Discovery

FEBRUARY 2015 THE QUARTERLY NEWSLETTER OF KOCH COMPANIES Koch’s largest project: Enid expansion

Koch Nitrogen’s facility in Enid, “A project this big is prey complex,” Other planned improvements at the Oklahoma, is already one of the largest Koch said. “It takes a lot of eort from Enid plant include construction of an plants in North America. But multiple capabilities to pull it together electric substation to improve power re- it’s about to become even bigger thanks  including tax, real estate, public sec- liability and high-speed loading equip- to a major expansion. tor, operations, engineering and market- ment for trucks and trains. Total costs for this three-year project ing capabilities. “Today, it takes us about 36 hours to will exceed $1.3 billion, making it the “It’s also been a great help to draw on load an 85-car train with 100 tons of largest in ’ history. the knowledge of other Koch compa- product per car,” Rader said. “When Steve Packebush, president of Koch Ag nies, such as Koch Membrane Systems.” this project is complete, we will be able & Solutions, calls this “an im- What it takes to load 110-car trains safely in 24 hours portant investment that underscores our or even less. con dence in the future of our fertilizer It not only takes a lot of capital to “We’ll also be able to load trucks twice business and our long-term commit- expand a fertilizer plant, it takes a lot of as fast. Instead of four or ve truckloads ment to our many customers.” water. According to Bob Rader, devel- per hour, we’ll be able to load up to 12 opment director for the Enid project, What does $1.3 billion buy? per hour with the new system, while the facility currently uses about 4 mil- still maintaining our existing system. lion gallons of water per day. At the Oct. 9 groundbreaking ceremony “at will really bene t our agricultural in Enid, Chase Koch, president of Koch “When the expansion is complete,” customers, who tend to need a lot of Agronomic Services, highlighted plans Rader said, “our average water usage will product all at once.” for the expanded facility. probably increase about 25 percent, and ese include construction of a new even more during the summer months.” Vision urea plant and revamping of existing Using that much potable water from “During the next 30 years, the world’s units, resulting in more than 1 million Enid’s municipal water system would population will probably grow by at tons of additional production capacity. put more stress on the already tight least 2 billion people,” Sco McGinn, Several infrastructure improvements are groundwater supply for the city. “So president of Koch Fertilizer, said. “at also planned. we’ve been very proactive in suggesting means an even greater need for ecient “Over the next three years,” Koch said, a way to lessen that burden,” Rader said. food production. Having more and “we will continue to improve the ef- at solution is to use Koch Membrane beer will be essential for ciency of this plant while boosting its Systems’ technology to further process meeting that demand. capacity and product quality. And in wastewater being discharged by the city. “is expanded facility in Enid will keeping with our vision and guiding KMS ultra ltration and reverse osmosis allow us to provide a far greater quan- principles, we’ll do it while consum- membranes will enable the plant to use tity and mix of products to meet our ing fewer resources and reducing our treated wastewater instead of drinking customers’ many needs.” carbon dioxide intensity. water for much of its processing. www.kfenid.com

this issue… Letters, awards and honors pg. 2 2014: Year in review pg. 5 Put that in your pipe pg. 11 Perspective: pg. 12 Postal Pipeline

