Document xzgEOmzgQgMv2ZN2d86w5Q8Ny

ANNUAL REPORT 1967 GENERAL ANILINE A FILM CORPORATION GAF 12370 I INDEX TO REPORT Coment Page DIRECTORS AND OFFICERS............................................... 1 LETTER TO STOCKHOLDERS............................................. 2 SUMMARY OF FINANCIAL ASPECTS................................4 OPERATIONS REVIEW ........................................................4 Chemicals ............................................................................. 5 Photo Products...................................................................... 7 Business Systems ............................................................... 8 Building Products and Miscellaneous............................. 9 International Operations . . 11 Distribution ...................................................... 11 Commercial Development .. . . Research and Development................................. 11 11 PERSONNEL AND ORGANIZATION 14 FIVE-YEAR FINANCIAL SUMMARY .15 CONSOLIDATED INCOME .............................. CONSOLIDATED RETAINED EARNINGS . . CONSOLIDATED BALANCE SHEET . 17 ... 18 16 CONSOLIDATED SOURCE & USE OF FUNDS ... 22 DIRECTORY OF PRODUCTS............................................... 23 DIRECTORY OF LOCATIONS . . . 24 jnt cover The Seguincge a! Bruges, Belgium. 55 miles from GAF s consumer photo proaucrs piontat Sirvl-.Vik/aos. From cn Anseochrome* transparency GAF 12371 j - o: -': I GENERAL ANILINE A FILM CORPORATION AND SUBSIDIARY COMPANIES tjesse Werner *T. Roland Berner **Jobn B. Bridgwood John A. Coleman Philip B. Dalton tFrancis A. Gibbons `Bailey K. Howard "Wm. Peyton Marin Seymour Milstein E. J. O'Leary Donald L. Sanders Chris C. Schulze 'Sumner H. Williams tAlvin Zises Chairman. \ew York. New York New York. New York New York. N'ew York N'ew York. New York New York. New York Nutlev, New Jersey Chicago. Illinois New York. New York New York. New York New York. New York New York. New York New York. New Y'ork Short Hills. New Jersey Boston. Massachusetts Member of Executive Committee t.Member of Retirement Board Member of Stock Option Committee Jesse Werner Philip B. Dalton Donald L. Sanders E. J. O'Leary Chris C. Schulze James M. Cloney Thomas A. Dent Thomas H. Dermody Frederick Grosser [ulien O. Heppes Leon Katz Juliette M. Moran Frederick K. Sweeney Frank P. Sottile C. Joseph Hyland President Executive Vice President Executive Vice President Senior Vice President Senior Vice President Vice President Vice President Vice President Vice President Vice President Vice President Vice President Vice President Treasurer Secretary Counsel Controller Herbert L Abrons |ohn F. Heintz Ri|ltrin Trooaler Aftata Tne Chase Mannaitan Bank Naiioni- kssoc.ariont 1 Chase Vanr.atun Plaza New \ork New Yorx 10015 Commercial Trust Company of New Jerse> ii Evc.iange Place |ersc> Cm New [erse> CT302 Firs: National Cm Bank 55 Wail S< reel New York New York 10015 Tne Corporation Trus? Company 1! Excnange Place Jersev Cit> New jersej 02320 The Annual Meeting of Stockholders will be held on April 23.1968 GAF 12372 n 1 /esse Werner, Chairman of the Board and President. TO r-2 i'OCKnCLCERS- Because of the growth and expansion achieved in 1966. the first full year of public ownership, my letter in last year s Annual Report rpferred to the "new GAF." Your company has continued to grow at such a rate that in 1967 we nearly doubled our size. On a restated basis which gives effect to the merger of The Ruberoid Co. into GAF. the company's net sales in 1967 were S520.872.000. which is 7.6 per cent over 1966 sales of $484,062,000. Net income was Sl8.961.000. against $18,725,000 in 1966. Net income per share of common stock was SI.14. as compared to last year's restated figure of Si.13 per share. However, income for 1967 was $19,312,000. or 21.4 per cent below the comparable figure for 1966. before giving effect to minority interests and a 1966 extraordinary item of The Ruberoid Co. These results are due to last year's sluggish economy and the effect of increased operating costs for labor, services and supplies, combined with the cost of the company's intensive growth program. The largest single acquisition undertaken by GAF was the merger with The Ruberoid Co. in May. 1967. It added S195 million to our sales and made GAF an important factor in the manufacture of asphalt roofing, roofing granules, asbestos cement products, and resilient floor coverings. GAF chose to join with The Ruberoid Co. because both managements believed the two companies had a great deal to gain by this union. Results to date confirm this belief. There has been a smooth meshing of people and projects between the two organizations. We look forward to the years ahead when GAF's chemical strength and technology can be brought to bear more profitably on the challenging problems of the build ing products field. Another of our acquisitions in 1967 was Shelby Business Forms. Inc., purchased in June for S8 million. Shelby, with sales at the S12 million level in 1966. has a very special place in GAF's future. The Shelby organ ization is tied in to the introduction of GAF's new Gafax " 500 electro static reproduction machine for the office convenience copy market, and is expected to play an important role in our program for accelerated growth in the entire business systems field. While the sales development and introduction expenses of the Gafax 500 copier program represented a net charge against profits in 1967, the customer acceptance already achieved by this unit and matching coated paper makes 1968 and future prospects appear extremely promising Also during the year, the remainder of the stock of certain partly owned photographic distributors was purchased for cash. These additions were a factor in the sales growth reported for GAF's photographic products line. Much remains to be done to overcome problems of profitability in the photographic area of our business, particularly production problems associated with the continual introduction of new and improved prod ucts and the lack of sufficient manufacturing capacity for photographic films and papers. A concerted effort is being made to improve the entire operation. The sales levels reached are evidence of our many tan,k|e achievements in 1967. GAF 12373 c The announcement of the construction of our second plant for the pro duction of Amiben herbicide was one of the chemical highlights of the year. Although a number of our chemical lines were severely affected in both sales and profits by the general slowdown in that sector of the economy, some sales improvement was evident by the end of the year and we are looking forward to continued recovery in 1968. Both sales and profits for GAF chemicals should also be helped by the price increases we instituted in several sales lines toward the end of the year. Price increases were also instituted in other areas of GAF's busi nesses. including building products and photographic sensitized goods. These higher prices for GAF's products and the implementation of a carefully applied cost improvement program cause us to look forward to more favorable earnings results in 1968 if the domestic economic climate continues to improve. Another of our important goals for 1968 is to bring a stronger GAF corporate sales orientation and identity to all our products, particularly those in our now greatly expanded consumer lines. As one step in this program, stockholders will be asked to approve, at the Annual Meeting in April, a change in the corporate name from General Aniline & Film Corporation to GAF Corporation. We believe the new. shorter name will help us achieve the greater impact and more recognizable over-all image the "new GAF" deserves and needs. I cannot close this summary of our current activities and plans without expressing particular gratitude to all the devoted people of GAF who contributed an extra measure of effort in 3967. They made it possible for the growth programs reported in the following pages to proceed smoothly and with full vigor during the reorganization of functions and departments necessary to implement our massive growth. Looking back at the statistics given in the GAF Annual Report for 1964 (which was the last one issued before the return of the company to public ownership) gives some measure of the distance we have traveled in three brief years. Sales were $192 million in 1964 against S520 million in 1967 N'et income was $10,706,000, or SO.89 per share of common stock, against this year's $18,961,000, or Si.14 per share. Additions to plant and equipment were Sll million compared with this year's S39.931.000 Stockholders equity was $169 million against this year's $273 million. The company consisted of 7.500 people, as against 19.400 this year. In 1964 the company paid no dividends, as against a total of $8,820,000 paid this year to both preferred and common stockholders. All of these results are due to the untiring efforts of GAF's people at every level. By order of the Board of Directors March 7, 1968 GAF 12374 / Jesse Werner Chairman of the Board and President 3 SUMMARY OP F! > ^ At the special meeting of stockholders on Max 26. 1967 authorization was given to increase the number of shares All of the figures given below are restated to reflect the of common stock from 20 million to 25 million, and to merger with The Ruberoid Co. create a class of 6 million shares of preferred stock, par value SI.00 per share. On the same day. 3.095.382 shares For the year ended December 31. 1967, CAF sales were of preferred stock. SI.20 convertible series, were issued for 5520.872.000. The comparable figure for 1966 was S484.