CFA Institute Front Matter Source: Financial Analysts Journal, Vol. 37, No. 5 (Sep. - Oct., 1981), pp. 1-69 Published by: CFA Institute Stable URL: http://www.jstor.org/stable/4478478 . Accessed: 13/06/2014 06:30 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. . CFA Institute is collaborating with JSTOR to digitize, preserve and extend access to Financial Analysts Journal. http://www.jstor.org This content downloaded from 195.78.109.119 on Fri, 13 Jun 2014 06:30:41 AM All use subject to JSTOR Terms and Conditions
Transcript
CFA Institute
Front MatterSource: Financial Analysts Journal, Vol. 37, No. 5 (Sep. - Oct., 1981), pp. 1-69Published by: CFA InstituteStable URL: http://www.jstor.org/stable/4478478 .
Accessed: 13/06/2014 06:30
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp
.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact [email protected].
.
CFA Institute is collaborating with JSTOR to digitize, preserve and extend access to Financial AnalystsJournal.
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Associate Editors WILLIAM H. BEAVER Graduate School of Business Stanford University Stanford, Califormia FISCHER BLACK Sloan School of Management, M.I.T. Cambridge RICHARD A. BREALEY Graduate School of Business London GLENELG P. CATERER, C.F.A. New York JAMES F. COLE Guardian Capital Group Limited Toronto ROBERT I. CUMMIN Lloyd Investments, Inc. Philadelphia M. HARVEY EARP, C. F.A. Brittany Capital Corporation Dallas CHARLES D. ELLIS, C.F.A. Greenwich Research Associates Greenwich, Conn. ROBERT FERGUSON College Ret. Equities Fund New York WILLIAM L. FOUSE, C. EA. Wells Fargo Invst. Advisors San Francisco WALTER R. GOOD, C.F.A. Continental Group, Inc. Stamford, Conn. WILLIAM S. GRAY, C.F.A. Harris Trust and Savings Bank Chicago DAVID L. GROVE Int. Chamber of Commerce U.S. Council New York GODFREY G. HOWARD North Carolina National Bank Charlotte IRVING KAHN, C.F.A. Kahn Brothers & Co. Inc. New York MARTIN L. LEIBOWITZ Salomon Brothers New York JAY 0. LIGHT Harvard Business School Boston EDMUND A. MENNIS, C.F.A. Security Pacific Investment Managers, Inc. Los Angeles ANTHONY H. MEYER Drexel Burnham Lambert Inc. New York ROBERT D. MILNE, C. F.A. Duff and Phelps Investment Management Co. Cleveland RUSSELL J. MORRISON, C.F.A. Investment Counsel Toronto STANLEY A. NABI, C.F.A. Lazard Freres & Co. New York GORDON PYE Irving Trust Company New York
FINANCIAL ANALYSTS
FEIFIIATIDE The Financial Analysts Federation, founded in 1947, is a non-profit professional organization consisting of 51 Financial Analysts societies located in the major cities of the United States and Canada. These societies have an aggregate of about 14,500 members who are engaged in security analysis, portfolio management, and executive direction of the investment function. The affiliated Institute of Chartered Financial Analysts awards the professional designation of "Chartered Financial Analyst" to qualified members upon successful completion of three examinations.
Officers: 1981-82 Chairman / Frank A. Cappiello, Jr. President / Theodore R. Lilley, C. F.A. Vice Chairman Edus H. Warren, Jr., C.F.A. Vice President Matthias Plum, Jr.
Board of Directors: 1981-82 J. Gary Burkhead, C.F.A. I Equitable Life Assurance Society
of the U.S., New York Harry A. Campbell, C.F.A. / Edelstein, Campbell & Co., Inc., San Francisco Frank A. Cappiello, Jr. I Dowbeaters, Inc., Baltimore Leon G. Cooperman, C.F.A. / Goldman, Sachs & Co., New York Anthony T. Cope, C.F.A. / Wellington Management Company, Boston Edward B. Dillmann, C.F.A. / Harris Trust and Savings Bank, Chicago Theodore R. Lilley, C.F.A. / The Financial Analysts Federation, New York John D. McStay, C.F.A. / Mercantile Securities Corporation, Dallas Frederick L. Muller, C.F.A. / Atlanta Capital Management Company, Atlanta John A. Nielsen, C.F.A. / Brown Brothers Harriman & Co., New York Matthias Plum, Jr. / Massachusetts Financial Services Company, Boston Robert G. Puchniak, C.F.A. / Tundra Trading Limited, Winnipeg Eugene C. Sit, C.F.A. / Sit Investment Associates Inc., Twin Cities James R. Vertin, C.F.A. / Wells Fargo Investment Advisors, San Francisco Edus H. Warren, Jr., C.F.A. / Capital Research Company, New York Ernest R. Widmann, C.F.A. / Widmann, Blee & Co., Inc., Philadelphia Erwin H. Will, Jr., C.F.A. / Capitoline Investment Services Inc., Richmond Gordon T. Wise, C.F.A. / Imperial Capital Management, Inc., Houston
Staff Secretary-Treasurer I Mildred M. Hermann Program Administrator / Jeanne A. Cox Manager, Member Services / Peggy E. Kelly Staff Accountant ! Ruth Goldklang
ADOLPHEJ. WARNER, C.F.A. Financial Consultant New York ROMAN L. WEIL Graduate School of Business University of Chicago Chicago ARTHUR ZEIKEL Merrill Lynch Asset Management New York
Journal Staff Production Manager / Joseph W. Hollis Advertising Coordinator / Eloise E. Sweeney Advertising Representative James R. Stack & Associates, Inc. 50 East 42nd Street New York, N.Y. 10017 / (212) 867-9690 James R. Stack / Marketing Manager
For Change of Address: Send old label and new address with Zip Code, six weeks before moving.
