Document wrooeo3ZDvggxXRyvYeDm33KB

PLAINTIFF'S EXHIBIT BBA-73 %i 1967 Annual Fleporf Kovners Combanv. Inc. and Consolidated Subsidiaries j. -i. --' ^ Five-Tear Financial Highlights -All Figures :n thousands, except per snare information ana numoer >r stockholdersi Revenue from saies and other income I__I-- 1965 3373,308 1964 3336.371 1963 5295.153 1962 5305.696 Income before income raxes and interest charges............................. Interest charees................................ Income taxes.................................... Net income...................................... `Earnings per share of common stock outstanding at vear end................ . S3. S3. ' s: 52..**. 320.497 51,106 37,339 512,052 319,795 51,343 58,502 ' 39,950 515,392 51,239 36,372 57,281 52.51., .... . 12.10 ,, . 31.50 515,062 51.239 55,998 57,825 4 51 .lo `Dividends declared and paid, pershare of common stock........................... 5I 1 51.20 31.20 . 31.00 51.00 Total of all taxes.............................. Taxes per share of common stock... `Number of shares of common stock outstanding at year end................ Number of stockholders at year end.. Si 5,'*35 52. -i "* :r" 314,124-r 314^639 i - - 312,685 :.i-ifv.-- * ...f,. > !3.iO>Y,v44vi.33.30-- 4 - * 32.86 '7S3i*is.-h-V'-'r c-;: -; -- . \'-:.4j444. I.;3.,:. 4,438.. ...... - vr./A". 15,60^;r:.;.:d6,143-..;.vi;r 15,778 311,557 32.57 -. ' ~ . -'4,496 16,261 Earnings retained in the business!... 5-.2'v' J6,057i;i/r. ` ;.J4,002...v.''-v.^:. $2^19 Gross addition ta.fixed assets and ' ^ investments ... $46.ol'o Net book value equipment -----... Term debt due after one year........... SI 15.5:56". '<>0 Wages, salaries and pension expense. Sli Materials, supplies and services........ S2-o.:~.' . Working capital at year end.............. Sl06.;r i Book value per share ofcommon stock at year end....................................... . .. -mRtssdlsprior to 1966hast hem rotated to reflect the tao-for-one stock split in Mort&j.l$6&u I as F: . r.V-.- Consolidated Statement of Income and Earnings Retained in the Business Years ended Decernoer it. jgrio and :go5 (See accompanvir.c notes.) Net sales............................................................................. Operating expenses (Note 2): Cost of saies................................................................ Depreciauon and depletion......................................... Taxes, other than income taxes................................... Selling, research, general and administrative expenses. Operating profit......................................... Other income: Dividends (Note 1), interest, etc.......... Profit on sales of capital assets........... Interest expense..:.................................... Income before provision for income taxes.. Provision for income taxes: ,. " ' Federal (Note 3)........... i'fi. State and foreign........... i..... . ... Net income for the year.. /.'Ed+dzjfJ.'l.:'. Earnings retained.t^jfchnsfimyatrtf1^1 [inning of period';. .. Earnings retain* * :<v companies; Cash dividends- On preferred; f VC. i. --t ^ ^ ** , < * 33XG * *. On common irem l966 and $1.20 per share in 1965*. ........ 2^- ]-*- i. \*f.i.jVi >:*** * * Special charge, net of applicable income taxes (Note 6)---------, .ii Earnings retained in the business at the end of period---- .... -- Shares of common stock outstanding atyear end............................ Earnings per share of common stock... ;. ;V....................................- Adjusted for two-far-one split of common stock on March ag, ig66 21 ; ()0 20.05. >5 1965 $371,009,872 r295,709,153 10,486,809 - , 6,785,427s ' 40,329,08# ~353,310,47^ 17,699,39? . 957,776 1,840,040 .^2,797,816 Vive ' .? - \R 7MU VvN.,L`iK!RK r 3 Var.B-.KN.rii from ;' ; -a D.r-c:or n v>n. -nuinz mor- '* v".ir a :nva::i.u*;i* joanc** r... ,n jo^rir: sr.$ i v.- ` jmaanv \ or.ina -r.or *: 7. Mi*;..;- Mr. V.tnSu<ic:rx a masor ns*:r- n iaPijcsntr ana anancia* ;:rc: inc ;.js --*n x Avars'* lore** n ?:ian:r:rn' r.a- '.;na:iv famous r**niM-oi inc --asvr*:rta- r.rr.t *ram. H:s r-rir-m-r.t '.. ooca- .sn--; av r.:s a^rsonai * *inv:cv/jn *,r.at -- not s**rvt5 an :nc 3o<ira aurr rfacn- r.a :r.J! as- oi ~o. JOSEPH 3ECKER It i5 witn ds-p recr-t mat Mr reoort me oeatn in Fenruarv.'