Document oM6mKLKvydQ2QK0B1LNBg7q7X

The Philip Carey Manufacturing Company Notice of Special Meeting of Shareholders to be Held April 12, 1967 To the Shareholders of The Philip Carey Manufacturing Company: \ Notice is hereby given that a Special Meeting of shareholders of The Philip Carey Manufacturing Company will be held at the office of the Company at Lockland, Ohio, on April 12, 1967 at 11:00 o'clock in the forenoon. Eastern Standard time, for the following purposes: 1. To consider and take action with respect to a Plan and Agreement of Merger, a copy of which is attached as Appendix m to the Proxy Statement accompanying this Notice, which provides, among other things, for the merger of this company with and into Glen AldeihCompany, Inc., a Delaware corporation (to be renamed "Glen Alden Corporation**), pursuant to which all out standing common shares of this company (except for shares held by said Glen Alden Corporation and a subsidiary thereof) will be converted, share for share, into shares of $2.25 Senior Cumulative . Convertible Preferred Stock of said Glen Alden Corporation; and 2. To transact such other business as may properly come before the meeting or any adjourn ment or adjournments thereof. . Only shareholders of record as shown by the transfer books of The Philip Carey Manufacturing Company at the close of business on March 20, 1967 are entitled to notice of and to vote at the meeting. By order of the Board of Directors, L. A. Pechstein, Jr. Secretary March 10, 1967. k .... .. . .... ' m?'. lue ndtlce was sentt *ali- shareholder*-Cf record at the close of business on March 20, 1967* mailing, first class mail or first class airmail, not earlier than March 13 nor later than March 31* 1967. ted to trdless L ALPHABETICAL INDEX Item Proxy Page Numbei 1, Annual Hooting 2 2, Anti-dilution formulae 5. Assets of Carey, % of Surviving Corp Cert, of Inoorp* 9 5 t? 4, Capitalisation 18 , 5, Continuations bualnoaa and employees of Carey 3; 6, Controls Rapid Aaorloan Corp* ovno 50*4% of McCrory - HoCrory owns 49*7% of Glen Aldon i 7* Dissenting Shareholders 16 6* Exchange Agents9 Transfer Agents, Registrars 18 9* Exchange of Stools 1,2 10* Expenses of Merger 1 14 11* Plnanelal Statements, Index F-l 12* Managenent of Glen Alden 59 13* Plan and Agreementof Merger (Carey) Append* III 14* Pre-emptive Rights (Ho Rights) 1$, Proxies and Votings Required Vote 9 Revoeablllty '9 16, Registration of Stook tinder Securities Act 13 17* Restriction on Corporate Action, (Glen Alden) ; 21 18* Rights of Abandonment - ^ 19* Seniority of $2*25 Senior Stook ... 12 Cert* 6t Inoorp* 6 20* Stock Options, Glen Alden 11 21* Tax, Federal income - Consequences . 15 Stook Provisions $2,25 Senior Cum* Conv* Pfd, Stock 22* Conversion 23* Dividends 24* Listing - yes 25* Liquidation 26, Redemption 27* Sinking Fund and S* F* Redemption 28* Voting 20 9 13 20 20 20 19 1 `NWo ' "* e ** Capitalization Comparative Data Book Values Per Share................................................................................ Earnings Per Share...................................................................................... Dividend Comparison.................................................................................. Market Prices................................................................................................ 39 39 40 40 History and Business of Glen Aldbn General.......................................................................................................... Textile Manufacturing ................................................................................ RKO Theatres ....................................................................................... Sale of Coal Properties and Business.......................................................... Briggs Manufacturing Company.................................................................. 41 41 44 45 47 History and Business of B.V.D. Products ........................................................................................................ Raw Materials ......................... *.................................................................. Distribution .................................................................................................. licensees ...................................................................................................... Competition .................................................................................................. Employees .................................................................................................... Plants and Properties................................................................................... Recent Acquisitions and Events................................................................. 48 49 49 49 49 50 50 51 History and Business of Philip Carey General........................................................................................................... Product Lines...................................................... Sales and Distribution..................... :........................... ................................ Raw Materials ...................... :....... .............................................................. Competition .............................................,................................................... Asbestos Mine and Mill.............................................................................. Manufacturing and OtherPrincipal Properties............................... * Employee Relations............................... 54 55 55 56 56 56 57 58 Management of Glen Alden Corporation..-..... ......................... Glen Alden Remuneration............................... .................. ...................... Glen Alden Stock Options..................... ......... .......................... ............; B.VJD. Remuneration ................................. B.V.D. Stock Options...................................................1.--......... ............... Philip Carey Remuneration..................................................... - 59 61 62 62 53 63 Index to Financial Statements.................................... ....... -.............. F-l Appendix I--Plan and Agreement of Merger (the "Glen Alden Merger Agree ment") Exhibit A--proposed Certificate of Incorporation of Glen Alden Corporation Exhibit B--proposed By-Laws of Glen Alden Corporation Exhibit C--(see Appendix II) Appendix II--Agreement and Plan of Reorganization (the "BVD Acquisition Agreement") Exhibit A--(see Appendix I) Exhibit B--Letter of Election and Transmittal for Preferred or Class C Stock of Glen Alden Corporation Exhibit C--Options, Warrants, Rights, etc., in re shares of BVD stock Exhibit D--Wholly owned Subsidiaries of BVD Exhibit E--Subsidiaries of Glen Alden Appendix m--Plan and Agreement of Merger (the "Carey Merger Agreement") Exhibit A--(see Exhibit A to Appendix I) Exhibit B--(see Exhibit B to Appendix I) Appendix IV--Supplemental Plan and Agreement of Merger (the "Supplemental Merger Agreement") Exhibit A--(see Exhibit A to Appendix I) Exhibit B--(see Exhibit B to Appendix I) Appendix V--Provisions of Pennsylvania Business Corporation Law Appendix VI--Provisions of the General Corporation Law of Ohio u PROXY STATEMENT SPECIAL MEETING OF SHAREHOLDERS of GLEN ALDEN CORPORATION and SPECIAL MEETING OF SHAREHOLDERS of THE PHILIP CAREY MANUFACTURING COMPANY and SPECIAL MEETING OF STOCKHOLDERS of THE B.V.D. COMPANY, INC. APRIL 12, 1967 PRELIMINARY STATEMENT This Proxy Statement should be lead carefully. The transactions discussed herein are complicated and should be understood before voting. Note especially the material captioned Preliminary Statement, Certain Significant Aspects of the Proposed Transactions, Purpose and Background of the Transactions, the Earnings Statements of Glen Alden, B.V.D. and Philip Carey, the Pro Forma Statements of Com bined Income, and Comparative Data. Ibis Proxy Statement relates to special stockholders* meetings of Glen Alden Corporation ("Glen Alden**), a Pennsylvania corporation. The Philip Carey Manufacturing Company ("Philip Care/*), an Ohio corporation, and The B.VJD. Company, Inc. ("B.VJD."), a Delaware corporation, to be held on April 12, 1967 for the purpose of considering and taking action on proposed transactions pursuant to which Philip Carey will be merged into Glen Alden and a wholly-owned subsidiary of Glen Alden will acquire substantially aU of the assets (subject to substantially all of the liabilities) of B.V.D. As part of the proposed transactions Glen Alden will be reincorporated as a Delaware corporation under the name "Glen Alden Corporation** ("Glen Alden Corporation" wherever used herein refers to said new Delaware corporation which is also referred to as the "Surviving Corporation'*). McCrory Corpo ration ("McCrory") controls the ownership of 1,000,002 shares of the Common Stock of B.V.D. and 2,388,230 Common Shares of Glen Alden through a subsidiary, Glen Alden-Delaware, Inc., a Delaware corporation ("Glen Alden-Delaware"), all of whose Common Stock is owned by McCrory and aU of whose Preference Stock is owned by Mr. and Mrs. Sol Kittay. Rapid-American Corporation owns 50.4% of the voting stock of McCrory. See "Purpose and Background of Transactions" for a more detailed discussion of Glen Alden-Delaware's relation to the proposed transactions. Simul taneously with the acquisition of the B.V.D. assets, Glen Alden-Delaware will be merged into the Sur viving Corporation. As a result of these transactions, *- (a) each common shareholder of Philip Carey (except Glen Alden and its subsidiaries) will receive one share of $2.25 Senior Cumulative Convertible Preferred Stock ("Senior Stock") of the Surviving Corporation in exchange for each common share of Philip Carey presently held; (b) each Common Stockholder of B.V.D. (except as provided in (d) below) will receive, at his election, either (i) one share of $3.15 Cumulative Convertible Preferred Stock ("Preferred Stock"), or (ii) one share of Gass C (Contingent Preference) Stock ("Gass C Stock") of the Surviving Corporation in exchange for each three shares of the Common Stock of B.V.D. presently held; (c) each Common Shareholder of Glen Alden (except as provided in (d) below) will receive one share of Common Stock of the Surviving Corporation in exchange for each Common Share of Glen Alden presently held; and (d) McCrory, as the holder of 2,388,230 shares of Common Stock of Glen Alden-Delaware, will receive 2,388,230 shares of Common Stock of the Surviving Corporation, and Mr. and Mrs. Kittay, as the holders of 333,334 shares of Preference Stock of Glen Alden-Delaware, will receive 333,334 shares of Class C Stock of the Surviving Corporation; the 2,388,230 Common Shares of Glen Alden and the 1,000,002 shares of Common Stock of B.V.D. held by Glen Alden-Delaware will be cancelled. The details of the transactions and the securities to be issued thereunder are set forth below. In arriving at the foregoing exchange rates the respective Boards of Directors took into considera tion among other factors the financial position, the recent operating results, the past and prospective earnings and sales, and the market value of the shares of each company. The directors of Glen Alden, Philip Carey and B.V.D. have carefully considered the proposed transactions and have concluded to recommend the same to their respective shareholders. None of the officers or directors of Glen Alden, B.V.D. or Philip Carey has any personal interest in the merger or acquisition except as the same may affect his interest as a shareholder. The investment banking firm of Werthelm & Co., of which Mr. Milton Steinbach, a Director of Philip Carey, is a general partner, has counselled Philip Carey in connection with the financial terms of the Philip Carey Transaction (as hereinafter defined). Wertheim & Co. will receive a fee of $100,000 for its services if the Transaction is consummated and will be reimbursed by Philip Carey for its out-of-pocket expenses if the Transaction is not consummated. Allen & Company, investment bankers, has counselled Glen Alden in connection with the Philip Carey Transaction. Because of the proximity of the normal annual meeting dates of Glen Alden, Philip Carey, and B.V.D. to the scheduled closing dates of the transactions discussed herein, the Boards of Directors, of the respective corporations have deemed it inappropriate to hold an annual meeting prior to the closing (or abandonment) of said transactions. The first annual meeting of the Surviving Corporation is scheduled under its By-Laws to be held in May 1968, and, if either of the transactions described herein is con summated, the persons who will become Directors of the Surviving Corporation, as described on pages 59-60 below, will serve until the election and qualification of their successors at said meeting. . The Surviving Corporation may be required to issue a maximum of 7,513,576 shares of Common Stock, assuming conversion at maximum conversion rates of all shares of Senior Stock and Preferred Stock issued in the proposed transaction, and a maximum of 4,538,339 additional shares of Common Stock upon conversion at maximum rates of the Class C Stock. The above figures are based upon the number of shares of B.V.D. Common Stock outstanding on October 1, 1966 and the estimate that there will be outstanding 603,393 shares of Preferred Stock and 583,334 shares of Class C Stock after the consummation of the B.V.D. Transaction. It should be noted that the Class C Stock becomes con vertible into Common Stock only upon the occurrence of certain events described in detail on pages 25-26 hereof under "Class C Stock". The above figures do not take into account possible conversions of Preferred Stock which may be issued under contractual commitments and stock options of B.V.D. to be assumed by the Surviving Corporation (see below "Stock Options and Commitments to Issue Stock"). CERTAIN SIGNIFICANT ASPECTS OF THE PROPOSED TRANSACTIONS 1. The stockholders of B.V.D. are entitled to elect to receive either Preferred Stock or Class C Stock of the Surviving Corporation. The Gass C Stock will not be listed on any national securities exchange. No dividends are expected to be paid in respect of the Class C Stock, nor will such stock be convertible into Common Stock, except under the circumstances described on pages 25-26 hereof under "Failure to Make Serial Redemptions". 2 2. Assets formerly owned by Philip Carey and B.V.D., respectively, will each represent 29% of the consolidated net assets of the Surviving Corporation. The shareholders of Philip Carey and B.V.D. will receive 1.4% and 4.7%, respectively, of the initial voting power of the Surviving Corporation before any conversions into Common Stock are effected. Additional voting rights will accrue to the former shareholders of Philip Carey and B.V.D., respectively, if the Surviving Corporation defaults on a specified number of cumulative dividend payments. 3. The initial aggregate redemption value and aggregate involuntary liquidation preference of the Senior Stock, Preferred Stock and Class C Stock to be outstanding following the proposed transactions will exceed the total pro forma consolidated stockholders* equity of the Surviving Corporation by $19,500,045 and $14,672,067, respectively. The figures set forth in paragraphs 2 and 3 above are based upon the Pro Forma Combined Balance Sheets set forth elsewhere herein. PURPOSE AND BACKGROUND OF TRANSACTIONS As appears below, since 1955 Glen Alden has been engaged in diversifying its business with the result that, at the present time, it is engaged largely in the business of manufacturing textiles and operating motion picture theatres. (See below under "History and Business of Glen Alden".) The transactions herein described constitute further major steps in Glen Alden's diversification program. Philip Carey is engaged in the manufacture and sale of a large variety of products, principally roofing, industrial and insulation products and a line of fabricated products. Through a Canadian subsidiary,' Philip Carey also owns and operates an asbestos mine and mill. (See below under "History and Business of Philip Carey".) B.V.D. is engaged principally in the manufacture and sale of various types of apparel for men, women and boys, and in operating men's retail apparel establishments. (See below under "His tory and Business of B.V.D.") Simultaneously with the consummation of the B.V.D. Transaction, the name of the Surviving Corpo ration's subsidiary organized for the purpose of such acquisition will be changed to "The B.VJ). Company, Inc.". Promptly after the consummation of the Philip Carey Transaction all of the assets and liabilities acquired by the Surviving Corporation from Philip Carey pursuant to the Carey Merger Agreement will be transferred to a newly organized wholly owned subsidiary of the Surviving Corporation the name of which will be "The Philip Carey Manufacturing Company". Thus the businesses now carried on by B.V.D. and Philip Carey, respectively, will continue to be carried on under the same names. It is intended that all present employees of both B.V.D. and Philip Carey will assume positions with such new subsidiaries identical with the positions which they now occupy and that all officers of the three corporations (with the exception of Mr. Robert S. King, Chairman of the Board of Philip Carey, who desires to retire because of his age) will be retained in capacities substantially similar to those in which they are presently serving. It is presently contemplated that the various divisions and subsidiaries of the three corporations will continue to be operated as separate units under the supervision of the personnel presently responsible for their activities. Glen Alden acquired the bulk of its holdings in Philip Carey in February 1966, when it and its subsidiary, Gera Corporation, purchased 244,083 common shares of Philip Carey at an aggregate cost of approximately $10,231,000, including fees and commissions, pursuant to a public Offer for Tenders made by it on February 14,1966. In connection with such purchase Gera borrowed $4,500,000 from a bank, of which $3,500,000 is presently unpaid and is represented by a 6% note of Gera in said amount payable April 17, 1967. After the expiration of the Offer for Tenders, and prior to April 1, 1966, Glen Alden and Gera increased their aggregate ownership to approximately 28% of the total Philip Carey common shares outstanding, by acquiring an additional 38,438 common shares of Philip Carey in the open market at an aggregate cost of approximately $1,522,000. Glen Alden-Delaware acquired its stockholdings in Glen Alden and B.V.D. on July 26, 1966 when (a) McCrory transferred to it 2,388,230 Common Shares of Glen Alden in exchange for a like number of shares of Common Stock of Glen Alden-Delaware, and (b) Sol Kittay and his wife, Frieda Kittay, 3 % transferred to it a total of 1,000,002 shares of Common Stock of B.V.D. in exchange tor 333,334 shares of Preference Stock of Glen Alden-Delaware, subject to the right of Mr. and Mrs. Kittay to require Glen Alden-Delaware to purchase such Preference Stock at $105 per share in installments over a tenyear period. The July 26, 1966 agreement provided that Glen Alden-Delaware would offer to acquire the remaining shares of B.V.D. Common Stock for the same consideration per share, or for one or more different considerations to be offered as alternatives. The consummation of the B.V.D. Trans action will terminate all remaining obligations of Glen Alden-Delaware pursuant to the foregoing. Glen Alden-Delaware was formed for the purpose of acquiring the above mentioned B.V.D. Common Stock and Glen Alden Common Shares, and said shares constitute its only assets. McCrory has voting control of Glen Alden-Delaware through its ownership of all of Glen Alden-Delaware's outstanding Common Stock. Upon the consummation of the B.V.D. Transaction, Glen Alden-Delaware will cease to exist, McCrory's 2,388,230 shares of Glen Alden-Delaware Common Stock (originally received in exchange for a like number of Glen Alden Common Shares) will be converted into a like number of shares of Common Stock of Glen Alden Corporation, the Surviving Corporation, and Mr. and Mrs. Kittay's 333,334 shares of Preference Stock of Glen Alden-Delaware (originally received by them on a "one-for-three" basis in exchange for B.V.D. Common Stock) will be converted into a like number of shares of Class C Stock of Glen Alden Corporation, the Surviving Corporation. This same Class C Stock may be received on B.V.D.'s liquidation on a "one-for-three" basis by each B.V.D. common stockholder who makes an appropriate election. As a result of the sale of its coal business on February 16, 1966, Glen Alden's basic ties to the Commonwealth of Pennsylvania were terminated. An effect of the merger of Glen Alden'into a new Delaware corporation will be the elimination for the future of a substantial Pennsylvania tax. Glen Alden Meeting MEETINGS OF STOCKHOLDERS Purposes of Meeting: The principal purposes of the Glen Alden shareholders* meeting are to consider and act upon the following: Proposal No. 1--The approval of (a) a Plan and Agreement of Merger (the "Glen Alden Merger Agreement") In the form attached hereto as Appendix I* and (b) an Agreement and Plan of Reorganization (the "B.VJ0. Acquisition Agreement") in the form attached hereto as Appendix IL Glen Alden Merger Agreement: Under the Glen Alden Merger Agreement, Glen Alden (die present Pennsylvania corporation) and Glen Alden-Delaware will be merged into Glen Alden Com pany, Inc., a wholly-owned Delaware subsidiary of Glen Alden organized for the purpose. The name of said Glen Alden Company, Inc. will be changed to "Glen Alden Corporation", the Surviving Cor poration. > Upon the consummation of the merger, Glen Alden, the present Pennsylvania corporation, will have been reincorporated in Delaware as "Glen Alden Corporation" (the Surviving Corporation) and all presently issued Common Shares of Glen Alden (except the 2,388,230 Common Shares held by Glen Alden-Delaware which will be cancelled) will have been exchanged on a share-for-share basis for Common Stock of the Surviving Corporation; Glen Alden-Delaware will have ceased to exist, McCrory will have received Common Stock of the Surviving Corporation in exchange for its present shares of Common Stock of Glen Alden-Delaware, and Mr. and Mrs. Kittay will have received Gass C Stock of the Surviving Corporation in exchange for their present shares of Preference Stock of Glen AldenDelaware. The B.V.D. Acquisition Agreement: Under the B.V.D. Acquisition Agreement, the Surviving Corporation, through a wholly-owned Delaware subsidiary, win acquire, simultaneously with the Glen Alden merger discussed above, substantially all of the assets (subject to substantially all of the liabilities) of B.V.D. in exchange for shares of Preferred Stock and Gass C Stock of the Surviving Corporation. The B.V.D. Acquisition Agreement provides that promptly after the foregoing exchange has been com pleted, B.V.D. will be liquidated and the shares of Preferred Stock or Gass C Stock so issued will be distributed to the present holders of the Common Stock of B.V.D. on the basis outlined above under 4 "Preliminary Statement". Glen Alden-Delaware will receive Preferred Stock of the Surviving Corpo ration in exchange for its shares of Common Stock of B.V.D., which shares of Preferred Stock will be cancelled in connection with the simultaneous merger of Glen Alden-Delaware into the Surviving Corporation. ' The principal differences between the Preferred Stock and the Class C Stock, and the details with respect to the election by the holders of the BVD Common Stock to receive shares of either class, are hereinafter described under "B.V.D. Meeting--Comparison of Certain Provisions of Preferred Stock and Class C Stock" and "Details of the Proposed Transactions--Election to Receive Preferred Stock or Class C Stock". Proposal No. 2--The approval of (a) a Plan and Agreement of Merger (the MCarey Merger Agreement") In the form attached hereto as Appendix III, and (b) a Supplemental Plan and Agreement of Merger (the "Supplemental Merger Agreement") in the form attached hereto as Appendix IV. Carey Merger Agreement: Under the Carey Merger Agreement, Philip Carey will be merged into the Surviving Corporation. Each holder of common shares of Philip Carey (except Glen Alden and a subsidiary, whose shareholdings will be cancelled) will receive shares of Senior Stock of the Surviving Corporation on the basis outlined above under "Preliminary Statement". Supplemental Merger Agreement: The Supplemental Merger Agreement will become effective only if the merger of Glen Alden (the present Pennsylvania corporation) and Glen Alden-Delaware into Glen Alden Company, Inc. pursuant to Proposal No. 1 above has not been consummated for any reason. The purpose of the Supplemental Merger Agreement is to reincorporate Glen Alden as a Delaware corporation if this has not already been accomplished by the Glen Alden Merger Agreement under Proposal No. 1. Under the Supplemental Merger Agreement, Glen Alden, the present Pennsyl vania corporation, will be merged into Glen Alden Company, Inc. (its wholly-owned Delaware sub sidiary the name of which will be changed to "Glen Alden Corporation", the Surviving Corporation, as above described), and each holder of the Common Shares of Glen Alden (including Glen AldenDelaware) will receive one share of the Common Stock of the Surviving Corporation for each Common Share of Glen Alden held by such shareholder. Required Votet: The only outstanding voting securities of Glen Alden are its Common Shares, each share of which entitles the holder thereof to one vote. Only Glen Alden shareholders of record at the close of business on March 20, 1967 are entitled to vote at the Glen Alden meeting or any adjournments thereof. As of March 7, 1967, there were outstanding 4,802,032 Common Shares of Glen Alden of which Glen Alden-Delaware is the owner of 2,388,230 shares (approximately 49.7%). As noted above, all of the Common Stock of Glen Alden-Delaware Is owned by McCrory. The approval of both Proposal No. 1 and Proposal No. 2 will require the separate affirmative vote of the holders of at least a majority of the outstanding Common Shares of Glen Alden. The management of McCrory proposes to cause Glen Alden-Delaware to vote the Common Shares owned by it for approval of both of said transactions and the agreements relating thereto at the meeting of the shareholders of Glen Alden. The transaction covered by Proposal No. 1 above is hereinafter sometimes referred to as the "B.V.D. Transaction" and the transaction covered by Proposal No. 2 is hereinafter sometimes referred to as the "Philip Carey Transaction". The two Transactions are not dependent on one another so that if either is approved by the required shareholder vote as described above, it may be consummated even if the other is not approved or is abandoned for any reason. Resolution* Proposed by Shareholders: Messrs. Lewis D. Gilbert and John J. Gilbert of 1165 Park Avenue, New York 28, N. Y., each of whom is the owner of 10 Common Shares of Glen Alden and. represent an additional family interest of 20 Common Shares and are acting as executors under a will for an additional 100 Common Shares have advised Glen Alden that they intend to introduce the following resolutions: 5 Shareholder Proposal I: "Resolved: That the stockholders of Glen Alden Corporation, assembled in annual meeting in person and by proxy, hereby request that any extensions of the Qualified Stock Option Plan, taking the form of an increase in the number of shares subject to option under the plan, or any new stock option plan, be made subject to the following provisions: (a) That the aggregate purchase price of the shares covered by an option may not exceed in the aggregate 150% of an individual's annual cash compensation; (b) That no more than 25% of the shares reserved for option, or subject to any new stock option plan, may be optioned to employees who were employees at the time of the extension of the present plan or of the approval of a new stock option plan; (c) That shares to be optioned will be optioned in yearly instalments as nearly equal as possible and that the right to purchase shares in each instalment will not be cumulative and will expire to the extent not exercised during the applicable instalment period; (d) No options will be granted in any year to executives who are within eighteen months of their automatic retirement date on March 31 of such years; (e) It shall be a negative factor in granting options if an optionee has sold optioned stock to pay off a loan, enabling the optionee to pick up new options." The statement made by the shareholders in support of the proposal is as follows: "Mr. Dudley Swim, Chairman of the Board of National Airlines, in the Monterey California Peninsula Herald of February 26, 1966, warns all stockholders of the need for greater protection in regard to stock options. We believe the provisions we advocate will protect us, as long term stockholders, to a greater extent than is now the case." Hte management of Glen Alden recommends that die shareholders vote "Against" this resolution for the following reasons: The management is not presenting to the shareholders for their approval at this Meeting any resolution either to extend the Qualified Stock Option Plan, which was approved by the shareholders at the 1965 annual meeting, or to adopt a new stock option plan. Before the existing Plan was formulated, a full study was made of the plans adopted by other corporations and it was the belief of the management that this Plan was best adapted to the requirements' of Glen Alden. In' the event the Plan were to be extended or a new plan were to be adopted, a further study would be made. In the opinion of the management it would be inappropriate to impose at this time various restrictions of the nature contained in the shareholders' resolution on future stock option plans, thus potentially limiting and hampering Glen Alden in its recruitment of key personnel. Shareholders* Proposal II: "Resolved: That the stockholders of Glen Alden Corporation, assembled in annual meeting in person and by proxy, hereby request that following the annual meeting the management issue a post meeting report which shall include a brief resume of questions and answers of general interest, a summary of the discussion, identification of participants, and the actual vote for and against all resolutions." The Statement made by the shareholders in support of the proposal is as follows: "Owners who for geographical or business reasons cannot attend the annual meeting are entitled to a complete report of the proceedings so that they may be kept abreast of corporate affairs. "Among companies that send out such a report are: P. Lorillard, Johns Martville, Xerox, Twentieth Century Fox and SuCrest. 6 "If you agree, please mark your proxy FOR this resolution; otherwise, it is automatically cast against it." The management of Glen Alden recommends that the shareholders vote "Against" this resolution for the following reasons: Last year, the management of Glen Alden sent to its shareholders a post-meeting report of what happened at the annual meeting. The Management intends to send to Glen Alden shareholders a similar report of what happens at the Special Meeting to which this Proxy Statement relates. The shareholders' proposal, which would require in addition that the participants in the discussions at annual meetings be identified, would serve only to publicize the individuals involved and would serve no useful corporate purposes. Revocability of Proxiet: Proxies received by Glen Alden may be revoked by the persons executing the same by the execution and delivery of another proxy or by giving notice (which may be oral) to the Secretary of Glen Alden prior to the exercise of such proxy. In the event of the death or incapacity of the shareholder, written notice thereof must be given to the Secretary of Glen Alden to revoke a proxy. B.V.D. Meeting Purposes of Meeting: The principal purposes of the meeting of the stockholders of B.V.D. are to consider and act upon (a) the B.V.D. Acquisition Agreement which, as noted in Proposal No. t above under "Glen Alden Meeting", contemplates the transfer of substantially all of B.V.D.'s assets, subject to substantially all of its liabilities, to a wholly owned subsidiary of the Surviving Corporation in exchange for shares of Preferred Stock and Class C Stock of the Surviving Corporation on the basis outlined above under "Preliminary Statement", (b) the change of B.V.D.'s name to Bivid Liquidating Corp. and (c) B.V.D.'s liquidation. Required Vote: The only outstanding voting securities of B.V.D. are its shares of Common Stock, each share of which entitles the holder thereof to one vote. Only B.V.D. stockholders of record at the close of business on March 20, 1967 are entitled to vote at the B.V.D. meeting or any adjourn ments thereof. As of March 6, 1967 there were outstanding 3,717,341 shares of B.V.D. Common Stock, of which, as noted above, 1,000,002 shares (approximately 26.9%) were owned by Glen AldenDelaware and 231,766 shares (approximately 6.2%) were owned by Mr. Sol Kittay. The approval of the B.V.D. Acquisition Agreement, including the approval of the change of name and liquidation of B.V.D., will require the affirmative vote of the holders of a majority of the outstanding shares of Common Stock of B.V.D. McCrory proposes to cause Glen Alden-Delaware to vote all of its shares in favor of the B.V.D. Acquisition Agreement (and the other matters above mentioned) at the meeting of the B.V.D. stockholders and Mr. Kittay proposes to take similar action. Comparison of Certain Provisions of Preferred Stock and Class C Stock: Each B.V.D. Common Stockholder will be entitled to elect to receive, in exchange for B.V.D. Common Stock presently held, either shares of Preferred Stock or Class C Stock, but not partly one and partly the other. For further details with respect to this election see below under "Details of the Proposed Transactions--Election to Receive Preferred Stock or Class C Stock". The following is a description of certain of the features of the Preferred Stock and Class C Stock respectively. This description and comparison does not purport to be complete, and reference is hereby made to the detailed state ments with regard to both classes of stock included below under "Description of Capitalization." (i) Redemption and Liquidation. The Preferred Stock is redeemable on and after June 30, 1973 at an initial redemption price of $110 per share (reduced by $1 in each of the next 5 years), and from July 1, 1978 at $105 per share (plus, in each case, all accrued dividends to the redemption date). On liquidation, the Preferred Stockholders will be entitled to receive (x) $110 per share 7 until June 30, 1973 and thereafter an amount equal to the then current redemption price, if such liquidation be voluntary, or (y) $105 per share, if such liquidation be involuntary, (plus in either case an amount equal to all accrued dividends) before any payment can be made to the holders of the Common Stock. The Gass C Stock will be issued in seven series with "Serial Redemption Dates" on the last day of February in each of the years 1968 through 1974. Each B.V.D. stockholder electing to receive shares of Gass C Stock will receive 20% of the total number of such shares to which he is entitled in each of the series having Serial Redemption Dates in February 1968, 1970 and 1972, respectively, and 10% of such total number in each of the remaining four series; all fractional shares otherwise issuable will be combined into whole shares of the seventh series with a Serial Redemption Date in February 1974. The shares of each such series are redeemable on or after the 30th day prior to the Serial Redemption Date for that series, and after June 30, 1973 all such shares are redeemable without regard to series, at a redemption price, in all cases, of $90 per share (plus any accrued dividends). (See below page 24 for limitations on redemption of less than all shares of certain series.) On liquidation, the Gass C Stockholders are entitled to receive $90 per share (plus any accrued cumulative dividends) on a parity with the holders of shares of Preferred Stock before any payment can be made on the Common Stock. Because of the many factors that must be taken into consideration, including the future earnings and financial condition of the Surviving Corporation and other related matters, the Board of Directors of Glen Alden has no view at present regarding the redemption of any or all of the Series comprising the Class C Stock. (ii) Dividends. The Preferred Stock will be entitled to cumulative dividends at the annual rate of $3.15 per share (before non-cumulative dividends may be paid on the Gass C Stock or any dividends-may be paid on the Common Stock). Dividends with respect to the Gass C Stock are initially non-cumulative. Glen Alden Corporation may, and expects to, pay dividends on the Common Stock without paying dividends on the Class C Stock unless and until dividends on such Gass C Stock have become cumulative. Cumulative dividends on the Gass C Stock, if any, will rank on a parity with the Preferred Stock dividends. See pages 23-25 for a detailed description of the initial and contingent dividend rights of the Gass C Stock. . (ill) Conversion. The Preferred Stock is convertible into Common Stock after February 1, 1968 at a con version rate of 7.65 shares of Common Stock for each share of Preferred Stock so converted. Unless Glen Alden Corporation fails to redeem shares of Gass C Stock of each series as the respective Serial Redemption Date for such series is reached, the Gass C Stock is not con vertible (see below on pages 25 and 26 for a statement as to the circumstances under which shares of Gass C Stock may become convertible and the applicable rates of such conversion). . (iv) Listing. It is intended to list the Preferred Stock on the New York Stock Exchange. The Gass C Stock will not be listed on any national securities exchange. As noted above, the Gass C Stock of each series is redeemable on the Serial Redemption Date appli cable to such series. Glen Alden Corporation will not be obligated to redeem shares of any one or more series on their Serial Redemption Dates. However if it fails to redeem shares of any series by its respec tive Serial Redemption Date, the holders of such shares become entitled to certain additional rights; and if Glen Alden subsequently fails to redeem shares of one or more later series the holders of Gass C Stock of such later series and of all subsequent series may become entitled to certain further additional 8 rights. Reference is hereby made to "Failure to Make Serial Redemptions", on page 25 below, for a detailed statement of these additional rights, the circumstances under which they may arise and the obligations imposed thereby upon Glen Alden Corporation. Revocability of Proxies: No special procedure is required to revoke a Proxy. Attendance at the meeting and voting in person will constitute revocation of a Proxy. Philip Carey Meeting Purposes of Meeting: The principal purpose of the meeting of the shareholders of Philip Carey is to consider and act upon the Carey Merger Agreement which, as noted in Proposal Number 2 above under "Glen Alden Meeting," contemplates the merger of Philip Carey into Glen Alden Corporation (the Surviving Corporation), the Philip Carey common shareholders to receive shares of $2.25 Senior Cumulative Convertible Preferred Stock ("Senior Stock") of Glen Alden Corporation (the surviving Corporation) on the basis outlined above under "Preliminary Statement." Required Vote: The only outstanding voting securities of Philip Carey are its common shares, each share of which entitles the holder thereof to one vote. Only Philip Carey shareholders of record at the close of business on March 20, 1967 are entitled to vote at the Philip Carey meeting or any adjourn ments thereof. As of March 7, 1967 there were outstanding 1,006,926 common shares of Philip Carey, of which 282,521 shares (approximately 28%) were owned by Glen Alden and one of its subsidiaries. The approval of the Carey Merger Agreement will require the affirmative vote of the holders of at least two-thirds of the outstanding common shares of Philip Carey. Glen Alden proposes to vote, and to cause its subsidiary to vote, all Philip Carey common shares owned by them in favor of the Carey Merger Agreement at the meeting of the Philip Carey shareholders. Revocability of Proxies: A Philip Carey shareholder, without affecting any vote previously taken, may revoke his Proxy by giving notice to Philip Carey in writing or in open meeting. Other Matters . None of the managements knows of any matter other than those listed in the respective Notice of Special Meeting of the three companies which are likely to be brought before any such meetings. However, if any other matter, not now known, properly comes before any of the meetings, the persons named in the enclosed form of Proxy will vote said Proxy in accordance with their best judgment ' Copies of the Glen Alden Merger Agreement, the B.V.D. Acquisition Agreement, the Carey Merger Agreement and the Supplemental Merger Agreement are attached hereto as Appendices "I", "H", "III", and "IV" respectively. The statements made herein are qualified by the more complete provisions in said agreements, to which reference is hereby made for a complete statement of the terms and conditions of the proposed merger and acquisition. FUTURE DIVIDEND POLICY It is the present view of the management of Glen Alden that the changes in capitalization and business resulting from the B.V.D. Transaction and the Philip Carey Transaction will not require any change in present policies with respect to dividends on Common Stock, subject to the future earnings and financial condition of Glen Alden Corporation and other related factors. It is presently intended that cumulative dividends will be paid at the annual rate of $2.25 per share on the Senior Stock and at the annual rate of $3.15 per share on the Preferred Stock. The Board of Directors has no present intention of declaring dividends on the Gass C Stock unless and until such dividends become cumulative (see "Description of Capitalization"). However, certain other factors may become significant and affect the future dividend policy. Under certain loan agreements of B.V.D. and Philip Carey, which will be binding upon the subsidiaries of Glen Alden Corporation which will operate the businesses heretofore conducted by B.V.D. and Philip Carey, respectively, there will be certain restrictions upon the payment of dividends by such subsidiaries to Glen 9 Alden Corporation. In addition, the terms of Glen Alden Corporation's Certificate of Incorporation relating to the Senior, Preferred and Class C Stock contain certain restrictions upon the payment of dividends on, or redemption or other acquisition of classes of, junior stock (see below under "Description of Capitalization"). Moreover, the Senior Stock is entitled to the benefits of a sinking fund, whereas, in the case of the Class C Stock, if the shares are not redeemed on their respective Serial Redemption Dates, certain additional rights (including cumulative dividends, conversion rights and the benefits of a sinking fund) become vested in the boiders of Gass C Stock (see below at pages 25 and 26 for the circumstances under which such additional rights arise and a full description thereof), There can be no assurance that the cash available to Glen Alden Corporation will be sufficient to comply with each of the foregoing provisions or to avoid a change in dividend policy as a result of the operation of one or more of the provisions or restrictions mentioned above. DETAILS OF THE PROPOSED TRANSACTIONS Consummation of B.V.D. Transaction The shareholders of Glen Alden and B.V.D. will be promptly notified of the effective date of consummation of the proposed transactions. All such shareholders (other than those B.V.D. stock holders who have theretofore elected to receive Gass C Stock, as described below) will also be advised as to the procedures for surrender of their certificates in exchange for certificates representing shares of stock of Glen Alden Corporation. Such exchange will be necessary in order to enable those B.V.D. stockholders who elect to receive Preferred Stock to receive dividends on their stock (at the time of any such exchange, or shortly thereafter, such Preferred Stockholders will receive, without interest, all dividends theretofore payable on their shares of Preferred Stock). Election to Receive Preferred Stock or Class C Stock If the B.V.D. Acquisition Agreement is approved by the required vote of the B.V.D. stockholders at the special meeting thereof to which this Proxy Statement relates, B.VJ). will immediately mail to each of its common stockholders at their respective addresses as the same appear on the transfer records of B.VJ)., a statement to the effect that if the B.VJ). Acquisition Agreement and the Glen Alden Merger Agreement become effective in accordance with their terms, each beneficial owner of B.V.D. Common Stock will be entitled, at his option, to receive only shares of either Preferred Stock or Gass C Stock of Glen Alden Corporation (but not both classes) in respect of all of the B.V.D. Common Stock beneficially owned by such stockholder. Such election will be required to be made in the manner set forth in said statement within 15 days from the date thereof. Said statement will be accompanied by a Letter of Election and Transmittal (the form of which is annexed as Exhibit B to the B.V.D. Acquisition Agreement, Appendix II hereof) and will require that any B.V.D. stockholder desiring to elect to receive shares of Gass C Stock of Glen Alden Corporation must appropriately complete such form and mail the same with his B.VJ). Common Stock certificates (or have a suitable bank or broker guar antee delivery of such certificates) to B.V.D.'s transfer agent within said 15 day period. Any B.V.D. stockholder failing to elect to receive shares of Gass C Stock by completing and mailing said Letter of Election and Transmittal as aforesaid will be conclusively deemed to have elected to receive shares of Preferred Stock. Mr. Sol Kittay, who together with his wife will receive 333,334 shares of Gass C Stock upon the merger of Glen Alden-Delaware into Glen Alden Corporation, will be entitled to receive only Gass C Stock in respect of any shares of B.V.D. Common Stock continued to be owned by him. Only shares of Preferred Stock will be issuable in exchange for the 1,000,002 shares of B.V.D. Common Stock now held by Glen Alden-Delaware, and said shares of Preferred Stock will, promptly after receipt thereof by Glen Alden Corporation as a result of the merger of Glen Alden-Delaware into Glen Alden Corporation, be cancelled and be restored to the status of authorized but unissued shares. 