- the same number of Ruberoid shares in connection with the 062.000. This represents an increase of 7.6 per cent for 1967. merger between the two companies. At year end 1967 there were 13.342,060.5 shares of GAF common stock and The company s four maior sales groups participated in this 3.117.922 shares of preferred stock outstanding. increase as shown in the comparative figures given below: - i " .*4 5 R c V i Z. W Chemicals Photo Products Business Systems Building Products Miscellaneous 1967 142.945.000 27.4 115.034.000 22.1 64.355.000 12.4 162.535.000 31.2 36.003.000 6.9 520.872.000 100.0 1966 % 139.596.000 28.9 98.338.000 20.3 48.494.000 10.0 159.357.000 32.9 38.277.000 7.9 484.062.000 1 00.0 While, as previously noted, the company's product lines are divided among four major sales groups and a miscel laneous group, control of GAF's operations is exercised through 21 major domestic and foreign divisions and sub sidiaries which are responsible for all GAF's marketing and manufacturing activities. These operating units encom pass 53 manufacturing plants and research locations in 23 states, and in Belgium, Canada. Great Britain and Holland. Net income totaled S18.961.000. or SI.14 per share of com In addition GAF has 103 sales offices, service centers and mon stock. This compares with $18,725,000. or $1.13. in photo processing laboratories in the U.S. and abroad. 1966. Net income for 1966 and for that portion of 1967 prior to May 26 have been restated to reflect the merger with Chemical operations are carried out through the Dyestuff The Ruberoid Co. on the basis of a pooling of interests to & Chemical Division and the Textile Chemical Division. the extent of 73.9 percent. Photo Product operations include the Photo & Repro Divi Shareholders' equity, or net worth, increased to S273.- sion and the Consumer Photo Division. 314.000 from S261.960.000. Business Systems are the responsibility of the Photo & Net working capital at year end totaled S157,564,000, Repro Division and Shelby Business Forms. Inc. against S184.709.000 at the end of 1966. The company has improved its lines of credit by setting up revolving credit The Building Products category includes the Building & arrangements totaling S75 million with nine banks. In addi Industrial Products Division and Floor Products Division tion. the company provides for its short-term needs for cash by sale of its own notes through the regular com There is also a miscellaneous sales group made up of the mercial paper market. industrial products of the Building & Industrial Products Division, the American Felt Company, and the Special Inventories increased S15.208.000. or 14.4 per cent, to Contracts group of the Photo & Repro Division 5120.956.000 from S105.748.000. This increase was due to new acquisitions and the requirements of higher sales Contributing lo every ma|or sales line is International volumes Operations, which is made up of the company's export de partment. as well as its wholly owned manufacturing sub Additions to plant and equipment totaled S39,931.000. com sidiaries: GAF (Belgium) N'.V . GAF (Canada) Ltd, CAF pared with S31.572.000 in 1966. There was an unexpended (Nederland) N.V.. and GAF (Great Britain) Limited There balance on all approved capital projects of S50.125.000 are also marketing subsidiaries in France. Germany. Japan a! year end. and Sweden. The net book value of fixed assets at December 31. 1967 was S212.623.000. The corresponding figure at the end of 1966 wasSl83.365.000 4 GAF 12375 I CHEMICALS The V.S. chemical industry was beset by economic prob lems throughout most of 1967. While GAF's over-all chem ical sates reached a record high for the sixth successive year, the increase over 1966 was only 2.4 per cent. Many of the company's chemical sales groups continued to show good sales growth in 1967. but some were severely depressed. This was especially noticeable in dyestuff and pigments sales, which were below the previous years as a consequence of the economic slowdowns and strikes in the textile, rubber and automotive industries. By the end of 1967. however, some strengthening in customer demand for chemicals was apparent, which brought the year to a close in a generally healthier state. to the alkylated series of PVP polymers--the Ganex* poly mer series, a group of products specifically developed for use as lube oil additives, dyestuff and pigment dispersants, detergent builders and polymerization aids. The Gafloc* flocculant series received wider acceptance during the year because of these products' superior performance as floccu lating agents in the treatment of industrial waste waters, sewerage and flue gas tailings. The Gantron* copolymer series gained wider attention as components of hot-melt and remoistenable hot-melt adhesives. A new derivative of butynediol. the first chemical in the PVP series, was manufactured in the plant for market de velopment introduction as a flame retardant for textiles. The product, a dibromobutenediol. is undergoing rigorous evaluation by prospective customers. In all of its chemical plants the company is actively co operating with local, state and federal regulatory bodies in meeting new and higher standards for the control of air and water effluents to improve environmental health conditions. Progress can be reported at every plant loca tion. but there remain many complex problems on which research is continuing at an accelerating rate. The Dyestuff A Chemical Division manufactures five major lines of products which are widely used throughout many industries High-Pressure Acetylene Chemicals-GAF continued its major program of research and commercial exploitation of the chemicals produced from reactions of acetylene with other chemicals under high pressure. GAF--at its Calvert City. Kentucky, plant--is still the only producer of two families of these chemicals in the Western Hemisphere: the PVP (polyvinylpyrrolidone) family, based on reactions of acetylene with formaldehyde, and the newer vinyl ether family, based on reactions of acetylene with alcohols. The PVP-related series of products includes butynediol. butanediol. butenediol, butyrolactone, pyrrolidone, methylpyrrolidone. vinylpyrrolidone. polyvinylpyrrolidone (PVPJ and vinylpyrrolidone copolymers Construction on a sec ond piant for the manufacture of these chemicals at a new site at Texas City, Texas, began early in 1966. The newer area of GAF's high-pressure acetylene work in volves vinyl ethers and their derivatives. One. the Gantrez5 AN vinyl ether copolymer, continued to attract increasing customer interest in 1967 for tablet coatings and binders for pharmaceuticals: stabilizers for detergents, adhesives and explosives: finishing agents for spandex fibers, and film-formers in cosmetics. As a result, a $2.5 million addi tion to manufacturing facilities for Gantrez AN was ap proved in 1967 and is scheduled for completion in the fall of 1968. The Gantrez AN copolymer line was further strengthened by the addition o: a hydrolyzed form called Gantrez HY which dissolves rapidly in cold water and is expected to have wide application as an ingredient in soil release agents and in drilling mud for petroleum recovery. The Gantrez ES copolymer series, another vinyl-ether group, now includes five products with applications in cosmetic formulations. The newest vinyl-ether copolymer to be introduced into market development is Gantrez VC. 1,4-Butanedioi By the end of 1967. construction on the $20-million Texas City plant was finished and preliminary startup activities vvere underway. All utilities, including steam, are operating, and the first reaction units are being tested under trial-run conditions. In view of the number of products and the complicated nature of the reactions, the startup phase is expected to continue through the first half of 1968. The market introduction of new vinylpyrrolidone polymers as intensified in 1967. Six additional members were added GAF chemicol ods are nofed for high technical content GAF 12376 present!; being evaluated as a resin for outdoor pamts The vear also brought new. successful and full-scale plant production of methyl vinyl ether, isobutvl vinyl ether and Gantrez M vinyl ether homopolymer. These products, all of which are current); in market development, have broad application in the drug, agricultural, synthetic organic, ad hesives. rubber, coatings, oil. paper, printing, textile and other industries. Olher Specialty Chemicals-GAF manufactures a wide va riety of custom-tailored specialty chemicals at its Linden. N.f.. and Rensselaer. N.Y., plants. For example, the com pany is the only manufacturer in the world of Amiben preemergent herbicide for soybeans which is enjoying a rapid growth in consumption. It is produced exclusively for Amchem Products. Inc., the discoverers and patent owners. GAF has been supplying Amiben since 1962 from its chemi cal plant in Linden. Production requirements have grown steadily so that the Linden facilities are being taxed. In October. 1967. approval was given for the construction of an entirely new Amiben herbicide facility at the company's Texas City plant, at a cost appreciably over $10 million. This new facility will provide a multi-million pound supple ment to the existing production, and is expected to be ready for operation early in 1969 Research, market-development and pilot-plant activities were accelerated throughout the year on many other specialty chemicals including agricultural chemicals, ultraviolet ab sorbers. brighteners and pharmaceutical intermediates. Heavy Chemicals-The company maintained its position as an important supplier of chlorine, caustic soda, muriatic acid and hypochlorite. particularly in the Northeast and Middle Atlantic Slates. In order to compensate for rising operating costs, a price increase on chlorine was instituted in October Demand for the company's other heavy chem icals - ethylene oxide, et.nylene glycol, formaldehyde and methyla.