D. Earnings Per Share Earnings per common and common equivalent share were computed based upon the weighted average number of shares of common stock and common stock equivalents outstanding during each year (30,609,869 for 1971, 31,047,089 for 1972, 31,282,480 for 1973, 31,434,755 for 1974, 31,540,461 for 1975, 31,540,460 for the nine months ended July 31, 1975 and 31,541,028 for the nine months ended July 31, 1976). The common stock equivalents are attributable to the assumed conversion of the 30c cumulative convertible preferred stock in 1973 and 1974 (86,176 and 79,024 shares, respectively). In the prior years when the assumed conversion of preferred stock would have had an anti-dilutive effect, net income was reduced by preferred dividends paid of $126,000 in 1971 and $125,000 in 1972. The effect of dilutive options and warrants, attributable to companies which Utah acquired by merger in fiscal 1974, was insignificant and therefore was not included in this computation. (Upon consummation of the mergers, the stock option plans terminated, and as of October 31, 1974, no warrants remained outstanding.) Earnings per share assuming full dilution were not presented in the statement of consolidated income since the additional dilution was immaterial. E. Stock Split The earnings and cash dividend per share amounts presented in the statement of consolidated income reflect the two-for-one stock split effected in the form of a stock dividend on May 7, 1973. The numbers of shares presented in Note D above have also been appropriately adjusted. UTAH MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE STATEMENT OF CONSOLIDATED INCOME Comparison of the Nine-Month Period Ended July 31, 1976 to the Comparable Period of 1975 Net income, before consideration of an extraordinary item, increased by 19% and gross revenues from operations by 32% primarily because of higher price realizations from coking coal sales (net of an export duty levied by the Australian government subsequent to July 31, 1975), increased coking coal deliveries and benefits obtained from higher prices on uranium deliveries made in the second and third quarters of 1976 under new sales arrangements. The near break-even results attained from copper and iron ore operations during the first nine months of 1976 compared unfavorably with the profit contribution from these products during the comparable 1975 period. Copper operating costs increased more than the price improvement experienced when comparing the respective 1976 and 1975 periods. Losses recorded during 1976 at the one-third owned Mount Goldsworthy iron ore mine in Western Australia essentially offset the profitability of the company's domestic iron ore activities. During July of 1975 an extraordinary loss totaling $19.1 million was recorded to provide for the expropriation of the Peruvian assets of Marcona. (But see "Business of UtahIron OreMarconaPeru" with respect to compensation proposed to be paid to Marcona by the Peruvian government.) The adverse change in Utah's equity in earnings or losses of affiliates resulted from this expropriation as marketing and ocean transportation activities associated with Marcona's Peruvian iron ore mining properties constituted a significant portion of Marcona's earnings in 1975. Since the expropriation, the shipping fleet has operated unprofitably as the loss of this business occurred during a depressed shipping market. Losses during 1976 were mitigated in part by a gain realized from the sale of three vessels, which included the assignment of Marcona's interest in a contract of affreightment, offset in part by a loss from the sale for scrap of two additional vessels. Comparison of 1975 to 1974 Commencement of coking coal shipments from the new Saraji mine in Australia during the first quarter of 1975 and significantly higher average price realizations from the 1975 shipments of the other Australian coking coal mines were the primary causes of the 37% increase in gross revenues and the 39% 22 increase in income before the extraordinary item. The new prices reflect extra-contractual increases negotiated during the year in recognition of sharply higher world market prices. Adversely affecting the benefits of the extra-contractual price increases was the imposition by the Australian government of an export duty of $A6.00* per metric ton (or about one-half of the average price increases) on exports of high quality coking coal subsequent to August 19, 1975. Earnings from copper operations were sharply lower as prices and profitability, when compared to 1974, were affected by a worldwide oversupply of copper. In view of the uncertainties regarding compensation for its expropriated Peruvian assets, Marcona wrote off the assets thus giving rise to the extraordinary loss recorded during 1975. Earnings of affiliates were sharply lower primarily as a result of the Peruvian expropriation and decreased earnings of another affiliate involved in the production and sale of copper. Comparison of 1974 to 1973 Net income increased by 57% and gross revenues from operations by 51% principally because of increases in the prices for Australian coking coal in addition to those normally realized from cost escalation provisions applicable to all existing long-term arrangements with both Japanese and European buyers. In addition, particularly strong copper prices in the first half of 1974 enabled Utah to record record earnings for both the Island Copper mine and the 25%-owned Cyprus Pima Mining Company. The significant foreign currency exchange gain reported for 1973 was attributable to currency realignments during that year which increased the value of the Australian dollar in relation to the U.S. dollar by about 25%. Other Comments New mines which had been under development for several years began making important profit contributions for the first time during 1972 and 1973the Island Copper mine began shipping copper concentrate during December 1971 and shipments of coking coal from the Goonyella and the Peak Downs mines began in October 1971 and July 1972, respectively. Offsetting these favorable benefits were increased net interest costs resulting from greater borrowings to finance the new mines, a decline in capitalized interest costs, and reduced profitability from uranium operations as well as from Marcona Corporation. Unusually favorable shipping revenues realized by Marcona in 1971 declined in 1972, and in 1973 Marcona reported losses from its Peruvian iron ore mine. Over the years, provisions for losses have been made as a result of continued uncertainties with respect to the profitable disposition of certain real estate and other investments. These provisions, included as part of costs and expenses except as noted, totaled $5.0 million in 1975 ($2.3 million of which was included under other, net), $12.3 million in 1974 ($3.0 million of which was included under other, net), and $7.0 million in 1973 ($2.0 million of which was included under other, net). * On September 30, 1976, the Australian dollar was equivalent to approximately $US1.24. 23