ML20133K407
| ML20133K407 | |
| Person / Time | |
|---|---|
| Site: | 07000036 |
| Issue date: | 05/31/1957 |
| From: | Knoop V MALLINCKRODT, INC. |
| To: | Johnson L US ATOMIC ENERGY COMMISSION (AEC) |
| Shared Package | |
| ML20133G976 | List:
|
| References | |
| FOIA-96-343 NUDOCS 9701210217 | |
| Download: ML20133K407 (17) | |
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Dear Lyall:
j In accordance with our discussion in Washington on Ma. 29, I am enclosing four copies of our annual report for 1996.
I helleve it will give you the l
information necessary to determine our financial responsibility in connection with leases of special nuclear material.
- Regards, MALLIMCKRODT C EMICAL WORKS P[
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ANNUAL REPORT 4
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1956 l
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ANNUAL R E P O R T r. -
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(M C H EMIC A L WORKS December 31,1956 Dl RECTORS Edward Mallinckrodt, Jr.
William D. Barry Charlton MacVeagh David R. Calhoun, Jr.
John R. Ruhoff Henry V. Farr flarold E. Thayer Joseph Fistere Vernon 11. Wallingford August 11. Ilomeyer Shields Warren
-OFFICERS Edward Mallinckrodt, Jr.,. Chairman of the Board Norman P. Knowlton..
. Vice-President Charlton MacVeagh.. Vice-Chairman of the Board John G. Moore.
... Vice-President and Treasurer and Assistant Treasurer John R. RuhotT..
. Vice-President Joseph Fistere.
. President flarold E. Thayer.
. Vice-President
%,illiam D. Barry.
.. Vice-President Victor 11. Knoop.
. Secretary Francis J. Carr...
. Vice-President Oliver M. Langenberg.
. Assistant Secretary i1enry V. Farr.
.Vice President Russell F. Ritschy.
. Assistant Secretary John E. Gaston..
. Vice-President Flarold A. Brinner.
. Controller l
i Counsett Shepley, Kroeger, Fisse & Shepley, St. Louis j
Certiped Public Accountants: Price Waterhouse & Co.
Dividend Disbursing Agent: St. Louis Union Trust Co., St. Louis 1
Transfer Agents: St. Louis Union Trust Co., St. Louis; J. P. Morgan & Co., Inc., N. Y.
Registrarst The Boatmen's National Bank of St. leuis; The Bank of New York, N. Y.
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()l l0 50 {lY 1956 1955 Net Sale' 530.101,540' 538,865,556 Cost of Goods Sold. 23,050,829' 30,232.762 Selling, General and Administrative Expenses. 5,002,559' 6,417,254 Research and Deselopment Expenses. I,309,808 1,153,595 income from Operations. 738,344 1,061,945 Income Before Federal income Taxes. 735,182 1,023.604 Net income. 367,182 497.604 Dividends-Preferred Stock. 119,932 91,432 Dividends-Common Stock-5.60 and 5.80 per share. 225,000 300,000 Earnings per share-Common Stock. 5.66 51.08 Current Assets. $18,377,773 521,713.242 4 2,570,132 3,477,048 Current Liabilities. Net Working Capital. 15,807,641 18,236,194 E Property, Plant and Equipment-Net. 12,158,489 9,960,568 Long Term Debt. 4,125,000 5 4,375,000 h 2,582,200 Preferred Stock-par value. 2,582,200 f, Common Shares Outstanding-510 par Common Stock Class A.. 255,000 shs. 255,000 shs. Common Stock Class 11.. 120,000 shs. 120,000 shs. Capital Surplus. 5 1,083,390 5 1,083,390 Accumulated income Reinvested. 17,131,392 17,109,142 i 558.51 llook Value per Share-Common... 558.57 g
- 1he 1956 results reflect the change on January 1,1956 in the Company's contract with the Atomic Energy Commission, described in the Financial Review secuan of this report. Also see note to Statement of Income on page 12.
