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Show First Half Earnings The Company reports its earnings on a semi-annual basis and the figures for the first half of our fiscal year ending April 30th are not yet available. However, we anticipate that the first half of the year will be the best first half in the history of the Company and certainly should compare very favorably with the comparable period last year. But I should caution you as I cautioned our stockholders last year not to attempt to arrive at a conclusion for the year as a whole by multiplying the first half figures by two. Seasonal influences are not a major factor in our earnings and interim reports are more influenced by the timing of profits arising out of the completion of construction contracts or large real estate transactions that tend to distort earnings in the period in which they occur. Suffice it to say, all aspects of the company's operationsland, construction, ocean shipping, and mining are reporting improved performance in the first half of this year compared to the first half of last year. Let me comment briefly upon the developments in 1965 that are causing this improvement in our profit picture. Land Development Although real estate activities in California have felt the impact of the change in defense spending and the overbuilding in some areas of residential and multiple housing, our own land development activities have, with some exceptions, performed well, and the normal profits from the sale of land in our inventory have been supplemented by the sale of certain of our long-term real estate investments. As a matter of company policy, we prefer to dispose of income-producing real estate investments when we feel that those investments have matured sufficiently to be of interest to the general investors in seasoned real estate. At this point they cease to be of interest to us because it is our hope and expectation that we can employ the money realized from the sale of the investment at a 2 greater return through repeating the entrepreneural functions we perform in creating the investments. In the present atmosphere of strong general business conditions I would expect our real estate activities to continue to give a good account of themselves throughout 1965. Looking farther down the road, our problem in our land development division is the shrinkage in our land inventory, for we have been net sellers of land for several years. Because of the inflation that has taken place in land prices for large parcels that would interest us, we have been hesitant buyers for the very simple reason that we are not attracted by the existing spread between what we think we can get for the land when it is developed and what new land will cost us if we purchase it at existing prices. Construction Our world-wide construction activities also show an improvement over last year, but here we are recording progress against a very unsatisfactory base. Last year's construction results were unduly depressed by large loses resulting from a contract for the construction of the Round Butte Dam in Oregon. Freed from that particular burden, 1965 construction earnings have improved, but are still far from satisfactory, measured against the risks assumed and the investment involved. Our construction backlog is higher than usual, and we believe that its quality is also better. Only one major contractthe Manapouri tunnel in New Zealandis causing us concern, and here we are possibly faced with a serious loss unless we can record better progress in the tunnel in the months ahead. Otherwise our major projects appear at this time to be going well, and we would hope that the progress made in construction in the first half will be sustained in the second half. However, the construction industry as a whole is currently characterized by intense competition and this, despite the high volume of work available, has seriously limited construction profits of other companies as well as our own. Physical construction vol- 3 |