Headquarters Office: 1633 Broadway, New York, NY 10019 / (212) 957-2860
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This semi-submersible oil rig 50 miles off the coast of Brazil uses a Vetco subsea oil production system. 600 feet below the surface. to help make early production possible.
and~~~1 dondept ee u neL,w rervs
Some of the most promising areas for new oil and gas dis-
coveries lie beneath the world's - seas. Yet only five percent of
all wells have been drilled there. Several Combustion Engineering companies have helped pioneer much of the technology used in finding and producing these offshore reserves. Probing to record depths. Vetco Offshore, a C-E subsidiary, has helped extend the search for crude to record depths below the surface of the ocean. The stakes are enormous. Some geol-
Ko ogists estimate that as much as 110 billion barrels, perhaps a quarter of the world's undiscov-
ered offshore reserves, may lie in water depths of 600 to 6,000 feet. To date, most wells drilled at 3,500 feet and beyond have used Vetco's wellheads. A num- ber have used Vetco's innovative guidelineless drilling system.
This system eliminates all cables between the vessel and the ocean floor. The crew uses scanning sonar and television to direct drilling equipment on the ocean floor. The drilling vessel may be dynamically positioned, with computer-controlled thrust- ers used to hold it in place above the well. At present, there are 11 dynamically positioned vessels in the world. Most of them carry Vetco equipment.
CIE's oil and gas market revenues: A continuing source of growth. Revenues from Combustion
Engineering's oil- and gas-related operations are continuing to lead the company's growth. In addition to Vetco, major C-E companies serving this market include Gray Tool Company, C-E Natco and C-E Randall.
We're also upgrading and building refineries and petro- chemical plants. Developing cleaner, more efficient ways electric utilities and other indus- tries can use coal. Providing equipment and services for nuclear power generation. And leading the way in the develop- ment of alternative fuels.
For more information about our diverse lines of energy- related businesses, write Combustion Engineering, Inc., Dept. 7004-187, 900 Long Ridge Road, Stamford, Connecticut, USA 06902.
EL-I COMBUSTION ENGINEERING
The Energy Systems Company
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Supply-Side Economics ............................ 29 Arthur B. Laffer An increase in the tax "wedge" on labor will raise wages employers pay and lower wages workers receive, causing employers to use less work- ers and workers to supply less work effort. A lower level of economic activity will ensue. With less activ- ity, the value of each unit of capital employed will decrease, and the demand for capital will fall; less capital will be employed and both yields paid and yields received will fall. Similarly, an increase in the tax wedge on the returns to capital will increase yields paid for capital while lowering yields received, the amount of both capital and labor employed, wages received and paid and overall output. A reduction in the rate of taxation on the earnings from capital would result in more investment, hence increased wages; lower tax rates on wages would increase employment, hence profits.
Interpreting Disclosures of the Effects of Changing Prices ............................... 45
William H. Beaver In a very real sense, the original cost of an asset reflects the expected inflation over its esti- mated useful life. On the other hand, there is no reason to believe that the depreciation method used by most firms measures either nominal or real eco- nomic depreciation. Thus historical cost and constant dollar accounting, which depend on a depreciation schedule, will not in general produce accounting rates of return that are interpretable as either real or nominal rates of return. By contrast, current cost ac- counting in its pure form - i.e., as a market value accounting model, free from arbitrary accruals -will produce interpretable numbers.
Measuring Equity Transaction Costs .......... 57 Kathleen A. Condon In a study of its own transaction experience, Bankers Trust defined market impact as a stock's price movement from the time the trading desk received an order until execution, with the effect of change in market level in the interim adjusted out. Market impact reached 0.92 per cent for purchases, versus 0.18 per cent for sales. Although the trans- action costs of broker-initiated and bank-initiated sales were not significantly different, broker-initiated purchases cost significantly less than bank-initiated purchases.
