Tabell’s Market Letter – June 19, 1964

Walston &Co. Inc —– Members New YOTk Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFfiCES Co,a.Sl TO COASl 'ND OVEaSEAS TABELL'S MARKET LEnER June 19, 1964 COPPERWELD STEEL COMPANY Current Price 50 Recent developments make a second Current Dividend 2.00 lodlt' at Copperweld Steel Company, first Current Yield 4.0 recommended in this letter in January, wort while. For the first quarter of 1964 the Long Term Debt 17,556,000 company reported a 16. 7/0 increase in sales Common Stock 1,191,737 shs. to almost 30,000,000 and net earnings of 1. 20 vs. .72 or a two-thirds increase. Sales 1964-E 112,000, OOO.-,c-Second quarterLl'esults should be'equally im- sales 1963 – —'- 101,434,502 pressive, and order backlog for the normally low third quarter continues high. It is now Earnings per Sh. 1964-E 4.75 possible to estimate 1964 earnings of around Earnings per Sh. 1963 3.08 4.75 vs. 3.08 in 1963. This will constitute the second best year Market Range 1964-59 55-263/4 in the company's history, surpassed only by 1959, the year of the steel strike. During that year, in the non-strike months, D. S. steel production was considerably above current levels, and Copperweld, moreover, benefited by bel ng among the companies not struck. Thus, the company's improvement program, under which some 9 million of capital expenditures have been made in the past two years, has evidently been highly successful. At less than 11 times anticipated 1964 earnings, C d be attractive in its own right, but it now appears obvious that i pow ill increase sub- stantially in the years ahead. The reason for this 1 ase c e found in three areas of the company's operations. 1. Alumoweld – Sales of this aluminu – ted I wire con1inue to be gratifying, a1yd now amountto some-5'oItlie -tal- ume.-production has increase-dfrom 7 million pounds in 1961 to ais; pounds in 1964, and capacity.is presently available to expand 0 i The product is gaining increased acceptance in variou e t n ssion applications, especially as overhead ground wire, and future e bright. 2. Continuou tin e company's Aristoloy Steel Division is 'currently installing a continuou ca g with 300,000 tons of ammmi capacity. Since this is less than half of A oloy's total capacity, it is expected that the new equipment will be used full time. Various estimates have been made in the trade as to possible savings from continuous casting, but a conservative estimate of the savings Copperweld might enjoy from this facility would be 10 a ton or 3,000,000 annually. After taxes, this would amount to approximately 1.25 per share of common stock ap.d a 15 per ton saving would amount to 1.88. The equipment is expected to be operational by the latter half of 1965. 3. New Copperweld Equipment – The company is now testing in a pilot plant new cost reduction equipment for the manufacture of its staple product, Copperweld, or copper coated steel wire. Eventual conversion of Copperweld production to this equipment will take place as volume increases warrant. Due to increased yield, savi ngs of as much as 20 appear possible on a product with better 20,000,000 annual sales. Thus, per- shire savings' as the new equipment is i'n;talled, -could be as much as 1.75 per common share. In summary, then, Copperweld probably has at the moment an annual eam ing capa- city in the 2.51) -5.00 range, depending on over-all steel demand. To this can be added an increment of 3.00-4.00 from the three factors mentioned above. Within the next three to four years, therefore, the basic earning power of the company could be 5.50- 9.00, depending on over-all steel demand. Earnings of this magnitude could well justify the technical upside potential wh ich is in the 80 – 90 range. The stock is again recommende for inclusion in capitaJ gains accounts. Dow-Jones Industrials 825.25 Dow-Jones Rails 206.82 ANTHONY W. TABELL WALSTON & CO, INC. 1 hi lllrh(j htt.er aut. und Ilndel no c'rcumstance5 IS to he aq, fin offer to Sl'U or n 501l(llatlo')n to hu' any S(!Cuntl(1 referrl'd to h!rem The miormntJon 'ont,llned hel em 15 n,'l U to ar..cnrnc… ,lr compll'hne;g lnd 1hc tl11'lcof 15 not. and under nv I'lrC\1I11tar1('el to be construed AI, It TI'prcsenta. 11JIl hv \\-nlHlon &. Co, Inc \lJ of lire \lhJcel to challJ1c WIthout notice 'alston & Co, Inc, and Officers, Directors, and i-mp1,;'('t.'s th('rrof, )lmchasp, sell linn PH.) have U'l 1Il1.1r……llll the mentlUnt'd h('rein ThIS market letter IS mtended and presented merel as a ItcnNui, mfornml commn\ary N' ,tIl to da 1Trkct new\ and not as 8 complete a1mh-!IIs AddItional mformatlon 'llh l(',pect to any securlb('s rderted to herein fIn rllh('.\ upon rNlllest