utah construction & mining co and subsidiaries notes to consolidated financial statements — october 31 1967 1 principles of consolidation the consolidated financial statements include the accounts of utah construction & mining co and all subsidiary companies after elimination of significant intercompany items and transactions in addition the statements include utah's equity in the net earnings of affiliated companies in which utah does not have a majority interest the equity in these earnings is recorded based upon the affiliates audited financial statements as of their most recent fiscal year-end and upon subsequent interim reports submitted by the respective companies estimated income taxes payable on such earnings when distributed have been provided in the accompanying financial statements the composi tion of utah's investment in affiliated companies at october 31 1967 and 1966 is as follows 1967 1966 total equity in undistributed earnings of affiliates 45,776,801 36,789,740 less estimated income taxes payable upon distribution of earnings 3,816,369 3,028,799 included in earned surplus 41,960,432 33,760,941 cost of investments 14,558,890 14,477,890 56,519,322 48,238,831 the following is a summary of the unaudited consolidated balance 46 equity owned at october 31 1967 and 1966 sheets of marcona corporation the company's most significant affitii current liabilities long-term liabilities stockholders investment . 1967 $ 34,837,000 132,031,000 166,868,000 $ 27,602,000 38,944,000 100,322,000 1966 $ 23,340,000 124,195,000 147,535,000 $ 21,593,000 36,601,000 89,341,000 147,535,000 marcona corporation's consolidated net income unaudited i 1966 respectively the accounts of foreign branches subsidiaries and affilia " live year-ends fluctuations in these exchange rates had no s 19,103,000 and 11,342,000 for the years ended october 31 1967 i es have been translated to u s dollars at the exchange rates in effect at the respec significant effect upon the accompanying consolidated financial statements 2 foreign operations recent currency devaluation by a number of countries is not expected to have a material adverse effect on operations and profits 3 surplus restriction the company's long-term loan agreement with the prudential insurance company of america contains restrictive provisions including certain limitations on the payment of cash dividends on the purchase or redemption of outstanding capital stock and on the purchase or redemption of convertible debentures — see note 8 on subsequent event and on advances to or investments in affiliated com panies consolidated earned surplus in the amount of 13,200,000 was free of such restrictions at october 31 1967 4 assessment liens and purchase money obligations these obligations are secured only by the related land and do not represent claims against other corporate assets 5 revenue 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 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 with respect to contracts completed in a prior year were recorded in 1967 or 1966 6 contingent liabilities and commitments contingent liabilities include the usual liability of contractors for the performance and completion of both company and joint venture contracts peruvian income tax deficiencies have been proposed against an affiliate of the company for the taxable year deficiencies are being contested by the affiliate and counsel has advised that there are substantial defenses again company's opinion any resulting tax liability of the affiliate would not have a material effect on the accompanying fi provision therefor has been made the company is defendant to certain litigation arising out of the 1960 merger with lucky me uranium corporation on october 2 1967 the trial court rendered a general judgment in favor of the company the time for appeal by plaintiffs has not expired management and counsel are of the opinion that there will be no ultimate liability imposed in connection with this matter accordingly no provision has been made in the accompanying financial statements for any liability arising from such litigation the company has a lease agreement expiring in 1980 for the rental of its home office the annual base rental under this agreement varies from 254,000 for 1968 to 270,000 for the last five years of the lease the company also has a long-term lease agreement for equipment requiring payments of approximately 420,000 annually for a remaining period of six years the company's federal income tax returns have been examined through 1963 and all deficiences paid 7 1966 statements certain amounts in the october 31 1966 balance sheet have been reclassified retroactively to make them comparable with the october 31 1967 classifications 8 subsequent event on november 30 1967 the company sold 25,000,000 of 5 convertible subordinated debentures due november 1 1992 proceeds will be used to partially finance the expansion of existing mining projects approximately 30 million and for construction and land development activities approximately 10 million the debentures are convertible at the option of the holders at a price of 96.50 per share subject to adjustment under certain conditions the company will be required to make sinking fund payments beginning november 1 1978 in an annual amount equal to 5 of the debentures outstanding at november 1 1977 if recognition is given to the requirements of paragraphs 8 and 9 of opinion 10 of the accounting principles board of the american institute of certified public accountants under which the discount attributable to the conversion privilege of the debentures would be capitalized an amount of 4,640,414 would be credited to capital surplus and the related charge would be amortized against income over the life of the deben tures.the initial annuai amount giving effect to recognition of the assignment of an amount to the amortization of such discount would be 234,958 1957 through 1966 the such deficiencies in the utah construction & mining co and subsidiaries 10 year comparison consolidated years ended october 31 7960 1959 1958 gross re 84,294 81,091 69,179 75,072 62,081 net income before income taxes 21,143 after income taxes $ 1 6,543 per share after income taxes 3.85 17,975 14,551 8,439 7,705 13,175 11,016 7,292 7,085 3.06 2.56 1.70 1.65 dividends paid cash stock of other companies . market value capital stock per share 4,730 4,300 4,085 3,873 1.10 1.00 95 90 2,497 2,230 712 1,389 58 52 common stock : shares outstanding 4,300 net of treasury shares number of shareholders . . 4,429 4,300 4,300 4,300 4,302 2,152 2,111 4,265 3,796 3,675 3,343 2,835 2,633 2,070 2,030 2,023 2,550 732 439 stockholders equity net worth net worth per share 95,755 22.27 84,802 76,356 69,640 66,480 19.72 17.76 16.20 15.45 63,324 14.71 57,756 13.42 51,358 44,748 38,336 11.93 10.40 8.93