profits

US Rubber Annual Report – 72nd Annual Report – Page 5

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$300,000,000 Expansion and Modernization Program

U. S. Rubber has undertaken a world-wide expansion and modernization program which will involve a total investment of more than 300 million dollars. We are well along in this program and expect it to be completed in three to four years. Approximately 200 million of this program is for the modernization and expansion of our tire production and distribution facilities, both in the United States and abroad and for chemical, textile and synthetic rubber plants which supply raw materials and components to our tire manufacturing operations. The remainder of the program will provide the other manufacturing divisions of the company with new facilities in the United States, Europe, Latin America, Australia, the Far East and Canada devoted to products other than tires and tire components. The program will open new markets for us at home and abroad, and will strengthen our competitive position in the more profitable areas of our business.

New Chemical Complex

At Geismar, La. we have invested more than 30 million dollars in a modern chemical complex, and our investments there will continue to increase in the future. Three plants are now in operation. One is producing vinyl monomers for use in plastics. Another is producing agricultural chemicals, and a third is turning out improved rubber and agricultural chemicals. This spring a fourth plant will start making Royalene, the new ethylene-propylene synthetic rubber.

U.S. Rubber Sales by Product Groups as Percent of Total Show Increasing Diversification

Areas of the company’s most rapid growth during the last quarter century are indicated in this chart. Chemicals, textiles and fibers, as well as our business outside the United States, enjoyed the greatest growth. In the meantime, tires, footwear, general and industrial products continue to be an important source of company business.

US Rubber Annual Report – 72nd Annual Report – Page 3

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February 12, 1964

To the Stockholders of United States Rubber Company:

In the first half of 1963 our profit rose 2.7 per cent, despite 1.4 per cent lower sales. But strikes in nine plants during the second half of the year reduced net income for the year to $22,105,000, or 14 per cent below 1962.

Our 1963 sales of $980,230,000 were second highest in our history, but 2.6 per cent below the record high of $1,006,793,000 set in 1962. Sales increased, however, in many product categories and in several cases set new records.

The strikes, which prevented sales from exceeding the 1962 record, lasted for varying periods of time at three chemical and synthetic rubber plants, a plastic plant, a Canadian footwear plant and four of our five domestic tire plants.

Strike issues varied from place to place but in the longest and costliest strikes at our tire plants the most important issue was the Company’s need to revise loose work practices which had evolved during the war and post-war years and which had prevented the Company from making full use of its expensive manufacturing equipment. New contracts signed at these plants will improve our position and provide long range security in the interest of stockholders and employes alike.

Capital expenditures for new plants and the modernization of existing ones reached a new level of approximately 65 million dollars, compared with 48 million in 1962. These figures include our direct capital expenditures, the expenditure at our new tire plant in Alabama and our share of investment in joint ventures and affiliated companies. Outside the U.S. A., new investments included a plastics plant in Italy, a footwear plant in Spain, a rubber company in Australia and both a tire and chemical venture in Japan.

This new level of capital expenditures strengthens our profit potential for the future. It is a part of a 300-million-dollar long term expansion and modernization program, the largest in the Company’s history, which is described on the following pages.

The Company made new strides in distribution of its products, particularly tires. Many new tire dealers took on the U. S. Royal franchise because of the outstanding quality of our tires and the new merchandising techniques we have developed. We moved strongly into many shopping centers. In areas where we could not obtain suitable independent dealers, we continued to supplement our distribution by opening Company tire centers. We now have a total of 228 Company-owned tire distribution outlets.

In research and development, a number of new products were put into production. In addition, we committed several million dollars for plants to manufacture new products starting in 1964. Among these are Royalene – our new ethylene-propylene rubber – a new dyeable polypropylene fiber, and Expanded Royalite – a new plastic material now coming into use in auto body parts, truck cabs, house trailers, and a host of other products. Gratifying progress was made in the development of a new high speed, super performance tire based on Royalene rubber.

We completed the second full year of use of our CVC bonding agent in tires. This development and other advances allowed us to move into a position of leadership in tire quality and performance. Late in the year, we completed construction of a new tire proving ground on a 6,900-acre tract in Laredo, Texas. This is by far the most advanced of any tire testing facility in the world today and will insure our maintaining product leadership.

By order of the Board of Directors,

[Handwritten signatures]
President
Chairman