Page 1
ANNUAL REPORT C H EMIC A L WORKS The annual report for 1956 has been considerably expanded to deal adequately with the many new deselopments that have taken place during the past year. This letter is designed to highlight the principal matters of interest which are covered in greater detail in subsequent sections. Sales for 1956 do not include processing charges accruing to the Company for its operation of facilities owned by the Atomic Energy Commission, other than the net compensation for such operation under the new cost-P us-fixed-fee contract elTective January 1,1956, while 1955 l sales do include such charges in accordance with the methods of operation i under the then existent unit price contract. Modification of this contractual arrangement explains all but a small percentage of the apparent decline in sales volume. The Company in 1956 carried out a planned reduction of approxi-mately $1,000,000 in sales of certain submarginal items. This reduction in volume was in considerable part offset by net increases in sales of other products. In addition, the Company's net sales included for the first time the revenues accruing from its new cuxenite and nuclear fuel plants. Earnings Earnings per share of common stock were 50.66 in 1956, compared with 51.08 in 1955. Dividends of 50.60 per share were declared in 1956, compared with 50.80 per share in the preceding year. Income from operations in 1956 was $738,344 compared with $1,061,945 in 1955. The decline of $323,601 reflects the effect of the amendment of the Company's contract with the Atomic Energy Com-mission and the costs of bringing on stream the Company's new plants mentioned below, to the extent that them decreased earnings and increased expenses were not olTset by the improvement in income from the Com-pany's general line commercial business. Regular commercial activities were operated on a more satisfactory basis than in 1955 due to considerable economies and improvements in operations and sales elTort, which absorbed higher wage and salary rates, increased depreciation charges,and a high level of research and develop-ment expenditures, as well as price reductions in certain items especially vulnerable to foreign competition. Assuming a general level of business for the current year similar to that of 1956, it is expected that this trend will be maintained. Page 2
1 Conditions of intense competition which affect earnings from the Company's commercial products are expected to continue. It is believed, howeser. that the Company's position has been bettered in this regard through capital expenditures for better facilities, larger appropriations for research and the integration ofits functions and organization. The Company's plant for the extraction of columbium-tantalum and uranium values from euxenite concentrates commenced operations in March of 1956. Although heavier than anticipated start-up costs were absorbed in the following nine months and the accelerated amortization charges are high. it is expected that this plant should operate on a break-even basis or better in 1957. In March 1956. the Company also iniuated construction of the first privately-owned plant designed to manufacture both normal and enriched uranium compounds for nuclear reactor fuel element use; production to meet orders was under way by early September. Current operations and backlog of future business are considered satisfactory. At the annual stockholders' meeting in April 1956, three new directors were elected to the Board. They were Dr. Shields Warren, professor of pathology at liarvard Unisersity and a distinguished authority on radiation efTects, and Mr. William D. Barry and Mr. liarold E.Thayer, vice-presidents of the Company. On Nosember 25,1956, Mr. Erwin H. Doht, vice-president in charge of purchasing, died suddenly. The Company lost a most valued and esteemed executive who had 47 years of service with the Company, and his associates lost a warm and loyal friend. On February 14,1957, a new subsidiary of the Company, Mallinckrodt Metals Company, was incorporated under the laws of the State of Missouri. It is expected that among the activities of this subsidiary will be the commercial development of products related to the Company's euxenite operations. The Company continues to strive for the best possible relationship with its personnel, stxkholders, customers and suppliers. For the support and cooperation during the past year of each interested individual in all of these groups, the directors and officers of Mallinckrodt Chemical Works wish to express their sincere appreciation. fY-. k March 5,1957 Page 3 ) I
