Front Matter

CFA Institute

Front MatterSource: Financial Analysts Journal, Vol. 37, No. 3 (May - Jun., 1981), pp. 1-76Published by: CFA InstituteStable URL: http://www.jstor.org/stable/4478444 .

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May/June 1981

Fina

The magazine for investment management

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Standard &I IePor's

_tffortu nately, advertising standards prevent it. However, we can tellyou that net incomeYforHouston Natural Gas

- increased an average of 21% over the last five years. And uwe can tellyou _ I that return on equity has averaged 25% over the same period. _ P ;;: ~~~~Find out all the facts and figures about HNG. Check them for yourself,

or contact your financial analyst.

The balance comes from H N G a Por'sCor

tw~~~~~~~~~~~~~~~~~~~~~~~~~awy NY iv HOSONNTRA'A

MNatural Gas derives approximately 72% of its income, before interest expense and income taxes, from oil and gas transmission, exploration and production. Th e ly balancedcomes marine activities, industrial gases and coal.



FINANCIAL ANALYSTS FINANCIAL ANALYSTS

JIIIEAL FEEFIAJIHE Editor / Jack L. Treynor The Financial Analysts Federation, founded in 1947, is a non-profit

professional organization consisting of 51 Financial Analysts societies Associate Editors located in the major cities of the United States and Canada. These societies WILLIAM H. BEAVER have an aggregate of about 14,500 members who are engaged in security analysis, Graduate School of Business o Stanford University portfolio management, and executive direction of the ivestment Stanford, California function. The affiliated Institute of Chartered Financial Analysts awards FISCHER BLACK the professional designation of "Chartered Financial Analyst" to qualified Sloan School of Management, M.I.T. members upon successful completion of three examinations. Cambridge RICHARD A. BREALEY Graduate School of Business London Officers: 1980-81 GLENELG P CATERER, C.F.A. New York Chairman / Erwin H. Will, Jr., C.F.A. JAMES F. COLE President / Theodore R. Lilley, C.F.A. Guardian Capital Group Limited Vice Chairman Frank A. Cappiello, Jr. Toronto ROBERT I. CUMMIN Vice President Edus H. Warren, Jr., C.F.A. Lloyd Investments, Inc. Philadelphia Board of Directors: 1980-81 M. HARVEY EARP, C.F.A. Brittany Capital Corporation H. Kent Atkins, C.F.A. / Bankers Trust Co., New York

CHARLES D. ELLIS, C.F.A. J. Gary Burkhead, C.F.A. / Equitable Life Assurance Society Greenwich Research Associates of the U.S., New York Greenwich, Conn. Harry A. Campbell, C.F.A. / Edelstein, Campbell & Co., Inc., San Francisco ROBERT FERGUSON Frank A. Cappiello, Jr. / Dowbeaters, Inc., Baltimore College Ret. Equities Fund New ork Anthony T. Cope, C.F.A. / Wellington Management Compdny, Boston WILLIAM L. FOUSE, C.F.A. Edward B. Dillmann, C.F.A. I Haffis Trust and Savings Bank, Chicago Wells Fargo Invst. Advisors Theodore R. Lilley, C.F.A. / The Financial Analysts Federation, New York San Francisco WALTER R. GOOD, C.F.A. Brian E. McManus, C.F.A. I Centennial Asset Management Continental Group, Inc. Corporation, Denver Stamford, Conn. John D. McStay, C.F.A. / Mercantile Securities Corporation, Dallas

Harris Tust and Savings Bank Alfred C. Morley, Jr., C.F.A. I Frank Russell Trust Co., Seattle Chicago John A. Nielsen, C.F.A. / Brown Brothers Harriman & Co., New York DAVID L. GROVE Michael M. Ryan / Pemberton Securities Limited, Vancouver hIt. Chamber of

Commeie Marion Van Dyke, C.F.A. / Bell Canada Pension Fund, Montreal U.S. Council New York Edus H. Warren, Jr., C.F.A. I Capital Research Company, New York GODFREY G. HOWARD Ernest R. Widmann, C.F.A. / Widmann, Blee & Co., Inc., Philadelphia North Carolina National Bank

Erwin H. Will, Jr., C.F.A. I Capitoline Investment Services Inc., Richmond Charlotte IRVING KAHN, C.F.A. James L. Woods / American Republic Insurance Company, Des Moines Kahn Brothers & Co. Inc. New York Staff MARTIN L. LEIBOWITZ Salomon Brothers Secretary-Treasurer / Mildred M. Hermann

