voting stock. As of March 31,1963, there were 156,000 shares authorized, of which 149,036 shares are outstanding. A voting trust agreement between the Com pany and the holders of 68.3% of this stock, which expires in 1970, or sooner under certain conditions, provides that the stock will be voted by trustees who pres ently are F. D. Gottwald, F. D. Gottwald, Jr., and B. C. Gottwald. The Class B Common Stock has no vot ing privileges except as required by law. As of March 31, 1963, there are 2,000,000 shares authorized, of which 1,038,326 shares are outstanding. The 6% Cumulative Preferred Stock was issued in four series, originally aggregat ing 58,618 shares. As of March 31, 1963, there are 100,000 shares authorized, of which 47,920 shares are outstanding and 1,018 shares are held in the Company's treasury. The Cumulative Preferred Stock is en titled to annual sinking fund contribu tions, the maximum of which is 5% ($293,090 at March 31, 1963) of the par value of the original issue of such stock. The Company intends to use Preferred Stock in treasury at March 31, 1963 to satisfy, in part, the sinking fund require ment due June 30, 1963. 10. Warrants Together with the issue of the $50,000,000 Subordinated Notes due 1979 to 1982, the Company sold warrants which entitle the holders thereof to purchase 400,000 shares of unissued Class B Common Stock, $5 par value, at $27.50 per share. $11,126,066 from the sale of warrants has been added to capital surplus; a corresponding amount has been recorded as amortizable discount on long term debt. The warrants are exercisable on or be fore November 1, 1982. As of March 31, 1963, none of the warrants had been exer cised. 11. Restricted Payments Under the terms of the Company's note agreements, the amount of cash dividends which may be paid on the Common Stock, $5 par value, is limited to $1.00 per share per annum, so long as any of the Subordi nated Notes due 1967 remain outstanding. In addition, an amount equal to the aggre gate of all cash dividends and sinking fund payments for the retirement of preferred stock must be prepaid on the Subordi nated Notes of 1967. The agreements contain provisions which, in addition to other restrictions, limit the aggregate amount of prepayments on any subordinated notes, cash dividends and expenditures for acquisition of the Company's stock to 60% of consolidated net earnings, as defined, accumulated after April 1, 1962 and prior to April 1, 1968 plus 50% of such consolidated net earn ings accumulated after March 31, 1968. At March 31, 1963, $2,150,000 of retained earnings is available for such payments. 24 ETC 16835 Ethyl Corporation and Subsidiaries 12. Stock Option PJan On November 12, 1962, the stockholders approved a restricted stock option plan under which 150,000 shares of unissued Class B Common stock were reserved for issuance to officers and other key employ ees. Up to March 31, 1963, options were granted to purchase 134,500 shares. On April IB, 1963, options to purchase an addi tional 6,800 shares were granted. These options are exercisable over periods up to 10 years at prices ranging from $56.50 to $77.00 per share. 13. Non-Cash Expenses __ ______ Depreciation and depletion charged to in come amounted to $5,766,779 and $2,294,903 in the years ended March 31, 1963 and 1962 respectively; other non-cash ex penses (principally amortization of in tangibles and of deferred discount and financing expenses) amounted to $789,113 in 1963. 14. Post Balance Sheet Events ____ On April 18, 1963, the Board of Directors voted to submit for the approval of holders of Class A and Class B Common Stock, at the annual meeting to be held May 23, 1963, amendments to the Company's Arti cles of Incorporation which would; (a) Increase the number of authorized shares of Class B Common Stock to 4,000,000; (b) Reduce the par value of each share of Class A and Class B Common Stock from $5 to $3 per share; (c) Concurrent with the reduction in par value, issue one additional share of Class B Common Stock, $3 par value, for each share of Class A and Class B Common Stock then outstanding; (d) Authorize new Cumulative Second Pre ferred Stock of 250,000 shares, par value $100 per share. Auditors' Report To the Board of Directors, ETHYL CORPORATION: We have examined the balance sheet of Ethyl Corporation (formerly Albemarle Paper Manufacturing Company) and its consolidated subsidiaries, as of March 31, 1963, and the related statements of income, of retained earnings and of capital surplus for the fiscal year then ended. Our examination was made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, die accompanying statements present fairly the financial position of Ethyl Corporation and its consolidated subsidiaries at March 31, 1963 and the results of their operations for the fiscal year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. r' /nL t New York, April 22,1963 LYURAND, ROSS BROS. * MONTGOMERY ZS . ETC 16836 Ten Years of Continuous Growth Fiscal Year Ended March 31 Sales and Income 1963(1) 1962 | 1961 Net salesP)................................................................ $99,814,250 Income before non-cash items and income taxes ......................................................................... 15,391,623 Depreciation, depletion and amortization , . 6,555,892 Income taxes........................................................... 4,455,000 Net income................................................................ 4,380,731 Cash flow.................................................................... 12,117,007 Financial Condition |_________________ $48,578,227 $50,320,518 5,776,220 2,294,903 1,719,051 1,762,266 | 1 | i ! 4,211,875 ! 7,252,998 2,077,980 2,740,399 2,434,619 4,680,496 Working capital....................................................... Ratio of current assets to current liabilities . Land, buildings, machinery, and equipment (Net)......................................................................... Expenditures for property, plant and equip ment ......................................................................... Long term debt....................................................... Common Stock 63,000,811 $2.75 to $1.00 150,959,130 10,313,111 $3.29 to $1.00 29,221,972 8,586,720 $2.73 to $1.00 28,336,492 I ^ 4,838,805 196,375,319 4,820,189 15,522,300 | s 2,644,359 13,092,000 Number of shares outstanding............................ Earnings per share PJ.............................................. Income taxes per share P)..................................... Dividends per share.............................................. Book value per share.............................................. 1,187,362 3.79 4.12 .50 31.86(41 1,029,674 1.47 | 1.67 .50 !i | 20.10 | 976,956 2.12 j f 2.68 .50 * 19.14 .I (1) 1963 figures include four months of combined operations; previous years include Albemarle operations only. 26 ETC 16837 Ethyl Corporation and Subsidiaries -- 1960 -------------------- [ 1959 1958 1957 1956 --1955 1 1954 ; 3 $44,572,285 $35,881,981 $34,527,980 $34,737,760 $29,082,043 $22,143,450 $21,143,286 ! 3 6,138,973 6,007,198 3 2,041,843 1,607,425 3 1,958,081 2,266,473 3 2,139,049 , 2,133,300 3 4,344,420 3,785,924 i i 3 7,950,568 | 9,143,917 30 $3.22 to $1.00 $3.91 to $1.00 5,781,548 1,482,130 2,378,411 1,921,007 3,795,461 7,640,165 $3.92 to $1.00 6,346,016 1,200,675 2,839,501 2,305,840 3,799,630 6,790,823 $2.73 to $1.00 4,828,940 1,248,266 1,972,419 1,608,255 3,149,360 3,458,134 $1.64 to $1.00 2,304,483 917,060 718,204 669,219 1,843,984 3,447,958 $2.81 to $1.00 2,170,706 865,577 | 1 688,470 616,659 1,769,708 3,014,233 $2.79 to $1.00 2 27,742,696 24,512,702 20,015,076 18,231,910 13,821,610 11,854,463 11,522,804 3 5,291,737 6,099,122 3 13,178,500 ` 13,793,100 i 2,957,526 8,700,000 5,557,245 9,109,043 3,009,303 5,248,392 1,451,386 4,824,262 1,617,579 4,695,183 3 2i 3 3i 4 971,803 1.85 1.94 1 .50 ! 17.50 ; 1 760,992 1.92 2.33 .50 16.28 699,761 1.73 2.47 .50 14.58 621,020 2.39 3.16 37>/i 13.26 542,880 1.79 2.39 -- 10.72 271,440 .65 .87 -- 8.94 271,440 .58 .83 -- 8.25 (2) Net saJes are stated before deducting freight cost. (3) Based on the average number of shares outstanding in each year, adjusted for stock splits and stock dividends. (4) includes addition to capital surplus of $9.37 per share resulting from sale of warrants. See Note 10 in Notes to Financial Statements. 27 Etc l6838 Ethyl Corporation Officers Floyd D. Gottwald, Chairman of the Board B. B. Turner, President J j Floyd D. Gottwald, Jr., Executive Vice President ' George F. Kirby, Executive Vice President William R. Perdue, Jr., Executive Vice President and Treasurer^ Joseph A. Costello, Vice President j Bruce C. Gottwald, Vice President and Secretary I Joseph M. Lowry, Vice President Malcolm P. Murdock, Vice President Frederick P. Warne, General Counsel Albemarle Paper Manufacturing Company ............................ '........................................................................................... (Wholly owned subsidiary] Headquarters: Richmond, Va. Officers Floyd D. Gottwald, Chairman of the Board Floyd D. Gottwald, Jr., President K. F. Adams, Executive Vice President S. Douglas Fleet, Executive Vice President Joseph M. Lowry, Executive Vice President and Treasurer H. W. Ellerson, Jr., Vice President Charles H. Robertson, Vice President Bruce C. Gottwald, Vice President and Secretary C. R. Hailey, Controller and Assistant Secretary , | j ! Paper Converting Divisions RAYMOND BAG DIVISION, Middletown, Ohio J. T. Walton, General Manager RICHMOND CONTAINER DIVISION, Richmond, Va. A. J. Bagley, Manager Ethyl Corporation of Canada Limited (Wholly owned subsidiary) Headquarters: Toronto, Ontario, Canada Officers B. B. Turner, Chairman of the Board Alan C. Tully, President Howard J. Philp, Vice President William R. Perdue, Jr., Treasurer Herbert A. Savage, Secretary Ethyl-Dow Chemical Company................... (Fifty percent owned affiliate) Headquarters: Freeport, Texas Officers G. F. Dressel, President Douglas E. Lake, Vice President and General Manager William R. Perdue, Jr., Vice President and Treasurer Arthur P, Deverill, Secretary and Assistant Treasurer Ethyl Corporation and Subsidiaries Directors urer ( J Floyd D. Gottwald, Chairman* B. B. Turner* Robert T. Marsh, Jr,, President, First and Merchants National Bank, Richmond, Va. Joseph A. Costello Malcolm P. Murdock S. Douglas Fleet, Executive Vice President, Albemarle Paper Manufacturing Company Bruce C, Gottwald* Floyd D. Gottwald, Jr.* Lewis F. Powell, Jr,, Partner, Hunton, Williams, Gay, Powell Sr Gibson, Richmond, Va. William R. Perdue, Jr.* Frank A. Howard, Research Consultant and Director of former Ethyl Corporation S. Buford Scott, Partner, Scott and Stringfellow, Richmond, Va. George F. Kirby* Joseph M. Lowry Edward L. Shea, Former President, Chairman and Director of former Ethyl Corporation * Members of the Executive Committee Directors Floyd D. Gottwald, Chairman B. B. Turner K. F. Adams H. W. Ellerson, Jr. S. Douglas Fleet Bruce C. Gottwald Floyd D. Gottwald, Jr. ALBEMARLE CONTAINER DIVISION, Odenton, Md. J. B. Marsch, Manager INTERSTATE BAG COMPANY DIVISION, Walden, N. Y. H. K. Steen, President C. R. Hailey T. G. Harris Manager, Timber Operations Joseph M. Lowry Lewis F. Powell Charles H. Robertson K. D. Running, Assistant Manager, Roanoke Rapids Division, Roanoke Rapids, N. C. Directors B. B. Turner, Chairman Joseph A. Costello George F. Kirby Malcolm P. Murdock William R. Perdue, Jr. Howard J. Philp Edward L. Shea Alan C. Tully Directors Donald K. Ballman, Vice President and Director, Dow Chemical Company Calvin A. Campbell, Vice President, Secretary and Director, Dow Chemical Company Joseph A. Costello G. F. Dressel Glenn O. Hayes, General Manager of Manufacturing, Ethyl Corporation George F. Kirby Douglas E. Lake William R. Perdue, Jr. ETC 16840 PAINTED IN U.S.A. Petroleum Chemicals Ethyl's petroleum chemicals are used by oil companies to im prove the quality and performance and to preserve the desirable qualities of petroleum products. "Ethyl" Antiknock Compounds TEL-Motor Mix TEL-Aviation Mix TEL*"Motor 33 Mix" TML-Motor Mix "MLA''-Motor Mix ,*TELMEL*,-Motor Mix "Ethyl" Ignition Control Compounds ICCl, ICC 3, ICC 4 "Ethyl" Multi-Purpose Additives MPA. MPA 9. MPA-D "Ethyl" Antioxidants 701, 702, 703, 728, 733 "Ethyl" Diesel Ignition improver "Ethyl" Combustion Improver 2 "Ethyl" Oil Soluble Dyes "Ethyl" Antiwear Additive 29 Albemarle's diversified lines of kraft paper, paper board and spe cialty and converted paper products find use in many indus trial, commercial and packaging applications. Unbleached Sulfate Pulp Kraft Liner Board Grocery Bag Kraft Shipping Sack Kraft Kraft Wrapping Paper Asphalting Kraft Variety Bag Kraft Garment Bag Kraft Shopping Bag Kraft Extensible Kraft Waxing Kraft Creping Kraft Kraft Tire Wraps Colored Kraft Printed Kraft File Folder Stock Masking Kraft Flame Resistant Kraft Beaming Kraft Mill Wraps Creped Kraft Saturating Kraft Coin Wraps Coating Kraft Potato Sack Kraft Water Repellent Kraft Textile Wraps Blotting Paper Filter Paper Creped Tape Gasket Paper Processed Papers Asphalt Laminated Kraft Asphalt Saturated Kraft Wax Laminated Kraft Wax Coated Kraft Wax Saturated Kraft Fiberglas Reinforced Kraft Air Filter Papers Oil Filter Papers Core Stock Resin Impregnated Papers Silicone Coated Papers Cast Coated Board Clay Coated Kraft Board Converted Products Multiwall Shipping Sacks Corrugated Shipping Containers Handle Shopping Bags Ethyl's industrial chemicals are essen tial components in the manufacture of a wide range of plastic, agricultural, indus trial, household, national defense and other products. Diethyl Aluminum Chloride Ethyl Aluminum Dichloride Ethyl Aluminum Sesquichloride Methyl Aluminum Sesquichloride Triethyl Aluminum Triethyl Aluminum- Diethyl Aluminum Hydride Mixtures Triisobutyl Aluminum Tri-n Propyl Aluminum Trimethyl Aluminum Triethyl Boron Diethyl Zinc Sodium Sodium Lead Alloy Ethyl Chloride Ethylene Dichloride Vinyl Chloride Vinylidene Chloride Methyl Chloride Hydropolymer Oil l.l.J-Trichloroethane Perchiorethylene Trichiorethylene Ortho-isopropylphenol Ortho-tert-butylphenol 2.6- Di-tert-butvlphenol 2.6- Di-tert-butyl- hydroquinone 4.6- Dinitro-2-secbutylphenol Ortho-sec-butylphenol Trimethyl Phosphate Caustic Soda (50%) "Ethyl" Antioxidants 702, 703, 736 XHI-Diisocyanate Chemicals Available in Development Quantities Antioxidant 712 Ortho-ethylaniline 2.6- Diethylaniline Ferrocene 2.6- Di-sec-butylphenol 2-6-Di-lert-butyl-p- benzoquinone Mixed Styrenated Phenols Plastics "VisQueen" polyethylene film, an unusually ver satile material, is widely used in modern packag ing, building construc tion, agriculture, industry, around the home, and in a variety of other applications. Packaging Films Q--general purpose Hi-Impact-general purpose, with increased impact resistance L--tough, for liners for drums containing liquids O--general purpose, medium density, for overwrapping "TnT"--strong, high clarity Shrink Film--high clarity, with excellent shrink properties Clear Industrial Grade and Industrial Grade-- utility types Natural--low-density, general purpose "Visotherm A"--rubbermodified high density Building and Agricultural Films Standard Custom Rolls 3' to 40' Widths Agricultural Specialties Mulch Film Green House Silo Caps Swimming Pool Covers Drop Cloths "VisQueen" Super Tough "VisQueen" Mobil Home Film "VisQueen" Concrete curing Highway Film "VisQueen" Blankets "VisQueen" Pressure Tape "Visklamps" ETC Ethyl International Ethyl International, a new division created during the year, handles the sale, distribution and servicing of the Com pany's petroleum and industrial chem icals, paper and plastic products in all countries outside of the United States and Canada. 16843 1963 ANNUAL REPORT Contents 2 The Year in Brief 3 Letter to Shareholders 6 Financial Review 12 Operations Review Insert The VisQueen Story 18 Maps: Facilities and Overseas Markets 20 Financial Statements 23 Notes to Financial Statements 25 Auditor's Report 26 Ten-Year Financial Summary 28 Officers, Directors, Subsidiaries Annual Meeting The annual meeting of Ethyl Corporation shareholders will be held at the Company's executive offices in Richmond, Va., on Thursday, May 28,1964. A formal notice of the meeting, together with a proxy statement and proxy form, will be sent to shareholders in advance of the meeting. Stock Transfer Agents First and Merchants National Bank, Richmond, Va. General Counsel Hunton, Williams, Gay, Powell & Gibson, Richmond, Va. Executive Offices 330 South Fourth Street, Richmond, Va. 100 Park Avenue, New York, N. Y. ETC 16844 ETHYL CORPORATION AND SUBSIDIARIES The Year in Brief First full year of combined chemical and paper operations completed successfully, o Sales of $226,554,354 and earnings of $13,558,080 exceed original forecasts. o Petroleum Chemicals, Industrial Chemicals, Ethyl International and Plastics divisions organized. "VisQueen" polyethylene film operations acquired. Rearrangement of long-term debt provides additional capital for further expansion, a Records established in volume of kraft paper produced. D Cost reduction and efficiency improvement programs successfully pursued, o Ethyl of Canada building new chemicals manufacturing facilities, o Synthetic primary alcohol plant under construction. FINANCIAL HIGHLIGHTS Net Sales....................................................... Taxes on Income............................................ Net Income................................................... Cash Flow....................................................... Net Income per Share of Common Stock!2) . . Cash Dividends Preferred Stock............................................ Common Stock............................................ Earnings Retained in Business...................... Depreciation, Depletion and Amortization . . Capital Expenditures..................................... Total Assets.................................................... Working Capital............................................ Book Value per Share of Common Stock . . . Twelve-Month Periods Ended December 31 March 31 1963 1963(a) $226,554,354 $ 99,814,250 13,560,000 4,455,000 13,558,080 30,388,016 4,380,731 12,117,007 $5.59 $1.90l3) 276,540 789,697 12,491,843 15,131,178 18,862,000 285,480,077 67,337,401 $20.06 283,488 554,701 3,542,542 6,555,892 4,838,805 284,909,145 63,000,811 $15.93(3) flj Includes only four months of combined paper and chemical operations. (2) Based on average number of shares outstanding in each period. (3; Adjusted for two-for-one stock split of May 31,1963. 2 ETC 16845 We are happy to report that the first full year of Ethyl Corporation (Virginia), formed November 30,1962 by the merger of Ethyl Corporation (Delaware) and the former Albemarle Paper Manufacturing Company, was very successful. It was a year when the two organizations were effectively associated, when progress was made in diversification and expansion, when steps were taken toward a divisional organization, and when sales and earnings exceeded original forecasts. Since the Company's annual accounting period has been changed to a calendar-year basis, this report covers the year ended December 31,1963. In 1963, net sales for the Company and its subsidiaries totaled $226,554,354. Net income for the year amounted to $13,558,080 or $5.59 per share of common stock. In the fiscal year ended March 31,1963, we reported net sales of $99,814,250 and net income of $4,380,731, or $1.90 per share of common stock. The substantial increases in the most recent period result primarily from the fact that the year ended December 31 included a full 12 months of combined paper and chemical operations, whereas the fiscal year ended March 31 included eight months of paper operations and only four months of combined paper-chemical operations. In the Company's chemical business substantial growth was experienced in a number of our newer products, while certain other products, especially vinyl chloride monomer, felt some adverse effects of intensified competition and price adjustments. Overall results in the chemical business were good. Ethyl continues to maintain a strong position in the antiknock compound market and expects to benefit from the growth in this area. In the paper business, product prices, which had declined sharply during the previous fiscal year, remained generally depressed for much 3 ETC of 1963. They did improve significantly in the last few months, however, and further price increases are anticipated. The introduction of new paper and paper-plastic products, the installation of modern, efficient, high-output equipment and facilities, together with improved prices, are expected to enhance the profitability of our paper operations in 1964. Acquisition of the major portion of the polyethylene film operations of Union Carbide Corporation's Visking division was a significant step in Ethyl's diversification and expansion. It strengthens our position in the packaging field, where the film is widely used, and fits very well into our situation as a producer of paper and packaging materials and a manufacturer of chemical intermediates for other plastics. While the polyethylene film business is quite competitive, we are confident that there is a good future in it for Ethyl and that it will make a material contribution to our earnings. The finances of the acquisition are discussed in the Financial Review section of this report, and the history, manufacture, sale and uses of the film are explained in a special insert entitled "The VisQueen Story." The Company has repaid $12.5 million of debt, leaving a present debt, both current and long-term, of a little over $194 million. Payments in the next five years range from $2 million in 1964 to $12 million in 1968, or an average of about $9.5 million a year. Summaries of our long-term debt and of debt maturities appear in the Financial Review section of this report. Cash flow--currently in the neighborhood of $30 million a year-- is providing ample funds for orderly debt retirement and for dividend payments at present rates, and is now furnishing approximately $20 million a year for capital expenditures. Over the next five years, depending on the rate at which new investments generate increased depreciation, and depending, of course, upon earnings, we estimate that between $100 million and $150 million will be available for capital expenditure, without recourse to further financing. Looking ahead, the Company's operations are being planned on a divisional basis, with a central staff management group coordinating the activities of the various units. In carrying out such a plan, a Petroleum Chemicals division, an Industrial Chemicals division, an Ethyl International division and a Plastics division have been organized. The activities of these divisions are described in the Operations Review section of this report. 4 Etc I684 7 ETHYL CORPORATION AND SUBSIDIARIES Successful research and engineering and effective pilot plant operations have culminated in a process to manufacture straight-chain alcohols, used in detergents and plastics. The Company is constructing a plant to produce these alcohols commercially at the Ethyl manufacturing center at Houston. In other expansion moves, the Company is entering the field of chlorinated solvents, and Ethyl Corporation of Canada has started construction of facilities to produce several industrial and petroleum chemicals for the Canadian market. Our research program continues to be aggressively conducted in a number of areas, investigating new applications and new products. We were saddened by the death, early in December, of Edward L. Shea, former president and chairman of Ethyl Corporation (Delaware] and a valued member of the board of directors of Ethyl Corporation (Virginia). Mr. Shea was a widely known and highly respected business executive whose constructive counsel was extremely helpful. We are glad to welcome to the board of directors E. Claiborne Robins, president of A. H. Robins Company, drug and pharmaceutical manufacturers of Richmond, Va., and Erwin H. Will, chairman of the board of Virginia Electric and Power Company, also of Richmond. In the year ahead, we plan to continue the consolidation of the organization along divisional lines and to make further progress in expansion and diversification. On the basis of a full year's operations of the new "VisQueen" polyethylene film business, projections of continued price improvements in paper during 1964, and another successful year in chemicals, we look for improved sales and earnings. Meanwhile, we want to express to shareholders, employees, suppliers and customers our appreciation for their continued outstanding support. B. B. TURNER President F. D. GOTTWALD Chairman of the Board 5 < Annual Accounting Period Beginning with 1963, the Company's annual accounting period is changed to i a calendar-year basis. In keeping with this change, and in order to present the results of a full year's operations, this report covers the 1963 calendar year, rather than just the nine-month period which has elapsed since March 31, 1963, the date of the last annual report. However, to provide a continuous fi nancial record, nine-month figures are shown in the Consolidated Statements of Income and Surplus on page 22. Throughout the report, where the calendar year 1963 is compared with the fiscal year ended March 31,1963, it should be remembered there is an overlapping period of three months, Ethyl research includes studies of new plastics and new uses for plastics. since January, February and March 1963 are included in both years. volume generally remained at satisfac Sales and Marketing tory levels. During 1963, there was a substantial Net sales of Ethyl Corporation and its increase in the cost of metallic lead, subsidiaries, for the year ended De the most important raw material used cember 31, 1963, totaled $226,554,354. in the manufacture of antiknock com The increase of $126,740,104 over sales pounds. Early in 1964 an increase was of $99,814,250 in the fiscal year ended effected in the price of antiknock com March 31, 1963 results primarily from pounds, which offset a substantial por the fact that the year 1963 includes 12 tion of this increased cost. months of combined paper and chem Ethyl Corporation of Canada Lim ical operations, and one month of poly ited, a wholly-owned subsidiary, in ethylene film operations. The fiscal creased the dollar volume of its sales year ended March 31, 1963, included and profits, primarily from greater sales eight months of just paper operations of antiknock compounds. Ethyl of and only four months of combined Canada has started construction of paper and chemical operations. new facilities for the production of The year 1963 was a generally good other petroleum and industrial chemi one for chemicals. All of the produc cals at its Sarnia plant. tion of the new caustic soda plant was In the kraft paper industry, product sold in its first year and it is anticipated prices, which had declined sharply in that the same sales position will be en 1962, remained at low levels during joyed in 1964. Sales of aluminum alkyls much of the year. There were some in and of various petroleum chemicals in creases in the last several months of creased during the year. Intensified the year, but Albemarle still must sell competition and price adjustments had most grades of kraft paper and con some adverse effect on some of the verted paper products at prices below Company's other products, but their the highs of a few years ago. I f 7 ETC 16850 Net Sales Year Ended December 31 240 Millions of Dollars Net Income Year Ended December31 15.0 Millions of Dollars 1955 56 5? 58 59 60 61 62 63 63 '--------------- Fiscal Year Ended March 31--------------- ' In absorbent and saturated papers prices remained firm, and some slight price increases are expected in these grades in the year ahead. During 1963, present grades have been improved and new outlets for saturated paper products have been developed. The record production of kraft paper and paper board accounts for most of the profits in paper operations. Con tinued demand, along with the modest price increases that are expected to ma terialize, should increase profitability during 1964. Overseas, Ethyl's products were sold in over 80 countries. The sale of anti knock compounds increased substan tially and there also were significant gains in the sale of other petroleum chemicals. Mixed lead alkyl antiknocks were successfully introduced to re finers in the Far East and their use is becoming increasingly popular. The volume of foreign business is expected to increase in the next year as Ethyl International, the new Corn- pany division created to handle the sale, distribution and servicing of prod ucts abroad, becomes fully operational. Earnings Earnings increased from $4,380,731 in the fiscal year ended March 31,1963 to $13,558,080 in the 1963 calendar year. This increase also is due primarily to including twelve months of combined paper and chemical operations in the calendar year vs. eight months of paper and four months of combined paper and chemical operations in the fiscal year. On a per-share basis, earnings amounted to $5.59 in the calendar year, against $1.90 in the fiscal year. Interest costs were at a peak level in 1963, amounting to $11,511,195. They will be $450,000 lower in 1964, and $2,500,000 lower by 1968. In addition, the year's earnings re flect charges of approximately $900,000, on an after-tax basis, for special retirements, non-recurring costs inci 8 te Working Capital Year Ended December 31 72 Millions of Oollars 60 R 48 36 i 24 n ..llllll 1956 56 57 58 59 60 61 62 6 3 63 1 nui iuI touted Mftil Ul J1 dental to the VisQueen acquisition, and the writeoff of certain assets and de ferred expenses. Capital Stock and Dividends In May 1963, the shareholders approved an increase in the amount of author ized Class B Common Stock from 2,000,000 to 4,000,000 shares, and a re duction in the par value of both Class A and Class B Stock from $5 to $3 per share. Concurrently, a two-for-one split was effected, whereby stockholders re ceived one share of Class B Stock for each share of Class A or B held by them. With the issue of these shares, plus the issue of 1,083 Class B shares under employees' stock options, there were outstanding, at December 31, 1963, 2,375,807 shares of Class A and B stock. Cash dividends paid or declared totaled $1,066,237 for the year. This total is comprised of dividends on the Class A and Class B Common stock, now at an annual rate of 36* per share, and dividends of $6 per share on the Cumulative Preferred. During the year, contributions of $293,090 were made into the Sinking Fund required for the retirement of Preferred Stock. The Treasury Stock (127 shares), as shown in the Decem ber 31,1963 balance sheet, will be used to satisfy, in part, the 1964 Sinking Fund requirements. In May 1963, the shareholders also authorized a Cumulative Second Pre ferred Stock in the amount of $25,000,000. This stock is represented by 250,000 shares with par value $100 per share, none of which has as yet been issued. Long-Term Debt The long-term debt has been repaid in the amount of $12,576,120. Payments include $8,000,000 on the 5V*% $16,000,000 Bank Loan; $2,015,000 on the 53/4% $20,000,000 Subordinated Notes 9 ETC 16852 of 1967; and $2,561,120 on the 3'/b% Guaranteed Notes of 1970. On December 30,1963, the Company refinanced at the same interest rate the $8,000,000 balance of the Bank Loan and the $17,985,000 balance of the Sub ordinated Notes of 1967. This action increases by approximately $14,000,000 the amount of cash which the Company will have available over the next five years for diversification and expansion. Under the debt rearrangement, divi dend restrictions of 50* per share on the Common Stock and limitations on payments on the Preferred Stock have been removed. However, the Senior Note Agreement limits the payment of cash dividends, prepayment of Subor dinated Notes, and redemption of out standing shares of stock to 60% of net earnings after April 1,1962. At Decem ber 31,1963, $5,900,000 of retained earn ings was available for such payments. The total borrowings at December 31, 1963, and the debt maturities are shown in the accompanying boxes titled "Summary of Long-Term Debt" and "15-Year Summary of Debt Ma turities." Capital Expenditures On November 30, 1963, the Company, completed the acquisition of "VisQueen" polyethylene film operations from Union Carbide Corporation. In the acquisition, the Company paid $17 million for three plants and associated equipment, plus patents, contracts, ac counts receivable and inventories con nected with the business. Inventories and accounts receivable were acquired for $4,800,000, and $12,200,000 was paid for the other properties, including property, plant and equipment at three well-located manufacturing plants -- Flemington, N. J.; Terre Haute, Ind.; and Fremont, Calif. The remaining capital expenditures of $6,662,000 were for improvement and expansion of the Company's pres ent business. 10 ETC 16853 ! * N V-!9lW Efficiencies in the handling of major raw materials include truck delivery of pulpwood to the pulp and paper mill at Roanoke Rapids, N. C,, and barge shipments of pig lead to the chemicals manufacturing plant at Houston, Texas. Summary of Long-Term Debt 516% Bank Loan--Out 1964-1870 ............................................................ $ 8,000,000 The Chase Manhattan Bank 5%% Senior Notes--Due $8,000,000 Annually 1965-1978 ................. The Prudential Insurance Company of America The Equitable Life Assurance Society of the United States The Northwestern Mutual Life Insurance Company New York Life Insurance Company 114,000,000 3tt% Guaranteed Notes--Due 1954-1970 ................................................ Three Canadian Banks (This debt is owed by the Canadian subsidiary and is guaranteed by the parent company.) 4,799,954 5K% Subordinated Notes--Due 1964-1972 ........................................... The Prudential Insurance Company of America The Equitable Life Assurance Society of the United States New York Life Insurance Company 17,985,000 Source and Disposition of Funds and Working Capital 5%% Subordinated Notes--Due 1979-1982 ........................................... Privately Placed with Various Investors Total Debt at December 31, 1963 .......................................... 50,000,000 194,784,954 The following tabulation shows the source and disposition of funds for the Current Portion of Debt............................................................ 2,185,211 Long-Term Debt.................................................................... $192,599,743 year: Slum of Foods: Net Earnings ...............................................