4 f-ANNUAL. REPORT C H E MIC AL WO R K S i = 4 1 1 Financial Review i 5 Also as the result of the new cost-plus-EfTective January 1,1956, the Com. fixed-fee contract, certain administration ex. pany's presious unit price contract with the penses previously carried by the Company 4 Atomie Energy Commission was amended were excluded from the Company's accounts and converted to a cost-plus-fixed-fee basis. for 1956. 4 The new contract, which will terminate Compensation to the Company in 1956 j on December 31,1959, unless earlier cancelled under the new contract with the Atomic or extended by the Government, provides for Energy Commission was le.cs than was re-operation by the Company of both the Com-ceived in 1955. While operating under unit i mission's existing uranium processing facili-price contracts in prior years, the Company j ties in St. Louis and the new facilities being had been entitled to retain as earnings some 3: - constructed by it at Weldon Spring, Missouri, portion of the savings resulting from opera-now expected to be completed in the spring tional elliciency and economies. A fixed-fee of 1958. The total cost of the Commission-contract, of course, precludes any such ar-a owned plants that will be operated by the rangement. The contract provides that the Company at that time is estimated at spproxi-Company's compensation will increase as mately $60,000,000, major production sections of the new plant J l In 1955, when its contract with the Com-at Weldon Spring are turned over to it for l mission was still on a unit price basis, the operation. The original dates of such trans-Company's accounts reflected both the fers have been postponed due to construction 1 processing charges to the Commission (in-delays; they are now due to take place in ciuding compensation to the Company) and successive stages from June 1957 to April the costs of processing. When the new cost-1958. In the interim, the Company has been 1 i plus-fixed-fee contract became efTective on taking over various utility and non-produc-i January 1,1956, only the Company's com. tion facilities as they are completed. pensation continued to be included in its A further change, and one favorably accounts while both the Commission's re-affecting the Company's financial position, imbursement for reimbursable costs and such resulted from the amendment of its contract costs themselves were excluded. with the Commission. This was the release to The appropriate adjustment of accounts the Company in 1956 of more than 51,500,000 to reflect this modification of contractual in working capital, being the amount pro-arrangement is the primary explanation for vided by the Company from its own resources . the discrepancy that is apparent in the Com-for operations under the then effective unit pany's income statement between the amounts price contract, and no longer required under A reported for 1956 and 1955 as sales and costs the new arrangement. The potential earning of goods sold. power of this capital, now available to the j 4 4 Page 4 9 r_-- y%- - - y . +,,, ,.-m ,-r - e-I
w i t n i i - Company for its commercial business, may be considered a partial offset to the decline Regular quarterly dividends were de-j sustained in lose from the lesel of compensa-clared on the Series B and Series C preferred j tion receised from the Commission in the stocks throughout the year. A dividend of 1 preceding, seat - 50.40 per share was declared on June 5, l 1956, on the Class A and Class H common stock and paid July 2,1956. A second divi-dend of $0.20 per share was declared on 1 Sales of the C.ompany s general line of. such stock on December 21, 1956 and paid mediemal, m. dustrial and other chemicals January 10, 1957 to stockholders of record were off 2.1o,, from 1955. Ilowever, consider-December 31,1956. The Board of Directors ably more than the decline in sales volume w condnue to ta action n dends on represented bs th6 percentage was due to the common stock semi annually until further a planned reduction of approximately n tice. Hrst action on such dividends for i SI,000,000 sales solume of certain submargi-1957 will be taken at the Directors' meeting I nal items. Otheruise, commercial sales of the to be held in June 1957, Company's standard products showed an in-crease, net, oser 1955, in spite of substantial The 3%% unsecured note payable to The Prudential Insurance Company of America declines in some product lines due to in. l creased competition, foreign and domestic, requires prepayments of $250,000 in 1957 and in e ch year thereafter to maturity. April 1, A combination ofincreased sales in this 1971, when the balance of the note is payable. l division of the Company's business and sub-The note contains various restrictions as to stantial operating economies resulted in a the payment of cash dividends on common 2 contribution to net earnings considerably stock. Of the amount of accumulated income greater than in 1955, after absorption of reinvested in the business on December 31, 4 h higher wage and salary rates and increased 1956, $4,633,338 is free from such restrictions. 