approximated vested benefits at that date the employee retirement income security act of 1974 has not had a significant effect on utah's retirement programs 7 long-term liabilities long-term liabilities at october 31 1975 and 1974 consisted of in thousands 1975 1974 unsecured - notes payable to banks 6.2 weighted average due in varying installments to 1981 a & notes payable to insurance company 7.6 due in varying installments to 1988 . 8 guaranteed sinking fund debentures due march 15 1987 c 7vz guaranteed notes due march 15 1979 advances under gas purchase contracts — noninterest bearing other notes and contracts less — current portion secured by assets — notes payable to banks 10.7 due through 1977 other notes and contracts , . . less — current portion 137,900 49,000 20,000 20,000 3,366 443 230,709 10,930 219,779 $ 30 4,653 137,638 52,000 20,000 20,000 3,689 729 $ 5,988 3,287 $ 9,275 661 2,797 $ 4,022 $ 6,478 223,801 233,688 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 mainte nance 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 after adjusting for the differences of float between utah's records and those of the banks the compensating balance requirements are immaterial 0 subject to redemption through a sinking fund to which pay ments must be made beginning in 1977 installments due on long-term liabilities for the five years subse quent to october 31 1975 are as follows in thousands 1976 1977 1978 1979 1980 11,591 36,452 39,181 48,866 27,433 during 1975 no interest costs associated with the development of new mining projects were capitalized whereas 4.9 million was capitalized during 1974 if these costs had been charged directly to expense in prior years the effect would have been to increase net income by 1.1 million in 1975 and to reduce net income by 2.1 million in 1974 after consideration of the amortization of interest capitalized in prior years and the related offsetting in come tax effect 36 8 income taxes the provision for income taxes consisted of in thousands 1975 federal and state - current $ 2,372 deferred 453 foreign - current 92,038 deferred 12,514 $ 1,518 346 34,465 33,747 70,076 deferred income tax expense results from differences in the accounting period in which certain revenues costs and expenses are recognized under utah's financial and tax accounting methods the sources of these differences and the tax effect of each were as follows in thousands 1975 1974 mine development costs accelerated deductions of foreign mining equipment and facilities . other $ 403 14,373 11,341 20,871 1,223 1,151 12,967 34,093 the income tax provisions are less than the amounts computed by applying the 48 u.s federal income tax rate to income before income taxes minority interest and extraordinary item the principal reasons for this difference are as follows dollar amounts in thousands ig75 1974 in prior years no provision was made for deferred income taxes applicable to differences arising from oil and gas exploration and development costs deducted for tax purposes but capitalized for financial statement purposes since future tax deductions attributable to statutory depletion were estimated to be in excess of the capitalized amounts however passage of the tax reduc tion act of 1975 significantly reduced statutory depletion bene fits as of january 1 1975 costs incurred prior to such date for which deferred income taxes were not provided nor required approximate 20 million utah will provide for income taxes on these prior differences on a prospective basis as prescribed by a financial accounting standards board pronouncement issued during 1975 in addition deferred taxes have been provided on timing differences originating after december 31 1974 9 earnings per share earnings per share were computed based upon 31,540,461 weighted average common shares outstanding in 1975 and 31,434,755 weighted average common and common equivalent shares outstanding in 1974 the common stock equivalents in 1974 were attributable to the assumed conversion of the 300 cumulative convertible preferred stock the effect of dilutive op tions and warrants resulting from mergers consummated during 1974 was insignificant and therefore was not included in the 1974 computation earnings per share assuming full dilution were not presented in the statement of consolidated income since the additional dilution was immaterial 10 contingent liabilities and commitments utah is in the process of developing or expanding certain mining projects this program will require an investment of approxi mately 190 million through 1980 in addition to the amount ex pended through october 31 1975 utah has entered into an agreement dated october 30 1975 with marcona corporation and several of its wholly owned sub sidiaries providing for the purchase of certain assets by utah the assets to be purchased by utah pursuant to the agreement include 1 marcona's 49 interest in samarco mineracao s.a samarco a company formed to develop an iron ore property in brazil the capital costs of which project are expected to total 560 million and 2 marcona's rights in a proposed steel produc tion project in saudi arabia the samarco project now under development is expected to begin shipments during july 1977 utah's acquisition of the samarco interest from marcona may require if