-nmes-was somewhat adversely affected by gen eral chemical industry conditions through most of 1967. As announced in the 1966 Annual Report, a major expan sion in the Linden chlorine-caustic plant was authorized in January. 1967. Engineering design on the protect has been completed and construction has started. The new unit, which is expected to be in operation early in 1969. will double present capacity and make GAF the largest single user of electrical power in the state of New Jersey. Dyestuffs and Pigments-L'nder the so-called "Kennedy Round'' of tariff negotiations which were concluded in 1967. the United States agreed to make substantial cuts in the import duties now levied on benzenoid chemicais which include dyes and pigments and chemicals used in their manufacture, as w ell as other organic chemicals. The reduc 6 tions. which will total 50 per cent, are scheduled to take effect at a rate of 10 per cent a year over five years begin ning in 1968. In addition, the United States negotiators agreed to ask Congress for a change in the American Sellmg Price" system of levying duties on benzenoid and other chemical imports. Since such a step would result in serious damage to American chemical manufacturers by drastically reducing the duties paid by foreign chemical producers the American chemical industry is strongly urging against such legislative action. Although it is difficult to predict the final outcome and all of the consequences of the current trade, tariff and U S balance of payments deficit situations. GAF is exploring every possibility for improving profit margins whiie snll maintaining its present position as one of the leading mar keters in the dyestuff industry Major emphasis in the company's continuing program of research in dyestuffs was placed on the development of new colors for synthetic fibers. During the year. 15 new dyes for polyester, acrylic and acetate fibers were either readied for or placed in production. Additional dyes for leather, paper and cotton were also introduced into plant production and new or improved blue, violet, green and scarlet pigments were manufactured. GAF research l.': oratories also produced several new color components for ne new color-based photographic and re production prod .:ts of the Photo & Repro Division Surfactants -- G \i continues to concentrate its surfactant research and market activities on specialty products During the year. 16 new products entered production as additions to the well-established igepal". Gafac'. Antarox and Emulphogene surfactant compounds used in the formula tion of cosmetics as textile wetting agents and lubricants, in low-foaming detergents, in agricultural dispersants 2nd in antioxidants. An expansion of manufacturing facilities was completed at the plant in Linden, \ J.. thus augmenting the production capacity for specialty surfactants that are the active in gredients of many commercial products, notably house hold and industrial detergents. The Dyestuff & Chemical Division's three chemica. plants all achieved new levels of safe operation. The Linden N 1 Rensselaer. N.Y., and Calvert City . Ky., plants were each able lo report a stretch of one million man hours of ope.a tions without a lost-time accident during the year The Textile Chemical Division is made up of the three companies purchased by GAF in April. 1966- Burkha.t Schier. Southeast Polymers and Checkmate Chemicals Throughout 196". efforts continued on consol.dat.tw ar. GAF 12377 strengthening the sales, manufacturing and technical serv ice operations of the Division's three departments. Success in this effort produced over-all results that surpassed the 1966 level. One important element in this achievement was the in creased sales recorded by the Polymer Department, which manufactures and sells modified styrene-butadiene latex polymers for carpet backing, paper coating and building product uses. Previously authorized manufacturing facili ties for the polymer plant in Chattanooga were successfully brought to full operating capacity in 1967. As a result of the continued sales growth of these products, further expan sion of the polymerization facilities was approved in 1967. Another new product which received excellent customer acceptance was Gafcote'" latex foam backing. This is an acrylic polymer formulation developed by GAF as a crushed foam backing for use in drapery fabrics to provide lining and insulation. shctc PaCD:- ' ' Sales of photographic products in 1967 increased $16,696.000, or 17 per cent over 1966. This represented higher sales in most major product lines plus additional sales realized from the purchase of the stock of two photographic distributors. Lenco and Lenco West. The company's photographic film and paper-coating opera tions continue to suffer from difficulties arising from lack of sufficient production capacity. This situation was parliculariy acute at the beginning of 1967, when the simul taneous introduction of a great number of new products amplified the problem and seriously affected production lei els and profitability. Remedial action taken throughout the year brought production to a much more favorable level by year end. To meet the need for additional facilities. construction was begun on a Sl6-m;lhon addition to the coating facilities at the Binghamton. X. y.. photographic plant. This expansion includes a new paper-coating and finishing facility and a new experimental film-coating lab oratory and pilot plant. The new facilities, scheduled for completion at the end of 1968. will benefit the consumer, professional and industrial photographic product lines The year 1967 brought another problem affecting ail photo graphic films and papers, which require the use of large amounts of silver. The price of silver rose steadily from the mid-year level of SI.29 an ounce to over S2 at year end GAF announced two price increases on sensitized pho tographic materials, one in July 1967. and one in [anuarv 1968. to cover added costs of manufacture due to the in creased cost of silver. Professional and Industrial Photo Products--The Photo & Repro Division is responsible for the manufacture and sale of medical and industrial X-ray films, graphic arts films, professional films and papers, industrial films and papers, and photographic chemicals. The well-received Supreme- medical X-ray film on Gafstar! polyester base reached full production early in the year. At the close of the year, the new GAF-X " X-ray film for medical radiology was introduced. This film, which can be processed in 90 seconds in automatic processors, meets the need tor a film that can be exposed, developed and read durin: the course of a surgical operation! Proc essing chemicals for the automatic processors were also made available New graphic arts products developed for the printing in dustry included Anscoime " film, which is currently being field-tested as a lithographic him for use in automaiic processors nr rr < AiTi.'Oe.T ne.-bicidf handbook lor soybean growers. /for ri.; on oi directed at me filmbuying public. GAF 12378 The professional film line was expanded by several new black-and-white and color products, including a new Anscopan aerial film, suitable for automatic processing to meet increased military requirements; black-and-white Versapan portrait sheet films on Gafstar base, and new VeeCee. Miradex" and Allura black-and-white papers. Sales of color photographic paper to selected processors also rose appreciably. Consumer Photo Products--GAF's sales to the consumer photographic market expanded in every area in 1967. In order to accelerate this growth, a new Consumer Photo Division was established that brings together the activ ities of the direct and dealer sales organizations for GAF films, cameras and projectors and the sales departments for View-Masted* stereo viewers and picture reels and Sawyer's " projectors, acquired by GAF in the 1966 pur chase of Sawyer's Inc. In 1967, GAF's line of consumer film products was signifi cantly expanded by the introduction of the exciting new Anscochrome* 500 color slide film, which has been ex tremely well accepted by both amateur and professional photographers. This film, which has by a wide margin the highest speed of any color film commercially available today, permits color photography under extremely difficult lighting conditions and without auxiliary lighting equip ment. Another well-received new line was the Ansco chrome 11 movie films in both 8mm and Super 8 cartridges for use in daylight and artificial light. An improved GAF Anscochrome D, 64 color slide film for standard 35mm and a line of Anscomatic instant-loading cameras were also successfully introduced. To the company s line of photographic equipment in 1967 were added three new GAF Anscomatic Super 8 movie cameras with through-the-lens cadmium sulfide exposure meters, three GAF Anscovision* movie projectors which can accommodate either 8mm or Super 8 film and three new GAF Anscomatic slide projectors. The Sawyer's brand Rotomatic* 707AQ slide projector and the othermembers of this quality line of projectors achieved record sales levels during the year, as did the company's line of View-Master stereo pictures and viewers and the line of Pana-Vue scenic slides and viewers. New or up dated packets were added to the View-Master line of scenic slides, childrens stories and education features throughout the year, bringing the View-Master reel library to 850 subject titles in 24 languages. GAF's projectors, slide viewers and View-Master reels and Pana-Vue slides are manufactured at its large, modern plant m Progress, Oregon, near Portland. In 1967 construc tion was begun on a new building which will permit consolidation of all manufacturing service functions and increase manufacturing efficiency. Construction has also started on a new facility at the