Document v64oaKa6eB3zyKjoqXRmD4pYE

FLINTKDTE ommercial and Industrial Products Floor Coverings and Adhesives REBUILDING AMERICA Government and construction industry authorities have publicly stated that America must be rebuilt in the next several decades. To do so, more houses, apartments, schools, hospitals, commercial and industrial buildings, as well as dams and roads, will need to be constructed than have been put in place since the first settlers colonized Virginia in 1607. Flintkote, because of its expansion and diversification, is well prepared to play a major role in this gigantic job of building and remodeling so essential to the na tion's burgeoning economy. DIRECTORS R. McLEAN CAMPBELL \V. L. DAVIS ALLEN O EATON WILSON HARVEY CHARLES HORNER jamcs e. McCauley \VM. W ALLACE MEIN, JR. JAMES D. MORAN CEORCE J. PECARO NOEL) REDMOND J. A. THOMAS B. A TOMPKINS HARRY F. VICKERS EXECUTIVE AND FINANCE COMMITTEE J. A. THOMAS, Chairman R. McLEAN CAMPBELL WILSON HARVEY CEORCE J. PECARO NOEL J. REDMOND B. A. TOMPKINS .HARRY F. VICKERS OFFICERS CEORCE J. PECARO, President vv. L. Davis, Vice President THOMAS L. DONOCHUE, Vice President WILSON HARVEY, Vice President JOHN LEGH-JONES, Vice President JAMES E McCAULEY, Vice President wm WALLACE mein. JR., Vice President JAMES D. MORAN, Vice President HAROLD F. STEPANEK, Vice President R. C WAGE, Vice President R. McLEAN CAMPBELL, Vice President and Treasurer CENE C. CURRY, Secretary and Legal Counsel WILLIAM L. KAUFFMAN, Controller oALLEN EATON, Clerk DONALD E. TRIMBLE, Assistant Treasurer JAMES A MAIN, Assistant Secretary JOHN E. ICOE, Assistant Controller December 31 The Facts in Brief 1965 19&4 (In Millions) iri " Sales .................................................. Net Income........................................ Cash Dividends (Common and Preferred) ............. Working Capital................................ Net Assets........................................... Depreciation and Depletion of Plant and Property......................... Common Shares Outstanding (Less Treasury Stock)..................... Common Shareholders of Record ... S286.9 12.8 7.5 54.5 172.8 13.2 5,551,037 22,738 $278.3 14.9 6.7 56.8 167.5 12.8 5,550,745 22,657 Per Common Share (Based on Average Number of Shares Outstanding-- 5,550,934 shares 19655,537,415 shares 1964) Net Income (After Preferred Dividends) ..................................... Cash Dividends ................................ $1.96 1.00 $2.34 .85 Further details are shown on the Financial state ments to be Found on pages 17 through 21. Contents The Facts in Brief.......................................................................... 3 Report to the Stockholders........................................................... 4 Sources of the 1965 Sales Dollar.................................................. 6 Distribution of the 1965 Income Dollar....................................... 6 1965 -- A Year of Consolidation.................................................... 7 Domestic Product Croups............................................................. 10 Foreign Product Croups................................................................. 15 Financial Statements.......................................................................17 Notes to Financial Statements........................................................20 Source and Application of Funds....................................................21 Ten-Year Comparison.....................................................................22 The World of Flintkole...................................................................24 THE FLINTKOTE COMPANY Annual Report 1965 ii 3 Report to the Stockholders Ceorge I. Pcciro, President To the Stockholders of The Fiintkote Company: In 1965 sales rose lo $286,917,507, largely due to sustained demand for our products in the non-residential construction market. Consolidated earnings were $12,843,013, a decrease in income from the preceding year primarily caused by two unanticipated develop ments beyond our reasonable control: a serious decline in the West Coast housing market for building materials and a substantial reduction in prices of gypsum products in all markets. Dividends paid on the common stock were $1.00 per share, compared with $0.85 per share in 1964. A major consolidation of Fiintkote operations, drawing our acquisitions and additions of the last decade closer together, should have favor able immediate and long-range effects on the profitability of the Company. Product group organizations were formed and management realigned to~better coordinate the multiple activities in which the Company is engaged. The diversification of our product groups and the expansion of our manufacturing facilities were thoroughly tested, with promising results. Since the activities of your Company are now spread over a wide spectrum of the nation's economy, its operations will be less vulnerable to individual market fluctuations. Capital expenditures were primarily made to re duce operating costs. Facilities and resources not contributing to profitable growth were sold and proceeds used to support working capital. In line with our continuing research programs, we have developed new products with substan tial sales and profit potential, which we plan to market in 1966. During the year we look forward to higher sales, reduced operating costs, lower start-up expenses and improved prices. Further more, our manufacturing and marketing efforts can be concentrated on increasing our penetra tion of the markets in which we are presently competing, freed largely from the pressures of designing, constructing and starting new opera tions. I am thankful for the efforts of the loyal and able employees who contribute so much to our per formance. The important role your directors take in working with