Dixon Corp.: The Collinsville Plant (Abridged)Harvard Business School Case # 201097Case Software #XLS-827

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American Chemical Allied Chemical Dow Chemical1974 1975 1976 1977 1978 1974 1975 1976 1977 1978 1974 1975 1976 1977 1978

Sales ($millions) 4828 4671 4805 5235 5490 2216 2333 2630 2923 3268 4938 4888 5652 6234 6888Net income ($millions) 323 198 212 251 349 151 116 117 135 120 558 616 613 566 575Earnings per share $7.60 $4.66 $4.98 $5.91 $8.20 $5.43 $4.17 $4.52 $4.93 $4.25 $3.18 $3.33 $3.30 $3.01 $3.16Dividends per share $1.00 $1.25 $1.50 $1.65 $1.80 $1.53 $1.80 $1.80 $1.85 $2.00 $.60 $.75 $.95 $1.15 $1.30Dividend yield 5.3% 5.7% 4.3% 5.0% 4.1% 6.3% 5.4% 4.5% 4.5% 7.1% 2.5% 1.7% 2.3% 4.5% 5.6%Common stock prices

High $23 $30 $36 $46 $48 $54 $42 $45 $51 $45 $35 $48 $57 $44 $31Low $10 $17 $21 $30 $32 $23 $27 $33 $39 $28 $25 $27 $38 $25 $22Close $19.00 $21.90 $34.86 $33.10 $44.28 $28.24 $32.94 $39.78 $43.88 $28.05 $27.98 $45.95 $42.90 $27.09 $24.96

Closing P/E 2.5 x 4.7 x 7.0 x 5.6 x 5.4 x 5.2 x 7.9 x 8.8 x 8.9 x 6.6 x 8.8 x 13.8x 13.0x 9.0 x 7.9 xTotal capitalization ($MM) 2014 2109 2198 2465 2527 1550 1839 1959 2279 2467 3498 4316 5118 5889 6793

Debt 886 780 813 715 986 434 625 646 820 937 1294 1554 1894 2356 2921Preferred stock - - - - 505 - - - - - - - - - -Common stock 1128 1329 1385 1750 1036 1116 1214 1313 1459 1530 2204 2762 3224 3533 3872

Number of shares (millions) 43 42 43 42 43 28 28 26 27 28 175 185 186 188 182Market value of equity ($MM) $808 $931 $1,484 $1,406 $1,885 $785 $916 $1,030 $1,202 $792 $4,910 $8,501 $7,969 $5,094 $4,543Beta ------------------------------------1.20---------------------------------------------------------------------1.43------------------------------------- ----------------------------------1.25-----------------------------------Interest coverage (a) 6.3 3.9 4.1 4.3 6.7 9.2 5.7 5.2 5.4 4.9 10.6 8.2 6.5 4.9 4.4Bond rating (b) -----------------------------------BBB/A--------------------------------------------------------------------A/A------------------------------------------------------------------------A/Aa----------------------------------

Du Pont Monsanto Union Carbide1974 1975 1976 1977 1978 1974 1975 1976 1977 1978 1974 1975 1976 1977 1978

Sales ($millions) 6910 7221 8361 9435 10584 3498 3625 4270 4595 5019 5320 5665 6346 7036 7870Net income ($millions) 404 272 459 545 787 323 306 366 276 303 530 382 441 385 394Earnings per share $2.74 $1.81 $3.10 $3.69 $5.39 $9.35 $8.63 $10.05 $7.46 $8.29 $8.69 $6.23 $7.15 $6.05 $6.09Dividends per share $1.83 $1.42 $1.75 $1.92 $2.42 $2.30 $2.55 $2.75 $3.03 $3.18 $2.18 $2.40 $2.50 $2.80 $2.80Dividend yield 6.0% 3.2% 3.7% 4.8% 5.8% 5.9% 3.4% 3.2% 5.4% 6.8% 5.3% 3.9% 4.0% 6.8% 8.2%Common stock prices

High $60 $45 $54 $45 $46 $70 $81 $100 $89 $60 $46 $67 $77 $62 $43Low $28 $29 $39 $35 $33 $39 $41 $76 $52 $44 $32 $40 $56 $40 $34Close $30.96 $41.99 $44.95 $39.85 $42.04 $41.14 $75.94 $88.44 $58.19 $47.25 $40.84 $61.05 $62.21 $41.14 $34.10