10 Fractional Shares No fractional shares of Preferred Stock or Class C Stock will be issued, and, in lieu thereof (except as specifically otherwise provided; see above page 7 "Comparison of Certain Provisions of Preferred Stock and Class C Stock"), each stockholder of B.V.D. to whom fractional shares would otherwise be deliverable will be entitled, at his option, either to sell his fractional interest or buy a sufficient fractional interest to make up a whole share, provided, however, that if more "buy orders" are received by B.V.D. than there are shares available, the excess, in the inverse order of receipt, will be treated as "sell orders". Stock Options and Commitments to Issue Stock Upon the merger of Glen Alden into Glen Alden Corporation, the "1965 Qualified Stock Option Plan of Glen Alden" will continue in effect as the Stock Option Plan of Glen Alden Corporation, and options granted prior to the merger under said Plan and under the "Glen Alden Corporation Stock Option Plan" and the "Employees Stock, Option Plan of Glen Alden" will continue as valid stock options of Glen Alden Corporation, in each case entitling the holders thereof to the same rights as if no merger had taken place. At the closing under the B.V.D. Acquisition Agreement, the acquiring corporation will issue to all of the holders of B.V.D.'s outstanding Sales Agent Incentive, Restricted and Qualified Stock Options, substitute options upon identical terms to purchase one share of Glen Alden Corporation Preferred Stock for each three shares of B.V.D.' Common Stock purchasable under said options, at purchase prices per share of Glen Alden Corporation Preferred Stock equal to three times the respective purchase prices per share of B.VX>. Common Stock payable under said options. B.V.D. has outstanding a number of contractual commitments to issue shares of its Common Stock in the future. (See Exhibit C to the B.V.D. Acquisition Agreement). Subject to the closing under the B.V.D. Acquisition Agreement, the acquiring corporation will be obligated to issue to such persons one share of Glen Alden Corporation Preferred Stock for each three shares of B.V.D. Common Stock to which such persons may be or become entitled under said contractual commitments. Rights of Abandonment The B.V.D. Transaction may be abandoned prior to its consummation upon a number of grounds of which the more significant are as follows (for a more detailed and complete statement of all such grounds, reference is hereby made to the Glen Alden Merger Agreement and the B.V.D. Acquisition Agreement, Appendices I and II hereto): (a) by mutual agreement of the Boards of Directors of Glen Alden, Glen Alden-Delaware and B.V.D.; (b) by Glen Alden and by Glen Alden-Delaware (i) if in the opinion of their Boards of Directors, the potential liability which might result from demands from the holders of Common Shares of Glen Alden who have taken, all then necessary steps to perfect their appraisal rights would render the transaction inadvisable and not in the best interest of Glen Alden and Glen Alden-Delaware or the stockholders of either corporation; (ii) if there shall be any breach of any of the covenants, warranties or representations on the part of B.V.D. under the B.V.D. Acquisition Agreement; (iii) unless all persons who are, or may upon exercise of options or upon the occurrence of certain events become, entitled to receive shares of B.V.D. Common Stock under certain contractual commitments of B.V.D. (excluding holders of B.VJ). Sales Agent Incentive, Qualified or Restricted Stock Options) agree in writing to accept one share of Preferred Stock of Glen Alden Corporation for each three shares of B.V.D. Common Stock to which they may be or become entitled under said commitments; 11 \ (c) by Glen Alden if tbere shall be any breach of the covenants, warranties or representations on the part of Glen Alden-Delaware under the Glen Alden Merger Agreement; (d) by Glen Alden-Delaware (i) if there shall be any breach of the covenants, representations or warranties of Glen Alden under the Glen Alden Merger Agreement; (ii) if by the Filing Date (as defined in the Glen Alden Merger Agreement), it shall not have received an order from the Securities and Exchange Commission either that it is not an investment company or that it is exempt from the provisions of Section 17 of the Investment Company Act of 1940; (e) by B.V.D. (i) if there shall be any breach of the covenants, representations or warranties of Glen Alden, Glen Alden-Delaware or Glen Alden Corporation under the B.V.D. Acquisition Agreement; . (ii) if for any reason the Glen Alden Merger Agreement shall not become effective. Consummation of Philip Carey Transaction If the Carey Merger Agreement is adopted and if the Merger is not thereafter abandoned pursuant to authorization contained in such agreement, the merger will become effective upon appropriate filing in the States of Ohio and Delaware. Upon the consummation of the Carey Merger Agreement, the common shares of Philip Carey owned by Glen Alden and one of its subsidiaries (aggregating 282,521 common shares) will be cancelled. The shareholders of Philip Carey will be promptly notified of the effective date of consummation of the proposed transaction. All such shareholders will be advised as to die procedures for surrender of their certificates in exchange for certificates representing shares of Senior Stock of,Glen Alden Corpora tion. Such exchange will be necessary in order to enable the former common shareholders of Philip Carey to receive dividends on their shares of Senior Stock (at which time such shareholders will receive, without interest, all dividends theretofore payable on their shares of Senior Stock). Rights of Abandonment . '. The Carey Merger Agreement provides that the merger may be abandoned prior to its becoming effective upon a number of grounds of which die more tgnifipanf are as follows (for a more detailed and complete statement of all such grounds, reference is hereby made to the Carey Merger Agreement, inAppendix hereof): > (a) by mutual agreement of the Boards of Directors of Glen Alden and Philip Carey; (b) by Glen Alden, if certain consents with respect to outstanding loan agreements of Philip Carey have not been obtained from The Equitable Life Assurance Society of the United States, Metropolitan Life Insurance Company and First National Bank of Middletown (of Middletown, Ohio); (c) by Glen Alden, if the shareholders of Glen Alden and Philip Carey who have taken all then necessary steps to perfect their appraisal rights with respect to die B.V.D. and die Philip Carey Transactions would hold, but for the exercise of such rights of appraisal and payment, an aggre gate of at least 350,000 shares of Common Stock of Glen Alden Corporation, toe surviving cor poration. For this purpose, each share of Senior Stock is deemed to represent the number of shares of Glen Alden Corporation Common Stock into which it is initially convertible; (d) by the Board of Directors of Philip Carey, if the potential liability of Glen Alden Cor poration which might result from demands from the holders of capital stock of any of the constituent 12 corporations who have taken all then necessary steps to perfect their appraisal rights with respect to the B.V.D. and the Philip Carey Transactions would reduce the Consolidated Net Tangible Assets of Glen Alden Corporation (as defined in the Carey Merger Agreement) to less than $72,440,500; (e) by either Glen Alden or Philip Carey, if on or before May 27, 1967, the ruling referred to below under "Federal Income Tax Consequences" has not been received; (f) by Philip Carey, if, except as contemplated by the Carey Merger Agreement: (i) any change has been made in the Articles or Certificate of Incorporation, by-laws or (with certain exceptions) the number of outstanding shares of capital stock, of Glen Alden or any of its subsidiaries except with the approval of Philip Carey which approval will not be unreasonably withheld; (ii) Glen Alden or any of its subsidiaries has encumbered or mortgaged any of its property or assets or entered into any transaction which by reason of its size or otherwise was not in the ordinary course of business, or if either Glen Alden or any of its subsidiaries, other than in the ordinary course of business, has incurred any obligation (contingent or otherwise) or has transferred or conveyed or has acquired any material assets or property; . (ill) Glen Alden has merged with or into, or has consolidated with, or has acquired all or substantially all of the assets of any other corporation, association, partnership or other business entity or has sold, leased or otherwise conveyed all or substantially all of its assets as an entirety; (g) by either Glen Alden or Philip Carey if the initial conversion rate of the Senior Stock . is greater than four shares of Common Stock for each share of Senior Stock and the parries ^ -e fail to agree upon the rate as described below under "Description of Capitalization-Senior Stock8. . Conversion"; (h) by either Glen Alden or Philip Carey, if there shall be any breach by the other (unless cured) of any of the representations or warranties set forth in the Carey Merger Agreement listing on New York Stock Exchange It is intended that the shares of Common Stock, Senior Stock and Preferred Stock of Glen Alden Corporation to be issued as herein described and the shares of Common Stock into which the Senior, Preferred and Class C Stock will be convertible will be listed on the New York Stock Exchange. There is no intention to apply for listing the Class C Stock of Glen Alden Corporation. . The B.V.D. Transaction may be abandoned by Glen Alden and by Glen Alden-Delaware unless the Common Stock to be issued to McCrory and to the holders of Common Shares of Glen Alden is listed or approved for listing on the New York Stock Exchange on or prior to the consummation of said transaction. Similarly, the B.V.D. Transaction may be abandoned by B.V.D. unless the shares of Preferred Stock to be received by the stockholders of B.V.D., and the shares of Common Stock reserved for issuance upon conversion of the Preferred Stock and Class C Stock are listed or approved for listing on the New York Stock Exchange on or prior to the consummation of said transaction. The Philip Carey Transaction may be abandoned by Philip Carey unless the Senior Stock to be issued to the holders of common shares of Philip Carey and the shares of Common Stock reserved for issuance upon conversion of said Senior Stock are listed or approved for listing on the New York Stock Exchange on or prior to the consummation of said transaction. Registration under the Securities Act of 1933 A Registration Statement will be filed with the Securities and Exchange Commission on an appropriate form so as to register under the Securities Act of 1933, as amended, all of the shares of the capital stock of Glen Alden Corporation to be issued in the proposed transactions (or issuable upon conversion thereof) to persons who are or may be affiliates (as said term is defined in the Rules of the 13 Securities and Exchange Commission) of Glen Alden, Philip Carey and B.VD. B.VJD. may abandon the B.V.D. Transaction unless on or prior to the consummation thereof said Registration Statement has become effective with respect to the Preferred Stock and Class C Stock (and the Common Stock issuable upon conversion thereof) of Glen Alden Corporation. Philip Carey may abandon the Philip Carey Transaction unless on or prior to the consummation thereof said Registration Statement has become effective with respect to the Senior Stock (and the Common Stock issuable upon conversion thereof) of Glen Alden Corporation. Certificate of Incorporation and By-Laws The Certificate of Incorporation and By-Law set forth in Exhibits A and B, respectively, to Appen dix I will be the Certificate of Incorporation and By-Laws, respectively, of Glen Alden Corporation. The Certificate of Incorporation provides for indemnification of directors and officers except in relation to certain matters as to which the officer or director has been adjudged liable for negligence or misconduct in the performance of his duties. The By-Laws of Glen Alden and B.V.D. and the Code of Regulations of Philip Carey contain generally similar provisions. Expenses of Merger and Acquisition B.V.D. will pay the fees and expenses of its counsel and accountants and one-third of the total printing expenses. If the B.V.D. Transaction is consummated, B.V.D. will pay the aforesaid expenses out of amounts retained for the purpose, with any unused balance to be remitted to Glen Alden Corporation. Glen Alden Corporation (the Surviving Corporation) will bear all other expenses of the two transactions, including the amounts, if any, to winch dissenting shareholders of Glen Alden and Philip Carey may be entitled by virtue of appraisal rights pursuant to the Pennsylvania Business Corporation Law and die General Corporation Law of Ohio, except that if the Philip Carey Transaction is not consummated, Philip Carey will pay the fees and expenses of its counsel, accountants and investment advisors and one-third of the total printing expenses, and if neither transaction is con summated, Glen Alden will pay the fees and expenses of its counsel, accountants and investment advisors and one-third of the total printing expenses. Federal Income Tax Consequences B.V.D. Transaction Counsel for Glen Alden, Messrs. Strasser, Spiegelberg, Fried & .Frank, Glen Alden's special tax advisers, Messrs. Hanigsberg, Delson & Brpser, counsel for B,V.D., Messrs. Riesner, Jawitz & Holland, and special tax counsel for B.V.D., Messrs. Sullivan & Cromwell, have advised that, in their opinion, the merger of Glen Alden and Glen Alden-Delaware with and into Glen Alden Corporation, and the acquisi tion of substantially all the assets of B.V.D. by a wholly-owned subsidiary of Glen Alden Corporation, will constitute reorganizations within the meaning of the current provisions of the Internal Revenue Code, and, accordingly, under such provisions no gain or loss will be recognized to Glen Alden, Glen Alden-Delaware or B.V.D. as a result of such merger and such acquisition, no gain or loss will be recognized to the stockholders of Glen Alden and Glen Alden-Delaware as a result of the exchange of Glea Alden Common Shares and Glen Alden-Delaware Common Stock for Glen Alden Corporation Common Stock and the exchange of Glen Alden-Delaware Preference Stock for Class C Stock of Glen Alden Corporation, and no gain or loss will be recognized to the B.V.D. stock holders as a result of the exchange of B.V.D. Common Stock for Preferred Stock or Class C Stock of Glen Alden Corporation upon the liquidation of B.V.D., except to the extent that frac tional shares to which such stockholders would otherwise be entitled are sold. Said counsel and advisers have further advised that, in their opinion, the basis to the stockholders of Glen Alden, Glen Alden-Dela ware and B.V.D. for the shares of Glen Alden Corporation stock received by them in the exchanges will be the same as the basis for their shares of Glen Alden, Glen Alden-Delaware or B.V.D. stock, as the case may be, surrendered in the exchanges, and their holding period for the Glen Alden Corporation stock will include their holding period for the stock of Glen Alden, Glen Alden-Delaware or B.V.D. so surrendered, 14 ^timing with respect to the latter that the surrendered shares constitute capital assets in the hands of such Glen Alden, Glen Alden-Delaware or B.V.D. stockholders, as the case may be. Said counsel and advisers have further advised that, in respect of the status as "Section 306 stock" of the shares of Preferred Stock and Class C Stock of Glen Alden Corporation exchanged for B.V.D. Common Stock and Glen Alden-Delaware Preference Stock, in their opinion such shares will not constitute "Section 306 stock" (and therefore subsequent disposition or redemption of such stock will not be subject to special rules taxing the proceeds therefrom as ordinary income) to any stockholder of B.V.D. or Glen AldenDelaware, assuming, as is required by the reorganization plan, that such stockholder receives only Preferred Stock or only Class C Stock in the exchange. The Philip Carey Transaction The Carey Merger Agreement provides that either Glen Alden or Philip Carey may abandon the Philip Carey Transaction- unless at or before May 27, 1967, Glen Alden on the one hand and Philip Carey on the other shall have received a ruling from the Commissioner of Internal Revenue in form and substance satisfactory to Messrs. Strasser, Spiegelberg, Fried & Frank, counsel to Glen Alden, and Messrs. Taft, Stettinius & Hollister, counsel to Philip Carey, to the effect that (a) No gain or loss will be recognized to Glen Alden Corporation, Philip Carey, or the share holders of Philip Carey as a result of the merger of Philip Carey into Glen Alden Corporation, and said merger will have no tax consequences to the stockholders of Glen Alden Corporation; (b) The basis of the Senior Stock in the bands of the Philip Carey shareholders received : in the aforesaid merger will be the same as die basis to each such Philip Carey shareholder of the common shares of Philip Carey from which such Senior Stock has been converted in connection - with such merger, and the holding period for such shares of Senior Stock will include the holding ' period for the common shares of Philip Carey so converted; (c) The conversion of any of the shares of Senior Stock into Common Stock will not result ...in recognition of gain or loss; and ' (d) The shares of Senior Stock so received in the aforesaid merger will not constitute "Section 306 Stock** (and therefore thatsubsequent disposition or redemption of such stock will not be subject to special rules taxing the proceeds therefrom as ordinary income). It is the opinion of counsel for Glen Alden, Messrs. Strasser, Spiegelberg, Fried & Frank and Glen Alden's special tax advisers, Messrs. Hanigsburg, Delson & Boager, that if Glen Alden (the present Pennsylvania corporation) is reincorporated in Delaware by merger into Glen Alden Corporation as part of the Philip Carey Transaction, such merger will constitute a reorganization within the meaning of the current provisions of the Internal Revenue Code, and, accordingly, that under such provisions no gain or loss will be recognized to Glen Alden or Glen Alden Corporation (the Surviving Corporation) as a result of such merger, and that no gain or loss will be recognized to the shareholders of Glen Alden as a result of the conversion of Glen Alden Common Shares into shares of the Common Stock of Glen AldenCorporation (the Surviving Corporation). Said counsel and advisers have further advised that the basis to the shareholders of Glen Alden for the shares of Glen Alden Corporation stock received by them as a result of such conversion will be the same as the basis for their shares of Glen Alden and that their holding period for the Glen Alden Corporation stock will include their holding period for the stock of Glen Alden converted, if the converted shares constituted capital assets in the bands of such Glen Alden shareholders. Accounting Treatment The acquisition of B.V.D.'s assets (subject to liabilities) pursuant to the B.V.D. Transaction and the acquisition of the Philip Carey assets pursuant to the Philip Carey Transaction, are considered for accounting purposes to be poolings of interests except to the extent of 282,521 common shares of Philip Carey previously acquired by Glen Alden and its subsidiary. 15 \ Haskins A Sella, independent certified public accountants, have reviewed and approved this treat ment as being in accordance with generally accepted accounting principles. Rights of Dissenting Shareholders Shareholders of Glen Alden Glen Alden is a Pennsylvania corporation. The shareholders of Glen Alden may dissent from either the B.V.D. Transaction or the Philip Carey Transaction or both Transactions. The Business Corporation Law of Pennsylvania sets forth the rights and remedies of the shareholders of Glen Alden who may object to and desire to dissent from either or both of the aforesaid Transactions. The B.V.D. Transaction and the Philip Carey Transaction are described above under "Purposes of Meetings". Pursuant to 515 and 908A of the Pennsylvania Business Corporation Law, a shareholder of Glen Alden who wishes to demand payment of the fair value of his shares must file with Glen Alden prior to the commencement of voting by shareholders upon the Transaction in respect of which such a shareholder desires to dissent, an appropriate written objection, and must not vote in favor of the Transaction from which he intends to dissent. Voting against the Transaction from which such share holder intends to dissent, or giving a proxy for such purpose, will not constitute such a written objection. In addition, such shareholder must, within twenty days after the date on which the vote was taken on the Transaction or Transactions in respect of which he intends to dissent, make written demand on Glen Alden, or, if either Transaction has been consummated, on Glen Alden or the Surviving Corporation, for payment of the fair value of his shares, stating the number of shares owned by him with respect to which he dissents. Within 20 days after such demand, such shareholder must submit his certificate or certificates to Glen Alden, or if either Transaction has been consummated, to Glen Alden or to the Surviving Corporation, for notation that such demand has been made. Glen Alden will notify shareholders filing written objection if the voting upon either of the proposed Trans actions is delayed more than three days beyond the scheduled date of the meeting as hereinabove set forth. If either of the proposed Transactions has been consummated, the Surviving Corporation will give written notice thereof within 30 days thereafter to those shareholders who have both dissented to such Transaction and complied with the foregoing requirements, and will make a written offer to each such shareholder to pay a specified price as the fair value for his shares. At any time after 60 days (and within 90 days) after the effectiveness of either Transaction in respect of which the shareholder has dissented, if the fair value has not then been agreed upon between the Surviving Corporation and such dissenting shareholder, the shareholder may demand court proceedings to value his shares. The costs and expenses of any such proceeding will be assessed against the Surviving Corporation but may be fully or partly apportioned against any or all of the dissenting shareholders if the court shall find that the action of such shareholders in failing to accept the Surviving Corporation's offer to pay for the shares was arbitrary, vexatious or not ) in good faith. I The statute provides that unless a shareholder files a written objection and makes the necessary demand within the 20 day period described above, he shall be conclusively presumed to have consented to the proposed transactions (or any thereof as to which no such written objection and demand has been made) and shall be bound by the terms thereof. Shareholders of PhUip Carey ' Philip Carey is an Ohio corporation. The General Corporation Law of Ohio sets forth the rights and remedies of shareholders of Philip Carey who may object to and desire to dissent from the Philip Carey Transaction. Pursuant to 1701.85 of the General Corporation Law of Ohio, any shareholder of Philip Carey whose shares are not voted in favor of the Philip Carey Transaction and who serves on Philip Carey a proper written demand for payment of the fair cash value of the shares held by him of record on the record date for the determination of shareholders entitled to notice of the meeting to which this Proxy Statement relates may obtain payment for his shares. The failure to vote for or a vote against the proposals will not, in itself, constitute compliance with the statutory requirements. The fair cash value, as defined in 1701.85 is the amount which a willing seller, under no compulsion to sell, would be 16 drifting to accept and a willing buyer, under no compulsion to purchase, would be willing to pay. Such ftir cash value is determined as of the day prior to the date on which the vote by shareholders authorizing the Philip Carey Transaction is taken and excludes from such value any appreciation or depreciation resulting from the proposal acted upon at the meeting. The relief provided by 1701.85 of the General Corporation Law of Ohio is the exclusive right of dissenting shareholders. Pursuant to the aforesaid section, a shareholder not voting in favor of the Philip Carey Transaction must file a written demand upon Philip Carey on or before the later of (1) the thirtieth day after the giving of notice of the meeting, or (2) the tenth day after the taking of the vote authorizing the Philip Carey Transaction. Philip Carey does not propose to give further notice of the dates herein referred to. The dissenting shareholder must make certain specifications as provided for in Section 1701.85 of the General Corporation Law of Ohio and must set forth the amount per share claimed by him as constituting the fair value of his shares. If Philip Carey is unwilling to pay the amount so demanded it may, within ten days after the expiration of the period within which such demand may be made, scf notify the shareholder and make a counter offer of a different amount per share. Within 15 days after Philip Carey mails to such shareholder a written request therefor, the shareholder must deliver the certificates representing his shares to Philip Carey to have endorsed thereon a legend to the effect that demand has been made for such payment. Philip Carey will then return the certificates so endorsed to the shareholder. If the shareholder does not comply with the request of Philip Carey to deliver his certificates for such endorsement within said 15-day period, his right to receive the fair cash value of his shares pursuant to 1701.85 will terminate. Section 1701.85 further provides that the fair cash value of the shares involved in the demand by the shareholders will be deemed to be the amount demanded by bim if he has complied with 1701.85, or, if Philip Carey has made a counter offer, then the amount per share specified in such counter offer, unless either (1) Philip Carey and the shareholder, at any one time within three months from the time said vote was taken, agree upon a different amount, or (2) the shareholder or Philip Carey within said three month period files a petition in the Common Pleas Court of Hamilton County to determine the fair cash value per share. If suit is filed, the, Court will determine whether the share holder is entitled to be paid the fair cash value of his shares; and if so, the Court will appoint three appraisers to determine and report such value to the Court for confirmation and approval or for such further proceedings as the Court may direct. The Court is authorized to fix reasonable compensa tion for the appraisers and equitably apportion such compensation and the court costs between Philip Carey and the shareholder. Philip Carey will pay only such portion of the appraisal cost as the Court may require. Stockholders of B.VJ). It is the opinion of Messrs. Riesner, Jawitz & Holland, counsel for B.V.D., that, under Delaware law, dissenting stockholders of B.V.D. will not be entitled to any appraisal rights by reason of the B.VD, Transaction. General The applicable provisions of the Pennsylvania and Ohio statutes are set forth as Appendices V and VI of this Proxy Statement. The foregoing is a summary of said statutory provisions, to which reference is hereby made for a complete statement. In the opinion of counsel for Glen Alden and Philip Carey respectively, the receipt of payment by dissenting shareholders of either -corporation will result in recognizable gain or loss for Federal income tax purposes. Differences in Corporation Law Shareholders of Glen Alden and Philip Carey may be affected by certain differences between the corporation law of Delaware and the corporation laws of Pennsylvania, on the one hand, and Ohio on the other. Neither Delaware law nor Glen Alden Corporation's Certificate of Incorporation requires cumulative voting in the election of directors. The Pennsylvania law requires cumulative voting and the Ohio law requires cumulative voting upon the timely demand of any shareholder. 17 \ t There are other differences among the laws of the three states in regard to shareholders' rights. Among these are variations in voting rights in connection with mergers, consolidations, acquisitions and other reorganizations. Moreover, the rights of dissenting shareholders to have their shares appraised upon the taking of such corporate action differ significantly in Delaware from those arising under the laws of Pennsylvania or Ohio. Solicitation of Proxies Solicitation of proxies wifi be made by mail, telephone and otherwise. Glen Alden, Philip Carey and B.V.D. may each utilize the services of some of their respective officers and regular employees (who will receive no compensation therefor in addition to their regular salaries) to solicit proxies personally. Each company intends to request banks and brokers who bold shares of its stock in their name or in their custody or in the names of others, to forward copies of the proxy material to those persons for whom they hold such shares and to request authorization for the execution of the proxies. Each company will reimburse such banks and brokers for their out-of-pocket expenses incurred in connection therewith. Glen Alden and Philip Carey have retained Georgeson & Co. to aid in the solicitation, at an estimated aggregate cost of $9,000. Transfer Agents, Exchange Agents and Registrars Chemical Bank New York Trust Company, New York, New York, and FideUty-Philadelphia Trust Company, Philadelphia, Pennsylvania, will be the Transfer Agents and The Chase Manhattan Bank, New York, New York and The Philadelphia National Bank, Philadelphia, Pennsylvania, will be the Registrars of the Senior, Preferred and Class C Stock and the Common Stock of Glen Alden Corporation. The Bank of New York and the Girard Trust Bank, Philadelphia, Pennsylvania, will be the Exchange Agents for the Preferred and Gass C Stock of Glen Alden Corporation in connection with the B.V.D. Transaction. The Fifth Third Union Trust Company, Cincinnati, Ohio, will be the Exchange Agent for the Senior Stock of Glen Alden Corporation in connection with the Philip Carey Transaction. DESCRIPTION OF CAPITALIZATION . A brief description of the proposed authorized capitalization of Glen Alden Corporation is set forth below. Reference is made to Article Fourth of the Certificate of Incorporation of Glen Alden Cor poration, attached hereto as Exhibit A to the Glen Alden Merger Agreement, Appendix I hereto, for a complete statement in connection therewith. Authorized Capita} Stock The authorized capital stock of Glen Alden Corporation will be (a) 21,000,000 shares of Common Stock, (b) 724,405 shares of Senior Stock, (c) 1,300,000 shares of Preferred Stock, and (d) 1,200,000 shares of Gass C Stock. The shares of Preferred Stock issued in exchange for shares of the Common Stock of B.V.D. owned by Glen Alden-Delaware will be cancelled and retired by Glen Alden Corpo ration but will remain subject to reissuance. None of the holders of any class of Glen Alden Corporation capital stock will have any preemptive right to subscribe to any shares or other securities issued by Glen Alden Corporation. Of the 21,000,000 shares of Common Stock authorized in the Certificate of Incorporation of Glen Alden Corporation, approximately 4,802,032 shares will be issued in exchange for Common Shares of Glen Alden (and Common Stock of Glen Alden-Delaware if the B.V.D. Transaction is consummated). Of the remaining authorized but unissued shares of Common Stock, Glea Alden Corporation will reserve a sufficient number of shares against conversion of shares of Senior, Preferred and Gass C Stock and for the exercise of options and for other contractual obligations as described under "Details of the Proposed Transactions". The balance of the authorized shares of Common Stock will be available for issuance by the Board of Directors in connection with possible acquisitions and other corporate IS '< oarn0$c$ without the necessity of further stockholder action, except to the extent required by Delaware > Sworby the rules of any national securities exchange upon which such shares may be listed. Except as aforesaid, no specific plans or intentions have been formulated for the issuance of shares of any class. t. , SENIOR STOCK Dividends Holders of shares of Senior Stock will be entitled to receive, when and as declared by the Board of Directors, cumulative cash dividends at the annual rate of $2.25 per share payable quarterly on the 15th day of March, June, September, and December in each year. Dividends will be cumulative from the date of payment of the dividend last paid in respect of its common shares by Philip Carey prior to the consummation of the Philip Carey Transaction. Voting * Holders of shares of Senior Stock will be entitled to one-tenth of a vote per share upon all matters considered at any stockholders meeting, except that, when the Senior Stockholders are entitled, by statute or by any provision of the Certificate of Incorporation, to one vote per share on any matter, such right will be substituted for, and will not be in addition to, the right to one-tenth of a vote per share. Jhe following special voting rights have been provided: (a) if dividends on the outstanding shares of Senior Stock are in arrears in an amount 7 equivalent to two full quarterly dividends, the holders of Senior Stock, voting separately as a ^P,` class, will be entitled to elect one-fourth of the entire Board of Directors (or the next lower whole ^ number, but in any event a minimum of two additional directors); and : as/- flflfib- .o (b) if dividends on the Senior Stock are in arrears in an amount equivalent to six full quarterly \ ^dividends, or if Glen Alden Corporation is in arrears with regard to two sinking fund redemptions 6&r5`(see below "Sinking Fund Redemption"), whether or not consecutive, the holders of Senior V' Sfei?. Stock, voting separately as a class, will be entitled to elect a majority of the Board of Directors. Certificate of Incorporation contains provisions relating to the method of calling stockholders T ' meetings for the purpose of enabling the holders of Senior Stock to elect directors in accordance with the foregoing. Such voting rights will continue until all unpaid dividends on the Senior Stock for past , , dividend periods and the then current dividend period have been declared and paid or declared and set apart for payment and, where appropriate, until all sinking fund redemptions in arrears have been made in full. For the purposes of the above special voting rights, so long as McCrory or Rapid-American Corporation, or their successors, controls, is controlled by, or is under common control with, Glen Alden Corporation, any shares of Senior Stock owned by any such corporation or any of its subsidiaries are deemed not to be outstanding and may not be voted. So long as any shares of Senior Stock are outstanding, Glen Alden Corporation may not (a) authorize any new class or series of stock ranking prior to, or on a parity with, the Senior Stock, as to dividends, rights upon liquidation or redemption (or increase the authorized amount of any such stock); (b) issue any shares of Class C Stock except in connection with the B.V.D. Transaction; or (c) alter the rights of any class of stock as a class if such alteration materially and adversely affects the rights or preferences of the holders of Senior Stock as a class, without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Senior Stock. In addition, so long as McCrory or Rapid-American Corporation, or their successors, controls, is controlled by, or is under common control with, Glen Alden Corporation, the affirmative vote of the holders of at least two-thirds of the outstanding shares of Senior Stock not held by such corporations and their subsidiaries, is also required in order to validate any such corporate action. 19 \ Conversion Bach share of Senior Stock will be convertible, at any time, at the option of the holder, into a number of shares of Common Stock of Glen Alden Corporation to be determined immediately prior to the first to be held of the shareholders' meetings of Glen Alden and Phitip Carey to which this Proxy Statement relates. The exact number of shares of Common Stock into which each share of Senior Stock will be convertible will be determined by dividing into $50 a sum equal to 125% of the average of the closing prices of Glen Alden Common Shares on the New York Stock Exchange for the first ten business days of the 15 business days immediately preceding the appropriate share holders meeting, as aforesaid, provided, however, that (a) each share of Senior Stock will be convertible into a minimum of 3.5 shares of Common Stock; and (b) if the conversion rate, as determined above, is greater than four shares of Common Stock for one share of Senior Stock, either Glen Alden or Philip Carey may abandon the Philip Carey Transaction unless (i) Philip Carey agrees in writing to accept Senior Stock having an initial conversion rate of four for one; or (ii) Glen Alden agrees in writing to issue Senior Stock having an initial conversion rate as determined above; or (iii) Philip Carey and Glen Alden agree in writing upon an initial conversion rate higher than four for one and lower than the rate determined as described above. All accrued and unpaid dividends on shares of Senior Stock up to the dividend payment date immediately preceding the surrender for conversion of any such shares will constitute a debt of Glen Alden Corporation payable without interest to the converting stockholder, and no dividend may be paid or declared in respect of any shares of Preferred Stock or Gass C Stock or Common Stock until such debt shall have been fully paid or provided for. The rate at which shares of Senior Stock are convertible into shares of Common Stock is subject to adjustment pursuant to anti-dilution provisions contained in Article Fourth, Section 1.11 of the Certificate of Incorporation. Voluntary Redemption . The Senior Stock may be redeemed in whole or in part at any time after June 30, 1972 at redemption prices ranging from a maximum of $52.50 per share for the 12-month period from July 1, 1972 to June 30, 1973, to a minimum of $50 per share after June 30, 1977, plus, in all cases, all accrued and unpaid dividends to the date fixed for redemption. If and so long as Glen Alden Corporation is in arrears with respect to any dividend or sinking fund redemption (see below, "Sinking Fund Redemp tion") in respect of the Senior Stock, Glen Alden Corporation may not purchase any shares of such stock except by redemption pursuant to Sections 1.4 and 1.5 of the Certificate of Incorporation. Liquidation In the event of any dissolution, liquidation or winding up of the affairs of Glen Alden Corpora tion, holders of shares of Senior Stock will be entitled to receive $50 per share if such action be involuntary, or $52.50 per share or the then current redemption price, whichever is less, if such action be voluntary, in each case together with any accrued and unpaid dividends, before any payment is made to holders of Preferred Stock or Gass C Stock or Common Stock. Sinking Fond Redemption Glen Alden Corporation is required, in each 12-month period commencing on July 1, 1972 and on each July 1 thereafter, to redeem 2% of the number of shares of Senior Stock outstanding on 20 July 1. 