()>>. otjosetm 3ccxer. oirector of me ijomsanv anc Aoria-r-r.ovvnea autr.oritv ;n coal anc ronine lecnnoioev. Mr. 3cxer -.ac h*--n associates `Mtn KoDOcrs lor -) --an. since .is natnatic'n. anc Or -:,T.t -.oars o-t'er mat Dr. Ho;nr:cn Kopperc H:s tarerr oaris.Virc me grower, anc oevnopment me -.v-proQuc: cox:ne moustrv n \merica. tor avacn .1 wn:cr. *.e aas itrose:: rcsDonsioie. In m* rariv a.o ; tie cevosocec me vicriv :sec :dkc oven mat jtiii sears ms name-- me Koopers-Bec.cer nen. He was jrantea manv coxr oven patents ma r-c-tvoa numerous .oonors anu .wares tor its went :n mat r.etc. 'Ir. Becxer was ice prestcent ana mnerat manaeer -,t" me Enzmeerir.a me Construction Division mm ms ttr-ment .n to;a. He .vas .-.amec i me Board in :o = o me terveo as ioeciai consultant to me 1 rniuanv liter ms retirement. X /SJ- *i r 5 * V : . % . .'.JhX- -. T H 3 iR r:t' i. au. 1 ;et . . : 30 3 . - 'l V- ' r ..RTt-tVR '"..'At Ci D'*. ald L. Df.''-'r:zs '..'t.;. ? -lvioj Dtrt.ta'e 3-- rest T. ..a. k:n......... ~).-.. ., ; \. H SCAN r.......... ; f HaLEV '..`team."trer tee ,,;;;e . 1'`0*. to D'r-irts Max C. HA.xisctt .''-'t: P-uart; Dtto.t e -.V 3. IaCXShX r:"R . ; 'aes ../ ;.e ;C" N'mholax Has Don- alo \. M.a.:,\r r< f isnwj'on i)~z. ?. V. Martin .eepiemrter t f'..cw.v*: >e Pu'L 1.. McCann tot: Carl H. Pottl.vczr Dlr'c:r,r .?r;e;rr.e J. D. Rtcs meji.e?m.e :ru ms:rzc:;-,r. cm:.: T. D. T AC3ENECK .'etiree;:.i.ee: ' ifo--net Frank 3. Varga '.'Tmeftoei ? ACL :A'ayaian oirrrr P~-t.yjas 0:r:s:m Frank . aVeise. ;r. oe^mfrrte? tea < 'initneizon .Ommi'ie 3. Otto `Vheslsv '1'inae'T Marxetinz Deannmrr.t r? j; ........1 c ( . - -1 - ..... Basse o.xvger. mrr.ac? BCF 'tee::r.a.-::::_r > me c.ese newer oroces^es. We estimate ::sa: Am.er.can -tee: tm.oanies will acd million tans : fast-o neratm.a. meter.: BOF cacacitv :.r. me .'.ex; -.'ears a; a more than St biiiicr.. We expect Kcnnem :o get a fizaoie -.tar-' of mis business. Koppers is ::;e world's leading xeturner an.c builder of BOF piants. in :g66 aione. me eigr.th. an.d ninth BOF instaiiatior.s designed b-v ::'.e Compar.v were completed ar.c put into operation. One of :.:ese two zi-ants ranks among she largest in :ne incustrv ana is ex pected to produce over a.a million tons of ingots anr.uoiiv. [n total. Koppers Isas designed about one-tmrd of a.i the BOF capacity in the United States. We currentiv .save three additional BOF plants under construction. Tisese will prcc.uce more than b million ingot tons of -tee: each year. _ Minuous Css;mg Every major steel producer is giving concentrated attention today to the continuous casting of steel. Our projection is that the industry will build ;oo miilion an nual tons of suer, capacity over the next ao years. This will create at least 51 biilion in potentiai new design and construction business. Koppers has made and is making major contribu tions to the technology of continuous casting. To date, the Company has built and helped to start up casting machines at sever, piaats. Design or construction work on six more facilities involving a total of 44 casting strands is currently under way. We received contracts for two casting piants in 1966. Breakthrough in Coke Oven Technology Koppers is now ottering the American steel industry a r.ewiv designed coke oven that will produce Bo per tent more coke in a siven time than the lamest existing 'v?nj The ovens are part of our 'tr.tmmmi m-arim : resenren. ana .'.eventprr.e.u: worst :c recucOur researcr. beexn with macnematica: utoce:- . 'masi-scaie ovens. 3v mic-s 06b. ooeratior.s wav at a fuii-scaie demonstration natter.' rate . built at our Kearny. New jersev. plant. Tins m.sta.ldt. itas more than fulfilled expectations nv nrccucir.z mm-' ooxe per oven, per day tnan ar.v xr.**r existing' a.-.-n. instaiiation. Witn this new oven teennoiogy. we exttect to retain tne position of leadership in the cc.