Institutional Buying Power and the Stock Market ................................ 62
R. David Ranson and William G. Shipman Mutual funds' cash to assets ratio tends to be low at market peaks and high at market troughs. One popular explanation is that changes in the funds' liquid asset balances cause changes in stock price levels. A more likely one is that changes in stock price levels cause changes in the denominator of the ratio -total assets.
On Reporting Dilutionary Exchanges ......... 70 Donald K. Clancy and John A. Yeakel Accounting Prin- ciples Board Opinion No. 15 requires that issuers re- port both primary and fully diluted earnings per share when significant potential dilution exists. The authors review the rules under APB No. 15 govern- ing the calculation of these ratios and discuss some alternatives.
Editor's Comment William S. Gray ................ 6
Editorial Viewpoint Robert I. Cummin ........... 10
Letters ................................. 15
Pension Fund Perspective Thomas M. Roginski.. 16
Securities Law and Regulation John G. Gillis .. 21
Accounting for Financial Analysis William C. Norby and Lee J. Seidler ......................... 25
Book Reviews Robert I. Cummin ............ ....... 74
FINANCIAL ANALYSTS JOURNAL I SEPTEMBER-OCTOBER 1981 ] 3
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You're looking at a Harris shear and an American Scrap-Grab'r working together to turn what used to be considered scrap into the high-grade product required by the steel industry's shift to electric furnaces.
At Amhoist, we're deeply involved in resource recovery. Harris presses and shears hold a major share of the U.S. market and are strong competitors overseas. American cable cranes and hydraulic grabbers also rank at or near the top of their market segments. Some of the Harris equipment, costing millions of dollars, is the biggest of its kind in the world.
Balers for non-ferrous metals and fiber materials are another area where we've achieved significant market penetration. Several hundred of our automated high-reduction balers are already in place.
Our solid waste balers are helping to recover and recycle usable waste materials, thereby minimizing transportation, space, cost, and pollution problems at landfill disposal sites. Customers range from small- and medium-sized municipalities to the vast Meadowlands reclamation project in New Jersey.
The growth prospects for our resource recovery equipment look excellent. Today, some 30 percent of all U.S. steel furnaces are electric and require large amounts of scrap steel for their operation. This figure is expected to reach 42 percent in the near future. As energy costs continue to rise, non-ferrous materials such as aluminum, copper, and paper will be recycled to a far greater extent than today since recycling takes only 10 to 25 percent of the energy needed to process raw material.
We hope this begins to give you an idea of how diversified we are for a company that most people know as a maker of heavy construction equipment. Because of our many products and markets - and because we're active in several markets that aren't directly affected by general construction's ups and downs - we offer surprisingly balanced performance coupled with fine opportunities for capital growth. To learn more about us, please write for our latest annual report.
American Hoist & Derrick Company 63 South Robert Street St. Paul, Minnesota 55107
m-i
I
CP 144
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PPG RESHAPES AN OLD PRODUCTI1NTO A NEW MARKET. It's not easy to transform
the market for a widely used commodity product like caustic soda. But that's just what PPG did when we developed it in a new and better form: tiny beads.
In its traditional flake form, caustic soda poses some difficult handling problems. It either cakes or kicks up lots of caustic dust when it's poured.
Our beads, then, provide a perfect answer. They're practically dust-free.
One result has been a new growth in the market, in industries : from cleanser manufacturing and food processing to petroleum exploration.
And now, PPG is more firmly estab- lished than ever as the nation's number one merchant supplier of caustic soda.
You might say we've left< the competition in the dust. And changed the market in the process.
We approach all our business areas with the same innovative energy. By seeing opportunities where others may not. And hon- ing our skills and resources to turn those opportunities into achievements.
We call it the PPG strat- egy. Grow in the best parts of four industries: chem- icals, glass, fiber glass, and coatings and resins.
PPG Industries, Inc., One Gateway Center, Pittsburgh, PA 15222. PPG: a Concern for the Future
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The search for new reserves of oil and gas is the fastest growing segment of our business. Subsidiaries invest in exploration and own and operate drilling rigs, such as this unit working in the Gulf of Mexico.
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A leader in interstate gas transmission for more than half a century, Panhandle Eastern is now a multi-faceted energy business with a growing stake in oil and gas exploration and production, contract well drilling and coal development. In recognition of this diversified energy base, Panhandle Eastern has recently completed its reorganization into a holding company structure. This new corporate posture provides more flexibility in financing multi- billion dollar energy projects, such as transporting natural gas from Canada and Alaska, importing LNG and converting coal to synthetic gas.