On behalf of Rosemount Elementary Charles, PTO and our students and sta, we Years ago, you generously agreed to fund want to thank Flint Hills Resources for the startup of a new company, Dredge- its generous donation to fund our Lego Masters International. We were very Robotics Club. is gi makes it pos- successful under your guidance, which sible for us to purchase new robots and allowed us to do what we know how to the soware required to run them. do  build dismountable dredges. Lego Robotics teaches students to use is ended, unfortunately, following the math and science concepts to solve sinking of one of our dredges in Mexico, problems in a creative manner. It also which eventually led to your decision helps develop teamwork and strategic to sell DMI. However, rather than just thinking skills that will last a lifetime. shuing DMI down, you gave us the Your generous gi to Rosemount opportunity to nd a buyer and keep the Elementary will help ensure that our company aoat. students are beer prepared for the I have always respected you for this deci- future, both in and out of the classroom. sion. You could have easily liquidated ank you for partnering with us to get the company with lile, if any, loss. You our students excited about math, sci- appreciated our success and felt we ence and learning. ank you for helping fund the rehab deserved beer. Tom Idstrom, principal of the injured Red-tailed Hawk found My relationship with you personally and Rosemount Elementary School near Koch’s headquarters in November. with Koch Industries was always fair, Rosemount, Minnesota For you to help a bird that most people helpful and aboveboard. I wish you and at the company won’t even see says a David only the best in your very gener- lot about your care for the environment ous and successful activities. At a Nov. 11 symposium in Baltimore, and the wildlife that lives in it. Maryland, six Koch companies were Don King, president recognized for earning Wildlife at e bird has a fractured ulna near the Dredge Central, LLC Work certification from the Wildlife wrist joint in its le wing. It will take Goodlesville, Tennessee Habitat Council. four to ve weeks to calcify, and then we is certication is part of an internation- will need several weeks to condition it al accreditation program that encourages to make sure it is in ying condition for companies to create wildlife habitat areas hunting and catching prey. on corporate land. In most cases, these We hope to release the hawk near where areas are then maintained by employee it was found at Koch Industries. For volunteers. now, your donation is providing food e six award-winners included FHR– and help with vet care for this and other Corpus Christi, Georgia-Pacic facilities injured birds of prey (including Bald In the October 2014 issue of Discovery, ’s at Leaf River, Monticello and Green Bay, Eagles) during the winter months. INVISTA–Camden, and Matador Cale TERATE® polyols were inadvertently omitted from the Company’s Beaverhead Ranch. Ken Lockwood, program director lengthy list of Koch company products being used in the Eagle Valley Raptor Center In total, Koch companies hold 16 Wildlife construction of Building H on the Wichita campus. This Habitat Council certications at 12 sites. Cheney, INVISTA product is part of the roofing insulation board of the new facility.

To “like” and follow Koch companies and leaders – Discovery February 2015 | Volume 21 | Number 1 including Georgia-Pacific, INVISTA, Flint Hills Resources, Matador Ranch, Koch Pipeline, and Charles and David Editorial board Questions? Comments? Susan Armitage Greg Guest Email us at: Koch – visit Koch Industries’ Facebook and Twitter pages. Melissa Cohlmia Charles Koch [email protected] Philip Ellender Steve Lombardo Rich Fink Walt Malone Letters and other submissions become the property of Koch Jeff Gentry Dave Robertson www.kochind.com Industries, Inc. and may be reproduced in whole or in part, includ- ing your name, for any purpose and in any manner. Letters may Deer at GP’s facility in Monticello, Mississippi. be edited for length or clarity. © 2015 Koch Industries, Inc. Koch is an EOE. M/F/D/V. 2 2014 was a record year for employee contributions to the Salvation Army’s Angel Tree campaign at many Koch sites. Georgia-Paci c employees in Atlanta served 818 angels  the most of any cor- poration in that city. Wichita employees set a new record of 1,545 angels served  a 13 percent in- crease over last year. Koch Industries has supported Angel Tree for 25 years. Liz Koch serves on the na- tional board for the Salvation Army as well as the local board in Wichita. To view an employee video highlighting this year’s campaign, visit: www.youtube.com/KochCompanies

Clockwise, beginning top left: Kate Ternes (Koch Creative Group) helps a mom pick up gifts for her family; Laurel Anderson (Koch Business Solutions) on a shopping trip for several “Angels”; Mark Sweat (KS&T) says “It’s not Christmas for me until I start assembling toys for Angel Tree.”

