financial comment 1971 was characterized by the highest level of capital spending in the com pany's history consequently there were significant changes in the finan cial structure of utah international as the rate of new investment in its 300 million expansion program reached its peak capital expenditures during the year for the inauguration of major new mining projects and the expansion of nearly all existing mines totalled 151 million to finance these requirements the company utilized internally generated funds and its inventory of market able securities which remained at the end of 1970 and increased its un secured borrowings under pre arranged credits by 120 million the increase in borrowings was in the form of additional loans from australian banks from the euro dollar market and from the domestic and canadian banking communities additionally the long-term insurance company loan was increased by 15 million and a credit with the export import bank of the united states was placed in operation for 1972 there will be further takedowns under existing credit arrangements to fin ance required expenditures under approved capital programs but with capital expenditures scheduled at 64 million in 1972 and 7 million in 1973 new loan takedowns will not ap proach the high levels experienced in 1971 additional funds that may be required to service the company's debt and dividends to shareholders and finance other cash requirements of the company's business are ex pected to be adequately supplied from operational cash flow also in 1971 the voluntary conver sions of the 53/4 subordinated guaranteed debentures due september 15 1983 of utah international finance corp into the common stock of utah international continued at a high rate as of the beginning of the year 15.0 million of the original 30 million face value remained out standing conversions during 1971 retired 8.8 million of these deben tures leaving a balance of only 6.2 million at the beginning of fiscal 1972 in effecting these conversions 235,525 shares of utah international inc having a par value of 471,050 were issued and an increase in paid-in capital of approximately 8 million was recorded the dilution factor which can be attributed to the 168,871 shares of common stock of utah international reserved for con version of the remaining debentures in this series is relatively minor and the company now reports its earnings with emphasis on the fully diluted basis on october 7 1971 the share holders of utah international ap proved a merger with eccles investment company the assets of which at the time of the merger consisted of utah stock and some cash the net effect of this transaction was to reduce the issued common stock of utah by 21,819 shares and to require a corresponding reduction in the common stock account by the aggregate par value of the shares retired and a like increase in the company's capital surplus account stockholders book equity interest rose from approximately 207 million at the beginning of the fiscal year to 241 million at the close of the period resulting in an annual increase second only to the performance of the previous year when the issue of utah development company shares and debenture conversions contri buted significantly to the equity accounts in the fiscal year just ended a number of events served to unsettle the international financial environ ment there were economic impacts on the relative trading positions of many countries the cost of pur chasing most major currencies moved upward and interest rates on the eurodollar market fluctuated sharply all of these factors have had or are expected to have some influence upon the financial planning of utah inter national inc uncertainty remains concerning the international eco nomic balance which will be achieved and it is not possible to make an accurate assessment of the situation at this time however in those countries where utah and its affiliates incur costs in foreign currencies primarily canada australia and peru the extent to which exchange rates varied during the year has not had an important influence on profits any adverse effect of high costs of eurodollar borrowing was effectively minimized by a flexible borrowing program which provided alternate sources of funds for the short time that these high rates prevailed utah international inc and subsidiaries statement of consolidated income for the years ended october 31 : income gross revenues from operations note 8 costs and expenses gross profit from operations equity in net income of — affiliates note 1 joint ventures and limited partnership proportionate share of gross revenue approximately 24 million for 1971 and 32 million for 1970 interest other net gross profit and other income expenses general and administrative interest note 5 provision for employees retirement plan minority interest in net income of subsidiary income before income taxes discontinued operations and extraordinary item .... provision for income taxes note 3 income before discontinued operations and extraordinary item income from discontinued operations net of income taxes note 9 income before extraordinary item extraordinary item net of income taxes note 9 net income earnings per common share note 10 income before discontinued operations and extraordinary item income from discontinued operations extraordinary item net income earnings per common share assuming full dilution note 10 income before discontinued operations and extraordinary item income from discontinued operations extraordinary item net income mpanying notes are an integral part of this