$13,558,080 Depreciation, Depletion and Amortization 15,131,178 . . Provision for Deferred Taxes 1,698,758 *$30,388,016 Disposition of Fundi: Cash Dividends........................................... $ 1,066,237 Capital Expenditures: Property, Plant and Equipment .... 6,662,000 Purchase of VisQueen Business $17,000,000; Less Inventories and Accounts Receivable (Included in Working Capital) $4,800,000 .... 12,200,000 Payment on Long-Term debt 12,576,120 Other Items (Net)....................................... (2,116,341) $30,388,016 At December 31,1963, working capital was $67,337,401, an increase of $4,336,590 over the amount of March 31,1963. The ratio of current assets to current liabilities at December 31, 1963 was $3.36 to $1.00. 15-Year Summary of Debt Maturities SVS% Bank Loan Due 1970 s%% Stflior Notts Due 1978 3H% Guaranteed Notes Due 1970 SK% Subordinated Notes Due 1972 Total Annual Amount 1964 1965 $ 500,000 500,000 $-- 8,000,000 $685,211 685,211 $1,000,000 1,000,000 $ 2,185,211 10,185,211 1966 750,000 8,000,000 685,211 1,000,000 10,435,211 1967 1968 750,000 1,250,000 8,000,000 8,000,000 685,211 685,211 2,500,000 2,500,000 11,935,211 12,435,211 1969 1,250,000 8,000,000 685,211 2,500,000 12,435,211 1970 3,000,000 8,000,000 688,688 2,500,000 14,188,688 1971 -- 8,000,000 -- 2,500,000 10,500,000 1972 -- 8,000,000 -- 2,485,000 10,485,000 1973-77 -- 8,000,000 -- -- 8,000,000 1978 -- 10,000,000 -- -- 10,000,000 5%% Subordinated Notes Due 1982 are payable in the years 1979-1982. > 11 ETC 16854 * Manufacturing During 1963, the chemicals manufac turing organization has continued to plan and install changes which have re duced costs. These include improving the utilization of facilities, materials and manpower to counteract the effects of rising costs of materials, increasing taxes and increasing wage rates. In another move to reduce operating costs, the antiknock compound manu facturing plant at Pittsburg, Calif., was put on stand-by status. Production was shifted to other Company locations, with no reduction in service to cus tomers. New records were established in the production of both pulp and paper dur ing 1963, and waste reduction and im proved operating efficiencies helped reduce manufacturing costs. The use of chemical additives increased effi ciency and output, and improved pulp and paper characteristics. Plans for an $11 million improve ment program at the Roanoke Rapids, N. C,, pulp and paper mill, including a new power plant, have been completed. The resulting improvements are ex pected to reduce manufacturing costs still further. An electronic computer process con trol system was installed at the Roan oke Rapids, N. C., mill for on-line data logging and process analysis. The sys tem contributes to a better understand ing of the variables of papermaking and provides an automatic data proc essing capability for improved produc tion scheduling. At the Raymond Bag division, changes in equipment and organization have been made to improve the organi zation's competitive position in the multiwall sack business and to put it in the all-plastic bag market by mid1964. The addition of a new six-color press will enable Raymond to print on plastic bag materials and produce fine quality color printing on paper bags. At the Albemarle Container plant, at Odenton, Md., a new corrugator and complementary equipment, to be in stalled in 1964, will enable the plant to compete more successfully in its area. The efficiency of the physical plant and organization at the Richmond Con tainer facility is being increased by making changes recommended in re cent industrial engineering studies. At the Interstate Bag Company plant at Walden, N. Y., a long-range expan sion program, including additions to Skilled operators and precise controls help assure efficiency in chemical manufacturing operations. Advanced chemical research plays a big part in the Company's growth and expansion. ,0 Bulk shipments of antiknock compounds in Ethyl's Chemical Trader save time and money for overseas petroleum refiners. buildings and production equipment to increase manufacturing capacity and service capabilities, is continuing. Pulpwood Supply and Forest Management Purchases of pulpwood for use at the Albemarle mill at Roanoke Rapids, N. C., rose to slightly more than 500,000 cords during 1963, an increase of 11 percent. Of this amount, 155,000 cords, or 32 percent, were purchased in the form of chips from more than 50 saw mills and lumber plants. Since truck shipment of pulpwood is more economical than rail, efforts are continuing to expand the use of truck shipments and to increase trucking ef ficiency. The 200,000 acres of woodlands that the Company currently owns or holds under long-term lease were supple mented by the purchase of 1,745 addi tional acres, mostly in one large tract, within 50 miles of the mill. Petroleum Chemicals Company activities related to the sale of petroleum chemical products and their use by oil refiners--including the Ethyl Sales department and research and technical units -- have been grouped together in a newly organized Petroleum Chemicals division. The division, which is responsible for the sale and service of all "Ethyl" additives for petroleum products in the United States, is backed by the entire Ethyl organization as it works closely with oil refiners. Besides providing depend able, on-time delivery of consistently high quality products, the Petroleum Chemicals division tailors to the re quirements of individual refiners the services of Ethyl's research and devel opment, technical service, safety, gas oline testing, market analysis, and ad vertising and sales promotion groups. As part of its continuing efforts to develop, evaluate, recommend and supply antiknock compounds of maxi mum cost-effectiveness, the Company has conducted an extensive evaluation program during the year. Thousands of hours of laboratory tests and more than two million miles of road tests have been devoted to the program and the results have been discussed with oil refiners. Fuel and engine research at laboratories in Detroit contribute to and new improved '`Ethyl" additives for petroleum products. 14 ETC 16857 r THE STORY This special insert is enclosed in "VisQueen TnT," an exceptionally strong, clear, glossy polyethylene packaging film. ETC 16858 HE acquisition of the major portion of the T"VisQueen" polyethylene film operations of Union Carbide Corporation's Visking division was a highlight of the year 1963. It makes Ethyl the leading r manufacturer and marketer of this highly versatile I and widely used plastic material. Polyethylene film is used in building construction, ! \ agriculture, industry, around the home and in modern packaging--in everything from weather balloons to transparent vegetable bags, from drapery materials to painters' drop cloths. Symbol of Quality Included in the acquisition were three manufacturing plants, accounts receivable, inventories, certain contracts and patents, and exclusive rights in the United States to the "VisQueen" trademark, which is widely recognized \ as a symbol of quality in polyethylene film. Ethyl is continuing the production and sale of high quality polyethylene film under the "VisQueen" label. Some 880 management, research, engineering, sales and production employees have joined the Ethyl organization. The "VisQueen" polyethylene film operations are the first part of the newly formed Ethyl Plastics division in commercial operation. r They are headquartered in Baton Rouge, La., where the Company has extensive research, manufacturing and administrative facilities. The Ethyl Plastics division is headed by Dr. Clarence M. Neher. Lloyd B. Andrew is general l manager of the "VisQueen" polyethylene film operations, while Harry C. Byrne, Jr., is general sales f manager and J. C. Wright is operations manager. Popular Plastic Polyethylene is one of the best known and most popular modern plastics, and its use is growing. Two ETC 16859 * * f t % i \ i fc ir Almost 2.2 billion pounds of polyethylene resin, the base material from which end products are made, were produced in the United States in 1963, about 12 percent more than the year before. Increasing demand is expected to push total production much higher in the next few years. Film and sheeting are by far the largest uses for polyethylene resin, accounting for about 625 million pounds last year. This amount is expected to increase approximately 50 percent--to about 900 million pounds--by 1968. About 70 percent of polyethylene film and sheeting is used for packaging. The building and construction industry takes about eight percent; agriculture five percent; and miscellaneous uses account for the remainder. Besides film and sheeting, polyethylene is used for wire and cable insulation; extrusion coatings on paper, paperboard and other substrates; plastic pipe; injection molding for toys and housewares; blow molded containers; and various other applications. Contributed to War Effort Polyethylene was developed in England during the 1930s. The first commercial production began in that country in September 1939, on the day that Germany invaded Poland to touch off World War II. Since polyethylene is a superior insulation material for submarine cable and for flexible, high-frequency cable for ground and airborne radar equipment, its production was accelerated and it made outstanding contributions to Allied war efforts. Sir Robert Watson Watt, the discoverer of radar, described polyethylene as having played an "indispensible part in the long series of victories in the air, on the sea, and on land, which were made possible by radar." During the war, at the request of the United States government, the Visking Corporation, which had Three i I i ETC 16860 been established in 1925 to manufacture cellulose ( food casings for the meat packing industry, became the first to produce unsupported thin polyethylene film from polyethylene resin. Visking developed a unique melt-extrusion process, which produced film with uniformly controlled characteristics. Among the first uses for the film were weather-proof covers for guns and ammunition. With the return of peacetime, the extreme versatility of "VisQueen" polyethylene film was quickly appreciated and its uses multiplied. First Plant at Terre Hante Visking's first plant to manufacture "VisQueen" polyethylene film was established at Terre Haute, Ind. The Company subsequently added film plants at Fremont, Calif., and Flemington, N. J. The Visking Corporation was acquired by Union Carbide Corporation in 1956, and during that ownership, a fourth plant at Cartersville, Ga., was added to the polyethylene film manufacturing operations. Subsequently, the Federal Trade Commission directed Union Carbide to divest itself of the polyethylene film operations that were a part of the organization at the time of Carbide's acquisition of Visking. This opened up the opportunity for Ethyl to acquire the Terre Haute, Fremont and Flemington plants, associated operations, and the widely known and highly respected "VisQueen" name. Obtained from Oil and Gas In manufacturing "VisQueen" polyethylene film, Ethyl buys conventional polyethylene resin in the form of small pellets. The resin is produced by chemical and petroleum companies which manufacture it from ethylene gas, which in turn has been obtained from natural gas or crude oil. Polyethylene resin is shipped to the "VisQueen" 1 facture cellulose ` ; industry, became thin polyethylene king developed a hich produced film :teristics. Among eather-proof covers , the extreme hylene film was multiplied. uie "VisQueen" jd at Terre Haute, Ind, led film plants at , N. J. The Visking nion Carbide > that ownership, a , was added to the ig operations. 'rade Commission st itself of the vat were a part of the hide's acquisition of jportunity for Ethyl to ont and Flemington and the widely known en" name. polyethylene film, ethylene resin in the n is produced by Janies which gas, which in turn has as or crude oil. . to the "VisQueen" j% plants in railroad hopper cars; in huge, collapsible, black rubber shipping bags, with a capacity of up to 10,000 pounds; and in multiwall paper shipping sacks. Depending on the desired characteristics in the type of film to be made, polyethylene resin of different types and certain concentrates are blended together. These blends are subjected to heat and the resulting "melt" is extruded as a tube of film from a round die. As the melt emerges from the die and starts to cool, it is inflated to several times the die diameter. The film is cooled by blowing cool air onto the outer surface of the bubble from an air ring. The air velocity, air temperature and point of contact of the air on the bubble may all be varied to impart desired properties to the finished film. For example, the rate of cooling affects optical properties, with rapid cooling giving a clearer, glossier film. The amount of stretch applied by blowing the semi-cooled melt into a bubble is an important factor in achieving high impact and tensile strengths. The film passes from the cooling system up into a collapsing frame where rollers flatten the cylindrical tube. The film passes over a series of rollers to a windup, where it is wound on cardboard cores. In the final stages, it may be treated to impart printability, or may be slit, if desired. Finally, all "VisQueen" film is carefully inspected in a series of exacting quality control tests and is packaged for shipment to customers throughout the country. Made into Bags "VisQueen" film for the packaging industry is sold primarily to converters who make it into bags or other packaging units, print it with product identification, brand names, trade marks and product use instructions for ultimate consumers. Film for Five -i'v. -;--:" ' "g*f Thrayv * -Jyt It Itural industries is distributed\irm flK ili~tiT fll"l"r ' * . -*(' '.r* *r " . S^fliid pdntr&ctoricVNfr^y^^ rrr ------i qualities, forms, folds{iS^'?p5v^-.7-* lpknesses and pattern' s-. It, onersfilm- '.v`. '.. ! ^ feel,wide-and from 4/10 of a.*.: c^s^s :r..; 3tab! l5S&3i5hjiL vr, K`"'-is**-.i\ ->*>t_ ' rtv:-- tYisQueeiiJ' polyethylene film'isrj.y' Je icTmany uses because of its'-'--v ^-L,ecpnomjvIt ilwaterpioox&u&U- -L . j "1- dblei Itdoes not craaduM^attrtl3'-?&.--?'.-:;J-1-i--j. resists tearing and is not affectedly. 3jfcKfflKr' .. lare'jespedally important in:J|gg- onragncultural'and household y*yV'- ; / SS-S^^SF*5* '" J y "-eas; tne film is used for such y; ,C:y .V'. yy~.y-tyy, v-I Pgrary repairs and^M^^*^-- cloths; machinery, boat, .:y- MMawf*v mm .- Nfc my t weetL, Lithe i 0^00$$ ideations, black ` `VisQueen'Vyy/. sb of its superior resistance to-. ^ mulchlblack.J'VisQueen"'&vS'^V' '. lon^yrevents erosion, controls^-/;.-,; ides an atmosphere for enriching soil. - *;-> S. -;- y- - elected crops is faster and the . rail mcoVered'with such filmy ss^osiSjfifrtjiSB^ysiy'iv-.-^*v,.v5y:y-.y .. ame qualities which recommend '. . -; c ...; & ' v` '. for buildings imaKe ifa superior^ Wmi W-K - >vS^-V.-vi;i..- * /. r: wy?'u .- ^'*i..:. ;v .-. ' ' ffy?-*;- yi '; - ?,r- ' "i, -' v, fey-tyay *'>. IV'. . '- ETC 16863 ion of .nns, folds, ` * ' :!;`.',v ..`.A"'-"** eras. It offers film ': m`4/10 of a ; -; v - ylene film is .use of its is waterproof, / -;' S-Vm oes not crack or 4 is not affected portant in nd household i is used for such 'y<r.**SV rriVv*^^ ^ irs and - \ **.- %::*; achinery, boat 'v;_y*. ^>[55: ation; hay, coal, orary greenhouses --^*3i nation ditch and ~ v -y<%3 . : r concrete floors . "VisQueen" ' -esistance to ' ' isQueen" on, controls Xcor enriching soil. ar and the : ith such film. X ' > :h recommend ?> ~ - *%?$, uilding, : ; r' ' '' " `' ** superior -XX'. '-'Of.P-i'-X -. *"* .< - . . X doors as a other '^SifUs*d in Balia ," ^ r ^^The unusua ' ... - :. ; x... - XX: X -' " ,. polyethylene an . '.-;vv.- -'. v-rvjar% known as TVisC u4 drums of chemicals ancf^ySfc _____ reliabihty^d^cbld fiimis XX&ei r ETC 16864 especially receptive to embossing and printing with attractive designs, is Same retardant, hangs well and has a good "hand." It is expected to be available in attractive drapes in thousands of retail outlets throughout the country. Nationwide Sales Force Orders for "VisQueen" polyethylene film of all types are channeled into the several plants from the experienced sales force operating throughout the country and headquartered in Baton Rouge, La. Besides introducing new films as they are developed, the sales force works closely with customers and potential customers--especially in the fast-growing building and agriculture and packaging fields--in the economical and efficient use of "VisQue-- "film. The addition of the "VisQueen" polyethylene film' operations represents an important step in Ethyl Corporation's growth and diversification. It strengthens Ethyl's position in the packaging field, where the Company is a supplier of paper and converted paper products, and fits into the Company's position as a leading producer of intermediates for other plastics. At the same time, the Company looks forward to even further expansion in the areas of new plastic films and other packaging materials. Industrial Chemicals In another move to organize the Com pany on a divisional basis, activities related to the sale of chemicals other than petroleum additives have been grouped together in an Industrial Chemicals division. The products of this division include basic and special ized chemicals used in a variety of plastic, industrial, agricultural, house hold, national defense and other prod uct areas. Capitalizing on its extensive re search and manufacturing experience in chlorinated hydrocarbons, the Com pany is entering the field of chlorinated solvents. Initial products consist of 1,1,1-trichloroethane, perchlorethylene and trichlorethylene, three chlorinated solvents widely used in dry cleaning and industrial degreasing. Facilities for the production of 1,1,1-trichloroethane are to be built at the manufacturing center at Baton Rouge, with completion scheduled for the fall of 1964. Other manufacturing facilities are planned for the future. Another important addition to Ethyl's industrial chemicals will be the straight-chain primary alcohols for de tergents and plastics to be made at a new plant now under construction at the Houston manufacturing center. Plastics To help implement the Company's plans for expansion and diversification in the polymer field, a Plastics division was created during the year, with head quarters at Baton Rouge, La. The "VisQueen" polyethylene film operations,which were acquired late in the year and which are described in de tail in a special insert in this report, are the first component part of the Plastics division in commercial operation. Since it is a major producer of vinyl chloride monomer and vinylidene chloride monomer, both of which are Stylish shopping bags made by the Interstate Sag division are popular with shoppers throughout the country. plastics intermediates, and now is a leading manufacturer and marketer of polyethylene film, the Company is evaluating other new opportunities in polymers. Ethyl International The Company's interest in the growing overseas market for its products led to the formation, during 1963, of an Ethyl International division. The new divi sion is responsible for the sale, distri bution and service of petroleum and industrial chemicals, paper and plastic products in all countries outside the United States, except Canada. In that country, Ethyl Corporation of Canada Limited manufactures and markets "Ethyl" products. While the Company's chemical and paper products have previously been sold in scores of foreign countries, Ethyl International is designed to capi talize on increasing foreign demand, resulting from fast growing industriali zation in many parts of the world. 15 During the year, two more terminals were added to the three already in op eration in the Caribbean-Latin Ameri can area to receive bulk shipments of antiknock compounds from the Ethyl tank ship "Chemical Trader." Employee and Public Relations Now a corporation of more than 7,000 employees at 14 manufacturing plants in 11 states and one in Canada, and at laboratories, offices, terminals and other locations, Ethyl and its subsidi aries enjoyed good labor and employee relations during 1963. Wages, salaries and benefit plans in the various parts of the organization continue to com pare favorably with those prevailing in industries and areas where the Com pany operates. Safety records at all locations have continued to be good. Ethyl and its subsidiaries have en joyed good public relations in plant communities, among shareholders, in dustry groups, the financial community and the general public. Active interest and participation by the Company and its people in community and indus try affairs, and a continuing program which provides accurate, up-to-date in formation about corporate develop ments, have contributed to these good public relations. Research and Development In furthering the Company's plans for continuing growth, research and de velopment activities are carried for ward on a broad front. They include process improvements, product appli cation and development, and the ex ploration of new product areas. An outstanding accomplishment was the development of the process for the production of straight-chain alcohols used in detergents and plastics. New applications for antioxidants and chemical intermediates from the Company's patented orthoalkylation process, including an anti-skinning agent for paint and components for herbicides, were introduced. In petroleum chemicals, besides continuing to evaluate antiknock com pounds, attention has been directed to new additives for lubricating oils and other products, with some introduced to sales or market testing and others undergoing more advanced research. The catalyst developed by Ethyl to remove potential smog-forming mate rials from automobile exhaust gases is performing satisfactorily in continu- Specially designed tank cars and efficient delivery services assure customers of dependable delivery of "Ethyl" chemicals. Right: Sturdy, attractive multiwall sacks are manufactured by the Raymond Bag division at Middletown, Ohio, and Richmond, Va. ing tests administered by the State of California. These tests are expected to be completed in 1964. Continuing chemical research is de voted to: new exhaust gas catalysts; further development of antioxidants for petroleum products, food, feed, plastics, rubber and intermediates for the chemical industry; chlorinated hy drocarbons, including various solvents for dry cleaning, metal finishing and other uses; polymers and finished products derived from polyvinyl chlo ride, olefins, and vinylidene chloride; sodium derivatives; and petroleum ad ditives of maximum cost-effectiveness and durability. In paper and packaging, research and development are carried out on pulp, paper and converted products-- with increased emphasis on product development. New products intro duced or ui-de^going market evalua tion include: filtration papers for use in automotive and diesel locomotive engines; decorative and functional paper and paper board coatings for packaging; high-strength bag materi als; and a variety of specialty kraft products. New laboratories for packaging, fil ter and coatings research are going into operation early in 1964. The Company continues to conduct research and development projects under the sponsorship of the federal government--primarily the Depart ment of Defense. These include such product areas as missile propellant components and special weapons. A total of 114 U. S. patents was granted to Ethyl in 1963. At the year end, the Company owned over 800 un expired U. S. patents. Id addition to the offices, plants, laboratories and terminals indicated on the accompanying map of the United States and Canada, a number of individual representatives from Ethyl's petroleum chemicals, paper and plastics organizations are lo cated throughout the country. Sales and service representatives and dis tributors represent the Company overseas. As the lower map indi cates, Ethyl's products are sold in scores of countries around the world. Legend o Executive Offices Chemical Manufacturing Plants n Plastics Manufacturing Plants Riper Manufacturing Plants o Research Laboratories o Gasoline Testing Laboratories @ Storage Terminals Regional Offices District Offices T Riper Sales Offices Plastics Sales Headquarters Countries in which Ethyl Products are Sold Financial Statements > 19 Consolidated Balance Sheets December 31 and Morch 31,1963 Assets Current Assets: Cash.................................................................. Short-Term Securities..................................... Accounts Receivable......................................... Inventories....................................................... Prepaid Expenses............................................ Total Current Assets...................... December 33 1963 $ 12,937,345 21,935,596 28,605,686 30,995,395 1,341,503 95,815,525 March 31 1963 $ 10,448,315 30,335,051 24,275,496 32,229,961 1,784,548 99,073,371 Property, Plant and Equipment.............................. Less: Accumulated Depreciation and Depletion . . Net Property, Plant and Equipment . 189,481,921 33,923,428 155,558,493 174,871,590 23,912,460 150,959,130 Investments in Affiliated Companies................... 7,270,439 7,177,722 Deferred Charges and Other Assets...................... Patents, Contracts and Other Intangibles .... 13,565,519 13,270,101 $285,480,077 14,703,281 12,995,641 $284,909,145 20 The accompanying notes are an1 ETC 168U ETHYL CORPORATION AND SUBSIDIARIES Liabilities Current Liabilities: Accounts Payable and Accrued Expenses . . . Long-Term Debt--Current Portion.................. United States and Canadian Income Taxes . . . Total Current Liabilities.................. December 31 1963 $ 16,094,794 2,185,211 10,198,119 28,478,124 March 31 1963 $ 16,375,126 8,905.831 10,791,603 36,072,560 Long-Term Debt................................................... Provisions for Deferred Income Taxes and Employee Benefits........................................ 192,599,743 12,253,909 196,375,319 9,939,474 Stockholders' Equity Capital Stock: 6% Cumulative Preferred, par $100 per share . . Class A Common, par $3 per share.................. Class B Common, par $3 per share................... Capital Surplus....................................................... Retained Earnings................................................ Less, Preferred Stock in Treasury -- 127 shares at December 31 and 1,018 at March 31 (at cost) . . . Total Stockholders' Equity .... 4,502,700 447,108 6,680,313 15,955,149 24,575,976 52,161,246 12,945 52,148,301 $285,480,077 4,792,000 745,180 5,191,630 17,118,590 14,778,157 42,625,557 103,765 42,521,792 $284,909,145 integral part of these balance sheets. 21 ETC 16872 Consolidated Statements of Income and Surplus Statements ot Income and Retained Earnings Income: Net sales.................................................... Miscellaneous income, net...................... Costs and expenses: Costs of goods sold..................................... Selling and general expenses.................. Interest & financing costs, long-term debt . United States & Canadian income taxes . . NET INCOME......................................... Retained earnings at beginning of period . . Deduct: Cash Dividends Preferred stock..................................... Common stock*..................................... Retained earnings at end of period............... Nine-Month Period Ended December 31 1963 $174,923,796 1,502,052 176,425,848 119,691,201 26,392,368 9,141,999 10,555,000 165,780,568 10,645,280 14,778,157 25,423,437 206,188 641,273 847,461 $ 24,575,976 Twelve-Month Periods Ended December 31 March 31 1963 1963t $226,554,354 2,154,701 228,709,055 $ 99,814,250 1,007,782 100,822,032 154,791,015 34,553,762 12,246,196 13,560,000 215,150,975 13,558,080 12,084,133 25,642,213 72,902,380 13,937,045 5,146,876 4,455,000 96,441,301 4,380,731 11,235,615 15,616,346 276,540 789,697 1,066,237 $ 24,575,976 - 283,488 554,701 838,189 $ 14,778,157 Statements of Capital Surplus Balance at beginning of period...................... Proceeds of warrants sold with 5s/<% Subor dinated Notes due 1982 .............................. Excess of conversion price of debentures re deemed over par value of common stock issued....................................................... Excess of cash received over par value of 1,083 shares of Class B Common Stock issued under Stock Option Plan............... Excess of cost over par value of preferred stock cancelled......................................... Increase in par value of common stock out standing resulting from change in par value from $5 to $3 per share and issuance of one additional share of Class B Common Stock for each common share outstanding . . . Balance at end of period.............................. $ 17,118,590 -- -- 27,761 (3,840) (1,187,362) $ 15,955,149 $ 17,118,590 -- -- 27,761 (3,840) (1,187,362) $ 15,955,149 $ 4,315,050 11,126,066 1,681,608 -- (4,134) $ 17,118,590 t Includes only four months of combined paper and chemical operations. At annual rates of $.25 per share through April l, 1963 (adjusted for two-for-one stock split of May 31,1963), and $.36 per share thereafter. The accompanying notes are an integral part of these statements. 22 etc 16873 I ETHYL CORPORATION AND SUBSIDIARIES Notes to Financial Statements 1. Change in Fiscal Year 31,1963 and $21,100,000 at March 31,1963, In July 1963, the Board of Directors au thorized a change in the Company's fiscal and generally on an average cost basis with respect to the balance. year end from March 31 to December 31. 4. Investments in Affiliated Companies For comparative purposes, this report in cludes income and surplus statements for the nine-month period ended December 31, 1963, the fiscal year ended March 31, 1963 and the twelve-month period ended December 31, 1963. Investments in unconsolidated affiliates are stated at cost and represent the Com pany's investments in and advances to Ethyl-Dow Chemical Co., a 50% owned company acquired on November 30,1962, and Halifax Timber Company, a wholly- 2. Acquisitions owned subsidiary organized to hold tim Ethyl Corporation (Virginia), formerly Al bemarle Paper Manufacturing Company, purchased all of the outstanding stock of, and merged with Ethyl Corporation (Dela ware) on November 30,1962. Accordingly, the accompanying financial statements in clude the assets and liabilities of the ac quired corporation and the results of its operations subsequent to November 30, 1962. Reference is made to "Capital Expendi ber and timberlands. The Company's equity in the net assets of such affiliated companies at December 31, 1963 is ap proximately $3,707,000. Dividends re ceived exceeded the Company's equity in the net income of these companies by ap proximately $45,000 in the nine-month period ended December 31, 1963, and $77,000 in the fiscal year ended March 31, 1963, but were $25,000 less in the twelvemonth period ended December 31,1963. tures" on page 10 of this report for infor 5. Property, Plant Sr Equipment mation concerning the Company's acqui sition of the "VisQueen" polyethylene film business on November 30, 1963. Property, plant and equipment is stated at cost as follows: December 31 March 31 i Land.............................. $ 11,134,097 $ 10,775,436 3. Inventories Timberlands and standing timber.......................... 4,049,512 4,097,231 Inventories include: December 31 March 31 Buildings.......................... 28,715,033 25,429,731 Machinery and equipment 145,583,279 134,569,192 Finished goods................. $10,660,747 $11,202,288 $189,481,921 $174,871,590 Raw materials and work in process . . . . 16,025,652 Stores, supplies, etc. . . . 4,308,996 17,122,480 3,905,193 6. Deferred Charges & Other Assets $30,995,395 $32,229,961 Deferred charges at December 31, 1963 Inventories are stated at the lower of cost include unamortized discount on long or market, with cost being determined on term debt of $10,493,017 (see Note 10), the last-in, first-out basis, with respect to and other deferred financing expenses of approximately $19,875,000 at December $2,096,563. t 23 tc r ^ j( Notes to Financial Statements continued 7. Patents, Contracts & Other Intangibles Patents and contracts with an unamor tized cost basis of $7,924,369 at December 31, 1963 are being amortized over their respective lives. Other intangibles are stated at cost of $5,345,732. 8. Long-Term Debt Reference is made to "Long-Term Debt" on page 9 of this report for information concerning the Company's borrowings. 9. Capital Stock The Class A Common Stock is the Com pany's voting stock. As of December 31, 1963, there are 156,000 shares authorized, of which 149,036 shares are outstanding. The Class B Common Stock has no vot ing privileges, except as required by law. As of December 31,1963, there are 4,000,000 shares authorized, of which 2,226,771 shares are outstanding. The 6% Cumulative Preferred Stock is callable prior to July 1, 1964 at $101.50, and thereafter at $101.00, and is entitled to annual sinking fund contributions of $293,090. As of December 31, 1963, there are 100,000 shares authorized, of which 45,027 shares are outstanding and 127 shares are held in the Company's treasury. A new Cumulative Second Preferred Stock was authorized on May 31, 1963. It consists of 250,000 shares, with par value of $100 per share, none of which has been issued. 10. Warrants Together with the issue on November 30, 1962 of the $50,000,000 Subordinated Notes due 1982, the Company sold war rants which entitle the holders thereof to purchase 800,000 shares of unissued Class B Common Stock, $3 par value, at $13.75 per share. $11,126,066 allocated as pro ceeds from the sale of warrants was added to capital surplus; a corresponding amourrt was recorded as discount on long-term debt and is being amortized. The warrants are exercisable on or ; fore November 1, 1982. As of December 31, 1963, none of the warrants had been exercised. 11, Stock Option Plan Under the Company's restricted stock op tion plan, 300,000 shares of unissued Class B Common Stock were reserved for issu ance to officers and other key employees. At March 31, 1963, options had been granted to purchase 269,000 shares at prices ranging from $28.25 to $38.50; dur ing the nine months ended December 31, 1963, options to purchase an additional 17,600 shares were granted at prices rang ing from $37.25 to $72.00. These options are exercisable in installments over pe riods up to 10 years. Options for 1,083 shares were exercised and options for 917 shares were cancelled, leaving options outstanding for 284,600 shares at Decem ber 31, 1963, of which options for 42,700 shares were then exercisable. 