management to attain greater profitability for the Company is also appreciated. I am heartened by the many com ments and letters ot encouragement sent me by stockholders of the Company, and gratefully acknowledge this support. February 75,7966 George J. Pecaro, President SOURCES or THE 1965 SALES DOLLAR Commercial jnd Industrial Products* StructurjI Building Products'* Floor Coverings and Adhesives I i Paper and Containers Roofings and Sidings Pipe and Conduit Cement, Aggregates and Concrete Products Lime Products. Asbestos. Road Materials. Protective Coatings. Sound Deadening Felts & Sealers, joint Scaler-Driveway Coatings. Airport Surfaces. Chemical Compounds. Insulating Materials efabricaied Roof DecL. Decorative and Acoustical Ceiling Tiles, Gypsum Ptoducts. Insulating Boards, Construction & Steel Products, MIRACLE^ Lime DISTRIBUTION OF THE 1965 INCOME DOLLAR PERCENT Production Materials, Supplies, Administrative, Selling and Research Expenses (Excluding Payroll) ry Retained in the " Business Depreciation and Depletion of Plant and Equipment 3 Cash Dividends 4 Federal, Foreign, State and Local Taxes 32 Payrolls and Cost of Employee Security ">65--A Year of Consolidation SALES Net sales for the fiscal year ended December 31, 1965 increased to a record high of S286,917,507 from $278,279,704 for the preceding year. Approximately 75 percent of total volume stemmed from sales to all segments of the construction in dustry, and more than half of such sales were in the non-residential market. In the residential mar ket, approximately 25 per cent of sales were for modernization and repair. Packaging products accounted for 17 per cent of total sales. Sales to the industrial processing and agricultural markets approximated 8 per cent of overall volume. The manifold end uses of Flintkote's products create a well-balanced distribution pattern, provid- g stability and profit potential not previously ailable to the Company before its operations were diversified. EARNINGS Net income was SI2,843,013, equivalent to SI.96 per common share, compared with S14,944,884. or $2.34 per common share a year earlier. The earn ings per share are after provision lor preferred divi dends and are based on the average number of shares outstanding during each year. DIVIDENDS Quarterly dixidends of SO.25 per common share were declared during 1965. The total paid for the year, $1.00 per common share, is an increase over the SO.85 per common share declared during the previous year. FINANCIAL POSITION "rhe Company's financial position continues sound, .counts receivable increased due to expanded sales and competitive marketing practices. Capital additions for 1965 were $21,587,000, and are esti mated at approximately $19,000,000 for 1966. De preciation and depletion, which were S13,240,000 in 1965, are estimated at S13.925.000 for 1966. Working capital stood at S54,511,047on December 31,1965. compared to $56,798,453 as of December 31,1964, and was subsequently enhanced by a sale of certain timberlands. On January 12,1966, the Company completed the sale of approximately 82,000 acres of timberlands in Alabama and Mississippi for approximately $14,000,000, retaining all mineral rights in the land. These timber reserxes exceeded the potential re quirements of the Company's xvood fiber board plant at Meridian, Mississippi. The Company re tains 14.000 acres of timberland to support this plant. The proceeds of the sale, xxhich are not re flected in the year end figures for 1965, will pro duce an after tax credit to surplus of approximately $9,600,000. Management expects an improvement in xvorking capital in 1966, and believes that necessary groxvth in the foreseeable future can be adequately fi nanced by internally generated cash without re course to outside financing. DOMESTIC OPERATIONS New production facilities were placed in opera tion, and existing ones modernized during 1965. These facilities are expected to improve the Com pany's market coverage and penetration, improve products and services and reduce costs. A new container plant at Centerville, Ohio, went into production in September, replacing an older plant at Miamisburg, Ohio. The Company also as sumed management of the Engineered Container Corporation, Houston, Texas, with an option to acquire the company at a later date. Txvo gypsum plants were placed in production, a fLINTROCK' products plant at Savannah, Georgia, 1965--A Year of Consolidation in February, and a BLUE DIAMOND* gypsum products plant at Fremont, California, in Sep tember. A new CALAVERAS* cement storage and distribu tion terminal at Sparks, Nevada, began operations in October. Installation of a new finish mill department, central control room and a complete conveying system was completed for the DIAMOND" cement plant in Ohio. A distribution terminal for KOSMOS" cement at In dianapolis is under construction, and a site for the relocation of a similar terminal in Cincinnati has been purchased. Near Baltimore, the Company is completing a facil ity for the production of industrial sands. In the same area, an existing plant is being expanded to produce calcium carbonate products for the paint, paper and plastics industries. A new plant is nearing completion at Richmond, California, to produce hydrated lime for soil stabi lization and for the construction industry. Major processing changes, including installation of automatic fabricating and finishing equipment, "were completed in our wood fiber board plant at Meridian. Mississippi. Smartly styled acoustical and decorative ceiling tiles have been given superior washable surface and strength characteristics. Significant advances in floor tile manufacturing techniques have improved quality and trimmed production costs, and have provided greater flexi bility of product design and improved styling. A major new flooring product, FLINTKOTE* Peel