JAY 0. LIGHT Director, Education and Programs / Russell K. Mason Harvard Business School Boston EDMUND A. MENNIS, C.F.A. Security Pacific Investment' Managers, Inc. Los Angeles ADOLPHE J. WARNER, C.F.A. Journal Staff ANTHONY H. MEYER Financial Consultant Production Manager I Joseph W. Hollis Drexel Burnham Lambert Inc. New York New York ROMAN L. WEIL Assistant Editor / Judith F. Kimball ROBERT D. MILNE, C.F.A. Graduate School of Business Advertising Coordinator / Eloise E. Sweeney Duff and Phelps Investment University of Chicago . . Management Lo. Chicago Cleveland ARTHUR ZEIKEL James R. Stack & Associates, Inc. RUSSELL J. MORRISON, C.F.A. Merrill Lynch Asset Management 50 East 42nd Street "Ionstm New York New York, N.Y. 10017 / (212) 867-9690

STANLEY A. NABI, C.F.A. James R. Stack / Marketing Managewr Lazard Freres & Co. For Change of Address: New York GORDON PYE' Send old label and new address with Irving Trust Company Zip Code, six weeks before moving. New York

Headquarters Office: 1633 Broadway, New York, NY 10019 / (212) 957-2860



nL Industries Reports...

Agreement to buy

Sperry-Sun, Inc. for $252 Million.

This report is a part of our program to keep you informed of what is happening at NL Industries.

If you would like additional information, please contact us.

> Ray C. Adam Chairman and

Chief Executive Officer

Theodore C Rogers President and

Chief Operating Officer

NL Industries announced on March 13, 1981 that it has entered into a definitive agreement to purchase Sun Company's oilfield services subsidiary, Sperry-Sun, Inc., for $252,340,000 in cash. Sperry-Sun is a leading worldwide supplier of directional drilling products and services for the oil and gas industry. Completion of the transaction is subject only to governmental review and clearance.

Sperry-Sun, with 1400 employees operating in sixteen countries, had sales of approximately $100,000,000 and net income in excess of $10,000,000 for the year ended December 31, 1980. During the past 5 years, sales and earnings of Sperry-Sun have been increasing at a compound annual rate in excess of

30 percent. Ray C. Adam, Chairman of NL

Industries, stated, "The acquisition of Sperry-Sun represents NLs initial entry into the large and rapidly growing directional drilling market. Sperry-Sun will also provide services which are complementary to NLs logging products and services and measurement-while-drilling research and development efforts."

Mr. Adam further stated that, "The purchase of Sperry-Sun under- scores NLs commitment to service the worldwide oil and gas industry and should enhance the growth opportunities of both Sperry-Sun and its employees."

Sperry-Sun provides electronic, magnetic, gyroscopic and other equipment and services needed when oil and gas well drilling is slanted, sometimes as much as two to three miles from the drilling rig.

NL believes that the market for directional drilling will continue to grow rapidly as more wells are being drilled in offshore and remote loca- tions. NL expects to participate fully in this growth through Sperry-Sun.

Sperry-Sun manufactures its broad range of equipment at plants in Sugar Land, Texas, Lafayette, Loui- siana and Cheltenham, England. Fifty-five sales and service offices are maintained throughout the world. In addition to providing directional equipment and services, Sperry-Sun also measures formation pressures with specialized equipment which it

manufactures. Sperry-Sun also manufactures a line of downhole tools, principally reamers and stabilizers.

Sun Company Chairman -and President, Theodore A. Burtis, said, "Sperry-Sun is a strong company in the high-growth oilfield services industry. It has a tremendous potential for enhancing its position, and this potential will be better fulfilled under NL because Sperry-Sun's aggrega- tion of skills, technology and service techniques is more compatible with NL future interests. Also, there is the real concern that an oilfield services company is less attractive to its customers-oil companies-when it is owned by another oil company. With the sale to NL, this barrier has now been removed. For these reasons, Sperry-Sun's future is a very bright one."

Sperry-Sun was formed in 1929 as a joint venture between Sun and Sperry Gyroscope Company, and it became a wholly-owned Sun subsidiary in 1947.Sperry-Sun will provide NL with its second major service operation with more than 50 years of continuous service to the petroleum industry. Baroid, which is NLs $600 million drilling fluid operation, was also formed in the late 1920's and represents almost half of NLs $1.2 billion petroleum service business.