1972, at a price per share of $50 plus accrued and unpaid dividends to the date fixed for itdempti00- Shares of Senior Stock that have been converted into shares of Common Stock, or purchased, redeemed or otherwise acquired by Glen Alden Corporation at any time after July 1, 1972 will be credited against sinking fund redemptions. Certain Restrictions on Corporate Action - Glen Alden Corporation may not merge or consolidate with or into, or sell or lease all or substantially all of its assets as an entirety to, another corporation (except, in each case, a corporation 90%, or more, of the outstanding capital stock of which is owned by Glen Alden Corporation), if the holders of 40% or more of the outstanding shares of Senior Stock vote against such transaction, unless Glen Alden Corporation or its designee makes a written offer to purchase, at a price of $50 per share, plus accrued and unpaid dividends, all shares of Senior Stock duly tendered by each stockholder who has voted against such transaction within a period (which must be at least 15 days) prescribed by Glen Alden Corporation's Board of Directors. If such transaction is not consummated for any reason, neither Glen Alden Corporation nor its designee will be entitled, or required, to purchase any of the Senior Stock so tendered. In lieu of the foregoing tender, any holder of Senior Stock may invoke any statutory right of appraisal available as a result of any of the aforesaid transactions. So long as any Senior Stock is outstanding, Glen Alden Corporation may not merge or consolidate with or into, or acquire all or substantially all of the assets as an entirety of another corporation, association, partnership or other form of business organization, or sell or lease all or substantially all of its assets as an entirety (except, in each case, for a transaction with a corporation 9096, or more, of the outstanding capita! stock of which is owned by Glen Aldea Corporation) or incur or assume or permit any subsidiary to incur or assume any debt which matures more than one year from the date of its creation (except renewals, extensions or refundings) unless immediately after such trans action becomes effective, its consolidated net tangible assets (as defined in Article Fourth of the Certificate of Incorporation) equals at least 200% of the aggregate voluntary liquidation price of the shares of Senior Stock then outstanding. n- Glen Alden Corporation may not reissue any shares of Senior Stock converted into Common Stock, purchased, redeemed, or otherwise acquired by it ' Distributions In Respect of Junior Stock So long as any shares of Senior Stock are outstanding, Glen Alden Corporation may not declare or pay any cash dividend or make any other distribution (other than a dividend payable in Common Stock) in respect of any shares of Preferred Stock or Class C Stock or Common Stock, nor may any such junior stock be purchased, redeemed or otherwise acquired by Glen Alden Corporation, unless all dividends on Senior Stock for all past dividend periods and the then current dividend period have been declared and paid or declared and set apart for payment, and all sinking fund redemptions then due have been made. So long as any shares of Senior Stock are outstanding, the aggregate amount paid by Glen Alden Corporation (i) as dividends (other than dividends payable only in shares of Common Stock) on the Preferred Stock and Class C Stock and the Common Stock, (ii) as distributions in respect of such junior stock and (iii) as payments on account of the redemption, purchase or other acquisition of shares of such junior stock (other than payments on account of the redemption, purchase or other acquisition of shares of Class C Stock on or after a date 30 days prior to the Serial Redemption Date of the series in which the shares so to be redeemed, purchased or otherwise acquired are included and other than payments on account of the redemption, purchase or other acquisition of Sinking Fund Class C Stock) shall not exceed the aggregate amount of consolidated net income, as defined in Article Fourth of the Certificate of Incorporation, of Glen Alden Corporation and its predecessors and their respective subsidiaries earned subsequent to December 31, 1965, undiminished by any dividends paid by such predecessors or any of their subsidiaries subsequent to December 31, 1965 and prior to the date of issuance of the Senior Stock, 21 \ PREFERRED STOCK Dividends Subject to the prior rights of the Senior Stock, holders of shares of Preferred Stock win be entitled to receive, when and as declared by the Board of Directors, cumulative cash dividends at the annual rate of $3.15 per share payable quarterly on the last business days of January, April, July and October in each year. Dividends will be cumulative from the date of payment of the dividend last paid in respect of its Common Stock by B.V.D. prior to the consummation of the B.V.D. Transaction. The Preferred Stock ranks, in respect of dividends, senior to the Common Stock, senior to the Class C Stock in respect of non-cumulative dividends thereon, on a parity with the Class C Stock in respect of all cumulative dividends thereon, and junior to the Senior Stock. Whenever dividends on the Class C Stock are cumulative, dividends may only be declared and paid or declared and set apart for payment on either the Preferred Stock or the Class C Stock If, simultaneously therewith, a proportionate dividend is declared and paid or declared and set apart for payment on the other class. Voting Holders of shares of Preferred Stock will be entitled to one-fifth of a vote per share upon all matters considered at any stockholders meeting, except that when the Preferred Stockholders are entitled, by statute or by any provision of the Certificate of Incorporation, to one vote per share on any matter, such right will be substituted for, and will not be in addition to, the right to one-fifth of a vote per share. If dividends on the outstanding shares of Preferred Stock are in arrears in an amount equivalent to six full quarterly dividends, the Board of Directors will be increased by two and the holders of Preferred Stock, voting separately as a class, will be entitled to elect such additional directors. The Certificate of Incorporation of Glen Alden Corporation contains provisions relating to the method of calling stockholders meetings, whether special or annual, for the purpose of enabling the holders of Preferred Stock to elect directors in accordance with the foregoing. Such voting rights will continue until there shall have been declared and paid or declared and set apart for payment dividends on Preferred Stock for all past dividend periods. So long as any shares of Preferred Stock are outstanding, Glen Alden Corporation may not (a) authorize any new class or series of stock ranking prior to or on a parity with die Preferred Stock as to dividends, rights upon liquidation or redemption (or increase the authorized amount of any such stock); or (b) alter the rights of any class of stock as a class if such alteration materially and adversely affects the rights or preferences of the holders of Preferred Stock as a class, without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Preferred Stock. Conversion Each share of Preferred Stock may be converted into 7.65 shares of the Common Stock of Glen Alden Corporation at any time on and after February 1, 1968. All accrued and unpaid dividends on such shares up to the dividend payment date immediately preceding such surrender for conversion of any such shares will constitute a debt of Glen Alden Corporation payable without interest to the con verting stockholder, and Glen Alden Corporation may not declare or pay any non-cumulative dividend on the Class C Stock or any dividend on the Common Stock, until such debt shall be fully paid or provided for. The rate at which shares of Preferred Stock are convertible into shares of Common Stock is subject to adjustment pursuant to anti-dilution provisions contained in Article Fourth, Section 2.4, of the Certificate of Incorporation. Redemption The Preferred Stock may be redeemed in whole or in part at any time after June 30, 1973 at an initial redemption price of $110 per share for the twelve month period commencing on July 22 1 1973, reduced by $1 in each year thereafter to a minimum of $105 per share for the twelve month ceriod commencing July 1, 1978 and thereafter, plus, in all cases, all accrued and unpaid dividends to the date fixed for redemption. Glen Alden Corporation is not prohibited from purchasing shares of preferred Stock while dividends in respect of such stock are in arrears. All redemptions and purchases of the Preferred Stock are subject to the prior rights of the Senior Stock. liquidation In the event of any dissolution, liquidation or winding up of the affairs of Glen Alden Corporation, holders of shares of Preferred Stock will be entitled after payment or provision for payment is made for all sums receivable by holders of Senior Stock, to receive $105 per share if such actioa be involuntary, or $110 per share or the then current redemption price, whichever is less, if such action be voluntary, together, in each case, with accrued and unpaid dividends, before any payment is made to holders of Common Stock. Preferred Stock and the Class C Stock rank on a parity as to rights upon dissolution, liquidation or winding up of the affairs of the corporation. Distributions in Respect of Junior Stock . So long as any shares of Preferred Stock are outstanding, Glen Alden Corporation may not declare or pay any dividend (other than dividends payable solely in Common Stock) or make any other distribution in respect of any shares of Class C Stock (with the exception of cumulative dividends on Class C Stock) or of Common Stock, nor may any Common Stock be redeemed, purchased or otherwise acquired by Glen Alden Corporation, unless all dividends on Preferred Stock for all past dividend periods and the then current dividend period have been declared and paid or declared and set apart for payment k:i * , Issue in Series class c stock 0700 The Certificate of Incorporation of Glen Alden Corporation authorizes seven series of Class C Stock ranking on a parity with one another except as provided under "Redemption" below. The shares of Class C Stock may be issued in any or all of the seven series as determined by the Board * ofDirectors. The B.V.D. Acquisition Agreement makes provision for the distribution of the respective ft;/ senesto be made to each stockholder of B.V.D. electing to receive Class C Stock (see page 7 above i. J' \ ; *Comparison of Certain Provisions of Preferred Stock and Class C Stock"). ... Dividends i _ _ 'Until the occurrence of any of the events described below under "Failure to Make Serial Redemp tions" the holders of Class C Stock are entitled to dividends only when and if declared by the Board of Directors and then at no greater than $3.15 per share, per annum. Such dividends will be non-cumulative so that dividends on other classes of stock (including the Common Stock) may be paid without payment of any dividends on the Class C Stock, except that dividends on the Class C Stock will be cumulative at the annual rate of $3.15 per share in any fiscal year immediately following a fiscal year in which the consolidated net earnings (as defined in Article Fourth, Section 3.2(b) of the Certificate of Incorporation) of Glen Alden Corporation and its subsidiaries exceeds $25,000,000. Dividends on the Class C Stock are always subject to the prior rights of the Senior Stock and if and to the extent cumulative, rank on a parity with dividends on the Preferred Stock. Whenever dividends on the Class C Stock are cumulative, dividends may only be declared and paid or declared and set apart for payments on either the Preferred Stock or the Class C Stock if, simultaneously therewith, a proportionate dividend is declared and paid or declared and set apart for payment on the other class. (See below under "Failure to Make Serial Redemptions" for statement of circumstances under which such dividend rate increases.) Voting Holders of Shares of Class C Stock will be entitled to one-fifth of a vote per share upon all matters considered at any stockholders meeting, except that when the Gass C stockholders 23 \ are entitled, by statute or by any provision of the Certificate of Incorporation, to one vote per share on any matter, such right will be substituted for, and will not be in addition to, the right to one-fifth of a vote per share. If cumulative dividends on the outstanding shares of any series of Class C Stock are in arrears in an amount equivalent to six full quarterly cumulative dividends, the Board of Directors will be increased by two and the holders of the Class C Stock, voting separately as a class, will be entitled to elect the additional directors. The Certificate of Incorporation of Glen Alden Corporation contains provisions relating to the method of calling stockholders meetings for the purpose of enabling the holders of the Class C Stock to elect directors in accordance with the foregoing. Such voting rights will continue until there shall have been declared and paid or declared and set apart for payment dividends on the Class C Stock for all past cumulative dividend periods. So long as any shares of the Class C Stock are outstanding, Glen Alden Corporation may not (a) authorize any new class or series of stock ranking prior to or on a parity with the Class C Stock as to dividends, rights upon liquidation or redemption (or increase the authorized amount of any of such stock); or (b) alter the rights of any class of stock as a class if such alteration materially and adversely affects the rights or preferences of the holders of Class C Stock as a class, without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Class C Stock. Redemption Except as described below under "Failure to Make Serial Redemptions", if Glen Alden Corporation is not in arrears under any dividend or sinking fund redemption obligation with respect to the outstand ing shares of Senior Stock, the shares of Class C Stock of each series may be redeemed as hereinabove described on page 7 (see "Comparison of Certain Provisions of Preferred Stock and Class C Stock"). Any redemption on or prior to their Serial Redemption Dates of shares included in the series having its Serial Redemption Date in 1968 or 1970 respectively must include all shares of such series; any other redemption of shares of Class C Stock may relate to all or any part of any series. Glen Alden Corpo ration is not prohibited from purchasing shares of Class C Stock while it is in arrears in respect of cumulative dividends or any sinking fund redemption provision relating to such stock. AU redemptions and purchases of Class C Stock are subject to the prior rights of the Senior Stock. Glen Alden Corporation may not reissue any shares of Class C Stock converted into Common Stock or purchased, redeemed or otherwise acquired by it Conversion Except as described below under "Failure to Make Serial Redemptions", the holders of shares of Class C Stock will have no conversion rights. Liquidation In the event of any dissolution, liquidation or winding up of the affairs of Glen Alden Corporation, whether voluntary or involuntary, the holders of shares of Class C Stock will be entitled to receive $90 per share, plus all cumulative dividends, if any, accrued and unpaid thereon, after payment or provision for payment is made for all sums receivable by holders of Senior Stock, but before any payment is made to the holders of Common Stock. The Preferred Stock and the Class C Stock rank on a parity as to rights upon a dissolution, liquidation or winding up of the affairs of Glen Alden Corporation. Distributions in Respect of Junior Stock So long as any shares of Class C Stock are outstanding, Glen Alden Corporation shall not declare or pay any dividend on, or make any other distribution with respect to, its Common Stock (other than 24 mr~ W (gyidends payable solely in Common Stock), or redeem, purchase or otherwise acquire any shares of men ^ Common Stock, unless all cumulative dividends on the Class C Stock, if any, for ail past dividend periods Ja respect of which dividends were cumulative and for the then current dividend period, if cumulative, have been declared and paid or declared and set apart for payment, and unless Glen Alden Corporation have complied with all then applicable sinking fund redemption provisions, all as described below under "Failure to Make Serial Redemptions". failure to Make Serial Redemptions Except for "Sinking Fund Class C Stock" described below, if Glen Alden Corporation faiis to redeem all of the shares of any series of Class C Stock on or before the Serial Redemption Date applicable to such series (as described on pages 7 and 8 above), the holders of the shares of such series not so redeemed will have the right to convert the shares of such series into Common Stock at a conversion rate of nine shares of Common Stock for each share of Class C Stock if such conversion is made on or prior to the April 14th immediately following the applicable Serial Redemption Date and thereafter at a conversion rate of 6.56 shares of Common Stock for each share of Class C Stock. The holders of any shares of said series not so converted will be entitled to receive, when and as declared by the Board of Directors, cumulative cash dividends at the annual rate of $3.15 per share, < payable quarterly on the last business day of January, April, July and October of each year, com- 1 mencing on the last business day in April next succeeding said Serial Redemption Date, and cumulative from the April 14th next succeeding said Serial Redemption Date. ' i'v;, i . ; Any accrued and unpaid cumulative dividends on shares of Class C Stock surrendered for - conversion, up to the dividend payment date immediately preceding such conversion, will constitute a ! debt of Glen Alden Corporation payable without interest to the converting stockholder, and no ! dividend may be paid or declared in respect of any shares of Common Stock until such debt is fully f ; * /J paid or provided for. . g* g. If, on any Serial Redemption Date, Glen Alden has failed to redeem on or prior to their respective i ^ Serial Redemption Dates a number of shares of Gass C Stock (the Serial Redemption Dates of which [ juvebccurred) at least equal to the total number of shares of Gass C Stock issued in Series 1 and 2 in ( 5 %4 connection with the B.V.D. Transaction (i.e., approximately 30% of the total number of Gass C Stock), ! ' ' and (i) if thereafter the Board of Directors fails, on or before the August 31st next succeeding such Serial Redemption Date or on or before any August 31st thereafter, to pass a resolution stating its intention (which shall not be binding) to cause Glen Alden Corporation to redeem all of the shares of the series of Gass C Stock whose Serial Redemption Date next succeeds such August 31st, on or prior to such next Serial Redemption Date, or (ii) if Glen Alden Corporation fails to redeem all of the out standing Gass C Stock of the series mentioned in (i) on or prior to its Serial Redemption Date in accordance with the intention to redeem as aforesaid, then all of the shares of each and every series of Gass C Stock whose Serial Redemption Date occurs after such August 31st (hereinafter called "Sinking Fund Gass C Stock") will be entitled, without regard to series, to the following additional rights: (a) in lieu of the dividends described above, the holders of shares of Sinking Fund Gass C Stock will be entitled to receive, when and as declared by the Board of Directors, cumulative dividends at the annual rate of $6.30 per share, payable quarterly on the last business days of January, April, July and October in each year, commencing on the first such dividend date next succeeding the date on which such shares of Gass C Stock became entitled to the rights of Sinking Fund Gass C Stock (hereinafter called the "Sinking Fund Date"), said dividends to be cumulative from the Sinking Fund Date; (b) the Sinking Fund Gass C Stock may be redeemed in whole or in part, pro rata or by lot, at any time after the Sinking Fund Date at a redemption price per share of $90 plus aQ cumulative dividends accrued and unpaid thereon up to the date fixed for redemption; (c) in lieu of the conversion rights described above, the holders of shares of Sinking Fund Gass C Stock will be entitled, at their option, to convert such shares into shares of Common 25 Stock, from time to time and at any time after the Sinking Fund Date, at the rate of 6.56 shares of Common Stock for each share of Sinking Fund Class C Stock so converted; and (d) Glen Alden Corporation will be required, in each six-month period commencing with the six-month period beginning on the Sinking Fund Date, to redeem 5% of the number of shares of Sinking Fund Class C Stock outstanding on the Sinking Fund Date, at a price per share of $90 plus accrued and unpaid cumulative dividends to the date fixed for redemption. Shares of Sinking Fund Class C Stock which have been converted into shares of Common Stock, or redeemed, purchased or otherwise acquired by Glen Alden Corporation at any time after the Sinking Fund Date, may be credited against such redemption obligation. If on the Sinking Fund Date, the number of shares of Class C Stock which Glen Alden Corpo ration has theretofore failed to redeem on or prior to their respective Serial Redemption Dates exceeds the total number of shares originally issued in Series 1 and 2 as aforesaid, the Sinking Fund Class C Stock will also include a number of shares equal to such excess selected (pro rata or by lot) solely from the then remaining outstanding shares, if any, of the last series of Gass C Stock with a Serial Redemption Date preceding the Sinking Fund Date which was not totally redeemed on or prior to its Serial Redemption Date. The Certificate of Incorporation provides that the holders of the shares so selected will lose their right to have such shares included in Sinking Fund Gass C Stock unless the certificates evidencing the same are surrendered for reissuance within 30 days after the mailing to them of a "Notice of Selection". If on February 28, 1974, the Sinking Fund Date has not occurred for any reason but the total number of shares of Gass C Stock which Glen Alden Corporation has failed to redeem on or prior to their respective Serial Redemption Dates exceeds the total number of* shares originally issued as aforesaid in Series 1 and 2, Sinking Fund Gass C Stock shall then include a number of shares equal to such excess, such shares to be selected solely from the then remaining outstanding shares, if any, of the latest series which Glen Alden Corporation failed to redeem, in whole or in part, on or prior to its Serial Redemption Date. : As has been previously noted on page 24 hereof under "Redemption", Glen Alden Corporation is entitled to redeem any series of Gass C Stock, other than Series 1 and 3, in whole or in pari. Thus, in the event of redemption of only a small part of a series, up to approximately 49% of the originally issued shares of Gass C Stock might be unredeemed as of their respective Serial Redemption Dates without any Class C Stock immediately becoming Sinking Fund Gass C Stock. On the other hand, apart from con version into Common Stock, to the extent of any excess of unredeemed shares over the number of shares originally issued in Series 1 and 2 as aforesaid, all shares of Gass C Stock not redeemed on or prior to their Serial Redemption Dates will ultimately become Sinking Fund Gass C Stock unless otherwise redeemed. The rates at which shares of Gass C Stock (including Sinking Fund Gass C Stock) are con vertible into shares of Common Stock are subject to adjustment pursuant to anti-dilution provisions contained in Article Fourth, Section 3.5 of the Certificate of Incorporation. COMMON STOCK Holders of Common Stock will be entitled to one vote for each share held on any matter submitted to a vote at any meeting of stockholders, including toe election of directors, except for those matters summarized above, as to which the holders of the Senior Stock, Preferred Stock or Gass C Stock will be entitled to a separate class vote. Dividends may be paid upon the Common Stock when and as declared by toe Board of Directors subject to the rights and preferences of the Senior, Preferred and Gass C Stock summarized above. Upon any voluntary or involuntary liquidation, dissolution or winding up of Glen Alden Corporation, after the holders of the Senior, Preferred and Gass C Stock have been paid in full the amounts to which they are entitled, toe remaining net assets of Glen Alden Corporation, or toe proceeds thereof, are distributable to the holders of Common Stock. Holders of Common Stock have no pre-emptive right and have no conversion rights. 26 '"C1 s 1II g o s I II o u O o. < s 27 Shareholders' Equity: 28 s |g 2 IN r Os <s >0 s vT 00 in in r s. s. <0 IN _ 0" kT 00* r- fn V IN IPS Os 1 N t 3 IN P.5. 1*1 OS m r 0 IN 0 Os r-. p-i in f*S IN IN ^ P| -- -- 0 00 00 I*... ow p *0n0 0* IN Os IN IN m in 1 r'- in 0^ 1 r* in IN P r> m p- IN O 00 tn Vw -- g N- M in m!N*. ** W IN r- IN IN 0 0 00 40 Os 9 V"> -- 28 0 r- 5. 00 00 to IN 0 0 00 0 40 00 0 r-_ r~ , 00 r~- -- IN IN it O' 00 n n IN 00* e> <s Ci m -- <**> IN* M MOl f Df' N^t^OO in in -- 0 IN r- -- w% Os m N1 N 0 Os t t"- 00 -O 0. l IN rJ m m INI 0 in *n rnto ST 00 n Nm 4 s mii~n- M 0 a a fi o.S g fjcwfccf ;*e ^ | y 0 r~ 00 0 00 0 Os v> 0 00 * V |N vt IN VC Cs 00 0 Os 00 IN <n sO IN Os Os' rT sn q Cv. 8 0 < r in IN Tf tn >c O' 00 0 v% 00 VC ' sn in <n IN Os -- IN -- m" --* in n0N wS OS vs 1 &. IN 0 in 0* O IN j i^J -a 1t3 I 8i 9 "go K S w o eftjg ^ (9 \ ^3 m .; g -2 g ra^jB S' o.o toll"! >*2 3 i`$9r9 9 - F'23g dT-8!* ; - S ---O. 0 '-^l1*^ -*0 -( jfl 8 a| ^ JS E CS 02 9aai Ua <01 s *3 *" 1l*Sa I!2S1 io fa so oi3g g.S Is -2 8-8 S4o.b 8 'Ba|sis"i as fc *>*a %& t?9opm- c2a?>nswj Q o Xs)T*JJ S 1 a J3 o o /~"-s=-u2 H = 0 = G 5 "I fl k U C Go Q, 03 U 0 0%010N4 s<ON yO% 3vt <fAsc m *mn Oisnqs On V o<NC O 00 vC IA 000 0 v> 40 V rvol 00 ^ iionnq rn V m--0 mI0N. --0n0 m-- .1 IN 'G 0O0s m|sNq P0IN0- ** IN Os OS 00 oq IN in V 0 in IN VI N00 O 00 s OS <*i P~ T| |N 00' VI In O <n IN Cv 00 00 IN O" IN <r> In T0 m O IN |N IN in IN m V0 Os ^ ntnh m m Os -- Os 0 IN 00 so |N |N Wl 0 |N IN n 0 00 tn w O 0 IN 9 0' |N 0 9 sn IN OO IN IN 9 n Ov r% 3 IN |N Os 5O m r-_ IN oq sn tn 00 in |N n IN IN IN 9 0 n 00 cq Os IN IN Os q tN P.- IN I8* 1 |N Os -- 9 00 rn n m <s 9 9* *4 9 Os Os --0 9^ N SOs IN 9 0 -- Os sn IN 9 SO 9m IN IN < -v OM if .2 J|j 5C -oH9 6 * e_Jt Savi k0 ci ' t ^e & SZP co o 2S*S2 BSf- .o 2 SPZ sfl s0ooa> *m!B,jjT 8 7; *1 all 5 9 -- III M < Mo U oa iiii O o ^ JEo JSg"o ' e S 2 0 illll iiiii i*SOS a o 29 n Os Os eo p in r* r in t* V 0 in m Os IN 0 3 <N vr> j v-\ <s r> ro in vC IN IN IN m* m in M o00q mIINN mImN 0it*n0 IINNc |n' , m * in0--n O0s 2 nIN m ij 0 oOOsSs h* rrr*->->s -- v o\ -- OS os sfnin O^sn n -- os 00 9 0 o.f* Os ao 1 $ 00 19 9 Os 9 00 oq |N , 1 |N Os oq |N 9O I1 3 |N 9fN -- IN ------O0 0 in sqo_ 9 OSOOOO0 SS 0 IN O O O IN -- -- w <n sn IN In 0 IN 9 IN m 0 0<\0M^O0 w , >-t o 0 In 0 IoNs' . I1 -NIN n N Os 9 0 0 Os IN N 0 O Z |a8*5b,32 81fc5l THIS'S 0 <E2-S5-5S Sffi C j* ^3 22.t*:s.- II? a2 8a 0 w So -M .S rG 2J oU Ob.U* "Z z \ NOTES TO STATEMENT OF CONSOLIDATED INCOME I. Sales, cost of sales, advertising, selling, general and administrative expenses and operating income of discon* tinned and sold operations are as follows: Nine Months Ended -------------------------------- Year ended December 31,------------------------------- N September 30. 1961 1962 1963 1964 1965 1965 Net sales............................................ Cost of products sold .................... Advertising, selling, general and ad ministrative expenses (Note 7) $68,619,046 $66,854,972 $65,643,060 $44,747,227 $31,301,026 $23,160,239 (61.576.098) (59,209,131) (56,594,878) (39,134,343) (27,419,145) (20,813,560) (5,628,529) (5,782,035) (4,820,865) (2,594,579) (2,196,420) (1,584,977) Operating income of discontinued > and sold operations..................... S 1.414,419 $ 1,863,806 $ 4,227,317 $ 3,018,305 $ 1,685,461 $ 761,702 2. Nonoperating items in the applicable periods were as follows: Nine Months Ended (------------- Year aded Decetnber3l,------------ ,r-------- September 30,------- -- 1962 1964 1965 1965 1966 Profit (loss) on sale of: Theatre properties .......................... Coal properties................................ Oil and gas properties.................... $ 405,446 -- 1,338,817 $2,057,652 1,457,765 $1,029,730 $1,170,452 (3,637,835) 175,681 5 (372,822) Industrial plant................................ 445,152 Capital stock of The American Hardware Corporation ...................... -- 5,451,416 .--, Operating assets of the Hubschman Division........................................... --(1,559,095) -- -- Mortgage notes and capital stocks of subsidiaries...................................... -- (1,165,839) (478,018) (478,018) . :i Provision for losses on miscellaneous assets and for possible Federal in* tc come tax assessments.................................. -- (2,464,498) (127,130) (24,422) Nonoperating items--net credit (Charge) .............................. $2,189,415 $3,777,401 $(3,213,253) $ 843,693 S (372,822) 3. Depreciation, depletion and amortization of fixed follows: Year Ended December 31: id intangible assets provided during each period was 93 Total Continuing Operations Discontinued and Sold Operations . 1961.........................................................-......... $2,574,096 $ 758,836 $1,815,260 1963................ ........................."..... 1.......... 1. 3,087,631 3,234,342 1,227,448 1,483,003 1,860,183 1,751,339 1964.........................................-.................... . 2,815384 1,669,730 1,145,654 1965................ .................................................... 2,406,549 1,631,373 775,176 Nine Months Ended September 30: 1965.................................................................... 1966.................................................................... 1.668,062 983,204 1,112,787 983,204 555,275 4. No Federal income taxes were provided during any period because of the availability of carry-forward net operating losses. The net operating loss carryovers will not be available after December 31, 1966. Reference is made to Note G to Financial Statements of Glen Alden. 5. The amounts per Common Share are based on the number of Common Shares outstanding at the end of each period. 6. As of December 31, 1966, Glen Alden has provided by a charge against income (nonoperating item) a reserve of $750,000 to reduce the carrying value of its investment in the capital stock of Briggs Manufacturing Company to approximate market quotation value at that date. Also during the quarter ended December 31, 1966, Glen Alden has sold certain theatre properties and realized gains (nonoperating item) of approximately $1,200,000 in connection therewith. ' 7. Corporate general and administrative expenses have been allocated to the several divisions and subsidiaries included in continuing and discontinued operations based on estimates of management, determined by use of various operational factors. 30 THE B.VJ). COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME fallowing statement of income presents the consolidated results of operations of The B.V.D. Company, Inc. ^J^olWated subsidiaries, including the operating results.of certain companies, acquired on the basis of poolings of CfaJrtheperiods prior to their respective dates of acquisition by B.V.D. The operating results of Adams Clothes, on May 16, 1966, on the basis of a pooling of interests, are included in the following statement for the UflflSaeaded October 1, 1966 only (on the basis indicated in the General note to the consolidated statement of ' An operations and earnings of Adams for the prior periods, which are not material, have been excluded. See Note 5Tfaftno&s to financial statements of B.V.D. The statement, insofar as it relates to the five years ended April 2, bn examined by S. D. Leidesdorf & Co., independent certified public accountants, who, as set forth in their Mt deluded elsewhere herein, have relied in part on the reports of other accountants. The data for the six months ended 2^965 and October 1, 1966 are-unaudited; inB.V.D.'s opinion, all adjustments (which include only normal recurjiavc been made which are necessary to present fairly the consolidated results of operations for the aforemen- ll4ste4B0Sth periods. This statement should be read in conjunction with the other consolidated financial statements of and notes thereto included elsewhere herein. ,-------------------------------------- Year Ended (Note A)--------------------------------------- -March 31r April 3, April 2, - ' ' 1962 1963 1964 1965 1966 laoos'oM '" -Six Months Euded- October 2, October 1, 1965 1966 -(Unaudited )- ................................ {if foftdfciiold---Note B........... fP0fltT6les.......................... I* fsoeral and administrative ex 1(4) ......................... fr&Ji (haz ,m *30,606,053 40,098,126 10,507,927 7,319,423 3,188404 $58,146,218 45,576,502 12,569,716 8,222,238 4447,478 $66,838,861 52,723,155 14,115,706 8,782,885 5,332,821 $104,571,534 $138,956,366 81,961,439 104,435,952 22,610,095 34,520,414 $67,173,323 51,083,421 16,089402 $85,994,079 64,322,270 21,671,809 14,967,339 7,642,756 23,792,704 10,727,710 10,537,368 5452434 15,424,212 6,247,597 e~`.. -ppfctfc . r P"*TtrrTo`T" ................... ..... ......... Oalt/(lost) on tales of fixed tfndlsaeoas............................ : ow) j- bsJOii'-; r deductions: Itercit oc long-term debt......... bterest--other.......................... Amortization of plant pre-openlog and start-up costs.............. IfiKeOaneoua............................ 154469 13,630 14,340 88,506 271,045 3,459449 217,907 295,822 26,713 161,430 12,129 212,781 75,720 93467 255451(a) 522,777 4,870455 472,437 181448 942,886 6475,707 175,459 370,686 432,516 316,129 25,836 33,080 540,442 571,981 781,725 i before Federal income taxes.... ffUoa for Federal income taxes, tortodfaf deferred taxes of $148,000 111964 and (credit) of ($9,000) is jm ended April 2, 1966--Note F ad (b)(c) ................................. . t toeooe--Note A and (b)(c)..... t Income per share of Common cek--Note A and (b)(c)(e)...... (A dividends per share of Common t > 2419,107 4498,274 5,493482 622,870 1,024,516 1,470,740 $ 2496.237(d) $ 3473.758(a) $ 4,023,242 $ .80 -- $1.00 -- $142 -- 274485 . 124,738 317468 38419 138,448 17,854 188,020 25499 5,222 145481 550,926 8,193,682 (17,162) 322,260 660,885 11.388495 (49,100) 160,774 267476 5,820,510 (22,365) 265,404 456,658 6,704455 713,612 520,492 59,799 38,641 1,332,544 6,861,138 1,086,131 680,736 83,259 300,969 2,151,095 9437400 296,160 593,644 40,734 59,896 990,434 4,830,076 550,148 754,436 58,106 69,290 1,431,980 5472,275 1,757,600 2,496,100 1,440,690 1,312,712 $ 5,103,538 $ 6,741,400 $ 3,389486 $ 3459,563 $1.53 $2.01 $1.02 $1.12 $ .40 $ JO $ .25 $ 45 31 NOTES TO CONSOLIDATED STATEMENT OF INCOME General--References to the Notes to 8.V.D. Financial Statements (included elsewhere herein) are designated by capital letters. ' In 1965, B.V.D. and its consolidated subsidiaries adopted a fiscal year ending on the Saturday closest to March 31,) except as to National Shirt Shops Inc. and its subsidiaries and other retail subsidiaries whose fiscal year ends January 31 and whose accounts are included in consolidation on that basts. The results of operations of Adams Clothes, Inc., whose fiscal year ends on January 31, are included in the* consolidated statement of income for the six months ended October 1, 1966 only. The accounts of Almar Rainwear Corporation ("Almar") (acquired subsequent to April 2, 1966, in a pooling interests) for its fiscal year ended June 30, 1962 included in the consolidated statement of income, have not beei audited. Sales, costs and expenses, and net income for such year are not material. Almar had a fiscal year ending on June 30 through 196S and on July 2, 1966. Because it is not practicable to recast operating data for Almar for B.V.D.'s fiscal years, the consolidated results of operations include the accounts of Almar for the five years ended July 2, 1966 combined with those of B.V.D. and its other subsidiaries for the five' years ended April 2, 1966. Net income of Almar for the three months ended July 2, 1966 amounted to $36,964, which is shown as a deduction from Earned Surplus for the six months eodcd October 1, 1966. Notes: (a) During the year ended March 31, 1963, B.V.D. adopted the policy of deferring the cost of promotional display fixtures and providing amortization therefor over five years. The accounts were retroactively adjusted to reflect the unamortized cost of such fixtures as at April 1, 1962; the adjustment resulted in a credit of approximate! $153,000 which is included in "Other income--Miscellaneous." Had B.V.D. continued the policy followed in p-: years, the net income for the year ended March 31, 1963 would have been decreased by approximately $70,009 ($.02 per share). (b) The provisions for Federal income taxes for certain consolidated subsidiaries operating in the United Stal have been computed after giving effect to net operating loss carryovers. Without the benefit of the carryovers, such taxes would have been greater by approximately $169,000 or $.06 per share (1962), $303,000 or $.09 per share (1963) $118,000 or $.04 per share (1964), $293,000 or $.09 per share (1965), $57,000 or $.02 per share (1966), and $245,000 or $.07 per share (six months ended October 1, 1966). Included in such amounts are approximately $135,C or $.05 per share (1962), $272,000 or $.08 per share (1963), $72,000 or $.02 per share (1964) and $264,000 or $.08 per share (1965) resulting from utilization of operating losses incurred by certain companies prior to their acquisiir by purchase. See Note F to the B.V.D. financial statements. (c) The consolidated statement of income includes the operating results of certain subsidiaries (including two predecessor affiliates) engaged in operations in Puerto Rico. The combined net income of these subsidiaries amounted to $1,483,845 or $.52 per share (1962), $1,607,664 or $.49 per share (1963), $1,960,363 or $J9 per share (1964), $2,184,586 or $.65 per share (1965), $3,654,373 or $1.09 per share (1966), $1,689,743 or $.50 per share (sa months ended October 2, 1965) and $2,363,202 or $.67 per share (six ended October 1, 1966). subsidiaries were granted exemptions, with certain reservations, from Commonwealth of Puerto Rico income taxes covering periods of ten to seventeen years, expiring 1970 to about 1982. If the exemptions had not been granted,- income taxes payable to the Commonwealth of Puerto Rico would have aggregated approximately $500,000 or $.1... per share (1962), $558,000 or $.17 per share (1963), $675,000 or $.20 per share (1964), $735,000 or $.22 per* share (1965), $1,250,000 or $.37 per share (1966), $540,000 or $.16 per share (six months ended October 2, 1965) and $767,000 or $.22 per share (six months ended October 1, 1966). So long as these subsidiaries remain exempt from Puerto Rican income taxes and remain entitled to the benefits1 under Section 931 of the Internal Revenue Code of 1954, any dividends paid by them to B.VD. will be taxed' as ordinary income without benefit of the 85% dividends received deduction ordinarily provided for domestic corporations under Section 243 of the Internal Revenue Code. If the operations of the two former Puerto Rican4 affiliates prior to September 30, 1961 had been conducted by subsidiaries entitled to the benefits of Section 931 and if dividends equal to the entire earnings from Puerto Rican operations had beeo paid to B.VD. during the years in * which such income arose, there would have been incurred additional United States income taxes at the prevailing: tax rates varying between 52% and 48% of such earnings. No provision has been made in the consolidated statement of income for such taxes since present law provides other methods under which such earnings may subse*^ quently be "reduced to the possession" of B.V.D. with either a lesser tax or no tax at all. i (d) Before deduction of a dividend in the amount of $7,500 paid on B.VD.'s Class AA 5% Cumulative Preferred Stock (redeemed In August 1961). 32 5ee consolidated statement of earned surplus of B.VJ>. for information with respect to dividends waived by certain stockholders. _ f-. ^ition to the cash dividends per share shown above, cash dividends in the amounts of $54,353 (1962), *Wt002 (1963)* 3I3^I9 (1964), $16,569 (1965) and $19,787 (1966) and $2,662 (six months ended October J, i*1966) were also paid by certain subsidiaries prior to poolings of interests (see Note A). i See Note O to the B.V.D. financial statements as to certain restrictions which limit the declaration and payment : fof dividends. H "(c) Computed for the year ended March 31, 1963 on the basis of 3,269,815 shares outstanding as at that date, and Pfar the yean ended in 1962, 1964, 1965 and 1966, and for the six months ended October 2, 1965 and October 1, 1966, foa *he basis of the weighted average number of shares, 2,872,971, 3,301,571, 3,338,105, 3,355,299, 3,350,719 and "J25.150, respectively, outstanding during those yean. Retroactive adjustments have been made for (i) shares issued connection with companies acquired on the basis of poolings of interests (except that, 113,438 shares issued to acquire Adams Clothes, Inc. were not retroactively adjusted since tbe results of operations of Adams have not been iwloded in the prior periods), and (ii) 3% stock dividends distributed in December 1962 and January 1964. v I In the opinion of the management of B.V.D., the following unaudited figures for the nine-month ^period ended December 31, 1966, and for the nine-month period ended January 1, 1966 include all , ^adjustments (comprising only normal recurring accruals) necessary to present fairly the results of opera . ftions for said periods: ` ii ,|*J Nine-Month Nine-Month ... ,c . tea* * Period Ended December 31, 1966 Period Ended January 1, 1966 AvTM (Unaudited) (Unaudited) tsrr.'* Net Sales.................................. $132,246,413 $101,888,637 . Net Income.............................. S~5^299,634 $ 4,872,103 fkD'^Net Income Per Share.......... $1.49* $1.44** imw' -> ,- * Based on 3,553,570 weighted average number of shares outstanding during the period. ** Based on 3,390,974 weighted average number of shares outstanding during the period. ' ftp* 5}f4: ^ it if c 2. 3" " 33 1 ts 5 3 A V 0 o a in 0V0) . X ov r- a on 0o0 <i*t -Nt. 0er0C oA> vs An N n00o00 A 0AIN0 IN onAA A * VvN --V 3 r~'1*o1 00 A *ar> --av ro rs ^ a . p p Q a ~ 00 -- 00 A VO IN A a Os Os A -- IN t- r3 r-T a s iO a a *orrC-o` N00 M CN Os aA O OvN A <N . <*> ' r*> o rf * * QOO\ MIN Ov j s3O? A8s\ OAN As fS N * 00 nV rACN OAoo AANO NCINN 0A0 AA sf* A 0r?0 A*> oca- 0000 00 2 Vr --A a Nro~o oo_ OooVC. oIN o IN A v 0000 ovc>ss AA 0 Os r4VA 10 *rv- vf oAAo ACA" <A N o> o ONs ** AAA fA^* 00 IN g00 " i 0000 * NO fA V% sIf V V A NO * OV V 3A 00 A c N 00 * a so t r a Nf A 2V N Ov A IN A s 11Ovv 00 "!* 3 3" &r- r- 020 NA a CN A* t- A oV N5 3 2 = 8 'S y O (o O 34 8? I m :S g ao A2 -a yQ. w 1m W as"S*-A. .O2 S P* <0 W_ .Sc M 52 C5O .0* t5 S.3** 5 S Z^ Zo. gu m ii NOTES TO STATEMENT OF CONSOLIDATED EARNINGS ^ TlJe provision for income taxes consists of the following: ,------------- Current- V Period Total Federal Canadian 'dr jbnbfc'-' Year coded December 31: 1961.................... 1962..................... 1963.................... 1964..................... 1965..................... $ 299,000 662,000 2,405,000 2,899,000 2,627,000 $ (9,915) 5,558 135.299 1,514,444 656,855 $ 301,070 211,884 4S6.176 1,059,061 1,947.167 Deferred $ 444,558 1,780,000 305,000 15,000 Stale $ 7.845 -- 3,525 20,495 7,978 - Nine months ended September 30: * .. ta*.. 1965..................... 1,928,000 187,334 945,572 783,084 12,010 gjf ' 1966..................... 