and Suck floor tile, will be marketed in 1966. This product can be quickly, easily and neatly installed by peeling a protective paper from the adhesive backing. It should appeal particularly to the do-ityourself market. WALK-EASE*, a new sheet vinyl floor covering with exceptional cushioning characteristics, which we presently manufacture in Canada, is now being introduced in certain regions of the United States. This unique, patented product is reinforced with fiber glass, imparting superior strength and stability to the vinyl foam backing and the thick, inlaid vinyl surfacing. Because of its construction, the product has outstanding recovery from indentation. Initial market acceptance of WALK-EASE floor cov ering has been encouraging. Production facilities are being engineered for construction of the first plant in the United States in 1966. Despite a.7-wcek strike in the asbestos-cement pipe plant at Ravenna, Ohio, and some weakness in prices of bituminized fibre pipe and conduit dur ing the first half of 1965, sales gains were made in all products of the Pipe and Conduit Croup. A current shortage of copper piping and tubing ma terials provides a market opportunity for our plastic pipe. Improved production efficiency will provide additional volume for sales increases anticipated in 1966. The Sealzit Contracting unit, in its first full year of business, found increasing market acceptance for its monolithic job-applied protective and insulat ing membranes, a concept pioneered by your Company under the MONOFORM brand name. Flintkote's asphalt roofing operations demon strated improved performance over previous years, reflecting the elimination of marginal plants dur ing 1964. The profitability of Flintkote automotive products kept pace with the increased production of the automobile industry in 1965- ORGANIZATION The internal organization of your Company was consolidated into major product groups, and man agement responsibilities assigned to maintain max imum operating efficiency. James D. Moran, a vice president and director, was assigned national responsibility for the Building Products Croup. Monte C. Carpenter, who joined the Company in 1965, was appointed general manager of Flintkote Building Products. W. L. Seitz was designated general manager of Blue Diamond Gypsum Products. W. L. Davis, a vice president and director, was assigned national responsibility for the Packaging Croup. W. L. Bapst and P. F. Paul were named gen eral managers of Hankins Container and Pioneer Packaging Products, respectively. James E. McCauley was elected a vice president and member of the board of directors, succeeding James R. Connell, who has retired. Mr. McCauley has been given national responsibility for the Pipe and Conduit Group. Harold F. Stepanek, who has had extensive man- 8 agement experience in the cement industry, joined '"ntkote at year's end. He was elected a vice presi- nt and given national responsibility for the Ce ment Croup. C. J. Buckfey was appointed general manager of Glens Falls Cement, succeeding Stanley H. MacArthur, who has retired. Thomas L. Donoghue was elected a vice president, succeeding Noel J. Redmond, who will retire in 1966, but will continue as a director. Mr. Donoghue was .named to head the Western Stone Products Croup. Richard L. Allen was designated general manager of Blue Diamond Concrete Materials. FOREIGN OPERATIONS The Flintkote Company of Canada Limited con tinued to contribute to the overall corporate profit. Through this Canadian subsidiary, your Company acquired last April the Granby, Quebec plant of Everlex Co. Ltd., and the exclusive right to manu facture and distribute WALK'EASE floor coverings in both Canada and the United States. At year's end, Stradwick Industries Limited was acquired. This company manufactures economy vinyl-coated sheet flooring at London, Ontario, d operates 15 outlets in Ontario for the sale and . istallation of a full line of flooring products. King Paving & Materials Limited, a Canadian sub sidiary', a construction contractor and a producer of ready-mixed concrete and crushed stone, en joyed increased sales and profits. Our British subsidiary. The Flintkote Company Lim ited, increased both sales and profits in 1965. Op erating on a world-wide basis, this London-based subsidiary accounts for the majority of The Flint kote Company's business overseas. Early last year, its new plant in Durban, operated by Flintkote South Africa (Ply.) Limited, began production of adhesives and liquid products. The modernization oi our Ohio cement plant typihes your Company's ability to keep pace with advanced tecknnlngv "*T , r-- -f nsrsf y-1 ^j.i Gypsum rock irom the Company's quarr\ in Sew lojndland is unloaded a: the deep-water terminal ad/acent to flintkote s gypsum plan: a: 5a-. ar.r.ar. Automated Well de-igned Attractive Like all new Flmtknte plants, this Cahiorma gypsum taciiil) was welcomed as a good industrial neighbor. l t \ - rl ' j Our Scalzit Contracting unit insulated these champagne storage tanks, using the MOSOfOKM' Insulation 1 j i 9 Domestic Product Groups Cvp.-urn loth ond plotter by Flintkotc lend lasting beauty and dignity to the mu-no: o' th:; church at Forest Lawn Cemetery in Los Angeles. BUILDING PRODUCTS GROUP Building Materials Architectural Products Industrial. Paving and Automotive Products Flooring and Adhesnc Products The Building Products Croup embraces Flintkotc and Pioneer Building Products, Blue Diamond Gypsum Products and Sealait Products. This Croup operates 34 facilities at 22 locations, with sales offices in principal cities across the country. Its products are widely used in residential, indus trial, commercial, and public construction and in the automotive industry. Main office locations are: Flintkotc Building Products 480 Central Avenue East Rutherford, New Jersey Pioneer Building Products 5500 South Alameda Street Los Angeles, California Blue Diamond Gypsum Products 1650 South Alameda Street Los Angeles, California Sealzit Products 3640 Chicago Avenue Riverside, California FLfX-SMTf' vinyl asbestos floor tile creates a handsome decorative effect in this Holiday Inn of America, Wilmington, Delaware. 