Progress plant to manu facture glass optical lenses for GAF projection equipment. BUSINESS SYSTEMS Sales of GAF's line of reproduction machines and sen sitized papers, audio-visual supplies and business forms and equipment reached $64,355,000, or 32.7 per cent over 1966. This increase represented not only higher sales in most major product lines sold through the Photo & Repro Division but also the additional sales arising from the pur chase of Shelby Business Forms, Inc. in June Profits in 1967 for this sales group were affected by both increased operating costs and by the expenses associated with new product introduction, particularly in connection with the new Gafax'" 500 electrostatic copier, which is dis cussed later. Increased sales volume, coupled with selected price increases, is expected to remedy this situation in 1968. Diazo Repro and Audio-Visual Products--GAF continued its leadership in the field of diazo reproduction and intro duced two new diazo whiteprint machines: the Ozamatic1300 whiteprinter. the first of a new series featuring entirely new styling and improved serviceability: a 42-inch-wide Printmaster4 920 whiteprinter that incorporates a novel air cushion transport unit; and an improved version of the Ozamatic 360 machine with several new features to offer in the reproduction of half-size engineering drawings, a rapidly expanding market in the automobile and aircraft industries. Major improvements were made in the company's line of semi-dry Ozalid* diazo papers. Changes in coating formula tions also improved the performance of the Ozalid dry diazo paper line. New black-line and sepia intermediate Scalemaster* diazo sensitized materials, coated on a poly ester base, were introduced last year For the audio-visual held, GAF introduced a new. light weight portable overhead projector--called the Porta-Lite' 200--which is used to project radiographs, as well as con ventional overhead transparencies. To meet growing volume requirements for standard diazo materials, additional coating capacity was installed at the Arlington. Texas. La Habra. California, and Elyria. Ohio plants during the year. New warehouse facilities were added at the Detroit coating plant. Sales of specialty coated diazo products-such as diazo foils for display, audio-visual teaching aids and diazo microfilm--are growing, and additional manufacturing ca pacity is required. Construction was started in 196' on a major expansion of specially coating facilities at GA s GAF 12379 diazo ccaung plant m Johnson City, NY. The multi-million dollar project is expected to be in production in the first half of 1968. Office System* Products--GAF s diazo whiteprinters, while preeminent in the engineering and architectural reproduc tion field, have somewhat limited usefulness for conve nience office copy purposes. Thus, in July of 1967 the com pany introduced its Gafax" 500 lens-type electrostatic copier as its initial entry in the convenience copy market. This machine is a small, high-styled unit which features the utmost ease of operation. The Gafax 500 produces an excellent quality copy from an original of any color and. because it holds a 460-foot roll of coated paper, it will make 11-inch-wide copies of any length. GAF offers both the Gafax 500 and associated paper and toner components of the system. That the new machine has been well received by customers is illustrated by the con tracts that had been obtained at year end to provide the 1966 electrostatic copying requirements of two major air craft accounts. At the close of the year, field evaluation was begun on an other addition to the company's products for the office field -the 'rols'! dictating unit. This light-weight, sturdy and easy-to-use machine has many advantages over existing machines It is manufactured at the company s plant at Progress. Oregon. Sbelby Business Forms, lnc.-In June. 1967. GAF purchased Shelby Business Forms, Inc. for approximately $8 million. Shelby employs 800 people at its business forms printing plan in Shelby. Ohio In 1966. Shelby had sales of about S12 million, net income of almost $600,000 and total assets of approximately S10.5 million. Shelby's products include sales books, manifold order books. Umtset and Card-Set forms, data processing forms, single copy forms, voucher and receipt books, forms for autographic registers and similar items. Since the acquisition of Shelby by GAF, most of the 250 Shelby salesmen have been trained in the selling of the Gafax 500 electrostatic machine and associated paper to the business accounts they serve. BUILDING PRODUCTS AND MISCELLANEOUS On March 23, 1967, the Boards of Directors of GAF and of The Ruberoid Co. approved a merger agreement between the two companies. This agreement was ratified by the stockholders of both companies at special meetings held on May 26. and the merger was effected on that day. GAF purchased for cash 1,090.200 shares, or 26.1 per cent, of Ruberoid capital stock at $27.50 per share, for a total of S29.960.500. Under the terms of the merger, the remaining 3.095.362 shares of outstanding Ruberoid stock were con verted to an equal number of shares of S1.20 convertible preferred stock of GAF having a par value of Sl.00 per share and convertible into 1.25 shares of GAF common stock. In 1966. The Ruberoid Co. reported net sales of $184 mil lion. and net income of S8.5 million, before a non-recurring extraordinary charge. The Ruberoid merger has made GAF a leading company in the nationwide manufacture, mining and marketing of a variety of building materials, floor coverings and miscella neous industrial products. The Ruberoid product lines can be classified into three maior segments. 1) Building Prod ucts--including asphalt roll roofing and shingles and sidings: Introducing the Gafax 500. The first copier you don't have to hide in the corner. GAF 12380 GAPs maior role in copying held is supported by strong nalionol advertising and direct mail programs I mineral fiber roof shingles and sidings: mineral fiber build ing and specialty board products: asphalt protective coat ings and a wide range of products for industrial, commer cial and residential roofing: gypsum board products; Fiberglas insulation, and roofing granules: 2) Floor Products-- including resilient floor tiles and sheet vinyl floor coverings for residential and commercial uses, 3) Industrial Products --including automotive acoustical products, pipe-cover ings and industrial insulations, asbestos and organic felts, asbestos fibers and inert fillers and mica. Through separate subsidiaries, the American Felt Company and Drycor Felt Company, a broad spectrum of wool and synthetic fiber felts is offered. Industrial felt products are used for papermaking. various filter devices, sealers, lubricators, piano hammers, and for a range of special applications such as ballistic protective padding and thermal protective felts for space suits. The consumer felts find their way into foot wear. women s skirts, clothing, home decorating, display items and other uses. The Ruberoid merger brought to GAF 36 manufacturing locations in 19 states. This total includes seven synthetic and wool felt mills and fabricating facilities. 12 asphalt roofing operations, three mineral fiber operations, six roof ing felt (paper) operations, one asbestos paper products plant, four floor tile plants, a sheet vinyl floor covering plant, an asbestos mine and mill, a gypsum mine and wallboard plant, six granule plants with five quarries, and one mica plant and quarry. The Ruberoid and American Felt product lines are sold through 20.000 nationwide outlets from 32 sales offices in 18 states. The company had 6,600 employees at the time of the merger. At the end of 1967, two new GAF operating divisions were created from the former Ruberoid Co. division: the Floor Products Division and the Building & Industrial Products Division. The American Felt and Drycor Companies con tinue as GAF subsidiaries. Building & Industrial Products Division--During 1967 a newtype of rustic wood-textured siding shingle was test mar keted in selected sales districts and will receive strong sales effort during 1968. The new product, called Ruco! thatch siding shingle, offers many advantages over wood shakes which it closely simulates in appearance. It is insect, vermin and rot proof, will not burn, has high impact resis tance and does not require painting. Development work was completed in 1967 on a new asphalt roofing shingle that has the appearance of and is designed to compete with wood shingles. Named Timberlme " shingles, they are scheduled for test marketing early in 1968. Also scheduled for 1968 introduction is a new high-temper ature industrial insulation--called "Inhibited Calsilite' in sulation"--which can inhibit stress corrosion cracking in austenite stainless steel. Floor Products Division--A number of new. high-styled vinyl-asbestos floor tile series were developed and com mercially introduced m 1967. These included Monticello, a smooth surface, five-color line: Stone Mosaic, an embossed four-color line: Colonial Wood, an embossed five-color line: and Alabaster, an embossed six-color line. In Roto-vinyl sheet flooring, the following new products were commercially introduced, in the Airtred* sheet floor ing series, a new cork design in two colors, as well as eight new colors for the Spanish Tile. Mexican Agate and Car mel designs: in the Luran^ Regency Embossed flooring series, a new design, Versaille, in six colors, and one addi tional color each for Marlstone and Capestone: in the se nes of Luran Standard-Embossed flooring, two new de signs, Miramarble. and Old American Tile, in seven colors each: for Softred-. four new designs, Quadrille, Texture. Malaga and Bagatelle, the first three m six colors each, and the fourth in five colors: and in the Sandrar. sheet flooring series, two new designs, Diamond Chip in six colors, and Delftile. in three colors. All the staff functions of The Ruberoid Co., such as Legal, Accounting and Financial. Research and Development, En gineering, Public Relations. Advertising and Promotion. Purchasing. Personnel. Export, etc., were integrated with the appropriate corporate GAF departments. Building product sales were seriously depressed at the be ginning of 1967 due to extremely inclement weather throughout most of the nation, combined with a drop in new housing starts, and a general slowdown of activity in many industrial construction areas. However, accelerating sales in the second half overcame this earlier deficit, so that the product area ended the year with sales of Sl62.535.000, or two per cent ahead of 1966. 