12. Restricted Payments The Company's senior note agreement contains provisions which, in addition to other restrictions, limit the aggregate amount of prepayments on any subordi- 24 ETc 16875 ETHYL CORPORATION AND SUBSIDIARIES nated notes, cash dividends and expendi tures for acquisitions of the Company's stock to 60% of consolidated net earn ings, as defined, accumulated after April 1, 1962. At December 31, 1963, $5,900,000 of retained earnings was available for such payments. 13.Depreciation, Depletion & Amortization Depreciation and depletion charged to in come amounted to $10,043,068 and $13,196,918, respectively, for the nine-month and twelve-month periods ended Decem ber 31, 1963, and $5,766,779 for the fiscal year ended March 31, 1963. Amortization of intangibles and of de ferred discount and financing expenses charged to income in the same three pe riods amounted to $1,453,120, $1,934,260 and $789,113, respectively. I Auditors' Report To the Board of Directors of Ethyl Corporation: I We have examined the balance sheet of Ethyl Corporation and its con solidated subsidiaries as of December 31, 1963, and the related state ments of income and retained earnings and of capital surplus for the nine-month and twelve-month periods then ended. Our examination was made in accordance with generally accepted auditing standards and ac cordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. We previously examined and reported upon the Company's consolidated financial statements for the fiscal year ended March 31, 1963. In our opinion, the accompanying statements present fairly the finan cial position of Ethyl Corporation and its consolidated subsidiaries at December 31, 1963 and March 31, 1963, and the results of their opera tions for the nine-month and twelve-month periods ended December 31, 1963 and for the fiscal year ended March 31, 1963, in conformity with generally accepted accounting principles applied on a consistent basis. j)]o New York, February 10,1964 alybrand, ross Bros, Montgomery I i 25 ETC 16876 Ten Years of Continuous Growth Year Ended December 31 ---------- ------------------------------------ *. Sales and Income Net sales!2)................................................. Income before non-cash items and income taxes ....................................................... Depreciation, depletion and amortization . . Income taxes................................................ Net income.................................................... Cash flow.................................................... 1963 $226,554,354 42,249,258 15,131,178 13,560,000 13,558,080 30,388,016 1963fl) $99,814,250 15,391,623 6,555,892 4,455,000 4,380,731 12,117,007 1962 ' $48,578,227 5,776,220 2,294,903 1,719,051 1,762,266 4,211,875 Financial Condition Working capital............................................ Ratio of current assets to current liabilities Property, plant and equipment (Net) . . . . Expenditures for property, plant and equipment................................................ Long-term debt............................................ $ 67,337,401 $3.36 to $1.00 155,558,493 18,862,000 192,599,743 $63,000,811 $2.75 to $1.00 150,959,130 4,838,805 196,375,319 $10,313,111 $3.29 to $1.00 29,221,972 j 4,820,189 ' 15,522,300 Common Stock Number of shares outstanding........................ Earnings per shared..................................... Income taxes per share (3).............................. Dividends per share!4)................................. Book value per share!4).............................. 2,375,807 $5.59 5.71 .33'/ $20.06 1,187,362 1,029,674 | $ 1.90 $ .73 | 2.06 .84 .25 $15.93 <!) .25 ;l $10.05 i !i _________ .____ + (1) Includes 4 months of combined paper and chemical operations, j Ail prior fiscal years represent paper operations only. I 12] Net sales are stated before deducting freight cost. j ETHYL CORPORATION AND SUBSIDIARIES 1- 1961 1M . - ............... - - - ' ------------------ - - Fiscal Years Ended March 31 1960 1959 1958 1957 1-- ------ ............................ .................... . 1956 1955 $50,320,518 7,252,998 2,077,980 2,740,399 2,434,619 4,680,496 $44,572,285 6,138,973 2,041,843 1,958,081 2,139,049 4,344,420 $35,881,981 6,007,198 1,607,425 2,266,473 2,133,300 3,785,924 $34,527,980 5,781,548 1,482,130 2,378,411 1,921,007 3,795,461 $34,737,780 6,346,016 1,200,675 2,839,501 2,305,640 3,799,630 $29,082,043 4,828,940 1,248,266 1,972,419 1,608,255 3,149,360 $22,143,450 2,304,483 917,060 718,204 669,219 1,843,984 $ 8,586,720 $2.73 to $1.00 28,336,492 $ 7,950,568 $3.22 to $1.00 27,742,696 $ 9,143,917 $3.91 to $1.00 24,512,702 $ 7,640,165 $3.92 to $1.00 20,015,076 $ 6,790,823 $2.73 to $1.00 18,231,910 $ 3,458,134 $1.64 to $1.00 13,821,610 $ 3,447,958 $2.81 to $1.00 11,854,463 2,644,359 13,092,000 5,291,737 13,178,500 6,099,122 13,793,100 2,957,526 8,700,000 5,557,245 9,109,043 3,009,303 5,248,392 1,451,386 4,824,262 976.956 $1.06 1.34 .25 $9.57 971,803 $ .92 .96 .25 $8.75 760,992 $ .96 1.17 .25 $8.14 699,761 $ .87 1.23 .25 $7.29 621,020 $1.19 1.58 ,18s/4 $6.63 542,880 $ .89 1.20 -- $5.36 271,440 $ .32 .44 -- $4.47 (3J Based on the average number of shares outstanding in each year, adjusted for stock splits and stock dividends. (4J Adjusted for two-for-one stock split of May 31,1963. (5) Includes addition to capital surplus of $4.66 per share resulting from sale of warrants. See Note 10 in Notes to Financial Statements. 27 ETC 16878 ETHYL CORPORATION Officers FLOYD D. GOTTWALD Chairman of the Board B. B. TURNER. President FLOYD D. GOTTWALD. JR. Executive Vice President GEORGE F. KIRBY Executive Vice President WILUAM R. PERDUE. JR. Executive Vice President and Treasurer JOSEPH A. COSTELLO, Vice President BRUCE C. GOTTWALD Vice President and Secretary JOSEPH M. LOWRY. Vice President MALCOLM P. MURDOCK, Vice President FREDERICK P. WARNS, General Counsel Directors FLOYD D. GOTTWALD* B. B. TURNER* JOSEPH A. COSTELLO S. DOUGLAS FLEET Executive Vice President--Marketing Albemarle Paper Manufacturing Company BRUCE C. GOTTWALD* FLOYD D. GOTTWALD, JR.- FRANK A. HOWARD Research Consultant, New York, N. Y. GEORGE F. KIRBY* JOSEPH M. LOWRY ROBERT T. MARSH. JR. Chairman of the Board First and Merchants National Bank Richmond, Va. MALCOLM P. MURDOCK LEWIS F. POWELL. JR., Partner Hunton, Williams, Gay, Powell & Gibson Richmond, Va. WILLIAM R. PERDUE. JR.* E. CLAIBORNE ROBINS. President A. H. Robins Company. Richmond, Va. S. BUFORD SCOTT, Partner Scott and Stringfellow, Richmond, Va. ERWIN H. WILL, Chairman of the Board Virginia Electric and Power Company Richmond, Va. * Members of the Executive Committee ALBEMARLE PAPER MANUFACTURING COMPANY (Wholly owned subsidiary] Headquarters: Richmond, Va. Officers FLOYD D. GOTTWALD Chairman of the Boord FLOYD D. GOTTWALD, JR., President KIRKWOOD F. ADAMS Executive Vice President-- Pulp and Paper Manufacturing S. DOUGLAS FLEET Executive Vice President--Marketing JOSEPH M. LOWRY Executive Vice President and Treasurer H. WATKINS ELLERSON, JR. Vice President--Converting Manager BRUCE C. GOTTWALD Vice President and Secretary C. RAYMOND HAILEY Vice President--Budget Director BRENTON S. HALSEY Vice President--Planning LAWRENCE K. NORTON Vice President--Sales CHARLES H. ROBERTSON. Vice PresidentIndustrial and Public Relations KENNETH D. RUNNING, Vice PresidentAssistant Manager, Roanoke Rapids Division HUGH H. BAIRD, JR.. Controller Directors FLOYD D. GOTTWALD FLOYD D. GOTTWALD, JR. KIRKWOOD F. ADAMS M. LEBBY BOZNEST, JR. Paper Mill Superintendent Roanoke Rapids Division H. WATKINS ELLERSON, JR. S. DOUGLAS FLEET BRUCE C. GOTTWALD C. RAYMOND HAILEY THOMAS G. HARRIS Manager. Timber Operations JOSEPH M. LOWRY LEWIS F. POWELL, JR. CHARLES H. ROBERTSON KENNETH D. RUNNING B. B. TURNER CHARLES L. WILLS Chief Engineer Roanoke Rapids Division Paper Converting Divisions RAYMOND BAG DIVISION Middletown. Ohio JOHN T. WALTON Vice President--General Manager DONALD R. RUSSELL Vice President--General Sales Manager RICHMOND CONTAINER DIVISION Richmond, Va. H. WATKINS ELLERSON. JR.. Manager ALBEMARLE CONTAINER DIVISION Odenton, Md. JOHN B. marsch, Manager INTERSTATE BAG COMPANY Walden, N. Y. HARFORD K. STEEN Chairman of the Board GOBLE w. BRYANT. President PARVIN E. CANTRELL First Vice President ETHYL CORPORATION OF CANADA LIMITED (Wholly owned subsidiary] Headquarters: Toronto, Ontario Officers B. B. TURNER. Chairman of the Board ALAN C. TULLY, President HOWARD I. PHILP, Vice President BRUCE C. GOTTWALD, Secretary WILLIAM R. perdue, JR.. Treasurer Directors B. B. TURNER ALAN C. TULLY JOSEPH A. COSTELLO FLOYD D. GOTTWALD, JR. GEORGE F. KIRBY MALCOLM P. MURDOCK WILLIAM R. PERDUE. JR. HOWARD J. PHILP ETHYL CORPORATION OFFICERS AND STAFF DIRECTORS FLOYD D. GOTTWALD Chairman of the Board FLOYD D. GOTTWALD, JR. Vice Chairman of the Board GEORGE F. KIRBY President WILLIAM R. PERDUE, JR. Executive Vice President Sr Treasurer BRUCE C. GOTTWALD Executive Vice President & Secretary MALCOLM P. MURDOCK Senior Vice President Petroleum Chemicals JOSEPH A. COSTELLO Vice President Industrial Chemicals, Purchasing & Traffic S. DOUGLAS FLEET Vice President Marketing Coordination GLENN O. HAYES Vice President Manufacturing ROBERT HERZOG Vice President Planning JOSEPH M. LOWRY Vice President Special Assignments KENNETH L. SWARTWOOD Vice President Research & Development FREDERICK P. WARNE General Counsel JAMES E. BOUDREAU Director of Public Relations FRANK J. McNALLY Director of Finance G. SAMUEL ROBERTS Chief Engineer STEPHEN B. RODI Director of Employee Relations RUSSELL B. WESTON Director of Advertising fr Sales Promotion FLOYD D. GOTTWALD* Chairman FLOYD D. GOTTWALD, JR.* Vice Chairman JOSEPH A. COSTELLO S. DOUGLAS FLEET BRUCE C. GOTTWALD* GEORGE F. KIRBY* JOSEPH M. LOWRY ROBERT T. MARSH. JR. Chairman of the Board First & Merchants National Bank Richmond, Va. MALCOLM P. MURDOCK LEWIS F. POWELL. JR. Partner Hunton, Williams, Gay, Powell Sr Gibson Richmond, Va. WILLIAM R. PERDUE, JR.* E. CLAIBORNE ROBINS President A. H. Robins Company Richmond, Vo. S. BUFORD SCOTT Partner Scott fr Stringfellow Richmond, Va. ERWIN H. WILL Chairman of the Board Virginia Electric Sr Power Company Richmond, Va. DIVISIONS Petroleum Chemicals MALCOLM P. MURDOCK Senior Vice President ROBERT A. DOUGLASS General Sales Manager RICHARD K. SCALES Technical Director Industrial Chemicals JOSEPH A. COSTELLO Vice President JAMES M. GILL General Manager HARRY KUHE Sales Manager General Chemicals Ethyl International ALBERT B. HORN Division Vice President & General Manager CHESTER D. CARTER Division Vice President WILLIAM J. RUSHER President Sr Managing Director Ethyl S. A. Plastics CLARENCE M. NEHER Division Vice President & General Manager VISQUEEN DIVISION LLOYD B. ANDREW General Manager HARRY C. BYRNE, JR. General Sales Manager JACK C. WRIGHT Operations Manager HOWARD L. LEVENTHAL Technical Director POLYMERS DIVISION HARRY M. ZIMMERMAN General Manager TONNIE A. HOYLE Sales Manager Ethyl Corporation of Canada Limited (Canadian Division} Wholly-owned subsidiary ALAN C. TULLY President JOHN F. KOEHNLE Vice President ROBERT H. SHANNON Manager/Chemical Products Department Albemarle Paper Manufacturing Company (Paper Division) Wholly-owned subsidiary FLOYD D. GOTTWALD Chairman of the Board FLOYD D. GOTTWALD, JR. President GOBLE W. BRYANT Executive Vice President Sr General Manager KIRKWOOD F. ADAMS Executive Vice President Pulp and Paper Manufacturing S. DOUGLAS FLEET Executive Vice President Marketing JOSEPH M. LOWRY Executive Vice President Sr Treasurer BRUCE C. GOTTWALD Vice President C. RAYMOND HAILEY Vice President/Budget Director BRENTON S. HALSEY Vice President/Planning LAWRENCE K. NORTON Vice President/Sales CHARLES H. ROBERTSON Vice President/lndustrial Sr Public Relations KENNETH D. RUNNING Vice President/Ass't. Manager Roanoke Rapids Division HUGH H. BAIRD, JR. Controller W. DOUGLAS GOTTWALD Secretary RAYMOND BAG COMPANY JOHN T. WALTON Vice President/General Manager DONALD R. RUSSELL Vice President General Sales Manager ALBEMARLE CONTAINER COMPANY JOHN A. COMLY General Manager ROBERT G. REDMAN General Sales Manager JOHN B. MARSCH Sales & General Manager Baltimore Plant INTERSTATE BAG COMPANY CLAUDE V. ALLEN General Manager (Acting) PARVIN E. CANTRELL Vice President/Sales 'Members of Executive Committee ETc 16883 K-- CORPORA T ION 1964 ANNUAL REPORT The Year in Brief 2 Letter to Shareholders 3 Financial Review 6 Divisions and Subsidiaries 12 Products in Use 14 Operations Review 16 Financial Statements 24 Notes to Financial Statements 27 Auditors' Report 29 Ten-Year Picture of Progress 30 Advertising and Sales Promotion 32 ANNUAL MEETING The annual meeting of Ethyl Corporation shareholders will be held at the Company's executive offices in Richmond, Va., on Thursday, April 15,1965. A forma! notice of the meeting, together with a proxy statement, has been enclosed in one envelope with this report. STOCK TRANSFER AGENT First and Merchants National Bank, Richmond, Vo. GENERAL COUNSEL Hunton, Williams, Gay, Powell & Gibson, Richmond, Va. EXECUTIVE OFFICES 330 South Fourth Street, Richmond, Va. 100 Park Avenue, New York, N.Y. Louisiana National Bank Building, Baton Rouge, La. 1 I i ; j1 I i ! . ETc 16884 THE YEAR IN BRIEF Consolidated net income increases to $19,811,373 on record sales of $277,478,496. Synthetic primary alcohols plant and polyvinyl chloride resins plant nearing completion. Overseas operations expanded and engineering of new Greek plant started. Record paper tonnage produced; paper plants modernization continued. New polyethylene film plant announced. Chlorinated solvents business entered; 1,1,1-trichloroethane plant built. Plastic pipe business acquired and expanded; plastic container subsidiary formed. New industrial chemicals and antiknock compound facilities added at Canadian plant. Cost reduction and efficiency improvement programs continued. Corporate identity advertising program inaugurated. FINANCIAL HIGHLIGHTS Years Ended December 31 1964 1963 Net Sales....................................................... Taxes on Income............................................ Net Income.................................................... Cash Flow....................................................... Net Income per Share of Common Stock . . . Cash Dividends Preferred Stock............................................ Common Stock............................................ Earnings Retained in Business...................... Depreciation, Depletion and Amortization . . Capital Expenditures..................................... Total Assets................................................... Working Capital............................................ Book Value per Share of Common Stock . . . $277,478,496 18,927,000 19,811,373 37,698,396 $2.32W 259,658 1,514,453 18,037,262 16,962,753 20,809,000 316,838,017 79,714,992 $8.52 $226,554,354 13,560,000 13,558,080 30,388,016 $1.59(J) 276,540 789,697 12,491,843 15,131,178 18,862,000 285,480,077 67,337,401 $6,69(J) (1J Based on 8,438.658 shares outstanding at December 31,1964. 12) Based on 2.375,807 shares outstanding at December 31,1963, adjusted for 3-for-l stock split in December, 1964 and 1,228 200 shares issued in 1964 upon exercise of warrants. f3) Adjusted for three-for-one stock split in December, 1964. To the Shareholders of Ethyl Corporation: The year 1964 was a year of well-rounded growth for Ethyl Corporation--growth in recognition, in organization, in diversification, in research developments, in manufacturing facilities, in international operations and in sales and net income. Consolidated net sales for the Company and its subsidiaries in 1964 totaled $277,478,496. Net income amounted to $19,811,373, or $2.32 per share on the 8,438,658 shares of common stock outstanding at the year end. For the year 1963, we reported sales of $226,554,354 and net income of $13,558,080, or $1.59 per share, adjusted to a basis comparable to 1964. ' Thus, sales increased 22 percent in 1964 over the preceding year and net income 1 increased 46 percent. The increased dollar volume of sales resulted from greater demand for most of the Company's established products, from the first full year's sales of "VisQueen" polyethylene film, and from sales of other new products. At the same time, all parts of the organization continued to pursue cost reduction and efficiency improvement programs, and these programs had a good effect on net income. Our expansion and diversification program is moving ahead successfully. As a result, Ethyl is now a broad-based chemical company, with substantial interests in other product areas and a growing product line. In Plastics, we have entered the plastic pipe and plastic container fields and expanded plastic film operations. We are building a new film plant at LaGrange, Ga., to supply the growing Southeastern market. At Baton Rouge, we have under construction a new facility to manufacture a full line of polyvinyl chloride resins and compounds, the materials from which many plastic prod- 2 ucts are made. The polyvinyl chloride business is quite competitive, but it has a strong growth rate. It offers a natural expansion of our operations, since Ethyl is a leading producer of vinyl chloride monomer, the intermediate from which PVC resins are made. To help meet the growing demand for vinyl chloride monomer, we are substantially increasing the capacity of production facilities at both the Houston and Baton Rouge manufacturing centers. A major industrial chemicals growth project is the synthetic primary alcohols plant which is nearing completion at Houston. A product largely of Ethyl research and engi neering, this plant is expected to make an important addition to our business when it goes ETC 16886 3 i into production later this year. Initial products will be alcohols for use in biodegradable detergents and plastics, but the technology also suggests several potential new chemicals. Further chemicals diversification has come from the Company's successful entrance into the chlorinated hydrocarbons business and the completion of new facilities at the Canadian plant at Sarnia, Ontario, to make industrial chemicals for Canadian industries. Expansion and modernization in our paper operations include construction of a new power plant at the Albemarle mill at Roanoke Rapids, N.C.; other projects there to im prove manufacturing efficiency and effect production economies; and new equipment at other mills and paper products plants. Overseas, our sales, operations and facilities are growing rapidly. The new plant to manufacture antiknock compounds, vinyl chloride monomer and related chemicals in Greece is under way and scheduled for completion in 1966. Ethyl S. A., our new European sales, service and distribution subsidiary, is in operation and delivering products through the recently completed storage and shipping terminal at Dordrecht, Holland, and a related distribution system. In several other areas, our activities are increasing and attractive new opportunities are being developed. To focus attention on Ethyl's emergence as a diversified company, we started a new corporate advertising program during the year. The full-page, full-color advertisements in the program appear regularly in widely-read national magazines, pointing out that Ethyl is an imaginative, growing, research-oriented corporation. We were saddened by the death, in late September, of Frank A. Howard. Mr. Howard was a founder and, for a time, first vice president of Ethyl Corporation (Delaware), one of the present Company's major predecessors. He was a member of that Company's board of directors from its incorporation in 1924 until 1962, and continued to serve on the Ethyl Corporation (Virginia) board until the time of his death. During the year, there was increased interest in, and emphasis on, the cleanliness of the air in a number of cities across the country. Investigations explored the various fac tors involved, including automobile exhaust gases. Scientific evidence presented in the course of these investigations was based, in part, on thorough research programs in which Ethyl has been a leader. This evidence clearly shows that lead alkyl antiknock compounds in automotive gasoline do not contribute to smog formation, or add harmful contents to the atmosphere, and are completely safe from both industrial and public health standpoints. However, increasing attention is being devoted to substantially reducing the volume of unburned hydrocarbons and carbon monoxide in exhaust gases. Recently, detailed fuel and engine studies, including those conducted by the experienced Ethyl research organi zation, have demonstrated that such a reduction can be accomplished by various methods --without the high cost to motorists that would be involved in modifying fuels. As the Financial Review section of this report points out, cash flow--at the rate of about $38 million a year in 1964--is providing ample funds for orderly debt retirement ETHYL CORPORATION AND SUBSIDIARIES George F. Kirby, president, and Floyd D. GottwaJd, chairman of the board of directors. and for dividend payments, and also provided in 1964 about $25 million for capital expend itures. At the year end, the Company had working capital of $79,714,992. This is substan tially in excess of our operating needs--and also well in excess of the specifications of loan agreements. These funds are being put to work in capital projects to further our growth. In the future, the Company plans to strengthen its position in present product lines and to continue its program of expansion and diversification. We are counting on the achievements of our capable and imaginative Research and Development department and on acquisitions as the basis for this expansion and diversification. Assuming a continued good economic climate and reasonably successful start-up of new plants, we look for continued improvement in sales and earnings in 1965. We antici pate increased demand for the Company's present products and good initial sales of prod ucts from the new plants that come on stream during the year. In reviewing past accomplishments and planning for the future, we recognize the important part that Ethyl's employees play in all phases of the Company's operations. We want to express our thanks to these employees for their outstanding contributions and to acknowledge also our indebtedness to shareholders, suppliers and customers for their confidence and support in the past and their anticipated cooperation in the years ahead. George F. Kirby President Floyd D. Gottwald Chairman of the Board --. ETC 16888 5 FINANCIAL REVIEW Sales and Net Income With demand increasing for the products in the Company's varied line, and new products provid ing good results, consolidated net sales rose more than $50 million in 1964, to $277,478,496. This was a 22 percent gain oversales of $226,554,354 in 1963. Sales trends in petroleum chemicals, industrial chemicals, paper, plastics products, and in the Company's Canadian and international operations --and the factors influencing them--are discussed under their respective headings in the Operations Review section of this report, starting on page 16. While sales were increasing, net income also increased substantially, rising to $19,811,373 in 1964, from $13,558,080 in 1963. This was a gain of $6,253,293, or 46 percent. Based on the 8,438,658 shares of Class A and Class B common stock outstanding at the year end, net income per share amounted to $2.32 in 1964. This compares to $1.59 per share in 1963 (based on shares outstanding at the end of 1963, adjusted for the three-for-one stock split in December, 1964 and 1,228,200 shares issued in 1964 upon exercise of warrants). All parts of the organization continued to pursue cost reduction and efficiency improvement pro grams. At the same time, interest costs were less NET SALES Year Ended December 31 MILLIONS OF DOLLARS NET INCOME AND TAXES Year Ended December 31 II TAXES TOTAL INCOME j | INCOME AFTER TAXES MILLIONS OF DOLLARS 35 30 25 20 15 j 1956 57 58 59 60 61 62 FISCAL YEAR ENDED MARCH 31 63 I 63 64 . 1 10 111111111 5 | 1956 57 56 59 60 61 62 63 | 63 64 FISCAL YEAR ENDED MARCH 31 7 TOTAL ASSETS Year Ended December 31 MILLIONS OP DOLLAR9 300 than they had been in the previous year, dropping to $11,055,029 in 1964, from $11,511,195 in 1963. Capital Stock and Dividends In October 1964, the Company received $5,580,850 from the issuance of 405,880 new shares of Class B common stock. Registration and other expenses of $210,783 reduced this amount to $5,370,067, which was added to working capital. The new shares, which were sold to the public by an underwriting group, were issued upon the exercise of outstanding warrants. These warrants had been sold to various institutional and private investors with 53/4% Subordinated Notes due 19791982 in connection with financing the acquisition of Ethyl Corporation (Delaware) by Albemarle Paper Manufacturing Company on November 30, 1962. At a special meeting held on December 30,1964, shareholders approved an increase in the number of authorized Class B common stock shares from 4,000,000 to 12,000,000 and a reduction from $3 to $1 in the par value of shares of both Class A and Class B common stock. At the same meeting, share holders also approved a three-for-one split in the common stock which provided for shareholders to receive two additional shares of Class B common stock for .each share of Class A or Class B common stock held by them. These changes were effective December 31,1964. With the issuance of the additional Class B shares in connection with the stock split, and 1,311,237 (adjusted for split) Class B shares upon the exercise of the warrants and employees' stock options, there were 8,438,658 shares of Class A and Class B common stock outstanding at December 31, 1964. While it is the Company's policy to retain most of net income to finance growth and diversification, cash dividends totaling $1,774,111 were paid or declared on the common and preferred stock in 1964. 250 200 150 100 50 ! 1956 57 58 59 80 81 62 FISCAL YEAR ENDED MARCH 31 63 | 63 64 Quarterly cash dividends paid on January 1,1965, and voted for payment on April 1,1965, are at the rate of $.08V3 per share, or an annual rate of $.33V3 per share on the split shares of both classes of the Company's common stock, and $1.50 per share, or an annual rate of $6 per share, on all series of pre ferred stock. This is double the rate paid on the common stock in the last two payments in 1964 and the same rate that had been paid on the pre ferred stock. During the year, contributions of $293,090 were made into the Sinking Fund required forretirement of cumulative preferred stock. The Treasury Stock (246 shares), as shown in the December 31, 1964 balance sheet on pages 24 and 25 of this report, will be used to satisfy, in part, the 1965 Sinking Fund requirements. At the special meeting on December 30, 1964, shareholders also approved an increase from $25 million to $50 million in the authorized amount of the Company's cumulative second preferred stock. None of this stock has been issued, but it is avail able for possible future financing needs. 8 ETC 16891 WORKING CAPITAL Year Ended December 31 MILLIONS OF DOLLARS 70 Source and Disposition of Funds and Change in Working Capital The following tabulation shows the source and disposition of funds for the year 1964: Source of Funds Net Income..............................................................................$19,811,373 Depreciation, Depletion and Amortization...................... 16,962,753 Increase in Deferred Taxes............................................... 924,270 Proceeds from the Exercise of Warrants and Employees' Stock Options....................................... Other Items......................................................................... 6,221,843 1,025,674 $44,945,913 Disposition of Funds Cash Dividends..................................................................... $ 1,774,111 Long-term Debt Paid in 1964 ..................................................................... 2,185,211 Additional Provision for 1965 Payments...................... 8,000,000 Capital Expenditures............................................................ Increase in Working Capital........................................... 20,609,000 12,377,591 $44,945,913 60 50 40 30 20 10 1956 57 58 59 60 61 FISCAL YEAR ENDED MARCH 31 62 63 | 63 64 Cash flow (Net Income plus Depreciation, Deple tion and Amortization and Deferred Taxes)--at the rate of $37,698,396 in 1964--is providing ample funds for dividend payments, and debt retirement and substantial funds for capital expenditures. (See "Capital Stock and Dividends", "Capital Expendi tures" and "Long-Term Debt.") At December 31, 1964, working capital was $79,714,992, an increase of $12,377,591 over work ing capital of $67,337,401 at the end of 1963. The ratio of current assets to current liabilities at December 31,1964 was $2.75 to $1.00, compared to a ratio of $3.36 to $1.00 at the end of 1963. Capital Expenditures During 1964 capital expenditures totaled $20,609,000. Most of this amount was spent on increased efficiency in the production of antiknock compounds and on modernization and expansion of, and additions to, facilities to produce industrial chemicals, paper and plastics products in connec tion with the Company's planned program of diver sification and expansion. The major construction projects under way at the present time, as well as newly operational facilities--all of which are expected to make important contributions to in creased sales and net income--are listed below. Projict Synthetic Primary Alcohols Plant Polyvinyl Chloride Resins and Compounds Plant Antiknock Compound and Chemicals Plant Power Plant Modernization and Expansion of Pulp and Paper Mill 1,1,1-Trichloroethane Unit Industrial Chemicals Plant New Antiknock Facilities VisQueen Film Plant Expansion of Vinyl Chloride Facilities location Houston, Texas Baton Rouge, La. Thessaloniki, Greece Roanoke Rapids, N. C. Roanoke Rapids Baton Rouge Sarnia, Ontario Sarnia LaGrange, Ga. Baton Rouge and Houston Completion Oato Mid-1965 Mid-1965 1966 Fall 1965 1966 Completed Completed Mid-1965 Fall 1965 1966 Estimated Cost $17 million $ 8 million $11 million $ 5.4 million $ 6.7 million $ 1.2 million $ .9 million $ .5 million $ 2.5 million $ 4.7 million 9 ETC 16892 Long-Term Debt In accordance with the debt repayment schedule, payments totaling $2,185,211 were made to reduce the Company's long-term debt during 1964. These payments included $500,000 on the 5Vs% Bank Loan due 1970; $685,211 on the 38/8% Guaranteed Notes due 1970; and $1,000,000 on the 5s/% Sub ordinated Notes due 1972. Since the Ethyl-Albemarle merger in November 1962, a total of more than $14 million of debt has been paid. As a result, the long-term debt now stands at $182,414,532. The various elements comprising the Company's long-term debt and the amounts falling due in each of the coming years are shown in the accompany ing tables, "Summary of Long-Term Debt" and "Summary of Debt Maturities." SUMMARY OF LONG-TERM DEBT Bk Lou-On* 1WUH................................................................... Hie Chau Manhattan Bank mh* Banter Not-- Due It.sea-- AsoRiOy IMS-107*............................. The Prudential Insurance Company of America The Equitable Ufa Assurance Society of the United States The Northwestern Mutual life Insurance Company New York Life Insurance Company **/% Guaranteed Notes l>ne 10M-1070...................................................... Hires Banka fOwed by Canadian subsidiary and guaranteed by parent company} PU% Subordinated Notes Poe 1NHI73................................................... The Prudential Insurance Company of America The Equitable Life Assurance Society of the United States New York Life Insurance Company PU% Subordinated Notes Poe 107M862................................................... Privately Placed with Various Investors Total Debt at December 31.1064.................................... Current Portion of Debt.................................................. ..... LoafTerm Debt ............................................... $ 7.500.000 114.000,000 4414,743 16.085.000 50.000.000 192.509.743 10,185,211 $182,414,532 1065 1066 1967 1068 1069 1070 1071 1972 1973-77 1978 Beak Lose Dwiin t 500,000 750,000 750,000 1,250.000 1,250.000 3.000,000 -- -- -- -- 8UMMAKY OF DEBT MATURITIES Beater Notes Dee 1178 Guaranteed Notes Dee tare . SV4% Subordinated Notes Dee 1873 $ 8.000,000 $885,211 $1,000,000 8,000,000 6,000,000 6,000,000 8,000,000 8.000.000 885411 685411 885411 685411 688,888 1,000,000 2,500,000 2,500.000 2,500,000 2,500.000 8.000.000 8,000,000 -- -- 2,500,000 2,485,000 8,000,000 -- -- 10,000,000 -- -- Total Annual Amount $10.185411 10.435,211 11,935,211 12,435411 12,435,211 14,188,668 10,500,000 10,485,000 8,000,000 10.000.000 5*U% Subordinated Notes Due 1082 are payable in the years 1070*1082. 10 ETC 16893 Top Photo: Chlorinated solvents for dry cleaning and metal finishing were among Ethyl's new products in 1964. Bottom Left: New product application studies include research into the use of synthetic primary alcohols in detergents. Bottom Bight: Frequent checks by skilled operators--and laboratory technicians--assure Ethyl's customers of high product quality. ETC 16894 DIVISIONS AND SUBSIDIARIES PETROLEUM CHEMICALS Headquarters: New York INDUSTRIAL CHEMICALS Headquarters: New York ALBEMARLE PAPER MANUFACTURING COMPANY (Paper Division) The Petroleum Chemicals Division The Industrial Chemicals Division Headquarters: Richmond, Va. is responsible for all activities in is responsible for all activities in the United States related to the the United States related to the Albemarle Paper Manufacturing marketing oi chemical additives for marketing and use of "Ethyl'' Company is a wholly-owned petroleum products and the use of chemicals other than petroleum subsidiary engaged in the research, these products by oil refiners, additives. These chemicals-basic manufacture and sale of pulp, paper distributors and jobbers. The and specialized-are used in a variety and converted paper products. additives are manufactured at Ethyl of chemical, plastic, industrial, Albemarle owns or holds under i plants at Baton Rouge, La.; Houston, Texas; and Orangeburg, S.C., and are agricultural, household, national defense and other products. They are long-term lease more than ,200,000 acres of woodlands in Virginia and shipped to customers in tank cars, manufactured at Ethyl plants at North Carolina, which supply part tank trucks and drums. The Baton Rouge, La.; Houston, Texas; of its pulpwood. 