Closing P/E 11.3x 23.2 x 14.5 x 10.8 x 7.8 x 4.4 x 8.8 x 8.8 x 7.8 x 5.7 x 4.7 x 9.8 x 8.7 x 6.8 x 5.6 xTotal capitalization ($MM) 4874 5085 5772 6127 6394 2396 2942 3349 3668 4115 3752 4485 5212 5750 5997

Debt 780 864 1270 1287 1087 599 853 904 1027 1235 976 1346 1668 1725 1679Preferred stock 244 254 231 245 256 - - - - - - - - - -Common stock 3850 3966 4271 4595 5051 1797 2089 2445 2641 2881 2776 3140 3544 4025 4318

Number of shares (millions) 147 150 148 148 146 35 35 36 37 37 61 61 62 64 65Market value of equity ($MM) $4,565 $6,310 $6,656 $5,886 $6,139 $1,421 $2,693 $3,221 $2,153 $1,727 $2,491 $3,744 $3,837 $2,618 $2,206Beta -----------------------------------1.22----------------------------------- -----------------------------------1.43----------------------------------- -----------------------------------1.05-----------------------------------Interest coverage (a) 9.5 4.1 6.0 6.1 9.5 11.4 9.1 8.4 7.0 6.5 14.0 8.4 7.0 5.0 4.9

Bond rating (b) ---------------------------------AAA/Aaa------------------------------ ---------------------------------AA/Aa------------------------------ --------------------------------AA/Aa------------------------------

(a) Equal to earnings before interest and taxes divided by interest expenses, (b) Standard & Poor's rating/Moody's rating. NR means Not Rated.

Exhibit 1 Financial Statements for American Chemical and Other Selected Large Chemical Companies

Universal Paper Crown Zellerbach International Paper1974 1975 1976 1977 1978 1974 1975 1976 1977 1978 1974 1975 1976 1977 1978

Sales ($millions) 1867 1902 2136 2248 2525 1172 1767 2136 2318 2467 3042 3081 3541 3669 4150Net income ($millions) 149 109 154 168 191 125 75 98 109 112 263 218 254 234 234Earnings per share $3.60 $2.63 $3.72 $4.06 $4.61 $5.06 $3.01 $3.88 $4.34 $4.39 $5.95 $4.93 $5.60 $4.98 $4.94Dividends per share $0.75 $0.75 $0.75 $0.85 $1.00 $1.75 $1.80 $1.80 $1.83 $1.90 $1.75 $2.00 $2.00 $2.00 $2.00Dividend yield 6.3% 3.9% 2.5% 2.8% 3.6% 7.5% 5.1% 4.0% 5.6% 6.2% 5.6% 3.5% 2.9% 4.6% 5.5%Common stock prices

High $17 $21 $34 $36 $38 $40 $41 $49 $45 $38 $56 $62 $80 $70 $49Low $10 $12 $18 $24 $26 $20 $24 $36 $32 $29 $32 $35 $58 $39 $35Close $12.24 $18.67 $30.13 $30.04 $27.66 $23.78 $36.12 $45.01 $33.85 $31.17 $36.30 $58.17 $68.88 $43.82 $37.05

Closing P/E 3.4 x 7.1 x 8.1 x 7.4 x 6.0 x 4.7 x 12.0x 11.6x 7.8 x 7.1 x 6.1 x 11.8x 12.3 x 8.8 x 7.5 xTotal book capitalization ($MM) 1349 1620 1787 1938 2018 1220 1290 1345 1446 1647 2207 2801 3093 3303 3407

Debt 405 470 572 620 666 403 426 417 434 560 728 1148 1052 1057 954Preferred stock - - - - - 12 13 13 14 16 - - - - -Common stock 944 1150 1215 1318 1352 805 851 915 998 1071 1479 1653 2041 2246 2453