10 American Felt Company--One of the important new Ameri can Felt products marketed in 1967 was the Snap Ring calibrated filter. The unique design of the system provices economic and efficient filtration in food manufacturing, in copper electroforming, and in packaging such viscous ma terials as paints, resms, waxes and lacquers. A new type of resin treated filter element for the air intake of small gasoline engines was also introduced At the end of the year production started on a nevvi) de signed automotive lubricating oil filter adapter element for the Ford Motor Company. This Improved filter product is expected to enjoy wide acceptance in the automoii market. * GAF 12381 Internationa. ;-.'i'.0S3 GAF sales outside the L'nited States from exports and foreign subsidiaries totaled S58.105.000 in 1967, compared with S39.871.000 in 1966. an increase of 45.7 per cent. Great Britain--At the end of 1967. GAF's operations in Great Britain were regrouped into one company, GAF (Great Britain) Limited. The new organization comprises three operating divisions, as follows: The Reprographic Products Division, which conducts the operations formerly carried out under the name Hall Hard ing Limited, acquired by GAF in 1966. This Division em braces the manufacture and sale of diazo materials and machines, reproduction services, and the sale of GAF's industrial photographic products. The Photo Products Division, which distributes products formerly sold by Sawyer's Photographic Products (UK) Ltd., a product group that includes Sawyer s projectors. View-Master stereo pictures and viewers, and GAF con sumer films. The Chemical Products Division, which now markets direct ly throughout the United Kingdom the GAF chemicals and dyestuffs formerly distributed for GAF by Fine Dye stuffs & Chemicals Limited. Belgium--GAF manufactures View-Master stereo viewers and scenic picture packets and Sawyer s projectors in its plant at Sint-Niklaas. Belgium. Effective January 1, 3966. the name of this Belgium subsidiary was changed from Sawyer s Europe N.V. to GAF (Belgium) N'.V. The sales operations throughout Europe of this subsidiary were expanded when a new marketing subsidiary was or ganized under the name GAF Svenska AB to sell the line in Sweden. Other marketing subsidiaries include GAF (France) S.a.r.l.. of Pans, and GAF (Deutschland) G.m.b.H., of Cologne. Germany. - aUTAff^AFTA-*^ Holland--Effective January 1. 1968 N" V Lichtdruhpapjerfabriek "De Atlas', which traded under the name GAF Atlas-Delft, was renamed GAF ,'Nederland] X V The for mer Atlas-Delft will operate as the Reprograpmc Duts.on of this new subsidian A 1967 development by this Division was the introduction of a line of 80 new industrial and household pressure sensi tive tapes sold under the "Gaftape' trademark. The Divi sion, in 1967, also assumed the distribution of the GAF line of industrial photographic films. The new addition to the repro plant at Delft. Holland, com pleted in 1966. was successfully placed into operation a! the beginning of 3967. GAF's consumer photo products marketing subsidiary in Holland moved into space provided at the recently ex panded Delft headquarters offices of the Reprographic Division. This photo subsidiary, formerly called Sawyer s (Nederland] N.V., became the Photo Products Division of GAF (Nederland) N.V.. effective January 1. 1968 DISTRIBUTION A new sales, service and distribution center was opened in Orlando. Florida in 1967 to provide these functions for the reprographic a: ` photo sales lines. The corporate Distribution Department has begun a com prehensive stun;. aimed at consolidating the traffic and other distribution functions of GAF's several new domestic divisions and subsidiaries. In coordination with the corporate Systems Department, it is also participating in a major study of the company s order handling, inventory and invoicing systems COMMERCIAL " F The corporate Commercial Development Department con tinued its activities in new field areas It participated in the studies and negotiations leading to the acquisitions pre viously described-in this report. Other opportunities for acquisitions, joint ventures and licensing arrangements con tinue to be explored by. the department - It is also actively engaged in studies looking to new plant sites as required in the iong-range plans'#? the operating divisions. RESEARCH A S ^'DEVELOPMENT The corporate Rfgch and Development Ipepartmenl^vas responsible for laboratory and pilot-plant activities leading to the dev^fcpment of new products described in the earlier sections of this Annual Report-.-:^ * GAF 12382 Make sure you buy^ hoiji that^s painted with a hatim I ifltltflL s^cr ; *m> MKOQ4JCTS %L- gaF DYEING MAN-MADE FIBERS & BLENDS 0 Shown here in reduced size, and throughout this report arc a few <;f the .JOG original ads and l.fKJI major piece; of product lilorature and sales promotion material produced hy GAF in l`Hi7 During the year GAF ads appeared almost 2,001) times in a total of more than [100 newsstand, trade, industrial and professional publications. This Christmas give, so that others may take. GAF 12384 A major effort was underway throughout the year to de velop closer organizational and planning coordination with the R&D units of the company's newly acquired subsidi aries and divisions. Another project of long-term importance was the installa tion and startup of the company's first in-house scientific computer system for chemical and chemical engineering research. PERSONNEL AND ORGANIZATION Personnel--Corporate personnel totaled 19.377 at year end 1967. This compares to 11,887 reported at year end 1986 before the 1967 mergers and acquisitions which added ap proximately 7,800 people to the company. During the year 21 labor contracts were negotiated at vari ous locations and a total of 28 additional labor contracts are scheduled to expire in 1968. There were three work stoppages in 1967: one of three-weeks duration took place at the Johnson City and Vestal, N.Y., plants of the Photo & Repro Division: two were in the Building & Industrial Prod ucts Division: one was a seven-week stoppage at the Gloucester City, N.J., plant, which began in December, 1966, and one was of two-weeks duration at Joliet, Illinois. Mr. Philip B. Dalton, Executive Vice President in cha operations. He was previously a Vice President rBe cf Mr. Donald L. Sanders, Executive Vice President* i,n cnvsfoA of administrative services. He was previously a V President. lce Mr. E. J. O'Leary, Senior Vice President. for markeservices. Mr. O'Leary had been elected a GAF Vice Pres^ dent and Director in May, 1967, and was also President The Ruberoid Co. Division. Dr. Chris C. Schulze, Senior Vice President, in charge of technical services. He was previously a Vice Presider Mr. Thomas A. Dent, Vice President, in charge of com mercial development. He was previously Vice President of operations for The Ruberoid Co. Division. Dr. Frederick Grosser, Vice President, in charge of research and development. He was previously technical director of dyestuff and chemical products. Miss Juliette M. Moran. Vice President, in charge oi com munication services. She was formerly Assistant i.> the President. Effective January, 1968. the employees of most of the new domestic divisions and subsidiaries were brought into the GAF employee benefit programs. As a result of these and other changes, improved benefit and retirement programs were made available to large numbers of the company's personnel. Organization Changes--GAF's growth in size and complex ity required a major change in management organization that was implemented in October. 1967, as follows: Reporting to the Chairman and President are two Executive Vice Presidents, two Senior Vice Presidents, and three Vice Presidents. One of the Executive Vice Presidents is respon sible for all domestic and foreign operating divisions and subsidiaries. The other Executive Vice President is respon sible for corporate administrative services including finan cial. legal, personnel and the Secretary's office. One Senior Vice President is responsible for corporate technical serv ices including engineering, economic evaluation, purchas ing and distribution. The other Senior Vice President has staff responsibility for marketing and marketing services. Three Vice Presidents are respectively responsible for re search and development, commercial development and communication services. In connection with this reorganization the following offi cers were elected in October. 1967: In September, 196". Mr. Thomas H. Dermody was elected a Vice President, w :th responsibility for corporate financial services. He was previously Senior Vice President of The Ruberoid Co. DU :sion. In December. 1967. Mr. Fred K. Sweeney was elected a Vice President, with responsibility for the new Building & Industrial Products Division. He was formerly a Senior Vice President of The Ruberoid Co. Division. Also in December. Mr. [ulien Heppes was elected a Vice President, with responsibility for the new Floor Products Division. He was formerly Vice President of The Ruberoid Co. Division. Effective January 1. 