1,825,000 490,518 1,417,121 (91,049) 8,410 Nr- Philip Carey's practice is to provide out of income each year amounts equal to the tax reductions resulting from vtf use, for income tax purposes only, of accelerated methods of depreciation and amortization in Canada and guideline depredation rates in (he United States. These amounts are provided for such time in the future when tax depreciation amortization may be lower than related charges for financial accounting purposes. j'-Xr T Earnings of Carey-Canadian Mines, Limited from its asbestos mill and mining facilities were exempt from Canadian income taxes during the three-year period from September 1, 1958 (date of commencement of commercial production) ^August 31, 1961. Depredation of its properties on a straight-line basis at expected life rates and amortization of mine development cost were charged annually to consolidated net earnings since September 1, 1958. However, in ; determining the earnings of Carey-Canadian Mines, Limited from September 1, 1961, which were subject to Canadian iincome taxes, charges for depreciation from September 1, 1958 (at accelerated rates provided in Canadian income tax ^regulations) and mine development cost were available to be claimed as deductions. As a result of the foregoing, iconsolidated net earnings for 1961 and 1962 were approximately $1,045,000 ($1.03 per share) and $720,000 ($.71 |PCTr|ihare), respectively, more than they otherwise would have been. In 1963 Philip Carey provided for deferred [Canadian income taxes at which time the accumulated depreciation of properties for income tax purposes exceeded it accumulated for financial accounting purposes. ^&~a result of enactment of the Revenue Act of 1964, Philip Carey changed its method of accounting for the sent tax credit to reflect the full amount ($137,831) for 1964 as a reduction of the provision for Federal income tax. The unamortized amount ($211,120) of the full credit, which had been applied against the property accounts in ;1962and 1963, was credited to the provision for Federal income tax in 1964, but it was offset by a provision for income : taxes for prior years and, thus, had no effect on net earnings. B. The per share amounts are based upon the number of common capital shares outstanding at the end of each & period. Hie following unaudited financial information in respect of Philip Carey for the year ended December 31, 1966 reflects, in the opinion of the management of Philip Carey, all adjustments (com prising only normal recurring accruals and year-end adjustments) necessary for a fair statement thereof. Year Ended ,------------ December 31,1966------------- 4 Per Stare of Amount Common Stock Net Sales...................................................................... $80,988,000 Earnings before extraordinary item........................ Extraordinary item (loss) on plant assets aban doned, less Federal tax effect............................ Net earnings for year................................................ $ 2,965,000 (91,000) $ 2,874,000 $2.94 (.09) $2.85 The Annual Report of Philip Carey for the year ended December 31, 1966 was mailed to Philip Carey shareholders on or about March 3, 1967. Upon request directed to the Secretary of Glen Alden or B.V.D., a copy of this Annual Report will be furnished to any stockholder of Glen Alden or B.V.D. 35 k GLEN ALDEN AND SUBSIDIARIES THE B.V.D. COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES PRO FORMA STATEMENT OF COMBINED INCOME (Unaudited) This Pro Forma Combined Statement represents on a pooling of interests basis the combination of the income statements of Glen Alden and B.V.D. No effect has been given in this Pro Forma Statem to possible future changes in accounting practices, methods of operation, and Federal income t' (Glen Alden had no current provision for Federal income taxes during the five years ended Deceml 31,1965); and no provision has been made for expenses to be incurred in connection with the transactions contemplated herein. This Pro Forma Statement of Combined Income should be considered in connectio with the statements of consolidated income and earnings of Glen Alden and B.V.D., respectively, included elsewhere herein. 1961 'Thousands of Dollars* 1962 1963 1964 1965 Cost of products sold................................................... Advertising, selling, general and administrative ex penses ........................................................................ Operating income of discontinued and sold op erations .................................................................... Income from operations............................................... Other income (deductions): Interest and dividends........................................... Interest expense................................................... Other--net ........................................................... Income before non-operating items............................ Non-operating items................................................... Income before income taxes...................................... Provision for income taxes........................................... Net income--historical: Glen Alden............................................................ B.VD..................................................................... Total........................................................ For dividend requirements on Preferred Stock (prior to any conversions) (a).................... For Common Stock (prior to any con version) (b)..................................................... Total..................................................... Pro forma net income per share of Common Stock, after Preferred Stock dividend requirements (b): After conversion of Glass C Stock and prior to conversion of Preferred Stock (c) (e) After conversion of all Preferred and Class C Stock (d) (e)............................................. Per share of B.VJ5. Common Stock after ex change for Vi share of Preferred Stock and conversion of Preferred and Class C Stock into Common Stock of the surviving corpo ration^) (e) ..................................................... Preferred Stock dividend, times earned.................... $ 73,438 58347 10,020 (1,414) 67353 5,885 1309 (1,429) (8) 5357 5357 623 3,038 2,296 $ 5334 $ 1,179 4,155 $ 5334 $.41 $ .41 $1.05 43 $106,217 86,771 12,051 0,864) 96358 9,259 1,730 (1,415) 49 9,623 2,189 11,812 1,024 7314 3374 $ 10,788 $ 1396 9,192 $ 10.788 $ 32 $ .78 $139 6.8 $119,883 99,452 12,988 (4,227) 108313 11,670 1332 (1,790) 1381 13393 13393 1,471 7,899 4,023 $ 11322 $ 1,629 10393 $ 11322 $1.03 $ .85 $2.17 7.3 $158,395 129,433 19,504 (3,018) 145,919 12,476 1,722 (1373) 636 12,861 3,777 16,638 1,757 9,777 5,104 $ 14,881 $ 1,668 13313 $ 14,881 $1.42 $1.11 $2.83 8.9 $186,826 144,465 27,768 (1,685 170,548 16,278 2,115 <2,734 105 15,764 (3,213 12^55' 2,496 3313 6,742 $ 10,055 $ 1.686 8,369 $ 10,055 $ .90 $ .75 $1,91 63 (a) Assuming exchange of all outstanding shares of B.V.D. Common Stock (excluding 1,000,002 shares held by Gjen Alden-Delaware and 750,000 shares [including 231,766 shares held by Mr. Kittay] which management estimates will be exchanged for 583,334 shares of Class C Stock) for Preferred Stock. See Note (e) to B.V.D. Consolidated Statement of Income for information concerning number of shares outstanding during period. (b) No dividend requirement on the Class C Stock has been provided since It is the intention of management not to pay such dividends until the net earnings In any fiscal year exceed $25,000,000 (the amount of net earnings required to be achieved in a fiscal year before such Class C dividends become cumulative). <c) Based on the number of Glen Alden Common Shares outstanding at the end of each period and conversion of 583,334 shares of Class C Stock into 4,538,339 shares of Common Stock (the maximum number of shares of Common Stock into which such Class C Stock is convertible). . (d) Assuming conversion at rate of 7.65 shares of the Common Stock of the surviving corporation for each share of Preferred Stock and conversion of 583.334 shares of such Class C Stock into 4,538,339 shares of Common Stock (the maximum number of shares of Common Stock into which such Class C Stock is convertible). (e) The conversion of the Class C Stock is subject to certain restrictions, as to which see "Failure to Make Serial Redemptions" elsewhere herein. 36 GLEN ALDEN AND SUBSIDIARIES jHE PHILIP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPANIES ^ PRO FORMA STATEMENT OF COMBINED INCOME (Uoaudlitd) xx: Yhis Pro Forma Combined Statement represents on a pooling of interests basis the combination of : the income statements of Glen Alden and Philip Carey. No effect has been given in this Pro Fonna ' gutement to possible future changes in accounting practices, methods of operation, and Federal income ^ (Glen Alden had no current provision for Federal income taxes during the five years ended {December 31, 3965); effect has been given to the fact that approximately 28% of the stock of I Philip Carey was purchased and is accounted for on that basis; and no provision has been made for l to be incurred in connection with the transactions contemplated herein. This Pro Forma i Statement of Combined Income should be considered in connection with the statements of consolidated S; and earnings of Glen ^Iden and Philip Carey, respectively, included elsewhere herein. v&i-Z ' 1961 > Ncfttlo.................................................................................... $ 92,786 CbaTof products sold.............................................................. 76,666 Advertising, selling, general and administrative expenses 10,790 Qpjjntfag income of discontinued and sold operations ... |T5T i-> - Ijgfclc: * (1,414) 86,042 1962 $121,273 101,627 12,572 (1,864) 112,335 1963 $122,407 102,941 12,184 (4,227) 110,898 2964 $129,755 108,433 12,963 (3,018) 118,378 1965 ' $126,323 103,635 12,825 (1,685) 114,775 : Income from operations..................................................... ... 6,744 Oder'bcome (deductions): Interest and dividends............................... _. expense ............................................ [Other--net ..................................................... - 1,554 ... (1,753) ... (402) before nonoperating items.................... ... 6,143 kting items............................................. fflcomc before income taxes.................................................... 66,,114433 for income taxes ... 299 Net. income--historical: l ' Glen Alden ................. ... 3,038 Philip Carey..... ........... j OCS.t >-. MmxMi Total ... 2,806 ... _$ 5,844 --Tor minority interest in net income applicable to purchased 28% interest in Philip Carey................ $ 779 _ . For dividend requirements on 724,405 shares of Senior Stock (prior to any conversions)................ 1,630 For Common Stock (prior to any conversions)..... 3,435 ' Tbtal ................................................................ 7 5,644 Pro forma net income per share of Common Stock after "Senior Stock dividend requirements: Prior to any conversions............................................... After conversions of all Senior Stock(f) ...._................ ' Per common share of Philip Carey after exchange for one share of Senior Stock and conversion into ^ Common Stock of surviving corporation(f)........... Senior Stock dividend, times earned..................................... 8,938 1,793 (1,746) (398) 8,587 2,189 10,776 662 7,514 2,600 $ 10,114 722 1,630 7,762 10.114 31.41 $1.12 $4.48 Is 11,509 2,012 (1,850) 775 12,446 12,446 2,405 7,899 2,142 $ 10,041 595 1,630 7,816 10,041 $1.42 $1.12 $4.48 Is 11,377 11,548 1,869 (1,480) 235 12,001 3,777 15,778 2,899 2J04 0,641) 066) 12,045 (3,213) 8,832 2,627 9,777 3,102 $ 12,879 3,313 2,892 $ 6,205 862 1,630 10,387 12,879 815 1,630 3,760 6,205 $2.17 $1.56 $ .78 $ .70 $6.24 7.4 $2.80 ~33 (f) Assuming conversion at rate of 4 shares of the Common Stock of the surviving corporation for each share of the Senior Stock. 37 V glen alden and subsidiaries THE B.V.D. COMPANY AND CONSOLIDATED SUBSIDIARIES THE PHILIP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPANIES PRO FORMA STATEMENT OF COMBINED INCOME (Unaudited) This Pro Forma Combined Statement represents on a pooling of interests basis the combinati of the income statements of Glen Alden, B.V.D., and Philip Carey. No effect has been given in Pro Forma Statement to possible future changes in accounting practices, methods of operation. Federal income taxes (Glen Alden had no current provision for Federal income taxes during the & years ended December 31, 1965); effect has been given to the fact that approximately 28% of stock of Philip Carey was purchased and is accounted for on that basis; and no provision has been m for expenses to be incurred in connection with the transactions contemplated herein. This Pro Fo Statement of Combined Income should be considered in connection with the statements of coasolida income and earnings of Glen Alden, B.V.D. and Philip Carey, respectively, included eslewhere here* Net sales................................................................................ Cost of products sold......................................................... Advertising, selling, general and administrative expenses Operating income of discontinued and sold operations Income from operations...................................................... Other income (deductions): Interest and dividends................................................ Interest expense........................................................... Other--net................................................................... Income before non-operating items.................................. Non-operating items........................................................... Income before income taxes.............................................. Provision for income taxes................................................ Net income historical: Glen Alden ................................................................ B.V.D, .......................................................................... Philip Carey........................................ ....................... Total ................................................... ........ For minority interest in net income applicable to purchased 28% interest in PhQip Carey............. For dividend requirements (prior to any conver sions) on: Senior Stock ....................................................... Preferred Stock(a)........................................... ; For Common Stock (prior to any conversions) (b) Total ........................................................... Pro forma net income per share of Common Stock, after dividend requirements(b): After conversion of Class C Stock and prior to conversion of Senior Stock and Preferred Stock(c)(e) ............................................................. After conversion of all Senior, Preferred and Class C Stock(d)(e)(f)................................................... Per share of B.VJ3. Common Stock after exchange for VS share of Preferred Stock and conversion of all Senior, Preferred and Class C Stock into Common Stock of the surviving corporation(d) (e) ............................................................................ Per common share of Philip Carey after exchange for one share of Senior Stock and conversion of all Senior, Preferred and Class C Stock into Common Stock of the surviving corporation(f).. Total Senior and Preferred Stock dividends, times earned ............................................................................ 1961 $143,392 116,764 18,109 0.414) 133,459 9433 1,567 (2,267) (171) 9,062 -- 9,062 922 3,038 2496 2,806 $ 8.140 $$ 779 1,630 1,179 4452 $ 8,140 $ .45 S .46 $1.17 $1.84 2.6 1962 $179,419 147,203 20,795 0,864) 166,134 13485 1,805 (2,293) 88 12,885 2,189 15,074 1,686 7414 3474 2,600 $ 13,388 $ 722 1,630 1,596 9,440 $ 13,388 $ .94 $ .75 $1.91 $3.00 3.9 1963 $189,246 155,664 20,968 (4.227) 172,405 16,841 2,088 (2,599) 1,610 17,940 -- 17,940 3,876 7,899 4,023 2,142 $ 14,064 $ 595 1,630 1,629 10,210 $ 14,064 $1.02 $ .80 $2.04 $3.20 4.1 1964 $234,326 190494 27,931 (3,018) 215407 19,019 1,994 (2,714) 563 18,862 3,777 22,639 4.656 9,777 5,104 3,102 $ 17483 $ 862 1,630 1,668 13,823 $ 17,983 $1.48 $1.05 $2.68 $420 5.2 1965 $265.280 "20 36,61 (1,685 243,( 2247 2442 (3,408 -or 2148' (3413 18,070 5,123 3ii 6,74 2,1 $ 1244 $ 8' '5 1,630 1,686 8,816 $ 12,947 $ -94 $ ,74 $1.89 $2.96 3.7 All note references are to the notes to the two preceding Statements of Combined Income; this statement should be read in conjunction therewith. 38 COMPARATIVE DATA Values Per Share , - .. foot values per Common Share of Glen Alden and Philip Carey and per share of Common Stock ' ^ p v.D. (based on their respective balance sheets at September 30, 1966 and October 1, 1966) are j. *1^34, $39.58 and $11.20, respectively. The initial redemption prices per share of the Senior Stock ' the Preferred Stock and the redemption price per share of Class C Stock are $52.50, $110.00 and ^ $9000, respectively. The initial redemption price per share of Senior Stock exceeds the September 30, j book; value per share of Philip Carey common by $12.92 and the initial redemption price per vhare of Preferred Stock and the redemption price per share of Class C Stock exceed the October 1, ^^966 book value of three shares of B.V.D. Common Stock by $76.40 and $56.40, respectively. . A'Tvitxt. Based on the Pro Forma Combined Balance Sheet there would be no book value attributable to - Ibe Common Stock of the Surviving Corporation when the equity applicable to the Senior Stock, it* Preferred Stock, and Class C. Stock is considered at aggregate initial redemption value. The aggregate "'initial redemption value of the Senior Stock, Preferred Stock, and Class C Stock exceeds total pro :^>!fonna stockholders' equity by $19,500,045. . ^',l ` -V **EanJings Per Share : Historical earnings per share have been computed based upon the number of outstanding common > ./Shares at December 31st of each year as to Glen Alden and Philip Carey. Historical earnings per share B.V.D. have been computed for the year 1962 on the basis of 3,213,315 shares outstanding at '"T&larch 31, 1963, and for the years 1961, 1963, 1964, 1965 on the basis of the weighted average number (of shares 2,816,471, 3,245,071, 3,281,605 and 3,298,799, respectively, outstanding during the fiscal ; of B.V.D. included therein; retroactive adjustments have been made for (i) shares issued in >nnection with companies acquired on the basis of poolings of interests, and (ii) 3% stock dividends stributed in December 1962 and January 1964. ua.c * ^The. following pro forma eamings per share are based on earnings as presented in the Pro Forma 2eats of Combined Income for each respective combination, included elsewhere herein. iiC i ' Philip Carry ' iahare~of Philip Carey Common Stock: Pro forma after exchange for one share of Senior f Stock and assumed conversion into a maximum Z^-of 4 shares of Common Stock of the surviving i ' corporation: Combination of Philip Carey and Glen Alden W /. &.. Combination of Philip Carey, B.V.D. and Glen Alden................................................... tc.rJ b B.VJ). Pe4r,*sTh_Ya?_rae_o f B.VJ).. Common Stock: Pro forma after exchange for V6 share of Pre ferred Stock and related conversion of Senior, Preferred and Class C Stocks into Common Stock of surviving corporation: Combination of B.V.D., Philip Carey and 1961 $2.76 1.96 1.84 $ .80 1.05 1.17 1962 $245 4.48 3.00 $1.00 1.99 1.91 1963 $2.10 4.48 3.20 $1.22 2.17 2.04 1964 $3.05 1965 $2.89 6.24 2.80 4.20 2.96 $1.53 $2.01 2.83 2.68 . 1.91 1.89 Glen Alden Per share of Glen Alden Common Stock: Pro forma after conversion of Senior, Preferred and Class C Stocks into Common Stock of surviving corporation: Combination of Glen Alden and Philip Carey Combination of Glen Alden and B.V.D........ Combination of Glen Alden, Philip Carey and B.VJ)...................................... .... $ -54 49 .41 .46 $1.37 1.12 .78 .75 $1.44 1.12 .85 .80 $2.04 1.56 U1 1.05 $ .69 .70 .75 .74 39 Dividend Comparison The following table compares the actual cash dividends paid per Common Share of Glen A1 and Philip Carey and per share of Common Stock of B.V.D. for the last fiscal year of each with pjfc forma dividends. Actual common dividend per share for last fiscal year: Glen Alden............................................................................................... Philip Carey ............................................................................................ B.V.D.......................................................................................................... $ .70 $1.60 $ .50 Pro forma preferred dividend requirement: Per share of Senior Stock....................................................................... Per share of Preferred Stock.................................................................. Per one third (Vi) share of Preferred Stock........................................ $2.25 $3.15 $1.05 v? * Pro forma dividend per share of Common Stock assuming continuation of current Glen Alden dividend rate: Per share of Common Stock.................................................................. $.70 > Per share of Philip Carey Common Stock after exchange for one share of Senior Stock and conversion into Common Stock (assumed conversion rate 4 shares of Common Stock for each share of Senior Stock) ....................................................................... $2.80 . Per share of B.V.D. Common Stock after exchange for VS share of Preferred Stock and conversion into Common Stock (conversion rate 7.65 shares of Common Stock for each share of Preferred Stock)................................................................................................... Market Prices $1,785 ' *!J2 The Common Shares of Glen Alden and Philip Carey are listed on the New York Stock The Common Stock of B.V.D. was listed on the American and Cincinnati Stock Exchanges February 28, 1962 until December 9, 1963 and thereafter has been listed on the New York Stoc Exchange. The high and low sales prices for the periods indicated are as quoted on the aforementioned stock exchanges. . Calendar Year 1961 .................................... 1962 .................................... 1963 .................................... Calendar Quarter 1964 First............................ Second ...................... Third .......................... Fourth ........................ 1965 First............................ Second ...................... Third .......................... Fourth ........................ 1966 First............................ Second ...................... Third .......................... Fourth ........................ January, 1967............................ February, 196?............................ March 1, 1967 (closing sale Price) ...................................... /--Glen Alden--* High Low - $17% $12% 14% 8% 16% 9% 14% 15% 15% 14% 12% 12% 13% 12% 14% 13% 13% 13% 11% 10% 11 11% 13% 14% 13% 11 11 % 12 11% 11% 9% 9% 9% 10% $11% /------- B.V.D.* % High Low (not publicly traded) $17% $ 8% 19% 14% 18% 18% 19% 22% 16% 16 17 17% 26 28% 26% 26% 20% 22% 23 22% 27% 27% 31% 23% 22% 25% 22% 23 22% 19% 20% 22% 523% ,--Philip Carey--s High Low . $36 526%J 32% 22 29% 23% ; 32% 30% 34% 33 23%' ' 27% 28% 28% 32% 31% 31% 30 29 28% 28% 27% 40% 41% 42 36 37% 38% 29% 36% 31 29% 35% 36% $37% Not adjusted for 3% stock dividends distributed in December 1962 and January 1964. 40 HISTORY AND BUSINESS OF GLEN ALDEN Glen Alden was incorporated under the laws of the Commonwealth of Pennsylvania in 1920 and, *^,n 1955^ its only significant business was the production and marketing of anthracite coal. During 'the early 1950's, the declining market for anthracite coal resulted in coal operating losses and, as appears W>w this business was sold on February 18, 1966. In 1955 Glen Alden began to diversify by the ^duisition of other businesses, and in 1959, following the merger with LIST Industries Corporation, its . included operations in a variety of other industries. As a result of other acquisitions and ?fltoSons since the merger, including the sale of the coal business, Glen Alden is now engaged, through /Jl division and subsidiaries, only in the business of operating motion picture theatres and manufacturing textiles. -iRbIbAs of September 30, 1966' Glen Alden and its subsidiaries had $26,000,000 of negotiable bank cersgficites of deposit and notes, mortgages and marketable securities of approximately $26,825,000, the fBMie important of which are the investment in Philip Carey and those described below under captions, R"Briggs Manufacturing Company" and "Sale of Coal Properties and Business". Included therein are notes receivable in an aggregate principal amount of approximately $11,000,000, a majority in principal ;t|ffl0unt of which are secured by mortgages. Notes carried at an aggregate discounted value of $3,104,000 ' either noninterest bearing or bear interest at nominal rates, and the balance bear interest at rates from 4% to 6% per annum. The principal amount receivable on these notes averages about *000,000 per annum. At the present time Glen Alden's principal business consists of the operation of the RKO Theatres pivision and, through subsidiaries, of a textile manufacturing business. The following table shows for ear ended December 31, 1965 and the nine months ended September 30, 1966 the approximate per- pffltages of contribution to net sales and operating profit of the principal subdivisions under which Glen iVoperations are conducted. The table reflects the elimination of gains from the sale of certain and the results of operations of the coal business. f; -1965. Net Operating Saks Profit Nine Months Ead4 September 30, 1966- Net Selee Operating Profit RKO Theatres Division. ^Textiles............................... 30.8% (1.5)% 69.2 101.5 23.6% 76.4 23.7% 76.3 .Profit margins in the RKO Theatres Division have substantially increased since the beginning of the second half of 1965 principally due to the sale or lease of a number of theatres which had been operated by the Division at significant losses. In addition, in the remaining theatres operated by the Division an `expense reduction program and certain changes in exhibition policies further contributed to increased operating profits. As appears below, Swift Manufacturing Company manufactures finished goods. Opp Cotton Mills ad The Micolas Cotton Mills manufacture greige goods which are staple items, the marketing of most Of which is similar to the commodities business. Although in 1965 and in the first nine months of 1966, Paige goods accounted for approximately 33V6% of total textile sales, the operations of Opp Cotton Mills and The Micolas Cotton Mills contributed a disproportionately larger percentage of operating P&fits in relation to sales due to the strong market for heavy, all cotton, greige goods which prevailed daring most of that period. Textile Manufacturing Glen Alden's textile manufacturing operations (which comprise less than 1% of the industry total) are conducted through Gera Corporation ("Gera"), a Delaware corporation of which Glen Alden 41 owns approximately 99.3% of the issued and outstanding Common Stock. Gera, which is not i engaged in any manufacturing operations, in turn owns ail of the stock of Swift Manufacturing pany ("Swift"), a Georgia corporation located in Columbus, Georgia, Opp Cotton Mills ("Opp"),' Alabama corporation located in Opp, Alabama, and The Micolas Cotton Mills ("Micolas"), an Alab corporation also located in Opp, Alabama. Swift Manufacturing Company Swift is a textile manufacturer producing fabrics for apparel, industrial, decorative and autom uses. Its line of apparel fabrics, principally for denims, work garments, and women's sportswear1' its line of industrial fabrics, principally for rug and pad backing, rug underlay, leno-woven prod' bags, insulators and filters, account for over 88% of its net sales. In the decorative field, Swift factures fabrics for draperies and slip covers. Most of Swift's apparel and industrial fabrics are sold directly to manufacturers. The remain of these lines and all of its decorative fabrics are sold to textile converters. Substantially all fab sold to converters is in dyed and finished form. In the main, sales are made by 15 of Swift's, salesmen, six of whom work out of the Columbus plant and the other nine of whom work out of regi offices located in New York, Chicago, Los Angeles and Atlanta. Some additional sales are. through two manufacturers' representatives. Export sales account for less than 5% of net sales consist in the main of leno-woven produce bag materials shipped to Canada. Swift's basic raw material is cotton and most of its fabrics are made from cotton in whole o?_ part However, particularly in the apparel and decorative lines, synthetics, such as rayon, polyesters1 nylon, are used in various combinations. At Swift's plant these materials, plus dyes and other chemi are processed into fabrics by various spinning, weaving, finishing and dyeing operations. . Opp and Micolas Cotton Mills * The Opp and Micolas Cotton Mills, acquired in 1962, are both manufacturers of woven co materials for apparel, industrial and decorative use, sold in an unfinished state. The apparel fab; principally for sports wear, sleeping garments, uniforms and shoes, account for approximately 3 of the combined net sales of the two companies. In the industrial area both companies manufactu fabrics for the laminating industry and for the bag industry as container material for flour, salt, and feed. In the decorative field, both companies produce fabrics used by the furniture and ho furnishing industry. . Approximately 80% of the combined products of Opp and Micolas are sold directly through a sal office located in New York City, with the remainder sold through various brokers and agents. Custome of the two companies consist of over 500 manufacturers and converters, the largest of which, as a packa producer, accounts for approximately 14% of the combined sales. With the exception of small experimental quantities of cotton and rayon blends, the two companies produce only cotton fabrics. Competition AH three subsidiaries of Gera encounter substantial competition in each of the fabric lines which they manufacture, mainly from other domestic suppliers of similar textile products some of which have much greater volumes and more diversified lines. Foreign fabrics and apparel result in additional direct and indirect competition. Cotton and synthetic fabrics compete to some extent with similar products made of jute, sisal and paper and fluctuation in the relative prices of these competing materials can be significant Equalization Payments Under the Agricultural Act of 1964, the United States Government reestablished a one-price cotton system applicable to the crop year of August 1, 1964. The objective of this Act was to make it possible for domestic manufacturers to purchase U. S. grown cotton at the same price paid by foreign 42 Wjetiikm for foreign grown cotton. Initially, equalization payments were made directly to the manu'^rt on the basis of bales opened. Subsequently, these payments were made directly to the cotton The law has been extended to 1970. The lower cost of raw materials to Swift, Opp and Micolas Mills, since passage of the Agricultural 9f of 1964, have beeo largely off-set by increased wages to employees and lower prices for products M* tokL-y Neither the finished products produced by Swift nor the raw materials from which such products ^^manufactured are faced with substantial foreign competition. Management therefore believes that tbs discontinuance of the foregoing equalization payments to Swift's suppliers would have little effect OL Swift's profit performance because, even though some increase in the price of raw materials might this increase would be offset by an increase in Swift's prices to its customers. Management is to forecast the effect on the profit performance of the Opp and Micolas Cotton Mills of any discontinuance of or reduction in the equalization payments to its suppliers. St d' :- Employees and Labor Relations Swift has approximately 1700 employees, all of whom, with the exception of regional sales perlotmel, are located at the Columbus plant. Opp and Micolas together have approximately 970 employees divided almost equally between them, all of whom are located at their respective plants. - There is no union representation in any of these subsidiaries and no unauthorized work stoppage has occurred at any of these plants in the last 30 years. Management considers its labor relations in all of gJffsstTplants to be good. and Property h fo^The Swift plant is owned by Swift and contains approximately 809,000 square feet located on a approximately 9.8 acres. Approximately 47% of the total floor space is included in buildings ly.muld-stoiy) portions of which were constructed at the time of Swift's founding in 1883 and ^fhOjftalancc of which consists of brick and wood-beam construction erected at various times in the vAy 1900's. The remainder of this plant, constructed of brick with steel beams, has been built at various .prom 1936 through 1960. This plant is now operating at or near capacity. As a result of a detailed lagement has recently undertaken a program involving the modernization of its existing plant i-inajor expansion at a new site in Phenix City, Alabama (across the Chattahoochee River from `Swift's existing plant). As presently planned, the new plant will be approximately 500,000 square feet ^&rnztind will be devoted entirely to the manufacture of specialty industrial fabrics. Approximately employees will be employed in this new plant. The cost of the new plant will be financed by a ; 000,000 industrial revenue bond issue of the Industrial Development Board of Phenix City, ^i^iabama, a public corporation. The plant will be built to Swift's specifications. Swift will occupy the plant under a long-term lease, at a rental sufficient to repay the principal when due and the interest on the oonds.from the Industrial Development Board of Phenix City, Alabama. Glen Alden will guarantee die payments under said lease. j-A.Opp and Micolas own their respective plants, which are located on approximately 130 acres in the aggregate. The Opp mill, expanded at various times mainly from 1940 to 1964, contains approximately 239,000 sq. ft. of floor space, including storage warehouses. A single-story brick building, this mill was originally constructed in 1921. The Micolas mill, also expanded at various times during the same period, contains approximately 216,000 sq. ft. of floor space, including storage warehouses, and a brick veneer executive office building. A single-story brick building, this mill was originally constructed in 1923. The Opp and Micolas plants are in excellent condition. The Micolas plant is being expanded at *0 approximate cost of $2,500,000. The expansion will be financed by a $2,500,000 industrial revenue bond issue of the Industrial Development Board of the City of Opp, Alabama, a public corporation. The plant will be built to Micolas* specifications. Micolas will occupy the plant under a long-term lease, at *rental sufficient to repay the principal when due and the interest on the bonds from the Industrial Development Board of the City of Opp, Alabama. Glen Alden will guarantee the payments under said lease. ' Management believes that all of its plants are well maintained, are in good condition and are adequate for present operations. 43 RKO Theatres As of September 30, 1966, the RKO Theatres Division of Glen Alden (formerly a wholly-osubsidiary, known as RKO Theatres, Inc., which was merged into Glen Alden on December 1,1964) directly and through a number of subsidiaries, operated 36 theatres in 15 cities in five states and District of Columbia, including 22 theatres in the New York Metropolitan area. Of these 36 thea 30 are owned or leased by RKO Theatres Division and operated for its own account, and six are ope by said Division under a management contract with Trenton-New Brunswick Theatres Company, a N Jersey corporation of which Glen Alden owns 50% of the outstanding capital stock (the balance be owned by persons unaffiliated*with Glen Alden). Of the 30 theatres operated for its own account by RKO Theatres Division as aforesaid, 1: owned in fee either by RKO Theatres Division or a subsidiary, two are on land leased from others'7 in 13 cases both land and building are leased from others. ^ v;,,j The contract pursuant to which RKO Theatres Division operates six theatres for Trenton-N Brunswick Theatres Company provides for a management fee of 5% of gross receipts from each the operated plus a specified weekly fee for film buying at each location. RKO Theatres Division in supplies all management services including maintenance, accounting and other similar functions. *. contract expires August 31, 1971. Of said six theatres, Trenton-New Brunswick Theatres Comj owns three in fee and the balance are leased from others. -v In addition to the foregoing, Bleury Investments, Limited, a Quebec corporation of which Glen owns 50% of the outstanding capital stock (the balance being owned by persons not affiliated with G Alden), owns a theatre in Canada which is leased to others and Trenton-New Brunswick Thea Company owns one theatre and leases another, both of which are closed. Finally RKO Theatres Divisi is the lessee of five theatre properties which are sub-leased to others, owns three theatres which are le to others and leases two theatres in buildings held under ground leases. The leasing or subleasing others of some of these theatres and the closing of others is part of a program designed to el unprofitable theatres from the operations of RKO Theatres Division. In many instances the property owned or leased includes, in the theatre building or conn: therewith, other types of commercial space or property, such as offices, stores and two hotels all of are leased to others. On September 30, 1966, RKO Theatres Division and its subsidiaries were le under an aggregate of 24 leases (excluding intercompany leases) which called for the payment of aggre annual minimum rentals, exclusive of real estate taxes and other expenses, of approximately $1,449, The theatres vary in type and size and range in seating capacity from 900 seats to 3,( Almost all of the theatres show "first-run* or "first neighborhood run" films in a particular city' neighborhood. For several years there has been a decline in motion picture attendance owing tc number of factors, including competition from home television and various other leisure time activit1 and a reduction in the number of quality pictures available. As a result there has been a reduction the total number of theatres being operated. Such decline in the number of admissions has been offset to some extent by increasing admission prices, admission tax eliminations, and reductions and economies in operation. There is keen competition in the exhibition of motion pictures which has been enhanced by changing methods of distribution during the past few years. The RKO Theatre Division has entered negotiations (and in some instances signed contracts) relating to the operation of ten additional theatres all of which will be in the metropolitan area of New York. ` Marginal theatres continue to be eliminated as a result of the expiration of leases or by sales t theatre properties. Other theatre properties have been sold, and, in some instances, the theatre has been leased back. Sales of theatre properties have generally been at prices in excess of the amount carried on the books for such properties. Some theatre properties have been condemned for urban renewal development and the proceeds received from such condemnation have been in excess of book value. Following one such condemnation, a modern type theatre was included in the urban renewal development and leased to the Division. 44 On October 12, 1966 Glen Alden acquired a 50% interest in a joint venture with two non!Stlited co-investors each of whom holds a 25% interest. The venture has acquired one of the theatre i Jttcertics presently leased to and operated by RKO Theatres Division together with a substantial con- '^jkuous parcel of land. The venture is negotiating the sale of said property. The venture has also ' flhichased four other properties in which are located theatres theretofore leased and operated by the JCykjonT In connection with said purchases three of these theatre leases were renewed and amended, one will be either cancelled or amended. In connection with its 50% participation, Glen Alden _ to advance the cash requirements of the venture up to a maximum of $2,250,000, but will be t0 complete reimbursement {with interest) before any division is made of profits or other iues of the venture. iThe operation of the RKO Theatre Division is subject to a consent decree signed by a predecessor ;0 Theatres, Inc. on January 2, 1951. This consent decree, originally dated November 8, 1948, out of an action in the United States District Court for the Southern District of New York ded U. S. vs. Paramount et al (Equity #84-273). The decree, dated November 8, 1948, among things, required Radio Keith-Orpheum Corporation (and the other defendants affiliated with RKO) vest its theatre operations from its picture operations. Article III A 6 (a) of the Consent Judgment ided that the new theatre company (RKO Theatres, Inc.) may acquire additional theatres (apart theatres substituted for discontinued theatres) only if, upon application to the Court, it is shown such acquisition will not unduly restrain competition. Court approval has been obtained for the Additional theatres in the New York metropolitan area, referred to above. `Xs'bf November 15, 1966, seven anti-trust cases arising from its theatre operations (in which treble art sought) were pending against Glen Alden or its subsidiaries and other motion picture Ibitors and distributors. The total amount of damages sought is approximately $124,700,000 includ$117,500,000 sought in an action brought in the U. S. District Court for the Southern District of fochia. Central Division, in connection with subscription television. During the year ended December six such cases involving an aggregate of $3,100,000 of damages demanded were settled for a yment of $9,500. Based on past experience with various types of litigation, an analysis of the Depending cases and on the opinion of Messrs. O'Brien, Driscoll & Raftery, as special counsel, ' *ent believes that the existing reserve of approximately $102,700 is adequate to meet the costs ^'ultimate liability from such litigation. Wr'.; . . bt/Coal Properties and Business K I'.' J'-'tt.: _j-The Glen Alden Coal Company division of Glen Alden was one of the largest producers and sellers jpnthracite coal in the country. The entire fuel business is highly competitive, both among sellers of rite and between anthracite sellers and sellers of ofl, natural gas and bituminous coal. Glen Alden's rite coal, mostly owned by it in fee, was mined from properties in Luzerne County, Pennsylvania, in - uje viciflity of Wilkes-Barre (the Wyoming Valley Region), and in limited amounts from properties of ..Others in adjoining Lackawanna County. Processing took place at two breakers in the Wyoming Valley Jtegioa. The coal was marketed through Glen Alden Fuel Sales, a division of a Glen Alden subsidiary, ^bpot 25% of total coal sales were of coal produced by others. During 1965 coal sales accounted for somewhat less than 39% of consolidated sales and revenues, jad. coal operating profits, coal royalties and other income contributed a slightly higher, percentage to Consolidated operating profits. Glen Alden's sale of its coal properties, as described below, resulted in a non-recurring loss (based on the book values of the assets sold) of $3,637,835 in the year 1965. February 18, 1966, Glen Alden (and one of its subsidiaries) sold (effective January 1, 1966) to Blue Coal Corporation ("Blue Coal"), a Pennsylvania corporation not theretofore active, substantially all assets of its Coal Division, including surface and coal lands (reserving to Glen Alden a 25% "carried interest" in oil and gas), machinery and equipment, inventories of run of mine coal and prepared coal, materials and supplies and certain notes and accounts receivable relating to the operation of the Coal Division, in exchange for 45 (a) 1,000 shares of the no par value common stock (100%) of Blue Coal; (b) the assumption by Blue Coal of the obligations, liabilities and contracts relating to Division operations (Glen Alden, however, agreeing to reimburse Blue Coal for one-half of liability, cost and expense incurred by Blue Coal in defending law suits relating to the Coal Di\ with respect to claims applicable to the period prior to January 31, 1966); (c) a Note of Blue Coal in the sum of $100,000 payable on December 31, 1974 wit interest, with prescribed prepayments measured by coal purchased by Blue Coal from anot supplier; (d) a Note of Blue Coal in the sum of $5,775,000 dated February 1, 1966, due February' 1976, with interest at the rate of 6% per annum for the first year, 7% per annum for the next years and 8% per annum thereafter, secured by a Purchase Money Mortgage ("Mortgage") on real property conveyed to Blue Coal and a Purchase Money Security Agreement on the "accounts'?