1 depreciation charges. Th.is improvement m earning power of the Company's general Stock Options and Additionai i commercial business did not, however, prove c o ne n s a t i o n man sutlicient to orTset both the decline in com-Of the 105,000 authorized but unissued pensation receised under the Company's new I contract with the Atomic Energy Commission shares of Class A common stock, there were l and certain expenditures related to new busi. reserved on December 31,1956,46,800 shares i ness. Among the latter were the research and against conversion of then outstanding shares net start up costs of bringing on stream the of Series C cumulative preferred stock, and Company's new plants for processing euxen. 25,000 shares were reserved against exercise ite concentrates and for the production of of stock options, granted and to be granted. nuclear reactor fuel elements. Additional On March 26,1956, options to purchase 4 costs were incurred in preparing for sub-18,500 of the authorized but unissued shares mission to the Atomic Energy Commission, of the Class A common stock were granted l jointly with Climax Molybdenum Company, to 57 key employees (not including the Chair-l a bid proposal (unsuccessful, as it turned out) man, Vice-Chairman and President) in ac-i for the operation of new, privately con. cordance with the Stock Option Plan adopted structed uranium processing facilities, by the stockholders on Ja,nuary 18,1955. The Page 5 i
-.~ .- ~ -. -. - - 1 i i option price was $33.25, representing 95% of serve. No earnings were available for distri-I the fair market value at the time the options bution as additional compensation under this were granted. None of the options were exer. Plan in 1956. cised during the year. Effectise January 1,1956, the lloard of Directors rescinded certain resolutions under ^II *"*'c for depreciation and amorts-which a limited number of executives had zation in 1956 was $948,811 compared with $711,927 in 1955 and $629,057 in 1954. The been entitled to additional compensation in am unt of this allowance for 1957 is cur-the form of a percentage of profits.To replace the informal profit-sharing plan set forth in rently running at the annual rate of approxi-those resolutions, the stockholders at the mately $1,200,000. annual meeting held on April 3,1956, ap-proved an Additional Compensation Plan under which key ollicers and employees may W rking capital (the excess of current assets over current liabilities) amounted to receive additional compensation. The total $15,807,641 at the end of 1956, a decrease amount asailable for payment as additional f $2,428,553 from the 1955 year-end figure. compensation pursuant to this Plan shall be This decrease reflected the increased invest-not more than twenty percent of the net income of the Company for any fiscal year ment in new plant and equipment mentioned below. The ratio of current assets to current after deducting: (a) the accrued and accruable dividends on the shares of all classes of pre-li bilities was higher at 7.15 to 1 on December 31,1956, than on December 31,1955, when ferred stock outstanding during the fiscal this ratio was 6.24 to 1. year; (b) an amount equal to 6% of the monthly aserage aggregate par value of the c uis,ia m o common stock outstanding during the fiscal year; and (c) an amount equal to 6% of the Investment in the Company's wholly-wned Canadian subsidiary, Mallinckrodt aggregate of the earned surplus, whether Chemical Works Limited, is carried on the appropriated or unappropriated, and of the books at a cost of $387,473. Losses of $39,871 monthly aserage of any paid.m or other and $11,729 (Canadian) were sustamed by capital surplus of the C,ompany during the th.is subsid.iary m 1956 and 1955 respectively, fiscal year. The net income of the Company and no dividends were declared during this is defined for the purpose of the Plan as the period, The Company's net equity in income before provision for estimated Federal Mallinckrodt Chemical Works Limited Income Taxes and before any deduction for amounted on December 31,1956, to $924,500 additional compensation, but after deducting (Canadian). all costs and expenses otherwise deductible in accordance with generally accepted ac-PIant and Equipment counting principles. The participants for any Investment in plant and equipment in-year are to be selected, on the basis of their creased $2,980,811 during 1956. The major contribution to the success of the Company portion of this increase was accounted for by i for the year, by a 130ard, of Directors' com-the new cuxenite and nuclear reactor fuel mittee on which only members ineligible to plants, by replacements or capacity increase receive compensation under the Plan may of existing plants, and by the installation of Page 6 k ew+ r-n w-r- re-