-ce over, nusir.ess "..at Koppers lias had in the past. Future coke oven business couid be verv -unstauttai. Thirty per cent of the American steel incustrv'^ present coking capacity was buiit before :94a. We estimate mat the industry will invest 51.3 billion in new cokir.u pacity over the next two decades to meet its ironmaxmc requirements. Construction Overseas Our position in the design and construction ot over seas steei piant facilities is a strong one. On the basts of Koppers experience with the most advanced steeimakir. technology in the U.S. and abroad, we foresee continue opportunities for promabie construction work outside me United States. One significant project now under fuii-scaie con struction is for Empresa Xacional Siderurgica. S.A. EN- SIDESA). Spain's largest steei producer. Koppers de signed and is helping to build a new blast furnace, a mii lion ton-per-year basic oxygen furnace piant and an : o- strand continuous casting facility at Aviles for E.\`- S IDESA. .. ' During the year. Koppers was retained by the gov ernment of the Republic of South Korea to form and lead an international consortium and to prepare a pian. including financing, for the first phase of an integrated ;;ee! plant with an ultimate caoacity of one million n. .is zroauc: ' 5 c'i't `ilc ' "CT:ClS<id JeVUVllZJ }~ lie T. .vi 38 miilion inzesinidn: pro-rzv: ~:-r :oniin:ted irou::h Koppers metai product; sales nave r.ear:v acuciec iir.ee : oco. Another saies pain is expected in tcop. To meet the demands of the growing market; in this segment of our business, expansions and improvements totaling over S3 million have been carried out at our metalworking facilities over the past two years. We have invested in machinery and equipment to reduce costs, to increase capacity and to maintain high quaiitv standards, in me tnree lines that account for two-thirds of the Com pany's metal product saies -- power transmission cou plings. piston and seaiing rings and container machinery -- we have built or are building new or greaciv expanded production facilities. These are the major developments in our metai products business: .Xetc Coupling Plant Ground was broken near Baltimore 1`or the world's largest flexible coupling plant. When this plant is in full operation early in 1967. it will increase our capacity to produce couplings by 50 per cent. Couplings are used to transmit power from one ro tating shaft to another, and to compensate for shaft mis alignment. Koppers is a world leader in the manufacture of couplings, with particular strength in those used in machinery and equipment operating at high speeds and under demanding conditions. majority interest in LTnaustriaie s.p.A.. a leading Ital ian producer of medium- and large-diameter piston rings used in diesel engines. This new affiliation will enable us :o participate in the growing European market for smaildiameter diesel engine rings. Greater Container Machinery Capacity We have undertaken a 50 per cent expansion of our capacity to produce container-making machinery. This expansion was started late in 1966 ana is expected to be completed in the second naif of 1967. - In this field, the Company is a leading producer of corrugating and box-making machinery. This product line includes machines to convert kraft paper to corru gated board and machines to fold, glue, slot and print .the corrugated board to form corrugated boxes. We are introducing major innovations and improvements in our corrugating and printing equipment. An annual growth rate of about 6 per cent is foreseen for this machinery, a growth that we believe will be world-wide and rela tively non-cyclical. Expanded Piston Ring Facilities We are adding 30 per cent to our capacity to pro duce piston and seaiing rings. The new facilities will also be in operation early in 1967. Koppers piston and sealing ring business has been growing since 1961 at the rate of :a per cent per year. Saies of our small-diameter rings, which we developed for use in high-speed diesel engines, have increased 37 per cent annually in that time, and we have become a prominent supplier in this market. Other rapidly grow ing ring markets include sealing rings for jet aircraft en-" gines and rings for compressors and hydraulic cylinders. A base for the saie and manufacture of Koppers industrial piston rings in the European Common Market countries was established in i960 with me purchase ot a crease a :o sudor.v *"? 