* "contract rights", "equipment" and "inventory" of Blue Coal (as those terms are used in Title 12; of Purdon's Penn. Stat. Sections 9-106, 9-109), with prescribed prepayments on the Note the Mortgage of (i) $166,666.67 on each of February 15, 1967, 1968 and 1969; , (ii) all cash received by Blue Coal from or on account of condemnations (or sales lieu thereof) of the Mortgage Property and two-thirds of all cash received by Blue Coal or on account of any other sales of the Mortgage Property (the prepayments described in subsection (ii) to be applied against the latest maturing instalments of principal of the Note, a Mortgage); and (iii) on March 1, 1968 and on the 1st day of each month thereafter, l/96th of the (xj balance of the principal amount due on February 28, 1968 less (y) the prepayment due Febi 15, 1969; and (e) other miscellaneous consideration. ini ,;*i Glen Alden remains contingently liable for all of the liabilities assumed by Blue Coat The amot _ of such liabilities was approximately $6,350,000 as of December 31, 1965 and was reduced to approx* mately $2,625,000 as of October 31, 1966. Among the obligations and liabilities assumed by Bh Coal were the obligations under a Conveyance of Production Payment dated December 30, 19< by Glen Alden to Durham Coal and Oil Corporation ("Durham"), as amended, in the amount o| $3,479,130, reduced to $2,333,000 at October 31, 1966. The sale and conveyance of the coal lane to Blue Coal required the approval of Durham, to whom Glen Alden had conveyed a Production] Payment pursuant to an agreement dated December 30, 1964, as amended. In consideration *qz Durham's consent to such sale and conveyance and Durham's release of certain lands theretofore 6i about to be condemned by the Commonwealth of Pennsylvania, and the awards relating thereto/' iU Glen Alden agreed to purchase the Production Payment as defined in the Conveyance (a) on December 31, 1968, or (b) at such earlier time, at Durham's request, as the consolidated net current assets of; Glen Alden shall be less than $5,000,000, in each case for an amount equal to the then unpaid balanc t of the Total Sum as defined in the Conveyance. Simultaneously with the sale of the coal properties to Blue Coal, Glen Alden sold and delivered the 1,000 shares of Blue Coal common stock to Raymond Colliery Company, Inc. ("Raymond"), a Pennsyl vania corporation, owned by parties unrelated to Glen Alden, for $500,000 in cash. Four of the stock-, holders of Raymond unconditionally, and jointly and severally, guaranteed performance by Blue Coal of its obligations under the $5,775,000 Note and Mortgage and Purchase Money Security Agreement, the guaranty, however, being limited to a maximum liability of $1,500,000 and terminating on January 31. *' 1970 if there shall then be no Event of Default as defined In the Mortgage (or any circumstance which with notice or the lapse of time or both would be an Event of Default), or at such later time as there shall be no such Event of Default or circumstance. 46 said stockholders of Raymond also are obligated to pay in cash to Blue Coal such amounts, jtto exceed $500,000 in the aggregate outstanding at any one time, as shall from time to time be ^'ifrtrif by Blue Coal to maintain a minimum net current asset position of $1,000,000, or after the ^Conveyance of Coal Production Payment has terminated, a minimum net current asset position 500,000. foregoing (and other) obligations of the said stockholders of Raymond are secured by a pledge of the outstanding stock of Blue Coal, Raymond and Carbondale Coal Company. Glen Alden is involved in a number of present and potential court and administrative proceedings to past and present coal operations and lease arrangements of it and its predecessors, all of which lgs are subject to the agreement between Glen Alden and Blue Coal described in subparagraph 'above. Some of such proceedings involve, or may involve, alleged air pollution claimed to be attrib- le to burning culm (refuse) 'banks. In November 1965 an action was commenced by the United t of America against Anthracite Export Association and others, including Glen Alden, then a member Association, alleging a violation of the Sherman Act in, among other things, fixing the prices of site supplied by the defendants under the United States Army program and in limiting participation United States Army program of purchasing solid fuel mined and produced from United States s for the use of the United States Armed Forces in Europe, and asking, among other things, for an against fixing prices or allocating sales of anthracite for domestic or export trade and against lining to participate in such United States Army program. No answer has yet been filed, but Glen . takes the position that it has acted properly pursuant to the provisions of the Webb Pomerene Act. lent has continued to maintain reserves for all such liabilities which in its opinion are adequate amounts which Glen Alden may be required to pay. , {.compensation for his services to Glen Alden in connection with the sale of the assets and of the Coal Division, Glen Alden has paid Albert A. List, former Chairman of the Board President of Glen Alden, $100,000 in 1966 and an additional $100,000 in 1967. A shareholders' action has been instituted to compel a refund by Mr. List of said payments. i^Manufacturing Company jGlea Alden owns 562,500 shares (approximately 18%) of capital stock of Briggs Manufacturing npany ("Briggs") which is carried on Glen Alden's September 30, 1966 balance sheet at approximately 16,000 and notes of Briggs in the remaining principal amount of $2,265,000 as of September 30, ){0 The majority of these securities were acquired by Glen Alden upon the sale of its Mathes air^ooditioning division to Briggs in 1961. The capital stock of Briggs is listed on the Detroit Stock ige. On March 3, 1967 the closing price of such stock on such Exchange was $1.75 per share. ' Briggs and its subsidiaries are engaged principally in the manufacture and sale of water-heaters plumbing ware. In addition, through certain wholly-owned subsidiaries, Briggs fabricates and . fells metal and plastic signs (through Texlite, Inc.), operates an aircraft maintenance business at Miami . International Airport (through American Airmotive Corporation), and operates a chain of retail auto ^*Pply stores (through Western Tire Auto Stores, Inc.). The net sales of Briggs and its subsidiaries for . -dm year ended December 31, 1965 were $65,114,802, and the net loss was $3,179,166. The net sales . **nd net loss for the year ended December 31, 1964 were $60,596,255 and $2,812,732, respectively. The net sales and net loss for the eleven months ended November 27, 1966 were respectively $51,090,000 <*od $6,449,000 (including non-operating losses of $2,798,000). On July 13, 1966, in connection with certain financing arrangements among Briggs, certain of its .r- trade creditors, and Bankers Life and Casualty Company ("Bankers Life"), 1,001,282 shares (approxi- ately 31%) of Briggs' capital stock owned by Republic-Odin Appliance Corporation and Milton J. t &*vens, the former Chairman of the Board of Briggs and the sole stockholder of Republic-Odin Appli ance Corporation, were placed in a voting trust, the trustees of which are designated one-half by Glen *den and one-half by Bankers Life, and Glen Alden undertook an active participation in the manageJit of Briggs. 210,074 of the above mentioned shares of Briggs capital stock were transferred subject 47 t .o prior rights of certain pledgees. The pledgees holding 150,074 of such shares have given they intend to sell said shares in exercise of their rights. Simultaneously with the above transaction, (i) Glen Alden agreed with Bankers Life to bear one-h of any toss suffered by Bankers Life in respect of Don-payment of any part of a $3,000,000 loan by Bankers Life to Briggs and secured by Briggs' inventories, and (ii) Glen Alden acquired options' purchase, at any time on or before July 1, 1971, all of the shares placed in the voting trust (orj voting trust certificates with respect to such shares) and 300,000 shares of Briggs' capital stock t owned by Bankers Life. The aggregate purchase price payable by Glen Alden upon exercise of alT these options will be $3,802,564 plus an additional $66,666 if exercise is delayed until after June.; 1968. In connection with the acquisition of these options Glen Alden paid Bankers Life an initial' I of $100,000 and must pay an annual renewal fee in like amount each year to prevent the option on"' 300,000 shares owned by Bankers Life from terminating. On July 13, 1966 immediately following consummation of the above transactions, Paul A. Johnsfdjj President of Glen Alden, was elected Chairman of the Briggs Board of Directors, and Leonard C. Vice Chairman of the Board of McCrory and a Director of Glen Alden, and Harry . Barch, Assistant^ the President of Glen Alden, were also elected directors of Briggs. On August 22, 1966, Sash A. Sj formerly a general partner in McKinsey & Co., management consultants, was elected president and executive officer of Briggs. Mr. Spencer, who had no prior affiliation with either Briggs or Alden, was also elected a director in the place of Harry E. Barch, who resigned. Briggs and certain other plumbing fixture manufacturers are currently defendants in two actions and one civil action which were instituted by the U. S. Department of Justice and two private treble damage actions, all charging the defendants with conspiracy to fix prices of plumbic fixtures in violation of federal antitrust laws. Ho prediction can be made of the outcome of these at the present time. In November 1966, Glen Alden and Bankers Life guaranteed a line of credit from certain fact and banks to Briggs in the maximum amount of $4,000,000, secured by first liens on Briggs* accot receivable and second liens on its inventories. ... . In January 1967 Briggs defaulted on an instalment then due on account of approximately $4,200,( of indebtedness to trade creditors in respect of which the trade creditors had agreed to accept deferi payments in connection with the above described July 13, 1966 financing arrangements. The creditc have granted Briggs a moratorium until June"!, 1967 to cure this default, failing which all of indebtedness may become due. HISTORY AND BUSINESS OF B.VJ). Products -s B.V.D., a Delaware corporation organized in 1950, continues a business founded in 1876. B.V.D' and its subsidiaries are presently engaged in the manufacture of men's and boys' underwear, dress and sport shirts, pajamas, robes and swimwear, under die trade mark "B.VJ)."; men's and boys' knit outerwear and neckwear under the labels "Wonderknit," "Botany," "Beau Brummcll" "Fabiani", "Mr. John" and others; women's lingerie, sleepwear, bras and foundation garments, under the labels, "Flexees," "Gilead" "Jubiled* and others; men's and ladies' rainwear and all-weather coats under the labels "Alligator" "Almar" and others; work clothes and slacks under the labels "Anvil" "Meadow" and others; children's and infants wear, under the labels "Fawn," "McKern" and "Nappies"; men's toiletries under the "Aztec" label; and men's and boys' clothing under the "Timely" label and others. Through wholly-owned subsidiaries, B.V.D. operates 201 retail men's furnishings, shops and four leased departments throughout the country. In addition, B.V.D. owns a majority stock interest in Timely Clothes, Inc., a manufacturer of men's and boys' clothing, which corporation, through whollyowned subsidiaries, operates ten retail furnishings stores. Through wholly-owned and partly owned 48 subsidiaries, B.V.D. also manufactures yarn and manufactures and sells men's and women's t en's underwear and sport shirts, and ladies' undergarments. Through other wholly owned ies, B.V.D. manufactures and sells men's and boys' clothing. |ie approximate percentage contribution to net sales of B.V.D.'s various divisions, eliminating interjy sales, contributing at least 15% to aggregate net sales, and the approximate percentage contri>to operating profit of such divisions are, as follows: %x.. Year Ended April 2,1966 Net Sales Operating Profit 64.8% 20.8 80.8% 15.1 Six Months Ended October 1,1966 Net Saks Operating Profit 57.4% 22.3 88.4% .3* * Maximum profits in retail store operations are realized in the second six-month period. iT.i~ Materials tB.vib. uses both knit and woven cloth in the manufacture of its apparel. Approximately 75% cloth is purchased from outside sources. The balance of 25% is made up as follows: (I) Knit in manufacturing men's and boys' T shirts, athletic shirts and briefs. B.V.D. knits all of fait cloth used for the foregoing products. 90% of the yarn required for this cloth is spun by from raw cotton, which B.V.D. purchases. The other 10% of the yam is bought from outside a(2) Men's and boys' private label knit outerwear. B.V.D. knits 90% of its cloth requirements products and purchases 10% from outsiders. Of the cloth knit by B.V.D., 80% of the yam is spun by B.V.D. from raw cotton, and the remaining yam is purchased from outsiders. ' fait shirts other than the B.VJ). brand. Substantially all the cloth used for this product it by B.VD. from yam which B.VD. purchases from outside sources. '.'i 'n; or: liVJD. sells its men's and boys' underwear products, dress and sport shirts, pajamas, robes and :mhder the "B.V.D." label, principally to retail outlets, such as department stores, chain .Jmail order companies and men's specialty shops. Men's and boys' knit outerwear are sold under j*p'>.." and other labels in the same manner. Neckwear products and toiletries are sold to departstores and men's haberdasheries. Women's foundation garments, bras and sleepwear are principally department stores and women's specialty shops. Men's and boys' clothing, rainwear and allr coats are sold to department stores and to specialty stores. Work clothes and slacks are sold artment stores and chain stores. Children's and infants wear are sold to department stores, Salty shops and chain stores. Substantially all sales (except foreign sales, which are not significant) made by sales personnel employed by B.V.D. Substantially all sales, other than those at retail, are on open purchase orders. ,'ojB.v.VD. advertises its products in national and trade magazines, newspapers, billboards and printed faSS-griiaallss used in retail stores. 7r '/Jbv tB.YVJ). has li.censing arrangements in effect throughout the United States and in various foreign 1 Unc^er which the licensees manufacture garments under "B.V.D" and other labels and trade 'm cons^eration for the payment of royalties. Licensing in Central and South America (the ^income from which, however, is not significant) is done by B.V.D. International, Inc., a Panamanian corporation, 46.4% of the stock of which is owned by B.VD. and the remainder by nonaffiliated persons. Competition The men's and boys' underwear business is competitive but is relatively stable, since it is not fleeted radically by changes in fashion design or season (except in the case of winter underwear). 49 The men's and boys* knit outerwear business is highly competitive. The neckwear business is highly competitive and is affected by changes in fashion and design. The women's lingerie, bras and foundation garments, and the children's and infants wear businesses are highly com| and are affected by changes in fashion and design. The men's and boys' dress and sport shirts, paja robes and swimwear business is competitive and affected to some extent by changes in fashion design. B.V.D.'s business in men's and boys' clothing, rainwear, all-weather coats, work clothes slacks is competitive but relatively stable. Employees B.V.D. employs approximately 17,000 persons, of whom approximately 90% are engaged iu production of its products and maintenance of its plants and properties. Of the production and tenance workers, approximately 4,500 are employed under union agreements. Employee relations considered by management to be good. Plants and Properties , B.V.D.'s operations are conducted at various locations in the United States and Puerto Rico, it has subsidiaries operating in the United Kingdom and Spain. B.V.D. and certain of its subsic own plants located at: High Point, North Carolina Richmond, Virginia Clinton, South Carolina Mullins, South Carolina Mount Gilead, North Carolina Hamlet, North Carolina Candor, North Carolina West Wyoming, Pennsylvania Washington, Georgia Tignall, Georgia As of March 1,1966, B. V. D. and certain of its subsidiaries sold plants located in Carrboro, bourn, Kings Mountain and Monroe, North Carolina; Cincinnati, Piqua and Tipp City, Ohio; Pem Pennsylvania; and Galax, Virginia, and a home office building located at Montvale, New Jersey, to) corporation all the stock of which is owned by The Bank of New York, as Trustee for an emploj pension fund of National Shirt Shops, Inc., a wholly owned subsidiary of B.V.D. The sales price was to B.V.D.'s book value of such real estate plus closing expenses, aggregating $5,000,000. Said prc erties were leased back to B.V.D. for a term of 25 years at a net rental of $375,000 per annum, options to renew for six successive five year renewal periods at reduced rentals. On December 21, 1! B.V.D. and certain of its subsidiaries sold plants located in St Louis, Missouri, Rochester, New Yc and Grayson County, Virginia, to a second corporation, all of die stock of which is owned by The of New York, as Trustee as aforesaid. The sales price aggregated $2,475,000, and said properties we leased back to B.V.D. for a term of approximately twenty-four years at an aggregate net rental $207,503.16 per annum, with similar options of renewal at reduced rentals. In addition to the forc^ going, B.V.D. and certain of its subsidiaries lease plants located at Caguas, Viequez, Lares, Utuado, Arecibo, Las Marias and Ponce, all in Puerto Rico; Pascagoula and Okolona, in Mississippi; Livingston^ Tennessee; Braselton and Atlanta, in Georgia; and Prattville and Bay Minette, in Alabama. B.V.D. main-1 tains its principal executive offices at 404 Fifth Avenue, New York, New York, under a lease expirii April 30, 1971, at an annual rental, which, at its maximum, is $36,500 per year. The minimum anna rental for all leased properties, including retail stores, aggregates approximately $3,900,000 per annum. In the opinion of B.V.D.'s management, the various plants maintained and operated by B.VD-i and its subsidiaries contain the necessary machinery and equipment for the activities conducted at the respective locations and the plants and equipment are well maintained and in good condition. There is herewith set forth in tabular form the average percentage utilization of capacity during B.V.D.'s most recent full fiscal year for each of its plants, 100% utilization being equated to a single shift operation. Each of said plants is in good operating condition and capable of meeting operating requirements in peak periods. 50 kvK ^ruot Location y^tafiStoo, Tenn. VfcquA P* Rt;.-,WP0i!-: V i ijjjBfrtaluu. '' > -* ..... joro, N. C.......... ,;cdbo, P. R.#l.... .-dbo, p. R. #2.... -dbo, P- R- #3.... :jldo, P. R.............. Las Marias, P. R...... , <' . ** Wyoming, ,, Pa.... Gilead, N. C. #1 "Gilead, N. C. #2. `Gilead, N. C. #3. Men's and Boys' Furnishings % Utilization 100% 90 90 88 90 100 95 60 100 100 90 100 Plant Location Caguas, P. R................ Kings Mountain, N. C.. Mullins, S. C................ Monroe, N. C............. Chadboum, N. C.......... Lares, P. R................... Tipp City, Ohio........... Ponce, P. R................... Cincinnati, Ohio ......... Galax, Va...................... Tignall, Ga.................... Washington, Ga............ Women's and Children's Wear 50% 85 85 70 75 Hamlet, N. C.. Braselton, Ga. . Prattsville, Ala. Atlanta, Ga. ... Okolona, Miss. % Utilization 15% 100 100 100 95 85 85 100 100 95 75 98 70% 60 80 80 80 Men's Clothing ette, Ala........................... ,'Miss. (men's)............... Va. ............................ HvwiU,r.>-''< ' ' V<v Acquisitions and Events 98% 95 100 St Louis, Mo... Rochester, N. V. 98% 93 is herein set forth in tabular form details concerning B.V.D. acquisitions during the past five jsettiog forth (1) the companies acquired; (2) the dates of acquisition; (3) the net book value `'`assets acquired; (4) the net income of the acquired companies for their last full fiscal year acquisition; and (5) the consideration given. In none of the foregoing acquisitions was there 'relationship between the acquired company and Glen Alden or any of its affiliates, Mr. Kittay, or ^ associate of the foregoing, except that National Shirt Shops Inc., which had originally been owned ibyiMcCroty, was sold to individuals who were principals in a corporation licensed by B.V.D., and - thereafter sold to B.VJX !**. ; .mr ' mi B-V. * *- L*xv fO' fcj 51 4 Company Beau Brummell Ties, Inc.................... County Mills, Inc................................. Effective Book Value Date of of Net Assets Acqufattioa Acquired 2/28/62 5/ 7/62 $1,547,555 1,054,378 Net Income/ (Lorn) For Lest Full Fiscal Year Prior to Acquisition (6/30/61) $ 87.116 11,898 /--Consideration Shares of B.V.D. Common Stock ifl 291,920(1) -- $1.36^ Mullins Textile Mills, Inc. ................. Flexees International, Inc. and 50% of the stock of Flexees Limited .. . 5/ 7/62 8/31/62 188.824 38,772 (12/31/61) (23,038)0) (219,708)0) 34,258 -- B. W. Mayer & Cohan Ltd................... United Mills Corporation.................... Wonderknit Corporation .................... L & B Enterprises, Inc......................... National Shirt Shops Inc..................... 4/ 1/63 12/31/63 7/ 1/64 8/28/64 10/ 1/64 52,107 1,280,793 326,028 620,926 1.366,157 (45,078) (90,857) (5/31/64) 131.684 (S/2S/64) 63,329 510,827 1,000 91.030 19,476 28,694 -- 3 'SI v>(Q| . 1,625,1 Fordham-Bardell Shirt Corp.............. 12/ 1/64 1,305,470 289098 125,000(5) The Alligator Company, Inc-.......... Anvil Brand, Incorporated................. Adams Clothes, Inc............................... Alnaar Rainwear Corporation............. Meadow Sportswear, Inc..................... Timely Clothes, Inc............................... Friedman-Marks Clothing Company, Inc. and its two affiliated corpora tions, Rockingham Stores Incorpo rated and 1400 West Marshall Street Corporation .......................... 6/11/65 2/ 1/66 5/16/66 6/17/66 6/30/66 <8) As of Close of Business 10/ 1/66 3,311,437 1,425,378 2,621,638 1,220.909 2060,040 (4/2/66) 4,165,729 . 5,243,090 (570058) 152,647 (S/31/64) 145,760 (6/30/6S) (143,520) (6/30/66) 827,545 (10/31/65) 75,078 -- 82,277 113,438(6) 56,500 3,63? Dt iOi : . / oSj 2,360,1 4,098,1 (11/30/65) 851,000 (Approx.) -- _ 7,501)3 (1) Including 135,180 shares Issued io exchange for a like number of shares of Beau Brummell Ties. Inc., ac by B.V.D. in July, 1961, for $1,263,262. (2) As of December 31, 1963, B.VD. sold its investment in County Mills, Inc. at underlying book equity. (3) Does not include B.V.D.'s equity in (a) the book value of Flexees Limited at date of acquisition and (b) net income of Flexees limited for the last full fiscal year prior to acquisition, which amounts are not stgni'r B.VD. has as of February 1967 purchased the remaining 50% of the stock of Flexees Limited, plus an a< payable from Flexees Limited to the selling stockholders, in exchange for 5,961 shares of B.V.D.'s capital (4) B.VD. had previously made a loan to National Shirt Shops, Inc. of $3,500,000. (5) Plus a further number of shares issuable at the end of a five-year period, the exact 0f w;_ contingent upon net earnings of Fordham-Bardell Shirt Corp. over said period, namely; one additional for each $2.00 of such net earnings after taxes in excess of $250,000 (averaged out on a yearly basis forii five-year period) op to an average five years' net earning of $375,000, or 62,500 shares, and then one ma additional share for each additional $8.00 of such average net earnings in excess of $375,000 without,linu| during said period. ^ (6) Plus a further number of shares issuable at the end of each of two successive three-year periods and a L further period of four years, the exact number of which further shares is contingent upon net earnings Adams Clothes, Inc. over said periods. Between May 16, 1967, and May 16, 1970, the B.V.D. stock ' ~ in this transaction may be put back to B.V.D. at $24 per share, if the market price is then less. (7) Plus a further sum payable after seven years which sum is contingent upon net earnings of Meadow Sporti wear, Inc. during said period. The contract provided that approximately $1,000,000 of the purchase pric was payable in shares of B.V.D. Common Stock valued as of the close of business June 30, 1966 ($25375).' On July 5, 1966 the principals, Emanuel E. Davis and Pearl L. Davis, agreed, from the cash proceeds! received in the _transaction, to purchase an additional 20,000 shares of B.V.D. Common Stock at the same] price. B.VD. is obligated, at the option of Emanuel . Davis and Pearl L. Davis, to repurchase all of the] foregoing shares of B.V.D. Common Stock during a limited period of 90 days commencing August 31, 1969 aff the purchase price of $25,375. u (8) Between February 9, 1966 and December I, 1966 B.VD. acquired 162,949 shares of the Capital Stock of] Timely Clothes, Inc. and $597,000 of its 6V6% Convertible Subordinated Debentures, alt of which debentures; have since been converted into shares of Capital Stock of Timely. As a result of the foregoing B.V.D., as of] December Z, 1966, holds a total of 199,937 shares of Timely's Capital Stock at a total cost of $4,098,695*] which shares represent approximately 90.8% of the outstanding Capital Stock of Timely Clothes, Inc. ' (9) Payable $200,000 in cash and $7,300,000 by the issuance by B.VD. of 20 year, 5% convertible subordinated debentures convertible into Common Stock of B.VD. at $30 per share. Said debentures contain customary anti-dilution clauses. The agreement provides that if B.V.D. does not redeem $5,500,000 of said debentures on or before August 15, 1969, the sellers shall have the right to have the stock of said companies returned to them upon surrender of the 57,300,000 in debentures, or their equivalent in cash and B.VD. stock, if previously converted, plus $100,000. (See Note J at page F-32 for a further description of the provisions of said debentures.) 52 iV.D.*i acquisition of a majority interest in Timely Clothes, Inc. was effected in February, 1966. 0 flothe3, Inc., Almar Rainwear Corporation and Meadow Sportswear, Inc. were acquired by m, as of May 16,1966, June 17, 1966, and June 30, 1966, respectively. The results of the operations ' `Rainwear Corporation are fully reflected in the financial statements set forth herein on a pooling- basis, and the results of the operations of Adams Clothes, Inc. are similarly reflected for the ttace February 1, 1966 (operations of Adams Clothes, Inc. for previous periods were not mateiTbe results of the operations of Timely Clothes, Inc. and of -Meadow Sportswear, Inc. are [in the financial statements set forth herein for the periods since April 2, 1966 and July 1, 1966, Jy. Friedman-Marks Clothing Company, Incorporated was acquired by B.V.D. as of the close [badness on October 1,1966 and is not reflected in the financial statements set forth herein. December 15, 1965, B.V.D. entered into a Revolving Credit Agreement arrangement with of New York, Girard Trust Bank, Bankers Trust Company and Manufacturers Hanover "Cbmpany, which provides for loans up to $6,000,000 from each of said Banks to July 31, 1969 ltotst at 5% per annum. The parties have since agreed to reduce the credit by $1,000,000 per commencing April 15, 1967. Said Agreement, among other matters, contains working capital jents and restrictions upon payment of dividends, purchases of B.V.D. stock, loans or advances iases of assets from Glen Alden, and acquisition of other companies, and provides that I Kittay is to continue as Chairman of the Board and chief executive officer of B.V.D., falling which may be called. The Revolving Credit Agreement further requires the consent of the Banks * tof B.V.D.'s assets, which consent has been given subject to consummation of the transaction. .Acquisition Agreement provides that, as a condition of closing, waivers and consents be where required. The parties to the Revolving Credit Agreement have orally agreed that on 1 1, 1967 the rate of interest shall be one-quarter of one percent above the prime rate, the fixed five percent (5%). j*of October 1, 1966, B1V.D. obtained a subordinated loan of $5,000,000 from Von-T, S.A., l|RJ\, due January 31, 1970, with interest at 6% per annum. On December 1, 1966, B.V.D. 'acommitinent from the same lender for an additional subordinated loan of $5,000,000, maturing date;'with interest at 6% per annum, of which $1,000,000 had been borrowed prior to 0? 1967.' -'i-- jNpyember 16, 1966, B.V.D. sold to Banque de Paris et des Pays Bas 80,000 shares of its J (Stock for die sum of $2,000,000; on November 23, 1966, B.V.D. sold to Amincor A.G., e<for Fasco A.G., 40,000 shares of its Common Stock for the sum of $1,000,000. Each of said was granted the right, exercisable for a period of thirty days commencing on a date three the closing of each of said transactions, to require B.VJD. to repurchase said shares, or any )f, at the aforesaid purchase price of $25 per share. Each of said purchasers has agreed to fcHares of Preferred Stock of Glen Alden Corporation, upon consummation of the B.V.D. Trans|f?*fefl*'8nd, thereupon, the repurchase obligations will be assumed by Glen Alden Corporation's newly [; , oynizcd subsidiary. On February 21, 1967, B.V.D. entered into a similar agreement with Banque de tom ^ Mines for the sale of 36,000 shares of its Common Stock for the sum of ^ sak bas not as yet been consummated, and has orally negotiated a similar sale of 44,000 ^ stock upon the same price per share and other terms to one additional purchaser, which *v^nent bas not to date been signed. The net proceeds realized and to be realized from the foregoing Ct 0^ stOck have been and will be added to B.V.D.'s working capital. ' * t/Ci. B.V.D. and its subsidiaries have pending three transactions with industrial development corpora te ttitf;0De m k*u^ns' Soutb Carolina, under the terms of which B.V.D.'s subsidiary, Mullins Textile Ss vrT* k constructing an extension to its manufacturing, warehousing and office facilities of ^^TMInateIy 120,000 square feet, and is in negotiation with Industrial Development Corporation in Iqp C5fy of Mullins, South Carolina, for the sale of the premises to said corporation for $1,000,000 leaseback for a period of twenty-five years at a rental sufficient to repay said sum, together with _ _ over *said period Vofcf titmWlVe), LrVeAnIVUta-Al CaSVt VthIIVe VeUnUd VoIf VthiIVe ttwVT VeUnVtJy*-Ufiv* We-*Jyear pSVe&r1ioWd Wto UbVe AniVeggVoWtitatVtVeMdi. A4 i *ilar transaction is pending by Wonderknit Corporation, a B.V.D. subsidiary, covering the construc- of new manufacturing, warehouse and shipping facilities of approximately 168,000 square feet in 53 i Mocksville, North Carolina, with Industrial Development Corporation in the County of Davie, N Carolina, involving $1,200,000. A third similar transaction, not as yet commenced, is plannee B.V.D. in Clio, South Carolina, covering the construction of a new manufacturing, warehousing shipping facility of approximately 180,000 square feet, the negotiations being held with Indust Development Corporation in the Town of Clio, South Carolina, and involving a possible $1,500,000 the transaction. In addition to the foregoing, Meadow Sportswear, Inc., a subsidiary of B.V.D., is negotiation with the City of Okolona, Mississippi, for the construction of an additional manufactur. facility of approximately 40,000 square feet, which will involve an expenditure of approximately $250,0 with a sale to the City and leaseback on an approximate 20-year lease on a self-liquidating basis. General HISTORY AND BUSINESS OF PHILIP CAREY Philip Carey was organized in 1888 under the laws of the State' of Ohio, and its general offi and principal plant have been located in Lockland, Ohio, adjoining Cincinnati, since 1895. Philip Carey is principally engaged in the manufacture and sale of roofing products, indusv products, asbestos fibres and related products, Miami-Carey Division fabricated products, and Insula' Division products. In addition, Philip Carey purchases a small variety of products for resale to customers as an accommodation. Asbestos fibre in various forms is an important ingredient in many of the products manufa by Philip Carey, and Philip Carey's subsidiary, Carey-Canadian Mines, Limited (herein referred fo "Carey-Canadian"), operates an asbestos mine and milling plant in Canada (described below) wiu produces asbestos fibres both to meet a significant portion of Philip Carey's requirements and sale in the open market The following table shows for the year ended December 31, 1965 and the nine months en September 30,. 1966 the approximate percentages of contribution to net sales and operating profit of. Carey's principal product lines contributing at least 15% to net sales or operating profits: - - - . Roofing Products........i................................ . Industrial Products.................................. ..... Asbestos Fibres and Related Products(l). Miami-Carey Division Products.......:......... -------- 1965---------- , Net Operating Safes Profit Nine Months Eode^ ,---- September Net Sales Profit 40.6% 9.0 15.2 15.9 24.9% 21.6 33.8(2) 12.9 39.1% 9.7 14.5 18.1 (1) After elimination of intercompany transactions. (2) After normal depletion deductions. Apart from "Asbestos Fibres and Related Products", the variation in the contribution to operating profit in relation to total sales is in large measure explained by differences in costs of sales and the necessity in the case of the Miami-Carey Division of incurring substantial transportation and warehous ing costs. Competition and other related matters affect the distribution selling costs of the vario* products manufactured and sold by Philip Carey. The Asbestos Fibres and Related Products contribute a higher percentage of operating profit relation to net sales partly because Philip Carey is able to market a substantial portion of its asbest fibres at low selling costs due to having an assured outlet to its own plants and partly because of the present strong demand in the world market for the type of asbestos fibres produced. Management makes no prediction as to the future of these markets. 54 jjnta following is a description of Philip Carey's principal product lines: m Roofing Products. Philip Carey's principal roofing products are asphalt shingles, roll roofings, ^mrited roofing felts, roof coatings, and asphalt plastic cements. .x1 Industrial Products. Philip Carey's principal industrial products are pipeline felts and padding, inorganic and organic papers, asphalt and fibre expansion joints, asphalt plank and tile, and ^`JJfciaproofing products. Asbestos Fibres and Related Products. Carey-Canadian produces and sells asbestos fibres. (See bSow under "Asbestos Mine and. Mill".) During the past four years sales to Philip Carey for its MB use by Carey-Canadian^^pjjaged about 18% of Carey-Canadian's total sales in terms of dollars ^dUbout 12.7% of total sales la terms of tonnage. The balance was sold by Carey-Canadian to outside tmTmrrr directly and through independent distributors. (See below under "Raw Materials" for ^BASnal asbestos requirements for Philip Carey.) Philip Carey itself manufactures and sells asbestos flat boards, siding, and corrugated sheets. ^f^Miami-Carey Division Products. The principal fabricated products of the Miami-Carey Division ^ bathroom cabinets, kitchen range hoods, bathroom and kitchen ventilating fans, bathroom wall ^mferorK door chimes, and bathroom cabinet lighting fixtures. Certain component parts, such as glass rs, a portion of the lighting fixtures for bathroom cabinet units and electric motors used fb^ventilating fans, are purchased. In addition, the Division sells bathroom accessories (such as liters, soap and glass holders, and electric bathroom heaters) and home radio intercommunication which it purchases from others. * lotion Division Products. The principal products of this Division are industrial insulation for ture ranges. In addition to selling these products, the Division acts as a contractor in installing Insulations manufactured by it and purchased from others. ccommodation Products. The principal products purchased by Philip Carey for resale to its ' an accommodation are roofing asphalts, tar pitches, and roof and home insulations. Distribution [Hip/ Carey sells its products through its own sales organization, principally to independent .. Its products are sold throughout the United States and Canada and many are exported .countries. It has district sales offices and warehouses at Atlanta, Georgia; Bellwood (Chicago), _ Beltsville (Washington, D. C.), Maryland; Boston, Massachusetts; Cleveland, Ohio; Dallas, jgai (warehouse only); Denver, Colorado (warehouse only); Detroit, Michigan, Jersey City, New York City, New York (sales office only); Philadelphia, Pennsylvania (warehouse only); * jMo^rancisco, CkHfonria (warehouseonly);Seattle, Washington (customer-service office only); St. Louis, Mtssoun; Montreal, Quebec; and St. John, New Brunswick, and warehouse facilities at its plants except ^ Srfpk*1*5.3* Wilmington, Swainsboro and Lennoxville. District offices and warehouses (except the Qgjadelphia warehouse which is owned and warehouses in owned plants) are leased. ..., . Carey maintains industrial contract departments at Detroit, Michigan; Indianapolis, Indiana; Angeles, California; Perth Amboy, New Jersey; Philadelphia, Pennsylvania; Providence, Rhode " ant* Washington, D. C., through which it furnishes and installs industrial and commercial insula^or boilers and similar equipment. jParC^^ana^*an s sa^es * ^bestos fibre (other than to Philip Carey itself) are to customers throughthe United States and Canada and in several other countries. rtq Philip Carey has approximately 20,000 customers. In 1965 the purchases of the largest single mer accounted for less than 2Vi % of net sales for such year. Raw Materials The principal raw materials used in the manufacture of Philip Carey's products are asbestos asphalt, cement, pulpwood, roofing granules, steel, tar, and waste paper. Philip Carey during secured approximately 53% of its asbestos fibre requirements from the East Broughton mill and pv the balance of its requirements (some of which are of different grades and types) in the. open All of the foregoing raw materials, as well as other items used in the manufacture or assembly of pr sold by Philip Carey are, in the opinion of management, in adequate supply and available from a nr of sources. Competition There is strong competition with respect to products sold by Philip Carey. Because of the variety of products which Philip Carey sells, it competes with a large number of both smaller and companies. The product lines of some of its competitors are not as broad as those of Philip Management of Philip Carey believes, on the basis of information available to it, that in T9 ranked fifth or sixth in the United States in the sale of asphalt roofings and ranked third in the. U States and Canada (measured in terms of tonnage) in the production of asbestos fibre. Asbestos Mine and Mill .. In 1915 Phflip Carey acquired a majority interest in a Canadian corporation which owned operated asbestos mines and a mill near East Broughton, P. Q., Canada, and subsequently acquir entire interest in this operation. The mining and milling of asbestos at this location was termina 1958 because the rock in these mines removable by open pit mining was exhausted. Between 1952 and 1956 Philip Carey's wholly-owned subsidiary, Carey-Canadian, acquiredtitl or mining rights in approximately 770 acres of land, also near East Broughton, through which e an asbestos bearing rock containing formations suitable for open pit mining. Subsequently, ad< real estate has been acquired surrounding this area, primarily for protection purposes. In 1958 Carey-Canadian completed the erection at this new location of a modem mill, of steel and asbestos cement board and consisting of a 12-story plant, warehousing faeflities, a shop, a research laboratory and other facilities. Open pit mining and milling on a commercial basis commenced on September 1, 1958. Since that time the warehouse capacity has been inc machinery has been added which has both increased capacity and added to the variety of fibred can be milled. As of December 31, 1965, the total investment in this-mill, its machinery and equip1 and in the mine and mining equipment, excluding rolling stock, amounted to approximately $15,550', Canadian funds, and the depreciated cost on the books of Carey-Canadian was approximately $6,650, The mill operations are highly automated. It has a capacity of at least 4,200 tons of rock per .da and for the past three years has operated at approximately 95% of capacity. It is served by the Que Central Railroad Company and by paved highways suitable for the shipment of asbestos fibres by tru The raining area has been divided by management for convenience into five zones, designa as Zones B, C, D, E and T. Carey-Canadian owns the land area of Zones C, D and E. It has o pit mining rights in the land area of Zone B granted by the land owners and mining rights in ,tb land area of Zone T granted by the government of the Province of Quebec. : All of these zones have been tested by Carey-Canadian to some extent by diamond drillin for the purpose of determining the character of the materials and the tonnage of underlying as bearing rock, available for open pit mining. Zone C has been so tested extensively and has been mined by Carey-Canadian by open pit mine methods during the past eight years. Some open pit mining has also been conducted in Zone B during the past two years. Based on the diamond drilling completed to date and the knowledge secured from the open pit mining in Zones B and C, management believes that in Zones B and C there are reserves of asbestos^3 bearing rock, estimated at approximately 36,705,000 tons, containing fibre of a fibre value similar 56 [; which has been heretofore mined and milled. If the foregoing estimates are correct, based "be present rate of mining, the asbestos-bearing rock of equal fibre value to that now being mined not be exhausted for approximately 30 years. i Additional drilling performed outside of Zones B and C indicates the existence in Zones D, E ' udaa aggregate of approximately 67,300,000 tons of asbestos-bearing material. Work done _ on these latter zones is insufficient to enable Carey-Canadian to predict to what extent, if *thi material can be mined commercially. Carey-Canadian intends, at some future date, to tj^oo further exploration in these zones to determine to what extent commercial mining is in feasible. The limited exploration already performed in the area outside Zones B and C indicates portion of the asbestos-bearing material (that contained in Zone T) is of approximately the s'grade as that contained in Zones B and C whereas the asbestos-bearing material in the other i appears to be of a substantially lower quality. LThese mines are known as short fibre mines, and the fibres produced are predominantly in the fNpriced "Asbestos Shorts" grades which are used in the manufacture of floor tile, plastics, joint"lt and similar products. However, important production is also obtained of fibres falling fAsbestos Fibres" grades which are used principally in the manufacture of asbestos papers and i cement products. total quantity of asbestos-bearing rock processed in the mill, the quantity of asbestos fibre the percentage of recovered fibre to rock milled, and the direct operating cost per ton v mined and milled (exclusive of depletion, depreciation, general administrative expenses, and on income) during each of the past three years and for the first eight months of 1966 are as follows: Direct It Toos Percentage Operating Costs per of Rock Tons of Fibre of Fibre Ton of Rock Milled Recovered Recovered Milled >63. ....................................... 