4 a central air-conditioning system for ' the The new company's authorized capital will laboratories and ollices in St. Louis. consist of one hundred shares of soting com-mon stock of the par value of $10 per share and 30,000 shares of non-voting preferred On February 14,1957, a new subsidiary, Mallinckrodt Metals Company, was incorpo_ stock, par value of $50 per share. An initial rated under the laws of the State of Missouri. issue of 15,000 shares of 4%% non-cumulatis e Mallinckrodt Chemical Works will own all and non-convertible preferred stock was sub-of the common stock of the new company. scribed for privately. Plants and Operations New and improved facilities in St. Louis of the euxenite plant were provided through for the warehousing and shipping of the the sale in April 1955 of $2,000,000 par Company's general line products were in value of the Company's 4%% cumulative operation for the full twehe months of 1956. preferred stock, Series C. Amortization is i Economies realized from the investment were being accelerated under an 80% certificate of at least equal to what had been estimated. necessity authorized by the Ollice of Defense New methods and procedures in manufactur-Mobilization. Profitable operation in the past ing and in the handling of orders also resulted year has been affected by heavy start-up in reduction of costs. Large-scale moderniza-expenses resulting in part from smaller than tion of some portions of the Company's older anticipated receipts of feed material in the plant and equipment progressed on schedule, earlier months. It is now expected that if Pilot plant facilites for use in connection with adequate supplies of cuxenite concentrates the Company's silicon program were meeting specifications are available on completed. schedule in the coming year, this plant should operate on a break-even basis or better in euxenito Pia"' 1957. Operations began in the Company's new Among the activities now planned for euxenite plant in the early spring of 1956. This the Company's new subsidiary, Mallinckrodt is, so far as is kn6wn, the only plant which is Metals Company, is the commercial develop-now separating, on a commercial scale, the ment of products related to present euxenite columbium-tantalum and uranium values operations. from euxenite concentrates. Its products are deliverable under a subcontract extending to New Plant at Hematite, Mo. June 1960, with Porter Bros. Corporation of Production of nuclear reactor fuel by Boise, Idaho, which company mines and con-private industry was first authorized in 1954 centrates the euxenite ore and holds prime by the Atomic Energy Act that became law contracts with the General Services Adminis-on August 30th of that year. tration for the delivery of mixed columbium-In accordance with regulations and tantalum pentoxides and with the Atomic licensing procedures by which the Atomic Energy Commission for the delivery of Energy Commission subsequently imple-uranium concentrates. mented the Act, Mallinckrodt Chemical The needed funds for the construction Works began in March 1956 to construct Page 7
the first prnately-owned and operated plant president in charge of this division is Mr. designed to produce, from Gosernment-Ilarold E. Thayer and Dr. Charles D. ow ned uranium hexalluoride, enriched liarrington is division manager. During the uranium compounds for nuclear reactor fuel past year this disision successfully handled element use. the many problems involved in conversion of This plant was constructed on a part of the contract with the Commission and the a newly acquired 150-acre site in llematite, expansion required for taking over the new Missouri. about 30 miles distant from St. facilities at Weldon Spring. l.ouis. Production to theet orders was under Production in existing plants was in way by early September of last year. Opera-accordance with schedules, and quality and tions are considered satisfactory and some yield were unchanged to improsed. At the expansion required for future business is cur-year's end, the division payroll numbered rently going forward. 