7 ~ "V' ' ' . t V v> -t< / W -/ ' Keepers has invested So million during rccj-rcco in new and expanded chemicai and tar processing facilities. A major portion of this amount is being expended :o strengthen and broaden the chemicai end of our tar and chemicai operations. Saies of Koppers chemicals have increased 60 per cent in the past nve years. Since these are essentiai chemicais used in many of the faster growing processes of American industry, their growth is expected to continue at a high rate. These are the major developments in our growing tar and chemicai business: We began an expansion of existing phthaiic ar.nvdride facilities that by mid-r967 wiil increase our capac ity by 40 per cent, from 50 million pounds a year to "o million pounds. Additionally, pians were announced for a new 100 million pouna-per-year phthaiic plant, with completion targeted for late :q63 or eariv : poa. This basic chemicai is used primarily in aikvd resins for paints, in plasticizers, ana in poiyester resins. .Wit1 West Coast Facilities During 1966. we added a resin piant in Richmond. California, that has provided Koppers with a regional operation for serving customers in growing West Coast markets. This has increased the Company's capacity to produce poiyester and various paint resins. The prime Western market for polyesters is the growing reinforced plastics industry. The paint manufacturing held is the important market for the other resins. We further increased our ability to serve the Western market with the construction of a new tar processing piant at Portland. Oregon. The plant's major products will include electrode binder pitch for the Northwest aluminum industry and creosote for the wood-treating industry. Koppers is a leading supplier to the U. S. and Canadian aluminum industry, a market that has been growing about 1 o per cent annually. The aluminum in dustry uses one pound of binder pitch in producing seven pounds of aluminum. ` Koppers growth in corrosion prevention products cieariv establishes the Company as a leader in this held. We have broadened and improved the Companv's line of bituminous and chemicai-'oased. colored ccatinss for pipelines, industrial maintenance, sewage and water works, and marine and swimming pool applications. A number of protective coatings introduced in 1066 re ceived exceilent reception. Expansion of Koppers phthaiic anhydridefacilities will help Jill the growing demandfor this industrial chemical. Koppers protective coatings will resist corrosive attack on the interior and exterior, steel and concrete surfaces of this Salt Lake City sewage treatmentfacility. :o The stcrv cf Keepers mastics operation; :r. . .c~ me of cont.r.ued grow:.-. . . of long range p.uns nearing realization ... of new products ar.c lacihtie; p..~- ::cs rinding new- markets. Stnciai t-Keepers In the eariv months of :q6". Bir.ciair-Kopper; w-.l complete two major pr.ases of an expansion propram re man in januarv. 1965. when the partnership :n tr.ermcpiastics with Sinclair Petrochemicals. Inc. was formec. An etnyiene piant at Houston. Texas. wiii come cr. stream with an annual capacity of 500 miiiion pour.es. arc wiil make the partnership fuiiy competitive with respect to the raw material suppiy for its poiyetr.viene operations. At nearby Port Arthur, completion of a new r.ighdensitv poiyethyier.e unit, and expansion of existing .owdensitv poiyethyier.e facilities, wiii bring our tetai poiyetnviene caDacity at that site to more than coo million pounds annuaily. compared to 60 miiiion pounds at tne beginning of 1965.. The national growth rate for nighdensitv poivethvier.e has been about co per cent per year and the demand for this materiai could accelerate dra matically :: new developments such as the r.cn-retumabie. poiyetnvier.e milk bottle illustrated or. opposite oage; succeed as well nationally as in test marxets. In other areas of tne expansion program: A new piant whicn can produce :oo miiiion pounds of poiystvrene per year was added late in 1906 at SinciairKoppers styrene-based ccmpiex at Kobuta. Pa. This gives us an improved cost position for conventional poly styrene piastic. In the second quarter of 196". ov_:te expandable cciystyrene cnpacitv will be increased by ct per cent with the start-up of new production facilities. This acci::on follows closely an earlier 50 