'equirements. Division includes headquarters and and Orangeburg, S. C, and are Albemarle manufacture- o nbleached field staffs and the following groups; shipped to customers in tank cars, sulfate pulp, kraft paper and paper Marketing Research and Analysis, tank trucks, barges, drums and board at its mill at Roanoke Rapids, Product Service and Safety, Gasoline special shipping containers. An N. C., and kraft paper and a variety Testing, Refinery Technology, important addition to the Industrial of blotting, absorbent, saturated, Products Application and Technical Chemicals Division's products will filter and other specialty papers in Service. The Division maintains be the synthetic primary alcohols several plants at Richmond, Va. regional and district offices and for detergents and plastics to be The Company's paper converting j representatives in a number of cities manufactured in a new plant now divisions include: Raymond Bag throughout the country, and under construction at the Houston Company, which manufactures technical staffs at the Company's manufacturing center. This plant is multiwall shipping sacks at laboratories in Detroit, and operates expected to be in production this Middletown, Ohio, and Richmond, five gasoline testing laboratories. summer. Representatives of the Va.; Albemarle Container Company, Petroleum Chemicals personnel work closely with refiners, helping Industrial Chemicals Division work closely with customers and potential which fabricates corrugated boxes at Odenton, Md,, and Richmond, Va.; them select the "Ethyl" product customers in developing new and Interstate Bag Company, which best suited to their individual markets for "Ethyl" products and produces handle shopping bags at requirements and assisting them providing technical advice in their Walden, N. Y. The Albemarle i in achieving maximum effective effective utilization. organization has sales offices, sales representatives and agents results. They tailor the services of throughout the United States and the Division's and the Company's i various groups to meet the needs Products -- Vinyl Chloride/ Vinylidene Chloride/Ethyl Chloride/ sells products in the export market. of each customer company. Ethylene Dichloride/Methyl Chloride/ Chlorinated Solvents (Perchlorethylene, Products -- Unbleached Sulfate Trichlorethylene, 1.1.1-Trichloroethane, Pulp/Kraft Liner Board/Kraft Wrapping Products -- Gasoline Antiknock l,U-Trichloroethane)/Caustic Soda/ Paper/Colored Kraft/Bag and Sack Compounds/Gasoline Ignition Control Sodium/Aluminum Alkyl Compounds/ Kraft/Specialty Kraft Papers/Blotting \ Compounds/Antioxidants/Gasoline Orthoalkylated Chemicals/ Paper/Gasket Paper/Filter Papers/ Detergent-Deicer-Corrosion Inhibitors/ Orthoalkylated Antioxidants/ Asphalt, Wax, Resin and Silicone Diesel Fuel Detergent-Dispersant- Hydropolymer Oil/Synthetic Primary Treated Papers/Coated Paper Board/ Corrosion Inhibitor/Diesel Fuel Alcohols [mid-1965J Multiwali Bags/Plastic Film Bags/ Ignition Improver/Fuel Oil Combustion Handle Shopping Bags/Corrugated Improver/Furnace Oil Stabiliser/ Containers Lubricating Oil Additives/Metal Deactivator/Oil Soluble Dyes ETc 16895 PLASTICS Headquarters; Baton Rouge, La. The Plastics Division is responsible for the VisQueen Division, which manufactures and sells "VisQueen" polyethylene and polyvinyl chloride film and polyvinyl chloride pipe, and markets "VisQueen" PVC panels, and the Polymers Division, which coordinates the research and production and will market the polyvinyl chloride resins and compounds to be produced in new facilities at the Ethyl manufacturing center at Baton Rouge, La. It also is responsible for the Company's 50 percent interest in Vypak Corporation, manufacturer and marketer of blow-molded polyvinyl chloride containers. "VisQueen" film for packaging, building and agricultural applications is manufactured in plants at Terre Haute, Ind., Flemington, N. ].; and Fremont, Calif.; and PVC pipe and conduit are made at Terre Haute. A fourth "VisQueen" film plant is under construction at LaGrange, Ga. Vypak makes polyvinyl chloride containers at Baltimore and has a new plant for expanded production under construction at Rockaway, N. J. "VisQueen" film and PVC pipe products and panels are sold by the nationwide VisQueen sales organization which has representatives throughout the country. The Plastics Division continues to evaluate new opportunities for the Company in the fast-growing plastics field. Products -- Polyethylene Packaging Films/Polyvinyl Chloride Packaging Films/Polyethylene Building and Agricultural FiJms/PoIypropylene Netting/Polyethyiene Tape/ "VisKJamps'VPolyvinyl Chloride Pipe, Conduit and Fittings/Polyvinyl Chloride Panels/Polyvinyl Chloride (VypakJ Containers/Polyvinyl Chloride Resins and Compounds ETHYL INTERNATIONAL Headquarters: New York and Baton Rouge, La. The Ethyl International Division is responsible for the manufacture, sale, distribution and service of the Company's products, and in developing new opportunities for the Company overseas. It directs all Company activities outside of the United States, except in Canada, where Ethyl Corporation of Canada Limited operates. The Ethyl International Division includes Ethyl S_A., sales, distribution and service subsidiary headquartered in Brussels, Belgium, which covers Europe, Africa and the Near East, and Ethyl Interamerica Corporation, which has similar responsibilities in Latin America. Ethyl International representatives handle the Company's business in the Far East. The new storage and shipping terminal at Dordrecht, Holland, five bulk terminals in the Caribbean area of Latin America, and Chemical Trader and EID, the two Ethyl tankers for bulk transportation of antiknock compounds, are operated by the division. The new antiknock compound and vinyl chloride manufacturing plant in Thessaloniki, Greece, is being built and will be operated by the division. Products -- Petroleum Additives/ Industrial ChemicaJs/Paper Products/ Plastics Products ETHYL CORPORATION OF CANADA LIMITED (Canadian Division] Headquarters: Toronto, Ontario ~ Ethyl Corporation of Canada Limited is a wholly-owned subsidiary, handling the manufacture, sale and service of "Ethyl" petroleum chemicals and industrial chemicals in Canada. Ethyl of Canada's manufacturing plant is located in Sarnia, Ontario. Its marketing organization consists of a Petroleum Additives department, which works closely with oil refiners, supplying products and services adapted to their needs, and a Chemical Products department, which provides technical support, handles industrial chemical sales, explores new market possibilities, and provides technical coordination with Ethyl Corporation in the United States. Ethyl of Canada representatives are strategically located near major oil refining and industrial centers to provide prompt, efficient service to customers and potential customers. Products -- Petroleum Additives/ Industrial Chemicals ETC 16896 13 PETROLEUM CHEMICALS PAPER INDUSTRIAL CHEMICALS ETHYL'S PRODUCTS IN USE A diversified--and further diversifying--com pany, Ethyl is a leading producer of a wide variety of chemicals, paper and plastics. Ethyl's products range from such basic and specialty materials as complex antiknock compounds, aluminum alkyls, caustic soda and vinyl chloride monomer to mod em packaging films and handy, popular shopping bags. While the Company's products play vital roles in industry, agriculture, commerce, transporta tion, national defense and the home--and some are seen and handled every day--others are rarely, if ever, visible to the millions of people who benefit from them. This is especially true of Ethyl's chemicals, which are used in processing and as catalysts, primary ingredients, intermedi ates or additives in the production of finished products. The photographs on these pages, color keyed to the above symbols of the Company divisions in volved, show a few of the finished products made by Ethyl and its subsidiaries and indicate some of the scores of applications in which other Com pany products are involved. 14 OPERATIONS REVIEW Petroleum Chemicals Paced by a strongly increased demand for gasoline, total domestic consumption of petroleum products in the United States rose substantially during 1964. As a result, the market for antiknock compounds and other petroleum additives continued to grow and Ethyl's sales of these products increased over 1963. Increases in the selling price of antiknock com pounds containing tetraethyl lead, early in 1964 and 1965, offset a substantial portion of increases in the cost of metallic lead, one of the principal raw materials for the products. Refiners continue to show increasing interest in new antiknock compounds with reduced halogen contents, in antiknocks of increasingly complex formulations and in special combinations of anti knocks and other additives. With its extensive re search and manufacturing facilities and know how, Ethyl is a leader in developing, evaluating, recommending and supplying new antiknocks and antiknock-additive combinations of maximum cost-effectiveness. However, these developments increase the complexity of selling petroleum chemicals and providing related services. There also is growing interest on the part of re finers in increasing the efficiency of gasoline blend ing operations at refineries. In this connection, Ethyl-developed systems for the automatic, in-line blending of gasoline components, antiknock com pounds and other additives, and for monitoring and/or controlling the quality of gasoline blends, are meeting with excellent response. The threat of rail strikes at several times during the year resulted in heavy pre-ordering by a num ber of customers. Adequate inventories maintained by the Manufacturing Department, and the Com pany's efficient delivery services and equipment, make it possible to fill large orders promptly and assure customers of uninterrupted operations. Consumption of gasoline and other petroleum products is expected to increase in 1965. Despite increasing competition, a strong sales position for "Ethyl" petroleum chemicals is anticipated. Industrial Chemicals The overall sales trend for "Ethyl" industrial chemicals in 1964 was strongly upward, with de mand exceeding the capacity of production facili ties in some cases. There were particularly strong increases in sales of vinyl chloride monomer and vinylidene chloride monomer, which are interme diates for the production of polyvinyl chloride and Ethyl-developed systems for monitoring and controlling gasoline blending are an important new Petroleum Chemicals service for customer oil refiners. f polyvinylidene chloride, two widely used plastics, research and engineering developments, is ex j The Company's facilities for the manufacture of pected to go into production about the middle of i these intermediates were increased somewhat dur 1965. Initial products will be alcohols for use in ing the year and further extensive expansion of biodegradable detergents and plasticizers for plas j these and related facilities is now in progress to tics, but the technology also suggests several po j supply the growing markets. tential new chemicals. 1 Drawing on its extensive research and manufac The marketing of products from this new facility turing background in chlorinated hydrocarbons, is expected to contribute significantly to sales in the Company successfully entered the chlorinated 1965. Meanwhile, with demand for some products solvents business early in the year, marketing 1,1,1- continuing to grow and demand for others remain trichloroethane, perchlorethylene and trichloreth- ing strong, it is anticipated that total sales of in 1 ylene. These products are used in dry cleaning, dustrial chemicals will increase substantially. industrial degreasing and metal finishing. A plant for producing 1,1,1-trichloroethane was built at the Paper * Baton Rouge manufacturing center during the year j and is now in operation. It is anticipated that facil With demand strong throughout 1964, Albemarle's ities to produce the other solvents will be added paper-making machines ran at capacity rates and , in the near future. record amounts of kraft paper and kraft liner-board One of the Company's major expansion and di were produced. At the same time, however, prices versification projects is the unique new synthetic continued at depressed levels most of the year. It primary alcohols plant now nearing completion at now appears that price increases are developing the Houston manufacturing center. This plant, and that the upward trend will continue. which was made possible by outstanding Ethyl In manufacturing operations, increased efficiency 17 ETC 16900 and improved processes and equipment contrib uted to even better product quality. A number of new kraft specialty products were introduced and decorative and functional coatings are now being produced in commercial quantities. Construction of the new power plant at the Roanoke Rapids, N.C., mill is progressing and this important new facility is expected to be in opera tion by the end of 1965. Other modernization and expansion projects at Roanoke Rapids and at plants in Richmond, Va., are expected to increase effi ciency and further improve product quality. In a related move, it was announced during the year that the Brown's Island mill in Richmond would be closed early in 1966. It is expected that an equivalent tonnage of paper now made at Brown's Island will be produced in expanded facilities at Roanoke Rapids. Converted paper products--handle shopping bags, multiwall sacks and corrugated containers-- accounted for increasing amounts of Albemarle paper production. Demand for shopping bags was very strong and the Interstate Bag Division did the largest volume of business in its history. Its highly attractive and utilitarian products are sold throughout the coun- j ! t j | ! 18 ij l 1 try and in many other parts of the world. New shopping bag production equipment was added during the year and further expansion is planned. The Albemarle Container Division experienced moderate growth, highlighted by the installation of modern, high-speed equipment for the production of corrugated boxes at the Odenton, Md., plant. At the Richmond plant, changes and improvements, which are continuing into 1965, were put into effect to increase productivity and profitability. The name of the Richmond unit was changed to Albemarle to provide a consistent marketing image, and it is planned to have any future facilities use the same name. The division looks forward to expansion of plant and production facilities to meet increased demand in the year ahead. The Raymond Bag Division was affected by sub stantial declines in multiwall bag prices and by a 30-day strike during the year, but good progress was made in improving operations, adding new equipment, developing new products and further strengthening the organization. The installation of a new six-color press and related equipment en hanced the division's ability to produce attractive, color-printed paper bags and also to make plastic bags. Plans are under way for important realign ments of equipment at the Middletown, Ohio, and Richmond, Va., plants to increase efficiency and broaden the product line. Increases in sales volume are anticipated in 1965. The Wood Department continued to increase the mechanization of pulpwood harvesting, the me chanization and consolidation of woodyards, and the amount of pulpwood purchased by weight and delivered by truck. These measures improved effi ciency and reduced raw material procurement costs. The forestry program was expanded during the year and the volume of pine pulpwood har vested on Company woodlands continues to in crease. It is anticipated that the forest management program will eventually provide over 400,000 cords of pine pulpwood from Company lands annually. Plastics Plant expansion, new products, new organization and increased sales highlighted the activities of the Plastics Division during 1964. The VisQueen Division maintained Ethyl's posi tion as the world's leading producer of polyethyl ene film. VisQueen sales increased substantially, due in part to new and improved products and services. New products included multilayer films with improved optical and stiffness properties, polyvinyl chloride films and other new specialpurpose films for packaging; improved films for protecting automobiles during production ani de livery; new perforated tubing and sheeting for dry cleaners' garment bags; ultraviolet-resistant film for greenhouses; specialized films for high-altitude balloons; polypropylene netting; and "VisQueen" PVC panels. The capacity of the three existing film plants was enlarged to meet increasing demand, and a cost improvement program was continued. Additional warehouses were added at four locations through out the country to provide better delivery service to customers. In addition, plans for a new film plant at LaGrange, Ga,, to supply the large and growing Southern market, have been announced. The plant is expected to be in production by the end of 1965. Acquisition of the assets of the Plastic Products Division of Texacon Industries provided a base for entering the plastic pipe business. The operations were added to the VisQueen Division and were moved to the film plant at Terre Haute, Ind., where they have been substantially enlarged. The Pipe Products group now offers a complete line of poly vinyl chloride pipe and fittings. These materials have a number of weight, durability and handling advantages and their increased use for irrigation systems, electrical conduit, gas transmission lines, oil field applications and in drain, waste and vent uses in building construction is anticipated. 19 ETC 16902 The Polymers Division was formed within the Plastics Division to coordinate the research and production and handle the marketing of polymers. The first of these polymers are the polyvinyl chlor ide resins and compounds that will be produced in a new plant at Baton Rouge. The plant--scheduled to go on stream about the middle of 1965--will be operated by the Manufacturing Department. Resins and compounds will be sold to manufacturers of upholstery material, floor coverings, handbags, raincoats, electric wire and cable insulation, phon ograph records, pipe, and other PVC products. Together with Solvay et Cie of Belgium, Ethyl formed Vypak Corporation, a jointly-owned com pany, to produce and sell blow-molded plastic products. A new plant is underway at Rockaway, N. J., where manufacturing, research and engineer ing, and management functions will be located. Initial Vypak products are PVC bottles for sham poos, detergents, mouthwashes, drugs, cosmetics, waxes and other products. With demand for existing products continuing to increase, with new manufacturing facilities going into production and new products becoming available during the year, the Plastics Division antici pates increased sales in 1965. , ! > Facilities for producing industrial chemicals and additional petroleum additives have been added to the Ethyl of Canada manufacturing plant at Sarnia, Ontario. Canada Ethyl Corporation of Canada Limited added new manufacturing facilities, strengthened its sales and market research and development organization, and increased sales during 1964. Sales of antiknock compounds were higher than in 1963--and 1963 had been an exceptionally good year. The dollar volume of all products--antiknock compounds and other petroleum and industrial chemicals--also showed an increase. A new industrial chemicals unit was built and put into operation at the manufacturing plant at Sarnia, Ontario. This unit produces gasoline addi tives, including antioxidants and detergent-deiceranticorrosion products, as well as aluminum alkyls. The latter are used as catalysts by manufacturers of synthetic rubber and plastics. Antiknock manufacturing facilities are being ex panded to include production of tetramethyl lead and mixed lead alkyls, newer compounds which are coming into more widespread use by oil refin ers. The new facilities are scheduled to go into operation in June. A new Chemical Products department was formed to handle the sale of industrial chemicals, to investigate and promote new market possibili ties and products, and to supply technical support to the Petroleum Additives department. In 1965, automobile and gasoline sales in Canada are expected to increase substantially, expanding the market for petroleum additives. While the con struction of a new plant by another antiknock compound manufacturer is expected to increase competition, Ethyl of Canada anticipates continued good sales. International The year 1964 was one of continued organization and staffing, growth, new construction, increased sales and further planning for the Ethyl Interna tional Division. Good progress was made in all of these areas. Sales of antiknock compounds, other petroleum additives and industrial chemicals increased sub stantially, as Ethyl and its products and services were successfully presented to customers and potential customers overseas. Ethyl S. A., the new sales, service and distribu tion subsidiary which covers Europe, the Middle East and Africa, was organized, with headquarters in Brussels, Belgium. A new storage and shipping terminal was built and put into operation at Dord recht, Holland, and a distribution system, including tank cars and tank trucks, was established. Two more terminals are under construction in Europe and others are under study. The M/V EID, a second, larger tanker for bulk shipment of antiknock com pounds, was put into service. A royal decree was obtained from the govern ment of Greece granting the Company permission to build a plant to manufacture antiknock com pounds, vinyl chloride monomer and related chem icals at Thessaloniki. The plant is slated to be in production late in 1966. In the Caribbean-Latin American area, another new terminal was opened during the year. This brings to five the number of installations in that area equipped to receive bulk shipments of anti knock compounds, increasing efficiency for cus tomer oil refiners. Other new terminals and several new business ventures are under study in various overseas areas. Increased sales of antiknock compounds and other "Ethyl" chemicals in overseas markets are anticipated in 1965. Research and Development As a company committed to growth in the com petitive chemicals, plastics and paper industries, Ethyl recognizes the importance of productive re 21 search. Consequently, an active research and de velopment program, which concentrates on Ethyl products of the present and future, is aggressively pursued. This program, which involves annual ex penditures equal to about four percent of sales, has continued to make significant contributions to the Company's growth and diversification in the last year. In support of present products, varied activities were carried forward to improve manufacturing processes and thus enhance the Company's com petitive position; to find new applications for the products; and to help customers make best use of "Ethyl" products from a cost-effectiveness stand point. In the latter connection, for example, exten sive vehicle tests were carried out on antiknock fluids with various scavenger proportions in 1964. The results of this work were highly interesting to customer oil refiners. Also in the area of petroleum chemicals applica tion and use: After thorough evaluation, the Ethyldeveloped catalyst designed to remove potential smog-forming materials from automobile exhaust gases was formally-recognized as meeting the standards of the California Motor Vehicle Pollution Control Board. Research centered on developing devices to complement the engine modifications being built into 1966-model cars by the automobile industry is continuing. Ethyl research helped develop processes and designs for new manufacturing facilities and for the production and marketing of new products. Some of the new facilities now under construction, or planned, include the synthetic primary alcohols plant at Houston, the polyvinyl chloride resins and compounds plant and the oxychlorination plant at Baton Rouge, and the new plant for the manufac ture of antiknocks, vinyl chloride monomer and related chemicals in Greece. In paper research and development, sources of fibrous raw materials with potentially improved 22 economy and greater strength have been identified. The production of decorative and functional coat ings has progressed from pilot plant to sustained commercial operation. A number of new kraft paper specialties have been introduced and new automotive and diesel locomotive filter papers have been introduced. Several new concepts in multiwall bag packaging have been proven in the laboratory and are undergoing market studies. The Company also carries out contract research for government agencies--especially the Depart ment of Defense. This research includes missile fuels and special weapons. The Research and De velopment Department continued to supply, on a production basis, significant quantities of special chemicals for use in these areas. During the year, the Company received about 90 domestic and 75 foreign patents. Ethyl now holds more than 900 unexpired U.S. patents and main tains over 600 abroad. The Company's laboratories are continuing to work on the development of new and improved products in the following fields: petroleum addi tives, detergent chemicals, polymers, chlorinated solvents, polymerization catalysts, papers and con verted paper products. Employee and Public Relations Ethyl takes pride in the good relations the Com pany and its divisions and subsidiaries enjoy with their employees and with the general public, and makes every effort to maintain and improve these relations. At the year end, there were, throughout the entire Ethyl organization, 7,772 employees, of whom 3,034 were salaried and 4,738 were hourly paid. A majority of the production and maintenance em ployees and some clerical employees are repre sented by various unions under 12 bargaining agreements. Eleven agreements were signed during 1964 and three are scheduled to expire in 1965. ETC 16905 O During the summer of 1964, members of Local 310, Pulp, Sulphite and Paper Mill Workers Union, AFL-CIO, voted a work stoppage at the Middletown, Ohio, plant of the Raymond Bag Company, multiwall bag division of Albemarle Paper Manu facturing Company. After a 30-day strike, the employees returned to work under a two-year agreement. Meanwhile, supervisory, technical and clerical employees maintained production at the plant and filled orders from customers, protecting Raymond's position in its highly competitive field. At the annual meeting in May, shareholders rati fied certain of the Company's employee benefit plans. Ethyl benefit plans and the wages and sal aries paid by the Company during the year com pare favorably with those prevailing in the areas v and industries in which Ethyl and its divisions and subsidiaries operate. I In announcing the closing of the Brown's Island mill in Richmond, Va., effective early in 1966, Albe ! marle Paper Manufacturing Company stressed that it will make every effort to find jobs for displaced employees within the Company or with other em ployers. The Company stated that it would pay separation pay to terminated employees. Floyd D. Gottwald, Ethyl's board chairman, was named "Management Man of the Year" by the National Management Association. He was chosen for the honor on the basis of executive and admin i istrative leadership. Throughout the year, Ethyl and its subsidiaries enjoyed good relations with the general public, the i financial community, industry groups and in cities and towns where it maintains operations. As the Company continues to diversify and expand, it is more widely publicized, and its public relations become more important. Expansion in plastics includes construction o) a polyvinyl chloride resins and compounds plant at the manufacturing center at Baton Rouge, La. i f ETC 16906 23 CONSOLIDATED BALANCE SHEETS ASSETS: Current assets: Cash............................. . . . Short-term securities . . . . Accounts receivable . . . . Inventories............................ Prepaid expenses................ Total current assets December 31 1964 1963 $ 15,191.756 43,838,707 32,001,232 32,867,755 1,241,054 125,140,504 $ 12,937,345 21,935,596 28,605,686 30,995^05 1,341,503 95,815,525 Property, plant and equipment............................................. Less, Accumulated depreciation and depletion . . . . Net property, plant and equipment................ 205,779,125 47,297,773 158,481,352 189,481,921 33,923,428 155,558,493 Investments in affiliated companies Deferred charges and other assets Patents, contracts and other intangibles 24 8,157,803 13,180,406 11,877,952 $316,838,017 7,270,439 13,565,519 13,270,101 $285,480,077 The accompanying I ETHYL CORPORATION AND SUBSIDIARIES LIABILITIES: Current liabilities: Accounts payable and accrued expenses.................... Long-term debt, current portion..................................... United States and foreign income taxes......................... Total current liabilities..................................... Long-term debt......................................................................... Deferred income taxes............................................................. Provision for employee benefits............................................. STOCKHOLDERS' EQUITY: Capital stock: 6% cumulative preferred, par $100 per share................ Class A common, par $1 per share................................. Class B common, par $1 per share................................. Capital surplus......................................................................... i Retained earnings..................................................................... Less, Preferred stock in treasury, 246 and 127 shares in the respective years (at cost}..................................... Total stockholders' equity................................. integral part of these statements. December 31 1964 1963 $ 22,001,358 10,185,211 13,238,943 45,425,512 182,414,532 6,208,473 6,687,730 240,736,247 $ 16,094,794 2,185,211 10,198,119 28,478,124 192,599,743 5,284,203 6,969,706 233,331,776 4,213,400 149,036 8,289,622 20,861,554 42,613,238 76,126,850 25,080 76,101,770 $316,838,017 4,502,700 447,108 6,680,313 15,955,149 24,575,976 52,161,246 12,945 52,148,301 $285,480,077 25 Etc 169q8 CONSOLIDATED STATEMENTS OF INCOME AND SURPLUS STATEMENTS OF INCOME AND RETAINED EARNINGS Income: Net sales................................................................................. Miscellaneous income, net................................................. Costs and expenses: Cost of goods sold................................................................. Selling and general expenses............................................. Interest and financing costs, long-term debt..................... United States and foreign income taxes............................. Net income......................................................... Retained earnings at beginning of year..................................... Deduct, Cash dividends: Preferred stock, $6.00 per share................................. Common stock, $.20 per share in 1964 and $.11 in 1963* Retained earnings at end of year................................................. STATEMENTS OF CAPITAL SURPLUS Balance at beginning of year..................................................... Excess of proceeds over par value of l,228,200t shares of Class B common stock issued upon exercise of warrants Excess of cash received over par value of 83,037t and 3,249t shares of Class B common stock issued under stock option plan......................................................................................... Excess of cost over par value of preferred stock canceled . . Increase in par value of common stock outstanding resulting from change in par value from $5 to $3 per share and issuance of one additional share of Class B common stock for each common share outstanding................................. Balance at end of year................................................................. *Adjusted for three-for-one stock split in December, 1964 and two-for-one stock split in May, 1963. fAd/usted for three-for-one stock split in December, 1964. The accompanying notes are an integral part of these statements. 26 Years Ended December 31 1964 1963 $277,478,496 2,951,885 280,430,381 190,859,901 39,038,292 11,793,815 18,927,000 260,619,008 19,811,373 24,575,976 44,387,349 259,658 1,514,453 1,774,111 $ 42,613,238 $226,554,354 2,154,701 228,709,055 154,791,015 34,553,762 12,246,198 13,560,000 215,150,975 13,558,080 12,084,133 25,642,213 276,540 789,697 1,066,237 $ 24,575,976 $ 15,955,149 4,190,267 $ 17,118,590 720,339 (4,201) 27,761 (3,840) $ 20,861,554 (1,187,362) $ 15,955,149 NOTES TO FINANCIAL STATEMENTS 1. Acquisition: Ethyl Corporation purchased the assets of the VisQueen polyethylene film business on November 30, 1963. Accordingly, the accompanying financial statements include the assets and liabilities of the acquired business and the results of its operations subsequent to the date of acquisition. 2. Inventories: Inventories include: 1964 1963 Finished goods.................................. *12,256,046 *10,660,747 Raw materials and work in process 15,869,070 16,025,652 Stores, supplies, etc......................... 4,742,639 4,308,996 $32,867,755 $30,995395 Inventories are stated at the lower of cost or market, with cost being determined on the last-in, first-out basis with respect to approximately $20,271,000 at December 31, 1964 and $19,875,000 at December 31,1963, and generally on an average cost basis with respect to the balance. 3. Investments in Affiliated Companies: Investments in unconsolidated affiliates are stated at cost and represent the Company's investments in and advances to Ethyl-Dow Chemical Co. and Vypak Corporation, 50% owned companies, and Halifax Timber Com pany, a wholly-owned subsidiary. The Com pany's equity in the net assets of these affiliated companies at December 31, 1964 is approximately $4,740,000. Dividends re ceived approximated the Company's equity in the net income of these companies in 1964 and 1963. 4. Property, Plant and Equipment: Property, plant and equipment is stated at cost, as follows: 1964 1963 Und........................................... * 11315,705 * 11,134,097 Timberlands tnd standing timber 3,984,457 4,049,512 Buildings....................................... 29,930,890 28,715,033 Machinery and equipment . . . 160,548,073 145,583,279 *205,779,125 *189,481,921 5. Deferred Charges and Other Assets: Deferred charges at December 31,1964 con sist principally of unamortized discount on long-term debt and other deferred financing expenses. 