Thus, Panhandle Eastern Corporation is the new parent company for:
* Panhandle Eastern Pipe Line Company and Trunkline Gas Company- two major interstate gas transmission systems com- posed of more than 16,000 miles of pipeline and supply- ing, through local distribution companies, approximately 10 percent of the population of the United States with nearly one trillion cubic feet of natural gas a year.
* Anadarko Production Company and Pan Eastern Exploration Company- which are investing nearly $200 Million this year in the search for oil and gas
reserves, drilling 300 wells, producing crude oil, natural gas and natural gas liquids.
Dixilyn-Field Drilling Company-operating 39 drilling ri.gs in the United States and overseas, with four additional units under construction this year.
These activities, plus inmpor- tation of LNGJ investments in Western coal development and liquid hydrocarbon ex- traction and marketing, com- plete the diversified energy base of Panhandle Eastern Corporation-the new name for a strong energy business with assets exceeding $3.5 Billion.
Consolidated nlet income has improved at a compound
growth rate of 22 percent in the last five years. Panhandle Eastern has paid cash divi- dends on its common stock continually since 1939.
The familiar PEL symbol has been retained for trad- ing the common stock of Panhanidle Eastern Corpora- tioIi on the New York and other major stock exchlanges. Newspaper quotes of the common stock now appear after the abbreviation PlanhEC.
Planihanidle Easterni Corporation P. O. Box 1642, Houston,Texas 77001
PANHANDLE EASTERN CORPORATION
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a 90% increase in second quarter earnings overthe same period for 1980.
"The earnings for the second quarter exceeded the record earnings achieved in the first three months:' said Ray C. Adam, chairman and
chief executive officer. "With the continuing growth in worldwide drilling activity and the expansion of NL's petro- leum services operations, we now anticipate reaching a sig- nificantly improved level of record earnings for the full year 1981."
Net income for the second quarter of 1981 was $75,428,000, or $1.12 per
common share, an increase of 90% over net income of $39,794,000, or $.58 per common share in the year- earlier period. Second quarter sales of $687,230, 000 were 3 5% over 1980 sales for the same period.
Earnings for the six-month
period were $134,952,000, or $2.00 per common share, a 77% increase over earnings of $76,299,000, or $1.12 per common share in the first half of 1980. N Us six-month sales totaled $1,292,902,000, a 27% increase over the first six months of 1980.
The income improvement for the second quarter and six months exceeded sales in- creases due to the growth in the higher margin petroleum services operations and the contribution of income
from N L's equity interest in partially-owned companies.
NL Petroleum Services operating income in the sec- ond quarter increased 97% over the same period last year and accounted for 74% of N L's operating income. As a result of continued high levels of drilling in the U.S. and worldwide, significant income gains were realized in drilling fluids and services, wireline and well services, tool rental, treating chemicals, and
workover and completion serv- ices. Earnings from blowout preventer and premium con- nection operations had dra- matic increases and backlog positions remain strong. Results for the second quarter of 1981 also include the directional drilling operations of NL Sperry-Sun, acquired in April of this year.
NL Chemicals earnings were ahead of the second
quarter of 1980 as the result of an improved performance in specialty chemicals and North American titanium pig- ments operations. These gains were partially offset by a weakness in demand for these product lines in Europe.,
Profits of Titanium Metals Corporation of America (TMCA) increased 20% over 1980, reflecting the continued strong aerospace demand for titanium metal. TMCA is a 50% owned subsidiary of NL. NL's fabricated metal products operations continued to be profitable, and second quarter earnings exceeded those of 1980 despite the continued depressed conditions in the automotive industry.
NL Industries is a leading worldwide manufacturer and supplier of petroleum services and equipment with annual sales of about $2.5 billion.
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, Inc. 1230 Avenue of the Americas NewYork, NY 10020
SALES AND EARNINGS (A) (unaudited) For the three months For the six months (In thousands, except per share) Ended June 30, Ended June 30,
Incomebeforetaxeson income $126,064 $ 61,711 $ 223,816 $ 126,167 Provision fortaxes on income 50,636 21,917 88,864 49,868
Net income $ 75,428 $ 39,794 $ 134,952 $ 76,299 Income per share of common
stock (B) $ 1.12 $ .58 $ 2.00 $ 1.12
Note (A) In April 1981, N L acquired Sperry-Sun, Inc. for cash in the amount of $252,340,000. The earnings of Sperry-Sun, Inc., before interest costs incurred to finance the acquisition, had a positive effect on NLs earnings. This impact, in relation to NLs total earnings, was not of sufficient magnitude to warrant separate reporting. Assuming this acquisition occurred as of January 1, 1980, interest expense, net of income taxes, would have increased as follows: second quarter 1981 and 1980, $1,360,000 and $5,220,000, respectively; six months 1981 and 1980, $7,530,000 and $10,820,000, respectively. Note (B) Income per share of common stock has been calculated after deduction for preferred stock dividend requirements of $.01 and $.03 per share of common stock for the three months and six months ended June 30, respectively, and reflects the two-for-one common stock split approved by shareholders on April 22, 1981.