NL Industries is a leading worldwide manufacturer and supplier of petroleum services and equipment, chemicals and metals with annual sales of over $2 billion.

N IIIIIIIIIIIII NL Industries, Inc.

1230 Avenue of the Americas NewYork, NY 10020



Juirhal ml * .1mm.e

Inflation Accounting for Debt ......................... 20 Lawrence Revsine Under the physical capital maintenance approach to current cost accounting, income consists of that portion of net operating flows a firm can distribute without reducing its physical operations. Because unanticipated inflation mainly represents a wealth transfer from bondhold- ers to stockholders, it doesn't affect cash flows to the firm, hence doesn't contribute to income. Under the financial capital maintenance approach, however, income consists of the flow that can be distributed without eroding begin- ning-of-period market value of net assets. Because a de- crease in the market value of debt constitutes an increase in owners' equity, it increases income.

Four Keys to Savings and Loan Profitability . 31

Heinz Jauch In understanding the savings and loan industry, four concepts are key. (1) S&Ls enjoy well entrenched market positions. (2) Regulatory lag in raising deposit rate and usury rate ceilings has in the past resulted in cyclical depres- sions in S&L earnings. (3) Since S&Ls borrow short and lend long, an inverted yield curve raises their costs relative to their revenues. (4) Because turnover rates on S&L mortgage portfolio and deposit pools differ, the yield spread between costs and revenues is inversely related to interest rate movements in the short run, but inversely related to the rate of change in interest rates in the long run.

Shouldn't You Own Fewer Long-Term Bonds?.... 45 J. Parker Hall, III Despite the recent debacle, bonds are still bonds; the nature of the bond contract guarantees that bonds will have less price and return variability than common stocks. But clients, susceptible to peer pressure, often argue for changing stock-bond ratios at precisely the wrong time. Will money managers have the courage to help them resist those pressures this time around?

Conditions Necessary for Developing a Conceptual Framework ..... ............ 51

Reed K. Storey If the Financial Accounting Standards Board is to establish a useful conceptual framework for financial accounting, it must, first, develop concepts rooted in the real world. Second, it must have the persistence to bring about broad-based acceptance of necessary changes in the present accounting model. Finally, it must take the new framework seriously; nothing will undercut the new concepts more quickly than for the Board to retreat from them merely because they result in unpopular answers.

Editor's Comment M.PT Barnum (a.k.a. Robert I. Cummin) ....... ..... 6

Editorial Viewpoint J.L.T .............................. 10

Accounting for Financial Analysis Peter H. Knutson ........................................... 14

Pension Fund Perspective Thomas S. Postek ........... 15

Securities Law an_ Regulation John C. Gillis. 17

Comments on Modigliani-Cohn .................61

Letters .................77

Book Reviews Robert I. Cummin .................79



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To many people, Amhoist is known as a manufacturer of land-based heavy lifting and construction equipment. It's true that our company is a market leader in mobile and stationary cranes, hydraulic backhoes, trenchers, and road compactors and mixers, as well as a world leader in the manufacture of shears and balers for scrap recycling.

But we've had our feet in and around the water for quite a while, too, with products ranging from traveling gantry cranes, truck and crawler cranes, stiffleg derricks, and pedestal cranes for in-port cargo handling to some of the world's largest ship- and barge-mounted revolving cranes.

To serve the unique needs of this market, our Marine-Energy Division works closely with contractors, oil platform fabricators, energy companies, port authorities, shipyards, and others who need custom-engineered equipment for specialized applications. Standard products are also offered by the division; one example is the new American Sea Horse crane, designed as a

competitively priced cargo crane for mounting aboard offshore oil platfonns. Lucker Pullers are another line of Amhoist Marine-Energy products. These linear winches are replacing conventional winches and windlasses on oil platforms and in other applications where their compactness, simplicity, high single-line pulling capacity, and low cost make them highly competitive with more traditional devices.

The Amhoist Marine-Energy Division is just one example of how we've shaped our company to serve new and changing markets. Our diversified product lines, high market shares, large export sales, and ability to serve the growing energy development and resource recovery markets enable us to give balanced performance with excellent growth prospects over the long term.

We'd like to tell you more about Amhoist. Please write for our latest annual report.