Number of shares (millions) 41.4 41.4 41.4 41.4 41.4 24.7 24.9 25.3 25.1 25.5 44.2 44.2 45.4 47.0 47.4Market value of equity ($MM) $507 $774 $1,247 $1,243 $1,146 $588 $900 $1,137 $850 $795 $1,604 $2,572 $3,124 $2,059 $1,755Beta -----------------------------------1.52----------------------------------- -----------------------------------1.03----------------------------------- -----------------------------------1.43-----------------------------------Interest coverage (a) 6.8 5.0 6.8 7.4 8.2 8.1 4.5 5.3 5.7 4.7 11.1 5.4 5.1 4.7 5.3Bond rating (b) -----------------------------------A/Aa----------------------------------- -----------------------------------A/A----------------------------------- -----------------------------------AA/Aa---------------------------------

Mead Corporation Kimberly-Clark St. Regis Paper1974 1975 1976 1977 1978 1974 1975 1976 1977 1978 1974 1975 1976 1977 1978

Sales ($millions) 1526 1245 1599 1822 2322 1439 1484 1585 1726 1911 1471 1395 1642 1996 2300Net income ($millions) 82 53 89 98 121 95 103 121 131 149 105 96 91 107 127Earnings per share $3.27 $2.05 $3.61 $4.10 $5.12 $4.10 $4.41 $5.21 $5.60 $6.36 $4.76 $4.27 $3.82 $3.36 $3.94Dividends per share $0.60 $0.80 $0.89 $0.98 $1.21 $1.48 $1.60 $1.80 $2.20 $2.60 $1.25 $1.43 $1.55 $1.66 $1.74Dividend yield 9.2% 6.6% 4.4% 4.7% 6.8% 6.5% 4.4% 4.1% 5.1% 6.4% 7.3% 4.5% 4.2% 5.6% 6.4%Common stock prices

High $13 $13 $23 $24 $34 $35 $37 $47 $48 $50 $37 $35 $31 $39 $35Low $8 $9 $12 $18 $17 $19 $24 $36 $37 $39 $18 $20 $34 $29 $26Close $9.16 $12.10 $20.94 $22.14 $23.04 $25.01 $37.04 $43.76 $43.12 $40.70 $19.04 $34.16 $38.96 $30.91 $27.97

Closing P/E 2.8 x 5.9 x 5.8 x 5.4 x 4.5 x 6.1 x 8.4 x 8.4 x 7.7 x 6.4 x 4.0 x 8.0 x 10.2 x 9.2 x 7.1 xTotal book capitalization ($MM) 826 880 965 1071 1171 1030 1086 1196 1347 1435 1127 1189 1296 1694 1791

Debt 281 308 318 407 422 247 228 239 269 273 372 345 337 525 537Preferred stock 50 53 48 43 12 - - - - - - - - - -Common stock 496 519 598 621 738 783 858 957 1078 1162 755 844 959 1169 1254

Number of shares (millions) 25.1 25.9 24.7 23.9 23.6 23.2 23.4 23.2 23.4 23.4 22.1 22.5 23.8 31.8 32.2Market value of equity ($MM) $230 $313 $516 $529 $545 $580 $865 $1,016 $1,009 $954 $420 $768 $928 $984 $902Beta -----------------------------------2.16----------------------------------- -----------------------------------0.99----------------------------------- -------------------------------------1.14----------------------------------Interest coverage (a) 4.6 2.9 4.5 4.7 5.3 9.1 8.3 10.0 10.1 10.5 7.6 7.2 6.1 5.6 5.9Bond rating (b) -----------------------------------A/A--------------------------------- -----------------------------------AA/Aa--------------------------------------------------------------------NR/NR---------------------------------

(a) Equal to earnings before interest and taxes divided by interest expenses, (b) Standard & Poor's rating/Moody's rating. NR means Not Rated.

Exhibit 2 Financial Statements for Universal Paper and Other Selected Large Chemical Companies

Year Average Price

1970 220,000 tons 270,000 tons $129/ton1971 260,000 300,000 1361972 280,000 300,000 1441973 300,000 320,000 1521974 310,000 335,000 1881975 270,000 355,000 2431976 345,000 370,000 2951977 380,000 385,000 3671978 410,000 420,000 3921979 455,000