6. Patents, Contracts and Other Intangibles: Patents and contracts with an unamortized cost basis of $6,387,261 at December 31, 1964 are being amortized over their respec tive lives; other intangibles are stated at cost. 7. Long-Term Debt: Reference is made to "Long-Term Debt" on page 10 of this report for information con cerning the Company's borrowings. 8. Capital Stock: The Class A common stock is the Company's voting stock. As of December 31,1964, there are 156,000 shares authorized, of which 149,036 shares are outstanding. The Class B common stock has no voting privileges, except as required by law. As of December 31, 1964, there are 12,000,000 27 NOTES TO FINANCIAL STATEMENTS continued shares authorized, of which 8,289,622 shares are outstanding. The 6% cumulative preferred stock is call able at $101 and is entitled to annual sinking fund contributions of $293,090. As of De cember 31, 1964, there are 100,000 shares authorized, of which 42,134 shares are out standing (including 246 shares held in the Company's treasury). A cumulative second preferred stock con sisting of 500,000 shares, with par value of $100 per share, has been authorized but none has been issued. 9. Warrants: At December 31, 1964, there are outstand ing warrants exercisable on or before De cember 1, 1982 which entitle the holders thereof to purchase 1,171,800 shares of un issued Class B common stock, $1 par value, at $4.58 per share. During 1964 warrants for 1,228,200 shares (adjusted for three-forone stock split in December, 1964) were exercised. 10. Stock Option Plan: Under the Company's restricted stock op tion plan, 900,000 shares of unissued Class B common stock were reserved for issuance to officers and other key employees. At De cember 31,1963, there were outstanding op tions to purchase 853,800 shares at prices ranging from $9.42 to $24.00. During the year ended December 31,1964, options for 83,037 shares were exercised and options for 67,053 shares were canceled, leaving outstanding at December 31,1964 options covering 703,710 shares, of which options for 164,220 shares 28 are exercisable at that date. Above numbers and amounts have been adjusted for threefor-one stock split in December, 1964. 11. Restricted Payments: The Company's note agreements contain restrictions, among others, against the pay ment of cash dividends. At December 31, 1964, $14,700,000 of retained earnings is free of such restriction under the agreement pres ently most restrictive. 12. Depreciation, Depletion and Amortization: Depreciation and depletion charged to income amounted to $14,849,528 and $13,196,918 in 1964 and 1963, respectively. Amortization of intangibles and of de ferred discount and financing expenses charged to income amounted to $2,113,225 and $1,934,260 in the respective periods. ETC 16911 ETHYL CORPORATION AND SUBSIDIARIES | AUDITORS' REPORT To the Board of Directors and Shareholders of Ethyl Corporation: We have examined the consolidated balance sheet of Ethyl Corporation and Subsidiaries as of December 31,1964, and the related statements of income and retained earnings and of capital surplus for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. We previously examined and reported upon the Company's consolidated financial statements for the year ended December 31,1963. In our opinion, the accompanying statements present fairly the consolidated financial position of Ethyl Corporation and Subsidiaries at December 31, 1964 and 1963, and the results of their operations for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. LYBRAND, ROSS BROS. MONTGOMERY New York, February 8,1965. etc 16912  TEN-YEAR PICTURE OF PROGRESS Sales and Income Net sales(2)......................................................... Income before non-cash items and income taxes............................................................. Depreciation, depletion and amortization . Income taxes, including deferred................. Net income..................................................... Cashflow......................................................... Financial Condition Working capital............................................. Ratio of current assets to current liabilities Property, plant and equipment (Net]. . . . Expenditures for property, plant and equipment..................................................... Long-term debt................................................. Common Stock Number of shares outstanding Net income per shared . . . Income taxes per shared. . . Book value per share,4) . . . 30 Years Ended December 31 1964 1983 t 1962 1963'*) $277,478,496 $226,554,354 $ 99,814,250 148,578,1 55,701,126 16,962,753 18,927,000 19,811,373 37,698,396 42,249,258 15,131,178 13,560,000 13,558,080 30,388,016 15,391,823 6,555,892 4,455,000 4,380,731 12,117,007 5,776.: 2,294,1 1.719, 1,762, 4,211, $ 79,714,992 $2.75 to $1.00 158,481,352 $ 67,337,401 $3.36 to $1.00 155,558,493 $ 63,000,811 *10,313 $2.75 to $1.00 3.29 to 150,959,130 29,221 20,609,000 182,414,532 18,862,000 192,599,743 4,838,805 4,820 196,375,319 15,522 8,438,658 $2.32 2.24 $8.52 2,375,807 $1.59 1.62 $6.69 1,187,362 1.02 $ .63 .69 $5.31m (1J Includes 4 months of combined paper and chemical operations. All prior fiscal years represent paper operations only. (2) Net sales are stated before deducting freight cost. ETC 16913 ETHYL CORPORATION AND SUBSIDIARIES [\LTHli 1962 1961 Fiscal Years Eiided March 31 1960 1959 1958 1957 1956 >0 (48,578,227 $50,320,518 $44,572,285 $35,881,981 $34,527,980 $34,737,760 $29,082,043 !3 5,776,220 )2 2,294,903 10 1,719,051 :l 1,762,266 >7 4,211,875 j| 7,252,998 2,077,980 2,740,399 2,434,619 4,680,496 6,138,973 2,041,843 1,958,081 2,139,049 4,344,420 6,007,198 1,607,425 2,266,473 2,133,300 3,785,924 5,781,548 1,482,130 2,378,411 1,921,007 3,795,461 6,346,016 1,200,675 2,839.501 2,305,840 3,799,630 4,828,940 1,248,266 1,972,419 1,608,255 3,149,360 1 110,313,111 10 329 to $1.00 0 29,221,972 $ 8,586,720 $2.73 to $1.00 28,336,492 $ 7,950,568 $3.22 to $1.00 27,742,696 $ 9,143,917 $3.91 to $1.00 24,512,702 $ 7,640,165 $3.92 to $1.00 20,015,076 $ 6,790,823 $ 3,458,134 $2.73 to $1.00 $1.64 to $1.00 18,231,910 13,821,610 >5 4,820,189 9 15,522,300 2,644,359 13,092,000 5,291,737 13,178,500 6,099,122 13,793,100 2,957,526 8,700,000 5,557,245 9,109,043 3,009,303 5,248,392 2 1,029,674 3 $ .24 9 .28 lt) $3.35 976,956 $ .35 .45 $3.19 971,803 $ .31 .32 $2.92 760,992 $ .32 .39 $2.71 699,761 $ .29 .41 $2.43 621,020 $ .40 .53 $2.21 542,880 $ .29 .40 $1.79 is. (31 Based on the overage number of shares outstanding in each year, adjusted for stock splits and stock dividends, except for the years ended December 31,1963 and 1964. which are based on the number of shares outstanding at the end of these years, with 1963 adjusted for the 3-for-l stock split in December 1964 and 1,228,200 shares issued in 1964 upon exercise of warrants. (4) Adjusted for stock splits and stock dividends. (5) Includes addition to capital surplus of $1.56 per share resulting from sale of warrants. 31 ETC 16914 ADVERTISING AND SALES PROMOTION >,, * fii*vin ii--a ! if i dun u*nilfiiiii; riniim nidi l-Jvi di^m film. riMr u> Ui h* tn iA.- firi rut, A corporate advertising program, designed to present Ethyl Corporation as a dynamic, growing, diversified company, was started in June 1964. The full-page, full-color advertisements in the program appear regularly in widely read national magazines. They already are making progress in correcting the impression that "Ethyl" gasoline is the Ethyl Corporation and that Ethyl is a one-product company serving one industry. Each advertisement features one of the many products in the Company's growing product line and enumerates many of the others that Ethyl and its divisions and subsidiaries supply to various industries. In addition to informing the business community--and hence customers and potential customers--the corporate advertising program points out to the financial world, government agencies, potential employees and the general public that Ethyl is a progressive, research-minded company. Like all of the Company's printed materials, the corporate advertisements carry the new, updated "Ethyl" trademark, which now serves all parts of the organization. Subsidiaries and divisions use the new trademark as a common denominator to identify themselves as members of the Ethyl complex and to further the concept of a diversified company. The corporate advertising program is supplemented by a number of other advertising programs designed to sell the products and services of the various divisions. These advertisements appear in the leading industry and trade publications. "Ethyl" antiknock compounds, for example, are advertised in magazines widely read by oil refiners, marketers, engineers and research people. "VisQueen" polyethylene film is advertised in magazines reaching the many companies interested in packaging all kinds and types of products. Other petroleum chemicals, plastics, industrial chemicals and paper products are promoted in specialized trade publications reaching potential customers throughout the world. Throughout the year, the Advertising and Sales Promotion department has created and produced a variety of printed materials, displays and visual aids for use by Company divisions in promoting "Ethyl" products and services. As the Company continues to add new products, advertising and sales promotion will play an important part in gaining recogition for these products and promoting their sale. ETC 16915 OCSlSN: ROBERTS, RCIXwaRDT * OnG Who would think that the old-fashioned shopping bag would become a status sym bol? Yet it has. Today, stores are set apart by their high-style, smart-looking shopping bags. Ethyl designs, makes and prints more shopping bags than anyone. We also make chemicals used in weather research, others that preserve life in rub ber, stop engines from knocking. Plastic films used to wrap phonograph records and socks for tots. These are some of the things we're doing today. Where will Ethyl products turn up next? Wherever research and our imagination take us. FTHYT rftRPflR ATT(IN New York, N.Y. Petroleum Chemicals Industrial Chemicals VisQueen Plastics Ethyl LlfllL W1U Ufl/illull 0f Canada Ethyl International Albemarle Paper Raymond Bag Interstate Bag I ETHYL The cover of this annual report is lithographed on Albemarle cast coat, produced by Albemarle Paper Co. The Yea r in Brief: SALES INCREASE 10%, AND EARNINGS INCREASE 23%, FOR NEW RECORDS IN 19S5. RECORD IttS CAPITAL EXPENDITURES BRING THREE-YEAR TOTAL TO OVER 0*1 MILLION. NEWLY COMPLETED PLANTS, AND OTHERS COMING ON STREAM, WILL BROADEN ETHYL S OPERATIONS. ETHYL'S FOURTH POLYETHYLENE FILM PLANT GOES ON STREAM IN LAGRANGE, GA. NEW POLYVINYL CHLORIDE PLANT IN OPERATION AT BATON ROUGE. THREE NEW POLYVINYL CHLORIDE PLASTIC PRODUCTS INTRODUCED IN IMS. NEW FACILITIES AT ROANOKE RAPIDS, N. C. WILL GREATLY IMPROVE ETHYL'S PAPER OPERATIONS. SYNTHETIC ALCOHOLS PLANT COMPLETED-OTHER INDUSTRIAL CHEMICAL FACILITIES UNDERWAY. PETROLEUM CHEMICALS GROWTH AIDED BY RECORD OVERSEAS AND CANADIAN SALES. LONG-TERM DEBT REDUCED TO % OF TOTAL CAPITALIZATION AT END OF IMS. Financial Highlights Years Ended December 31 1965 1964 Net Sales....................................... ......................... .......... Taxes on Income....................................................... .......... Net Income............................................................... .......... Cash Flow................................................................... .......... Net Income Per Share of Common Stock.................. .......... Cash Dividends Preferred Stock..................................................... .......... . Common Stock....................................................... .......... Earnings Retained in Business................................... .......... Depreciation, Depletion and Amortization................ .......... Capital Expenditures................................................. .......... Total Assets............................................................... .......... Working Capital....................................................... .......... Book Value per Share of Common Stock................... .......... $305,011,163 17,047,000 24,183,030 44,106,269 $2.52"' 239,309 4,269,106 19,674,615 18,666,955 52,050,000 335,338,396 69,863,287 $10.21 $277,478,496 18,927,000 19,811,373 37,698,396 $2.08121 259,658 1,514,453 18,037,262 16,962,753 20,609,000 316,838,017 83,182,403 $8.52 (1) Based on 9,487,380 shares outstanding at December 31,1963. (2) Based on 8,438,638 shares outstanding at December 31,1964 adjusted for 963,000 shares issued in 1963 upon exercise of warrants. ETc 16919 ethyl corporation/1965 annual report k 3 Message to Shareholders 7 Financial Review 10 Operations Review 24 Financial Statements 27 Notes to Financial Statements ^ 29 Auditors' Report 30 Ten-Year Summary f 32 Officers and Directors A utal Meeting The annual meeting of Ethyl Corporation shareholders will be held at the Company's executive offices in Richmond, Va., on Thursday, April 21,1966. ; 5; ck Transfer Agents (I First and Merchants National Bank, Richmond, Va. Chase Manhattan Bank, New York, N.Y. P / gistrais Of Stock . The Bank of Virginia, Richmond, Va. j Morgan Guaranty Trust Co., New York, N.Y. C l ne ml Counsel Hunton, Williams, Gay, Powell 4c Gibson, Richmond, Va. I executive Offices 1 330 South Fourth Street, Richmond, Va. 23219 100 Park Avenue, New York, N.Y. 10017 Louisiana National Bank Building, Baton Rouge, La. 70821 ETc ^6920 message to shareholders Ethyl Corporation's common stock, with the ticker symbol EY, was admitted to trading on the New York and Pacific Coast stock exchanges on October 14,1965. Below, the floor of the New York Stock Exchange as trading began in the Company's stock. i 2 ETC 16921 ethyl corporation and subsidiaries s' 7 > the Shareholders of Ethyl Corporation: The past year was one of broad growth and progress in many directions--in increases in sales and earnings, in the addition of new plants and improvements to existing facili ties, in the introduction of new products and the applications of Ethyl research, and in diversification into new and promising fields. In 1965, consolidated net sales for the Company and its subsidiaries increased 10% over 1964 to a level of $305,011,163, and net income increased 22% to $24,183,030. | These results compared with consolidated net sales of $277,478,496 and net income of $19,811,373 for 1964. Net income in 1965 was equal to $2.52 per share compared with S2.08 a share in 1964 adjusted to a comparable basis, y All major product lines--petroleum chemicals, industrial chemicals, paper and l plastics--contributed to the over-all increase in sales, with the Company's industrial | chemicals, paper and international operations accounting for the largest percentage gains, i The growing effect of the Company's diversification is evident in the fact that sales of ! products other than petroleum chemicals were approximately rwo-thirds higher in 1965 ; than they were in 1963. | A major highlight of 1965's operations was an unprecedented program of capital j expenditures for new plants and equipment. Capital expenditures in 1965 amounted to i S52.1 million, for a three-year total of more than $91 million, and they were applied to ! the construction of new plants, to expansions of existing facilities, and to process and other improvements to increase efficiency and reduce operating costs. Among the new facilities completed in 1965 were the compounds portion of a ^ polyvinyl chloride plant in Baton Rouge, a new polyethylene film plant--the Company's fourth--in LaGrange, Ga., and a synthetic primary alcohols plant in Houston. Morei over, the Company completed a new power plant at its Roanoke Rapids, N. C. paper | mill, expanded its paper operations at other locations, and increased its participation in the industrial chemicals, plastics and petroleum chemicals fields. | This vigorous expansion is continuing in 1966. Currently, the Company is building | an antiknock compound plant in Greece, and is proceeding with revisions to the Roanoke ; Rapids installation to enlarge its capacity. Meanwhile, it has completed the resins portion of its polyvinyl chloride plant at Raton Rouge, and is going forward with construction projects for industrial solvents, chlorinated hydrocarbons, and other industrial chemicals. The construction projects completed in 1965 were subject to delays, in a number of instances, and thus contributed little to the Company's operations for the year. More- Sales up 10%, earnings up 22% over 1964 Capital expenditures in 1963-1965 exceeded S91 million New plants completed in 1965 broadened the Company's operations i \ Floyd D. Gottwald, 1 i chairman of the board of directors, and Dr. George F. Kirby, \ president of Ethyl Corporation. i over, some of the highly complicated installations, such as the synthetic primary alcohols plant, must undergo an extensive period of start-up before reaching planned operating levels. Nevertheless, as the various construction and improvement projects are completed i and hit their stride, we expect that they will begin to contribute to increased sales and earnings in 1966. In a further diversification step, the Company has contracted to purchase all the Acquisition of aluminum extruder planned in 1966 common stock of The William L Bonnell Company, Inc., an aluminum extruder with headquarters in Newnan, Ga. The Bonnell transaction, scheduled for completion by mid-1966, involves purchase of 600,000 shares of Bonnell stock for approximately $10.5 (i million. The Bonnell acquisition will give Ethyl an entry into aluminum fabrication. The Company's cash flow increased from about $38 million in 1964 to $44.1 million in 1965. This was more than adequate to cover dividends and long-term debt payments totalling $14.7 million in 1965, but covered only a portion of the year's large capital expenditures, resulting in a decline in working capital. Accordingly, the Company entered into an agreement as of December 31, 1965 with the holders of Senior Note agreement revised its 534% Senior Notes, whereby the Company's annual payments on these notes (originally scheduled at $8 million annually) are deferred until 1971, when they will be replaced by new annual instalments of $12 million. This will, in effect, make available to the Company a total of $40 million over the next five years, which can be applied to increasing its working capital and financing further expansion. Other revisions of the ft Senior Note agreement will give the Company additional flexibility in planning its future | growth. Details of this transaction are reported in the Financial Review of this report. j Following the approval of the common stockholders, the former A and B classes of i the Company's common stock were reclassified in June 1965 into one class of common stock with general voting rights. In October 1965, the reclassified common stock of Ethyl was admitted to trading on the New York Stock Exchange and the Pacific Coast Stock Exchange, thus broadening the market for the Company's securities. In connection with the continuing study of automobile exhaust as it relates to air pollution, questions were raised in 1965 as to whether lead antiknock compounds in The question of air pollution gasoline contribute to air pollution or create a possible hazard to public health. Similar questions have been raised from time to time since antiknock compounds were first put into general commercial use. On the basis of facts developed by scientific and medical investigations extending * I i i i n b back over forty years, the Company believes that lead antiknock compounds are not a significant factor in air pollution, do not contribute to the formation of photochemical smog, and do not pose a public health problem. Indeed, lead antiknock compounds have been among the most thoroughly studied groups of industrial products, from the standpoint of public health. Ethyl has sponsored much of this long-range research as a matter of company policy and in the public interest. ^ In January 1965, the U. S. Public Health Service published the results of a com prehensive survey of lead in the atmosphere of three representative cities--Los Angeles, Philadelphia and Cincinnati. Ethyl participated in carrying out this survey. The Public b Health Service study confirmed the earlier research findings and showed that atmos pheric lead levels are low and that the observed levels of lead in the human body are well within the accepted normal range. The Public Health Service sponsored a scientific symposium on environmental lead in December 1965, at which the data and opinions on the subject were reviewed, and additional public inquiries into lead and other components of automobile exhaust are expected in 1966. The Company intends to continue its own research program and to cooperate with other agencies in obtaining further reliable data in the field of air pollution. We are confident that such data will continue to confirm that lead in general, and antiknock compounds in particular, create no hazard to the public health. At this time, we want to express our sincere appreciation to our employees, stockholders, customers and suppliers for their loyalty and support. We hope to continue to merit their confidence in 1966 and in all the years ahead. George F. Kirby President /Jj- ^ Floyd D. Gottwald Chairman of the Board * iTSEHf, ethyl corporation and subsidiaries review 4 6 etc 16925 1 % Sal and Set Income Consolidated net sales and net income higher net income reflected increased sales, reached new high levels in 1965. improved prices in some fields, and in Sales in 1965 reached a level of $305,011,163. These represented an in crease of $27,532,667, or 10 percent, over sales of $277,478,496 in 1964. Higher sales were achieved in all major product lines. Besides increases in volume, * dollar sales in some instances were aided by price improvement during the year, > notably in the paper industry. Conversely, weaknesses in polyethylene film prices were offset by a larger sales volume. Petroleum chemicals accounted for the largest dollar increase in sales, followed by paper and industrial chemicals. The increase in petroleum chemicals is partly accounted for by substantial gains in sales by Ethyl of Canada and by the Interna tional Division, reflecting substantial prog ress by those divisions. Sales by major product lines, together creased efficiency and reduced operating costs in a number of directions as well as the lower federal income tax rate and an increased investment credit which largely offset plant start-up costs during the year. Net income in 1965 represented an 8% return on sales as compared with a 1% return on sales for 1964. The 1965 net income was equal to $2.52 a share on the 9,487,380 shares of common stock outstanding on December 31,1965. It compares with net income of $2.08 a share in 1964 on the basis of 8,438,658 shares outstanding on Decem ber 31, 1964 adjusted for the exercise of warrants for 963,000 shares during 1965. In the course of placing its new plants into operation, the Company incurred start-up costs (including preliminary ex pense) of $5,052,000. AH but one of these plants are now fully on stream. An * with their relative percentages of total sales, are shown in the table below. investment credit of $2,350,000 was ap plied to a reduction of Federal income Net income for 1965 increased to taxes. Since the investment credit is a * $24,183,030, which was $4,371,657, or direct effect on after-tax income, it almost 22 percent, higher than in 1964. The entirely offset the effect of start-up costs NET SALES BY PRODUCT LINES -- 1963-1965 (in thousands of dollars) 1965 1964 1963 Percentage Percentage Percentage Net Sales of Total Net Sales of Total Net Sales of Total Petroleum Chemicals . . . . . . 5189,504 62% 5173,001 62% 5157,122 69% Industrial Chemicals . . . . . . 29,855 10% 25,389 9% 18,309 8% Plastics...................................... . . 29,955 10% 28,856 n% 2,211 1% Paper and Paper Products . . . . . 55,697 18% 50,232 18% 48,912 22% 5305,011 100% 5277,478 100% 5226,554 100% in the year. The investment credit was equal to 25 cents per share of common stock outstanding on December 31,1965. Interest costs in 1965 amounted to $10,885,777, down slightly from the in terest charges of $11,055,029 in 1964. Capital Stock and Dividends The former A and B classes of common stock were reclassified in June 1965 into one class of common stock with general voting rights. During the year, a total of 1,048,722 new shares of common stock were issued as the result of the exercise of warrants and of employee stock op tions. This brought the total number of common shares outstanding to 9,487,380 on December 31, 1965. Also at the special meeting on June 22, 1965, the shareholders authorized the re demption of the Company's former Cum ulative Preferred Stock and the redesigna tion of the Cumulative Second Preferred Stock as the Cumulative First Preferred Stock. Holders of the former Cumulative Preferred Stock were given the option of exchanging their shares, on a share-forshare basis, for shares of the new Cumula tive First Preferred, designated 6% Series A, or of redeeming their shares at a price of $101 per share plus accrued dividends. Holders of 38,036 shares of the former preferred stock elected to exchange their shares for an equal amount of the new Cumulative First Preferred Stock, and holders of 3,824 shares redeemed their shares for a total of $391,582, including accrued dividends. ETC 16926 7 The Company's stockholders, at the special meeting on June 22, 1965, also approved an increase to $100 million from $50 million in the amount of the new Cumulative First Preferred Stock author ized for issue. Common stock dividends, which were at the quarterly rate of 8 VS cents a share during the first two quarters, were in creased 50% to a level of 12 VS cents a share, beginning with the July 1 dividend. This brought total dividend payments to 41 VS cents a share for the year. The Com pany's policy is to retain most of its net income to finance its growth and diversi fication program. Source and Disposition of Funds and Changes in Working Capital The following table shows the source and disposition of funds for the year 1965: Source of Funds Net Income ...........................................*24,183,030 Depreciation, Depletion and Amortization................................. 18,666,955 Deferred Income Taxes...................... Proceeds from the Exercise of Warrants and Employees' Stock Options................................. 1,256,284 5,266,056 Decrease in Working Capital and Other Items........................... 17,421,301 *66,793,626 Disposition of Finds Cash Dividends.................................* 4,508,415 Long-Term Debt Payments .... 10,235,211 Capital Expenditures...................... 52,050,000 *66,793,626 8 Cash Flow (consisting of Net Income plus Depreciation, Depletion and Amor tization and Deferred Income Taxes) in creased from $37,698,396 in 1964 to $44,106,269 in 1965. TTiis increased cash flow amply provided for cash dividends and long-term debt payments in 1965 totalling $14,743,626. However, the ap plicable balance of cash flow covered only a portion of the Company's large capital expenditures during 1965. New funds of $5,266,056, arising from the exercise of warrants and stock options during the year, and funds taken from working capi tal provided the balance of the year's capital expenditures. At December 31,1965, working capital was $69,863,287, and the ratio of current assets to current liabilities was 2.93 to 1. This compared with working capital of $83,182,403 and a ratio of current assets to current liabilities of 2.98 to 1 on De cember 31,1964. Capital Expenditures During 1965, capital expenditures to taled $52,050,000. This brought capital expenditures for the past three years to a total of $91,521,000. Most of 1965's capital expenditures were for new plants and for expansions and modernizations of existing facilities in connection with the Company's overall program of expan sion and diversification. The major projects in the program, some of which were completed in 1965, are listed in the following table. Project and Location Synthetic Primary Alcohols Plant, Houston, Texas Polyvinyl Chloride Resins and Compounds Plant, Baton Rouge, La. Antiknock Compound and Chemicals Plant, Thessaloniki, Greece Power Plant, Roanoke Rapids, N.C. Modernization and Expansion of Pulp and Paper Mill, Roanoke Rapids, N.C. VisQueen Film Plant, LaGrange Ga. Expansion of Vinyl Chloride Facilities, Houston, Texas Baton Rouge, La. Perchlorethylene and Trichlorethylene Units, Baton Rouge, La. Aluminum Extrusion Business Acquisition, Newnan, Ga. Estimated Total Cost Completion Dato Completed Early 1966 Fall 1966 Completed Early 1966 Completed Completed Mid-1966 Late 1966 Purchase to be completed by Mid-1966 *68.8 Million Long-Term Debt Debt repayments totalling $10,235,211 were made during 1965. These consisted of payments of $500,000 on the Bank Loan, due 1970; $8,000,000 on the 534% Senior Notes, due 1978; $685,211 on the 3Vi% Guaranteed Notes, due 1970; $1,000,000 on the Subordinated Notes, due 1972 and $50,000 on a sub sidiary's debt. Since the Ethyl-Albemarle merger in November 1962, a total of $24,996,542 has been paid on long-term debt. As ot December 31, 1965, the long-term pot tion of the debt stood at $180,294,971, which was equal to 64 percent of the Company's total capitalization. To increase its working capital, and ETC 16927 to make available funds for future expan sion, the Company as of December 31, 1965 entered into a revised agreement with the holders of its 534 % Senior Notes. Under a revision of the agreement, the Company's annual debt payments on these notes, due in 1966 through 1970, have been deferred until 1971. These payments were originally scheduled at a rate of $8,000,000 annually from 1966 through 1970. Beginning in 1971, new annual instalments of $12,000,000 will be applied against the $106,000,000 in Senior Notes outstanding as of December 31, 1965. This revision will have the efiect of making available to the Company a total of $40 million between 1966 and 1970, which can be used to increase its working capital and provide funds for further ex pansion. A second revision in the note agreement permits an increase in the Company's borrowing ability to $50 mil lion. This, too, will give the Company greater flexibility in financing its future growth. The elements of the Company's long term debt and the amounts falling due in future years are shown in the accom panying tables, "Summary of Long-Term Debt" and "Summary of Debt Maturi ties."* SUMMARY OF L0NB-TERM DEBT 5V4% Bank Loan--Duo 1988-1970 ............................................................................................ The Chase Manhattan Bank 544% Senior Notes--Due 1971-1978 ....................................................................................... The Prudential Insurance Company of America The Equitable Life Assurance Society of the United States The Northwestern Mutual Life Insurance Company New York Life Insurance Company 344% Suaranteed Notes--Due 1988-1970 ................................................................................. Three Canadian Banks (Owed by Canadian subsidiary and guaranteed by parent company) 544% Subordinated Notes--Due 1966-1972 ............................................................................ The Prudential Insurance Company of America The Equitable Life Assurance Society of the United States New York Life Insurance Company 544% Subordinated Notes--Due 1979-1982 ............................................................................ Privately Placed with Various Investors Miscellaneous Debt Due 1966-1969 ............................................................................................ Total Debt at December 31, 1965 Current Portion of Debt Long-Term Debt 1966 1967 1968 1969 1970 1971 1972 1973-77 1978 516% Bank Loan Due 1970 $ 750,000 750,000 1,250,000 1,250,000 3,000,000 -- -- -- -- SUMMARY OF DEBT MATURITIES 544% Senior Notes Due 1978 -- -- -- -- -- $12,000,000 12,000,000 12,000,000 22,000,000 344% 544% Suaranteed Notes Subordinated Notes Due 1970 Due 1972 $685,211 685,211 685,211 685,211 688,688 -- -- $1,000,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,485,000 ---- ---- $ 7,000,000 106,000,000 3,429,532 15,985,000 50,000,000 415,650 5182,830,182 2,535,211 $180,294,971 Total Annual Amount $ 2,535,211' 4,035,211' 4,535,211' 4,550,861' 6,188.688 14,500,000 14,485,000 12,000,000 22,000,000 * Includes miscellaneous debt payments of 8100,000 annually in 1966-1968 and 1113,650 in 1969. 53/i% Subordinated Notes Due 1982 are payable in the years '`>79-1982. ETC 16928 9 operations review i i j Petroleum Chemicals PRODUCTS: GASOLINE ANTIKNOCK COMPOUNDS / GASOLINE IGNITION CONTROL COMPOUNDS / ANTI knock market was increased by favorable trends in gasoline consumption, but com need for cleaner burning distillate and heavy fuel oils). OXIDANTS / GASOLINE DETERGENT-DEICER-COR ROSION INHIBITORS / DIESEL FUEL DETERGENTDISPERSANT-CORROSION INHIBITOR/DIESEL FUEL IGNITION IMPROVER / FUEL OIL COMBUSTION IM PROVER/FURNACE OIL STABILIZER/LUBRICATING OIL ADDITIVES / METAL DEACTIVATOR / OIL SOLU BLE DYES petition from other suppliers intensified. The dollar volume of other products increased by more than one-third in 1965. Notable contributors to this improve ment were "Ethyl" Multi-PurposeAdditive-Gasoline (which supplanted competitive products because of superior During 1965, greater emphasis was placed on rendering individualized serv ice to customers. This re-orientation made the Division's Refinery Technology, Auto motive Product Application, and Market ing Services even more effective in building customer confidence and buying ^ The Petroleum Chemicals Division ex performance and the trouble-free quality), response. perienced another successful year in 1965. "Ethyl" Multi-Purpose Additive-Diesel One of the newer activities of the Divi- ^ An aggressive sales program, built (reflecting an increasing demand for pre sion carried forward in 1965 is the "Ethyl" i around a unique structure of technical mium diesel fuel), Ethyl's anti-oxidants Octane Analyzer. This is a system of elec and marketing services, enabled the Divi (because of their superior cost-effective tronic instrumentation which automates sion to continue its effective marketing of antiknock compounds. The over-all anti ness), and "Ethyl" Combustion Improver for heating oils (reflecting a growing the blending of gasoline to any desired octane specification. It is an outgrowth of Ethyl's continuing effort to improve the mixing and handling of antiknocks in the refinery. It combines newly developed equipment with the "Ethyl" automatic knock-test engine to enable a refiner to monitor or control his gasoline blending operation. 