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design, our small boats require plastic canoes. Designed for less horsepower and less gas speed, efficiency and safety, than many boats made from these new canoes are helping to
HIGH-PERFORMANCE CRUISING SAILBOATS other materials. And because broaden the market and widen AND A WHOLE NEW HULL FOR
SMELL BOATS. they're lighter, our boats can the appeal of the sport.
be trailered with the down- For mnore about how The flagships of the sized cars of the '80s. Grumman covers the water-
Grumman fleet are our Pearson front in the $7 billion boating Yachts. Ranging in size to our A LIGHTWEIGHT CANOE industry, write: Grumman 53' Diesel auxiliary ketch, FOR HEAV Y DUT Y CANOEING. Corporation, Dept. GCP, they are the designs of noted Bethpage, New York 11714. naval architect Bill Shaw. Grumman pioneered the
Newest in the Grumman concept of the aluminum canoe. line of leisure craft is a trio 4t And we have sold over 400,000) G RUM MAN of small boats also de- '1t of these nearly indestructible_ signed by Bill _ _ i craft. More than any other Shaw. Due to manufacturer. their efficient Most recently, aluminum hull Grumman introduced
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A rich province, Ontario. Ontario generates 40% of
Canada's total G N P. Personal income per capita for its 8.5 million people is more than 9% above the national average. And its vital heart, the Toronto area, continues to be one of the fastest growing economic regions in North America, with nearly $2 billion in building
permits issued annually. It is Canada's most
productive agricultural region. It is the manufacturing leader. And the pacesetter for industrial growth.
Ontario is powered by one of the world's largest electric utilities: Ontario Hydro.
This huge utility is also a major exporter of power to the
U.S., with revenues from these sales totalling more than $500 million in the last three years. For more information, write:
ONTARIO HYDRO 700 University Avenue Toronto, Ontario M5G 1X6
Ww.,
1 m a qs a DJ TI.,e,'
011P.'' M7 M/1.1% a a, a
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Northwest Industries aftertax return on average total capital
20%
17
15% 13.3 13.8 13.8 13.7 13.3 12.61.
9.9
10% 9.0
7.7
6.0 5.4
5% 4.
0%
Nvo queston.We've made our invest-
ments workThrough close attention to the allocation and control of capital - both fixed and working capital.That's a major reason Northwest Industries has been successful since its founding in 1968.
Our earnings per share increased from 53 cents in 1968 to $5.03 in 1980, a compound annual growth rate of 20.6 percent.That compares to an annual com- pound growth rate of 8.3 percent for earnings per share of Standard & Poor's 400 over the same period. Most important, aftertax return on average total capital more than doubled from 5.4 per- cent to 12.2 percent. And 1981 aftertax return on aver- age total capital is expected to reach an estimated 17 percent.
Sound Internal Investment This growth hasn't been
accidental. Our goal is clear- to put our money where it will bring the greatest return com- mensurate with risk We believe it's important that the management of capital be for the long term. Our long- term growth attests to the validity of this belief.
As always, our first priority is sound investment in our operating companies. Our greatest improvement in return on capital - and much of our growth - has come from internal investment. Since our founding in 1968, we've spent about $1.4 billion in fixed and working capital to strengthen our companies.
Of course, spending a lot doesn't mean much unless you spend it well. And that's where management comes in. We try to analyze internal investments as dispassion- ately as possible and are guided by policies we believe have been proven effective.
We carefully review our operating companies' capital project proposals, weighing future market trends and adding our independent appraisal to each situation. We require that each project hold a likelihood of achieving an aftertax discounted cash flow rate of return, including associated working capital, of more than 15 percent.
And we believe this careful investment review has paid off. For example, we've invested more than $370 million, excluding working capital, in our integrated pipe company, Lone Star Steel, since 1973 to make it more profitable. And in that time, Lone Star Steel's shipments of oil country casing and tubing have grown much faster than industry shipments.
Improving Asset Utilization Close attention to existing
asset utilization has also strengthened Northwest Industries over the years. Our strategies are guided by the goal of increasing the productivity of our fixed assets and, in tum, the profitability of our operating companies. Through sound investment in asset maintenance, cost reduction, and vertical inte- gration programs, our com- panies strive for more efficient production and lower costs.
For example, Union Under- wear Company's vertical integration, back to spinning cotton, has helped make it a highly profitable, efficient market leader in the men's and children's underwear industry.
