OCR Text |
Show a interest rates on certain notes change with eurodollar interbank rates or domestic prime rates and range from 1a to 1 above such rates b subject to redemption through a sinking fund to which payments must be made beginning in 1977 debentures in addition to those redeemable through the sinking fund may be redeemed by payment of a premium beginning in 1979 c may be redeemed atlhe principal amount beginning in 1977 d convertible into common stock of utah at 18.53 per share subject to adjustment under certain conditions these debentures are redeemable by payment of a premium utah capitalizes financing costs of identifiable new borrowings associated with the develop ment of new mining projects these capitalized costs amounted to 1,569,000 in 1973 and 1,983,000 in 1972 5 income taxes utah's effective income tax rate is lower than the normal statutory rate for corporations principally because of the percentage depletion allowance on mining income and the 85 domestic dividend deduction applicable to the earnings of affiliates principally mar cona and pima in recent years the effective rate has been increasing because of increasing parent company and subsidiary earnings attributable primarily to expanding operations the provision for income taxes consists of in thousands taxes currently payable . deferred income taxes 1973 13,992 16,843 1972 6 earnings per share earnings per common share were computed based upon the weighted average number of shares of common stock outstanding during each year 28,802,455 for 1973 and 28,707,962 for 1972 earnings per common share assuming full dilution were determined based upon the assumed conversion of the 53/n subordinated guaranteed debentures for purposes of thi 7 common stock on february 9 1973 the board of directors approved a two-for-one stock split effected in the form of a stock dividend on may 7 1973 the numbers of shares earnings per share and cash dividends per share presented in the consolidated financial statements and notes have been adjusted to reflect the stock split at october 31 1973 101,105 shares of common stock were reserved for future issuance to officers and key employees as restricted stock bonuses over an indefinite number of years and 184,522 shares were reserved for issuance upon conversion of the 5 subordinated guaranteed debentures 8 restrictions on retained earnings utah's long-term agreements with lending institutions contain restrictive provisions on certain payments unless utah has adequate consolidated re tained earnings as defined such provisions include limitations on the payment of cash dividends and on the purchase or redemption of outstanding capital stock and convertible debentures retained earnings of 82,088,000 were free of such restrictions at october 31 , 1 973 9 contingent liabilities and commitments utah is in the process of developing or expanding certain mining projects this program will require an investment of approximately 109 million in addition to the amount expended through october 31 1973 commitments have been obtained by utah which permit additional borrowings of approxi mately 76 million from lending institutions outside the united states and 22 million from lending institutions within the united states in the opinion of management proceeds from borrowings together with current working capital and cash generated internally are sufficient to fund mining projects now underway and to finance the other cash requirements of utah's business during 1972 the supreme court of peru affirmed a 1971 decision of an appellate court to the effect that a marcona subsidiary's operations on a mining concession assigned from an instru mentality of the government of peru did not qualify for depletion deductions in computing income taxable in peru based upon this decision additional taxes and penalties were assessed for the years 1957-1969 aggregating approximately 17.9 million after crediting approximately 2 million for tax overpayments in prior years the subsidiary arranged with the peruvian banco de la nacion for payment of the additional assessment in monthly installments over a period of ten years peruvian counsel have advised marcona that under the provisions of the concession as signment agreement the peruvian government instrumentality is obligated to indemnify the marcona subsidiary against liability for the additional assessment based upon this advice marcona considers that no loss will be sustained as a result of the additional assessment accordingly no liability for this item has been recorded in marcona's financial statements marcona and the government of peru were engaged in negotiations which contemplated that an agency of the government would purchase a 25 interest in the subsidiary's peruvian assets for fair value the peruvian mining operations were to be conducted by the parties as a special mining enterprise owned 75 by marcona which would also manage the operation during 1973 negotiations with the peruvian government were deferred pending negotiation and approval of an expansion contract authorizing additional ore processing facilities the peruvian government did not complete its review by the established deadline further discus sions are planned to determine whether there is a basis for re-establishing negotiations certain individuals who have received finders fees based upon the early activity at a marcona subsidiary's mining operations in peru have brought an action against both utah and marcona alleging breach of contract and fraud judgment has been rendered for the defendants on all claims made by the plaintiffs and plaintiffs have filed an appeal 10 subsequent event on november 30 1973 utah acquired ladd petroleum corporation ladd through a merger of ladd into a wholly owned subsidiary of utah utah will issue approximately 1,212,000 shares of common stock for all of the outstanding common stock of ladd in a transaction which is to be accounted for as a pooling of interests the effect of this merger is not significant to the consolidated financial statements of utah auditors report to the stockholders and board of directors of utah international inc we have examined the consolidated balance sheet of utah international inc a delaware corporation and subsidiaries as of october 31 1973 and 1972 and the statements of consoli dated income stockholders equity and changes in financial position for each of the years then ended our examination was made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing pro cedures as we considered necessary in the circumstances we did not examine the financial statements of certain affiliated companies the investments in which are recorded using the equity method of accounting see note 2 to the consolidated financial statements these statements were examined by other auditors 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 auditors in our opinion based upon our examination and the reports of other auditors the accom panying financial statements present fairly the financial position of utah international inc and subsidiaries as of october 31 1973 and 1972 and the results of their operations and the changes in their financial position for each of the years then ended in conformity with generally accepted accounting principles applied on a consistent basis during the periods arthur andersen & co san francisco california december 3 1973 |