10 CEMENT GROUP Portland Cement Products Included in the Cement Croup are the Calaveras, Diamond and Glens Falls organizations, and the Kosmos Portland Cement Company. This Croup operates 5 cement plants and 10 distri bution terminals. Its products are an integral part of practically all types of commercial, industrial and residential construction. They are also widely used in the construction of dams, highways and other public projects. Main office locations are: Calaveras Cement Diamond Cement ' Clens Falls Cement Kosmos Cement 315 Montgomery Street San Francisco, Caliiorma Middle Branch, Ohio 313 lower Warren Street Clens falls. New York 153`J Starks Building Louisville, Kentucky i This new llinllnlc cement storage and dislrihutinn terminal built in Nevada is among the most modem in the industry. I 11 PACKAGING GROUP Corrugated Packaging Products. Displays and Folding Cartons The Hankins Container and Pioneer Packaging Products organizations comprise the Packaging Croup. They supply American enterprises, large and small, with a wide variety of expertlv designed packaging to promote and protect products of all shapes and sizes. These products are produced at 11 plant locations throughout the nation. Main office locations are: Hankins Container Pioneer Packaging Products 14801 Emery Avenue Cleveland, Ohio 5300 South Alameda Street Los Angeles, California 7hi< nen Fhntkote container plant, replacing an older facility, enemphf.es the Company's progress m meeting growme demand- ior iti corrugated packaging products, displays and folding cartons. e-v PIPE AND CONDUIT CROUP FLIKTITE* Asbestos Cement Pipe OFtASCFSL'RC Bituminous fibre Pipe and Conduit ORASCEBURC Plastic Pipe Underfloor Duct Systems The Company's pipe and conduit products are made and marketed by the Orangeburg Manufac turing organization. These products are widely known and well re ceived by the trade in both public and private con struction markets for use in water and sewerage systems, irrigation projects, and electrical and air duct installations. The 3 manufacturing plants of this Croup are lo cated in California, Ohio and New York. Main office location is: Orangeburg Products Orangeburg. New York . V* r i / j- / ORAXCIBLIRC? brand hiluniinous pipe, adaptable to many applications, is here being installed lor the drainage ol an un derground parking lot on Michigan Boulevard in Chicago. r\ t v $ < . \* '* v** T .. i V STONE PRODUCTS GROUP Ready-Mixed Concrete Rock, Stone. Sand and Gravel limestone. Lime and Calcium Carbonate Products SAKRETF* Mixes Steel fabrication The Company's Eastern Stone Products Croup in cludes Grove Lime Products and the Harry T. Campbell Sons' Corp. The Western Stone Products Croup includes U.S. Lime Products and Blue Dia mond Concrete Materials. The Eastern and Western Stone Croups operate 71 manufacturing and processing facilities at 47 locations. These products have a wide variety of end uses in all phases of construction. They are also used ex tensively in agriculture and in industrial processing. Main office locations are: Harrs T. Campbell Sons' Corp. Tovvson, Baltimore. Maryland Grove lime Products Lime Kiln, Maryland U.S. Lime Products 2144 Beverly Boulevard Los Angeles, California Blue Diamond Concrete Materials ibSO South Alameda Street Los Angeles, California Large quantities of reads-mixed concrete and road base aggregates ere supplied by Fhntkote lor this highway. Flintkote concrete was used to build this reservoir t1 Foreign Product Groups CANADIAN GROUP Flooring and Adhesive Products Building Materials Protective Coatings Road Emulsions Asbestos fibres Ready-Mixed Concrete Stone, Sand and Crave/ The Canadian Croup of subsidiaries includes The Flintkote Company of Canada Limited, King Paving & Materials Limited, Flintkote Mines Limited and Stradwick Industries Limited. Your Company operates 38 manufacturing and processing facilities, depots and warehouses in 23 Canadian cities and communities. The wide variety of products marketed by our Canadian Croup are used in virtually all types of construction. Main office location is: The Flintkote Company of Canada Limited 30th Street, lonj; Branch Toronto, Ontario OVERSEAS GROUP Protective Coatings Adhesives Automotive Products Industrial Paints Roofing, Flooring and Insulation Systems Your Company operates overseas through its sub sidiary, The Flintkote. Company Limited, London, England. Foreign subsidiaries of the London-based Company include Enfield Chemicals, Limited, Flintkote France S.A.R.L., Flintkote (New Zealand) Limited and Flintkote South Africa (Pty.) Limited. The Overseas Group operates 14 manufacturing and warehouse facilities in 5 cities. Its products are sold in construction and industrial markets throughout the world. Main office location is: The Flintkote Company Limited Adam House, One Fitzroy Square London W. 1, England 6 The Flintkote Company and its Wholly Owned Subsidiaries Consolidated Statements of Income and Earned Surplus (or ihe years ended December 31,1965 and 1964 Sales .................................................................................... Cost of goods sold............................................................. Cross profit on sales............................... Selling, administrative and general expenses............... Other income .................................................................... Other charges: Cash discounts on sales............................................ Interest....................................................................... Miscellaneous ........................................................... Income before federal and foreign taxes on income..................... Federal and foreign taxes on income: Currently payable: United States..................................................... Foreign ........................................................... . . Deferred (Note 3)..................................................... Charge equivalent to investment tax credit, net (Note 4) ........................................................... Net income .............................................. Earned surplus, January 1................................................ Less,Cash dividends on: Preferred stocks................................................ Common stock: 1965, SI.00 per share; 1964, $.85 per share...................................... Earned surplus, December 31 (Note 8)........................... 1965 1964 $286,917,507 221,567,784 65,349,723 40,307,809 25,041,914 2,674,127 27,716,041 4,671,945 3,241,201 700,896 8,614,042 19,101,999 $278,279,704 207,249.901 71,029,803 37,723,960 33,305,843 1,687,983 34,993,826 4,779,602 2,652,024 829,078 8.260,704 26,733,122 2,272,210 1,072,165 2,306,903 607,708 6,258,986 12,843,013 80,772,676 93,615,689 1,982,163 5,550,939 7,533,102 $ 86,082,587 6,196,248 1,347,732 3,785,580 458,678 11,788,238 14,944,884 72,518,703 87,463,587 1,982,163 4,708,748 6,690,911 $ 80,772.676 Provision (or depreciation and depiction amounted to 513,240,000 (or 1965 and $12,770,000 for 1964. The accompanying notes arc an integral part of the financial statements. 17 Consolidated Balance Sheets December 31,1965 and 1964 ASSETS: 1965 ------------------------ Cash........................... ................................................................. $ 7,790,135 1964 $12,758,103 Marketable securities, at cost (approximates market)......... 1,671,150 3,330,174 Accounts and notes receivable: Customers, less allowance for doubtful items: 1965, S4,044,936; 1964, $3,126,085 ........................ Other.................................................................................. 48,379,726 1,586,751 49,966,477 38,558,080 1,509,980 40,068,060 Inventories, at the lower of average cost or market: Finished goods and work in process.............................. Raw materials and operating supplies............................ Total current assets............. ............................. 21,732,851 17,344,499. 39,077,350 98,505,112 20,188,591 16,469,947 36,658,538 92,814,875 Property, plant and equipment (Note 7J................................ 169,422,819 163,526,583 Investments, at cost, and long-term receivables................. 3,871,928 2,312,032 Cood will, patents and other rights, at cost.......................... 7,744,425 7,414,515 Prepaid and deferred expenses and other assets................. 5,992,107 5285,536,391 The accompanying notes arc an integral part of the financial statements. 6,093,402 $272,161,407 The Flintkote Company and its Wholly Owned Subsidiaries LIABILITIES: Accounts payable and accrued expenses................. Notes payable............................................................... Current instalments on long-term debt................... Accrued federal, state and other taxes..................... Reserves for product guarantees and self-insurance Production payment, net of taxes............................. Total current liabilities....................... Long-term deb! (Note 2)............................................ Reserve for product guarantees.................................. Deferred taxes on income (Note 3)........................... Deferred investment tax credits (Note 4)................. Commitments (Note 5) CAPITAL: Capital stock (Notes 2,6 and7): Preferred stocks............................................................... Common stock, $5 par: Authorized 10,000,000 shares; issued, 1965, 5,571,067 shares; 1964, 5,570,775 shares, stated at................................................................. Issuable under stock option plan purchase contracts (3,397 shares)...................................... Earned surplus, statement annexed (Note 8)....................... Less, Common stock in treasury, 20,030 shares, at cost............................................................................ '" 1965 $ 23,080,965 11,995,159 965,672 5,760,385 1,688,318 503,566 43,994,065 46,537,168 1,900,000 17,328,711 2,995,734 112,755,678 27,977,635 59,179,476 75,911 86,082,587 173,315,609 534,896 172,780,713 $285,536,391 1964 $ 18,509,641 2,341,939 10,153,464 2,071,878 2,939,500 36,016,422 49,395,813 1,950,000 14,946,089 2.388,025 104,696,349 27,977,635 59,173,732 75,911 80,772,676 167,999,954 534,896 167,465,058 S272,161,407 The accompanying notes arc an integral part of the financial statements. 19 The Flintkote Company and its Wholly Owned Subsidiaries Notes to Financial Statements 1. Property, plant and equipment are stated at cost, less: 1965 1964 Allowance for depreciation and depletion ..5135,445,327 5129,944,118 Allowance lor estimated losses on disposal of certain plants . . 893,281 1,149,694 At December 31, 1965, properties carried at a de preciated cost of approximately $6,300,000 were pledged under long-term debt agreements. 2. Details of long-term debt at December 31,1965 are as follows: Description Current Portion Due Subsequent to 1966 Total Annual Instalments Sinking fund debentures: 4 4VVo, due April 1, 1981 -- S33.250.000 SI,750,000through 1980, balance 1981 4V"/o, due April 1,1977 7,478,000 5478.000 lor 1967, 5500,000 through 1976,baiance1977 debentures, dueOctoberl,l980 S147.000 1,499,000 S147,000 through 1976 except each fourth instalment beginning 1968 shall be 5146,000, Notes: 5%, due balance 1977 December1,1970 200,000 900,000 S 200.000 through 1969, balance 1970 4'/%, due April 1,1977 300,000 2,400,000 5300.000 for 1967, with lesser amountslhereafter Other long term debt 318.672 1,010,168 Varying through 1988 5965,672 546,537,168 The 4'/:% debentures are convertible into com mon stock at the rate of one share for each 545 principal amount of debentures. At December 31, 1965, 36,578 shares of common stock were re served for conversion of such debentures. 