In addition, we seek to dispose of those assets, be it equipment or plants, which do not produce an acceptable return. Just as with invest- ment, we try to view and analze possible divestments as dispassionately as possible following the same general guidelines. Attention to Woridng Capital
We also pay close attention to our working capital invest- ment- less visible than fixed investment, but critical in peiods of high-cost money. In fact, the compensation of our key operating company officers is tied in part to working capital measures.
This attention has paid off. Our working capital turns have improved from 2.2 times in 1968 to 5.9 times in 1980. In 1980 alone, we were able to improve our working cap- ital utilization by more than 25 percent.
Our objective is continued growth through investment, control, and compensation programs that seek to put our money where it will bring the greatest return commen- surate with risk.To leam more about our company -
our policies, strategies, and performance - write for our annual report or our SEC Form 10-K to 6300 Sears Tower, Chicago, IL 60606.
Northwes A t Inrdus trisc 198 ?Northwest Industries, Inc., 1981
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Grace's second quarter was one for the books. The record books.
Our net income for the second quarter of 1981 went up 18% over the same period last year. To a record $99.4 million.
And Grace had sales of $1.7 billion, a new high for a second quarter, up 9% over last year.
Earnings per share increased 16% from $1.79 to $2.08.
And for the first half of 1981, net income rose 21% to $182.5 million.
We've enjoyed continued earnings growth from our operations in specialty chemicals, and especially good performance from natural resources. And our retailing and restaurant
businesses are again posting strong profits. Such impressive results, however, come as no surprise to Grace-watchers. In our last 17 year-to-year quarterly comparisons, we've posted higher earnings. In line with this growth, our quarterly dividend was just raised 13%. With that kind of record, shouldn't you look into Grace now? Before another quarter goes by. Send for our latest earnings statement. Write J. G. Stier, Investor Relations, W. R.Grace & Co.,1114 Avenue of the Americas, New York, N. Y 10036, Dept. FAJ. And look into a company that's looking better and better. Quarter after quarter.
New facilities now comprise more than two-thirds of Asarco's modernized plant at El Paso, Texas.
wilth this modernized copper and lead plant. Asarco's policy of building for the future has resulted in new and modernized metal-producing plants, such as the copper and lead smelter and zinc fuming complex shown above. New technology has also helped improve the productivity of this plant and of our other facilities around the country.
Asarco's copper refinery in Amarillo, Texas, is the most modern in the industry, as is our lead smelter and refinery in Glover, Missouri.
Asarco does more than process ore from its own mines. Performing this service for other mining companies is an essential part of our business. Today, we are the world's largest custom smelter and refiner of nonferrous metals. The metallurgical sophistication
of our plants enables us to handle complex ores which cannot be processed elsewhere in the United States and to recover valuable by-products in the process.
For more information on Asarco, write for the latest edition of our Fact Book. Department 53, ASARCO Incorporated, 120 Broadway, New York, N.Y 10271.
MSARCO Metals & Minerals
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Behind our familiar "phone company" image, there's a side to United
Telecom a lot of investors find surprising. It's called computer services. And it's the fastest growing side of
our already fast-growing company. In fact, total revenues from our com-
puter services companies have grown from $2 million to more than $115 million in the past 10 years.
But that's merely the beginning. Because, of all the major telephone com- panies in the United States today, only United Telecom is bringing telephone technology and computer services know- how together in such a far-reaching way.
With our sophisticated super-com- puters, including the CRAY-lS, we're the only company in the telecommunications field able to offer private industry a range of computer services incorporating every- thing from business information systems to engineering design analysis and processing.
We've successfully applied additional computer resources to the
development of our worldwide telecom- munications supply and distribution net- work. The revenues from this group grew by five times during the past decade, reaching more than $380 million in 1980.
That's the kind of growth we're build- ing on to make our future look just as bright as our past-a past that has seen United Telecom grow from a $415 million company in 1970 to one with revenues of nearly $2 billion in 1980.
If you'd like to know more, please write for our latest annual report to D.A. Forsythe, United Telecommunications, Inc., Box 11315, Kansas City, Missouri 64112. New York Stock Exchange symbol, UT. Newspaper listing, UniTel.
United Telecom wii United Telecommunications, Inc HUE? Progrmmedfor dMe fixtue. Telephone Services * Computerized Distribution Services Computer Services, An affirmative action employer.
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GROWYTH BY DESIGN. In th e]a s tfi ve yea rs, th ey'veJ
at a 10.3 percent compound
Investors in IC Industries know the rewards of "Growth by design" A $300 million regional railroad just 14 years ago, IC Industries has grown to become the nation's 90th largest industrial corporation, with sales of over $4.1 billion.
The past five years-each one a record-produced a 22 percent compound annual growth rate in per-share earnings. Common share dividends were increased at a 10.3 percent compound annual rate, from $1.35 in 1976 to a current rate of $2.20 in 1981.
