Construction The term "Construction Industry" is a convenient catchall for the economist and statistician in which to place a wide variety of activities that have as much to distinguish them one from the other as they have in common. While generally speaking each type of work calls for building something new that did not exist before, there is considerable difference between constructing homes and driving tunnels, between dredging and commercial building construction. The risks are different, the skills are different, the people required are different, and the equipment used is different. The classes of work in which Utah normally enagages actually comprise only about 17% of the domestic construction market and a somewhat higher percentage of the foreign market, where a substantial part of our work is performed. While we have increased our commitment in construction assets in recent years, the contribution of construction activities to our profits has not responded favorably. Gross profits have fluctuated violently from year to year and reached an all-time record peak in 1961 and in 1964 may well record our largest loss. In the past decade our construction activities have done little more than cover overhead charges and left little for the stockholder as a return on his investment. Our experience is not uncommon in the industry, for intense competition has caused profit margins to decline substantially since 1956. In 1963 and again in 1964 the difference between a profit and a loss in our construction division could be attributed to a single contract, which, fortunately, will be completed this year. This contract is the largest loss ever experienced by our company and has obviously depressed our earnings last year and again this year. We have had losses before and undoubtedly will again, for contract construction is a risk-taking business, but the magnitude of the present loss is without precedent, and I hope will never be repeated. We have recently analyzed our construction performance and find that over the last 10 years the relative profitability varies widely by the types of work involved. We are now embarked on a deliberate program, concentrating our efforts on those categories of work where the return has been satisfactory and shunning the types of work where we have had unsatisfactory experience. Herein lies the expectation of restoring construction in our company to a positive 2 contributor to our earnings picture. This program has the further advantage of freeing up capital funds that we cannot employ advantageously in construction for other more rewarding purposes. Our construction backlog is running ahead of a year ago and now exceeds $125,000,000, including the Cornwall project for Consolidated Edison on which the joint venture in which we are participants was low bidder but is awaiting a formal permit to proceed from the Federal Power Commission. Our construction work is being performed in the United States and seven foreign countries. There is abundant construction work in prospect both here and abroad, and it would be our hope that we can obtain our fair share of the type of work that we want to do at prices that will yield a reasonable return. Land Development and Real Estate Investment $25 million in land and real estate was carried on our books at the close of the last fiscal year. Equities in land accounted for about half of this total. The other half represented the depreciated value of improved real estate held for investment purposes. Basically our land program involves the acquisition of well-located raw acreage which we develop, subdivide and sell at a profit as industrial and residential sites. We have fairly extensive holdings of land located in fast-growing California. While some of the acreage is slow-moving, we are on the whole well satisfied with our land inventory. We feel that its acquisition cost will allow it to produce profits in the future as it has in the past. In improved real estate we own directly or indirectly various interests in two telephone buildings, a shopping center and several commercial properties. These regularly contribute to our earnings. We are satisfied that their market values exceed the depreciated figures at which we carry them on our books, and by the sale of some of these investments in future years we would expect to make important additions to our profits. Earnings from our land development activities have fluctuated from year to year. Some land projects have reported losses in their early phases when interest charges and development costs were high. But as distinguished from construction, where on particular jobs substantial losses have offset the return from more 3