3. Depreciation for book purposes is provided on the straight-line method and for certain assets is less than depreciation claimed for income tax pur poses. Further, certain mine development costs are claimed for income tax purposes as incurred but for book purposes are deferred and amortized on a per-ton-mined basis.The resulting current tax bene fits are deferred to subsequent periods when book provisions for depreciation and amortization will exceed the amounts allowable (or income tax purposes. 4. Investment tax credits are being amortized rata bly over ten-year periods. 5. At December 31,1965, the Company had author ized future additions to plant and property of which the estimated cost to complete was 510,700,000. The companies have long-term lease obligations involving annual rentals of approximately Si,100,000 through 1967 and reduced amounts thereafter through 2000. 6. Preferred stocks comprise: Shares Authorized Outstanding $4 cumulative, no par . 53,877 4l/jc/ convertible second, $100 par . . 72,965 54.50 Series A con vertible second. 5100 par ......... . 120,225 52.25 Series B con vertible second. no par..................... . 648,000 53,877 72,965 120,225 398,800 Amount 5 5,714,329 7,296,500 12.022,500 2,944,306 S27,977,63S Certain provisions of the preferred stocks follow: Voluntary (and Involuntary Redemption) Amounts to which each share is entitled in liquidation (in each case plus accrued dividends): 54 cumulative........................... . 5100 00 $107.00 4V: Vc convertible second ... . 100.00 105.00 54.50 Series A convertible second.................................... . 100.00 105.00 52.25 Series B convertible second.................................... 50.00 52.50 At December 31, 1965, the aggregate stated value of the 52.25 preferred stock was less by 516,995,694 and S17,992,694 than the aggregate involuntary and voluntary liquidation amounts, respectively. The 54 preferred stock has a sinking fund provision requiring the annual redemption of 2,000 shares, with the privilege of applying any excess redemp tions to subsequent periods. Shares have been ac quired and retired to meet the sinking fund re quirements through 1968. Conversion features: Shares of Common Slock for Each Share of Preferred Slock 4 '/j'/ Scries..........................3.000 54 50 Scries..........................2.678 $2.25 Series............................1.111 Common stock reserved for conversion of pre ferred stocks aggregated 983,925 shares at De cember 31, 1965. 7. At December 31, 1965, there were outstanding xercisable stock options, granted to certain officers d employees, to purchase 98,949 shares of comnon stock at prices ranging from $22.00 to $36,872 per share. During 1965, no options were granted or exercised and options for 2,586 shares were can celed. In addition, there were outstanding at December 31, 1965, exercisable options for 320 shares at $29,567 per share, issued in 1958 in substitution for options issued by an acquired company. During 1965, options for 292 shares were exercised at $19,669 per share and options for 2,330 shares were canceled. The afore-mentioned option prices are not less than 95 per cent of the fair market value of the stock a! the time the options were granted. Such prices have not changed, except as affected by normal operation of antidilution provisions of the stock option plan. Shares reserved for future options at the beginning and end of 1965 were 55,752 and 58,338, respec tively. 8. The indentures covering the sinking fund deben tures, the long-term note agreements and the Company's Articles of Consolidation contain re strictive provisions as to the payment of cash dividends on, and the purchase or redemption of, Company stocks. Under the most restrictive of these provisions, the. amount of earned surplus available for cash dividends on common stock at December 31,1965 was approximately $34,400,000. 9. The Company on January 12. 1966 sold certain timberlands for a gain, after estimated taxes, of approximately $9,600,000. Such gain will be cred ited to earned surplus during 1966. Statement of Source and Application of Funds Source of funds: for the year ended December 31,1965 Net income.................................................................................................................. Provision for depreciation and depletion............................................................... Increase in deferred taxes and investment tax credits.......................................... Other, net.................................................................................................................... $12,843,000 13,240,000 2,990,000 618,000 $29,691,000 Application of funds: Additions to property, plant and equipment......................................................... Reduction in long-term debt..................................................................................... Dividends paid on preferred and common stocks................................................ Decrease in working capital (Note 9)...................................................................... $21,587,000 2,859,000 7,533,000 31,979,000 2,288,000 $29,691,000 To the Board of Directors and Stockholders, The flintkote Company, New York, N Y. Auditors' Report We have examined the consolidated balance sheet of THE FLINTKOTE COMPANY and Us WHOLLY OWNED SUBSIDIARIES as of December 31. 