United States Rubber Company and Subsidiary Companies
During 1963, the book value of the net assets of our Indonesian plantations was restated to reflect the lower foreign exchange value of the Indonesian rupiah. Such restatement had no effect on 1963 consolidated net income, since the decrease in net assets of $4,077,000 was charged to the Reserve for Foreign Activities, created from prior years’ earnings of the Indonesian plantations.
Net Income and Dividends
Net income of United States Rubber Company and subsidiaries was $22,105,000 for the year 1963, equivalent to $2.90 a common share. This compares with 1962 earnings of $25,694,000, or $3.50 a common share.
As previously indicated, earnings for the year 1963 were adversely affected by the loss of sales and abnormal absorption of maintenance and other costs during the periods certain of our manufacturing facilities were shut down because of strikes.
Preferred stockholders received regular quarterly dividends of $2.00 a share, for a total of $8.00 for the year.
Quarterly dividends of 55 cents a share, or a total of $2.20 for the year, were paid on the common shares in 1963. The same amount was paid in 1962.
Investments
Investments at December 31, 1963 amounted to $21,782,000, comprising $16,677,000 in affiliated companies, in which we own 50 per cent or less of outstanding shares, and $5,105,000 of miscellaneous investments, principally notes receivable from customers due after one year.
During 1963, we made additional investments of $4,400,000 in foreign affiliated companies for the manufacture of tires, plastics and chemicals for the Japanese, Australian and South American markets. Our equity in the net assets of affiliated companies (owned 50 per cent or less) was $25,550,000 at December 31, 1963, compared to $21,620,000 at the close of the preceding year.
Long Term Debt
Long term debt at December 31, 1963 was $157,276,000, comprising $139,436,000 for the parent company and $17,840,000 for foreign and domestic subsidiaries.
Long term debt increased by $6,346,000 during the year, comprising additional foreign borrowings of $11,625,000, less a decrease of $5,279,000 in parent company debt.
During 1963, we purchased and delivered to the Trustee for retirement $2,779,000 face value of our 25% debentures due in 1976. These purchases, together with $3,785,000 debentures held by the Trustees at January 1, 1963, satisfy 1963, 1964 and 1965 sinking fund requirements in full and leave $564,000 as an advance payment against the $2,000,000 due May 1, 1966.
At December 31, 1962, the Trustee held $168,000 of our 25% debentures due in 1967; and we purchased $2,334,000 in 1963. $2,500,000 was required to satisfy our April 1, 1963 sinking fund requirement, leaving $2,000 held by the Trustee.
Property, Plant and Equipment
At December 31, 1963, gross property was $616,458,000 of which $462,087,000 was in the United States; $65,869,000 in Canada, Central and South America; and $88,502,000 in other offshore locations.
The net book value at the close of the year was $218,861,000.
In 1963, a total of $65,491,000 was expended on property, plant and equipment. This total comprised direct expenditures of $44,648,000 for additions and improvements to properties owned by United States Rubber Company and subsidiaries; $12,862,000 towards construction of a new $21 million tire plant being financed with Industrial Revenue Bonds issued by the City of Opelika, Alabama and $7,981,000 expended as our share of capital requirements to increase the manufacturing facilities of domestic and foreign affiliated companies.
The total of all these expenditures is encompassed in the Capital Expansion Program of $300 million commented on pages 5 through 13 of this report.
For 1963, depreciation and obsolescence charged to parent and subsidiary companies’ operations aggregated $27,217,000, compared with $27,657,000 in 1962.
(Additional financial comments are offered on pages 19 and 20 of this report.)