1965........................................ tv.[1966 (Through August 31) 893,848 974,913 1,069,628 721,982 171,048 182,224 190,564 122,741 19.14% 18.69% 17.81% 17.00% $4.23 4.23 4.01 3.82 jhaye been no material changes in mining conditions or in the deposit being mined at these jbverthe past several years and none are anticipated, other than normal variations which may 1 nom the relocation, if any, of mining operations and the type and quantity of fibre produced. HowfjPcosts may increase in the future due to increased ratio of waste removed to asbestos-bearing rock as the depth of the pits increases. Hauling and water pumping costs also increase for the reason. m* ring and Other Principal Properties In addition to the East Broughton mill, Philip Carey operates ten manufacturing plants, four of jWeh are devoted to the manufacture of "Miami-Carey Division" products, and the remaining six of Rliph manufacture various items included in the other general product lines. These plants are of widely varying ages, the oldest having been built in 1895 and the two newest having been completed in '*966. Six of these plants are owned by Philip Carey and two are occupied by Philip Carey under term leases with purchase options, with respect to which the aggregate annual rental obligation is r_ remaining two plants are owned by Philip Carey Co., Ltd., a wholly-owned Canadian The buildings are of different types of construction, including brick and steel, corrugated concrete blocks and other non-combustible materials. The plants have transporta . I*-Bon facilities for both raw materials and finished products which management believes to be adequate. maoagement believes that all of its plants are well maintained and are suitable for the purposes 57 intended, are being operated efficiently and have capacity for substantially increased production; ten major plants operated by Philip Carey in addition to the East Broughton mill, the principal tions of each at the present time, and the approximate space they occupy are listed below: Location Lockland, Ohio..................... Perth Amboy, N. J.............. Wilmington, Illinois............. Memphis, Tennessee............ Houston, Texas..................... Monroe, Ohio........................ Swainsboro, Ga. (leased).... Santa Fe Springs (L. A.), California (leased) ......... Principal Operations Philip Carey's general offices: manufacture of bunding materials and industrial products. Manufacture of asphalt shingles, roll roofings felts, asphalt coatings and plastics, and asbestos cement siding and flat boards. Manufacture of asphalt roofing products and roofing coatings and plastics. Manufacture of asphalt roofing products, roof coatings and plastics. Manufacture of saturated felts, asphalt shingles and roll roofings, asphalt coatings and plastics. Miami-Carey Division products. Manufacture of door bells, buzzers, door chimes. transformer*, push buttons and driveway alarm signal systems (Miami-Carey Division). Manufacture of Miami-Carey Division products. Buildings 1,090,660 sq.ft 219,130 sq. ft. 278,630 sq.ft 133,400 sq.ft 70,700 sq.ft 276,500 sq. ft 35.000 sq. ft 87,300sq.ft. tM 81*3.,! 47.6 t & in M 11 15 :T 213 ^ 30 "> 4.827' LennoxviDe, P. Q-, Canada.. Manufacture of asbestos paper, felt paper, asphalt shingles, roll roofing, roll brick a'ding, insolated brick aiding, expansion joints, composition planking, asphalt coatings and plastics and low pressure coverings. 109,400 sq. ft Toronto, P. 0,, Canada........ Manufacture of Miami-Carey Division products. 88,000 sq. ft 13 Employee Relations m f.w( Carey and its Canadian subsidiaries have approximately 3,500 full-time employees in the Ur States and Canada. Substantially all of its approximately 2,600 production and maintenance hoi rated employees are represented by labor unions. Philip Carey has eight principal labor agreement which five (including two in Canada) expire in 1967, two in 1968 and one in 1969. Philip Carey'c siders its relations with its employees and the unions representing them to be satisfactory. ', Carey and its Canadian subsidiaries have in effect pension plans for their salaried employees at four of its plants, for hourly-rated employees, and other employee benefit plans providing life it sickness and accident benefits, and hospital and surgical benefits. 58 MANAGEMENT OF GLEN ALDEN CORPORATION Nta present directors of Glen Aiden will continue in office as directors of Glen Alden Corporation. All 'Iqt officers of Glen Alden, Philip Carey and B.V.D. will continue in their present capacities (except S. King. Chairman of the Board of Philip Carey, who plans to retire because of his age). ^fetors listed below will serve until the first annual meeting of the stockholders of Glen Alden Corporariving Corporation) which is scheduled for May 1968, and until their successors shall be elected and jlified. ^, stjon respect to the principal occupation of each of the persons who will be directors of Glen Alden _____the periods which they have served as directors of Glen Alden, and their beneficial ownership of shares Philip Carey and B.V.D. as of February 15, 1967 is set forth in the following table: Serred Dircatar I Clea Alden Sine* Principal Occupation Clea Aides Pfcuip Cemnea udSfairee Carer Ceauaea Share* cad Eqairaleat Eqalreleat la Clea la Clea Aldea Aldea Cerperatiea Carparatiap Caramon Sealer Slaek(l) Stack Stack fcBeeker....... .. 1964 Vice Chairman of the Board (formerly Financial Vice-President) and Treasurer of McCrary; Chairman of the Finance Committee and Financial Vice-Presi dent of Rapid-American Corporation. .. 1957 President of Fowler, Dick & Walker, 1,250 -- Department Store, Wilkes-Barre, Pa. -- S&.--..... . 1957 Chairman of the Board of Case & 500 jflkw- Company, Inc, Management Con HVT> sultants, New York, N. Y. ggfford(2) . January 17,1966 President and Director of The Security 500 -- -- National Bank of Long bland from February 1, 1966; for more than the previous 5 yean President of Metro iXmv r politan Division of Franklin National Bank and then Executive Vice-President of Franklin National Bank. :3:.C.V January 17,1966 Chairman of the Board of The Golden 2,020 -- -- Cycle Corporation, gold and uranium mining; until 1962 Chairman of the Board and President of BSF Company, * c investment company; from 1962 to 1964 Business Consultant and Invest V- W ?J- fw' ment Advisor to Continental Copper and' Steel Company, manufacturer of specialty metal products, and Plume JbaS ,.yr and Atwood Corp, brass and copper manufacturing. January 17,1966 Chairman of the Board of Financial 300 -- -- Mwmm Mi: r.. . sScrV" Consultants International S. A, Chair man of North Carolina Research Triangle Foundation; formerly United tggwui ; iVflfpTiT : " States Secretary of Commerce and Governor of North Carolina; and also Production Manager and in charge of textile mills of Marshall Field and Com pany and Head of the Textile Division of Office of Price Administration. JZumphrey(4).. P. Johnson(2) 1954 President and director of Philip Carey* -- Former Senior Vice-President and now 2,625 8,292 -- -- Director of Fidelity-Pbiladelphia Trust Johnston(2). 1965 Company, Philadelphia, Pennsylvania. President and Chief Executive Officer 2,100 -- of Glen Alden. )..... .......... September 19, President and Chairman of the Board -- -- 231,766 1966 of B.V.D, C. Lane(2) ... 1964 Vice Chairman of the Board of Me- -- -- Crory; Vice Chairman of the Board and Executive Vice-President of Rapid- American Corporation; President and Trustee of the National School of Home Study. mat.- 1964 President of Cello-Craft Products Corp., packaging materials manufacturer; -- -- Vice-Chairman of the Board of Rapid- American Corporation. Clea Aide*. Delaware Preference Stack Eqaireteat la Clea Aldea Cerpentlet Qui C Stock -- ---- -- -- 164,612 241,867 % M-- Austin List.... M. Lester Mendell(2) Gilbert H. Perkins Bert R. Prall............ Meshulam Riktis(2). Harry H. Wachtel. t Dh*M*r fCUa $Ja< 1965 1961 1954 1964 1964 1964 OwmpiHli Vice-President of Glen Alden and of Gera Corporation; President of Opp Cotton Mills and The Micolas Cotton Mills, subsidiaries of Glen Alden. Director of several corporations. For 2,700(5) merly Vice-President, Bankers Trust Company. Consultant to Chemical Bank New York Trust Company; formerly until his re tirement in August 1961 Vice Chairman of the Board of Chemical Bank Hew York Trust Company. Chairman of the Board, The ChicagoTokyo Bank, Chicago, Illinois. Chairman of the Board of Glen Alden; Vice-Chairman of the Board of Glen Alden (1964-1965); for more than 5 years Chairman of the Board and for merly President of McCrary and Chair man of the Board and President of Rapid-American Corporation. Partner, law firm of Rubin, Wachtel, Baum & Levin and predecessor law firm, Wachtel & Micbaelson; Executive Vice-President of Rapid-American Cor poration and of McCrary. -- (1) The following nominees have reported the beneficial ownership on February 15, 1967 of the following equity McCrary, which may be deemed to be a parent of Glen Alden: Isidore A. Becker, 14,100 shams Common Stock; Leonard C. Lane, 14,500 shares Common Stock, 30 Stock (owned as custodian for minor children, beneficial ownership is disclaimed); Bert R, Prall, 4,042 shares 500 Common Stock Purchase Warrants and 50 shares 4VS % Cumulative Preference B Stock; Meshulam Riklis, Common Stock; Harry H. Wachtel, 2,000 shares Common Stock. .. The following nominees have reported the beneficial ownership on February 15, 1967 of the following equity Rapid-American Corporation, the owner of approximately 51% of McCrary's outstanding Common Stock: Isidore A. Becker, 9,279 shares Common Stock and 23,000 Common Stock Purchase Warrants; Maurice 590,000 principal amount 5% % Convertible Subordinated Debentures; Leonard C. Lane, 58,939 shares Common, shares Common Stock (owned by spouse, beneficial -ownership is disclaimed), $550,000 principal amount 544 % Subordinated Debentures, $127,000 principal amount 544% Convertible Subordinated Debentures (owned as trustee children, beneficial ownership is disclaimed), $3,500 principal amount 544% Convertible Subordinated Deb by spouse, beneficial ownership is disclaimed); 15.000 Common Stock Purchase Warrants, 10,000 Common Warrants (owned by spouse, beneficial ownership is disclaimed); 9,700 shares of 754 Cumulative Convertible Prefc held in the name of Meshulam Riklis; Samuel J. Levy, 71.952 shares Common Stock and $154,800 principal Convertible Subordinated Debentures; Meshulam Riklis, 159,439 shares Common Stock (including 2^39 shares in Mrs. Riklis, 438 shares in the names of his three children), and 1,698 shares in the name of Judith R. Riklis and Delson as trustees for the three children, 125,000 Common Stock Purchase Warrants (of which 25,000 are in the Mrs. Riklis who also owns $9,100 principal amount 544% Convertible Subordinated Debentures), $1,800 principal 544% Convertible Subordinated Debentures in the names of the three children, $6,600 principal amount 544% Subordinated Debentures owned by Judith R, Riklis as custodian for the three children, $273,600 principal an Convertible Subordinated Debentures owned by Judith R. Riklis and George V. Delson as trustees for the three 45,268 shares of 754 Cumulative Convertible Preferred Stock (including 9,700 shares held for the account of Leonard ( Harry H. Wachtel, 565 shares'Common Stock and $100,000 principal amount 544% Convertible Subordinated Det-- Messrs. Riklis and Wachtel are two of three trustees of the McCrory-McLellan-Green Stores Division Emploi ment Trust which owns $1,300,000 principal amount 544 % Convertible Subordinated Debentures and 199,202 shares of Stock of Rapid-American Corporation and are also two of three trustees of Rapid-American Corporation Employees liquidation) which owns 23,013 shares of Common Stock of Rapid-American Corporation and are also two of three The Mayers Company Profit Sharing Trust (in liquidation) which owns 7,673 shares of Common Stock of Rapid- Corporation. The Rapid-American Foundation. Inc., of which Messrs. Becker, Lane, Riklis and Wachtel are four of directors, also owns 8,173 shares of Common Stock of Rapid-American Corporation. '1 The Directors and Officers of Glen Alden reported the beneficial ownership on February 15, 1967 of an a 133,642 shares (approximately 2.5%) of the Common Stock of McCrary and an aggregate of 288,950 shares (ap 13.7%) of the Common Stock of Rapid-American Corporation. (2) Member of Executive Committee. (3) Mr. Kittay has served as a director of B.V.D. since 1951. Mrs. Kittay holds 168,722 shares of Glen AldenPreference Stock, equivalent to 168,722 shares of Glen Alden Corporation Class C Stock, as of the Effective Date. (4) Immediately after the consummation of the Philip Carey Transaction, the Board of Directors of Glen Alden Co will be increased by one and it is expected that Mr. Humphrey will be elected to the vacancy. Mr. Humphrey has been * of Philip Carey since 1948. j (5) Not including 100 Common Shares of Glen Alden owned by Mr. MeodeU's wife. Mr. Mendefi disclaims any interest in the shares owned by his wife. 60 KemanertUon jC aggregate remuneration received from Glen Alden and its subsidiaries for the year 1966 for is all capacities by (1) each director, and each of the three highest paid officers, of Glen Alden ^remuneration exceeded $30,000, and (2) all persons as a group who were directors or officers Alden is set forth in the following table. The estimated annual benefit to be payable under Idea's Employees' Retirement Plan and Trust is also shown. Name Meshulam Riklis........................ >aul A. Johnston(2)..................... ted M. Lyon(3)......................... I**' ' . Austin List(4)............................... All Directors and Officers as a group (27 persons including the above)(5) ...................... ~...... Capacities in Which Remuneration was Received Chairman of the Board President President, Opp and Micolas Cotton Mills Vice President Aggregate Remuneration $ 50,000 115,000 58,250 56,666 634,033 Estimated Annual Benefitob Retirement tinder Retirement Plan(l) $11,000 18,000 1,500 14,000 estimated benefits under the Retirement Plan, with respect to which no amounts were set aside or accrued in 1966, will become payable in the amounts indicated if (i) employment continues until normal element age of 65; (ii) payments by employer corporations and/or earnings of the Trust are sufficient to permit payment of pensions at the rate now contemplated; and (iii) remuneration continues at the current >or contract rate until normal retirement age. Under a contract effective October 1, 1965, Mr. Paul A. Johnston will receive a salary at the rate of not less than $100,000 per annum for a term of three years and deferred compensation of $1,250 a month for each month of active employment under such contract, such deferred compensation to be payable $1,250 a month commencing on the last day of the calendar month immediately following the month .in which his active employment terminates and continuing until the total amount of such deferred compensation is `(exhausted. Unless either party elects not to extend such contract by at least six months' prior written notice, h shall automatically be extended for an additional period of three years. If Mr. Johnston shall be employed - for a period of ten years or more from October 1, 1965, he shall be entitled to receive an annual retirement sum which shall be calculated on the basis of $15,000 a year, less any amounts received under the Retirement t ' Plan, payable in the amount and subject to the conditions provided in such contract, commencing the last .day of the month in which Mr. Johnston reaches the age of 60 or the last day of the month in which his death shall occur. In the event that at the expiration of such contract Glen Alden and Mr. Johnston do reach a mutually satisfactory agreement for continuation of his employment by Glen Alden, Mr. Johnston ' * will act as a consultant to Glen Alden for a term of three years thereafter and shall receive compensation at the rate of $35,000 per annum, payable monthly, subject to earlier termination and circumstaoces. 3) Mr. Lyon retired as President of the Opp Cotton Mills and The Micolas Cotton Mills on December 31, 1966. (4) Under a three year contract effective October 1, 1965, Mr. Austin List received a salary at the rate of $50,000 per annum until April 1, 1966 and thereafter will receive a salary at the rate of $60,000 per annum. Unless either party elects not to extend such contract by at least six months' prior written notice, it shall automatically be extended for an additional period of three years. If Mr. List shall be employed for a xt- ^*1^ * ten or m<>re from October 1, 1965, he shall be entitled to receive an annual retirement sum of $10,000 a year, less any amounts received under the Retirement Plan, payable in the amount and subject i , to the conditions provided in such contract, commencing on the last day of the month in which Mr. List Z reac^les the age of 60 or the last day of the month in which his death shall occur. . *' ?Urin8 the year.cnd4 December 31, 1966 Glen Alden paid, in addition to amounts normally paid to s. ectors for their attendance at B---o--a-r--d---of D---i-r-e--c-t-o--r-s- ' mmeeeettiinnggss aanndd ffoorr tthheeiirr services in the capacity of rectors, an aggregate sum of $112,401 to three of its directors; one director was paid $25,000, a second rector was paid $10,000 as a consultant's fee and the balance was paid to another director pursuant to a" 8rement made on January 27, 1964 (when the recipient was not a director of Glen Alden) in connection with the disposition of certain assets of Glen Alden. 61 Glen Aides Stock Options The following table shows the number of Glen Aldeo Common Shares issuable under,! granted since January l, 1966 under Glen Alden's 1965 Qualified Stock Option Plan to of directors named above under "Glen Alden Remuneration" and to all other officers and dire group; together with information with respect to the same individuals and group concerning < exercised during year 1966. ` OPTIONS GRANTED Date of Expiration Number of Shares Market Value Pe? Share oa Date of j Grant and OpfllTa i Price Per Share*'J Officers and Directors as a Group..... 12/5/71 1/3/72 5,000 5,000 9-875 9.75 J OPTIONS EXERCISED Number of Shares Fred M. Lyon...................................... All other Officers and Directors as a Group ........................................... 600 2,200 Purchase Price $ 6,342 $23,254 Market Value onl Date of Purchase 2 $ 7,950'"vl $26,400 J * Above options were granted at 100% of market value as of the date of grant B.V.D. Remuneration The following table sets forth the remuneration for service in all capacities paid during the. ended April 2, 1966, by B.V.D. and its subsidiaries to each director and to each of the three high* officers whose aggregate remuneration exceeded $30,000, and to all directors and officers as a group] . Name Capacities in Which Remuneration was Received ,J Aggregate A Remuneration(a) . j jj Sol Khtay................. ..... Sol Goldentbal ........ ...... Harry Lesavoy.............. Harry C. Isaacs.............. G. Fred Noz................... Directors and Officers as a Group (consisting of 16 persons) .............. Chairman of the Board; President, and Director Senior Executive Vice President and Director Vice President and Director Vice President and Director Vice President and Director $ 75,150 46,950 * '* fl 50.150(b) 36,350 36,350 567.150(c) (a) None of the listed officers is entitled to any retirement or other similar benefits. (b) Mr. Lesavoy is employed under an agreement which runs for five years from May 7, 1962. at a salary of $2 per annum. He received a Restricted Stock Option for 20,000 shares granted at $12.01 per share, 85% of market price thereof, expiring May 6, 1967, increased by 6%--1,218 shares--under the anti-dilution pr thereof, without requirement of additional payment. This option has now been hilly exercised. (See MB.VJ9i| Options.") Mr. Lesavoy is not at present a Director of B.V.D. (c) Nick Badami, President of Fordham-Bardell Shirt Corp. (Fordham-Bardell), a subsidiary of B.V.D, Saul Goldmark, Vice-President thereof, each have five-year employment contracts from December !, 1964, at $5 and $42,000 per annum, respectively, with said subsidiary. By agreement of December 1, 1964 B.V.D. acquit of the capital stock of Fordham-Bardell in exchange for 125,000 shares of B.V.D.'s stock plus a further numb B.V.D.'s shares issuable at the end of a five-year period contingeot however upon net earnings of Fordham-Bardell^ said period; namely one additional share for each $2.00 of such net earnings after taxes in excess of $250^ (averaged out on a yearly basis for the five year period) up to an average five year net earnings of $375,000 per1 or 62,500 shares, and then one more additional share for each additional $8.00 of such average net earnings in $375,000, without limit, duriog said period. Nick Badami individually and as Trustee for his son Craig held 425 10%, respectively, of the stock of Fordham-Bardell, Saul Goldmark 15%. Riesner, Jawitz & Holland, of which Julian Jawitz, a director of B.V.D., is a partner, receb remuneration during B.V.D.'s last fiscal year aggregating $125,000 for legal services rendered \ B.V.D. and its subsidiaries. 62 L Stock Option* ^following table, as of January 20, 1967, shows the number of shares of B.V.D.'s Common Stock under options granted since die beginning of the last fiscal year under B.V.D.'s Qualified Stock piaa to officers and directors as named above under "B.V.D. Remuneration," and to all officers ^glfectors as a group, together with information with respect to the same individuals and group con- options exercised during said period, under the Restricted Stock Option Plan. No options have ` "exercised to date under the Qualified Stock Option Plan. Under the Restricted Stock Option Plan, ZL ^re granted at 85% of the fair market value of the stock as of the date of grant. No options issued under said Plan since December 31, 1964. Under the Qualified Stock Option Plan, 'were granted at 100% of the fair market value of the stock as of the date of the grant. Under Plan, options expire five (5) years from the date of grant and, in each case, participants are desig; by the Board of Directors, from among the management and key personnel of B.V.D. and its sub- ^4es. No options under either Plan can be exercised until the lapse of one (1) year from the date of and each optionee has agreed to remain in B.V.D.'s or its subsidiaries' employ for no less than one from the date of grant ^(9V. *CZ - :Z ' 'l-: `u. Customary anti-dilution protective provisions exist in both Plans. Date of Expiration ----- Options Granted-- Number of Shares Market Valoe Per Share on Date of Grant and Option Price Per Share* and Directors above named.......................... Officers and Directors as a Group..................... 2/10/71 4/ 5/71 5/24/71 6/29/71 --None-- 10,000 1,000 2,000 2,500 $25.70 26.75 23.50 25.13 Number of Share* -Options Exerdsed- ' MarketValue Purchase on Date of . Price Purchase voy............................................................... 0/Isaacs............................ ;................................. ! Noz..................................................................... Officers and Directors as a Group..................... 21,218 3,182 3,182 6,862 $240,400 $ 40,500 $ 40,500 $ 88,850 $499,685 $ 86,709 $ 76,368 . $167,945 Above options were granted at 100% of market valoe as of the date of grant Carey Remuneration The aggregate remuneration received from Philip Carey and its Canadian subsidiaries for the year 966 for services in all capacities by (1) each director, and each of the three highest paid officers, of Carey whose remuneration exceeded $30,000, and (2) all persons as a group who were directors TOC officers of Philip Carey is set forth in the following table. The estimated annual benefit to be payable the pension plans and trusts of Philip Carey and its Canadian subsidiaries is also shown. W. Humphrey(l).............................. -oss Barrett(2)..................................... AH Directors and Officers as a group (18 *- persons including the above) (5) Note; Capacities In Which Remuneration Was Received President Executive Vice President Aggregate Remuneration $ 78,000 48,000 385,469(3) Estimated Annual ` Benefits oo Retirement Under Pendon Plads<4) $ 19,236 13,823 131,331 U) Under a contract effective January 1, 1962, Mr. John W. Humphrey will receive a salary at the rate of 566,000 per annum and, if voted by the Board of Directors of Philip Carey or its Executive Committee, 63 additional compensation not to exceed $25,000 in any one year. Tbe contract extends through 1967, and thereafter until Mr. Humphrey's fulltime services are terminated by Philip Carey or Mr. Huta giving tbe other 90 days' notice. Upon cessation of fulltime employment, Mr. Humphrey may not -- with Philip Carey prior to September 30, 1977 and until that date will act as consultant to Philip' whenever requested to do so and shall receive compensation at the rate of $18,000 per annum, ' monthly, subject to earlier termination under certain circumstances. Such benefits will be in addition* benefits on retirement under the Company's Pension Plan. (2) Under a contract effective January 1, 1962, Mr. H. Ross Barrett will receive a salary at the rate of per annum and, if voted by the Board of Directors of Philip Carey or its Executive Committee, ad compensation as may from time to time be deemed warranted. The contract extends through Octo' 1967, and thereafter until Mr. Barrett's fulltime services are terminated by Philip Carey or Mr^ giving the other 90 days' notice. Upon cessation of fulltime employment, Mr. Barrett may not compe Philip Carey prior to October 31, 1977 and until that date will act as consultant to Philip Carey w`* requested to do so and shall receive compensation at the rate of $12,000 per annum, payable a subject to earlier termination under certain circumstances. Such benefits will be in addition to the on retirement under the Company's Pension Plan. " .-.ta (3) Under a contract effective January 1, 1962, Mr. Edgar H. Boadway received a salary at the rate ofv per annum and additional compensation in amounts voted by the Board of Directors of Philip Carey Executive Committee from time to time. Philip Carey terminated the fulltime employment and Mr. Boadway on April 30, 1966, the date of his reaching normal retirement age of 65. Mr. retired as Vice President of Philip Carey, but remains a Director of Philip Carey and its Canadian subst The contract provides that Mr. Boadway may not compete with Philip Carey or its Canadian subsidiaries' to April 30, 1976 and until that date will act as consultant to Philip Carey or its Canadian cut whenever requested to do so and shall receive compensation at tbe rate of $10,000 per annum, monthly, subject to earlier termination under certain circumstances. Such benefits are in addition to *h~ pension for $7,391 made up of $2,264 paid under the Company's Canadian subsidiaries' Pension pl under the Company's Plan and $4,584 which the Company has agreed to pay Mr. Boadway so thatJ pension will not be less than the amount he would receive if his entire compensation bad been pak^ Company. In addition under an agreement effective May 1, 1966 and cancelled effective December 3 Minerals Exploration and Consulting Company of which Mr. Boadway is the President and principal holder, received a fee of $2400 and an expense reimbursement for $530 for mineral exploration performed by Mr. Boadway exclusively for Philip Carey. - (4) The estimated annual pension benefits of certain officers also include benefits resulting from pcnnissfre tributions by them. ^ (5) Mr. George A. Rentschier resigned as a Director and from the Executive Committee on October 24,J personal reasons unrelated to the Philip Carey Transaction. Wertheim & Co., of which Milton Steinbach, a director of Philip Carey, is a general partn paid $50,000 in 1966 for financial services rendered to April 1966. \\ 64 INDEX TO FINANCIAL STATEMENTS v Pro Forma Combined Statements (Unaudited): Pro Forma Statements of Combined Income: Glen Alden and B.V.D............................... Glen Alden and Philip Carey..................... Glen Alden, B.V.D. and Philip Carey........ Pro Forma Combined Balance Sheets............. Glen Alden Corporation: Report of Independent Accountants............................... ^ Consolidated Balance Sheet............................................ Statement of Consolidated Income................................. Statements of Consolidated Surplus............................... <. Notes to Financial Statements........................................ 'The B.V.D. Company, Inc.: Reports of Independent Accountants............................ ^k Consolidated Balance Sheets............................................ Consolidated Statement of Income................................. tv Consolidated Statements of Surplus...........:....... .......... Notes to Consolidated Financial Statements.................. Philip Carey Manufacturing Company: Opinion of Independent Certified Public Accountants. Consolidated Balance Sheet............................................ Statement of Consolidated Earnings............................... Statement of Consolidated Reinvested Earnings......... Notes to Financial Statements....................................... 36 37 38 F-2 F-7 F-8 29 F-10 F-n F-18 F-22 31 F-24 F-25 F-33 F-34 34 F-36 F-37 F-l \ GLEN ALDEN AND SUBSIDIARIES THE B.Y.D. COMPANY, INC AND CONSOLIDATED SUBSIDIARIES THE PHILIP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPy PRO FORMA COMBINED BALANCE SHEETS (Unaudited) September SO, 1966 (Octoba I, 1966 is to B.VJ>.) ASSETS Current Assets: Cash, including bank certificates of deposit.............................. Marketable securities, at cost (approximates market)........... Trade receivables, less allowances............................................ Mortgages and other notes and accounts receivable--current portion ....................................................................................... Inventories, at the lower of cost or market................................ Prepaid expenses, etc.................................................................... Total currtnt assets...................................................... Mortgage Nona an Other Receivable*........................................... Glen Alden and Philip Carey (Note 1) $ 35,353,056 -- 19,291,918 2,506,960 18,008,182 520,493 75,680,609 9,367,867 Glen Alden and B.V.D. $ 37,796,723 84,445 28,081,383 4467,846 65495,170 520,493 137,046,060 9467,867 -1 Investments in and Advances to: Philip Carey common stock, at cost......................................... Briggs Manufacturing Company common stock and notes, at cost less appropriated reserve................................................ Foreign companies, at cost...................................I-.................. Sundry .......................................................................... --........ Property, Plant, Equipment and Leaseholds.................................. Less allowances for depredation and amortization................ _ -- 3,980,868 --- - 725,197 4,706,065 114,422,180 63,536,177 50,886,003 11,752,751 3480,868 907423 725,197 17466,339 82,739483 47421,451 34,818432 $4 144,4 68,C Other Assets: Intangibles, less amortization.......... ......... Deferred charges and prepaid expenses. Cash surrender value of life insurance... Deposits and sundry................................. Total ....................................... 2,118,089 1,549,392 -- 1,719,865 5,387,346 $146,027,890 2449493 2,773,439 549,711 762,630 7,035,773 $205,634471 10.C $259; See Notes to Pro Forma Combined Balance Sheets. F-2 GLEN ALDEN AND SUBSIDIARIES XHE B.V.D. COMPANY, INC AND CONSOLIDATED SUBSIDIARIES PHILIP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPANIES PRO FORMA COMBINED BALANCE SHEETS (Unaudited) September 30, 1966 (October !, 1966 u to B.VD) Glen Aides and Philip Carey (Note 1) Glen A(den and B.VJD. LIABILITIES AND SHAREHOLDERS* EQUITY 'Liabilities: ,payable to banks............................................................ portion of long-term debt........................................... ^'ti payable............................................................. -...... jp< factor........................................................................... expenses and sundry................................................... income taxes.............................................................. payable.................................................................... Total current liabilities............................................. Debt, less current portion........................................... 4CURREHT Items, principally deferred taxes................ IKTEBEST IK SUBSIDIAIIES................................................ $ 3,500,000 2,862,731 $,088,170 -- 6,056,68$ 915,863 840,163 19,263,612 21456,790 7,359,888 134,842 $ 8,525,000 4,687,170 18,276414 4,642,600 9,718,805 1,620,109 1,117486 48487484 44,606445 2,842,764 868,627 Glen Alden, B.VJJ. and Philip Carey (Note 2) $ 8425,000 6,056,493 22,124441 4,642,600 11,693,887 2435472 1,117486 56,695,879 56,392422 7404,858 868,627 s' Equity (Note 3): stocks, without par value: Senior, authorized 724,40$ shares, outstanding 724,40$ shares at stated value (aggregate initial voluntary redemption requirement $38,031,263)........................ Preferred, authorized 1,300,000 shares, outstanding . 603,393 shares at stated value (aggregate initial voluntary redemption requirement $66,373,230)......... Class C, authorized 1,200,000 shares, outstanding $83,334 shares at stated value (aggregate redemption requirement $$2,$00,060)............................................. Common Stock, par value $1 per share; authorized 21,000,000 shares, issued 6,124,986 shares............................................. Capital surplus.......................................................................... Gained surplus.......................................................................... 4 Common Stock in treasury, at cost (1,324,0$4 shares).... P Total stockholders' equity......................................... : Total ............................................................................... 724,405 .-- 724,405 -- 20483,020 20,233,020 -- 19,608,730 19,608,730 6,124486 73,151,486 33,941,924 (16,430,043) 97412,753 $146,027,890 - 6,124486 62,047,734 17,094,624 (16,430,043) 108,729,051 $205,634471 6,124486 73,151,486 33441424 (16,430,043) 137,404408 $259466,094 See Notea to Pro Forma Combined Balance Sheets. s1. ** -l . F-3 GLEN ALDEN AND SUBSIDIARIES THE B.V.D. COMPANY, INC AND CONSOLIDATED SUBSIDIARIES HttJP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPANIES NOTES TO PRO FORMA COMBINED BALANCE SHEETS (Unaudited) accompanying pro forma combined balance sheets should be read in conjunction with the financial staterelated notes thereto of Glen Aldeo. Philip Carey and B.V.D., and in conjunction with "Purpose and BackTransactions" and "Details of the Proposed Transactions", appearing elsewhere herein. 'provision has been made-for expenses (not expected to exceed $850,000) to be incurred in connection with transactions nor for "Stock Options and Commitments to Issue Stock" as set forth under "Details of the ictions" appearing elsewhere herein. JICin~ i tial redemption and liquidation prices of the Preferred Stocks in the aggregate ($156,904,553) exceed values by $116,288,398; and such excess exceeds the aggregate amount of Common Stock and surplus by ,^Upon liquidation the Senior Stock is first in order of preference and the Preferred Stock and Class C junior to the Senior Stock, but rank on a parity with each other. There are no restrictions upon surplus "of such excesses. Reference is made to "Future Dividend Policy" appearing elsewhere herein. $6: F-5 REPORT OF INDEPENDENT ACCOUNTANTS fond of Directors of Alden Corporation btve examined the consolidated balance sheet of Glen Alden Corporation and subsidiaries December 31, 1965, and the related consolidated statements of income for the five years then of surplus for the three years then ended. Our examination was made in accordance with accepted auditing standards, and accordingly included such tests of the accounting records 'other auditing procedures as we considered necessary in the circumstances. L< opinion, the accompanying balance sheet and statements of income and surplus present 'consolidated financial position of Glen Alden Corporation and subsidiaries at December 31, the consolidated results of their operations for the five years then ended, in conformity with accepted accounting principles applied on a consistent basis. i,completed our examination of the financial statements as of December 31, 1965, and for of five years then ended (referred to in the second paragraph above) on March 4, 1966, "^have made no review of transactions and events subsequent to that date. However, we have r'ied with a letter of Haskins & Sells, auditors for the year ending December 31, 1966, ites that although they have not.yet made an examination for any period, certain limited and inquiries carried out by them with respect to Glen Alden Corporation and subsidiaries Mtbring ^ their attention anything which would have a material effect upon the financial statements our opinion or which should be disclosed in order to make such financial statements not Ork, New York 3966 i & Ernst & Ernst F-7 September 30, 1966 (Unaudited) $ 3.500,000 1,240,143 840,163 686352 2309,039 m,oi2 1,493,408 11,155317 9,771,113 345,855 2,151339 134,842 ' 1320,872 and 1,324,054 Common Shares of treasury stock, at December 31, 1905 and September 30, I960, respectively, at cost...... Total Shareholders* Equity. and Contingent Liabilities (Notes J, K and L) Total ........................................................................ ........ See Notes to Financial Statements. J89.737.365 6,124^86 62,047.734 17,094,624 85,267344 16,430,043 68,837301 $92396,367 GLEN ALDEN CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED SURPLUS For the Three Years Ended December 31,1965 and (Unaudited) Nine Months Ended September 30,1966 CAPITAL SURPLUS Balance at beginning of period..................................... Yesr Ended December 31r 1964 1965 (Note B) $67,286,327 $67,264,477 $67344,771 Deduct: Excess of cost over proceeds received for shares of treasury stock issued upon exercise of stock options ................................................................ Excess of cost over par value of 554,716 shares of treasury stock retired........................................... Total........................................................ Balance at end of period............................................... 21.850 . 21,850 $67,264,477 19,706 19,706 $67,244,771 12,777 5.173369 5,186,046 $62,058,725 EARNED SURPLUS Balance at beginning of period..................................... Net income for the period............................................. Total....................................................... $ 8,382,354 7,898,788 16,281,142 Deduct: r v' Cash dividends........................................................ Appropriation for revaluation of investment in Briggs Manufacturing Company to approximate market ......................................................... ;.... Provision for prior years* Federal income taxes (Note G)............................................................ Total......................................................... Balance at end of period............................................ 3.85U19 3,851,319 $12,429,823 $12,429,823 9,777,144 22306,967 3.357,393 3,357393 $18,849374 $18.849374 3313372 22,162,846 3364,032 2,000,000 _ 5,364,032 $16,798,814 See Notes to Financial Statements. GLEN ALDEN CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS For the Three Yean Ended December 31, 1965 and (Unaudited) Nine Months Ended September 30,1966 jctples of Consolidation: |je(*cpo-nsolidated financial statement* include the account* of Glen Alden and all of it* subsidiary companies and to the elimination of all significant intercompany accounts and transactions. The statement of consolidated ifedodes the operations of Swift Manufacturing Company from January 1, 1962 aod those of Opp Cotton Mills ifllkolas Cotton Mills from August 17, 1962, effective dates of their acquisition; and of Aluminum Industrie*, November 11, 1963 and of the Hubscbman Division to November 20, 1964, effective dates of their disposition. January !, 1965, Glen Alden changed its method of accounting for investments in subsidiaries from cQg plus it* equity in their undistributed earnings since dates of acquisition. Accordingly, the appropriate to earned surplus was made as of Jaouary 1, 1965 and the following condensed income statement of and totally-held subsidiaries includes Glen Alden's equity of $3,712,227 and $2,761,166, respectively, ended December 31, 1965 and the nine months ended September 30, 1966 in the net income of Gera and subsidiaries. The earned surplus of Glen Alden and totally-held subsidiaries at December 31, 1965 and 30, 1966 includes an amount of $7,979,580 and $10,740,746, respectively, representing Glen Alden's equity j^RDd&ributed net income of Gera Corporation and subsidiaries since date of acquisition. following condensed financial statements of Glen Alden Corporation and totally-held subsidiaries as of pl$l, 1965 and for the two years then ended were prepared from the Annual Reports (Form 10-K) filed itifUden with the Securities and Exchange Commission for those years. The condensed financial statements [September 30, 1966 and for the nine months then ended are unaudited, but the management of Glen Alden believes ijurtments (consisting only of normal recurring accruals) necessary for a fair presentation of the results ) months ended September 30, 1966 have been included therein. ASSETS at assets .............................................. ' >Mortgage notes and other receivables........ i-i.v. . .. investments and other assets.......................... ^Property, plant, equipment aod leaseholds. Deferred charges ......................................... rl. _ Total .............................. LIABILITIES Current liabilities ........................... r- .Long-term debt ................................. Other liabilities ................................ Reserves for taxes and contingencies Shareholders' equity .......................... Total .................. December 3L1965 $39,187,534 (0,867,844 23,577,666 10,209,030 238,244 $84,080,318 September 30, 1966 $36384360 9367367 28,727,730 9306,002 205330 $83,891,895 $ 4,250,032 8,468,800 420,147 2,321,462 68,619,877 $84,080318 $ 5,034374 7,625,000 376369 2.018351 68,837301 $83,891,895 * Costs and expenses and Nonoperating Net income Revenues and other Item*--net for the other Income deductions credit (charge) period Tear ended December 31; 1964.................................... $58,936,818 $56,421,600 $ 5336,496 $ 7.851.714 1965 .................................... 52,366,068 46,149,348 (2,903,448) 3.313.272 Nine months ended September 30, 1966................................ 12,586,955 8,106,245 4.480,710 F-ll GLEN ALDEN CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Continued) Note B--Sale op Coal Psopbrties: Effective January I, 1966, Glen Alden sold its assets and business related to producing and selling for approximately S12.500.000, represented by cash of $500,000, a $5,775,000 mortgage note receivable, g g| other note receivable and the assumption of certain liabilities by the purchaser. The consolidated balance the sale as of December 31, 1965. Revenues and costs and expenses related to the coal operations for the ended December 31, 1965 were approximately as follows: Year Ended December 31 Revetmet Costs and Expense* 1963....................................................... 1964........................... ........................... 1965............................ ........................... $42,810,000 36,873,000 30,736,000 $39,156,000 34,140,000 28,694,000 CNote --Inventories: Inventories, stated at the lower of cost or market, are summarized as follow*: Lnst-ta, Firstfoot Cost Method Ffastfa, Ffastaotor Averse# Cost Method December 31, 1965: Finished goods.................... ............................ Work In process............................................. Materials and supplies..... . Total................................................................................... $1410.411 883,705 1,022,199 $3,416415 $ 794,165 343,289 540464 % 1,678,018 li ,t. . if 4f* 1 Total $ 2404476 1,226494 1462463 $ 5,094433 September 30, 1966: - Finished goods...............-................................................:.... Work in process.......................... ......................................... Materials and supplies.................................................... Total................................................................................... $1479435 1,358,614 1484,890 $4,623,439 $ 616,697 346416 597400 $ 1460413 $ 2,496,632 1,705,130 1482,190 $ 6,183452 Inventories (discontinued and told operations includes inventories relating to the coal business, ee Note in computing cost of products sold were as follows: Conffandog r>i,mwfiwm^ December 31: Operations Sold Operations Total 1962............................................................. 1963......................... '................................. 1964............................................................. 1965............................................................. $4,715,439 4461,017 4496,403 5,094433 $ 9,992,324 3,628,226 1,840.023 1,474,202 $14,707,763 8,189,243 6,136,426 6,568435 September 30, 1966............................................ 6,183452 -- 6,183,952 F-12 GLEN ALDEN CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Continued) iNTAKOIBUa: v unoont carried as intangibles at December 31, 1965 and September 30, 1966, which is being amortized at the S% per year, t* attributable to the excess of the value assigned to the common shares of a predecessor issued la exchange for the assets of the Cleveland Arcade Company, over the amount assigned to the tangible [acquired. The principal tangible asset to acquired was a majority interest In the capital stock of Gera Corporation. i Psoperty, Plaht, Equipment and Leaseholds: _ buildings, equipment and leaseholds are stated on the basis of cost in cash or assigned values of securities therefor, after certain write-downs with respect to properties of the parent company in 1944 and except for i properties of the RKO Theatres Division which are stated on the baas of revaluations in 1928, 1932 and 1937. iExcept as to certain assets acquired subsequent to January 1, 1954, as to which depreciation is computed on ffcasti of accelerated methods permitted by the Internal Revenue Code, depredation is generally computed by Jt'itfiigbt-line method. The rates under each method are based on the estimated useful lives of the properties. * principal lives used are as follows: Ptafldings ad building equipment...................................................................................................... 7*50 yean f, fixtures and equipment, etc............................................................................................. 4-25 yean buildings and equipment (Composite rate applied to total cost after elimination of items (which were fully depreciated at the time the present depreciation policy was adopted during She year 1946) (See Note B).......................................................................................................... 30 yean HM [Cost of leaseholds and leasehold improvements is amortized over the terms of the respective leases or estimated . lives of specific assets, whichever is the shorter period. iteoance and repairs are charged to income as incurred. Renewals and betterments are capitalized. it the time of sale or disposition of fixed assets, the costs and related allowances for depreciation are eliminated ^accounts and gains or losses are reflected in Income. /, plant, equipment and leaseholds and their related allowances for depletion, depreciation and amortization riser 31, 1965 and September 30, 1966, are summarized as follows: . f Mi't; December 31,1965----- N/-----September 30,1966----- Assets Allowance* Assets Allowances ^ Land (including perpetual leaseholds) $ 9,113,170 -- $ 8,410,237 -- : Buildings and building equipment...... 17,649312 $14,668,194 16,686381 $13359,038 Machinery, fixtures and equipment.... 21,258,789 14,516,095 21,808,644 15,355,670 ac Leasehold improvements and equip ment ............................................... 4,222,362 3,899,178 4306363 3328,079 Leaseholds ............................. ........... 24,353 23316 24353 24,350 Construction in progress.................... -T Excess of equity in net assets of acquired companies over amounts paid for their capital stock, less amortization .................................... 553,733 -- 1,545309 -- 2,089,767 1,750,773 $52,821,719 $35,196350 $52,681,687 $35,017310 F-13 ****>, GLEN ALDEN CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Continued) Note F--Long-Term Debt: Long-term debt at December 3!, 1965 and September 30, 1966, including maturities due within one year - of the following: v ,-----December 31,1965-----, <--September 30,1 Current Non-Current Current Nos Portion Portion Portion ~p Glen Alden Corporation: 4Ji % Mortgage and Collateral Trust Sinkiog Fund Notes on certain theatre properties; sinking fund payments of $625,000 are due each January 1, through 1978, bal- - ance due March 1, 1979 (payment due January 1,1966 , was paid in December 1965)....................................... -- $ 8,250,000 $ 625,000 $7! Subsidiaries: G. A. Enterprises, Inc.: 5% Registered First Mortgage Bonds due June 15, 1967; sinking fund payments are based on earn* ings ........................................................................ Gera Corporation: 6% Subordinated Sinking Fund Debentures (including Series A Debentures authorized in 1957) due June 30, 1970; sinking fund payments or retire ments aggregating $714,858 are required to be made each June 30 through 1970.......................... $ 48,000 702^39 218,800 2,859,432 '- 211,800 .A~ ' 656,608 - -2; Total ......................................................... $750,539 $11,328,232 $1,493,408 >, $9. - 501 The aggregate amount of maturities of and sinking fund requirements on the long-term debt for the five yes September 30, 1966 are as follows: , Year ended September 30: *; ''* 1967 (included m current liabilities)...................................... $1,493,408 ' 1968 .......................................................................................... 1,339,858 1969 ......................................................................................... 1,339,858 :\ 1970 ......................................................................................... 1,339,858 ; 1971 ............................................................... 625,000 Note G--Federal Income Taxes: ^. Consolidated Federal income tax returns filed showed no Federal income taxes due in respect of 1963, 1965 taxable income because of loss carryovers from prior years and differences between book and tax basis for purposes of determining income. On the basis of such returns and of prior years' consolidated Federal ~ returns, as filed, net operating los carryovers will not be available after December 31, 1966. Management is opinion that no Federal income taxes will be payable for the year 1966. : Certain adjustments to the consolidated taxable income have been proposed by the Internal Revenue Swt years prior to 1962, not resulting in tax liability for those years, but which affect loss carryovers. Glen Alden agreed to these adjustments. The consolidated returns for 1963 through 1965 have not been examined. ' See Note 3 to Glen Alden Statement of Consolidated Income. ; The consolidated Federal income tax returns of LIST Industries Corporation (which was merged into Glen Corporation April 21, 1959) and subsidiaries then affiliated with it, for 1958 and the period ended April 21, are being currently examined by the Internal Revenue Service. As at September 30, 1966, a reserve has been pro for the estimated liability for these years and a related charge of $1,900,000 made to earned surplus. . Tax counsel are of the opinion that no Federal income taxes are payable through December 31, 1965 and 30, 1966, except as provided in the accompanying consolidated financial statements. (See Note H.) Note H--Reserves for Taxes and Contingencies: Certain suits and proceedings for damages, injunctive relief, or both, were pending against Glen Alden subsidiaries, in which allegations are made as to violation of antitrust laws,~unlawful trespass, breach of contract of coal lease agreements and other matters. The reserves have been provided for cost of antitrust suits, r: assessments of Federal income taxes and other contingencies, the amounts of which are not presently determfc During 1?61 and 1962, the reserves were charged with $187,985 and $901,952, respectively, for income assessments for prior years. During 1963, the reserves were charged with $580,000, representing the uninsured on machinery and equipment, sustained when a coal breaker collapsed. During 1964, the reserves were charged approximately $130,000 for claims and related legal fees and with approximately $108,000 representing provisions in prior years of self insurance reserves, and were increased by a provision of $1,000,000 for Federal income tax assessments and possible losses on miscellaneous assets and by approximately $850,000 represen transfers from current and deferred Federal income tax liabilities. During 1965, the reserves were charged approximately $1,380,000 representing reserves applicable to the coal business (see Note B) and were in F-14 GLEN AUDEN CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Continued) rjjuldy $139,000 representing transfers from other accounts. During the nine months ended September ^^961 the reserves were charged for a reclassification of $123,000 to current liabilities for guaranty of accounts - od for contingent charges of $180,000, such charges relating primarily to the sale of the Coal Division January 1, 1966. iL^Stoac Option Plans: _ the terms of the 1959 Agreement and Plan of Merger, the LIST Industries Corporation Incentive Stock 'plan was continued as a Glen Alden Plan, aod the Employees Stock Option Plan of Glen Alden was modified pbct the conversion of one share before merger to one and one-quarter shares after merger. The Employees Stock Plan of Glen Alden (expired April 27, 1963 as to the granting of new options) provided for granting of options (including officers) to purchase common shares at not less than 95% of the fair market value at the time wa3 granted. Option; granted under the Plan are exercisable ratably over a period of four years beginning from the date of granting and expire five years after the date of granting or sooner in the event of death or " termination of employment. The LIST Industries Corporation Plan (expired May 7, 1960 as to the granting of options), provided generally for exercise ratably over a five-year period and for expiration seven years after the of granting. |q 19(2 Glen Alden adopted a Stock Option Plan (which was amended May 15, 1964) under which 150,000 Shares were reserved for the granting of options to employees (including officers) to purchase Common ^not less than 95% (amended to 100%) of the fair market value at the time the option is granted. Options ^under the Plan become exercisable (and terminate if not exercised within two months of becoming exercisable) ` over a period of six years (amended to five years) beginning one year from the date of granting and expire (amended to five yean) after the date of granting or sooner in the event of death or other termination -t 11965 Glen Alden adopted a Qualified Stock Option Plan under which 250,000 Common Shares were reserved 'ygraatiag of options to officers, other executives and key employees to purchase Common Shares at not less Vmarket value at the time an option is granted. Options under the Plan become exercisable ratably over of not less hn approximately three yean and expire not more than five yean after the date of granting 'in the event of death or other termination of employment Of the 250,000 shares initially reserved for options *T965 Plan there were 123,000 shares and 127,000 shares, respectively, available for the granting of additional of December 31, 1965 and September 30, 1966. Alden makes no charges to income with respect to stock options. of stock options exercisable and exercised during the yean ended December 31, 1963, 1964 and 1965 sine months ended September 30, 1966, and of the shares under option at December 31, 1965 and September follows: vffiidi became exercisable during: Number of Shares --Option Price-- -- Range Per Share Total ------Fair Market Value--------- * Range Per Share Total air ended December 31: 1963........................................ 1964............................................ 1965........... .......... ............... . 6,462 144,3528 10,136 $ 8.49 to $13.60 $ 76352 8.49 to 13.60 161327 8.49 to 14.49 114306 $11.00 to$I4.81(a) 13.06 to 13.94(a) 11.06 to 13.38(a) $ 87306 200,179 130,887 months ended September 30, 1966 .. ................... . exercised during: 37,167 1037 to 14.49 502,036 12.13 to 12.63(a) 464,233 Tear ended December 31: 1963.................... 3:,. 1964................... ............. .... 1965............................................ I Nine months ended September 30, 1966 .............................................. 6301 $ 7.13 to $ 8.49 $ 47,647 $11.50 to 814.13(b) $ 79,074 9364 8.49 to 1037 96,938 12.81 to 1436(b) 130,721 7317 8.49 to 10.57 75341 1131 to 13.06(b) 93,750 6,118 8.49 to 1037 63,625 11.75 to 1238(b) 75,800 ** Bader option: 31, 1965.......................... September 30, 1966........................... 163,317 137,433 $ 8.49 to $14.49 8.49 to 14.49 $2,195,441 1,892,759 $ 833 to 81535(c) 8.93 to 1535(c) $2316320 1308331 (*) At dates options became exercisable. (b) At dates options were exercised. *e#' W At dates options were granted. information presented above includes transactions under the 1962 Stock Option Plan which was terminated 1965 and under a former stock option plan which expired on April 27, 1963, under which plans options _. 30,967 shares and 5350 shares, respectively, were outstanding at December 31, 1965 and for 14,433 shares " toe 1962 Plan at September 30, 1966. F-15 GLEN ALDEN CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Coollniied) Note J--Retirement Plan: Glen Alden maintains a pension and retirement plan for the benefit of eligible employees. The plan, fully funded, has an estimated normal cost of approximately $200,000. No charges were made to for the three years and nioe months ended September 30, 1966 since earnings of the plan exceeded the normal Note K--LonoTerm Leases: ~ J At December 31, 1965 and September 30, 1966, Glen Alden and its subsidiaries were obligated, under expiring on dates more than three years from the balance sheet date, for the payment of minimum annual rentals gating approximately $1,450,000 and $1,365,000, respectively, plus, in certain instances, real estate taxes, insut--' Five of the leases, with aggregate annual rentals of $105,000, expire between 1981 and 2023, and the of the leases expire between 1969 and 1979. Note L--Guaranties: As of December 31, 1965 and September 30, 1966 Glen Alden was guarantor: a) at December 31, 1965 as to principal and interest of notes payable by unrelated parties in the principal amount of $5,836,158. Collateral with an aggregate quoted market value greater than such amount had been pledged as security to the cotes. Such notes were paid on July 29, 1966 and Glea obligation terminated. b) at December 31, 1965 and September 30, 1966 as to principal, interest, premium (if any) on, and formance of all of the covenants and obligations contained in an indenture relating to $1,920,000 ot Convertible Subordinated Debentures due December 1, 1969, issued by B. S. F. Company. In order to ^ Glen Alden, B. S. F. Company has deposited with a bank securities with an aggregate market value in excess'" principal and premium on such Debentures. c) at December 31, 1965 and September 30, 1966 in the amount of approximately $7,000,000 and $6,6ji respectively, as to mortgage cotes (having varying maturities to 1984) previously held by Glen subsidiaries. . d) at December 31, 1965 as to trade accounts receivable of approximately $2,150,000 and pay deferred production payment of $3,480,000 and $2,480,000 at December 31, 1965 and September 30, 19 tively, relating to Glen Alden's coal business which was sold effective January 1, 1966 (see Note B). e) at December 31, 1965 as to payment of notes in the amount of $255,225 held by the Glen Alden Retirement Trust, payable or guaranteed by Briggs Manufacturing Company. f) also see "History and Business of Glen Alden--Briggs Manufacturing Company" for infor ccnting commitments made relating to Briggs. Non M--Events Subsequent to December 31, 1965: During the nine months ended September 30, 1966 Glen Alden acquired for cash principally through a tender 282421 shares (approximately 28%) of the common shares of Philip Carey. Dividends received from Philip ~ during the nine months ended September 30, 1966 amounted to $279,643. See the following captions under "History and Business of Glen Alden": a) "RKO Theatres" for information concerning a joint venture and possible operation of ten theatres. b) "Briggs Manufacturing Company" for Information concerning recent developments. See Note 6 to Statement of Consolidated Income of Glen Alden Corporation and subsidiaries. F-16 GLEN ALDEN CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Concluded) ^..Supplementary Profit and Loss Information: Charged Directly to Profit and Loss and Repain: to cost of products sold and operating expenses to other operating accounts............................ -Year Ended December 31,- 1963 1964 1965 $1,137,695 16.229 $1,153,924 $ 792,196 10,280 $ 802,476 $2,710,358 62,466 $2,772,824 Nine Months Ended September 30, 1966 $2,373,953 26,647 $2,400,600 Utioo. Depletion, aod Amortization: Assets: 01 Charged to cost of products sold and operating expenses.............................................................. ({Charged to other operating accounts.................... mstr .Totaj............................................................ credit representing amortization of equity in net assets of acquired companies over amounts ^paid for their capital stocks................................ ^ ''Net............................................-..... -.............. pfele Assets: Charged to other deductions.................................. Charged to nonoperating items.............................. t. Total.......................................... ... ......... . $3,307,195 171,208 $3,478,403 513.600 $2^64,803' $ 269,539 $ 269,539 $2,897,336 81,933 $2^79,269 509,500 $2,469,769 $ 229,225 116,390 $ 345,615 $2,446,343 115,965 $2362,308 452,000 $2,110,308 $ 224,779 71,462 $ 296,241 $1,059,768 96,667 $1,156,435 338,994 $ 817,441 $ 165,763 $ 165,763 Federal Income Taxes: . rged to cost of products sold and operating expenses.................................... ...................... .. rged to other operating accounts....................... $1,729,123 75,523 $1,804,646 $1,446,719 76,863 $1,523,582 $1,058,632 107,446 $1,166,078 $ 583,134 24,044 $ 607,178 Charged to cost of products sold and operating s expense*.................................................... .... L-Charged to other operating accounts........................ $1,792,948 128,894 $1,921,842 $1,911,726 100,264 $2,011,990 $1,189,807 142,759 $1332,566 $ 489,934 100,704 $ 590,638 Charged to cost of products sold and operating expenses................................................................... Charged to other operating accounts........................ t.. $ 387,785 218,066 $ 605,851 $ 157,161 264,096 $ 421,257 $ 146,127 290,001 $ 436,128 $ 161,958 170,604 $ 332,562 I?*** to cost of products sold and operating expenses .......................................................................... .Charged to other operating affpntite............................... fenltfes: Charged to cost of products sold and operating openses ...... $2,009,408 159,453 $2,168,861 $ 83.585 $1,761,891 152,613 $1,914,504 $ 111,052 $1,604,980 248,702 $1,853,682 $ 71,475 $1,095,677 87,600 $1,183,277 $ 40,900 F-l7 i ACCOUNTANTS* REPORT To the Board of Directors The B.VJX Company, Inc. New York, N. Y. We have examined the consolidated balance sheet of The B.V.D. Company, Inc. and subsidiaries as at April 2, 1966, the related consolidated statement of income for the five ye ended and the related consolidated statements of surplus for the three years then ended. Our ex was made in accordance with generally accepted auditing standards, and accordingly included of the accounting records and such other auditing procedures as we considered necessary] circumstances. As to some companies and entities whose financial statements for certain periods were not ea by us, we were furnished with reports by other certified public accountants, as follows: Mullins' Mills, Inc. and its subsidiaries, consolidated statement of income for the two years ended March $l) and County Mills, Inc. and its subsidiaries, consolidated statements of income and deficit for die] from May 6, 1962 (date of acquisition by The B.V.D. Company, Inc.) to March 31, 1963--Laj Krekstein, Griffith & Co.; United Mills Corporation and its subsidiary, consolidated financial state the period from January 1,1964 to March 31, 1964, and United Mills, a division of a consolida sidiary and United Mills Realty Company, Inc., consolidated financial statements as at and for the ended April 2, 1966--Wassennan & Tates; Fordbam-BardeE Shirt Corp. and its subsidiaries,^ dated financial statements as at and for the five years ended April 2, 1966--Joseph Company; Almar Rainwear Corporation and subsidiary, consolidated financial statements for^tj years ended June 30, 1965--Clarence Rainess & Co. Our opinion expressed herein, insof relates to the amounts included for these subsidiaries and entities, is based solely upon suc^* In our opinion, based upon our examination and the reports of other certified public referred to above, the consolidated financial statements mentioned In the first paragraph hereof,^ with the notes thereto, present fairly the consolidated financial position of The B.VJX Comj: and consolidated subsidiaries at April 2, 1966, and the consolidated results of their operations^ five years then ended, in conformity with generally accepted accounting principles applied on. a <-- bass. . New York, N. Y. June 14, 1966, except as to Note A, which is as of June 17, 1966 S. D. Leidesdorf & Co.1 :d F-18 I I i r ACCOUNTANTS' REPORTS Boards of Directors Mills, Inc,, and ; Textile Mills, Inc. York, N. Y. e have examined (a) the consolidated statements of income and deficit of County Mills, Inc. jpjbsidiaries for P^od from May 6, 1962 to March 31, 1963, and (b) the consolidated statement e of Mullins Textile Mills, Inc.; and its subsidiaries, liquidated in 1963, for the two years ended 31, 1963 (all not presented separately herein). Our examinations were made in accordance "-rally accepted auditing standards, and accordingly included such tests of the accounting id such other auditing procedures as we considered necessary in the circumstances. ''our opinion, the above-mentioned statements present fairly the consolidated results of operations gj-`County Mills, Inc. and subsidiaries, and (b) Mullins Textile Mills, Inc. and its subsidiaries above stated periods, all in conformity with generally accepted accounting principles applied Consistent basis. I. , ; . hia. Pa. 0,1963 lac.-. tisJ . 0.T-. . ., Board of Directors of the Bardell Shirt Corp. Laventhol, Krekstein, Griffith & Co. e have examined the consolidated balance sheet of the Fordham-BardeQ Shirt Corp. and its ' companies as at April 2, 1966, the related consolidated statement of income for the five years ended, and the related consolidated statements of surplus for the three years then ended (neither statements being included separately herein). Our examination was made in accordance with illy accepted auditing standards, and accordingly included such tests of the accounting records such other auditing procedures as we considered necessary in the circumstances. - * In our opinion, the above-mentioned financial statements, together with their notes, present fairly ;consolidated financial position of the Fordham-Bardell Shirt Corp. and its subsidiary companies at ** 2,1966, and the consolidated results of their operations for the five years then ended, in conformity generally accepted accounting principles applied on a consistent basis. York, N. Y. 14,1966 &Joseph Kantor Company F-19 ACCOUNTANTS* REPORT To the Boards of Directors United Mills Corporation and United Mills, Division of Flexees International, Inc. and its wholly owned subsidiary, United Mills Realty Company, Inc. Mt. Gilead, North Carolina ' ?- ,ir 5 $ A We have examined the following consolidated financial statements (not presented separatajj (a) United Mills Division of Flexees International, Inc. and its wholly owned lu United Mills Realty Company, Inc.--statements of financial condition as at April 2,^ of operations and divisional equity for the fiscal years ended April 3, 1965 and April 2, (b) United Mills Corporation and its subsidiary--statement of income and surpl'- period from January 1, 1964 to March 31, 1964. .t >; Our examinations were made in accordance with generally accepted auditing standards, and a included such tests of the accounting records and such other auditing procedures as we co sary in the circumstances. ^ In our opinion, the above-mentioned statements present fairly the consolidated finan* of United Mills Division of Flexees International, Inc. and its wholly owned subsidiary Uni Realty Company, Inc. at April 2, 1966, and the consolidated results of their operations and. tions of United Mills Corporation and its subsidiary for the periods shown above, in generally accepted accounting principles applied on a consistent basis. ' *: w New York, N. Y. June 1,1966 Wassbrman & Tai :*w F-20 M fr Board of Directors iwear Corporation ACCOUNTANTS* REPORT fcave examined the consolidated statements of income of Almar Rainwear Corporation and for the three years ended June 30, 1965 and the related consolidated statement of retained ffbr the two years then ended. Our examination was made in accordance with generally accepted 'Standards and accordingly included such tests of the accounting records and such other auditing as we considered necessary in the circumstances. * opinion, the aforementioned consolidated statements (not separately presented herein) xfcurly the results of operations of Almar Rainwear Corporation and subsidiary for the three led June 30, 1965, in conformity with generally accepted accounting principles consistently Clarencb Rainess & Co. .1- F-21 THE B.V.D. COMPANY, INC AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS April 2, 1966 and (Unaudited) October 1, 1966 ASSBTS Current Assets: Cash ....................................................................................................................... U. S. Government securities and other marketable securities--at cost (which approximates market) ............................... Receivables--Note E: Trade, less reserves for doubtful accounts, 5282,942 and $344,989, and discounts and allowances, $160,711 and $128,875..................................... Factor ......................................................... --.................................................. Sundry (including $103,683 and .$103,798 due from employees), less reserves of $34,529 and $20,719............................................................... Merchandise inventories--Note B........................................................................ Total Current Assets....................................................................... Investments in and Advances to Foreign Companies--at cost--Note A...................... $ 4,310,405 84,445 16,704,380 379,729 1,168,046 52,018,298. 74,665,303 906,313 .c Other Assets: Cash surrender value--life insurance policies--Note G....................................... Notes and mortgages receivable..................................................._.................. .... Deposits ............................. _..... .............--........................................................... Sundry .......................................................... ........... ........................................... Property, Plant and Equipment--at cost--Notes A, C, G, I and 1: Land, $488,507, and land improvements............. ,,..... ....................................... Buddings, machinery and equipment, furniture, fixtures and leasehold improve* ments, etc. .......................................................................................................... Less: Reserves for depredation and amortization.................................... ,,.......... Goodwill, Intangibles, Etc.--at cost, less reserve for amortization of intangibles of $128,819 and $162,276--Notes A and D................................................................,, 542,139 549,382 56,825 145,256 1,293,602 499,285 26,400,648 26,899,933 11,363,541 15,536,392 845,036 29 Deferred Charges: Unexpired insurance ........................................................................................... Promotional display fixtures, leas amortization................. Unamortized financing expense, being amortized over the term of the related debt Plant pre-opening and start-up costs, being amortized over a term of five years.... Other ...................................................................................................................... 427,569 301,331 128,105 442,499 705,760 2,005,264 $95,251,910 54 $113,23 The accompanying notes are an integral part of these statements. F-22 P XHE B.VJD. COMPANY, INC AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS April 2, 1966 and (Unaudited) October 1, 1966 LIABILITIES tv. ities: payable--banks ............................................................................................ Installment* of long-tenn debt--Note O.......................................... payable--trade (including $30,102 at April 2, 1966 to an uncon*ub*idiary) ......................................................................................... i to factors--Note E........................................................................................... BabQitie* and accrued expenses: [Taxes withheld and accrued............................................................................. `Salaries, wages, commissions and bonuses...........................................-......... [sundry, including interest of $255,298 and $248314, and $125,000 due to . an officer of a subsidiary company........................................................... fcr Federal income taxes--Note F............. --.......................................... Total Current Liabilities. _________________ --~ April 2, 1964 $ 3,800,000 1,060,431 11,495,871 3345,695 1949,169 1,611,641 1999.948 2320331 241363 27,824349 October 1, 1966 (Unaudited) $ 5,025,000 3,193,762 17,036,371 4,642,600 1.603329 1,745,484 2388,489 1,620,109 277323 37.432367 31,176,651 34,835,432 and State Income Taxes. UR;vl -Note A. 139,000 235,714 139.000 205970 in a Subsidiary--Note A.,,.... ..... w- ' Equity--Notes A,Q,H ssd J: Stock--par value $2 per share: .{Authorized--10,000,000 shares t imed and outstanding--3,487,700 and 3,560,182 shares. Surplus........................................................................... Surplus ........................................................................... Commitments, Leases, Subsequent Events and Other Comments-- Notes I and J 1,041,827 3,487.700 11381372 19965397 34,834,469 733,785 3360,182 12992,487 23339,081 39391,750 W! 1,. $95351910 The accompanying cotes are an integral part of these statements. $113338304 F-23 THE B.V.D. COMPANY, INC AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF SURPLUS For the Three Years Ended April 2, 1966 and (Unaudited) Six Months Ended October 1, 1966 <i CapItiU Surplus: March 31, 1964 April 3, 196S Aprfl3 196% Balance as at beginning of period, including, as to 1964, $1,773,850 applicable to companies acquired subsequent thereto on the basis of poolings of interests--Note A..................................... $ 7,591463 $10,560,233 Balance as at beginning of period applicable to Adams Clothes, Inc., acquired on the basis of a pooling of interests--Note A ... Excess of proceeds from sale of 24,651 shares, 4,872 shares, 27,389 snares and 13,073 shares, respectively, of Common Stock over the par value thereof, issued upon exercise of stock option^-Note H........................................................................ 287,374 57,618 Excess of approximate market quotation over par value of 87,035 shares of Common Stock issued in connection with a 3% stock dividend.................................................................... 1,345461 -- Excess of approximate market quotation of 91,030 shares of Common Stock over the par value thereof, issued in connec tion with the acquisition of the net assets of United Mills Corporation--Note A................................................................ 1,319,935 -- Excess of approximate market quotation of 1,000 shares of Common Stock over the par value thereof, issued in connec tion with the acquisition of the capital stock of B. W. Mayer .1 St Coban, Ltd.--Note A.......................................................... Excess of approximate market quotation of 48,170 common 16,000 -- treasury shares over the cost thereof. Issued in connection with the acquisition of the capital stocks of Wonderkoit Corporation and L&B. Enterprises, loc.--Note A.............. -- 81,496 Excess of approximate market quotation over the par value thereof of (a) 39,409 shares of Common Stock issued in con nection with the acquisition of the net assets of Meadow Sports wear, Inc. and (b) 20,000 shares of Common Stock sold to former stockholders of Meadow Sportswear, Inc..................... ' -It 10,560433 10,699,347 Less: Excess of cost of 43,974 common treasury shares over the par value thereof, issued in connection with the acquisi tion of the capital stock of Fordham-Bardell Shut Corp. --Note A............................................................................ Less amount charged to Earned Surplus........................ -- 718.515 593.515 -- 125,000 Balance as at end of period--Notes A and Q............................. $10460433 $10474447 $lU8Ui Earned Surplus: Balance as at beginning of period, including, as to 1964, $1,126427 applicable to companies acquired subsequent thereto on the basis of poolings of interests--Note A--................................ Balance as at beginning of period applicable to Adams Clothes, Inc., acquired on the basis of a pooling of interests--Note A.... Net income ..................................... ............................................. $ 5,776,726 4,023442 9,799468 $ 8,335478 5,103438 13,438,916 $12463*538] 2,004,43? 6,741,400! 20,909,376) Less: Dividends: 1 B.V.D.: 3% Stock dividend (including cash of $18,475 paid in lieu of-fractional shares)......................................... Cash--$.40 a share, $.50 a share and $.25 a share, respectively (exclusive of $573,951, $696,085 and $335,710, respectively, waived by certain principal holders of Common Stock)....................................... Paid by subsidiaries prior to poolings of interests............ Net income of Almar Rainwear Corporation for the three months ended July 2, 1966, included in consolidated in come for the fiscal year ended April 2, 1966.................... Portion of excess of cost of 43,974 common treasury shares over the par value thereof, issued in connection with die acquisition of the capital stock of Fordham-Bardell Shirt Corp...................................................................................... Balance as at end of period--Notes A and G............................. 1,451,071 13,519 1,464490 $ 8,335,378 -- 665494 16,569 593,515 1475478 $12.163438 924,192 19,787 943,979 The accompanying notes are an integral part of these statements. F-24 XHE B.VJ). COMPANY, INC AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , (insofar as applicable to dates and periods sobseqaent to April 2,1966, these notes 'gre not cohered by the report of the Independent certified public accountants.) General" note to the consolidated statement of income, to op Preparation and Principles of Consolidation: `April 2, 1966 and October 1, 1966, all domestic subsidiaries are wholly-owned, except for Timely Clothes, dow). The accounts of all domestic subsidiaries are included in the accompanying consolidated financial r-after elimination of intercompany items and transactions. The accounts of foreign subsidiaries are not since, on a combined basis, they are not significant jobsidiaries acquired subsequent to March 1, 1961, which have been included in consolidation on the basis of & interests, are as follows: t Company Date of acquisition or organization Periods Included hi consolidation 'IThe Bravada Corp. and its predecessor affiliate ....... Porto Mills Inc. and its ; predecessor affiliate ....... 'Beau Brumraell Ties, Inc..... Mullins Textile Mills, Inc... t Tordham-Bardell Shirt Corp. avil Brand, Incorporated. dams Clothes, Inc............. Rainwear Corporation September 13, 1961 September 13, 1961 July 6, 1961 February 1, 1966 May June 16, 1966 17, 1966 April 1, 1961 until merger into B.VJX on July 30, 1965 Five yean ended April 2, 1966 and six months ended October 1, 1966 April 1, 2961 until merger into B.VJ?. on February 28, 1962, (on October 1, 1964, it became a division of a con solidated subsidiary) Five yean ended April 2, 1966 and six months ended October 1, 1966 Five yean ended April 2, 1966 and six months ended October 1, 1966 Five yean ended April 2, 1966 and six months ended October 1, 1966 Six months ended October 1, 1966 Five yean ended April 2, 1966 and six months ended October 1, 1966 ae of the acquisition in September 1961, of certain assets of predecessors of The Bravada Corp. and . ijnc, the capital stocks of these companies were substantially all owned by the same persons who were the principal stockholders of B.VJ). or associates thereof. "agreements relating to the acquisition of Fordham-Bardell Shirt Corp. and Adams Clothes, Inc. provide for " of additional shares of B.VJ).'* Common Stock at the eod of a five year.period as to Fordham-Bardell and Jandof two successive three year periods and a further period of four yean as to Adams. The number of shares is upon the net earnings of such companies over those periods. Should the average net earnings of Fordhamfor such five-year period be the same as they have been for the two yean ended April 2, 1966, approximately hares would be issuable under the agreement. No provision, however, has been made in the accompanying _ balance sheets for the issuance of additional shares since the amount is contingent upon future earnings. **hnitc of additional shares as to Adams is presently determinable. See below for contingent payment in connection acquisition of Meadow Sportswear, Inc. The consolidated financial statements also include, from date of acquisition, the following companies acquired Company County Mills, Inc. (sold at underlying book equity as of December 31, 1963)............................................................... Flexees International, Inc..................................................... ..... B. W. Mayer & Cohan, Ltd..................................................... United Mills Corporation (acquisition of assets)--on October 1, 1964, it became a division of a consolidated subsidiary. .. Wonderknit Corporation and its affiliates.................................. L. & B. Enterprises, Inc.............................................................. National Shirt Shops, Inc.......................................................... The Alligator Company, Inc. and its affiliate (acquisition of assets) ................................................................................... Timely Clothes, Inc. and its subsidiaries................................... Meadow Sportswear, Inc........................ .................................... F-25 Date of equation or organization May August April 7, 1962 31. 1962 1. 1963 December 31, 1963 July 1, 1964 August 28, 1964 October 1. 