per cent expansion com pleted in 1905. Use of this foam piastic -- for packaging of breakable articles, in produce containers, in hot ar.c raid drink cups and in insulation applications -- is grow ing faster than twice the growth rate of the plastics :n- astry as a w'noie. Stvrene-butadier.e latex facilities at Kobuta are :t:rrentiv being expancec and about one-third more capacitv wiil be available curing the firs: quarter of :qo-. The make etr.vibenzer.e ar.c -itvrer.e monomer, raw materia./ vr.ich support tne Kcouta poivstvrer.e czerauor.s. To increase its marxe: per.etraticr.. eir.ciair-Kocoer--s moving into tr.e production ar.c sa.e of end orccucts. b,uch er.d-use items as poivethvier.e him. occties ar.c ccrainer closures and foam piastic pacxagir.g aoccur.tec :zr :a per cent of Sinciair-Koppers sa.es :r. :ocb. K topers International Plastic: f.e:/;:m The Companv's growing overseas mastics ausir.ess now includes four amiiates: two m Brazil, one in Argen tina and a 1965 investment in Spain. This latest investment invoivec tr.e purcr.ase of a one-half interest in Arranona. S.A.. a poiystvrene hrm Headquartered at Barcelona. Spam. The ounces for our investment in Arranona is encouraging, especiailv since the Spanish markets for polystyrene are expected to grow 15 to 20 per cent annually based on steadiiy increasing demand for end uses such as refrigerator components, television sets, other appliances and packaging. Reinforced Plastics In 1966 we further broadened our market develop ment approach to reinforced plastics by tne addition of two California facilities. The technology of fiberglass reinforced piasdes barely beyond its infancy, but it has already produced a whole new family of materials being used in hundreds of products. Reinforced plasuc products have a very high strength-to-weignt ratio. They have exceptional resist ance to corrosion, moisture and impact, wiii r.ot conduct electricity, and can readiiv be moicec and fabricated. Our emphasis has been in tr.e newer areas of rein forced piastics technoiogy, and on proprietary preducts for fast growing markets. Koppers has a basic position in the plastic resins usee in this business. unciair-/coopers :s imonq :he leader: :r. :r.t r'trt; :o date to deveioc 'nance! for ton-nturnaoie ooi'ieinsient e.e.e tcct.e:. In cue -.unrated plant shown it the r;q"t. tattle: ftcac/a jv :r.-otant -v.din% machine: in filed with -ntik ir.a thtcced to :::omert. 1 more ?a::s;ac:crv earmncs The cuticck :cr future zrcwth of these mar.uacturmg earnings is gccc. as is the continuing ;utcck :hr rrcwth ir. product sales. 7a take advantage :r these opportunities for bgr.ir.car.t grcwtn ar.c righer earnings. K-oppers invested about S70 ntiilicn n new plants and equipment between jar.uar" .065. and December 3:. :aoo. The approximate distribution of this investment among our manufacturing operations is illustrated n the following chart. Our continuing investment program is directiv related to our stated operating philosophy: "we will become seriousiy involved cniy with those markers and products where we now have a leadership po sition in terms of market position, raw material csrs. process emciency. product quality and technica. and marketing know-how. or where we have the inherent potential to achieve such leadershiD." iI cent. trenerni ,'cur.sei ur.c manager :: me .a'-1-' ceaurt- mer.t. He Aji j:so eiectec: lecretarv me Ibrr.aar.v. Mr. Cochran, a rr.err.ber Hoppers .e-.ro. staff fcr ter. ears, aad beer, course: and assistant -ecre-.ar". He -:uc- reecs John M. Crirr.rrrrs. manager ct" :r.e .aw aenarimer.t since :coi. who resisr.ec ".o enter ur.vate .aw arac- THOMAS C. COCHRAN, JR. ROBERT C. WILSON tice. Robert G. Wilson was elected vice presicer.t and general manager of tre Engineering arc Cor.scrttctton Division, following tre retirement at Her.rv A. Der.r.v who haG directed the Division's activities since : to:. Mr. \ 'A iison has beer, with tre Division for over : year; arc. prior to his presert assignment, server as assistant general manager. Jack D. Rice, a vice president of tre Division, was named assistant general manager and wiil continue to have the prime responsibility for the Division's mar JOHN A. HAGAN keting