Exhibit 3 Sales and Capacity of Sodium Chlorate Producers in the United States

Sales of Sodium Chlorate

Domestic Capacity

435,000a 413a

a Expected

Producer Capacity Plants Capacity

Hooker Chemical Corporation 114,000 tons 65,000 tons

40,000

Niagara Falls, NY 9,000Pennwalt Corporation 72,000 37,000

Portland, OR 26,000Tacoma, WA 9,000

American Chemical Corporation 65,000 40,000

Wenatchee, WA 25,000Kerr-McGee Corporation 63,000 33,000

Henderson, NV 30,000Inter. Minerals & Chemicals Corp. 40,000 Orrington, ME 40,000

Olin Corporation 20,000 20,000

ERCO Corporation 20,000 20,000

Universal Paper Corporation 20,000 20,000

Georgia Pacific Corporation 15,000 15,000

Brunswick Chemical Company 11,000 11,000

Southern Chemicals Corporation 10,000 6,000

4,000

Pacific Eng. and Prod. Co. of Nev. 5,000 Henderson, NV 5,000

U.S. Total 455.000 tons 455.000 tons

Southeastern U.S. Total 311.000 tons

Exhibit 4 Domestic Producers of Sodium Chlorate

aColumbus, MSaTaft, LA

aCalvert City, KY

aCollinsville, AL

aHamilton, MS

aMcIntosh, ALaMonroe, LAaRome, GAaPlaquemine, LAaBrunswick, GAaReigelwood, NCaButler, AL

aPlants serving the Southeastern U.S. market

Pennwait Kerr-McGee International Minerals and Chemicals1974 1975 1976 1977 1978 1974 1975 1976 1977 1978 1974 1975 1976 1977 1978

Sales ($ millions) 641 714 777 835 921 1,550 1,799 1,955 2,165 2,072 859 1,303 1,260 1,280 1,364Net income ($ millions) 27 33 35 42 45 116 131 134 119 118 70 166 135 108 120Earnings per share $2.81 $3.25 $3.56 $4.23 $4.54 $4.64 $5.15 $5.19 $4.61 $4.57 $3.59 $9.91 $7.73 $6.09 $6.61Dividends per share $1.24 $1.36 $1.54 $2.25 $2.05 $0.85 $1.00 $1.19 $1.25 $1.25 $0.57 $1.38 $2.10 $2.45 $2.60Dividend yield (%) 7.4% 4.6% 4.9% 5.2% 6.7% 1.4% 1.4% 1.8% 2.7% 2.6% 1.9% 5.3% 5.9% 6.4% 7.4%

Common stock – high $26 $30 $38 $39 $43 $93 $95 $83 $75 $53 $41 $49 $42 $44 $44Common stock – low $15 $17 $27 $32 $32 $47 $60 $61 $45 $40 $21 $31 $33 $35 $34Common stock – close $16.86 $27.95 $33.11 $38.92 $33.14 $71.92 $70.04 $67.99 $47.02 $47.99 $39.13 $37.66 $40.97 $40.80 $35.03

Closing P/E 6.0 x 8.6 x 9.3 x 9.2 x 7.3 x 15.5 x 13.6 x 13.1 x 10.2 x 10.5 x 10.9x 3.8 x 5.3 x 6.7 x 5.3 xTotal book capitalization ($MM) 371 441 469 500 524 851 1,091 1,325 1,433 1,533 577 781 990 1,083 1,161

Debt 104 150 155 170 162 162 218 318 301 261 242 297 366 390 372Preferred stock - - - - - 0 0 0 0 0 58 31 20 11 12Common stock 267 291 314 330 362 689 873 1,007 1,132 1,272 277 453 604 682 778

Number of shares (millions) 9.6 10.2 9.8 9.9 9.9 25.0 25.4 25.8 25.8 25.8 19.5 16.8 17.5 17.7 18.2Market value of equity ($MM) $162 $284 $326 $386 $329 $1,798 $1,782 $1,755 $1,214 $1,239 $763 $631 $716 $724 $636Beta -----------------------------------1.33----------------------------------- -----------------------------------1.06----------------------------------- -----------------------------------0.81-----------------------------------Interest coverage (a) 2.9 3.3 3.8 4.1 4.2 19.4 17.1 10.8 8.4 6.4 5.5 11.6 8.4 5.5 6.3Bond rating (b) -----------------------------------A/A----------------------------------------------------------------------AA/Aa----------------------------------------------------------------------NR/A-----------------------------------