1 In another area of service to the oil in dustry, the Petroleum Chemicals Division has for many years been helping the in- g dustry to increase the overall gasoline mar ket by persuading motorists to drive more. As part of this, it recently pro ' i duced a motion picture travelogue, "Road to Adventure, U.S.A.," which will be shown in theatres throughout the coun try as part of the President's "Discover America" program. Ethyl's fleet of railroad cars, numbering over 1,300 cars, is taking on a new appearance as a result of a new design and color scheme. 10 ETC 16929 * ft Ethyl's petroleum chemicals, which are added to fuels and lubricants at refineries, help to improve the performance of these fuels and lubricants in a wide range of applications. ETC 16930 11 Industrial Chemicals PRODUCTS: VINYL CHLORIDE/VINYLIDENE CHLOR IDE/ETHYL CHLORIDE / ETHYLENE DICHLORIDE/ METHYL CHLORIDE/CHLORINATED SOLVENTS (PERCHLORETHYLENE, TRICHLORETHYLENE, 1,1.1TRICHLOROETHANE) / CAUSTIC SODA / SODIUM / ALUMINUM ALKYL COMPOUNDS/ORTHOALKYLATED CHEMICALS / ORTHOALKYLATED ANTIOXIDANTS / HYDROPOLYMER OIL / SYNTHETIC PRIMARY ALCO HOLS / ALUMINUM SULFATE The Industrial Chemicals Division, with marketing responsibility for all Ethyl chemicals other than petroleum additives, experienced a record sales year, with de mand for some of its products outstrip ping the Company's capacity. An even greater sales increase is anticipated for 1966. Among the products contributing to the Division's record sales was vinyl chloride monomer, the chemical inter mediate for polyvinyl chloride polymers. Ethyl is one of the largest merchant pro ducers of vinyl chloride monomer, and 1965 saw a substantial increase in its sales of the product. To meet the growing demands, expan sion projects in monomer capacity have been underway at both the Baton Rouge and Houston plants. A substantial increase in monomer capacity was accomplished at Houston during 1965, and a much larger increase in capacity is nearing com pletion at Baton Rouge. Related to this vinyl chloride expansion at Baton Rouge are major process im provements, including construction of an oxychlorination unit scheduled for com pletion in 1966. This facility will process 12 hydrogen chloride recovered from various chlorination operations. It represents an other step forward in Ethyl's long expe rience and many contributions to the field of chlorinated hydrocarbons. Nationwide, a major expansion of vinyl chloride capacity is underway by various producers. However, Ethyl is confident it will be able to maintain and strengthen its competitive position in the field. In related chemical fields, Ethyl in creased its capacity at Baton Rouge for vinylidene chloride, another plastics inter mediate, and is increasing its capacity at ETC 16931 wpmiitutmem KI Mliinnn continued Baton Rouge for methyl chloride, an in dustrial chemical used in the manufacture of synthetic rubber, silicones, and other products. A large and growing area of operations for the Industrial Chemicals Division is the chlorinated solvents field. These prod ucts--1,1,1 -trichloroethane, trichlorethylene and perchlorethylene--are used in a wide spectrum of applications, including industrial degreasing, metal finishing and .commercial dry cleaning. One of the many chemical processing units at the Ethyl manufacturing center in Baton Rouge. As part of its over-all diversification program, Ethyl began marketing these three chlorinated solvents in 1964. Sales increased in 1965, and further increases are expected for 1966. The field is highly competitive, and the 1965 financial re sults were affected to some extent by price weakness. Besides developing the market for its chlorinated solvents, Ethyl made good progress in its manufacturing plans for these chemicals. A new 1,1,1-trichloroethane plant at Baton Rouge, completed in 1964, was in commercial operation throughout most of 1965. In addition, Ethyl in 1965 announced plans for the construction of facilities for producing per- and trichlorethylene at Baton Rouge, and construction will be underway by mid-1966. When completed, these new facilities will mean that Ethyl is produc ing all three of the chlorinated solvents it now markets. Meanwhile, to strengthen its distribu tion network for solvents, the Industrial Chemicals Division in 1965 completed arrangements which will permit water transportation to key market areas. A major step in Ethyl's expansion and diversification program is its new synthe tic primary alcohols plant at Houston. The plant was completed in 1965, and is now in the start-up phase. The alcohols plant, which embodies many Ethyl research contributions, is producing synthetic primary alcohols which are used in the manufacture of biodegradable detergents and plasticizers. In addition to alcohols, the plant is also producing aluminum alkyl com pounds, which are widely used in the plastics and rubber industries, and alumi num sulfate, which is used in water puri fication and paper sizing, among other industrial uses. Completion of the Hous ton facility gives the company two domes tic locations for producing aluminum alkyls. Ethyl's sales of aluminum alkyls have shown a steady growth in every year since the Company entered the field. Continued substantial progress is forecast for 1966. Other products marketed by the In dustrial Chemicals Division include caus tic soda, antioxidants, and sodium. The full output of caustic soda from its caustic-chlorine plant in Baton Rouge has been sold out in each year since operations began in 1963, while the chlorine is used by the Company in its own manufactur ing operations. Sales of antioxidants by the Division, primarily to the rubber and plastics industries, increased in 1965, and are expected to show a further gain in 1966. These products are derived from a unique chemistry developed and patented by Ethyl. Progress is being made in de veloping additional products to serve new needs. ETC 16932 13 <er PRODUCTS: UNBLEACHED SULFATE PULP/KRAFT PAPER BOARD / KRAFT WRAPPING PAPER / COLORED KRAFT / BAG AND SACK KRAFT / SPECIALTY KRAFT PAPERS / BLOTTING PAPER/GASKET PAPER /FIL TER PAPERS/ASPHALT, WAX. RESIN AND SILICONE TREATED PAPERS / COATED PAPER BOARD / MULTI WALL BAGS / PLASTIC FILM BAGS / HANDLE SHOP PING BAGS / GROCERY BAGS / CORRUGATED CON TAINERS Ethyl's Paper Division operated at ca pacity levels during 1965, and set new records in sales and earnings. Most of the Division's operations are conducted by Albemarle Paper Co. (formerly Albe marle Paper Manufacturing Co.). Aided by increased demand for its prod ucts and improved prices throughout the paper industry, all of the Division's paper machines operated at capacity throughout the year. Demand for Albemarle's base paper grades was excellent, and at year's end, its Roanoke Rapids, N.C., mill had the largest backlog of orders in ten years. Other factors that contributed to Albe the completion of the modernization pro gram, the kraft paper tonnage formerly a number of new kraft paper grades, and developed several new cast coated prod marle's superior 1965 performance were produced in Richmond has been trans ucts. an expansion and modernization of vari- ferred to Roanoke Rapids, and the Rich The Interstate Bag Co. Division had 1 ous facilities, the results of a cost reduc- mond facility has been converted to other another successful year, and the addition | tion program begun in 1964, the consoli- operations. of a new plant at Flora, Ind., enabled it to | dation of basic paper production capacity, The Paper Division also benefited from strengthen its distribution organization i and the development of new products. its research and development work in and improve its service to customers. In late 1965 and early 1966, the Roan 1965. In cooperation with Ethyl's Vis- The Albemarle Container Division oke Rapids mill completed two major Queen Division, a new family of "Queen- made changes and improvements at its construction projects. One was a new Cote" paper-plastic laminants was devel Odenton, Md. and Richmond, Va. plants, power plant, which will greatly reduce oped and introduced as well as Raymond increasing their productivity. Additional operating costs, and the second was a Bag's highly successful "Multibag." More equipment will be installed at both plants comprehensive modernization program over, Albemarle's research staff developed in 1966 to broaden their product lines which will both reduce costs and increase production efficiency and capacity. With 15 new filter papers for automotive and diesel applications, helped commercialize and improve their efficiency. A new con tainer plant, scheduled for 1966, will 4 strengthen distribution and improve serv ice to customers. The Raymond Bag Co. Division in creased efficiency and broadened its prod uct line during 1965. Raymond's "Multi bag" was well received in the packaging trade. Negotiations are under way to license its manufacture overseas as well as domestically. The Consumer Bag and Packaging Corp. business, including a plant in Rich mond, was acquired in 1965, and is now operated as a division producing grocery bags and sacks. Programs are under way to improve its operations, add new equip ment, and develop new products. Left, the Consumer Bag and Packaging Division plan! in Richmond, which produces grocery bags and sacks . . . Right, the newly-completed power plant at the Roanoke Rapids pulp and paper mill . . . Below, this novel method is used at Roanoke Rapids to unload a truckload oj wood chips into a receiving bin. * f Mntta nvicw continued i ETC 16934 15 Plastics PRODUCTS: POLYETHYLENE PACKAGING FILMS / $2.5 million plant increases Ethyl's pro been well received by piping contractors POLYVINYL CHLORIDE PACKAGING FILMS / POLY duction capacity and will provide im because of its ease of installation, its free ETHYLENE BUILDING AND AGRICULTURAL FILMS / POLYPROPYLENE NETTING / POLYETHYLENE TAPE / "TIE-EYES" / POLYVINYL CHLORIDE PIPE, CONDUIT AND FITTINGS / POLYVINYL CHLORIDE PANELS / POLYVINYL CHLORIDE RESINS AND COMPOUNDS / POLYVINYL CHLORIDE (VYPAK) CONTAINERS proved service to VisQueen customers throughout the Southeast. It is expected to increase total polyethylene film sales substantially in 1966. Meanwhile, the other three VisQueen plants--in Remington, N. J., Terre Haute, dom from leaks, and other advantages. Additional facilities for me prc,,' >.ction of "Bell:Ring" pipe are scheduled to be in stalled early in 1966. The Polymer Division completed the compounds portion of its PVC plant dur The Plastics Division continued its pro Ind., and Fremont, Calif. -- increased ing the first half of 1965, and began mar gram of diversification and growth during their capacity with the addition of new keting these compounds. The Polymer 1965 both in polyethylene film and in facilities and improvements to existing Division gained an increasing number of polyvinyl chloride resins and compounds equipment. This increased capacity, outside customers during the year, in addi and finished products. coupled with other manufacturing econo tion to supplying compounds to VisQueen. VisQueen maintained its leadership in mies, increased the productivity of all Completion of the resin portion of the the production and sale of quality poly three plants. PVC plant was delayed for some months, ethylene film. Sales of polyethylene film VisQueen introduced three new major due to a construction strike and a short increased to users of film in packaging, polyvinyl chloride products in 1965 -- age of competent craftsmen. However, industrial, building and agricultural PVC packaging film, PVC building panels while no resin sales were made in 1965, applications. and PVC "Bell:Ring" pipe. the Polymer Division pilot plant devel This sales increase was aided by signifi PVC packaging films were introduced oped formulations for many polymers, in cant quality improvements, particularly as protective wrappings for red meat, cluding homopolymer, copolymer, and in the optical qualities of the film. fresh produce and other products. In emulsion resins. Samples of these resins, New uses for polyethylene film, such as these applications, PVC films are ideal evaluated by potential customers, showed polyethylene bread bags, continue to pro because of their sparkling clarity and their that Ethyl's resins are fully competitive mote wider use of "VisQueen" film. Other vapor barrier properties. Commercial pro with others on the market, and many of product innovations, such as polyethylene duction of these films was begun at new the polymers showed superior properties. i film with an integral blue stripe to aid facilities in the Terre Haute plant. Vypak Corporation--owned jointly by I assembly of automobile seat covers, help VisQueen also began the marketing of Ethyl Corporation and Solvay et Cie., of to maintain VisQueen's position as a PVC building panels during the year. Belgium--put into operation in 1965 a I leader in the polyethylene film industry. These panels are sold to builders and modern plant in Rockaway, N. J. for the Unfortunately, the prices of polyethy contractors for use as skylights, glazing, production of rigid PVC plastic bottles. lene film declined somewhat during 1965. siding, and other uses. PVC panels offer These plastic bottles can be made with a However, new production economies the builder a translucent panel with non clarity approaching glass, and they are helped to offset this factor. combustible features. light-weight and impact resistant. Vypak A new "VisQueen" polyethylene film In the PVC pipe field, VisQueen took is seeking to develop a market for these plant--the Company's fourth--was com a major step forward with the introduc containers in consumer product fields, pleted and put into operation at LaGrange, tion of its "Bell:Ring" pipe. This pipe has with initial sales efforts directed at toile Ga., during the latter part of the year. The a unique mechanical slip joint which has tries, cosmetics and other products. 16 i Two of the newest production facilities in Ethyl's Plastics Division are seen below. Top, the new poly ethylene film plant--the Company's fourth--in LaGrange, Ga. Bottom, the newly-completed polyvinyl chloride resins and compounds plant which has gone into operation at Baton Rouge. wntas nvin continued ETC 16936 17 ( I Ethyl International PRODUCTS: PETROLEUM ADDITIVES / INDUSTRIAL 1965, with good results. As in the case CHEMICALS t PAPER PRODUCTS / PLASTICS of other growing world markets, plans are being made for more frequent contact Record sales of antiknock compounds with Latin American customers, in order to overseas refiners, development of a full- to be of maximum service. Ethyl pres fledged marketing organization in Europe, ently has five distribution terminals in and the start of construction on an anti the area. knock manufacturing plant in Greece highlighted the activities of the Ethyl Ethyl representatives spent substan tially increased time in Japan during 1965 International Division in 1965. in recognition of the increasing impor Sales of antiknock compounds, other tance of Japan and the Far East in Ethyl's petroleum additives, and industrial chem international operations. Ethyl's repre icals increased substantially as a result of sentation there has resulted in increased Ethyl personnel being in Europe and sales. Negotiations have been conducted Japan in order to be closer to customers and potential customers in those areas. At the same time, other Ethyl representatives continued to cover Latin America and with certain Japanese companies on two joint ventures, which are subject to Jap anese Government approval. Ethyl S.A., the sales, service and dis Ethyl's terminal in Dordrecht, Holland, which had its first full year of operation in 1965, pro vides a central distribution point in Europe for "Ethyl" antiknock compounds. other areas to increase Ethyl's participa tion in these growing markets. Sales and service efforts were intensi fied in the Latin America area during tribution subsidiary for Europe, the Mid dle East and Africa, had its first full year of operations in 1965. A primary distribu tion terminal for antiknocks, located in Dordrecht, Holland, was in full operation in 1965. This was augmented by other terminals in Norway and the Canary Is lands, and additional European terminals are expected to be completed in 1966. I Construction began in July on a new antiknock compound manufacturing plant in Thessaloniki, Greece, which will give Ethyl tariff-free access to the European Common Market. The plant will provide antiknock compounds for refiners through i i out Europe, the Middle East and Africa It will also manufacture vinyl chloride i monomer, for conversion into plastics, and related chemicals. The Ethyl manufacturing plant in Greece, shown here in early stages of construction, will upon its completion serve refiners throughout Europe, the Middle East, and Africa. 18 ETC 16937 mritusmtan continued Eti: . of Canada PRODUCTS: PETROLEUM ADDITIVES / INDUSTRIAL CHEMICALS / ALUMINUM ALKYL CATALYSTS The Company's subsidiary, Ethyl Cor poration of Canada Limited, achieved rec ord sales of antiknock compounds and chemical products in 1965 and also greatly strengthened its manufacturing capability. Antiknock compound sales benefited from an estimated 5% increase in Cana dian gasoline consumption during the year. Ethyl of Canada also increased its sales of other petroleum additives, cata lysts and chemical intermediates. During the summer, Ethyl of Canada completed and put into operation at its plant in Sarnia facilities for the man ufacture of the newer antiknock com pounds. These include tetramethyl lead and the mixed lead alkyls. Added to its capacity for tetraethyl lead, this means that a full range of antiknock compounds is available to the Canadian refiners from a single domestic source. At the same time, Ethyl of Canada con tinued to provide Canadian refiners with specialized services to help them in their refining and marketing operations. These services include gasoline testing, current reports on Canadian gasoline quality and trends, and refinery technology. A major antiknock supplier has built a manufacturing plant in Canada, marking the first Canadian-based competition for Ethyl of Canada. While this new com petition will have some effect on sales, Ethyl of Canada looks for some offsetting The Ethyl of Canada plant in Sarnia, Ontario manufactures aluminum alkyls and petroleum additives as well as a full line of antiknock compounds. influences in the continuing increase in gasoline consumption and the expected improvement in gasoline quality. In 1964, Ethyl of Canada added new facilities for other additives and indus trial chemicals. These include multi-pur pose additives for gasoline, antioxidants for fuels and lubricants, and aluminum alkyl compounds which are used as cata lysts in synthetic rubber and plastics. Increased sales of these chemicals con tributed to Ethyl of Canada's record sales in 1965, and further sales gains are antici pated in 1966. Ethyl of Canada also plans to expand its line of industrial chemicals in 1966. 19 ETC 16938 f l Employee Relations JAdvertising jPublic Relations employee relations The Company is keenly aware of its dependence on com petent and loyal employees for the con tinued success of its operations. Management devotes considerable time to insure that its working conditions are excellent and that its wages and benefits in each division are in line with those of other companies with whom we are in competition. A measure of accomplish ment in these areas is indicated by the fact that our turnover ratio is one of the lowest in industry. In keeping with Ethyl's rapid expan sion program, recruiting efforts have been intensified, and substantially more time and effort have been devoted to Company- sponsored in-plant training to insure an adequate reservoir of trained personnel. As of December 31, 1965, there was a total of 7,870 employees of whom some 3,700 were represented by union bargain ing agents. During 1965, a new three-year agree ment was reached covering production and maintenance employees at the Ro anoke Rapids pulp and paper mill. At Baton Rouge the agreement covering TEL-Sodium employees was extended for two years and that covering Hydrocarbon area employees for one year. Employees at the Odenton, Md., and Richmond, Va., plants of Albemarle Container Division voted in NLRB supervised elections on new bargaining agents. Negotiations at Odenton were in progress at year's end, and negotiations at the Richmond plant began in January, 1966. At the Houston plant, in March, 1965, proceedings were filed with the National Labor Relations Board by unions attempt ing to sever crafts from the existing unit and contesting the representation rights of the incumbent bargaining agent. At year-end, those unions attempting to sever crafts withdrew from the proceeding. In an NLRB-scheduled election, late in Janu ary, 1966, the present union was again certified as the bargaining agent for the maintenance and production unit. In 1966, eight bargaining agreements Above, educational materials form part of Ethyl's comprehensive employee indoctrination program . .. Right, a scene from Ethyl's new color motion picture, "Road to Adventure, U.S.A." 20 1 ETC 16939 - wntta mini continued will be up for renewal in various divisions of the Company. advertising The Advertising and Sales Promotion department, as part of its re sponsibilities, carried forward Ethyl's corporate identity advertising program in 1965. The program's objective is to pro ject the image of Ethyl Corporation as a growing, diversifying company with a varied line of products, serving a wide range of industries. In addition to this corporate program, other advertisements appeared regularly in industrial publications in many fields. These are designed to promote the prod ucts and services of the Ethyl divisions, thus reinforcing the various sales pro grams. Antiknock compounds, for exam ple, received special emphasis in leading oil industry publications. Industrial chem icals were advertised in specialized publi cations as well as in broad-based chemical magazines. Other Ethyl products received similar advertising support. During 1965, the Advertising and Sales Promotion department created and pro duced a variety of individual sales pro motional tools, such as printed materials, displays and visuals, as well as entire pro grams designed for use by the Company divisions in promoting Ethyl products and services. public relations The Public Relations department in 1965 was responsible for numerous programs and services on behalf of the Company and its divisions. scent wise...its5 Ethyl ckcakal wfae-.lt's Etyt t Examples oj the highly successful advertising campaigns conducted in 1965 by Ethyl are seen above. Publicity and public relations programs were undertaken to support the introduc tion of new products, to supply informa tion about the Company to the general public, the financial community and other important groups, and to promote the reputation of the Company as a progres sive organization of growing importance in many fields. During 1965, the department con tinued its program of regular informa tional and educational services. Included among these are the Ethyl News, which is widely distributed throughout the oil, chemical, automotive and other industries as well as to stockholders and employees, and the Ethyl Reporter, which is distrib uted to employees at many Ethyl loca tions. As part of its educational activities, the department prepared a new edition of its highly successful booklet, "The Story of Gasoline," which tells in simple terms many facts about gasoline manufacture and utilization and the role that antiknock compounds play in improving gasoline performance. A Spanish language edition of the booklet is planned for 1966. ETC 16940 21 Research and Development Pilot plants, such as the one shown above, play an important part in EtbyVs broad research and development programs. The Research and Development depart ment engaged in a broad range of research projects during 1965 in support of the Company's present business and future goals. The research budget in 1965 was equal to about 4% of the Company's sales. In view of the large number of produc tion facilities currently under construc tion, a substantial part of the work in this department in 1965 involved process de sign for these projects. This included proc ess work on the antiknock plant under construction in Greece, on the oxychlo rination plant being built in Baton Rouge, on Ethyl's expansion of its vinyl chloride monomer capacity, and on its new poly vinyl chloride plant. Another phase of Ethyl research was concerned with development work to im prove present processes and reduce manu facturing costs. This work is essential in view of the highly competitive nature of Ethyl's fields of business and the con stantly changing technology. Significant progress was made in re search programs in several fields, includ ing polymers, additives for petroleum products, detergent intermediates, and other industrial chemicals. The comple tion of programs such as these continues to provide from within a foundation for continuing company growth and diversi fication. A constant aim of Ethyl research is to investigate new product opportunities and discover new chemical reactions, and on the basis of these findings to develop new processes and commercial products. In recent years, moreover, Ethyl's chemical, plastics and paper technologists have worked closely together on joint projects. A significant area of Ethyl's R & D ac tivities involves special research assign ments for various government agencies. During the past year, contract research programs were conducted on behalf of the Department of Defense, the Department of Health, Education and Welfare, and the Atomic Energy Commission. Numer ous fields were investigated, including specialized fuels and lubricants. In January, 1966, Ethyl's Detroit re search laboratories reported to the Society of Automotive Engineers on experimental automobile engine induction systems, de veloped by Ethyl, for reducing undesir able emissions in automobile exhaust. Ethyl's new systems can not only meet the present California requirements for re duced exhaust emissions but also the more stringent standards scheduled there for 1970. And the systems meet these rigid standards without significantly affecting car performance, fuel economy or driveability. While Ethyl's experimental systems would require extensive further develop ment before they could be commercial ized, it was pointed out, they nevertheless illustrate some of the further possibilities for cleaner air that can be achieved. Ethyl's research laboratories have also been active in a fundamental study of fac tors such as automotive engine design and operating conditions, and fuel and lubri cant compositions, as they relate to exhaust emissions. Attention is also being given to the possibility of developing products of significant value in the reduction of these emissions. Reflecting the high level of Ethyl's re search activity, over 320 patent applica tions were filed in the United States and various foreign countries during 1965. At the same time, Ethyl received about 85 domestic and 150 foreign patents on ear lier applications. Ethyl now holds almost 1,000 unexpired U. S. patents, and main tains nearly 750 abroad. t ) \ Ethyl's research, which encompasses many fields, involves the use of highly intricate and specialized equipment and prototype models of new developments. MFitfcB mini continued consolidated balance sheets Assets Current assets: Cash ............................................................... Short-term securities....................................... Accounts receivable......................................... Inventories ..................................................... Prepaid expenses............................................. Total current assets................................... 1965 December 31 1964 $ 18,860,191 7,806,551 37,241,462 41,570,190 576,283 106,054,677 $ 15,191,756 43,838,707 32,001,232 32,867,755 1,241,054 125,140,504 Property, plant and equipment............................. Less, Accumulated depreciation and depletion Net property, plant and equipment.......... 259,193,670 64,645,557 194,548,113 205,779,125 47,297,773 158,481,352 Investments in affiliated companies...................... 8,071,943 8,157,803 Deferred charges and other assets........................ 16,446,644 13,180,406 Patents, contracts and other intangibles................ 10,217,019 $335,338396 Tbe accompanying notes are an integral part of these statements. 11,877,952 $316,838,017 24 etc 16943 ethyl corporation and subsidiaries Liabilities Current liabilities: Accounts payable and accrued expenses.......................................... Long-term debt, current portion.................................................... United States and foreign income taxes......................................... Total current liabilities............................................................. Long-term debt....................................................................................... Estimated income taxes payable in future years ................................... Provision for employee benefits............................................................. Stockholders' Equity Capital stock: 6% cumulative preferred, par $100 per share............................... Common, par $1 per share............................................................... Capital surplus......................................................................................... Retained earnings.................................................................................. Less, Preferred stock in treasury, 246 shares (at cost)............... Total stockholders' equity........................................................ 1965 December }1 1964 $ 26,640,091 2,535,211 7,016,088 36,191,390 180,294,971 11,681,400 6,517,274 $ 22,325,358 10,185,211 9,447,532 41,958,101 182,414,532 9,999,884 6,363,730 3,803,600 9,487,380 25,074,528 62,287,853 100,653,361 100,653,361 $335,338,396 4,213,400 8,438,658 20,861,554 42,613,238 76,126,850 25,080 76,101,770 $316,838,017 The accompanying notes are an integral part of these statements. ETC 16944 25 cuisoHM staunts il Inuae ami snhs Statements of Income and Retained Earnings Income: Net sales...................................................................................... Miscellaneous income, net........................................................... Casts and expenses: Cast of goods sold....................................................................... Selling and general expenses....................................................... Interest and financing costs, long-term debt................................. United States and foreign income taxes....................................... Net income........................................................................... Retained earnings at beginning of year............................................... Deduct, Cash dividends: Preferred stock, $6.00 per share........................................... Common stock, $.46 per share in 1965 and $.20 in 1964 .... Retained earnings at end of year....................................................... Years Ended December 31 1965 19* $305,011,163 2,739,565 307,750,728 $277,478,496 2,951,885 280,430,381 212,456,499 42,439,636 11,624,563 17,047,000 283,567,698 24,183,030 42,613,238 66,796,268 190,859,901 39,038,292 11,793,815 18,927,000 260,619,008 19,811,373 24,575,976 44,387,349 239,309 4,269,106 4,508,415 $ 62,287,853 259,658 1,514,453 1,774,111 $ 42,613,238 Statements of Capital Surplus Balance at beginning of year............................................................. Excess of proceeds over par value of 963,000 and 1,228,200 shares of common stock issued upon exercise of warrants......................... Excess of cash received over par value of 85,722 and 83,037 shares of common stock issued under stock option plan............................. Excess of cost over par value of preferred stock canceled.................. Balance at end of year....................................................................... $ 20,861,554 3,450,750 766,584 (4,360) $ 25,074,528 The accompanying notes are an integral part of these statements. $ 15,955,149 4,190,267 720,339 (4,201) $ 20,861,554 26 \69 45 notes to financial statements ethyl corporation and subsidiaries 1. lnrentorits: Inventories include: Finished goods . . . Raw materials and work in process .... Stores, supplies, etc. . 1965 $15,089,284 21,202,821 5,278,085 1964 $12,256,046 15,869,070 4,742,639 $41,570,190 $32,867,755 Inventories are stated at the lower of cost or market, with cost being deter mined on the last-in, first-out basis with respect to approximately $26,571,000 at December 31, 1965 and $20,271,000 at December 31, 1964, and generally on an average cost basis with respect to the balance. 2. lm csnurtitshiA fiW.it tdCompanies: Investments in unconsolidated affiliates are stated at cost or less and represent the Corporation's investments in and advances to Ethyl-Dow Chemical Company and Vypak Corporation, 50%-owned compa nies, and Halifax Timber Company which is wholly owned. The Corporation's investments in 50%owned companies exceed its equity in the net assets of those companies at December 31, 1965 by approximately $3,399,000 representing the excess of investment over equity in net assets of Ethyl-Dow at date of acquisition (November 30, 1962) less undistributed earnings of $53,000 since that date. Dividends received from EthylDow were $1,800,000 in 1965 and $1,640,000 in 1964. Such amounts were not significantly different from the Cor poration's equity in Ethyl-Dow earnings. The investment in Halifax Timber is less than the underlying net assets by ap proximately $109,000 which represents undistributed earnings. The net income of Halifax Timber is not significant.. 3. Propi i7). Pirn! and EotttPmi u'.: Property, plant and equipment is stated at cost as follows: 1965 1964 Land....................... $ 12,811,929 $ 11,315,705 Timberlands and standing timber 4,110,338 3,984,457 Buildings .... 32,749,874 29,930,890 Machinery and equipment . . . 209,521,529 160,548,073 $259,193,670 $205,779,1254 5 4. Deie rnd Chvgt.i and Othc i Assets: Deferred charges at December 31,1965 consist principally of unamortized dis count on long-term debt and other defer red financing expenses. Also included therein is $2,400,000, the amount paid to selling stockholders under a contract to purchase a controlling interest in the William L. Bonnell Co., Inc. The purchase is scheduled to be consummated not later than June 30, 1966 and will involve pay ment of additional amounts aggregating $8,100,000 if all the outstanding stock of the company is acquired. 