1007 of whom 100 were located at the new plant site where the Company has taken oser operations of the water plant, boiler house i, o r ....i + The Company's Uranium Disision is and other utilities and service-type buildings charged with the responsibility for operating as they were completed. During the first two the Gosernment-owned uranium processing months of 1957 an additional 50 of the facilities under the Company's contract with Company's employees were at work at the the Atomic Energy Commission. The vice-new site. Research and Development During 1956 the Company maintained the Uranium L)ivision are carried on by the a level of research and development activity Technical Division under the general super-comparable to that of 1955. Somewhat more vision of Dr. John R. Ruhoff, vice-president than half of the expenditures were made in and technical director, and Dr. Albert Q. connection with the development of new Butler, manager. This division includes the products and processes and the balance on five departments of organic research, in-the deselopment of existing products. Ex-organic research, process development, prod-penditures for chemical control are included uct development and chemical control. The in general costs of operations. Technical Division cooperates with the Research and development activities of Uranium Division in the recruitment of tech-the Company other than those conducted by nical personnel. Organization and Employee Relations Operations of the Company's commer-The Eastern Sales Division operates cial plants in St. Louis and Jersey City are from headquarters at 72 Gold Street, New under the general supervision of Mr. John G. York City, under the supervision of Mr. Moore, vice-president. Operations managers William D. Harry, vice-president, and Mr. in St. Louis and Jersey City are, respectively, Dudley Dunlop, manager. At the main plant Mr. Charles W. SwartSut and Mr. William in St. Louis, Mr. John E. Gaston, vice-W. Fuchs. president, has general charge of merchandis-Page 8
ing actisities and Nlr. Walter S. Keut/er is Improsed communications were desel-manager for Western Disision sales. oped through meetings and training programs Actisities of the Company's Special Metals instituted and carried on during the past year, Division, whieh is responsible for operation and by the issuance of two new house organs of the new plant at Hematite, are directed by -the Expansion News, a mimeographed let-Mr. Frederick M. Belmore, special assistant ter of especial interest to employees of the to the president and manager of the new Uranium Division, and the MCW News, a division. printed magazine for general distribution to in 1956 Dr. Vernon H. Wallingford, for Mallinck rodt personnel in all divisions, plants many years director of organic research, was and otTices. appointed Senior Scientist of the Company. Mallinckrodt Quarter Century Clubs in Two statT departments were established for St. Louis, Jersey City and New York met market research in medicinal and industrial simultaneously in November 1956 for the chemicals, under the direction respectively of third annual dinners to be held since their Dr. August H. Homeyer and Dr. Paul A. organization, at which new members of the K rueger. Clubs were welcomed and presented with On December 31, 1956, the number of appropriate souvenirs. The Company has at all employees on the Company's payroll present 177 active employees with 25 or more totaled 2,845. Of this total,10% were pro. years of service with the Company to their fessional chemists or chemical engineers. credit. Relations between the Company and its Among other public relations activities employees continued harmonious throughout during the year, the Company sponsored a j the year. At the beginning of 1956, one-year large exhibit by the Atomic Energy Com-contracts were successfully negotiated be-mission " Atoms for Peace"-at the St. tween the Company and the five unions repre-Louis Mid-America Jubilee last September. senting different groups of its wage payroll Continued full support for the United personnel. The wage separation rate for the Funds in St. Louis and Jersey City, coordi-Company was in the past year approximately nated by energetic labor-management com-one-fourth of the general average of the mittees in the two plants, resulted in record chemical industry. contributions to those drives in 1956. 4 Page 9