American Hoist & Derrick Company 63 South Robert Street St. Paul, Minnesota 55107. rq h o

i I II i I -I. I - -

IG '' IE i

CP-138



From the prime contractor

to the prime beneficiay:



CongTatulati

I

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on, merica. Once again, America is

leading the world into space. Rockwell International is

prime contractor for the Shuttle orbiter. Also, our Rocketdyne Division built the main engines. And we assist NASA in the integration of the Space Transportation System. Our achievements in space and aircraft development demonstrate the high technology which characterizes all the businesses of Rockwell International.

We join America in saluting

NASA, the Columbia crew- John W. Young and Robert L. Crippen -and the 50,000 people in many companies who worked with us to build America's Space Shuttle.

Congratulations, America. Through the Shuttle, designed for repeated flights into space, you have built a technology bridge to the benefits of this vast new frontier. It is a uniquely American achievement.

Good old American "know-how" is alive and well.

@ Rockwell International

...where science gets down to business

Automotive /Aerospace Electronics /General Industries



Asarco... meeting the metal needs of the 80's

Asarco's new Troy mine will be one of the largest silver mines in the United States.

For many years, Asarco has recognized the long-range growth in demand for silver for industnal, decorative, and investment uses. In 1978, Asarco made another

'IL am fle w ~~~major commitment to silver when we started w it development of the Troy mine in Montana. Scheduled for start-up in 1981, the Troy mine will have an annual capacity of 4.2 million ounces of silver and 20,000

S ilv e r ~ ~~~~~~~~~tons of copper contained in concentrates. Asarco also operates two silver mines in Idaho. The Galena mine started production in 1955 and the Coeur mine in 1976. Our total domestic mining capacity will be more than 1 1,000,000 ounces of silver annually when the Troy mine is in operation.

For more information on Asarco, send for our latest Fact Book. Department 73, ASARCO0 Incorporated,

''t~~~~~~~~~~~~~2 Boda,NwYr,.Y12.

F~ ~~~~~~Mtl &S E Minerals



At Grumman, we're developing and marketing products that help Americans use the energy that is all around us.

__ HOT WATER FROM THE SUN. __ ~~~~~AN IDEA WHOSE TIME HAS COME.

Forty years ago, thousands

= i _ ~~of Florida homes and businesses used simple solar col-

t.Grumman is selling far more reliable solar systems. And



z-iAI USE

Sea water. This safe, non- polluting technology may well provide

energy. A second generation much of the world's windmlll, developed by electricity in the Grumman Energy Systems 21st century.

Americans from the Frost Belt for the Department of Energy, These are just a few of our to the Sun Belt are rediscovering delivers 18 kilowatts of elec- ideas that can help America the energy and cost benefits of tricity in a 28 mph wind. With become less dependent on harnessing heat from the sun. the cost of electricity continuing foreign oil. For more information

If just 10% of the homes in to skyrocket, mass production of on Grumman's present and America were equipped with the Grumman wind system could future participation in Grumman.SunstreamTM provide one practical energy energy markets, write: Grumman Solar Hot Water Systems, option for the near future. Corporation, Dept. GCP,

annual energy savings would be FUSION FROM THE SEA. Bethpage, NewYork 11714. the equivalent of 500 million AN IDEA WHOSE TIME WILL COME. gallons of fuel oil.

ELECTRICITY FROM THE WIND. LooKing further into the GR UMM AN AN IDA WHOE TIE IS EAR.future, Grumman is helping to AN IDA WHOE TIE IS EAR.develop magnetic fusion. This

Wind power is free, clean, safe, clean source of electric inexhaustible, and another power derives its fuel from a practical alternate source of low cost, abundant commodity.



* - *a ' *w

Stephen S. Conway Jr. President,

10 Abex CorporatioD4 ,ju

$4BIL 12 YAS S

/4 How do the it?

W q-S. 2 k

Just 12 years ago, IC Industries was the llinois Central, a $300 million regional railroad. 'Today, it's an international corporation diversified in consumer products, commercial products and railroad activities.

In 1980, for the fifth consecutive year, results reached record levels. Sales exceeded $4 billion, income from continuing operationis was $120.7 million and income per common share reached $6.02.

All according to plan. In 1968, the management team led by William B. Johnson,

Chainrman and CEO, proceeded to diversify. Selectively. 'fo lessen the effect of business cycles while reducing capital and labor intensity as well. To grow. By design.

A foundation of six principal business units is in place- Abex, Pet, Hussmann, Pepsi-Cla General Bottlers, Midas and the Illinois Central Gulf Railroad. These companies have man- agemenit authority and the incentives to grow. Because that

gets the best results -for operations and for shareholders. IC Industries now is ready for a new stage in its growth.