5. Patents. Contracts and Other Intangibles: Patents and contracts with an unamor tized cost basis of $4,726,328 at Decem- 27 notes to financial statements ber 31, 1965 are being amortized over their respective lives; other intangibles are stated at cost. 6. Long-Term Debt: Reference is made to "Long-Term Debt" on page 9 of this report for information concerning the Company's borrowings. 7. Capital Stock: As of December 31, 1965, there are 12,156,000 shares of common stock au thorized, of which 9,487,380 shares are .outstanding. As of December 31, 1965, there are 1,000,000 shares of cumulative first pre ferred stock, $100 par, authorized, of which 38,036 shares of 6% Series A are outstanding at that date. The 6% Series A stock is callable at $101 and is entitled to annual sinking fund contributions of $114,108. 8. Warrants: At December 31, 1965, there are out standing warrants exercisable on or before November 1,1982 which entitle the hold ers thereof to purchase 208,800 shares of unissued common stock, $1 par value, at $4.58 per share. During 1965, warrants for 963,000 shares were exercised. 9. Stock Option Plan: Under the Corporation's restricted stock option plan, 900,000 shares of unissued common stock were reserved for issuance to officers and other key employees. At December 31,1964, there were outstand ing options to purchase 703,710 shares at prices ranging from $9.42 to $24.00. Dur 28 ing the year ended December 31, 1965, options for 85,722 shares were exercised and options for 42,438 shares were can celed, leaving outstanding at December 31,1965 options covering 575,550 shares, of which options for 171,390 shares are exercisable at that date. There were 110,004 shares available for grant under the plan at the beginning of the year and 152,442 shares at the end of the year. 10. Restricted Payments: The Corporation's articles of incorpor ation and note agreements contain restric tions, among others, against the payment of cash dividends. At December 31,1965, $18,650,000 of retained earnings is free of such restriction under the agreement presendy most restrictive. 11. In vestment Credit: The Corporation's provision for United States and foreign income taxes was re duced (and net income increased) by in vestment credits of $2,350,000 and $441,000 in 1965 and 1964, respectively. 12. Depreciation. Depletion and Amortization: Depreciation and depletion charged to income amounted to $16,208,622 and $14,849,528 in 1965 and 1964, respec tively. Amortization of intangibles and of deferred discount and financing expenses charged to income amounted to$2,458,333 and $2,113,225 in the respective years. 13. Reclassifications: For purposes of comparison, certain re classifications have been made in the ac companying 1964 balance sheet. auditors'report ethyl corporation and subsidiaries To the Board of Directors and Shareholders of Ethyl Corporation: We have examined the consolidated balance sheet of ETHYL CORPORATION and SUBSIDIARIES as of December 31, 1965, and the related statements of income and retained earnings and of capital surplus 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 audit ing procedures as we considered necessary in the circumstances. We previously examined and reported upon the Corporation's consolidated financial statements for the year ended December 31,1964. In our opinion, the accompanying statements present fairly the consolidated financial position of Ethyl Corporation and Subsidiaries at December 31,1965 and 1964, and the results of their operations for the years then ended, in conformity with generally accepted accounting principles applied on a con sistent basis. New York, January 27,1966. LYBRAND, ROSS BROS. & MONTGOMERY 29 ten-year summary Sales and Income Net sales'1' ............................................................................ Income before non-cash items and income taxes............. Depreciation, depletion and amortization........................... Income taxes, including deferred.......................................... Net income............................................................................. Cash flow .............................................................................. Financial Condition Working capital...................................................................... ____ Ratio of current assets to current liabilities...................... Property, plant and equipment (Net)............................... Expenditures for property, plant and equipment............. Long-term debt...................................................................... Common Stock Number of shares outstanding............................................ Net income per share1*'......................................................... Income taxes per share1*'.................................................... Book value per share'4'......................................................... Years Ended December 31 I 1965 1964 1963 1 1305,011,163 59,896,985 18,666,955 17,047,000 24,183,030 44,106,269 $277,478,496 55,701,126 16,962,753 18,927,000 19,811,373 37,698,396 $226,554,354 42,249,258 15,131,178 13,560,000 13,558,080 30,388,016 $ 69,863,287 $2.93 to $1.00 194,548,113 52,050,000 180,294,971 $ 83,182,403 $2.98 to $1.00 158,481,352 20,609,000 182,414,532 $ 67,337,401 $3.36 to $1.00 155,558,493 18,862,000 192,599,743 9,487,380 $ 2.52 1.80 $10.21 8,438,658 $2.08 2.01 $8.52 2,375,807 $1.43 1.46 $6.69 (1) Includes 4 months of combined paper and chemical operations. All prior fiscal years represent paper operations only. (2) Net sales are stated before deducting freight cost. 30 ethyl corporation and subsidiaries 1 1963'" $ 99,814,250 15,391,623 6,555,892 4,455,000 4,380,731 12,117,007 1962 $48,578,227 5,776,220 2,294,903 1,719,051 1,762^66 4,211,875 Years Ended March j11---------------------- 1961 1960 1959 1958 $50,320,518 7352,998 2,077,980 2,740,399 2,434,619 4,680,496 $44,572385 6,138,973 2,041,843 1,958,081 2,139,049 4,344,420 $35,881,981 6,007,198 1,607,425 2366,473 2,133,300 3,785,924 $34,527,980 5,781348 1,482,130 2,378,411 1,921,007 3,795,461 1957 ( $34,737,761-* 6,346,016 1,200,675 2,839,501 2,305,840 3,799,630 $ 63,000,811 $2.75 to $1.00 150,959,130 4,838,805 196,375,319 $10,313,111 $3.29 to $1.00 29321,972 4,820,189 15,522,300 $ 8386,720 $2.73 to $1.00 28,336,492 2,644,359 13,092,000 $ 7,950368 $3.22 to $1.00 27,742,696 5391,737 13,178,500 $ 9,143,917 $3.91 to $1.00 24,512,702 6,099,122 13,793,100 $ 7,640,165 $3.92 to $1.00 20,015,076 2,957326 8,700,000 $ 6,790,823 $2.73 to $1.00 18,231,910 5,557,245 9,109,043 1,187362 $ -63 .69 $5.31'sl 1,029,674 $ 34 .28 $3.35 976,956 % .35 .45 $3.19 971,803 $ .31 .32 $2.92 760,992 $ .32 .39 $2.71 699,761 $ 29 .41 $2.43 621,020 $ .40 .53 $2.21 (3) Based on the average number of shares outstanding in each year, adjusted for stock splits and stock dividends, except for the years ended December 31, 1963, 1964, and 1963, which are based on the number of shares outstanding at the end of these years, with 1963 adjusted for the 3-for-l stock split in December 1964 and 1963 and 1964 adjusted for 2,191200 shares issued in 1964 and 1963 upon exercise of warrants. (4) Adjusted for stock splits and stock dividends. (3) Includes addition to capital surplus of S1.36 per share resulting from sale of warrants. ethyl corporation Officers and Staff FLOYD D. GOTTWALD Chairman of the Board FLOYD D. GOTTWALD, JR. Vice Chairman of the Board GEORGE F. KIRBY President WILLIAM R. PERDUE, JR. Executive Vice President & Treasurer BRUCE C. GOTTWALD Executive Vice President & Secretary MALCOLM P. MURDOCK Senior Vice President Petroleum Chemicals GLENN 0. HAYES Vice President Manufacturing ROBERT HERZOG Vice President Planning JOSEPH M. LOWRY Vice President Special Assignments KENNETH L. SWARTWOOD Vice President Research & Development JAMES E. BOUDREAU Director of Public Relations JAMES H. KIRBY Controller JAMES B. LONERGAN Director of Advertising & Sales Promotion FRANK J. MCNALLY Director of Finance G. SAMUEL ROBERTS Chief Engineer STEPHEN B. RODI Director of Employee Relations FREDERICK P. WARNE General Counsel Directors Divisions FLOYD D. GOTTWALD* Chairman FLOYD D. GOTTWALD, JR.* Vice Chairman JOSEPH A. COSTELLO Retired Vice President, Ethyl Corporation S. DOUGLAS FLEET Retired Vice President, Ethyl Corporation BRUCE C. GOTTWALD* GEORGE F. KIRBY* JOSEPH M. LOWRY ROBERT T. MARSH, JR. Retired Chairman of the Board First & Merchants National Bank Richmond, Va. MALCOLM P. MURDOCK LEWIS F. POWELL, JR. Partner Hunton, Williams, Gay, Powell & Gibson Richmond, Va. WILLIAM R. PERDUE, JR.* E. CLAIBORNE ROBINS President A. H. Robins Company Richmond, Va. S. BUFORD SCOTT Partner Scott 6r Stringfellow Richmond, Va. ERWIN H. WILL Chairman of the Board Virginia Electric 6r Power Co. Richmond, Va. *Member of Executive Committee Petroleum Chemicals MALCOLM P. MURDOCK Senior Vice President ROBERT A. DOUGLASS General Sales Manager RICHARD K. SCALES Technical Director Industrial Chemicals JAMES M. GILL General Manager STANLEY A. HARRIS Sales Manager Chlorinated Solvents HARRY KUHE Sales Manager General Chemicals Ethyl International ALBERT B. HORN Division Vice President & General Manager CHESTER D. CARTER Division Vice President Business Development ETHYL S.A. WILLIAM J. RUSHER President Managing Director ETHYL HELLAS CHEMICAL COMPANY. S.A. ELMO F. DIEDRICH Vice Chairman & Managing Director Plastics CLARENCE M. NEHER Division Vice President & General Manager YISOUEEN DIVISION LLOYD B. ANDREW General Manager HARRY C. BYRNE, JR. General Sales Manager JACK C. WRIGHT Operations Manager HOWARD L. LEVENTHAL Technical Director POLYMER DIVISION HARRY M. ZIMMERMAN General Manager TONNIE A. HOYLE Sales Manager Ethyl Corporation of Canada I.imited ( CmiuuUsm Division) Wbolly-ourntd tubiidiory ALAN C. TULLY President JOHN F. KOEHNLE Vice President ROBERT H. SHANNON Manager t Chemical Products Department Albemarle Paper Company (Paper Division) Wbolly-ou ned subsidiary FLOYD D. GOTTWALD Chairman of the Board FLOYD D. GOTTWALD, JR. President GOBLE W. BRYANT Executive Vice President & General Manager KIRKWOOD F. ADAMS Executive Vice President Pulp and Paper Manufacturing JOSEPH M. LOWRY Executive Vice President & Treasurer BRUCE C. GOTTWALD Vice President C. RAYMOND HAILEY Vice President / Budget Director BRENTON S. HALSEY Vice President / Planning LAWRENCE K. NORTON Vice President / Sales KENNETH D. RUNNING Vice President! Ass't. Manager Roanoke Rapids Division JOHN T. WALTON Vice President / Converting HUGH H. BAIRD, JR. Controller W. DOUGLAS GOTTWALD Secretary JOHN E. BRYAN, JR. Director of Industrial Relations ALBEMARLE CONTAINER DIVISION JOHN A. COMLY General Manager ROBERT G. REDMAN General Sales Manager JOHN B. MARSCH Sales & General Manager Odenton Plant CONSUMER BAG AND PACKAGING DIVISION M. LEBBY BOINEST, JR. Executive Vice President & General Manager JOHN W. EDWARDS Vice President! Manufacturing INTERSTATE BAG COMPANY CLAUDE V. ALLEN General Manager PARVIN E. CANTRELL Vice President / Sales RAYMOND BAG DIVISION DONALD R. RUSSELL President / General Manager CHARLES K. WATTERS Vice President General Sales Manager Ethyl's products--in the fields of petroleum additives, paper, plastics and industrial chemicals--find a multitude of uses in transportation, industry, agriculture, and in everyday life. Message to Shareholders / 3 Financial Review / 6 Operations Review /10 Financial Statements / 20 Notes to Financial Statements / 23 Auditors' Report / 25 Ten-Year Summary / 26 Officers and Directors / 28 ANNUAL MEETING The annual meeting of Ethyl Corporation shareholders will be held at the Company's executive offices in Richmond, Va. on Thursday, April 20, 1967 STOCK TRANSFER AGENTS First and Merchants National Bank, Richmond, Va. Chase Manhattan Bank, New York, N.Y. REGISTRARS OF STOCK The Bank of Virginia, Richmond, Va. Morgan Guaranty Trust Co., New York, N.Y. GENERAL COUNSEL Hunton, Williams, Gay, Powell & Gibson, Richmond, Va. EXECUTIVE OFFICES 330 South Fourth Street, Richmond, Va. 23219 100 Park Avenue, New York, N.Y. 10017 Louisiana National Bank Building, 1966 1998 $384,177,640 $305,011,163 19,596,000 17,078,000 29,168,339 24,291,926 52,463,097 44,905,297 rNet Income Per Share of Common Stock .. ; Cash Dividends ' ... . ..-X f'.., Preferred Stock_____________ .'I____; ~ - "`-J; $3.00`'> W " f' '/ ' ' 585,496 ^$2.53"* 239,309 Common Stock ;.............. V.",,ik /I1 5,476,933 * 4,269,106 -Earnings Retained in Business . ...__ . i Depreciation, Depletion and Amortization .... 23,105,910 r 22,077,448 19,783,511 19357,087 .Capital Expenditures %. *~***-V.'V ; - 53,278,000 52,050,000 Total Assets............ \.Tr^ a * 382,156,228 337323,359 -Working Capital............ ........ ^ - - '* * ! Book Value per Share of Common Stock 77,936,863 T* $12.63 <- r **' & * -'r* ' ^ -V? .; Bnrtai 9.53B1655 thmmautttantfinion iwcemar >1,1S66. : *> Sated 0)9,467,380 rtarmoufdandftw or Mcamtar 31, iS6S*4Mted tar . 12^300 tftare toned toJ966 upon etereto tV ertrrt/rtv 69,573,891 $1032 *****'*- ^<5S* 4s * % -f! Message to Shareholders ii s1 n ,f ^ The executive committee of Ethyl Corporation at one of its regular meetings. TO THE SHAREHOLDERS OF ETHYL CORPORATION: Substantial progress on a broad front was achieved in 1966. Sales and earnings set new records for the third consecutive year. Capital expenditures were also the highest in the Company's history. Consolidated net sales increased to $384,178,000 in 1966, for a gain of 26% over sales of $305,011,000 in 1965. Net income reached a level of $29,168,000 in 1966, which was 20.1% higher than the $24,292,000 earned in 1965. The net income was equal to $3.00 a share on the 9,538,655 shares of common stock outstand ing on December 31, 1966, as compared with earnings of $2.53 a share in 1965 adjusted to a comparable basis. Sales in 1966 scored the greatest year-to-year gain in the Company's history, and net income the second highest rate of growth. While all major product lines--petroleum chemicals, plastics, industrial chemicals, and paper--contributed to the higher sales total in 1966, industrial chemicals and plastics scored the greatest percentage increases. The Company's sales were also aided by the acquisition of the William L. Bonnell Co., a leading aluminum ex truder, which added nearly $26 million in sales for the last nine months of 1966. These newer fields for the Company--plastics, in dustrial chemicals, and aluminum products--accounted for more than a fourth of total sales in 1966, and major expansions in each of these areas are being planned. Capital expenditures for new facilities and equipment in 1966 amounted to over $53 million. This brought the Company's fouryear total to approximately $145 million. PAGE THREE ETC 16958 w ! In October, Ethyl's board of directors held its regular monthly meeting tor the first time at the Baton Rouge plant. A number ot directors used the occasion to tour the plant and observe its newly completed facilities. t Construction projects in 1966 included an expansion and improvement of facilities for antiknock compounds and chemical intermediates; expansion in the Company's vinyl chloride monomer capacity and in the new polyvinyl chloride resins and compounds plant; a new oxychlorination plant at Baton Rouge which will be a key factor in the chlorinated hydrocarbon complex there; and facilities for the production of perchlorethylene and trichlorethylene, two of the leading chlorinated solvents in use. A number of these projects were subject to construction delays during the year, but at year's end, the majority were either com pleted or in the final stages of completion. The Paper Division also completed a major expansion and modernization program at its various plants and mills in 1966, and began the construction of another corrugated container plant. The 1966 construction program included a new antiknock compound manufacturing plant in Greece. The plant, which is be ginning operations early in 1967, is the first of its kind to be built in southeastern Europe, and it will supply refiners in Europe, the Mid dle East and Africa. The plant also will produce and sell vinyl chloride monomer. PAGE FOUR ETC 16959 To serve the growing gasoline markets overseas, the Interna tional Division added new storage and distribution terminals for antiknocks in Europe and Latin America, and expanded its services to refiners. Problems of air pollution received continued attention from legislative bodies and the general public in 1966, and the Company followed closely developments relating to the regulation and control of certain automobile exhaust emissions. Antiknock compounds have come under close scrutiny in recent years because they are a component of gasoline and hence of motor vehicle exhaust, but to date their use has not been subject to legislative restriction. Additional research and governmental examination of the possible effects of antiknock compounds upon the public health can be ex pected in the future, but the Company will continue to maintain, on the basis of data accumulated over 40 years of medical and sci entific research, that antiknock compounds are not a significant factor in air pollution and do not constitute a public health hazard. As a result of its many years of comprehensive research into fuels, engines and the internal combustion process, the Company has developed substantial know-how which we believe will be an important asset in the continuing efforts of industry to contrsl air pollution. In this connection, the Company is doing significant re search and development work on new devices and compounds which, it is believed, are of potential value in reducing air,,r; '.ution from industrial sources as well as automobile emissions. In adoition, it is undertaking the marketing of a plastic aerating and filtering < medium for treating sewage and industrial wastes, thereby aiding in the attack on water pollution. Ethyl intends to continue and to enlarge its activities in developing products to control air and water 1 pollution in view of their national importance. These activities are a natural adjunct to Ethyl's established areas of interest. The continuing support of our employees, stockholders, cus tomers and suppliers helped make possible our progress thus far, and gives us great assurance for the future. * GEORGE F. KIRBY FLOYD D. GOTTWALD President Chairman of the Board 4 PAGE FIVE Financial Review NET SALES YEARS ENDED DECEMBER 31 PAPER OPERATIONS 1 COMBINED OPERATIONS MILLIONS OF DOLLARS ggfli SB 59 60 61 62 63 63 64 65 66 -- Fiscal Year Ended March 31 -- SALES AND NET INCOME Record sales and earnings were achieved in 1966 for the third consecutive year. Consolidated net sales reached a level of $384,177,640 in 1966, which was $79,166,477, or 26%, higher than the sales of $305,011,163 for 1965. The sales increase, the largest annual increment in the Company's history, was due to the acquisition on April 1 of the William L. Bonnell Co., an aluminum extruder, and to gains in all of the Company's major product lines. The addition of Bonnell sales for the last nine months of 1966 accounted for nearly a third of the over-all sales increase. Of the Company's major product lines, sales of petroleum chemicals con tributed the largest dollar increase, followed by paper and paper products, industrial chemicals, and plastics, in that order. The in crease in petroleum chemicals sales included sales gains by Ethyl of Canada and the International Division as well as the domestic sales organization. As part of the over-all increase in sales, substantial progress has been achieved in diversifying the Company's operations. Thus, while sales of petroleum chemicals continued to increase in 1966, gains in other product lines had the effect of lowering petroleum chemicals' percentage of total sales from 62% in 1965 to 55% in 1966. Meanwhile, industrial chemicals and plastics accounted for 10% each of total sales, paper and paper products accounted for 18%, and nine months' sales of aluminum extrusions by the William L. Bonnell Co. accounted for 7% of the total. Details of these sales breakdowns are shown in the accompany ing table. NET SALES BY PRODUCT LINES-1B64-19M (IN THOUSANDS OF DOLLARS) 1988 1885 1984 Net Sales Percentile Net of Total Sales Percentile Net Pertentaie of Total Sales of Total Petroleum Chemicals . $213,112 55% $189,504 62% $173,001 62% Industrial Chemicals 40,009 10 29,855 10 25,389 9 Plastics ................. 37,702 10 29,955 10 28,856 11 Paper and Paper Products .... . 67,433 18 55,697 18 50,232 18 Aluminum Products . 25,922 7 ---- ---- $384,178 100% $305,011 100% $277,478 100% Net income for 1966 rose to $29,168,339, which represented an increase of $4,876,413, or 20.1%, over the net income of $24,291,926 for 1965. The net income in 1966 was equal to a 7.6% return on sales as compared with an 8% return on sales for 1965. The 1966 net income was equal to $3.00 a share on the 9,538,655 shares of common stock outstanding on December 31, 1966. It compared with a net income of $2.53 a share for 1965, on the basis of 9,487,380 shares outstanding on December 31, 1965, adjusted for the exercise of warrants for 12,000 shares during 1966. The increase in 1966 net income over 1965 is attributable principally to higher sales and generally firmer prices. Due, how ever, to heavy plant start-up costs, the gain in 1966 net income was less than it otherwise would have been. These costs, which apply to various new facilities, including the synthetic alcohols plant, page six f . NET INCOME AND TAXES YEARS ENDED DECEMBER 31 MILLIONS OF DOLLARS K PAPER OPERATIONS COMBINED OPERATIONS SB 59 GO 61 62 63 -- Fiscal Year Ended March 31 -- amounted to approximately $9,000,000 before tax and to $4,680,000 after tax. On the other hand, net income in 1966 was aided by an investment credit of $2,738,000 as compared with an investment credit of $2,350,000 in 1965. The investment credit was applied to a reduction of Federal income taxes. Interest costs in 1966 amounted to $10,642,000 as compared with interest costs of $11,004,000 in 1965. During 1966, 51,275 shares of common stock were issued as the result of the exercise of warrants for 12,000 shares and of em ployee stock options for 39,275 shares. This brought the total number of common shares outstanding to 9,538,655 on December 31,1966. Common stock dividends paid during 1966 were at the rate of 12% cents a share quarterly for the January 1 and April 1 dividends. This rate was increased to 15 cents a share quarterly, beginning with the July 1 dividend, and brought total dividend payments to 55 cents a share in 1966. With the July 1 increase, dividend pay ments were thus increased to an annual rate of 60 cents a share as compared with 50 cents a share formerly. In April 1966, in connection with the acquisition of the William L. Bonnell Co., an issue of $10 million 5% Cumulative First Pre ferred Stock was sold to a small group of private investors. Under the terms of the stock issue, sinking fund payments of $2 million per year are to be made, beginning with June 30, 1967,'for the redemption of this stock. SOURCE AND DISPOSITION OF FUNDS The following table shows the source of funds and the disposition of funds for the year 1966: 80URCE OF FUNDS: Net Income......$29,168,339 Depreciation, Depletion and Amortization .... Deferred Income Tax . . . Proceeds from Sale of Preferred Stock . . . Proceeds from the Exercise of Warrants and Employees' Stock Options... 443,856 22,077,448 1,217,310 10,000,000 $62,906,953 DISPOSITION OF FUNDS: Cash Dividends................. $ 6,062,429 Capital Expenditures: Property, Plants and Equipment 45,178,000 . Balance of Purchase Price of the William L. Bonnell Co. due (total purchase price: $10,500,000) . . 8,100,000 Net Decrease in Long-Term Debt ... . 572,881 Increase in Working Capital and Other Items .... 2,993,643 $62,906,953 Cash Flow, which consists of Net Income plus Depreciation, Depletion and Amortization and Deferred Income Taxes, amounted to $52,463,097 in 1966, and compared with a cash flow of $44,905,297 in 1965. The 1966 cash flow was sufficient to provide for cash dividends and debt payments in 1966, and to provide substantial funds for capital expenditures. At December 31, 1966, working capital was $77,936,863, and the ratio of current assets to current liabilities was 2.64 to 1. This compared with working capital of $69,573,891 and a ratio of 2.90 to 1 at December 31,1965. CAPITAL EXPENDITURES Capital expenditures during 1966, includ ing the Bonnell acquisition, totaled PAGE SEVEN WORKING CAPITAL YEARS ENDED DECEMBER 31 MILLIONS OF DOLLARS $53,278,000. This brought total capital expenditures for the past four years to $144,799,000. The principal expenditures included in the 1966 total were for new plants, for expansion and moderniza tion of existing facilities, and for timberlands. The major projects in this program, some of which were com pleted in 1966, are listed in the following table: PROJECT Polyvinyl Chloride Resins and Compounds Plant, Baton Rouge, U. Antiknock Compound and Chemicals Plant, Thessaloniki, Greece Modernization and Expansion of Pulp and Paper Mill, Roanoke Rapids, N.C.................................................................... Expansion of Vinyl Chloride Monomer Facilities, Baton Rouge, La. Acquisition of William L. Bonnell Co., Inc., Neman, Ga. . . . Perchlorethylene and Trichlorethylene Facilities, Baton Rouge, La. Expansion of Antiknock Compound Facilities, Baton Rouge, La. Acquisition of Timberlands............................................................ Estimated Total Cost............................................................ COMPLETION DATE Completed Early 1967 Completed Completed Purchase Completed April 1, 1966 Early 1967 Completed Completed $63 Million LONG TERM DEBT Debt repayments totaling $3,476,211 were made during 1966. These consisted of pay ments of $750,000 on the 5Vi% Bank Loan, due 1970; $685,211 on the 3%% Guaranteed Notes, due 1970; $1,000,000 on the 5%% Subordinated Notes, due 1972; and $1,041,000 on subsidiaries' debts. A total of $27,431,753 in long-term debt has been paid since the Ethyl-Albemarle merger in November 1962. As of December 31,1966, the long-term portion of the debt stood at $181,260,000, which was equal to 57% of the Company's total capitalization. TOTAL ASSETS YEARS ENDED DECEMBER 31 PAPER OPERATIONS COMBINED OPERATIONS MILLIONS OF DOLLARS 400 300 RtlMcU Four Months cl Combined Otwrationt t> 200 100 Kliil 58 69 60 61 62 -- Fiscal Year Endad March 31 0 63 64 66 66 PAGE EIGHT ETC 16963 % A CAPITALIZATION RATIOS 1963-1966 PERCENT 1963 1964 1965 1966 To finance the acquisition of timberlands in 1966, the Company borrowed approximately $2,750,000 in long-term and $2,250,000 in short-term notes, which are covered by a long-term commitment for funds in 1967. The elements of the Company's long-term debt and the amounts falling due in future years are shown in the accompanying tables, "Summary of Long-Term Debt" and "Summary of Debt Maturities." SUMMARY OF LONQ-TERM DEBT 5Vi% Bank loan--Due 1967-1970 ............................................................ $ 6,250,000 The Chase Manhattan Bank 5V% Senior Notes--Due 1971-1978 ........................................................ The Prudential Insurance Company of America The Equitable Life Assurance Society of the United States The Northwestern Mutual Life Insurance Company New York Life Insurance Company 106,000,000 366% Suaranteed Notes--Due 1967-1970 ................................................ Three Canadian Banks (Debt of Canadian subsidiary guaranteed by parent company) 2,744,321 966% Subordinated Notes--One 1967-1972 ........................................... The Prudential Insurance Company of America The Equitable Life Assurance Society of the United States New York Life Insurance Company 14,965,000 566% Subordinated Notes--Due 1979-1982 Various Institutional Investors 50,000,000 Miscellaneous.............................................................................................................. 5,893,325 Total Debt at December 31, 1966 Current Portion of Debt 9185,872,646 4,612,646 Long-Term Debt 9181,260,000 SUMMARY OF DEBT MATURITIES 9tt% Bank Loan Dua 1170 5*% Sanior Notas Dua 1978 3H% Guaranteed Note* Dua 1970 Miscellaneous 5%% Debt Subordinated Various Notas Maturities Oua 1972 to 1991 Total Annual Amount 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 $ 750,000 1,250,000 1,250,000 3,000,000 -- -- --J -- -- -- -- -- -- -- -- -- $12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 22,000,000 $685,211 685,211 685,211 688,688 -- -- -- -- -- -- -- -- $2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,485,000 -- -- -- -- -- -- $677,435 677,435 613,350 497,500 514,500 498,500 498,500 214,500 214,500 124,500 124,500 124,500 9 4,612,646 5,112,646 5,048,561 6,686,188 15,014,500 14,983,500 12,498,500 12,214,500 12,214,500 12,124,500 12,124,500 22,124,500 566% Subordinated Notes Due 19B2 are payable in years 1979-1982. f PAGE NINE OPERATIONS REVIEW Sales of other petroleum chemicals its use by the military and the successful Petroleum Chemicals also increased substantially in 1966. Among them is "Ethyl" Multi-Purpose Additive for gasoline--a combination carburetor detergent, de-icer, and anti corrosion agent. Since its introduction completion of a two-year test of the ad ditive by a major public utility. Among its many services to refiners, the Petroleum Chemicals Division pio neered the automation of gasoline knock some years ago, MPA has become the testing, beginning with the Push Button The Petroleum Chemicals Division en leading such additive in use. Octane Number unit. joyed a banner year in 1966. Aided by A second product, "Ethyl" Multi-Pur A significant milestone in its use was increasing gasoline demand, sales of pose Additive-Diesel, keeps fuel injectors reached in 1966, when the 100th PBON antiknock compounds increased sub clean, protects engine parts against rust unit was installed in an oil company stantially, with the lighter lead alkyls and corrosion, and lowers maintenance laboratory. showing particular strength. Ethyl's full costs. MPA-D has helped a trend toward This earlier work led to the develop range of antiknocks helps refiners to pro premium diesel fuel in the oil industry. ment of the "Ethyl" Octane Analyzer for duce the most efficient gasolines with As a result, its sales increased sharply in automatically monitoring and controlling superior road performance for today's 1966, and further rapid growth is the octane number of gasoline in the re varied driving needs. anticipated. finery. The "Ethyl" Octane Analyzer was To meet the octane requirements of A third product, "Ethyl" Combustion demonstrated throughout the oil indus the motoring public, Ethyl in 1966 mod Improver 2, has been developed for use try in 1966. Its proved reliability, ease of ernized and enlarged its antiknock man in distillate fuels, where it improves the operation, and accuracy have attracted ufacturing capability, and further expan efficiency of combustion. Highlights of many customers to order this cost saving sion projects are planned for 1967. 