1968, Francis A. Gibbons. Senior Vice President of GAF. and a member of the Board of Directors, retired as an officer of the company Mr. Gibbons joined GAF in 1929 in the corporate Accounting Department as chief accountant. He was successively elected Secretary. Treasurer, and Vice President. Mr. Gibbons conlinues his long and devoted service to the company as a member of the Board of Directors and as a consultant. In June. 1967. Mrs. Oveta Culp Hobby resigned from the Board of Directors, and in January, 1968. Mr Mathew Manes also resigned. The Board expressed its deep appreci ation to both for their service to the company GAF 12385 Of jc.-' `i- i . ** a 5 * ~ - * ;;9P0RmT!cn FIVE-YEAR FINANCIAL SUMMARY (Dollars in thousands except per share figures] 1967 Operating Results: Net Sales $520,872 Income: Before Income Taxes and Other Charges 33,441 Net Income 18.961 Per Common Share (a) 1.14 Dividends Paid: Preferred 2,686 Capital Stock of Acquired Companies 797 Common (b) 5,337 Per Common Share (b) .40 Capital Expenditures 39,931 Wages and Salaries Including Employee Benefits 151,751 Year Ended December 31 1966 1965 1964 $484,062 $416,677 $362,840 45.289 18,725 1.13 - 3,147 4,786 .40 31,572 39,123 19,538 1.20 - 2,768 3,590 .30 43,979 32,184 15,656 .92 2,593 - 16,567 137,006 121,876 108,577 1963 $325,615 24,900 11.183 .58 - 2,566 - 13,270 102,686 Financial Condition: Current Assets Current Liabilities Working Capital Property, Plant 4 Equipment (Net) Total Assets Long-term Debt Shareholders' Equity Number of Employees 1967 230,327 72,763 157.564 212,623 473.522 96,192 273,314 19,377 1966 December 31 1965 1964 237,809 53,100 184,709 183,365 441.645 78.095 261,960 18.477 204.758 46.956 157.802 161.487 375,011 34,050 249,904 15.911 195.170 37,192 157,978 128,865 333,933 27,395 234,793 14,065 1963 175,666 31,085 144,581 126,352 312,461 30.687 220.626 13,546 U) Based on average number of common shares outstanding after recognition of preferred divi dend requirements. |h) Represents dividends paid by GAP since commencement of quarterly dividends on common stock in second quarter of 1965. GAF 12386 I 15 GENERAL ANILINE & FILM CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED INCOME Revenues: Net sales Other income--net Cost and Expenses (Note 8): Cost of products sold Distribution and selling expenses Research and development expenses Administrative and general expenses Interest on borrowed capital Income before Income Taxes and Other Charges Provision for Income Taxes and Other Charge (Note 4): Federal and foreign income taxes: Current Deferred Charge equivalent to investment tax credit--net Income before Minority Interest and Extraordinary Item Minority Interest Income before Extraordinary Item Extraordinary Item Net of Applicable Income Tax and Minority Interest Net Income Per Share of Common Stock (Note A): Income before extraordinary item Extraordinary item Net income Pro Forma Per Share of Common Stock (Note B): Income before extraordinary item Extraordinary item Net income Year Ended December 31 1967 1966 $520,871,770 2.748.988 523.620.758 $484,062,358 2.216.922 486.279,280 368.503.548 82,720.025 12,367.769 20.248.029 6.340.168 490,179.539 33,441.219 336.057.545 71,607,660 11,466.984 18,617.966 3.039.933 440.990.088 45.289,192 10.992.891 2.828.791 307,841 14.129.523 19.311.696 350,334 18.961,362 17,080,471 2.914.938 721,266 20,716,675 24,572,517 2,299.697 22.272,820 $ 18,961,362 (3.547.200) $ 18.725.620 Si.14 - SI.14 Si.40 (.27) $1.13 $1.10 - $1.10 $1.30 (-20) $1.10 Note A--Based on average number of common shares outstanding during each year after recogni tion of preferred dividend requirements. Note B--Based on assumption that the outstanding preferred shares and 5Vs% convertible sub ordinated notes were converted into common shares at the conversion ratio in effect at the end of each year, reflecting the shares issuable on conversion and eliminating the preferred dividend requirements. The Notes to Consolidated Financial Statements are an integral part of this statement. ie GAF 12387 GENERAL ANILINE & FILM CORPORATION AMO CONSOLIDATED SUBSIDIARIES CONSOLIDATED RETAINED EARNINGS Year Ended December 31 1967 1966 Balance, beginning of year $198,993,633 $188,201,041 Net Income 18,961,362 18,725,620 Cash Dividends: Preferred stock--1967, S.86Yj per share Common stock--1967 and 1966. S.40 per share To shareholders of acquired companies prior to pooling $2,685,754 5,336,824 797.499 $4.786,453 (8,820.077) 3.146.575 (7.933.028) Retirement of Treasury Stock ( 159,667) -- Balance, end of year $208,975,251 $198,993,633 The Notes to Consolidated Financial Statements are an integral part of this statement. 01 L GAF 12388 I : . : Ah'. - i * N* C s PO -=? A T 0 S CONSOLIDATED BALANCE SHEET ASSETS Current Assets: Cash U. S. Government and other marketable securities, at amortized cost which approximates market Accounts receivable, less allowance for doubtful accounts Inventories, at lower of average cost or market (Note 2) Prepaid expenses December 31 1967 1966 $ 14,412,198 $ 16,876,968 73,428 90,617,278 120.956.191 4,268,165 230.327,260 30.253.41B 82,013,677 105,747,781 2,917,062 237.808,906 Other Investments and Advances, at cost (Note 3] 1.9'1.640 3,026,783 Property, Plant and Equipment, at cost: Land, land improvements and mineral properties Buildings and building equipment Machinery and equipment Construction in progress 11,990.803 93.711.728 238.286.078 35.306.312 Less accumulated depreciation, amortization and depletion 379.294.921 166.671.782 212.623.139 8.879.657 90.366,538 217.073.513 17.546.687 333.866.395 150.501,113 183.365,282 Goodwill, Patents, Trade-marks, etc. (Note lj 28.599.841 $473,521,880 17.443,735 $441,644,706 The Notes to Consolidated Financial GAF 12389 LIABILITIES Current Liabilities: Notes payable Current portion of long-term debt Accounts payable Accrued taxes, wages, etc. Federal and foreign income taxes (Note 4) Deferred income Long-term Debt Less Current Portion Above (Note 5) Obligation under Long-term Lease (Note 9) Deferred Income Taxes (Note 4) Other Liabilities Deferred Investment Tax Credit [Note 4) Minority Interest December 31 1967 1966 S 20.337,297 5,656,151 25.563,574 12,781,83 7 8.045.380 379,321 72,763,560 96,191.900 4.395.000 19.606.353 2,855.538 4,323,62: 72.323 $ 7,320,000 20,154,390 11,979,855 11.439,348 2,206,400 53,099,993 7B,095,000 4.605,000 16.356.690 2.756,298 3,873,902 20.898.137 SHAREHOLDERS' EQUITY Preferred stock. Si par value, authorized 6.000.000 shares; SI.20 convertible series issued and outstanding 1967-- 3,117.922 shares, issued 1966-3.124.438 shares, at assigned value of Si.25 per share (liquidation value 1967, $85,742,855] (Note 6) Common stock, Si par value, authorized 25,000,000 shares: issued and outstand ing 1967--13.342.060.5 shares, 1966-13.296.114.5 shares (Note 6) Paid-in surplus (Note 7) Retained earnings [Note 5) Less preferred stock held in treasury. at cost (61.376 shares] 3,897,402 13.342,061 47,098,869 208.975.251 273,313,583 273,313.583 S473.521.880 3,905.547 13.296.115 46.619,665 198.993,633 262.814,960 855.274 261,959,686 $441,644.706 nts are an integral part of this statement GAF 12390 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Not* 1 Principle* of Consolidation-In the accompanying financial statements the accounts of all significant subsidiaries have been consolidated. The accounts of consolidated foreign subsidiaries, which are not material in relation to the consolidated accounts, have been translated into U. S. dollars at appropriate rates of exchange. At December 31, 1966 the Company owned a 57Yj% interest in Sawyer s Europe S- A. (a Belgian company) and in fanuary 1967 the Company acquired the minority interest in exchange for 45.946 shares of its common stock. The financial statements for both years include amounts appli cable to The Ruberoid Co. which was merged into General Aniline & Film Corporation on May 26. 1967. The merger has been accounted for as a pooling of interests to the extent of 73.9%. which represents the portion of the Ruberoid stock ex changed for 3.095.382 shares of $1.20convertible preferred stock of the Company, and as a purchase to the extent of 26.1%. which represents the portion of the Ruberoid stock acquired for cash. The results of operations of Shelby Business Forms, Inc., purchased in June 1967. have been included in the financial statements from the date of acquisition. The cost of investments in and advances to subsidiaries at December 31. 1967 was $6,191,069 in excess of the Company's equity in their net assets. In consolidation this amount was in cluded in accounts as follows: Goodwill. Patents. Trade-marks, etc..................... $13,317,017 Retained Earnings (net income since acquisition) ..................................................... 7.125.948 Note 2 Inventories-Inventones consisted of the following: Finished goods...................... Work in process.................... Raw materials and supplies ... December 31 1967 1966 $ 55.730,740 $ 46.884.406 29.470.092 35.755.359 27.654.106 31,209.269 $120,956,191 $105.7477^ Note 3 Other Investment* end Advance*-The Company owns 49% 0( the common stock of Chemical Developments of Canada Limited. The remaining 51% is owned by Dorotar. Ltd. The Company's equity in the net assets of Chemical Developments of Canada. Limited at December 31.1967 was $697,124 in excess of its investment in this company. Not* 4 Income Taxea and Other Cherge-For income tax purposes only, the Companies use accelerated depreciation methods and the shorter '`Guideline ' lives as permitted by the US- Treasury Department. The resulting reductions in the provisions for cur rent income taxes have no effect on net income, however, since amounts equivalent to such reductions are provided for de ferred income taxes. The investment tax credit available under the Revenue Act of 1962 is being deferred and reflected in income ratably over the estimated service lives of the respective assets. Note 5 Long-term Debt and Dividend Reetrictione-Long-term debt represents the balance of unsecured loans as follows: December 31 1967 1966 6% note due March 14. 