1 S N0 hk0( C O M P A R ATIV E BALANCE SHEET Assets i J 1956 1955 CURRENT ASSETS: Cash. 5 2,277,190 5 4,505,398 U. S. Gos ernment securitics, at cost (which approximates market). 900,927 1,049,862 i Accounts receivable, less allowance of $100,000 for doubtful accounts, cash discounts, and other allowances.... 2,864,164 3,603,484 Inventories, at the lower of cost (principally on the first-in first-out ~ basis) or market-9 Raw materials and packaging supplies. 2,243,647 2,108,704 Work in process. 2,314,409 I,781,250 Finished products. 7,040,692 7,391,315 3 Mechanical, laboratory, and other supplies, at cost.... 461,336 j 943,415 J i Prepaid insurance, taxes, and other expenses..... 275,408 l 329,814' l 1 518,377,773 l 521,713,242 } l I INVESTMENTS AND ADVANCES, including investment in Canadian l subsidiary carried at cost of 5387,473...... 5 705,852 5 702,970 l PROPERTIES. at cost: i Buildings, machinery, and equipment. 517,789,302 514,667,354 Less-Depreciation and amortization. 7,186,090 6,403,200 510,603,212 5 8,264,154 Land. 675,459 644,105 Construction in progress.. 879,818 1,052.309 512,158,489 5 9,960,568 531,242,114 532,376,780 1 The above statement should be read in conjunction with pages 4 to 7 of this report. Page 10
.l l 1 / B D / C G O ff24 k d DECEMBER 31, 1956 AND 1955 Liabilities and Stockholders' Inwstment 1956 3 1955 CURRENT LIABILITIES: Note payable-amount due within one year. $ 250.000 f $ 125,000 y Accounts payable. 1,458,779 4 2,165,843 d Salaries and wages. 218,327 l 325,075 541,095 - Estimated federal income taxes., 316,551 j Dividends payable. 104,983 104,983 l Other current and accrued liabilities.......... 221,492 215,052 i 5 2,570,132 5 3,477,048 NOTE PAYABLE TO THE PRUDENTIAL INSURANCE COMPANY of AMERICA,3%%, unsecured, excluding amount due within one year 5 4,125,000 $ 4,375,000 STOCKilOLDERS' INVESTMENT: Preferred stock, cumulatise $50 par value-Authorized 100,000 shares Issued-l1,644 shares of Series B,6%. 5 582,200 5 582,200 40,000 shares of Series C,4%%.. 2,000,000 2,000,000 Common stock, 510 par value-Class A, authorized 360,000 shares, issued 255,000 shares........ 2,550,000 2,550,000 Class B, authorized 240,000 shares, issued 120,000 shares........ 1,200,000 1,200,000 Amoimt paid in for capital stock in excess of par value............. 1,083,390 1,083,390 Accumulated income reinvested in the business (see accompanying statement). 17,131,392 + 17,100,142 l 524,524,732 $24,546,982 531,242,114 532,376,780 Page 11
l i i STATEMENTS OF INCOME AND ACCUMULATED INCOME REINVESTED IN THE BUSINESS FOR THE TWO YEARS ENDED DECEMBER 31,1956 1956 1955 Sales, net.. 530,101,540 $38,865,556 Cost of goods sold., 23,050,829 30,232,762 Gross profit. 5 7,0$0,711 5 8,632,794 Selling, general, and administrative expenses. 5 5,002,559 5 6,417,254 Research and deselopment expenses.. 1,309,808 1,153,545 5 6,312,367 5 7,510.849 Income from operations. 3 738,344 5 1,061,945 Other income and (deductions): Interest on unsecured note. 5 (148,710) 5 (152,930) Discount on purchases and miscellaneous, net. 145,548 114,589 5 (3,162) 5 (38,341) Income before estimated federalincome taxes. 5 735,182 j $ 1,023,604 Estimated federal income taxes. 368,000 8 526,000 Net income for the year. 5 367,182 5 497,604 Accumulated income reinvested in the business: f Balance at beginning of the year..... _ 17,109,l_42 j 17,002,970 517,476,324 } $17,500,574 Dividends declared-If Preferred stock-l 2 Series B, 6%,...... 5 34,932 5 34,932 Series C,4V4 (at annual rate of $2.125 from date of issue), 85,000 56,500 Common stock-l 153,000 204,000 Class A. Class B. 72,000 96,000 5 344,932 5 391,432 Balance at end of the year ($12,498,054 restricted under agree-h $17,109,142 ment relating to note payable). $17,131,392 g Prior to January 1,1956, the Company's contract with the Atomic Energy Commission was on a unit price basis and the accounts reflected the processing charges to the Commission and the costs of processing. Effective January 1,1956, the Company's contract was converted to a cost-plus-fixed-fee basis and the reimbursable costs thereunder, together with the reimbursement therefor by the Commission, have been excluded from the Company's accounts, thereby reducing, on a comparable basis, both the recorded operating costs and the recorded sales volume. At that date the Company also revised its methods of dis-tributing certain other expenses which had the effect generally of reducing amounts classified as adminis-trative expenses and increasing production, selling, and research expenses, j The above statement should be read in conjunction with pages / to 7 of this report. Page 12 P
l l Saint Louis, Mo. February 15,1957 To the Board of Directors of Mallinckrodt Chemical Works In our opinion, the accompanying financial statements present fairly the financial position of Mallinckrodt Chemical Works at December 31, AUD1 TORS' 1956, and the results of its operations for the year then ended, in con-REPORT formity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Our examination of such state. ments was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Price Waterhouse & Co.
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