utah construction & mining co and subsidiaries statement of consolidated income for the years ended october 31 1963 and 1962 income gross revenues from operations note 5 . costs and expenses gross profit from operations equity in net income of affiliates note 1 joint ventures note 5 gain on sale of property and investments interest other income expense 1962 expenses general and administrative employees retirement plan provi interest . net income before income taxes provision for income taxes net income statement of consolidated earned surplus for the years ended october 31 1963 and 1962 1962 balance beginning of year .... add net income deduct dividends shares and per share amounts after giving effect retroactively to the stock split in 1963 note 4 cash 90 per share in 1963 and 87 per share in 1962 stock 82,912 shares at 20.25 per share balance end of year including equity in undistributed earnings of affiliates notes 1 and 3 utah construction & mining co and subsidiaries notes to consolidated financial statements october 31 1963 1 the consolidated financial statements include the accounts of utah construction & mining co and all subsidiary companies after elimina tion of significant intercompany items and transactions in addition the statements reflect utah's equity in the net earnings of affiliated com panies in which utah does not have a majority interest estimated income taxes payable on such earnings when distributed have been provided in the accompanying financial statements the equity in the earnings of these affiliates has been computed based upon the reports submitted by the respective companies some of which are unaudited the composition of utah's investment in affiliated companies is shown below equity in undistributed earnings of affiliates included in earned surplus included in liability for deferred income taxes payable upon distribution of earnings cost of investments 27,024,065 1,760,405 374,100 s29 158,570 1962 si 8,677,589 4,477,057 23^154,646 1,630,058 639,200 25,423,904 2 the company and its consolidated subsidiaries have entered into various agreements for the acquisition of land to be developed and sold among other things these agreements generally provide that the related obligations will mature only as the company chooses to develop indi vidual units or parcels further such obligations amounting to 6,764,108 at october 31 1963 and 8,864,919 at october 31 1962 are secured only by the related land and do not represent claims against other corporate assets 3 the company's long-term loan agreements contain certain restrictive provisions including a limitation on the payment of cash dividends and on the purchase or redemption of its outstanding capital stock consolidated earned surplus in the amount of 9,121,615 was free of such restriction at october 31 1963 4 the 4,304,206 decrease in capital surplus in 1963 resulted from the capitalization of the par value 2.00 per share assigned to 2,152,103 shares of capital stock distributed to stockholders in a 2-for-l stock split effected in the form of a stock dividend 5 major construction contracts may extend over a period of years accordingly the company reports income from its construction contracts on a percentage-of-completion basis the company's share of income from joint-venture construction contracts is reported in the same manner based upon reports submitted by the respective joint ventures some of which are unaudited proceeds from claims against owners or price adjustments arising out of construction contracts are recorded in the year such claims are resolved no significant items of this nature were recorded in 1963 or 1962 6 contingent liabilities include the usual liability of contractors for performance and completion of both company and joint venture contracts in addition the company was contingently liable at october 31 1963 for obligations of an affiliated company in the amount of 1,125,000 and for the guarantee of notes receivable of 537,000 sold to a bank the company has entered into a long-term lease agreement for equipment requiring payments of approximately 420,000 annually for a now-remaining period of 10 years 7 the accompanying statement of income includes provisions for depreciation and depletion of 6,938,445 in 1963 and 6,597,134 in 1962 8 the company is defendant to certain pending litigation arising out of the 1960 merger with lucky me uranium corporation management and counsel are of the opinion that the company's position is correct and sound and the action is being vigorously defended accordingly no provision for such litigation has been made in the accompanying financial statements