activities. John A. Hagan, vice president, was ap pointed manager of operations for the Division. During the past five years. Mr. Hagan served as president of Hoppers of Turkey. Inc. with responsibility for construc tion of the new steel plant at Eregli. Turkey, and assist ance in the management of the completed facility. T. D. Taubeneck was appointed vice president and assistant general manager of International Operations. A member of Hoppers law department since 1961. Mr. T. D. TAUBENECK B. G. BARTLEY, JR. Taubeneck is a graduate of the Woodrow Wilson School of Public a - d International Affairs at Princeton Univer sity and the Harvard Law School. He has been cioseiv associated with our overseas operations for several years. In the Forest Products Division. 3. G. Bartley. Jr. was named vice president and marketing manager and Paui Way-man was appointed vice president and operat ing manager. Mr. Bartley was previously Division saies manager and Mr. Wayman had been an assistant vice president and assistant to the general manager. PAUL. WAYMAN WILLIAM 2. JACKSON William 3. Jackson was named general manager of the Tar and Chemical Division. A vice president in that Division, he previously was manager of operations. T. H. Bartholomew was appointed a vice president of that Di vision and continues as manager of procurement. 3. Otto Wheeiev was assigned the responsibility for ail Tar and t Cnemicai Division marketing activities, in addition, to his dudes as vice president and manager of the Com- canv's marketing deoartmer.t. 3. OTTO WHZSLSY y nr Cvii*.'. g The Comoar.v'- oacarog or. f>-;emner :. : /'n. ' ;S 0:0.mtiiion. "iigr.ttv below tne reeorct cao.da:: :: it":million at the end or' :q65. The manufacturing portion or our backlog was wed t:;ove the yeaf-earrier ievei. rehectir.s the strong rate >f new orders for choppers products that prevarieo chrouirntut the year. The backlog that relates to construction was lower at tne end or 1966 than at the beginning or the year. -- ewe' 'iT a.es .1' ;r . ,rr. namings '.r. ;_x* are rttpectec to snow acnreclart.e improvement over :96b. wan saies at or aoove the inch .eve: :.n spice of signs treat tne general economy meant V siowimz down. > - ^ >t=r" rred C. Fov Chairman of :he Board F. L. 3vromt Dresiaint :r.er.t -- :o ~r.ar.ct me Companv's grcwtr. in -..ant :apaci:v and sale? ---.as arranged in :-.rfo witr. a group :f nine ban.ts. Cr.-aer mis iine of credit. tappers car. :arrow on a rtvoiv.r.a basis until Marcr. :. : .66. A: time. ar.y tunes ocrrowec under the agreement 'ahi ;e:one a term icar. pavabie :n semiannual ir'inkne:::: curing the following ttve years. The Companv r.as the option of substituting longer-term debt for the bank loans. Investment Credit Koppers investment credit, which was equai to 29 cents per share in 1965. amounted to 27 cents per share in i960. It shouid be about twice that much in too?, re heating completion of several major plant units in the current year. Other Financial Matters Totai shares of Koppers common stock, outstanding as of the end of 1966 amounted to 4.074.61a. reheating the two-for-one split of the common stock on March 29. ; 966. During the year :: 4.928 shares previously purchased by the Company and held in the treasury were used in two acquisitions. Common stock owners received tctai dividend pavmer.ts of $6.3 million $1.40 per share; during iced, compared to $5.4 million iSt.ao per share; during '.903. Dividends totaling $600,000. equai to 24.00 a share, were paid to preferred stockholders. Cash how from operations during the year -- con sisting of net income, depreciation, depletion and de ferred federal income tax -- totaled $24.8 million, equai to $5.17 per share. This compares with cash how at $25 million, or 25.36 per snare, in 1965. Inventories on December 3:. i960, amounted to 261.2 miilion. compared to 253.3 miiiion at the end :i the orecedir.s vear. Receivables at vear end 1066 tccaiec responsibility for the day-:o-dav operations jf ail Koppers divisions ar.d departments. Mr. Grymes has been vice president and general manaeer of the Company's Forest Products Division since 1058. and a director of the Company since March of -.066. He will continue to have genera: -upervision of the Forest Products Division. Mr. C-rvmes has been with the Division for ever ?