Georgia-Pacific Brunswick Chemical Southern Chemicals1974 1975 1976 1977 1978 1974 1975 1976 1977 1978 1974 1975 1976 1977 1978

Sales ($ millions) 2,432 2,359 3,038 3,675 4,403 1.9 2.1 3.0 4.0 4.3 1.7 2.0 2.7 3.6 3.9Net income ($ millions) 164 148 215 262 302 0.20 0.15 0.37 0.71 0.79 0.10 (0.05) 0.28 0.74 0.73Earnings per share $1.74 $1.54 $2.12 $2.54 $2.93 $0.40 $0.30 $0.74 $1.42 $1.58 $0.61 ($0.24) $1.38 $3.69 $3.66Dividends per share $0.47 $0.49 $0.70 $0.83 $1.03 $0.10 $0.10 $0.15 $0.35 $0.40 $0.00 $0.00 $0.00 $0.30 $0.30Dividend yield (%) 3.1% 1.9% 2.1% 3.5% 4.5% c c c 2.9% 3.5% c c c 1.2% 1.3%

Common stock - high $27 $30 $37 $37 $33 c c c $13.00 $14.25 c c c $28 $31Common stock - low $13 $16 $26 $25 $24 c c c $7.50 $9.00 c c c $11 $20Common stock - close $14.96 $26.03 $36.89 $27.94 $24.03 c c c $12.00 $11.50 c c c $24.72 $23.42

Closing P/E 8.6 x 16.9x 17.4x 11.Ox 8.2 x c c c 8.5 x 7.3 x c c c 6.7 x 6.4 xTotal book capitalization ($MM) 1,935 2,150 2,045 2,541 2,878 1.8 1.9 2.1 2.6 3.2 1.6 1.5 1.8 2.4 3.0

Debt 871 903 450 737 835 0.59 0.57 0.53 0.49 0.48 0.80 0.75 0.74 0.67 0.63Preferred stock - - - - - - - - - - - - - - -Common stock 1,064 1,247 1,595 1,804 2,043 1.21 1.33 1.58 2.11 2.72 0.80 0.75 1.06 1.73 2.37

Number of shares (millions) 94.3 96.1 101.4 103.1 103.1 0.50 0.50 0.50 0.50 0.50 0.16 0.21 0.20 0.20 0.20Market value of equity ($MM) 1,410 2,501 3,741 2,882 2,476 c c c 6.04 5.77 c c c 4.96 4.67Beta -----------------------------------1.50----------------------------------- c c c -------------1.1----------- c c c -------------1.20-----------Interest coverage (a) 4.3 4.4 8.1 9.9 9.3 6.7 5 12.3 47.0 53.0 3.5 0.4 9 22.0 24.0Bond rating (b) -----------------------------------AA/Aa----------------------------------------------------------------------NR----------------------------------- -----------------------------------NR-----------------------------------

(a) Equal to earnings before interest and taxes divided by interest expenses, (b) Standard & Poor's rating/Moody's rating. NR means Not Rated, (c) Stock not publicly traded.

Exhibit 5 Financial Statements of Selected Sodium Chlorate Producers

For the Years Ended December 311974 1975 1976 1977 1978

RevenuesSales-tons 36,899 30,819 37,464 40,076 39,790 38,507Average price/ton $ 188 $ 243 $ 295 $ 367 $ 392 $ 413Sales - $000 $6,937 $7,489 $11,052 $14,708 $15,598 $15,903

Manufacturing CostsVariable - Power $2,935 $3,395 $4,631 $5,530 $6,173 $6,759

- Graphite 354 369 545 653 689 714- Salt & other 693 800 1,047 1,274 1,307 1,385

Total variable $3,982 $4,564 $6,223 $7,457 $8,169 $8,858

Fixed - Labor $ 590 $ 608 $ 646 $ 739 $ 924 $1,072- Maintenance 143 201 220 272 235 237- Other 474 659 902 1,063 509 1,107

Total fixed $1,207 $1,468 $1,768 $2,074 $1,668 $2,416Total Manufacturing Costs $5,189 $6,032 $7,991 $9,531 $9,837 $11,274Other Charges