Strategic goals are set to increase shares of basic markets, and accelerate internal growth and productivity through the 1980s and beyond.

The plans are ambitious. But then so were those made 12 years ago.

For more information, please write: IC Industries, One Ilinois Center, 111 East Wacker Drive, Chicago, Illinois 60601.

IC Industries Growth bydesign

Diversified in six business units: Abex, Pet, Hussmann PePsi-Cola General Bottlerm, Midas, Illinois Central Gulf.



NLIndustries Reports...

Proposed stock split ad increased cash dividend

This report is a part of our program to keep you informed of what is happening at NL Industries.

If you would like additional information, please contact us.

aARay C. Adam Chairman and

Chief Executive Officer

C C. Theodore C. Rogers

President and Chief Operating Officer

On February 25,1981, the Board of Directors of NL Industries, Inc. rec- ommended that NL shareholders approve, at the Company's annual meeting on April 22, 1981, an increase in authorized common shares from 60 million to 150 million and a split in the current common shares outstanding 2 for 1. The Board intends to establish a new quarterly dividend rate after the split of $.20 per share per quarter, first payable June 30, 1981. The new annual rate would be $.80 per common share. This is equivalent to $1.60 per share when compared to the current annual rate on the existing common shares of $1.40.

Regular Quarterly Dividend Declared

The Board of Directors also declared the regular quarterly dividend of $35 per share, payable March 31 to shareholders of record March 11, 1981.

Expect Record Earnings for 1981

This will be the first stock split for NL Industries since its 2 for 1 split in April, 1969. During the twelve years since the last split, NL Industries has changed from a company primarily engaged in chemicals and metals to one emphasizing petroleum services. While petroleum services con- tributed less than 10% of NLs 1969 sales, NL obtained 59% of its sales and 73% of its operating income from this sector in 1980. In the fourth quarter of 1980, 85% of its operating income was generated by petroleum services. The Company expects earnings from petroleum services to lead NL to a fourth consecutive year of growth and a new record high net income.

In 1969, NL earned $50.8 million or $2.13 per common share. By 1971, earnings had declined to $22.8 million or $.95 per common share. In 1980, earnings rose to $1677 million equal to $4.94 per common share, more than five times the 1971 low point. Earnings per common share in

1980 were 47% higher than in 1979 and this followed annual increases of 24% and 19% in 1979 and 1978 respectively NLs surge in petroleum services earnings followed the merger with The Rucker Company in 1977 and subsequent capital expenditures and acquisitions of more than $700 million during the 1977-1980 period.

Capital Expenditures for 1981 to exceed $250 million

The projected increase in cash dividends for 1981 is in recognition of NLs strong and improving financial position. Long-term debt as a percent of invested capital is now less than 25%, and NLs 1981 pretax income before interest should exceed its fixed charges by more than seven times. While the increase in the cash dividend will be the second in a year, bringing NLs payout to the highest percentage in the petroleum services industry, it is well within the financial capability of the Com- pany. Even with the increased payout and estimated capital expenditures exceeding $250 million in 1981, NL expects, in the absence of major cash acquisitions, to reduce its debt as a percent of invested capital further this year. The Company also expects its return on common stock equity to exceed the 20% level achieved in 1980.

NL Industries, Inc. 1230 Avenue of the Americas

New York, NY 10020



grow in the bess parts

In 1967, PPG established a We.ofcourse,continue tobe strategy to segment our core busi- a world leader in chlorine and I r nesses, and to hold or gain leader- caustic soda, chlorinated chemi- Again, our strategy has paid ship in key markets through tech- cals, and vinyl chloride monomer off. PPG's proprietary AzdelO nical and marketing strengths. production. sheet and the new HMC? and

This strategy has guided -- ^ XMC? composites which employ capital expenditures and product - our technology show enormous development in our four busi- potential in automotive and other nesses. Briefly, here's how we've m potarkets because of their fortabil put it to work in each: ity and high strength-to-weight

-A a ; XW!> t ratios. Glass | l < 2 Q I 1 PPG textile yarns are in Glass 1' ~~~~~~~~~~~~demand for electronic circuit

As America's number one pro- ducer of float glass, PPG has led boards, pollution control devices, the flat glass business with new and asbestos substitutes. technologies for environmental '

and insulating glass products.