1965 jnd the related consolidated statement ot income and earned surplus for the vear then ended Our exam ination was made in accordance with generally accepted auditing standard*. and accordingly included such tests of the account ing records and Mich oilier auditing procedures as we considered necessars m the circumstances. We previously examined and reported upon the consolidated financial statements of the Company for 1964 In our opinion, the aiorc-mentioned linancial statements present fairly the consolidated financial position of The riintkote Company and its Wholly Owned Subsidiaries at December 31, 165 and 1964, and the results ot tbou operations for the years then ended, in conformity y\ith generally accepted accounting print ipley applied on a consistent basis. We have made a similar examination ol the accompany mg statement n( source and application of funds yvhich, m our opinion, hen considered in relation to the hasu tinancul statements presents rauly the sources am) application ot funds of The flintkote impanyand Us Wholly Owned Subsidiaries for the year ended December 31, 1965. New York, January 29,1906. i if---- "A I I i 21 Ten Year Comparison CONDENSED CONSOLIDATED BALANCE SHEET* 1%r. ASSETS: Cash........................................................................................... Marketable Securities .......................................................... Accounts and notes receivable Cess allowances)......... Inventories .............................................................................. Total current assets............................................. $ 7.790,135 1,071,150 49.W, 477 39,077.350 90.505,112 Property, plant and equipment: Cross ..................................................................................... Allowance for depreciation and depiction................ Net......................................................................................... 305,701,427 136.310.000'* 109,422,019 InveMnirnts and long term receivables........................... Coed sv.ll, patent*, and other rights.................................. Prepaid and deferred expenses and other assets......... 3P.~1.928 7,744,425 5.902.107 5205.536,391 LIABILITIES: Accounts payable and accrued expenses...................... Notes and current instalments on long-term debt .... Accrued federal, state and other taxes............................. Reserves for product guarantees and self-insurance .. Production payment, net of taxes.................................... Total current liabilities...................................... Long-term debt ...................................................................... Reserve for product guarantees......................................... Deferred taxes on income.................................................... Deferred investment tax credits...................................... Total liabilities...................................................... CAPITAL: Capital stock: Preferred............................................................................... Common, issued and subscribed.................................. - Earned surplus ........................................................................ Less, Treasury stock, at cost........................................... S 23.080.965 12.900,831 5,760.385 1,088,318 503,506 43,994,065 46,537,168 1,900,000 17,328,711 2.995.734 6112.755,078 S 27,977,635 59.255.387 87,233,022 86.082.587 173,315.609 534.896 $172.700.713 5205.536.391 191.4 5 1 2.750.103 3.310,174 40,060.000 36 650.510 92.014,1:75 294,620,395 111.091 r. 12 * * 161.520.583 2,312.032 7,414,515 6.09.1,402 5272.101.407 S 18.5C9.641 2.341.939 10,153.464 2.071,878 2.939.500 3b,016,422 49,395,813 1.950,000 14,946,089 2.388.025 5104,696.349 5 27,977,635 59.249.643 87,227,278 80.772,676 167,999,954 534.896 5167,465.058 5272,101.407 1903 5 10,300,306 ' 1.465.391 37,999.763 35.147.400 114.972.933 291,120,031 129.436 007" 161.001.964 2,070.335 7,507,103 5.957,666 5262.192.001 5 20,525,122 2.059,877 10,725,986 1,972,637 35,283,622 52,353,014 2,300,000 10,982,866 1,929,347 5102.848,849 S 27,977,635 59.381.710 87,359,345 72.516,703 159.878,048 534.896 S159.343.152 5262.192,001 CONDENSED STATEMENT OF CONSOLIDATED INCOME* 1965 1964 Sales............................................................................................ Cost of goods sold................................................................. Cross profit on sales........................................................ Selling, administrative and general expenses................ Other income.......................................................................... Other charges........................................................................... Federal and foreign taxes on income................................ Net income ............................................................................. Provision for depreciation and depiction included above $286,917,507 221.567.784 65,349,723 40.307,809 25,041,914 2,674,127 27,716,041 8.614.042 19,101,999 6.258.986 S 12.043.013 S 13.240.000 5278,279 704 207,249,901 71,029.803 37.723,960 33.30S.843 1,687,983 34.993.026 8.260,704 26,733,122 11,788.238 S 14,944 804 S 12.778,000 1963 $278,789,673 209.690,645 69,099,028 37.269,865 31,829,163 1,438.305 33,267,468 8,724,593 24,542.870 11.163.950 6 13.378.920 5 12.753.000 Ofiftgt-burg Mjnu/JCfunng Co . Inc . and 7he /Ij.ilirs Container Company tnclutlrd only in yea/j 1957 7%5 Blue Dianumd Corporation, Cj/jvcrjj Cement Company and C/ens falls Portland Ctnunt Company included only m yeas 7955 fh'Ou/;h 7965. Harry T. Campbell Sons' Cor poration. 