1967 ....................................................................................................................................... ....$ - S 200.000 2.95% note due June 1. 1967 ..................................................................................................................................... .... 4.500.000 5l' % notes due January 23.1968 with prepayment of $200,000 on January 23.1967 ............................. 200.000 400.000 6'% note due August 8. 1968 ......................................................................................................... ..................... ___ 2.500.000 4.000.000 4%% notes due June 30. 1969 with quarterly installments ranging from $250,000 beginning March 31. 1967 to $750,000 beginning March 31. 1969 ................................................. 3.000.000 4.000.000 4'e 0 notes due June 30.1972 with quarterly installments ranging from $750,000 beginning September 30. 1969 to $1,000,000 beginning September 30. 1971 ........................................ . . . . 10.000.000 10.000.000 3':% notes due March 1. 1972 with annual prepayments of $1,250,000 on March 1. 1967 through 1971 and balance of $5,250,000 payable March 1. 1972 ................................................................. . .. 10.250.000 11.500.000 6% note due April 1. 1972 with semi-annual installments of $85,000 through October 1. 1971 and $35,000 on April 1. 1972 .................................................................................. . . . 715.000 1.055.000 6`/s% note due July 15. 1975 ................................................................................................................................... 203.700 - 5%% Senior note due January 20, 1980 with annual prepayments of $200,000 beginning January 20. 1969 ................................................................................................. .. .. 2.400.000 2.400.000 513 % Convertible Subordinated Notes due April 1. 1983 with annual prepayments of $200,000 on April 1.1972 through 1982 and balance of $1,800,000 payable April 1.1983 .................................. .... 4.000.000 4.000.000 5%% notes due August 2. 1985 with semi-annual installments of $66,000 beginning August 1. 1971 ___ 2.000.000 - 5% % Sinking Fund Debentures due December 1. 1991 with annual sinking fund payments of $2,500,000 beginning December 1. 1972 .............................. ............................................................... ___ 50.000.000 43.360.000 6% notes payable to banks under credit agreement dated October 9. 1967 .......................................... Other notes ............................................................................................................................................................ Total .......................................................................................................................................................... . . . 16.500.000 79.351 85.415.000 Less portion due within one year ....................................................... 20 Remainder.................................. q , - ] 2 0 r " c' - ........ ___ 5,656.151 .. . ___ $96,191,900 7,320.000 S78.095.000 GAF 12391 Under the terms of a revolving credit agreement dated October 9. 196" the Company may borrow up to a maximum of $75,000.000 on 90-day notes On April 30. 1970 the then outstanding notes are repayable and the Company may reborrow up to 575 000.000 on Term Loans payable quarterly to May i. 1974. At December 31. 1967 the Company had borrowed S22.500,000 un der this agreement. $16,500,000 of which ts classified as long term debt since it is the present intention of the Company to convert these notes to Term Loans. The remaining $6,000,000 is classified as current notes payable. Dividends are restricted under the provisions of the indenture relating to the sinking fund debentures and of certain loan agreements. Under the most restrictive of these provisions, approximately $179,000,000 of the consolidated retained earn ings at December 31. 1967 was not available for dividends. Note 6 Capital Slock-The $1.20 convertible preferred stock, dividends on which are cumulative, is convertible at any time into com mon stock at the rate of 1U shares of common stock for each share of preferred. At any time after June 1. 1972. the Company may redeem the preferred stock at specified prices ranging from $30.00 to S27.50 per share. Under the provisions of the Company's stock option plan, op tions for 580.000 shares of common stock may be granted to key emplovees during a period of ten years. The prices at which opuons may be granted may not be less than 100?o of the fair market value of the shares on the date the option is granted. Options for 235.000 shares were outstanding at December 31. 196" as follows- Number Date ot Grant lanuary 5 1966 of Shares 198.000 Option Price Per Share Total $30 625 $6,063,750 March :o 196- 37.000 25 375 938.875 235.000 S7.002 625 Options for 16.000 shares were granted on January 10 1968 at "v? fair market value of S22 81 per share or a total of S364.960 aid for 97 250 shares on January 26 3968 at the fair market d'.ue of $22 19 per share or a total of $2,157,978. The options are vercisabie for five years from the date of grant. None of the options had been exercised at fanuary 31. 1968 l' addition to the above. 64.220 shares of $1.20 convertible pre;erred siock were reserved at December 31, 1967 for options assumed by the Company as a result of the Ruberoid merger ;ne cP,,on prices per share range from $13.50 to S20 00. for asgregaie of Si. 124.789 Options for 55.620 shares were exer- sable at December 31, 1967, During the year. 57.360 shares of referred slock were issued for options exercised, including common shares of Ruberoid issued in 1967 prior to the merger itito the Company. The proceeds from stock options exercised amounted to $805,728. and the excess over the assigned or car rying value of the stock was credited to paid-in surplus At December 31. 196" the following number of shares of the Company's capital stock were reserved for issuance as follows $1.20 Convertible Preferred Stock Reserved for exercise of stock options Common Stock: Reserved for conversion of $120 convertible preferred stock including 8D.2"5 shares for stock options........................ 3.9"" 6"" Reserved for exercise of stock options 580 000 Reserved for conversion of 5l2o convertible subordinated notes due April 1. 1963 convert ible on, or prior to. April 1. 1976 at S29.1404 per share.......................................................................................................... 13".:66 4.69-; 9-13 Note 7 Paid-in Surplua-Changes in paid-in surplus during 1967 were as follows- Balance. December 33. 1966 ........................... S46.619.665 Premium from stock options exercised . .. 411.408 Premium from acquisition of additional inter ests in acquired company .... 970.609 Expenses in connection with pooling of inter ests ofacquir'dcompanies (561.45'} Retirement oftreasury stock ........................ (341,356: Balance. Decern ier 31. 1967 S47 098.869 Note B Retirement PUn-The Company and its subsidiaries have sev eral pension plans covering substantially ail employees. The total pension cost for the year, which was funded, amounted to $5,012,373. A change, as of January 3 196". in the method of determining pension cost had the effect, after applying Federal income taxes. 0/ reducing net income by approximately $700,000. Pension cost for 1967 includes, as to certain of the plans, amortization of prior service cost over periods ranging from 10 to 40 years. Not* 9 Long-term Leaaea-Under the terms of a long-term lease obliga tion covering 3s.o to 4U% City of Annapolis. Missouri indus trial revenue bonds, an annual rental of approximately S385.000 is payable until September 30. 1983 to cover bond principal and interest At December 31. 196" the Companies were obligated under other long-term leases as follows Leases Expiring In Aggregate Annual Renial 2-5 Years S2.005.000 6-10 Years 220.000 12-20 Years 1.475.000 Over 20 Years 110.0DQ GAF 12392 0 1- GENERAL ANILINE & FILM CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED SOURCE A USE OF FUNDS Year Ended December 31,1967 Funds Provided by: Net income Depreciation and amortization Deferred income taxes Long-term borrowing, less related expenses Stock options exercised Other-net Funds Used for: Capital expenditures Purchase of minority interests Purchase of subsidiary (less working capital of such subsidiary) Reduction of long-term debt Dividend payments Decrease in Working Capital Working Capital, beginning of year Working Capital, end of year S18.961.362 17,023.555 2.828.791 23.028,385 805,728 1,225.431 63.873.252 39.931.340 30.416,415 4.435,633 7,415,000 8,820.077 91.018.465 27,145.213 184.708.913 $157,563,700 ACCOUNTANTS' OPINION HASKINS A SELLS *!