1964 June April June 11, 1965 2, 1966 30, 1966 THE B.VJ>. COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES' NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Tbe agreement relating to the acquisition of Meadow Sportswear, Inc. provides for an additional payment" based on earnings, as defined, for a period of seven fiscal yean. No provision, however, has B.V.D.'s consolidated financial statements for such payment since the amount is contingent upon future From February 9 to April 2, 1966, B.V.D. purchased for cash approximately 75% of the outst' stock of Timely Clothes, Inc. outstanding at April 2, 1966 and $565,600 of its 614% Convertible Debentures (of a total of $625,000 outstanding as at April 2, 1966). The debentures are the option of the holders, into shares of Common Stock of Timely at $16.14 a share to July 1, 1966 and share thereafter to July 1, 1980- The excess of the underlying book amount at date of acquisition over '' investment of $235,714 is shown as a deferred credit in the accompanying consolidated balance sheet as at A' From April 3 to October 1, 1966, B.V.D. further acquired approximately 6% of the capital stock andj 6V4% Convertible Subordinated Debentures of Timely and converted substantially all the debentures h?' increasing its investment to approximately 84% of Timely's capital stock. The aforementioned deferred reduced by $18,903 as a result of these transactions. Included in tbe caption "Goodwill, Intangibles, Etc." in the accompanying consolidated balance sheets is (April 2, 1966) and $674,557 (October 1, 1966) representing excess of cost of investments in certain subsi their underlying net assets as at the respective dates of acquisition. Such amounts and the deferred credit in the preceding paragraph, are being amortized over a period of ten years. In connection with the acquisition of Adams Clothes, Inc. and Meadow Sportswear, Inc., hereinabove upon, each of the Sellers has an option to "put" to B.V.D. shares of its Common Stock issued and/or sold 113,438 shares, at $24.00 a share as to Adams Clothes, Inc., between May 16, 1967 and May 16, 197<^ the market price is then less than $24.00 per share, and 59,409 shares, at $25,375 a share, as to Meadow'" Inc., during the ninety-day period after August 31, 1969. Based on latest available unaudited information, the aggregate underlying equity of B.V.D.'s investments companies was in excess of the cost of the investments in such companies; in the aggregate, B.V D.'s equity in of operations of these companies was not significant Investments in consolidated subsidiaries are carried on B.VD.'s books (a) at cost as to companies v organized or acquired by purchase, and (b) as to companies acquired in a pooling of interests, at tbe _ value of B.VJD.'t capital stock issued therefor. As at April 2, 1966 and October 1, 1966, B.VJVs equityi* assets of its consolidated subsidiaries, as shown by their books (after elimination of intercompany $20,170,998 and $24,186,941, respectively in excess of the carrying amount of the investments in such The difference is reflected in the accompanying consolidated balance sheet as follows: '~ /--------- April 2,1966--------- * ,--------October 1,1966^- _ Debit Credit Debit Credit Earned Surplus...................... ........... Capital Surplus.................................. Deferred Credit.................................. Goodwill, Intangibles, Etc.................. Property, Plant and Equipment--net.... -- -- --- $ 654,557 911,218 $19,273,427 2^27,632 235,714 -- -- -- -- -- $ 674,557 873,259 $23,301,155 2^27,632 205,97: $1465,775 $21,736,773 $1447,816 $25,734,757, Tbe minority interest in Timely Clothes, Inc. as at April 2, 1966 and October 1, 1966 consists of the April 2, October LI966 Capital Stock ................................................... Capital Surplus................................................. Earned Surplus ................................................ $ 447,140 34,010 560,677 $ 359,127 53,299 321,359 $1,041427 $ 733,785 See Note J for information relating to other acquisitions subsequent to October 1, 1966. Note B--Merchandise Inventories: As at April 2, 1966, merchandise inventories of retail subsidiaries amounting to $9,326,872 are stated at the of cost or market determined by the retail inventory method. Tbe remaining inventories at that date are stated cipilly at the lower of cost or replacement market; cost represents the latest invoice cost, plus direct labor and to the extent applicable. Complete physical inventories were not taken by all of tbe companies as at October 1, 1966. The inventories those companies which took physical inventories have been priced at the lower of cost or market The inv of the other companies as at October 1, 1966 have been computed by management by adding to the inventories F-26 THE B.vj). COMPANY, INC AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) of the year, purchases, direct labor and overhead (to the extent applicable) and deducting therefrom of goods sold based on the gross profit percentage method. April 2, 1966 October 1,1966 Merchandise inventories consist of: "Raw materials and supplies................................................... $13,814,258 Work in process.................................................................... 7,331,893 $59,811,218* k Finished goods ...................................................................... 30,872,147 $52,018,298 $59,811,218 it practicable to classify estimated inventories as at October 1, 1966. [and closing inventories used in the computation of cost of goods sold are as follows: March 31,1963............................................................................ $18,262,922 March 31,1964............................................................................ 21,762,196 April 3,1965............................................................................ 33,687,712 April 2,1966........................................................................... 44,595,276 . October 1, 1966............................................................................ 59,811,218 I not include inventories of Timely Clothes, Inc. and Adams Clothes, Inc. and their subsidiaries (see Note A) [g7,423,022, included in the consolidated statement of income only for the six months ended October 1, 1966. JEfaorEXTY, Plant and Equipment: machinery and equipment, furniture, fixtures and leasehold improvements, etc, are summarized as Buildings and building improvements. Machinery and equipment.................. Automobiles and trucks...................... : Furniture and fixtures.......................... Leasehold improvements--.................. April 2, 1966 $ 5,164,218 13,324,328 398,927 4,015,807 3,497,368 $26,400,648 October 1,1966 S 6,328,040 14,508,931 449,440 4,406,188 3,866,412 $29,559,011 npanies provide for depredation and amortization of fixed assets either by the straight-line method or by method, principally at the following annual rates, which conform to those used for Federal purposes: 0b -Rates per aumm- Straight- DccfinJng- S'.:.- fine method method Land improvements ............ Buildings and building improvements ................. Machinery and equipment.. Automobiles and trucks...... Furniture and fixtures.......... 20% 2%-13V6% 2%-33V5% 20%-33V6% 3V4%-33V6% 5%-20% 7J%-50% 20%-50% 10%-50% Building on leased land Leasehold improvements Amortized over term of lease or over the esti mated useful life of the asset, whichever is shorter Expenditures for renewals and betterments which extend the lives of the assets are capitalized. Expenditures tmaintenance and repairs are charged to income, as incurred. When assets are retired or otherwise disposed of, " ' the related accumulated depreciation or amortization are eliminated from the accounts, and any gain or or charged to income. 1 R<4e O for property, plant and equipment pledged as collateral and Note I (6) for sale and leaseback of 1 J**l Properties as of March 1, 1966, and Note J for proposed sale and leaseback of other property subsequent I. 1966. Goodwill, Intangibles, Etc.: Tbe companies have not adopted any policy of amortization with respect to goodwill, trademarks and trade names ijjjjj^gating $255,803 as at April 2, 1966 and $256,127 as at October 1, 1966. With respect to amortization of cost of __ in subsidiaries in excess of underlying book amounts as at dates of acquisition, see Note A. Patents jai'igltmj $63,496 as at April 2, 1966, were fully amortized by October 1, 1966. I F-27 THE B.VJ). COMPANY, INC. AND CONSOUDATED SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(Continued) Note E--Dob to Factor (payable by a subsidiary): A factor has a continuing security interest in collateral which, as at April 2, 1966, aggregated ai $2,970,000, represented by a bank account of $41,000 and trade and notes receivable--net, including intercompany accounts eliminated in consolidation. As at October 1, 1966 the security interest in collateral, approximately $3,700,000, represented by a bank account of $9,000 and trade and notes $940,000 of intercompany accounts eliminated in consolidation. Note F--Taxes: Federal income tax returns of B.V.D. have been examined or accepted as filed by the U. S. Treasury through March 31, 1963. The tax returns for the consolidated subsidiaries have been examined for Certain consolidated subsidiaries acquired subsequent to March 31, 1962, have operating loss may be applied against their future earnings to the extent permitted by the Internal Revenue Service, of ap $779,000 at April 2, 1966 and $426,000 at October 1, 1966. The loss carryovers of $426,000 at Octo' expire in fiscal years ending in 1968 ($6,000), 1970 ($120,000) and 1971 ($300,000). The investment credits for 1964, 1965 and 1966 under the Revenue Act of 1962, which are not been recorded as reductions of the provisions for Federal income taxes. The investment credit for 196$3 material) was included in the reserves for depreciation and amortization as a reduction from the related accounts In that year; in 1964, it was credited to income and is included under the caption "Other cellaneous" in the B.V.D. consolidated statement of income. r The earnings of consolidated subsidiary companies may be subject to Federal and state taxes on when transferred to the respective parent companies in the form of dividends. The accompanying consolidated financial statements are subject to final determination of Federal, state and local taxes. t See Notes (b) and (c) to the B.VJ). consolidated statement of income. Note G--Long-Term Debt: Long-term debt consists of the following: B.VJ).: Revolving Credit Agreement: 596--90 day Promissory Notes payable--banks.... 5V496 Promissory Note Due 1978.............................. 496 Notes Payable...................................................... Payable to Bada Manufacturing Corp* without inter* est (subordinated to Revolving Credit Agreement and JV496 Promissory Note)................................. 6% Promissory Note--Von--T.S-A. due January 31, 1970 (subordinated to Revolving Credit Agreement and SYa% Promissory Note).................................. Subsidiary Companies: Mortgages payable at Interest rates from 296 to 6V496 (collateralized by property, plant and equipment in the depreciated amount of approximately $2340,000 and $3,530,000)..................................... Sundry, at interest rates from 496 to 61496, con sisting of convertible debentures (see Note A), notes, etc. (a portion of which is collateralized by life insurance policies with an aggregate face amount of $200,000 and a cash surrender value of $128^46 and $130,724)..................................... /------April 2,1966------- t October!^ Amount doe Amount doe Amount doe ' after within one year one year - -fid-s $24,000,000 4,330.000 24,167 $22,000,000! 335,000 4,330,000 I 17,500 13,333'' 371,058 450,986 145,565 -- -- 5,000,000 1,148,778 119,445 1,711,217 1,302,648 137,500 1,635317 $31,176,651 $1,060,431 $34335,432 $3,* * The notes are renewable at the option of B.VJ). at each maturity date until July 31, 1969 and h is iatention to renew the notes. Pursuant to an agreement entered into subsequent to October 1, 1966, the agreed to reduce the principal balance of these notes by quarterly installments of $1,000,000 commencing April 151 The parties to the Revolving Credit Agreement have orally agreed that, on and after April I, 1967, the interest shall be Ya of 1% above the prime Tate in lieu of the fixed 5%. * One of the stockholders of Bada is a principal stockholder of B.VJ). F-28 gjHE B.VJ). COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(Contiaoed) ,t$ (as amended) relating to the Revolving Credit, the 5V4 % Promissory Note sod other obligations wbicb, among other matters, provide for optional prepayments (at declining premiums with respect ___fy Note), maintenance of minimum consolidated working capital and debt-net worth ratio (as restrictions as to mergers, acquisitions, contingent liabilities and investments. Also see the last three History and Business of B.V.D." elsewhere herein. itioned agreements also contain limitations as to borrowings, declaration and payment of dividends dividends) and purchase of shares of stock of B.VJ). Under the most restrictive of such provisions, and purchases would be limited to approximately $1,140,000 at October 1, 1966. installments of principal payable after October 1, 1966 are as follows: Year . ending hi October 1,1966 ilf.y1 U'i IB** ` 1967......................... 1968.......................... 1969......................... 1970.......................... ....... ...... ..... ..... ...... 1971.......................... Subsequent to 1971............................................ Balance of 5%-90 day Promissory Notes pay able--banks (renewable at the option of B.VJ). at each maturity date until July 31, 1969) ............................................................ $ 3,193,762 5,158,342 2,668,929 5,565,831 535,828 4,906,502 16,000,000 $38,029,194 OtnoHs: , ........ . ^Qualified Stock Option Plan- providing for the granting of options to key employees, including ors of B.VJ), and its subsidiaries, who own not more than S% of B.VJX's Common-, Stock OB.VJ). also has a Restricted Stock Option Plan under which all options authorized have been ition, B.VJ). has a Sales Agent Incentive Stock Option Plan, under which all options have been tioned. options provide for an exercise price of not less than 100% (with respect to options granted -3C.1963) and not less thant'85%' (with respect to options granted on or prior to that date) of 'the ae of the* shares at the date of grant; they become exercisable after one year from the date "of grant any options granted to employees of B.VJ). and its subsidiaries after December 31, 1963, may not -Vhfle'-there are outstanding, as defined by Section 422 (c)(2) of tbe Internal Revenue Code, any :ed stock options previously granted by B.VJ). to' the same employee) and are exercisable generally /the optionee's employment by B.VJ)., and expire five years from the date of grant lApril 2,1966 and October 1, 1966, options to purchase 139,271 and 136,878 shares, respectively, of Common .VJ). were outstanding under the Restricted, Qualified and Sales Agent Incentive Stock Option Plans, and 1125,150 shares, respectively, were reserved for granting of future options (subject to the plans' anti-dilution i). information with respect to the aforementioned plans is summarized as follows: Outstanding as at April 2,1966: granted during year ended: WupW 36,739 26J02 8,680 6,150 61,500 /------1--"--OpU.1 pleTt! --------------------Moktt prtM~ Per ihir, (At 4at ( (rant) Tul $12.73 and $12.77 1133 to 14.18 1439 to 17.40 1635 to 2135 23.10 to 25.88 $ 467,775 317350 129300 109,108 1337,133 $13.67 to $14.62 1131 to 16.63 16.81 to 17.48 1635 to 21.25 23.10 to 25.88 $ 534,075 365376 151,028 109,108 1,537,133 139J71(a) $2,560,666 $2,696,720 F-29 I THE B.VJO. COMPANY, INC AND CONSOUDATED SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(Continued) HnW (Am -Optima prW- Pm* dun Ttl Xi` (At dt* ( (rut Options outstanding ax at October 1, 1966i Options granted during year or period ended: March 31, 1962........................ March 31. 1963........................ March 31. 1964........................ April 3, 1965............................ April 2. 1966............................ October 1, 1966........................ 23,539 25,407 7,032 6,050 60,100 14,750 136.878(b) $12.73 and $12.77 11.33 to 14.18 14.29 to 17.4Q 16.25 to 21.25 23.10 to 25.88 23.00 to 26.75 ( 299,702 307,224 104,827 107,483 1,503,681 375,450 $2,698,367 $13.67 to $14. 11.91 to 16 16.81 to 16.25 to 23.1010 23.00 to Options which became exercisable (other than options lapsed) during year or period ended: (At date first ex- March 31, 1964................................ April 3, 1965.................................... April 2, 1966..................... .............. October 1, 1966................................ 50,129 9,876 10,100 3,000 73,105 $11.33 to $14.18 14.29 to 17.40 16.25 to 21.25 24.13 $602,495 146,941 174,745 72,390 $16.14 to $1740 1645 to 21.7 24.25to 26.62 25.00 $996471 Shares as to which options were exercised during year or period ended: (At date of. Man* 31, 1964................................ April 3, 1965...............:...................... April 2, 1966...................... October 1, 1966_____ :............. . :` ' 24,651 4,872 27,389 13,073 69,985 $11.67 to $15.05 12.73 to 17.40 1U3 to 21.25 12.73 to 1645 $ 312,025 62,490 361417 171439 $907,171 $16.69 tol 16.63 to <25 2348 to 47.: 23.00 to4048 itht (a) After the lapse during the year ended April 2, 1966 of certain options for 1,238 shares(inch granted during the 1966 fiscal year)at-prices from $12.74 to $25.88 per share (aggregate $2(f lapsed options, 250 are rcissuable. . (b) After the lapse during the period ended October 1, 1966 of certain options for 4,070 shares atprices?' to $25.88 per share (aggregate $70,044). Of the lapsed options, 1,400 are rcissuable. . During the year ended March 31, 1964, options for 35,214 shares expired; during the year ended V options for 3,878 shares (including 100 shares granted during the 1965 fiscal year) at prices from $12.73 per share (aggregate $51,611) lapsed. None of these options is rcissuable. /.3 Between October 1, 1966 and March 2, 1967, options for 45,644 shares were exercised at prices to $14.50 a share (aggregate $552468). The number and prices of shares have been adjusted, where applicable, for the effect of stock dividends' in prior yean. At the time an option is exercised, it is B.VJD.'a policy to credit $1 per share to Common Stock account, the par value thereof, and to credit Capital Surplus account with the remainder of the proceeds. In addition to the foregoing stock option plans of B.V.D., Timely Clothes, Inc. (see Note A) has (1 option plan (under Section 422 of the Internal Revenue Code) providing for the granting of options'll salesmen and other key employees; and (2) an informal arrangement for issuance of stock options * all options have been granted. The stock option plan, referred to under (1) above, provides for an exercise not less than 10096 of the fair market value of the shares at the date of grant. Options generally become c~ six months from the date of grant for a period of five years (except as to certain options granted under the arrangement which may be exercised to 1970) and are exercisable generally only during the optionee's cmpk Timely. As at April 2, 1966, options for 4430 shares of Timely were outstanding at prices of $11-94 and $ a share (aggregate $52,200). The market prices of the related shares at the dates of grant ranged from $10 ygg B.VJ). COMPANY, INC. AND CONSOLIDATED SUBSIDIARIES < ' NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) veg(ctaggprr*o*v*i*s*ions*9. ,8A3s8)aat nOdct4o,b5e0r0 shares were reserved for 1, 1966, options for 541 the granting of future shares of Timely were option*, subject to the outstanding at a price 'ifeere (aggregate $6,460). The market price of the related shares at the date of grant was $11.08 a te $5,994) and 4,500 shares were reserved for the granting of future options (subject to the plan's orovisions). From April 2 to October 1, 1966 options for 3,789 shares were exercised at prices of $12.92 a share (aggregate $45,740). The market prices at dates of exercise ranged from $18.31 to Jbve (aggregate $78,114). The above number and prices of shares have been adjusted, where applicable, t'of nock dividends previously distributed. an option is exercised, it is the policy of Timely to credit $10 per share to its common stock account ''capital surplus account with the remainder of the proceeds. icENCiES, Commitments, Leases, and Other Comments: VD. is contingently liable to banks in respect of continuing guaranties, etc., including clean sight credits, operations of foreign subsidiaries not consolidated in the approximate amount of $1,400,000 at April 2, $(`600,000 at October 1, 1966. In addition, certain consolidated subsidiaries have commitments for the I*of fixed assets of approximately $2,300,000 at April 2, 1966 and $3,400,000 at October 1, 1966 and have fen of credit outstanding of approximately $200,000 at April 2, 1966. Janagemeot believes, based on the opinion of counsel, that pending litigation and claims which may ie"ordinary course of business will have no material effect on the accompanying consolidated financial iS0T>.r- . lUoder the terms of employment contracts, certain companies are obligated to pay benefit* of $63,500, in the event contracts terminate because of death prior to expiration date, and to make payments 1 and/or advisory services of (a) a maximum of $56,000 per annum to 1971, and (b) a maximum pinnnm for the lives of certain individuals. No provision has been made in the accompanying 1 statements with respect to the foregoing. ereare several retirement plans in effect (some of which are non-contributory) covering qualified employees [^consolidated subsidiaries. The plans may be amended, suspended or terminated at any time. The unfunded ! past service benefits under the plans, based on the latest reports by the consulting actuaries, aggregates ar^pril 2, 1966 and $480,000 as at October 1, 1966. No decision has been made as to the funding of erbehefits. The related charges to income during the fiscal yean ended in 1964, 1965, 1966 and in the Landed October 2, 1965 and October 1, 1966 approximated $2,600, $81,000, $75,000, $37,000 and $46,000, . XfTi -- - iWiinimum annual rentals under- noncancellable leases in which B.VJ), and. consolidated subsidiaries (-aggregated approximately $3,690,000 (including $375,000 referred to in (6) below) at October 1, 1966. $2,340,000 applies to leases with expiration dates to October 1976, $700,000 to leases with expiration ioct-1986, and $650,000 to leases with expiration dates to February 1992. In addition, certain leases provide qiadditional rentals based on a percentage of sales over a fixed amount, plus, in certain instances, real 'insurance, maintenance, etc. ' ' eL March 1, 1966, B.V.D. and several consolidated subsidiaries sold real properties to Montvale Realty 'value of approximately $5,000,000, and entered into an agreement to leaseback such properties at an rental of $375,000 over a period of twenty-five years, with options to renew for six periods of five years annual base rental of $50,000. Among other provirions of the lease, the lessee ts obligated to pay for . all taxes (other than Federal income taxes), assessments, and maintenance and repairs to the leased property at itsExpense, make reasonable alterations of and additions to the property. Montvale Realty Corp. is ^by the Trusteed Plan known as "Employees* Retirement Plan" of National Shirt Stops Inc. (a wholly-owned of B.VJ).). The trustee of the plan is The Bank of New York. Montvale Realty Corp. obtained & 5V6% loan of $5,000,000 from John Hancock Mutual Life Insurance Company in connection with which the ^company obtained a mortgage on the properties, and assignment of the leases and the lease payments thereon, payments under the aforementioned leases are less, by an insignificant amount, than the depredation and : charges would be on the related properties. Subsequent to October 1, 1966: ^November 1966, the Company sold 120,000 shares of its Common Stock to Bank de Paris et des Pays Bas J'&ares) and Amincor A.G. (40,000 shares) at $25 per share (aggregate $3,000,000). On and after three the respective dosing dates and for a period of thirty days thereafter the buyers may require the Company or any of the aforementioned shares at $25 per share. On February 21, 1967, B.VX>. entered . nqmllar agreement with Banque de Suez et de LTJnion Des Mines for the sale of 36,000 shares of its * Stock for the sum of $900,000, which sale bas not as yet been consummated. consolidated subsidiaries sold three parcels of real property to Valemont Realty Corp. ("Valemont") for <^^^_stely $2,475,000 and B.VJ>. entered into agreements to leaseback such properties at an annual base rental of j^gBXimalely $207,500 over a period of approximately twenty-four years, with options to renew for six periods of five s***1 annual base rental of approximately $24,750. Among other provisions of the lease, the lessee is obti- [topay for insurance, certain taxes, assessments and maintenance and repairs to the leased properties and may, at its I reasonhle alterations of and additions to the properties. Valemont is owned by the Trusteed Plan known ^employees Retirement Plan" of National Shirt Shops Inc. (a wholly-owned subsidiary of B.VJ3.). The trustee of F-31 THE B.VJX COMPANY, INC AND CONSOLIDATED SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(Concluded) (he plan is The Bank of New York. Valemont obtained a 6V4% mortgage loan of $2,475,000 from Massachusetts Mutual Life Insurance Company in connection with which the insurance company obtained a mortgage on the properties, and an assignment of the leases and lease payments thereon. The excess of the aforementioned selling price over the net book amount of the properties amounting to approximately $420,000, will be amortized over the terms of the related leases. The rental payments under the aforementioned leases are less, by an insignificant amount, than the depreciation and interest charges would be on the related properties. As of the close of business on October 1, 1966, B.V.D. acquired all the capital stock of Friedman-Marks Clothing Company, Incorporated and its affiliated companies in exchange for (i) $200,000 cash, (ii) 20-year 5% Subordinated Convertible Debentures (Series A) in the amouat of $1,800,000, and (til) 20-year 5% Subordinated Convertible Debentures (Series B) in the amount of $5,500,000. The Debentures are subordinated to all senior indebtedness (as defined) of B.V.D. and are convertible into B.V.D.'s Common Stock at the rate of $30 a share (subject to anti-dilution provisions) at any time until maturity or earlier redemption. Unless the Debentures are redeemed at an earlier date (see "Recent Acquisitions and Events"--Note (9) for further information relating to the acquisition of Friedman-Marks and the rights of the sellers to terminate the contract under certain circumstances) they are redeemable, prior to September 30, 1986 at 105% to 100% of principal amount and commencing October 1, 1976, B.V.D. will be required to retire annually 7V6% of the principal amount of Debentures then outstanding. 243,333 shares of B.V.D.'s Common Stock are reserved for conversion of the Debentures. B.V.D. has purchased the outstanding 50% of the capital stock of Flexees Limited not previously owned by it, plus an account payable from Flexees Limited to the selling stockholders, in exchange for 5,961 shares of B.V.D.'s capital stock. As of October 1, 1966, B.V.D. obtained a subordinated loan of $5,000,000 from Voo-T, SA., Panama, R.P., due January 31, 1970, with interest at 6% per annum. On December 1, 1966, B.V.D. obtained a commitment from the ynw. lender for an additional subordinated loan of $5,000,000, maturing on the same date, with interest at 6% per annum, of which $1,000,000 had been borrowed prior to January 20, 1967. B.V.D. is presently negotiating for the acquisition of other businesses. See also "History and Business of B.VJ3.-- Recent Acquisitions and Events". Notb K--Supplementary Profit and Loss Information: Six Months Maintenance and repairs: Charged to cost of goods sold.................-.......................... Charged to other expenses........................................... ...... * March 31, 1964 $ 390,69$ 34,613 $ 425,311 Depredation and amortization: Depredation and amortization of fixed assets.................... Amortization of intangibles................................................. $ 775,666 9,901 $ 785467 Charged to cost of goods sold................................................ Charged to other expenses....................................................... $ 664440 121,027 $ 785467 Taxes, other than Federal income taxes: Payroll ...................................................................................... Real estate and personal property.......................................... State franchise and income..................................................... Other.......................................................................................... $1,174,423 177,689 190,658 61435 $1,604405 Charged to cost of goods sold................................................. Charged to other expenses....................................................... $1432400 372,005 $1,604405 Rents: Premises .................................................................................... Equipment ................................................................................ $ 361408 154474 $ 516,482 Charged to cost of goods sold............................................. Charged to other expenses................................................... $ 263,871 252,611 $ 516,482 Royalties: Charged to cost of goods sold............................................. .- Charged to other expenses................................................... $ 222,418 $ 222,418 April 3, 1965 $ 491,837 5641$ $ 548,155 $1,173438 19,198 $1,193,136 $ 922493 270,843 $1,193,136 $1,661,452 285,135 229465 48,617 $2424,769 $1,682,776 541493 $2424,769 $1402,771 252,095 $1,454,866 $ 364,780 1,090,086 $1,454,866 $ 18,410 48,466 $ 66,876 April 2,' 1966 $ 571488 134,174 $ 705462 $1,699462 60484 $1,760446 $1,182,423 577423 $1,760446 $2,187467 406459 277498 79,447 $2450471 $2,024428 926,043 $2450471 $2,575,009 430,070 $3,005,079 $ 651,018 2454,061 $3,005,079 $ 92410 $ 92410 October 1,1966 $ 451464 82,405 $ 533,769 $1,005,827 33,455 $1,039482 $ 734,080 305,202 $1,039482 $1462,899 212,860 124,735 62,319 $1462,813 $1,387,040 575,773 $1462,813 $1,741,801 242499 $1484,400 $ 562446 1,421,854 $1484,400 $ 89,694 $ 89,694 F-32 OPINION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS fffU? Carey Manufacturing Company: >6 have examined the consolidated balance sheet of The Philip Carey Manufacturing Company fotiridfrT companies as of December 31, 1965, the related statement of consolidated earnings for then ended, and the statement of consolidated reinvested earnings for the three years then Our examination was made in accordance with generally accepted auditing standards, and ly included such tests of the accounting records and such other auditing procedures as we necessary in the circumstances. * opinion, the above-mentioned consolidated balance sheet and statements of consolidated and reinvested earnings present fairly the financial position of The Philip Carey Manufacturing and subsidiary companies at December 31, 1965 and the results of their operations for the then ended, in conformity with generally accepted accounting principles applied (except 'diange in 1964, in which we concur, in the method of accounting for the investment credit in Note A to the statement of consolidated earnings) on a consistent basis. Ohio 11, 1966 IX Haskins & Sells p *- if F-33 THE PHILIP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET December 31,1965 and (Unaudited) September 30, 1966 December 31, 1965 ASSETS Current Assets: Cash ................................................................................................................... Short-term bank deposits.................................................................................... Marketable securities--at cost (approximates market).................................... Accounts and notes receivable: Customers (less allowance of $375,000 at December 31, 1965 and $390,442 at September 30, 1966)...-.................. Other .............................................................. Cost of contract work in progress in excess of related billings................... Inventories, at the lower of cost or market (Note 2): Finished products ...................................................................................... Work in process................................................................ Raw materials and supplies........................................................................ Total current assets........... ........ $ 3,073,626 704,169 1,554,762 12,338,802 230,963 201,530 6,286,459 574,518 3,693,964 28,658,793 Property, Piant, and Equipment, at Cost (Note 3): Mineral lands and development (less accumulated depletion of $113,043 at December 31, 1965 and $129,202 at September 30, 1966)______ _____ Land, land improvements, and yard equipment-............................................... Buildings ............................................................... -......................................... Machinery and equipment................................................................................. Construction in progress.........................._........................................................ Less accumulated depreciation.................................................... ..................... Property, plant and equipment--net............... -......................- 380,057 2,803,760 15,114,728 36,564,295 2,774,175 57,637,015 26,868,734 30,768,281 Other Assets--At Cost Deferred Charges and Prepaid Expenses: Unamortized mine development (Note 3)........................... Other ................................................................................... Total deferred charges and prepaid expenses. Total _______________ __________ 1,194,077 706,664 831,202 1,537,866 $62,159,017 See Notes to Financial Statements, September 30, 1966 (Uaaodlted) $ 1,496,745 652,610 14,920,424 274,835 1,044 7,351,126 645,841 3,826,219 29,168,844 370,961 2,816,926 15,162^66 38,952,244 4,438,096 61,740,493 28,518,267 33,222,226 1,150,663 645,932 627,407 1,273,339 $64,815,072 F-34 THE PHILIP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET December 31, 1965 and (Unaudited) September 30,1966 Current Liabilities: Current portion of long-term debt LIABILITIES Accounts payable: Trade .................................................... Other .................................................... Federal and Canadian income taxes........... Accrued salaries, wages, and commissions. Other accrued liabilities............................... Total current liabilities................... December 31, 1965 $ 1,347,167 2,549,273 538,976 1,282,408 997,623 552.489 7,267,936 Long-Term Debt (less current portion) (Note 4): 3H% notes--$575,000 due annually through 1971, and $1,375,000 in 1972 5%9& notes--1750,000 due annually through 2973, and $1,000,000 in 1974 496 note payable to a bank..................-........................................................ Total long-term debt..............................................................-....... Unearned Premiums (roofing guarantee contracts).............................................. Deferred Income Taxes (Note 3)................................................ --..... --...... 4,250,000 6,250,000 487,887 10,987,887 2,375,000 2,680,000 Shareholders' Investment (Note 5): Common capital shares--authorized, 1,500,000 shares of $10 par value each; issued, 1,019,610 shares, less shares in treasury 17,500 shares at Decem ber 31, 1965 and 12,684 shares at September 30, 1966............ ...................... Capita! arising from issuance of capital shares for amounts in excess of par value .................................. Reinvested earnings ................................... Total shareholders' investment........................................................ 10,021,100 6,259,668 22,567,426 38,848,194 September 3d, 1966 (Unaudited) $ 1,369,323 3,467,777 380,250 915,863 989,760 985,322 8,108,295 4.250.000 6.250.000 1,285,677 11,785,677 2,473,142 2^88,952 10,069,260 6,371,928 23,417,818 39,859,006 Total Sec Notes to Financial Statements. $62,159,017 $64,815,072 F-35 THE PHILIP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPANIES STATEMENT OF CONSOLIDATED REINVESTED EARNINGS For the Three Years Ended December 31,1965 and (Unaudited^ Nine Months Ended September 30,1966 (------------ Year Ended December 31,------------ . 1963 1964 196$ Balance at beginning of period................................. .... Add--Net earnings and in 1965 special item.............. Total.......................................................... .... Deduct--Cash dividends.................... ...................... .... Balance at end of period (Note 5)....................... .... $19,582,493 2,142,208 21,724,701 1,628.465 $20,096,236 $20,096,236 3,102,188 23,198,424 1,628,466 $21,569,958 $21,569,958 2,613,604 24.183.562 1,616,136 $22^67,426 Nine Months Ended September 39, 1966 (Unaudited) $22,567,426 2,055,324 24,622,750 1.204,932 $23,417,818 Sec Notes to Financial Statements. THE PHILIP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS For (be Three Years Ended December 31,1965 and (Unaudited) Nine Months Ended September 30,1966 t. Principles or Consolidation: The accompanying statements include all subsidiaries; and intercompany transactions have been eliminated. The equity of Philip Carey in the net assets of its subsidiaries exceeded its aggregate investment in the subsidiaries by *13,483,446 at December 31, 1965 and *13,734,110 at September 30, 1966. This excess, representing reinvested earnings of the subsidiaries since the dates of acquisition, is included in consolidated reinvested earnings. Valuations in Canadian currency have been translated on the following bases: property, plant and equipment, provisions for depreciation, and accumulated depreciation converted at exchange rates at dates of acquisition or origin; other assets and liability accounts at current exchange rates at the balance sheet date; and income and expenses at the average exchange rates for the periods. Adjustment, which was not material, resulting from translating Canadian currency to United States dollars has been taken into income. 2. Inventories and Cost of Products Sold: Inventories are stated at the lower of cost or market Cost is determined generally on the basis of standard costs with percentage adjustments to reflect approximate actual costs. The inventories (excluding contract work in progress) used hi Che computation of cost of products sold are as December 31, 1962............................................................... December 31, 1963.............................................................. December 31, 1964._............... ..................;......................... December 31, 1965.............. ..............-.......... ...................... September 30, 1966..........;........... ........ ............................. . *10,894,024 9,949,805 9,701,160 10,554,941 11,823,186 3. PROPERTIES AND DEPRECIATION: .' Provision is made for depredation at rates which are designed to extinguish the cost of properties, less estimated salvage value, over their service live*. The annual rate* used are generally as follows: - -' - : Land improvements and yard equipmit.,,.'...'....;..;.'......... "3% Ho 8% :v' Buddings............__________......................................Ul...'-.;.... 2% to t% Machinery and equipment........... .............................4% to 1596 Depletion is charged to operations based on usage and estimated fibre deposit reserves. Cost of mine development is amortized by charges to operations based on as estimated useful life of eighty months. ' ' '1 Maintenance, repairs, and minor renewals are charged to operations. Betterments and major renewals involving the installation of a replacement unit are charged to the property accounts. In the plants which have detailed prop erty records, the gain or loss on retirements of property is credited or charged to earnings; in the other plants the cost of property retired less proceeds of sale or salvage realized k charged to the accumulated depredation with the exception that gain or loss is credited or charged to earnings in connection with extraordinary retirements of large units of property. See Note A to Philip Carey Statement of Consolidated Earnings for information on income tax matters. 4. Lcno-Term Debt; The note payable to a bank is collateralized by a mortgage on facilities under construction and is payable ratably over a period of 20 years. - The aggregate of long-term debt maturing daring the five years ending September 30, 1971 is approximately as follows: 1967, *1,369,000 (included in current liabilities); 1968, *1,371,000; 1969, *1,373,000; 1970, *1,375,000; and 1971, $1477,000. None of the long-term notes are held by or for the account of the issuer, held in fafcfag or other special funds of the issuer, pledged by the issuer, or held by 5. Shareholders' Investment: Under sgreements relating to the long-term notes, reinvested earnings of $3,774,440 at December 31, 2965 and $4,278,488 at September 30, 1966 were available for paymeats of dividends (other than share dividends), or for purchase of the capital shares. F-37 THE PHILIP CAREY MANUFACTURING COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS (Continued) Philip Carey is authorized to Issue 75,000 preferred capital shares of $100 par value each. No capit&t shares are held by affiliates or reserved for options, warrants, conversions, or other rights. Changes in capital arisiog from issuance of capital shares for amounts in excess of par value during the periods were as follows: Balance, January 1, 1963............................................ -................. $6469,031 Add excess of proceeds over par value of 2,969 treasury shares issued in 1965............................................................................... 59480 Total ........................................................................ 6428,411 Less excess of cost over par value of shares purchased for treasury: 1964 ........................................................................................ 1965 ........................................................................................ 23,652 345,091 Total ...................................................................... 368,743 Balance, December 31, 1965............................................................ Add--excess of proceeds over par value of 4,816 treasury shares issued during 1966........................................................................ 6459,668 112,260 Balance, September 30, 1966........ $6471428 . 6. Employee Plans: Philip Carey has in effect funded and trusteed pension plans for the benefit of hourly-paid and salaried employees which provide generally for normal retirement at age sixty-five. The amount of pension is based upon a factor applied to the number of yean of service at normal retirement date. Philip Carey provide* the totiti actuarial cost of benefits tinder the plans, except that under the salaried employees plan, participants may make contributions to obtain supplemental benefits. The Canadian subsidiaries have insured pension plans for salaried employees under which the employees and the companies each contribute 5% of salaries. . At December 31 1965 and September 30, 1966, the estimated remaining past service costs under the funded retire ment plans for employees were $2460,000 and $2405,000, .respectively. Such past service costs are being funded over an approximate 30 year period. The aggregate contributions under all plans for the following periods were: For the year ended December 31: 1963 ......................... ............. .............. For the nine months ended September 30, 1966. $565450 508400 564,000 397490 F-38