Depreciation $ 433 $ 394 $ 402 $ 391 $ 384 $ 399Selling 114 92 126 155 181 204R&D 105 154 207 274 351 429Total $ 652 $ 640 $ 735 $ 820 $ 916 $1,032

Operating Profit $1,096 $ 817 $2,326 $4,357 $4,845 $3,597

Exhibit 6 Financial Statements for the Collinsville Plant (000s)

1979a

a Expected

Exhibit 6 (continued)

For the Years Ended December 311974 1975 1976 1977 1978 1979a

AssetsAccounts receivable $701 $779 $1,128 $1,456 $1,575 $1,622Inventories 254 544 681 647 639 651

4,066 3,978 4,003 3,853 3,964 4,014

Total $5,021 $5,301 $5,812 $5,956 $6,178 $6,287

LiabilitiesAccounts payable $ 402 $ 472 $ 619 $ 780 $ 795 $ 873

Net Assets $4,619 $4,829 $5,193 $5,176 $5,383 $5,414

Percent of Sales RatiosPower costs 42.3% 45.3% 41.9% 37.6% 39.6% 42.5%Variable costs 57.4 60.9 56.3 50.7 52.4 55.7Fixed costs 17.4 19.6 16.0 14.1 10.7 15.2Manufacturing costs 74.8 80.5 72.3 64.8 63.1 70.9Operating profit 15.8 10.9 21.0 29.6 31.1 22.6

Accounts receivable 10.1 10.4 10.2 9.9 10.1 10.2Inventories 3.7 7.3 6.2 4.4 4.1 4.1Accounts payable 5.8 6.3 5.6 5.3 5.1 5.5Net assets 66.6 64.5 47.0 35.2 34.5 34.0

Operating Profit/Net Assets 23.7 16.9 44.8 84.2 90.0 66.4

Net property, plant & equipment

a Expected

For the Years Ended December 311975 1976 1977 1978 1979a

Sales $19,128 $23,830 $28,348 $34,770 $42,259 Cost of goods sold 14,085 16,889 19,950 24,467 29,185Selling and admin. 1,952 2,308 2,824 3,291 4,436Research 325 388 593 682 716Interest 400 320 240 160 80Taxes 1,125 1,878 2,285 2,932 3,818Profit after taxes $1,241 $2,047 $2,456 $3,238 $4,024Earnings per share $1.13 $1.86 $2.23 $2.94 $3.66Dividends per share $ .20 $ .30 $ .40 $ .40 $ .50

Cash & marketable sec. $385 $357 $556 $1,273 $4,824Other current assets 4,208 5,016 5,939 7,267 8,029Property, plant & equip. 7,436 7,895 8,354 8,842 8,918Total assets $12,029 $13,268 $14,849 $17,382 $21,771

Current liabilities $2,314 $ 2,836 $3,402 $4,138 $ 6,053Debt (incl. cur. mat.) 5,000 4,000 3,000 2,000 1,000Stockholders' equity 4,715 6,432 8,447 11,244 14,718Total liabilities $12,029 $13,268 $14,849 $17,382 $21,771

Stock price range $7-14 $8-22 $19-30 $25-40 $35-45Closing stock price $9 $20 $27 $38 $40 (10/30/79)

Beta --- --- 1.06 --- ---Bond rating --- --- Not rated --- ---

Exhibit 7 Financial Statements of Dixon Corporation (000s)

a Expected

For the Years Ended December 311980 1981 1982 1983

RevenuesSales-tons 32,000 35,000 38,000 38,000Average price/ton 415 480 520 562Sales - $000 13,280 16,800 19,760 21,356trend 6.0 6.2 6.3 6.3slope 0.0914918677668987

Manufacturing costsVariable - Power 6,304 7,735 9,386 10,526% of sales 0.47 0.46 0.48 0.49slope 0.01 0.02power cost 2 6294.72 7728 9386 10464.44

% of sales 0.474 0.46 0.475 0.49power units in ton 7000 7000 7000 7000power cost 2/kwh 0.028 0.031 0.035 0.039power cost/ton 196.00 219.52 245.86 275.37power cost 3 6272 7683 9343 10464

- Graphite 645 791 875 960% of sales 0.049 0.047 0.044 0.045slope -0.001

- Salt & Other 1,285 1,621 1,753 1,836% of sales 0.097 0.096 0.089 0.086slope -0.003