<> -. ears in a number of saies and management posittons. Since he was named general manager of Forest Products, the Division's saies have doubied and the ;Derations have been broadened from a wood pre serving business to the production of a diverse line of forest products. 292.6 miilion. compared to 277.4 ^liilion on December 31. tOO;. Labor Relations During 1966 the Company negotiated mutuaiiv agreeable work contracts at a3 plants with just five worst stoppages. In 70 per cent of these settlements we obtained agreements of two years or mere duration. The hve strikes totaled 91 days, and ranged in length from : to 4" lavs. In most cases, we were abie to continue operations at these plants. Kippers saies continued to improve tr. : 7.66. exceedng S400 miilion for the first time. Sate: vciume :cca:en fa.'''1 rr.fiiion. up from S37: million tr. :p6=. The Companvh manufacturing units set a ~a.es recerd of 1706.3 miilion. : 7 per tent acove :nn 7. Earnings from cr.ese manufacturing tperattcr.s aiso rose -ucscanuafiy m :g66. Net income for the year tvas St 1.500.000 compared to Si2.052.000 in 1965. After payment of preferred divi dends. :96b earnings were equivalent to S2.3: per so.are of common stock outstanding, compared to S-a. 3; in : 065. This S2.31 figure was after deducting losses equiva lent to 47 cents per common share incurred during the -ear in our engineering and construction business. Construction Probums. The improved manufacturing earnings achieved in : 966 were more than onset by the toss situation that oc curred in our usuaily profitable construction business. This was the hrst loss year in construction since forma tion of the present Company in 1944. and resuited large;v from the nationwide shortage cf skilled construction labor. In order to fulfill contract commitments, it became necessary- to greatly extend the length of the average work week and all too often to employ iess-skiiled work ers. Inevitably, this meant that many more hours were required to comoiete a .riven contract than we ever pre viously experienced. The greatest impact came from contracts that were negotiated in 1964. but cn which held labor require ments peaked in 1966. Steps have been taken during the past year designed to protect us against the adverse erects of a recurrence of this labor problem. Conse quently. we expect our construction operations in : 96 to contribute again to overall Company earnings. Record Level of Capital Investment: In :c66 the Company invested $46.7 miilion in new cnr.t construction and exoansion. in the modernization of existing facilities anti in new acquisitions and invest ments. This brings our two-year investment total to S75.3 million, twice the Company's average annual in vestment rate of Si7 million in the five-year period :coo through 1964. With a number of large exDansior.s neariv com pleted. capital investments in 1967 will be less than in 966. but are expected to approach S30 miilion. The bulk of this investment will be used to complete projects started in 1965 and 1066. Increased Interest Charges Much higher interest expenses have resulted from the borrowings required to finance this sizable capital investment program. Interest charges were S3.3 miilion in 1966. an increase from 1965 of Sc.2 miilion. The exec: of this heavy interest expense on our earnings was mag nified in 1966. since the major investments that brought about this greater interest burden were not yet contrib uting to Company earnings. Company Debt The Company's term debt on December 31. :o6o. totaiea S68 miilion 128 per cent of tocai capitalization; and consisted primarily of Sio miilion in promissory notes placed privately in August. 1966. anc Sf 5 miilicn 'rot/- fc r> r r . z> \ * r \ *: z * ; A ' . **;* ; . r *-t * Wct` V*Z;5\ r;^vC7T2. 271C WICU . ;o4 ' (Cions o :oo :*o :eo j.=o ,:uo :.-o -.*55 '-55 :064 :^63 .552 Millions 0 - 4o $ 10 1266 -.365 1964 1363 1962 Dollars 0 9.50 1.00 1.50 2.00 2.50 I/O D::-:c'r.as ?i:d :o Common Stockhoiddrs * 1966 1965 1964 1263 1962 Dollars "r snare 0 0.50 1.00 " "-*'5 ina snor years restatea to reriece Twa-rbr-one ca: ,>i :otnooD jtocx 5q Marcn 13. 1565 . z*)