7-tljill! Coatings andResins ri?ivhiligilil PPGs.ctiono-PPG's cathodic electrodeposi -

R iiillliNl VVtion temhrnkolIof rhas crperateed wiorlsd-| li(A

nowused on more than half ofUS. autos. PPG also supplies original

finishes for thousands of other products.

1i. Our consumer line, Pittsburgh? Paints, provides solid returns through constant product )

, ~ improvement and concentration on quality-oriented outlets. The PPG strategy has us

Another strength has been - poised for the '80s with an array the diversity of our markets, of strong businesses, and a con- including residential, commercial 7XJII& I IUk'XN E,,; sistent operating policy for growth construction, and production of i -. within each. glass for popular, smaller cars. To receive a copy of our

. ;r 1 1 - 1ld sAnnual Report, write PPG P hemicals p tehnl Industries, Inc., Dept F-8. One

t

A w . NJ>tS; 4>. ~~~~~Gatewax Center,Piftsburgh, PPr-,hasp ronrietarv technol- Mo A ;R| 1-_ P 1522

ogy inproducts such as CR-39? lZ j) A\ j PA\ 15 Cetr Pitsurh monomer for plastic eyeglass /\>: I Y\ !N M , PPG: a CDoncern for the Future lenses, antimony oxide flame ( \\ >1'li/is d< retardants, and chloroformates Q < ? /: AglCe , used in pharmaceuticals, pesti- ml gadi. cides, and ascore of applications 3.;k --- /-

still in development. f- ' W / iNDUSTRiES



iustemis -a

ASS N~~~~~~~~~~~~~~~~~~~~~~~~~I

'~~~~~~~~~~~~ i

Bu_ako

A 22-year record of annual dividend increases, a quadrupling of total

revenues since 1970, and a solid growth rate in earnings per share over the past 10 years: All these idicators tell you some- thing about our past performance as a telecommunications company.

But that's not the hall of it. It's our position in compruter services

that adds a dramatic new dimension to our future growth.

In fact, of all the major telephone companies in the United States today, only United Telecom is bringing telephone technology and computer services know-how together in such a far-reaching way.

Since 1970, annual revenues from our computer services companies have grown from $2 million to more than $115 million.

With our sophisticated super-com- puters, including the CRMY-IS, we're the only company in the telecommunications field able to offer private industry a range of computer services incorporating everything from business information systems to engineering design analysis and processing.

We've applied additional computer resources to the development of our worldwide telecommunications distribution and support network.

Most people still think of United Tele- com as America's third largest telephone system. But today, telephones obviously aren't the whole story. We're approaching our computer-oriented future with the same aggressiveness and innovation that have characterized our growth from a $415 million company in 1970 to one with revenues of nearly $2 billion in 1980.

If you'd like the full growth and earnings story, please write for our latest annual report to: D. A. Forsythe, United Telecommunications, Inc., Box 11315, Kan- sas City, Missouri 64112. New York Stock Exchange symbol, UT. Newspaper listing,

UniTel.

UnitdTelecMENi United Telecommunications, Inc. UEMO

P ----Iue fr h hue Telephone Services - Computerized Distribution Services Computer Services - An affirmative action employer.



Why Williams

Is WorthWatching in the'80s.

One good reason is because we're rich in with an energy equivalent of nearly a barrel of oil; and resources. During the '70s we set out to E some 75 tons of coal reserves. We also have position ourselves as a resource-rich growth many other valuable assets which we consider company of the '80s.We have been successful major resources for the '80s. We own and operate with this strategy and it's paying off for us, as four of the nation's largest, most cost effective evidenced by record 1980 net income of $139 S chemical fertilizer manufacturing complexes; million, double that of the previous year. a successful oil and gas

Today, we are strong in natural resources, ,, exploration and production with increasingly valuable reserves of phosphate company; the world's rock, oil, natural gas and coal. These resources largest independently owned w

provide us considerable promise for continued prog- petroleum products pipeline ress in the '80s and beyond. So extensive are these system; and one of the largest - 1 3

reserves that each of Williams' 29,700,000 networks of metals service - D 1

outstanding shares of common stock centers in the United States. equates to an ownership of: about Yes,The Williams Companies 14 tons of recoverable /? }( 1 / is indeed a resource-rich, growth phosphate rock reserves; R: e _ company that is truly "worth watching in the '80s." oil and natural gas reserves j iitP 2 \j/lX 1 But there are many more reasons you can learn

about by writing L. R. Francisco, manager- investor relations, The Williams

Companies, One Williams Center, Tulsa, OK 74172. Ask for a copy

Xv . K 0 <of our 1980 Annual Report. We are rich in resources.