Total variable $ 8,234 $ 10,147 $ 12,014 $ 13,302

Fixed - Labor 1,180 1,297 1,427 1,580% OF SALES 0.089 0.077 0.072 0.074SLOPE -0.003

- Maintenance 256 277 299 322% OF SALES 0.0192771084337349 0.016488095 0.015131578947 0.0150777299SLOPE -0.00092194024124606

- Other 1,154 1,148 1,179 322

Total fixed $ 2,590 $ 2,722 $ 2,905 1,113Total manufacturing costs $ 10,824 $ 12,869 $ 14,919 $ 3,015

$ 16,317Other charges

Selling $ 112 $ 125 $ 138

Exhibit 8 Pro Forma Financial Statements for the Collinsville Plant3 (000s)

R&D 451 478 508 $ 152Depreciation $ 1,060 $ 1,110 $ 1,160 543Total $ 1,623 $ 1,713 $ 1,806 $ 1,210

Operating Profit $ 833 $2,218 $ 3,035 $ 1,905$3,134

1984 1985 1986 1987 1988 1989

38,000 38,000 38,000 38,000 38,000 38,000606 660.54 720.0 784.8 855.4 932.4

23,028 25101 27360 29822 32506 35431

6.4

11,780 13106.7 14576.8 16205.3 18008.9 20005.9

0.51 0.52 0.53 0.54 0.55 0.560.53 0.54 0.55 0.56 0.57

11767.308 13107 14577 16205 18009 20006

0.511 0.53 0.55 0.57 0.58 0.60

7000 7000 7000 7000 7000 70000.044 0.049 0.055 0.062 0.069 0.078

308.41 345.42 386.87 433.29 485.29 543.5211720 13126 14701 16465 18441 20654

992 1048 1107 1167 1230 1294

0.043 0.042 0.040 0.039 0.038 0.037

1,956 2046 2137 2227 2317 2404

0.085 0.082 0.078 0.075 0.071 0.068

$14,728 16201 17821 19600 21556 23704

1,738 1819 1901 1983 2063 2143

0.075 0.072 0.069 0.066 0.063 0.060

3540.01537259

1,153

$ 3,245$ 17,973

$ 168

591$ 1,270$2,029$3,026

Exhibit 8 (continued)

1980For the Years Ended December 31

1981 1982 1983

AssetsAccounts receivable $ 1,622 $ 1,328 $ 1,680 $ 1,976 $2,136Inventories 651 598 756 889 961

Net property, plant & equip. 10,600 10,025 9,440 8,840 8,230Total $12,873 $11,951 $11,876 $11,705 $11,327

LiabilitiesAccounts payable 873 730 924 1,087 1,175

Net Assets $12,000 $11,221 $10,952 $10,618 $10,152

Percent of sales ratiosPower costs 47.5% 46.0% 47.5% 49.3%Variable costs 62.0 60.4 60.8 62.3Fixed costs 19.5 16.2 14.7 14.1Manufacturing costs 81.5 76.6 75.5 76.4Operating profit 6.3 13.2 15.4 14.7Accounts receivable 10.0 10.0 10.0 10.0Inventories 4.5 4.5 4.5 4.5Accounts payable 5.5 5.5 5.5 5.5Net assets 84.5% 65.2% 53.7% 47.5%

Operating profit/net assets 7.4% 20.3% 28.6% 30.9%

Expected December 31,

1979

aThese pro forma financial statements were based on the following assumptions:1Continued use of unlaminated graphite electrodes.

2Though excess industry capacity would hold price increases to less than an 8% annual rate in 1980, by 1984 the average annual price increase over the period 1979-1984 was assumed to equal 8%.

3Power costs per KWH would increase 12% per year.4Depreciation would increase because Dixon would have written up the value of the Collinsville plant to $10.6 million.

Exhibit 8 (continued)

1984

$ 2,3031,0367,560

$10,899

1,267

$ 9,632

51.2%64.014.178.013.110.0

4.55.5

41.8%

31.4%

Though excess industry capacity would hold price increases to less than an 8% annual rate in 1980, by 1984 the average annual

Depreciation would increase because Dixon would have written up the value of the Collinsville plant to $10.6 million.