IC Industries has entered a new stage of growth. Implementation is well underway to increase shares of basic markets, redeploy assets and accelerate earnings growth. And to improve financial performance, expand technology and further penetrate international markets.
A foundation of six principal business units is in place-Abex, Pet, Hussmann, Pepsi-Cola General Bottlers, Midas and the illinois Central Gulf Railroad.
It's a diversified and balanced foundation. Designed for growth. For more information, please write: IC Industries,
One llinois Center, 111 East Wacker Drive, Chicago, illinois 60601.
IC Industries Growth bydesignL
Diversified in six business units: Abex, Pet, Hussmann, Pepsi-Cola General Bottlers, Midas, Illinois Central Gulf Railroad.
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pounds of milk. Automobiles aren't the only things that millions of acres of farmland. roll off the production lines of Michigan. So whatever the pace of the nation's"Big
So do almost $1/2 billion in pharmaceuti- Three;' Michigan's diverse economy is a cals, more than that in flour and grain mill solid base for Consumers Power Com-
products, $3/4 billion in paper products pany, a gas and electric utility serving 67 and so on, up to an an- of the 68 counties in the
nual total of $40 bil- State's Lower Peninsula. lion in value-added by That solid base includes 7,800 manufacturers. more than 2.25 million Although the auto in- residential and almost
dustry is the largest, it 214,000 industrial and claims only about a third commercial customers.
of the total. Year after year, they al- A , mr ta m_ low Consumers Power facturind more duthan manu - z | to produce a continu- facturing produces ous flow of dividends
income for Michigan. So and earnings for its do millions of tourists shareholders. each year. And so do
? consumers | ~~Power ~~company
C M S..........F U LL PO W ER AH EA D 1665-C
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About ten years ago, NW man- agement took time out to train a hard, practical look at the years ahead. To plan for the long haul.
We made a long-term commit- ment to our employees, our cus- tomers and our stockholders. We were determined to stay on track in pursuit of our objectives, and not let quarter-by-quarter results influence us.
What has happened since we came to that decision?
In a period when traffic was on the decline, our working capital spiraled upwards-by 300%.
We've chopped our long-term debt in half-by 49%, to be exact. We've generated a gratifying cash flow which enabled us to modern- ize our plant and equipment.
As for traffic, coal has always been our bellwether. Last year we handled more than 86 million tons-with revenues rising 22.5%. And we've surpassed ourselves in meeting the growing overseas demands for coal. The years ahead will find us superbly equipped to handle domestic and foreign coal requirements.
As a company we've never been stronger. And to add to our strength, our plan to consolidate with Southern Railway will pro- duce a rail network partnership of 18,000 miles, a boon to all shippers who demand reliability and responsibility from the railroads they put their trust in.
Norfolk and Western employ- ees share the enthusiasm of man- agement for the future. And they
have shown it in ways that would make any corporation proud.
At NW, employee productivity has risen by 59%. Railyard pro- ductivity more than matched it with a rise of 60%. And hopper- car productivity gained 28%. Last yearwebrought almost 15% of our revenues down to the bottom line -the best record of any major railroad.
Increased profits, increased productivity, improved plant and rolling stock, opportunities for
h. Small wonder we're con- fidently highballing into the future. For more information, contact John P. Fishwick, Chairman and CEO, NW, Roanoke. VA 24042 _
a
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What's the current outlook for gas supplies? How about the capital needs and advantages of the gas industry? What's the status of coal gasification and other unconventional gas technologies? These are only some of the questions to which you need accurate answers, so you can make informed investment decisions.
The American Gas Association regularly publishes a series of detailed economic analysis reports on topics of concern to the gas utility industry. Members of the
financial community and others will find these reports valuable reference sources, keeping them abreast of significant developments in the gas energy field in the 80's. Many of these reports are free for the asking, and others are available at a nominal subscription fee.
To find out more about A.G.A.'s publications, and to decide which analyses will be most helpful to you, sim- ply fill out the coupon below, and mail it to American Gas Association, Consumer Communications Depart- ment, 1515 Wilson Blvd., Arlington, VA 22209.
Gas: The future belongs to the efficient. American Gas Association ?1981
* Please send me a brochure * describing A.G.A.'s publications.
Nam.e_
*Title_
Company
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City State Zip
____U_ __________
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Speed Learning is replacing speed reading. It's easy to learn... lasts a lifetime... applies to everything you read.. .and is the only accredited course with the option of college or continuing education credits.
Do you have too much to read and too little time to read it? Do you mentally pronounce each word as you read? Do you frequently have to go back and re- read words or whole paragraphs you just finished reading? Do you have trouble concentrating? Do you quickly forget most of what you read?
If you answer "yes" to any of these questions - then here at last is the prac- tical help you've been waiting for. Whether you read for business or plea- sure, school or college, you will build excep- tional skiils from this major breakthrough in effective reading, created by Dr. Russell Stauffer at the University of Delaware.