THE FERTILIZER, ENERGY AND METALS COMPANY J Agrico Chemical Company * Wlilliams Exploration Company W zZ U

Wlilliams Pipe Line Company * Edgcomb Metals Company *Zg



"Despite worldlwide economic instabiiy < n~~~ ~ 0

1980 was the best year in

ITTie 61-year history."

So begins the Chairman's "Letter to sixteen of our companies, reducing our Shareholders" in our latest Annual Report, debt and reinvesting the proceeds to pro- which surveys a remarkable twelve- vide a stronger base for continued growth month achievement. in the years ahead.

Our sales and revenues reached Which helps explain why ITT's Board $23.8 billion, an all-time high. of Directors authorized the 17th consecu-

And net income too was a record - tive increase in the dividend -to a new $894 million, or $6.12 per common equivalent annual rate of $2.60 per share equivalent share. (Including a $.62 per from the $2.40 per share in 1980. share gain on the sale of Rayonier's In 1980 we committed over $1 billion British Columbia properties.) to new facilities and equipment -matched

Looking behind the statistics, major by another $1. 1 billion for R&D and en- earnings improvements were scored by gineering (almost half of it ITT funded). two of our industry groups: Telecommuni- And finally, we've streamlined our cations and Electronics and management to shorten Consumer Products and lines of communication and Services. make our ITT companies

And in telecommunica- more responsive to their tions, there was an espe- markets. cially noteworthy order for If you'd like to know ITT's System 12'" digital more about our 1980 per- switching system. The formance, and our plans for order, placed by Telmex, a promising and profitable the Mexican national tele- future, send for your copy phone company, was for of our Annual Report. over 500,000 equivalent Write: Department of lines -the largest single : l I_Investor Relations-ARil2, order for digital switches l ls|Internatioal Telephone and ever received by an interna- : Telegraph Corporation, tional manufacturer. Tl 320 Park Avenue, New

During the year, we sold 3 York, New York 10022.l

? 1981 International Telephone and Telegraph Corporation, 320 Park Avenue, New York, N.Y. 10022.



For a free copy of this speech, write to: AEP. 180 East Broad St., Room 1500-E. Columbus, Ohio 43215

We're American Electric Power. We're also Appalachian Power,

Columbus and Southern Ohio Electric, Indiana & Michigan Electric,

Kentucky Power, Kingsport Power, Michigan Power, Ohio Power,

and Wheeling Electric.

American Electric Power



COMBUSTION ENGINEERING REPORTS TO THE FINANCIAL COMMUNITY:

|~~~~~~~~~~~~~~~~~ - PI I ? Vt. W-

_-.

,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A,

.w. .I

The Energy Systems Company reports on five years of steady growth.

It makes gireat reading. In 1980, C-E sales set a new record at $3.1 billion. Earnings increased 20% to $116 million, up for the fifth straight year. With a five-year compound annual growth rate of 21.2%. Per share earnings, adjusted for the two-for-one stock split in November, were $3.56 compared with $2.98 the previous year. Dividends were raised to an annual rate of $1.50 per share, the fifteenth consecutive year in which C-E increased its payout to shareholders.

Once again, C-E's oil and gas equipment and services operations led the company's performance, with 1980 revenues totalling over $800 million. That makes us one of

the top ten suppliers to the oil patch.

C-E: World leader in energy technology. We're helping to find and bring in oil and gas. Upgrading and building refineries and petrochemical plants. Developing cleaner, more efficient ways electric utilities and other industries can use coal. Providing equipment and services for nuclear power generation. And leading the way in the development of alternative fuels.

For more information, write Combustion Engineering, Inc., Dept. 7004-189, 900 Long Ridge Road, Stamford, Connecticut, USA 06902.

E=2 COMBUSTION ENGINEERING

The Eegystm Compary



1980 WASI AVERYI

GOOD YEAR.I

Inl980ourincomefromoperations r reached a record $240 million ($3.67 per Mail to: share) on revenues of $4.4 billion. Transamerica Corporation

In a difficult economic envi- Corporate Relations Dept. ronment like 1980, we think this P.O. Box 7648 I kind of performance demonstrates San Francisco, CA 94120 the soundness of our basic strategy, I which is to operate as a diversified I company and concentrate our efforts in businesses with strong growth potential.