# *CCOvNUal TWO I SOA OWAV NEW YOWK lOOOA To the Stockholders and Board of Directors of General Aniline A Film Corporation: We have examined the consolidated balance sheet of General Aniline A FI la Corporation and Its consolidated subsidiaries as cf December 31, 1367 and the related statements of consolidated Income, retained earnings and source and use of funds for the year then ended. Our exam:nation was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circuostances. In our opinion, the accompanying consolidated balance sheet and statements of consolidated income and retalneo earn ings present fairly the financial position of the companies at December 31, 1967 and the results of their operations for the year then ended, in conformity vith generally accepted account ing principles applied on a basis consistent vith that of the preceding year; and the accompanying statement cf consolidated source and use of funds presents fairly the information shown therein. January 31, 1?68 GAF 12393 I DiF; DYESTUFF & CHEMICAL DIVISION Surfactants-nonionic, anionic, cationic, and amphoteric surface-active agents for use as delergents. emulsifiers, dispersants, and wetting agents Specialty Chemicals-processing and formulating agents -- including bactericides and fungicides, finishing agents, ad hesive additives, sequestrants. antistatic agents. lubricants, and solvents, for use in various industries High-Pressure Acetylene Derivatives--monomers, polymers, copolymers, solvents, organic intermediates, and other chemicals derived from acetylene for use m cosmetic, petroleum, pharmaceutical, plastic, textile, adhesive, and a variety of other industries industrial Organic Chemicals--aromatic derivatives, com plex cyclic compounds, and aliphatic compounds (including formaldehyde, choline chloride, and methylammes). for use as intermediates in the dye. pharmaceutical, and chemical processing industries Heavy Chemicals-chlorine, caustic soda, muriatic acid, ethylene oxide, and glycols Iron Powders --microscopic-size spheres of iron used in VHF and UHF circuitry, transmitters, receivers, radar, and in powder metallurgy Ultraviolet Absorbers--ultraviolet-screening agents for plas tics. textiles, pigments, rubber, adhesives, and cosmetics Dyestuffs--acid. azo. azoic. basic.condensation, chrome, di rect. disperse, fiber-reactive, mordant metalized. sulfur, vat. and vat-ester dyes: fluorescent brighteners: oil-, spirit-, and water-soluble dyes Pigments-azo. benzidine, BON. cadmium, carbazole. car bon. chrome, diamsidine. fluorescent, molybdate, naphthol. mtroso. oxide. PMA. phthalocyanme, PTA. pyrazolone, and jliramarine pigments --lakes, dispersed powders, toners, d.spersed pastes, flushed pigments, and presscakes TEXTILE CHEMICAL DIVISION Textile auxiliaries: flame retardants: carpet antistats, rub ber latices for rug backings, fabric coatings and paper coatngs. CAFCOTE" latex foam backing for drapery fabrics CONSUMER PHOTO DIVISION AXSCOMATIC*- still- and motion-picture cameras, AXSCOMATIC. ANSCORAMA". and SAWYER'S"brands slide projectors. ANSCOVISION* motion-picture protec tors. and accessories: darkroom equipment, chemicals, and supplies AN'SCOCHROME* color-slide film and color motion-picture film: black-and-white roll film: PANA-VUE* Slide viewers and scenic color slides: VIEW-MASTER* stereo viewers and picture reels: TRU-VUE' photographic toys GAF 12394 PHOTO 4 REPRO DIVISION Professional Photo Products--color and black-and-white films, papers, and chemicals tor portrait, photofinisher press, industrial, aerial, and motion-picture uses: film and paper automatic processors Industrial Photo Products--photorecording film and papers X-ray Products--medical and industrial X-ray films chemi cals. and accessories: radiologic teaching aids Reprographic Products--diazo copying machines and sensi tized materials for engineering and business systems, films, paper, and chemicals for offset printing, photolithography, photoengraving, rotogravure, and silk-screen printing, audio-visual equipment and supplies: microfilm Office Systems Products--GAFAX" 500 electrostatic cop ier, papers, toners, and supplies: dictating machine and accessories Precision Analytical Equipment--contract manufacture of precision parts and equipment SHELBY BUSINESS FORMS. INC. Design and printing of data-processing forms, sales books, manifold-order books, single copy forms. UNITSET" forms, voucher and receipt books. CARD-SETS" forms, and forms for autographic register and similar items FLOOR PRODUCTS DIVISION Floor Coverings--asphalt and vinyl-asbestos resilient floor tiles: adhesives: rove bases: LURAN*. SOFTRED*. and SAN'DRAN* sheei-i myl floor coverings for residential and commercial uses BUILDING 4 INDUSTRIAL PRODUCTS DIVISION Ruberoid Building Materials--FIREGUARD". SOVEREIGN' and SELF-SEAL asphalt roof shingles; asphalt roll roofing and sidings: asphall. asbestos or tar built-up roofing felts asphalt protective coatings and cements. T \A 200s roof ing membrane, mineral fiber board, roof shingles, sidings, building and specialty boards' mineral fiber canal bulkbeads; building and roof insulations; gypsum building board, lath and plasters Industrial Products--automotive acoustical products: as bestos fibers; unsaturated felts: asbestos and organic insu lating felts and boards: asbestos papers, molded high-pres sure pipe coverings and industrial insulations: electrical insulating tapes, high-purity mica and inert fillers AMERICAN FELT/DRYCOR FELT COMPANIES Wool and synthetic fiber felts and filter devices for air. liquid, and gas filtration: sealing and lubricating devices, plate-glass and metai-polishing felts: piano felts: wool felts for apparel and interior design, felts for automotive, indus trial. and aerospace applications: non-woven papermakers felts for paper, asbestos-cement pipe, and waliboard manufacture SEN = .' - : CORPORATE OFFICES BUILDING 4 INDUSTRIAL PRODUCTS DIVISION CONSUMER PHOTO DIVISION DYESTUFF 4 CHEMICAL DIVISION FLOOR PRODUCTS DIVISION PHOTO 4 REPRO DIVISION INTERNATIONAL OPERATIONS COMMERCIAL DEVELOPMENT DEPARTMENT TEXTILE CHEMICAL DIVISION 1228 Chestnut Street. Chattanooga. Tenn. 37402 PRINCIPAL SALES AND DISTRIBUTION OFFICES Arlington. Texas Atlanta. Georgia Baltimore. Maryland Binghamton. New York Brookfield (Milwaukee!. Wisconsin Caledonia. New York Charlotte. North Carolina Chattanooga, Tennessee Cheverly (Washington, D.C.J. Maryland Chicago. Illinois Cincinnati. Ohio Dallas, Texas Dalton. Georgia Denver. Colorado Detroit. Michigan Erie. Pennsylvania Hagerstown. Maryland Harper Woods. Michigan Houston. Texas Indianapolis. Indiana Joliet. Illinois Kansas City. Missouri Knoxville. Tennessee La Habra [Los Angeles). California Long Beach. California Maryland Heights. Missouri Melrose Park. Illinois Miihs. Massachusetts Minneapolis. Minnesota Mobile. Alabama Monroeville. Pennsylvania Nashville. Tennessee New York. New York Orlando. Florida Paoli [Philadelphia). Pennsylvania Portland. Oregon Savannah, Georgia Seattle. Washington South Bound Brook. New Jersey South San Francisco. California Syracuse, New York Tampa. Florida Union. New Jersey Vails Gate. New York Westwood (Boston). Massachusetts PLANTS AND - RESEARCH LABORATORIES Annapolis. Missouri Arlington. Texas 24 *1 140 WEST 51 STREET. NEW YORK. N.Y 1002C Baltimore, Maryland Binghamton. New York* Blue Ridge Summit. Pennsylvania Bound Brook. New Jersey Caledonia. New York Calvert City. Kentucky Chattanooga. Tennessee" Chicago. Illinois* Dallas. Texas Dalton. Georgia Delta. Pennsylvania Denver. Colorado Detroit, Michigan (2 plants) Easton, Pennsylvania* Elyria. Ohio Erie. Pennsylvania Fairmount. Georgia Franklin. Massackiw-tts Fullerton. Pennsyh ..-.ta" Gloucester City, NV-. Jersey Greenwich. Conner .cut* Hagerstown. Mary! nd* Hartwell. Georgia Houston. Texas Huntsville. Alabama Hyde Park. Vermont Johnson City. New York Joliet. Illinois 12 plantsl Kansas City. Missouri La Habra California Linder.. New Jersey" Long Beach. California Mtllts. Massachusetts Minneapolis. Minnesota Mobile, Alabama Newburgh. New York Paterson. New Jersey Pembine. Wisconsin Portland. Oregon Rensselaer. New York' Rockville. Connecticut St. Louis. Missouri Savannah. Georgia Shelby. Ohio South Bound Brook. New Jersey Staffordville. Connecticut Tampa. Florida Texas City. Texas Vails Gate. New York* Vestal. New York Westerly. Rhode Island GAF 12395 rm FILM-PROCESSING LABORATORIES' and photo-equipment repair stations Binghamton. New York* Hollywood. California Long Island City, New York Union. New Jersey* In addition, GAF-authorized film-processing laboratories and equipment-repair stations are located throughout the United States. SUBSIDIARIES United States AMERICAN FELT COMPANY Greenwich. Connecticut DRYCOR FELT COMPANY Staffordville. Connecticut SHELBY BUSINESS FORMS. INC. Shelby. Ohio Canada GAF 'CANADA) LIMITED Cooksville. Ontario Europe GAF (BELGIUM) N.V. St. Niklaas. Belgium CAF (GREAT BRITAIN) LIMITED Chemical Products Division Manchester. England Photo Products Division Reprographic Products Division London. England CAF [NEDERLAND) N.V. Photo Products Division Reprographic Products Division Delft. Holland GAF SVENSKA A B Stockholm. Sweden CAF (FRANCE) S.a.r.l. Pans. France CAF (DEUTSCHLAND) C.m.b.H. Cologne. Germany Asia CAF JAPAN LTD. Tokyo. Japan A. R. BERNARD CORPORATION Chicago. Illinois LENCO. INC. Chicago. Illinois LENCO WEST. INC. Los Angeles. California affiliate Canada CHEMICAL DEVELOPMENTS OF CANADA, LTD. Pomte Claire. Quebec. Canada The pigments jn the printing inhs used in this report, and the dyes, bnghteners and certain other chemicals m the paper are products of the Dyestuff Sr Chemico/ Division of CAF GAF 12396 3 . - ; r, _ . I B Protectors and VIEW-MASTER reels are among products made at GAF $ Sint-N'iklaas. Belgium, plant for ail Europe C CAF s Shelby Business Forms ;n Ohio, is one of Ihe largest forms priming plants under one roof GAF's asbestos mining facilm at Hyde Park. Vt . supplies fiber for building and flooring products E. This Tampa. Fia plant and 11 o*hers have made GAF an impor tant factor in the aspnalt roofing held F. This new Texas Cm plant will produce AMIBEN herbicide and a line of acetylene-derived chemicals GAF 12397 *$00-109 Printed :n U S A 28