1966 include a government contract for device. i! OPERATIONS REVIEW Industrial Chemicals Unprecedented demand for many of its products highlighted the activities of the Industrial Chemicals Division in 1966, and its sales increased approximately a third over 1965. One of the Division's leading products is vinyl chloride monomer, the chemical starting point for polyvinyl chloride plas tics. Ethyl is one of the largest merchant producers of vinyl chloride monomer, and to meet the steadily growing de mand, completed two successive expan sions in capacity, at Houston and Baton Rouge, in 1965 and 1966. In addition, Ethyl in 1966 put on stream at Baton Rouge an oxychlorination plant which will substantially improve the efficiency of its vinyl chloride operations. Other chlorinated hydrocarbons pro duced by Ethyl include ethyl chloride, ethylene dichloride, and methyl chloride. We are one of the largest producers of methyl chloride, which is used in the manufacture of antiknock compounds as well as in silicones, synthetic rubber, and other industrial applications. An ex pansion in capacity was completed in 1966, to serve the growing market. Another growing industrial chemicals field is chlorinated solvents, which are used primarily for metal degreasing and dry cleaning. Demand for these products in 1966 was particularly strong, partly as a result of Vietnam war requirements, and supply shortages were felt during the year. Ethyl has been marketing chlorinated solvents since 1964, and has developed an effective sales position in three lead ing solvents--1,1,1-trichloroethane, trichlorethylene, and perchlorethylene. A plant to produce 1,1,1-trichloroethane has been in operation since 1965, and facilities for tri- and perchlorethylene are scheduled to be completed early in 1967. Ethyl's new synthetic alcohols plant at Houston was in operation during 1966, although, as is to be expected, many start-up problems were encountered in a plant of this size and complexity. Numerous improvements in the plant's through-put and efficiency were accom plished during the year, and continuing emphasis is being applied to realize its design productivity and efficiency. In addition to synthetic alcohols, the plant also produces aluminum alkyls which are used as polymerization cata lysts and aluminum sulfate which has a number of industrial uses. The addition of the Houston capacity has enabled Ethyl to strengthen its position as the world's largest producer of aluminum alkyls, and enabled it to share in this rapidly growing market. Chlorinated solvents are widely used in metal cleaning and degreasing operations. PAGE ELEVEN ETC 1 6966 OPERATIONS REVIEW with a large potential use in construction. Plastics Another relatively new line of products is PVC films for packaging red meat and produce. With the development phase completed, emphasis is shifting to the The Plastics Division in 1966 increased marketing of these superior films. its sales by more than one-fourth over Production and sales of PVC pipe in 1965, strengthened its position as the creased significantly in 1966. PVC pipe leading producer of polyethylene films, has been well received in the construc and increased its participation in the tion trades, and its sales were spurred by polyvinyl chloride field. VisQueen's Bell:Ring pipe joint, which Polyethylene film sales continued to insures ease of installation and positive grow, and the VisQueen Division in sealing. More PVC pipe capacity is creased its market share. Continuing being constructed. technical improvements in film proper The Polymer Division's new PVC resins ties led to the development of new films and compounds plant was in operation for the more sophisticated markets. during 1966, although it experienced The new LaGrange, Ga., plant, on construction delays and start-up prob stream in 1966, produced good quality lems. Nevertheless, the Division's resins film at satisfactory cost levels. An expan and compounds achieved industry rec sion in capacity is presently underway. ognition as superior products, and a sub Increased film capacity was realized stantial increase in production and sales at the other three VisQueen plants as a is anticipated for 1967. result of process improvements. These Vypak Corporation, formed jointly by and other manufacturing economies in Ethyl and Solvay et Cie. in 1964, is de creased productivity at all three plants. veloping rigid PVC plastic bottles for II i In the product area, improvement of laminate films continued, and a new product with greater toughness was in various consumer products. Early in 1967, Ethyl acquired Solvay's 50% inter est in Vypak, making it a wholly owned troduced. Another new product is a rein Ethyl enterprise. A broad expansion in forced film having strong tear resistance. Vypak's operations is planned. < This high-speed sheeter at the Roanoke Rapids mill cuts rolls of paper into desired sizes and lengths. I OPERATIONS REVIEW Paper containers in 1966. The Division has projects under way which will result in production of a wider range of container styles at both the Odenton, Md., and Interstate is installing new production capacity in 1967, and developing sev eral new products. Albemarle research activities were Richmond plants. The Division's third concentrated on product and process de Albemarle Paper Co. and its divisions container plant, near Lexington, N. C., is velopments in 1966. A number of new achieved new records in sales and earn nearing completion. kraft paper and specialty paper products ings in 1966, and its kraft paper opera The Raymond Bag Division also in were successfully commercialized, in tions were at capacity levels. creased its sales in 1966, particularly as cluding new paper products for use in Demand exceeded capacity i'n several a result of its sophisticated plastic-paper agriculture, packaging, and the auto major kraft paper grades, and order combination shipping sacks. Raymond motive industry. backlogs were high throughout the year. now produces over twice as many plastic- Price increases in several kraft grades, paper bags as the traditional multiwall as well as in absorbent paper and con paper bags. tainer board, also contributed to the im Raymond in the last few years de proved results. veloped and patented its revolutionary To meet the increasing market de plastic-paper combination shipping bag mands, a major modernization program under the registered trademark, "Multi was completed at the Roanoke Rapids pulp and paper mill in 1966. This re sulted not only in substantial increases bag." Raymond currently is in the process of licensing other multiwall bag producers in production and plant efficiency and a to manufacture the "Multibag." reduction in operating costs, but also in The Consumer Bag & Packaging Co. important gains in product quality and a Division, acquired in 1965, enjoyed a broader product line in both kraft paper and linerboard. The Paper Division acquired approxi good market for its products, which consist of grocery bags and sacks. A major expansion program was initiated mately 41,000 acres of timberland in in 1966. 1966, the largest annual acquisition of The Interstate Bag Co. Division experi timberland in its history. enced a strong demand for its handle Albemarle Container Division substan shopping bags, which are finding in A comprehensive reforestation program is car r. tially increased its output of corrugated creasing use as an advertising medium. ried on by Albemarle Paper Co. PAGE THIRTEEN OPERATIONS REVIEW International Construction of an antiknock plant in Greece, authority for an antiknock plant in Japan, and increased sales and serv ices in overseas markets highlighted the International Division's activities in 1966. Construction of the Greek plant, situ ated in Thessaloniki, was essentially completed in 1966, and full operation is expected early in 1967. The plant will provide antiknock compounds to refiners throughout Europe, the Middle East and Africa. It will also produce and market vinyl chloride monomer for conversion into polyvinyl chloride. The Japanese Government approved formation of a joint venture to manufac ture antiknock compounds in Japan for domestic consumption and export throughout the Far East. Ethyl has a 47.5% interest in the venture, and its Japanese partners are Toyo Soda, Mitsui and Co., Nomura Jimusho, and Asano Chemicals. Discussions on other joint ventures are also being conducted with certain Japanese companies. Meanwhile, the location of full-time Ethyl representa tives in the Far East during 1966 was instrumental in maintaining Ethyl's sales position there. Antiknock sales in the Ethyl S.A. mar keting area (Europe, the Middle East and Africa) reached a new high in 1966. Area industrial chemical sales declined, how ever, due to increased European compe tition. A distribution terminal for anti- knocks is under construction in Cadiz, Spain, and will supplement the three European terminals already in operation. Sales and service efforts in Latin America resulted in increased sales of antiknocks, other petroleum additives, and industrial chemicals. A new Latin America terminal, the sixth, went into operation in the Virgin Islands in 1966, and a terminal in Peru is scheduled to begin operations early in 1967. 'I ' i 1 \ * , PAGE FOURTEEN ETC 16969 OPERATIONS REVIEW Canada Ethyl's Canadian subsidiary, Ethyl Cor poration of Canada Limited, increased its sales of antiknock compounds and other chemicals to new record levels in 1966. The company also became an exporter of products for the first time in 1966. Aided by higher automobile registra tions and increased gasoline demand, antiknock sales increased, despite Cana dian-based competition. Moreover, the growing demand for the lighter lead alkyl antiknocks produced by Ethyl of Canada was reflected in the fact that they ac counted for nearly 10% of the Company's total antiknock sales, domestic and foreign. Sales of other petroleum additives showed an improvement over 1965, with Ethyl of Canada retaining its leadership in supplying antioxidants and detergentdeicer additives for gasoline. Ethyl of Canada is also the sole manu facturer of aluminum alkyl compounds in the country, and supplies all con sumers in the synthetic rubber and plas tics industries with these widely used catalysts. The company also made its first export shipment of aluminum alkyls in 1966. For 1967, Ethyl of Canada looks for continuing gains in the production and sales of its petroleum additives and in dustrial chemicals. PAGE FIFTEEN ETC 16970 One of the extrusion lines at the William LBonnell plant in Newnan, Ga. OPERATIONS REVIEW Bonnell Co. The William L Bonnell Co., which was ac quired by Ethyl as of April 1, 1966, shared in the aluminum extrusion indus try's growth, and increased its sales by about 20% over 1965. The Bonnell Co. also completed a vig orous program of expansion and im provement in its manufacturing facilities at Newnan, Ga. Bonnell, which is the largest inde pendent extruder of aluminum shapes, molding and trim, primarily serves the building and construction industry. A small portion of its products also goes into consumer durable goods and trans portation units. Ordinarily, its business is sharply af fected by seasonal factors in the building and construction trades, but contrary to expectations, Bonnell's operations con tinued at a high level throughout 1966. While reduced construction activity, brought on by tight money conditions, is among the factors to be reckoned with in its business, Bonnell nevertheless looks forward to continuing sales and earnings gains in 1967. As part of its expansion and improve ment program, Bonnell installed its twelfth press during the year, increasing its extrusion capacity by approximately 18% and enabling it better to serve its customers in peak periods. The company also is expanding its casting facilities which will increase its billet capacity by around one-third and also minimize its dependence on open market purchases of billets. In addition, new facilities to expedite the packaging and shipping of its prod ucts were completed during 1966. Moreover, a great deal of effort was devoted to improving other phases of Bonnell's operations and services to its customers during 1966, and this is ex pected to contribute to a steadily im proved performance in 1967. Aluminum pig metal is ted (o a furnace in the Bonnell plant, where it is melted down and alloyed before further processing. PAGE SIXTEEN etc 16971 OPERATIONS REVIEW Advertising, Employee and Public Relations EMPLOYEE RELATIONS-As the Company expands and diversifies, the importance of good employee relations becomes in creasingly evident. We are very fortunate in having an excellent group of em ployees who have worked diligently and effectively to achieve the goals that Ethyl has established. As of December 31, 1966, there was a total of 10,149 employees. Of the total number of employees, approximately 6,000 were employed in the domestic chemical and plastics oper ations of Ethyl Corporation; around 350 in the Canadian and overseas chemical operations; approximately 2,600 in Albe marle Paper Co. and its divisions; and about 1,350 in the William L.Bonnell Co. Of all Ethyl locations, the Baton Rouge plant had the largest number of employ ees, approximately 3,000, as of Decem ber 31, 1966. public relations programs on behalf of the Company and its individual divisions. A substantial amount of effort was de voted to publicity supporting the intro duction of new products, in order to make them known to potential customers. Related publicity, including magazine articles, was prepared on the Company's services, particularly in technical areas, as an aid to divisional objectives. Another area of the Department's ac tivities consisted of information about the Company to the business and finan cial community, and educational mate rials for the public at large. The department also assisted various company divisions in their employee re cruiting efforts and other special projects. < ADVERTISING - The Advertising and Sales < Promotion department, as part of its re sponsibilities, continued the Corporate Identity advertising program in 1966. Its objective is to emphasize that Ethyl is a research-minded, diversifying corpora tion with a varied line of products serving many industries. To support product sales activities, industrial advertisements appeared pro moting the products and services of the Ethyl divisions. . For example, antiknock compounds received special emphasis in advertise ments featuring Ethyl's experience, facil ities and skills in serving its customers. Packaging film and PVC resins and com pounds were advertised in trade publica tions reaching appropriate audiences. Other products were similarly supported. I In the sales promotion area, a variety of individual sales tools, such as printed materials, visual aids and trade show ex hibits, as well as entire promotional pro grams, were produced to aid the sales activities of the various divisions. public RELATIONS - The Public Rela tions department conducted numerous PAGE SEVENTEEN ETC 16972 OPERATIONS REVIEW Research and Development With effective research vital to its con tinued success, the Company pursued an aggressive research program in 1966. Expenditures on research and develop ment were equal to about 4% of annual sales. Ethyl continued its research program on experimental gasoline engine induc tion systems intended to reduce unde sirable emissions in the vehicle exhaust. In addition, studies were made of other engine designs and operating variables which show promise of reducing emis sions still further. The continuing objec tive is to reduce exhaust emissions to the lowest level consistent with satisfactory engine operation. Research leads have been uncovered in the search for special additives to re duce emissions, and new techniques and instrumentation have been devised to assist in our emission studies. Two con tracts in the emissions area, being conducted for the U.S. Public Health Service, have broadened our knowledge in this exceedingly complex field. Chemical research programs in 1966 ranged from synthetic edible fats to foamed aluminum to new iecnnology ap plicable to the production of lead anti knock compounds. A new product area of high potential is represented by syn thetic fatty acids applicable in the deter gent and other industries. Significant progress was also made on research into soap and acid derivatives. Accompanying Ethyl's entrance into the plastics field has been an extensive research and development program on plastics. This has included both research on polymers and on process and product improvement work in present product areas. Illustrative of the latter is the de velopment of polyvinyl chloride com pounds for such applications as plastic pipe, battery separators, bottles, shoe soles, and wire coating. Research projects were also carried out for the Department of Defense. The results of this contract research are in advanced stages of testing by the mili tary. In addition, the R & D Department in 1966 continued to supply significant amounts of chemicals used by the De partment of Defense. During 1966, Ethyl received about 100 U.S. patents and 125 foreign ones. Ethyl now holds over 1,000 unexpired U.S. patents and maintains about 800 foreign patents. PAGE EIGHTEEN OPERATIONS REVIEW Products Ethyl's products find a multitude of uses. They range from petroleum chemicals for use in automotive transportation to industrial chemicals and paper and plas tics with innumerable everyday applica tions. A few of these products are shown on this page. They include PVC pipe for potable water systems, shopping bags for consumers, PVC film for packaging red meat and produce, polyethylene film for packaging bread, PVC bottles for various consumer products, and chlorin ated solvents used in dry cleaning gar ments and in industrial cleaning operations. The various Ethyl products are listed below: PETROLEUM CHEMICALS: GASOLINE ANTIKNOCK COMPOUNDS/GASOLINE IGNITION CONTROL COMPOUNDS / ANTIOXIDANTS / GASOLINE DETERGENTDEICER-CORROSION INHIBITORS / DIESEL FUEL DETERGENT-DISPERSANT-CORROSION INHIBITOR / DIESEL FUEL IGNITION IMPROVER / FUEL OIL COM BUSTION IMPROVER/FURNACE OIL STABILIZER/ LUBRICATING OIL ADDITIVES / METAL DEACTIVA TOR/OIL SOLUBLE DYES INDUSTRIAL CHEMICALS: VINYL CHLORIDE/ ETHYL CHLORIDE/ETHYLENE DICHLORIDE/ METHYL CHLORIDE/CHLORINATED SOLVENTS (PERCHLORETHYLENE, TRICHLORETHYLENE, 1,1,1TRICHLOROETHANE)/CAUSTIC SODA/SODIUM/ ALUMINUM ALKYL COMPOUNDS/ORTHOALKYLATED CHEMICALS / ORTHOALKYLATED ANTIOXIDANTS / HYDROPOLYMER OIL / SYNTHETIC PRIMARY ALCO HOLS/ALUMINUM SULFATE PLASTICS: POLYETHYLENE PACKAGING FILMS/ POLYVINYL CHLORIDE PACKAGING FILMS/POLYETHYLENE BUILDING AND AGRICULTURAL FILMS/ POLYETHYLENE TAPE/"TIE-EYES"/POLYVINYL CHLORIDE PIPE, CONDUIT AND FITTINGS / POLY VINYL CHLORIDE RESINS AND COMPOUNDS/POLYVINYL CHLORIDE (VYPAK) CONTAINERS PAPER PRODUCTS: UNBLEACHED SULFATE PULP/ KRAFT PAPERBOARD/KRAFT WRAPPING PAPER/ COLORED KRAFT/BAG AND SACK KRAFT/SPE CIALTY KRAFT PAPERS/BLOTTING PAPER/GASKET PAPER/FILTER PAPERS / ASPHALT, WAX, RESIN AND SILICONE TREATED PAPERS / COATED PAPER BOARD/MULTIWALL BAGS/PLASTIC FILM BAGS/ HANDLE SHOPPING BAGS/GROCERY BAGS/COR RUGATED CONTAINERS ALUMINUM PRODUCTS: ALUMINUM SHAPES, MOLD' ING AND TRIM ASSETS Current assets: Cash ....................................................................... Short-term securities (approximates market) . . . Accounts receivable............................................... Inventories ............................................................ Prepaid expenses ................................................. Total current assets.......................................... December 31 < 1966 1965 $ 12,745.343 4,688,070 56,131.388 50,387,055 1.620.890 125,572.746 $ IS; 70,151 7,806,551 37,241,462 41,570,190 615,084 106,103,438 Property, plant and equipment................................. Less, Accumulated depreciation and depletion . . Net property, plant and equipment................ 312,303.298 86.270,827 226.032,471 266,213,837 67,310,665 198,903,172 Investments in 50%-owned companies 5,831,460 5,640,112 Deferred charges and other assets 15.046.624 16,459.618 Patents, contracts and other intangibles 9,672.927 $382,156,228 10,217.019 $337,323,359 The accompanying notes are an integral part of these statements. PAGE TWENTY .m ETC 16975 LIABILITIES Current liabilities: Accounts payable and accrued expenses........... Notes payable........................................................ Long-term debt, current portion........................... United States and foreign income taxes............. Total current liabilities............................. Long-term debt.......................................................... Estimated income taxes payable in future years ... Provision for employee benefits............................... Minority interest in consolidated subsidiary........... December 31 1966 1965 $ 32,650,000 2,250,000 4,612,646 8,123,237 47,635.883 181,260,000 12,945,319 5,833,097 350,000 $ 26,683,858 - 2,789,146 7,056,543 36,529,547 181,832,881 11,681,400 6,517,274 - SHAREHOLDERS' EQUITY Capital stock: 6% cumulative preferred, par $100 per share . . 5% cumulative preferred, par $100 per share .. Common, par $1 per share.................................... Capital surplus.......................................................... Retained earnings...................................................... Less, Preferred stock in treasury, 680 shares (at cost)........................................ Total shareholders' equity...................... 3,691,200 10,000.000 9,538,655 25,465,985 85,502,659 134,198,499 66,570 134,131,929 $382,156,228 The accompanying notes are an integral part ot these statements. 3,803,600 -- 9,487,380 25,074,528 62,396,749 100,762,257 100,762,257 $337,323,359 PAGE TWENTY-ONE tuna ETHYL CORPORATION AND SUBSIDIARIES - Con ca'?t:9*?P: .*r- It *tr\ *'*-"* f**. e* C \ t nlV; f i^. t* * < # STATEMENTS OF INCOME AND RETAINED EARNINGS Income: Net sales........................... Miscellaneous income, net Costs and expenses: Cost of goods sold................................................. Selling and general expenses............................... Interest and financing costs, long-term debt .. . United States and foreign income taxes............. Net income........................ Retained earnings at beginning of year Deduct, Cash dividends: 6% Preferred stock, $6.00 per share . 5% Preferred stock, $3.61 per share . Common stock, $.58 per share in 1966 and $.46 in 1965 ............................. Retained earnings at end of year December 3J 1966 1965 $305,011,163 3,006,775 308,017,938 212,456,499 42,448,845 11,742,668 17,078,000 283,726,012 24,291,926 42,613,238 66,905,164 239,309 4,269,106 4,508,415 $ 62,396,749 STATEMENTS OF CAPITAL SURPLUS Balance at beginning of year.................................... Excess of proceeds over par value of 12,000 and 963,000 shares of common stock issued upon exercise of warrants.......................................... Excess of cash received over par value of 39,275 and 85,722 shares of common stock issued under stock option plan............................. Excess of cost over par value of preferred stock canceled........................................................ Balance at end of year............................................... 5 25 r~ 4 34 S 25.45 $ 20,861,554 3,450,750 766,584 (4,360) $ 25,074,528 The accompanying notes are an integral part of these statements. PAGE TWENTY-TWO I .. - v . : i . . , 1. CONSOLIDATION PRINCIPLES: The accompanying financial statements include the accounts and operations of all wholly-owned subsidiaries, in cluding Halifax Timber Company, the operations of which were not previ ously consolidated and the investment in which was stated at cost in ETHYL CORPORATION AND SUBSIDIARIES previous financial statements. The financial statements for 1965 have been restated to give effect to this change in presentation and net income for 1965 as previously reported has been increased by the amount of the net income of Halifax Timber Company for that year ($44,403) and the accumulated retained earnings of that company as of January 1, 1965 I ($64,493). 2. ACQUISITION: Ethyl Corporation purchased all the outstanding common stock of The William L. Bonnell Company, Inc. on April 1, 1966. Accord ingly, the accompanying financial statements include the assets and lia bilities of the acquired corporation and results of its operations for the nine month period ended December 31, 1966. 3. INVENTORIES: Inventories include: I 1996 1965 Finished goods ................. . $18,557,199 $15,089,284 Raw materials and work in process ................... 25,156,048 21,202,821 Stores, supplies; etc........... 6,673,808 5,278,085 $50,387,055 $41,570,190 Inventories are stated at the lower of cost or market, with cost being de termined on the last-in, first-out basis with respect to approximately $25,822,000 at December 31, 1966 and $26,571,000 at December 31, 1965, and generally on an average cost basis with respect to the balance. - INVESTMENTS IN 50%-OWNED COMPANIES: Investments in 50%-owned companies are stated at cost or less and represent the Corporation's in vestments in and advances to Ethyl-Dow Chemical Company and Vypak Corporation. The Corporation's investments exceed its equity in the net assets of those companies at December 31, 1966 by approximately $3,352,000, representing the excess of investment over equity in net assets of Ethyl-Dow at date of acquisition (November 30, 1962) less undis tributed earnings of $100,000 since that date. Dividends received from Ethyl-Dow were $1,825,000 in 1966 and $1,800,000 in 1965. Such amounts were not significantly different from the Corporation's equity in Ethyl-Dow earnings. Subsequent to December 31, 1966, the Corporation acquired the other 50% interest in Vypak Corporation. PAGE TWENTY-THREE ETC 169T8 Notes to Financial Statements Continued 5. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at cost as follows: 1966 196! Land ................................... $ 14,135,981 $ 12,811,929 Timberland and standing timber............................. 17,924,861 11.130,505 Buildings............................. 36,642,563 32,749,874 Machinery and equipment . 243,599,893 209,521,529 $312,303,298 $266,213,837 6. DEFERRED CHARGES AND OTHER ASSETS: Deferred charges at Decem ber 31, 1966 consist principally of unamortized discount on long-term debt and other deferred financing expenses. 7. PATENTS, CONTRACTS AND OTHER INTANGIBLES: Patents and con tracts with an unamortized cost basis of $3,510,741 at December 31, 1966 are being amortized over their respective lives; other intangibles are stated at cost. 8. LONG-TERM DEBT: Reference is made to "Long-Term Debt" on page 9 of this report for information concerning the Company's borrowings. 9. CAPITAL STOCK: As of December 31, 1966, there are 12,156.000 shares of common stock authorized, of which 9,538,655 shares are outstanding. As of December 31, 1966, there are 1,000,000 shares of cumulative first preferred stock, $100 par, authorized, of which 36,912 shares of 6% Series A and 100,000 shares of 5% Series B are outstanding. The 6% Series A stock is callable at $101 and is entitled to annual sinking fund contributions of $114,108, and the 5% Series B stock is entitled to annual sinking fund contributions of $2,000,000. 10. WARRANTS: At December 31, 1966, there are outstanding warrants exercisable on or before November 1, 1982 which entitle the holders thereof to purchase 196,800 shares of unissued common stock, $1 par value, at $4.58 per share. During 1966, warrants for 12,000 shares were exercised. 11. STOCK OPTION PLAN: Under the Corporation's restricted stock option plan, 900,000 shares of unissued common stock were reserved for issu ance to officers and other key employees. At December 31, 1965, there were outstanding options to purchase 575,550 shares at prices ranging from $9.42 to $24.00. During the year ended December 31, 1966, options for 39,275 shares were exercised and options for 38,375 shares were cancelled, leaving outstanding at December 31, 1966 options covering 497,900 shares, of which options for 231,770 shares are exercisable at that date. There were 190,817 shares available for grant under the plan at the end of the year. An option to purchase 29,500 shares at $33.12 per share was granted in January 1967. 12. RETAINED EARNINGS RESTRICTION: The Corporation's articles of incor poration and note agreements contain restrictions, among others', against the payment of cash dividends. At December 31, 1966, $30,105,000 of retained earnings is free of such restriction under the agreement pres ently most restrictive. 13. INVESTMENT CREDIT: The Corporation's provision for United States and foreign income taxes was reduced (and net income increased) by invest ment credits of $2,738,000 and $2,350,000 in 1966 and 1965, re spectively. 14. DEPRECIATION, DEPLETION AND AMORTIZATION: Depreciation and de pletion charged to income amounted to $19,845,641 and $16,898,385 in 1966 and 1965, respectively. Amortization of intangibles and of de ferred discount and financing expenses charged to income amounted to $2,231,807 and $2,458,702 in the respective years. PAGE TWENTY-FOUR * p ' t f Auditors' nrf W i ti ETHYL CORPORATION AND SUBSIDIARIES 1 I TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ETHYL CORPORATION: We have examined the consolidated balance sheet of ETHYL r ^RPORATION and SUBSIDIARIES as of December 31, 1966, and the related statements of income and retained earnings and of capital surplus for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. We previously examined and reported upon the Corporation's consolidated financial statements for the year ended December 31, 1965. In our opinion, the aforementioned statements present fairly the consolidated financial position of Ethyl Corporation and Subsidiaries at December 31, 1966 and 1965, and the results of their operations for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. LYBRAND. ROSS BROS. & MONTGOMERY New York, February 6,1967. i PAGE TWENTY-FIVE ETC 16980 Ten-Year Summary SALES AND INCOME Net sales"' .................................. |--------------------1 1966 ' Years Ended December 31 1965 1964 $384,177,640 $305,011,163 $277,478,496 Income before non-cash items and income taxes ................... 70,841,787 60,727,013 55,701,126 Depreciation, depletion and amortization............................ 22,077,448 19,357,087 16,962,753 Income taxes, including deferred 19,596.000 17,078,000 18,927,000 Net income.................................. 29,168,339 24,291,926 19,811,373 Cashflow..................................... 52,463,097 44,905,297 37,698,396 FINANCIAL CONDITION Working capital............................ Ratio of current assets to current liabilities ................... Property, plant and equipment (Net)..................... Expenditures for property, plant and equipment............... Long-term debt............................ $ 77.936,863 $2.64to$1.00 226,032,471 53,278,000 181,260,000 $ 69,573,891 $2.90to$1.00 198,903,172 52,050,000 181,832,881 $ 83,182,403 $2.98to$1.00 158,481,352 20,609,000 182,414,532 COMMON STOCK Number of shares outstanding .. . Net income per share131............... Income taxes per share<3J........... Book value per share14'............... 9,538,655 $ 3.00 2.05 $12.63 9,487,380 $ 2.53 1.80 $10.22 8,438,658 $2.08 2.01 $8.52 (1) Includes 4 months oI combined paper and chemical operations. All prior liscal years represents paper operations only. (2) Net sales are stated before deducting freight cost. PAGE TWENTY-SIX ----------------------- 1 1963 I $226,554,354 1 i 1963"' $ 99,814,250 1962 $48,578,227 Years Ended March 31 1961 I960 $50,320,518 $44,572,285 1959 $35,881,981 1958 1 1 $34,527,980 42,249,258 15,391,623 5,776,220 7,252,998 6,138,973 6,007,198 5,781,548 15,131,178 13,560,000 13,558,080 30,-388,016 6,555,892 4,455,000 4,380,731 12,117,007 2,294,903 1,719,051 1,762,266 4,211,875 2,077,980 2,740,399 2,434,619 4,680,496 2,041,843 1,958,081 2,139,049 4,344,420 1,607,425 2,266,473 2,133,300 3,785,924 1.482,130 2,378,411 1,921,007 3,795,461 $ 67,337,401 $ 63,000,811 $10,313,111 $ 8,586,720 $ 7,950,568 $ 9,143,917 $ 7,640,165 $3.36to$1.00 $2.75to$1.00 $3.29to$1.00 $2.73to$1.00 $3.22to$1.00 $3.91 to$1.00 $3.92to$1.00 155,558,493. 150,959,130 29,221,972 28,336,492 27,742,696 24,512,702 20,015,076 18,862,000 192,599,743 4,838,805 196,375,319 4,820,189 15,522,300 2,644,359 13,092,000 5,291,737 13,178,500 6,099,122 13,793,100 2,957,526 8,700,000 2,375,807 $1.42 1.45 $6.69 1,187,362 $ .63 .69 $5.31l!> 1,029,674 $ .24 .28 $3.35 976,956 $ .35 .45 $3.19 971,803 $ .31 .32 $2.92 760,992 $ .32 .39 $2.71 699,761 $ .29 .41 $2.43 13) Based on the average number of shares outstanding in each year, adjusted for stock splits and stock dividends, except for the years ended December 31, J963, 1964, 1965 and J966, which are based on the number of shares outstanding at the end of these years, with J963 adjusted lor the 3-for-l stock split in December 1964 and 1963, 1964 and 1965 adjusted for 2,203,200 shares issued in 1964, 1965 and 1966 upon exercise of warrants. (41 Adjusted for stock splits and stock dividends. (5) Includes addition to capital surplus of $1.56 per share resulting from sale of warrants. PAGE TWENTY-SEVEN Ethyl Corporation OFFICERS AND STAFF DIRECTORS DIVISIONS FLOYD D. GOTTWALD Chairman of the Board FLOYD D. GOTTWALD, JR. Vice Chairman of the Board GEORGE F. KIRBY President LAWRENCE E. BLANCHARD, JR. Executive Vice President BRUCE C. GOTTWALD Executive Vice President & Secretary MALCOLM P. MURDOCK Sen/or Vice President JOSEPH M. LOWRY Senior Vice President JAMES M. GILL Vice President Chemicals Group GLENN 0. HAYES Vice President Manufacturing ROBERT HERZOG Vice President Planning FLOYD D. GOTTWALD* Chairman FLOYD D GOTTWALD, JR.* Vice Chairman JOSEPH A. COSTELLO Retired vice President, Ethyl Corporation S. DOUGLAS FLEET Retired Vice President, Ethyl Corporation BRUCE C. GOTTWALD* GEORGE F. KIRBY* JOSEPH M. LOWRY LAWRENCE E. BLANCHARD, JR.* ROBERT T. MARSH, JR. Retired Chairman of the Board First & Merchants National Bank Richmond, Va. MALCOLM P. MURDOCK LEWIS F. POWELL, JR. Partner Hunton, Williams, Gay, Powell & G/Oson Richmond, Va. Pelrole m Chemicals ROBERT A. DOUGLASS Divisional Vice President & General Manager JOHN F. KOEHNLE General Sales Manager R. J. OSTRANDER Technical Director Industrial Chemicals MERLE L. GOULD General Manager STANLEY A. HARRIS Sales Manager Chlorinated Solvents HARRY KUHE Sales Manager General Chemicals Ethyl International ALBERT B. HORN Divisional Vice President & General Manager CHESTER D. CARTER Divisional Vice President Business Development ETHYL S.A. LEONARD L. HUXTABLE Vice President PuOlic Relations & Advertising E. CLAIBORNE ROBINS President A. H. Rooms Company Richmond, Va. THOMAS M. SMYLIE Vice President KENNETH L. SWARTWOOD Vice President Research & Development i FRANK J. McNALLY i i Treasurer SIDNEY BUFORD SCOTT Partner Scoff & Stringfellow Richmond, Va. ERWIN H. WILL Chairman of the Board Virginia Electric & Power Co. Richmond, Va. WILLIAM J. RUSHER Managing Director ETHYL HELLAS CHEMICAL COMPANY S.A. ELMO F. DIEDRICH Managing Director Plastics CLARENCE M. NEHER Divisional Vice President & General Manager William L. Bonnell Co., Inc. E. M. HARVEY President & Treasurer WARREN BROCKWAY vice President & Genera/' Safes Manager D. A. WAGNER Vice President--Manufacturing F. A. DANIELS, JR. Controller Albemarle Paper Company (Wholly-owned subsidiary) C. RAYMOND HAILEY Executive Vice President & General Manager JOHN T. WALTON Vice President & Assistant General Manager M. LEBBY BOINEST, JR. Vice President Kraft Paper Division KIRKWOOD F. ADAMS Executive Vice President Puip and Paper Manufacturing LAWRENCE K. NORTON Vice President--Sales KENNETH D. RUNNING Vice President--Assistant Manager Roanoke Rapids Division R. C. WILLIAMS Vice President--Planning HUGH H. BAIRD, JR. Treasurer and Controller W. DOUGLAS GOTTWALD Secretary JOHN E. BRYAN, JR. Director of Industrial Relations ALBEMARLE CONTAINER DIVISION JAMES H. KIRBY Confro//er JAMES B. LONERGAN Director of Advertising & Sales Promotion G. SAMUEL ROBERTS Chief Engineer STEPHEN B. RODI Director of Employee Relations FREDERICK P. WARNS i General Counsel i VISQUEEN DIVISION LLOYD B. ANDREW General Manager HARRY C. BYRNE, JR. General Sales Manager JACK C. WRIGHT Operations Manager POLYMER DIVISION HARRY M. ZIMMERMAN General Manager ARTHUR A. SMITH General Sales Manager VYPAK CORPORATION (Wholly-owned subsidiary) RICHARD F. SANDS President JOHN A. COMLY President ROBERT G. REDMAN Genera/ Sales Manager CONSUMER BAG AND PACKAGING DIVISION R. W. HANNAH President JOHN W. EDWARDS Vice President--Manufacturing INTERSTATE BAG COMPANY BRENTON S. HALSEY President PARVIN E. CANTRELL Executive Vice President--Sales RAYMOND BAG DIVISION Ethyl Corporation of Canada Limited (Canadian Division Wholly-owned subsidiary) ALAN C. TULLY President DONALD R. RUSSELL President CHARLES K. WATTERS Vice President--Sales JAMES H. MAIN Manager--Petroleum Additives Department * Member of the Executive Committee ROBERT H. SHANNON Manager--Chemical Products Department PAGE TWENTY-EIGHT i 4 A r The synthetic primary alcohols plant in Ethyl's Houston manufacturing center. Its principal products are synthetic alcohols used in the manufacture of biodegradable detergents and of plasticisers. The plant l also produces aluminum alkyl compounds, which are ' used as catalysts in the plastics and rubber industries, and it makes aluminum sulfate, which is used in water purification and paper sizing. Design: Roberts, Reinhardt 1 Ong, Inc. ETC 16984 ri;S; X.-* ' -y* t ,^p; - *./. -* . vV-V';` Mi-/-: \'S-y>.- r Y- li I swrf^cx*-'vi>i^ri \ -- ... . *r-^ *' ^ :/"-.. "V* - *-5' . M-` #?a- CV . =-jTY" .->' \ , ' Y/'-;. : ; J.'' : `' ' :;.; -.- ..; '.-. - >$/ ';!/~ . -v^-'YY v ' * ?yyyyyist %wy-ypipr > i t e ' v **' \-r'-. R*- X-}*v - Ethyl Corporation y , ". '' YYYY; .'nv.'&i- -:Y Y:-YIY^V- A- >:;. v-y *! eivt ;j ?, asftgm : - y# wllpSSteYy'\ETHY1^ ^ ^ 1 38901 s# Vr*.. *,' -Sj i-v.<-V!^*.-,,v --* y.yyyv :. ' : -;: VjjsjS^Jj ^V'-'-- '- - - ETC 16985