We think these record figures also I point out our overall financial strength, the added value we bring to our individ- ual operations, the talents of our people, I and of course, our dedication to giving our * I customers First Rate Service at a Fair Pricer I

1980 was, in fact, our fifth straight TasrP lease send me a copy of l record year. Over those five years our Transamerica's 1980 Annual Report. l

growth in both earnings and dividends has I significantly outpaced the Standard & I Poor's averages. Name__

If you'd like more information about how our companies have been doing-in I Address I financial services, travel and entertainment II services and manufacturing of precision- I City/State/Zip________________ I engineered products-just send the l I coupon at right and we'll send you our I _ll=TI 1980annualreport. 1 I lr alS m lcl

l Trnlmeic



Santa Fe Industries: Realistic Planning. Real Earnings Growth.

In vital businesses like ours, the rate of inflation in real progress can't be left to earnings growth. chance. For five consecutive years of record earnings, When you look ahead, you'll you need solid long range find Santa Fe Industries. planning and a corporate For more information about structure that actively our dramatic 1980 results, encourages growth. please write for a copy of

our annual report: Our results for 1980 illustrate the value of having a long- Santa Fe Industries, Inc. range perspective and build- Department 333 ing for tomorrow right now. 224 South Michigan Avenue Net income in 1980 was a Chicago, Illinois 60604 record $301.8 million, an increase of 33% over 1979. in199. I a i

en viro bsnment,ik ours copn Energ svntransotefifation.i ra

coantinuges toaotditanctielEery p o r oducma ing98 resources.



Another record quarter. Earnings up 26%.

Shouldn't you look into Grac

Once again in 1981, Grace has achieved record first quarter growth.

Our net income rose 26% over the same period a year ago. Our earnings per common share were up 24%. And we also enjoyed record first quarter sales of $1.5 billion.

Operating income after taxes from our chemical businesses was up by 42%. Additionally, we expect continued impressive growth in natural resources as we expand oil, gas and coal production, and our oil field services. Yet, as dramatic as our first quarter results

have been, they should hardly come as a surprise. Grace has posted higher earnings in its last 16 quarter-to-quarter comparisons- despite ups and downs in the economy. With a record like that, shouldn't you look into Grace? Send for our latest earnings statement by writing to J. G. Stier, Investor Relations, W. R. Grace & Co., Grace Plaza, 1114 Avenue of the Americas, New York, N.Y 10036, Dept. FAJ. And look into a company that's looking better every quarter.

WR.GRACE & CO. FIRST QUARTER 1981 VS. 1980

($ MILLIONS EXCEPT PER SHARE)

Increase Increase 1981 1980* Amount Percent

SALES $1,481.9 $1,369.5 $112.4 8.2%

NET INCOME $ 83.0 $ 65.8 $ 17.2 26.1%

EARNINGS PER COMMON SHARE $ 1.75 $ 1.41 $ .34 24.1%

*Restated for poolings of interests.

One step ahead of a changing world.

chemicals natural resources * consumer products

W. R. Groce & Co., 11 14 Avenue of the Americas, New York, N.Y 10036



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answer key questions necea- 4. following facts. advisor or to attend a seminar. such a strong binding seldom- sary for loan approval and in .o, 9s Only 9.60/o of approved loans Fo xml:hado obeGuarantee. No order to help avoid having your " -.were actually made to minor/tea Initially. this amazing Guaran- stronger guarantee possible! It application turned down-gives '- . " laat year teed and Direct Loans Manual was actually pays for you to order a you advice on what you should * What SBA recognizea as a specially designed to be the basis copy of this remarkable manual - not do under any circumstances. ~ ' small business" actually of a Small Business Loan Seminar 100% tax deductible as a bus/ness

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WHAT'S BETTER THAN SPEED READING?

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Does business strss cause high blood pressure?

Stress on the job is a real problem for most of us. Many people think high-pressure jobs cause high blood pressure.

Scientists and doctors aren't sure if stress causes high blood pressure. But one thing is for sure: anybody, no matter how they react to stress, can have high blood pressure.

If you have high blood pressure you

can control it -with medication, weight control, less salt, and whatever else your doctor tells you to do, every day.

No matter what you do for a living, keep on living.

itgh blood pressure.

Treat it and live

National High Blood Pressure Education Program. National Hearl. Lung. and Blood Institute. U.S Department of Health and Human Services



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