Not just "speed reading" - but speed reading-thinking-understanding-
remembering-and-learning The new Speed Learning Program
shows you step-by-proven-step how to increase your reading skill and speed, so you understand more, remember more and use more of everything you read. The typical remark made by the 75,000 slow readers who completed the Speed Learning Program was: "Why didn't someone teach me this a long time ago?" They were no longer held back by the lack of skills and poor reading habits. They could read almost as fast as they could think.
What makes Speed Learning so successful? The new Speed Learning Program does
not offer you a rehash ofthe usual eye- exercises, timing devices, costly gadgets you've probably heard about in connec- tion with speed reading courses or even tried and found ineffective.
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thing you have ever seen or heard about. Research shows that reading is 95% thinking and only 5% eye movement. Yet most of today's speed reading programs spend their time teaching you rapid eye movement (5% of the problem) and ig- nore the most important part (95%) think- ing. In brief, Speed Learning gives you what speed reading can't.
Imagine the new freedom you'll have when you learn how to dash through all types of reading material at least twice as fast as you do now, and with greater comprehension. Think of being able to get on top of the avalanche of newspa- pers, magazines and correspondence you have to read ... finishing a stimulating book and retaining facts and details more clearly and with greater accuracy than ever before.
Listen-and-learn at your own pace This is a practical, easy-to-learn pro-
gram that will work for you - no matter h ow slow a reader you think you are now. The Speed Learning Program is sci- entifically planned to get you started quickly. . . to help you in spare minutes a day. It brings you a "teacher-on- cassettes" who guides you, instructs, en- courages you, explain- ing material as you
read. Interesting items taken from Time Magazine, Business Week, Wall Street Journal, Family Circle, N.Y. Times and many others, make the program stimulating, easy and fun . . . and so much more effective.
Executives, students, professional people, men and women in all walks of life from 15 to 70 have benefited from this progam. Speed Leaming is a fully accred- ited course ... costing only 1/5 the price of less effective speed reading classroom courses. Now you can examine the same, easy, practical and proven methods at home . . . in spare time . . . without risking a penny.
Examine Speed Learning FREE for 15 days
You will be thrilled at how quickly this program will begin to develop new thinking and reading skills. After listen- ing to just one cassette and reading the preface you will quickly see how you can achieve increases in both the speed at which you read and in the amount you understand and remember.
You must be delighted with what you see or you pay nothing. Examine this remarkable program for 15 days. If, at the end of that time you are not con- vinced that you would like to master Speed Learning, simply return the pro-
gram and owe nothing. See the coupon for low price and convenient credit terms.
Note: Many companies and gov- ernment agencies have tuition assistance plans for employees providing full or partial payment for college credit programs.
In most cases, the entire cost of your Speed Learning Program is Tax Deductible.
i e rn 113 Gaither Drive, Mt. Laurel, NJ 08054 21FAJ-E I INCORPOFCATED
YES! Please rush me the materials checked below: O Please send the Speed Learning program @ $89.95 plus $4 postage and handling. El Please send the Speed Learning Medical Edition @ $99.95 plus $4 postage and handling. OL Please send the Junior Speed Learning program (ages 11 to 16) @ $79.95 plus $4 postage and handling.
I Check method of payment below: NJ residents add 5% sales tax.
O Check or money order enclosed O Charge my credit card under the regular payment terms
D O Visa O Master Card Interbank No.__ O American Express
Card No. Exp. Date_ _
I understand that if after 15 days I am not delighted in every way, that I may return the materials in their original condition for a full refund. No questions asked.
Name cassette_player,_you_may_If you don't already own a I ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~- cassette player, you may Address
_________________________________________ order this Deluxe Cassette Recorder for only $49.95.
city _________State_____ Zip______ (includes handling and | City State delivery.)
I Signature Check here to order D L - Outside USA add $10 per item plus $4 surface mail-Airmail extra - - -
COLLEGE CREDITS
You may obtain 2 full semester hour credits for course U) completion, wherever you reside. Credits offered
through Whittier College (California). Details included in your program.
CONTINUING EDUCATION UNITS
_ National Management Association, the world's largest _*I association of professional managers, awards 3.0 CEU's
r-J for course completion. CEU's can be applied toward the certificate in Management Studies.
PROFESSIONAL SOCIETIES
Speed Learning is offered internationally to members of profes- sional associations such as: American Chemical Society, Founda- tion for Accounting Education, Institute of Electrical and Electronics Engineers and dozens more. Consult your Education Director for information.
BUSINESS, INDUSTRY, GOVERNMENT
Many companies and government agencies offer Speed Learning as a wholly-paid or tuition reimbursement program. Consult your Training or Personnel Director for details.
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