consummated an investment of approximately 130 million including 49 million for the purchase of marcona's in terest which will be payable over an extended period of time the remaining additional investment of about 81 million would be reduced if project loan agreements now aggregating 294 million are increased project loan take-downs subsequent to the date of the agreement have been guaranteed by utah utah in succeeding to marcona's interest in the samarco project guarantees the repayment of all amounts borrowed under the samarco agreements and guarantees the completion of the samarco project although marcona remains a primary obligor of the credits similar guarantees have been made by the 51 samarco shareholder which is a major brazilian company utah is also committed under the marcona agreement to purchase three of marcona's combination ore-oil vessels and certain related assets at book value approximately 25 million if the proposed sale of such vessels to a third party is not consummated existing commitments to utah permit additional borrowings of approximately 38 million from lending institutions in the opinion of management proceeds from borrowings together with current working capital and cash generated internally are suffi cient to fund mining projects now underway to finance the sa marco commitments and to meet other cash requirements of utah's business 11 common stock at october 31 1975 191,550 shares of common stock were reserved for future issuance to officers and key employees as restricted stock bonuses over an indefinite number of years as of october 31 1975 and 1974 no stock option plans war rants or other claims for utah stock were outstanding 12 restrictions on retained earnings utah's long-term agreements with lending institutions contain restrictive provisions on certain payments unless utah has ade quate consolidated retained earnings as defined such pro visions include limitations on the payment of cash dividends and on the purchase or redemption of outstanding capital stock re tained earnings of 190,712,000 were free of such restrictions at october 31 1975 13 subsequent event on december 15 1975 utah announced that the boards of direc tors of general electric company and utah international inc had authorized the negotiation of a definitive merger agreement the proposed merger is to be accomplished through a tax-free exchange of 1.3 shares of general electric common stock for each share of utah common stock outstanding consummation of the merger is subject to the negotiation of a mutually satis factory merger agreement and to the approval by the boards of directors and stockholders of both companies the merger is also subject to requisite governmental approvals auditors report to the stockholders and board of directors of utah international inc we have examined the consolidated balance sheet of utah inter national inc a delaware corporation and subsidiaries as of october 31 1975 and 1974 and the statements of consolidated income stockholders equity and changes in financial position for the years then ended our examination was made in accord ance with generally accepted auditing standards and accord ingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances we did not examine the financial statements of certain affiliated companies the investments in which are re corded using the equity method of accounting see note 3 to the consolidated financial statements these statements were ex amined by other public accountants whose reports thereon have been furnished to us and our opinion expressed herein insofar as it relates to the amounts included for such affiliates is based solely upon the reports of the other public accountants as explained in note 3 during 1975 the peruvian government expropriated the iron ore mining properties and facilities of marcona corporation a 46%-owned affiliate located in peru marcona has accounted for the losses associated with the expropriation as an extraordinary item and utah has recorded 23,809,000 as its share of the loss u.s government officials working together with marcona management have held discus sions with the peruvian government in an attempt to collect com pensation for the expropriated peruvian assets the amount that marcona may realize is not determinate at this time in our opinion based upon our examination and the reports of other public accountants subject to the effect of such adjust ment if any as may be required as a result of compensation which may be received by marcona for the expropriated peru vian assets as described in the preceding paragraph the ac companying consolidated financial statements present fairly the financial position of utah international inc and subsidiaries as of october 31 1975 and 1974 and the results of their operations and the changes in their financial position for the years then ended in conformity with generally accepted accounting prin ciples applied on a consistent basis during the periods after giving retroactive effect to the change with which we concur in the method of accounting for foreign currency exchange gains as explained in note 5 to the financial statements arthur andersen & co san francisco california december 8 1 975 except with respect to the matter discussed in note 13 as to which the date is december 15 1975