UTAH INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Accrued Liabilities Accrued liabilities consisted of the following at October 31, 1975 and July 31, 1976 (in thousands): October 31, July 31, 1975 1976 Accrued payroll.................................................................. $ 3,404 $ 4,040 Accrued taxes, other than income..................................... 3,161 8,082 Accrued interest................................................................. 4,375 4,169 Other accrued liabilities..................................................... 35,464 32,282 $46,404 $48,573 8. Long-Term Liabilities Long-term liabilities at October 31, 1975 and July 31, 1976 consisted of (in thousands): October 31, July 31, 1975 1976 Unsecured-Notes payable to banks, 8.2% and 7.3%, respectively (weighted averages), due in varying installments to 1981 (a)(b)...................................... $137,900 $100,350 Notes payable to insurance company, 7.6%, due in varying installments to 1988.................................. 49,000 46,000 8% Guaranteed Sinking Fund Debentures due March 15, 1987(c)................................................. 20,000 19,600 7 1/2% Guaranteed Notes due March 15, 1979........... 20,000 20,000 Advances under gas purchase contracts noninterest bearing.............................................................. 3,366 1,094 Other notes and contracts.......................................... 443 2,580 $230,709 $189,624 LessCurrent portion............................................... 10,930 18,328 $219,779 $171,296 Secured by assetsOther notes and contracts................. $ 4,683 $ 4,524 LessCurrent portion............................................... 661 497 $ 4,022 $ 4,027 __ _ $223,801 $175,323 - (a) Interest rates on certain notes change with the prime rate or its foreign money market equivalent and range from 0% to 1% above such rates. (b) Utah believes that competitive conditions require the maintenance of compensating balances (not legally restricted) under certain loan agreements. Depending upon the interest rates of the borrowings, compensation realized by the banks from the performance of other services and the level of use of the lines of credit, the compensating balances range between 10% and 20% of the lines of credit. At the level of borrowing under these agreements as of October 31, 1975 ($7 million) and as of July 31, 1976 ($26 million), after adjusting for the differences of "float" between Utah's records and those of the banks, the compensating balance requirements are immaterial. (c) Subject to redemption through a sinking fund to which payments must be made beginning in 1977. F-38 UTAH INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Installments due on long-term liabilities for the five years subsequent to October 31, 1975 and July 31, 1976, are as follows (in thousands): _Year Ended_ October 31, July 31, 1976............................................................. $11,591 $ * 1977............................................................. 36,452 18,825 1978............................................................. 39,181 21,968 1979............................................................. 48,866 47,554 1980............................................................. 27,433 41,464 1981............................................................. * 6,473 * Not applicable. Interest costs associated with the development of new projects, principally new mining projects, have been capitalized during the development periods (none capitalized in 1975 and the nine months ended July 31, 1976). If these costs had been charged directly to expense in prior years, the effect would have been to reduce net income by $4.1 million in 1971, $1.1 million in 1972, $0.2 million in 1973, $2.1 million in 1974, and to increase net income by $1.1 million in 1975 and $766,000 for the nine months ended July 31, 1976, after consideration of the amortization of interest capitalized in prior years and the related offseting income tax effect. 9. Restrictions on Retained Earnings Utah's long-term agreements with lending institutions contain restrictive provisions on certain payments unless Utah has adequate consolidated retained earnings (as defined). Such provisions include limitations on the payment of cash dividends and on the purchase or redemption of outstanding capital stock. Retained earnings of $190.7 million were free of such restrictions at October 31, 1975 ($261.6 million at July 31, 1976). 10. Foreign Currency Exchange Gains and Losses Prior to August 1, 1975, foreign currency exchange gains and losses related to foreign borrowings used to finance the development of certain mining properties were deferred and amortized over the estimated lives of such mining operations. As a result of a Financial Accounting Standards Board pronouncement made during October 1975, all foreign currency exchange gains and losses, including the previously deferred items, should be included in the determination of net income for the period in which they occur. The accompanying financial statements have been appropriately restated to comply with this pronouncement and accordingly, all such gains and losses have been included in "Foreign currency exchange gains (losses)" in the statement of consolidated income. The following is a reconciliation of net income and earnings per share as previously reported with such items as restated: _Year Ended October 31_ 1971 1972 1973 1974 Net income (in thousands) As previously reported...................................... $38,296 $44,026 $55,436 $96,941 Foreign currency exchange gains (losses)....... (631) 302 6,793 691 As restated......................................................... $37,665 $44,328 $62,229 $97,632 Earnings per share As previously reported...................................... $1.25 $1.41 $1.77 $3.08 Foreign currency exchange gains (losses)....... (.02) .01 .22 .03 As restated......................................................... $1.23 $1.42 $1.99 $3.11 F-39 ?