7he Diamond Portland Cement Company and M / Crove lime Company included only rn years 7959 through 7905 f.nc/jdrs reserve lor property /c'srt net of Ivdrtal Uses The Flintkotc Company and its Wholly Owned Subsidiaries 1962 10,859820 385,268 37,595,021 33,161,561 82.001,670 275,648,078 117,600.145 158,041.933 2,360.338 7,593,325 5.709.781 $255,709,047 $ 19,507,217 2.966,732 10,669,531 1,361,670 34,505,150 53,831,097 7,552,996 483,430 6.3-2.673 27,977,635 59.249,647 87,227,282 72,643.98S 159,871,270 534.896 5159,336.374 S253.709.047 1961 $ 14,339,093 772.460 36.676,791 32.4'16 637 84.194.981 254,891.914 109.887.614 145.0 i-l.l 00 2,350.552 7,669.815 5.629.737 $244,649,185 I960 S 12,683.534 1,987,123 35,044,172 32,134.753 81.649,582 229.804,203 102.338.266 127,465.942 6,583.310 7,512,063 4.954.549 S228.370.440 1959 S 15,597,009 2.706.901 30,164,111 30.279.99S 78,747.929 206.549.925 90.619.094 115.930.921 2,893.028 2.962.004 4.517,803 5205.0.51.683 S 17,322,268 1,813,549 11,551,461 1,099,480 31,786,758 55.941,097 3,935,597 5 91.663.452 S 16.9G9.637 13,219.037 17,087,518 880,537 $ 15.649,567 1,380,742 17,964.317 759,554 48.156,729 27,869,976 ' 2,344,322 35,734,180 22,496,666 990.382 $ 78.371.027 5 59.241.228 S 27,977.635 55.297.193 87,274,828 66.445.801 _ 153,720.629 5.34 896 S153.165.733 5244 649,1 S3 S 28,190,526 58,991.644 67,182,170 63,055 833 150,236.008 238.589 5149.999.419 S228.379.446 $ 28,433,567 56.503,084 84,936,651 61,062.704 145.999,355 188.898 S145.810.457 S205.051.685 1938 S 14.021.674 2.683.370 23.842.258 26.252.860 66.80*0 162 160.851,720 71.980.904 88.870.816 3,398,910 2,962.004 3.664.967 S165.696.859 S 12.688,910 1,007,403 8.045,384 630,879 22,372,576 16,874,862 532,930 S 39.830.363 S 26.931.315 51.685.9" 78.617,292 47,433.657 126,100.949 234 458 5125 866.491 S1(,5 0**6 859 1937 S 10.074,915 4,666,898 14.476.833 19.405.848 4",fi24.4ti4 118.664.121 46.417.493 72.246.628 489.227 2.8~8,109 2 "58.667 Si 26.197 125 S 9.335.977 3,332,856 5,685,530 532,377 18,886,740 12,850,000 - S 31.736.740 S 27,760,214 35.216.281 62.976,495 32,999.161 95.975,656 715.271 S 95.260.385 SI 26.99'.125 1956 5 6.981.881 2.640.825 11,169.716 13.664.044 34.4r,t> 4f>f> 84,847.370 .34.777.645 50.069.725 266.755 2,878.108 1.837.983 S 89.509.037 S 5,664,245 943,612 5,432.474 627,090 12,667,421 3,150,000 - S 15,817,421 S 15,346,962 29.836.765 45,183,727 29.369.214 74,552.941 861.325 S 73.691.616 S 89,509.037 1962 S272.357.365 205.906.404 66.450,961 36.499.500 29,951,461 2.002.002 31.953.463 8.705.1': 23.2 411.291 10.616.119 * 12.602.172 11.470.000 1961 $248,758,325 187.461.261 61,297.064 34.675.922 26,621,142 1.681.553 26,304.695 7,252.686 21,052.009 9.573.269 S 11.47b.740 S 10.504.000 1960 $252,171,900 189,324.95' 62.846,943 34.071.915 28,775,028 1,703,915 30.483,943 6.578 118 2.1,905.1,25 10.941.998 S 12.`16 1.627 S 10,434.000 1939 S253,054.691 189.197,174 63.857,517 31.733 440 32.1 .'4.077 1 621.245 33,915.322 5 636.6,52 28.305.6 10 1 1 240 222 S r. in,:. 418 $ 10,4"0 (Wl 1958 $194,071,638 147 4 14.190 46.617,448 21 62t-.O'10 23,011.448 1.605.160 24,616,603 4.549.603 20,067.000 9 078.862 S in 95b 138 5 7.720 000 1957 S155.131.213 119.208.638 35,922.575 19,344.124 16,578,451 1,530,516 18,108,967 3.363.769 14,745,198 6.647.195 S 6 096,003 $ 5.210 000 1936 $113,655,116 86,156.251 27,498,865 14,198.613 13,300,252 1,553.213 14,853.465 2.285.087 12,568,378 5.434.266 S 7.134.112 S 3.623,000 23 mcunvi offices 30 Rockefeller Plaza New York. N.Y. 10020 DOMES! 1C PRODUCT CROUPS Building Products Croup Blue Diamond Gypsum Products Flintkote Building Products Pioneer Building Products Scalzil Products Cement Croup Calaveras Cement Diamond Cement Clcns Falls Cement (Cosmos Cement* Packaging Croup Hankins Containers Pioneer Packaging Products Pipe and Conduit Croup Orangeburg Pipe and Conduit Flintile Pipe Eastern Stone Products Croup Campbell Products' C.rove Products Western Stone Products Croup Blue Diamond Concrete Materials U.S. Lime Products FOREIGN CROUPS Canadian Croup The Flintkote Company ol Canada Limited King Paving <S Materials Limited All-Weather Asphalt Mix Limited Flintkote Mines Limited Slradnick Industries Limited Overseas Group The Flintkote Company Limited Enfield Chemicals Limited Flintkote France S.A.R.L. Flintkote (blew Zealandi Limited Flintkote South Africa (Pty.) Limited TRANSFER AGENTS Bankers Trust Company 405 Lexington Avenue, New York 17, N.Y. Bank of America Nat l Trust and Savings Assoc. Ill West 7lh Street, Los Angeles 14, Calif. Old Colony Trust Company 45 Milk Street, Boston 6, Mass. REGISTRARS The Manufacturers Hanover Trust Company The First National Bank of Boston United California Bank AUDITORS Lybrand, Ross Bros. & Montgomery COUNSEL White & Case, New York, N.Y. Ropes ft Cray, Boston, Mass. 5ubiirf/*w-Kmmo* Portland Omrnf Company and Harry 7. LarnjibvU $nm' CorporaImn and thvir rnpcciivt* subsidiaries. s 4,, \ A '. < < \ t* THE WORLD OF FLINTKOTE In advertising and news stories. The Flintkote Company is often de scribed as a "... leading U.S. and world-wide manufacturer of diversi fied building and construction materials, containers, and paperboard products___ " The map above vividly illustrates why. Flintkote operates 186 manu facturing and processing plants in 126 localities in the U.S.A., Canada, and overseas, drawing on company-held raw material sources at 48 different sites. Serving our customers in diverse and expanding markets are principal sales offices in 75 cities in this country and Canada. Addi tionally, there are sales outlets for Flintkote products in some 115 countries around the world. Numbers, and symbols on a map, compose only part of a company's picture but they do indicate how Flintkote is growing and why its potential is so promising. / / A A A" A 1 A ;/ A, A A A " aL Aii"" * ` * L-' A*fc':3 * '^AA A AA > t ca aaj^ < A IB A Ki "A aaSa > i*A A A A " aAA" r.e . ' Aiir;:' "a ; A AA Aj * >. A* * 4 --i ^ Z' \ \ Manufacturing and Processing Plants Natural Resources Principal Sales Offices Each symbol on the map denotes the locale of company facilities and, in many in stances, represents multiple operations. V