The overcriminalization op-ed by Since retiring from the FBI, I have too Small businesses have had to close their Charles Koch and Mark Holden was an oen seen unbridled actions on the doors because the DOJ not only ned awesome article! I totally agree. My part of the Justice Department and the them to death, but also took forever state, Louisiana, seems to be one of the U.S. Aorney’s Oces. ey penalize to provide the disposition of the case. states with higher incarceration and individuals and companies on which they is lingering doubt, created by being poverty rates. have opened cases, especially when they investigated, can prove to be a death e majority of these incarcerations are discover they do not have a prosecutable knell when customers become hesitant drug related. Many young people go to oense. to do business. prison for drug-related crimes, come out e penalty inicted, a “ ne” or “sele- I applaud your contributions to support much worse o, and ultimately go back ment,” amounts to a “saving-face strat- efforts by the National Association of to prison. egy.” is way the government gets Criminal Defense Lawyers. We need to I am happy to see Charles Koch address something out of the deal so as to not address overzealous and unrestrained this, because when he talks, people do end up looking incompetent for proceed- actions by prosecutors who have lile to listen. ing with the investigation in the rst no checks and balances. place. en they turn around and use the Susan Landry Daniel L. Jablonski monies collected to justify their existence Wichita, Kansas Product stewardship compliance manager and pat themselves on the back. KMP Holdings In your overcriminalization op-ed, you Lafayee, Louisiana To read the op-ed and an interview explaining Koch’s are exactly right to wonder, “how the lit- views on this issue, visit: www.kochind.com tle guy who doesn’t have Koch’s resources deals with prosecutions like that.” 3 International News

Mexico – Employees at INVISTA’s Monterrey facility created this mural as part of China – GP Cellulose has helped fight poor sanitation in rural Chinese “Living Our Culture Day.” schools by supporting the Green Hand™ Project.

Monterrey – Employees at INVISTA’s “As telecom becomes increasingly wire- sanitation and hygiene for Chinese ber facility in the northeastern state of less, there is intense pressure to provide schoolchildren. Nuevo León, Mexico, have assembled beer infrastructure for supporting web- “e Green Hand Project is unique,” what may be a rst for Koch: a large- enabled smart phones that can handle said Pat Boushka, president of GP Cel- scale MBM®-themed mural. enormous amounts of data,” said Tim lulose, “because it enables us to connect e mural was created on “Living our Ru, senior vice president of . with our customers in a dierent way. Culture Day,” Oct. 29. Measuring 7 feet “SDP not only specializes in that sort of It ties back to their local communities. by 16 feet, it is composed of 72 panels, technology, it represents an important It creates value while helping improve each hand-painted by a team of employ- step towards achieving our vision of of- thousands of lives.” ees from the facility. fering totally integrated solutions to our GP donates one dollar for every metric Because the teams worked on their global markets.” ton of Golden Isles u pulp purchased panels independently, the 60 employees SDP’s founder, Shyam Gupta, was a by GP customers in China. (Flu pulp had no idea how their handiwork would nalist for Ernst & Young’s Entrepreneur is used in many hygienic products, be combined and used. of the Year award in 2009. He believes including baby diapers and feminine When the panels were assembled, sev- the acquisition will create enormous hygiene products.) eral messages relating to MBM, Koch’s value for customers. Customers in China who buy u pulp 10 Guiding Principles and INVISTA’s “Molex and SDP can now provide a from GP Cellulose are allowed to use Business Process Transformation proj- unique value proposition for deeper the Green Hand logo on their packag- ect were revealed. technical engagement with wireless ing, further promoting the program. e lesson of this exercise was simple: equipment makers,” Gupta said. “To- GP’s minimum commitment over two individual contributions at work can gether, the companies have many new years is $500,000. e Green Hand make a big dierence to the company as opportunities for growth in multiple Project is helping improve water and a whole. segments of wireless markets.” sanitation conditions in schools for www.sdptelecom.com about 15,000 Chinese schoolchildren. Montreal – Molex, which has been a Koch company for just over a year, Xinjiang – According to UNICEF, more “Even the smallest things  like soap recently completed an important ac- than 25 percent of rural schools in and water, and having a clean place to quisition when it bought SDP Telecom China lack hand-washing facilities and wash your hands  can make a big dif- at year-end. (OpLink, a fiber-optic com- 17 percent have no water supply at all. ference,” Boushka said. “And by starting pany, was acquired by Koch Dec. 23.) at scarcity of sanitation results in with children, we can aect generations to come in a way that is sustainable. Montreal-based SDP, which has manu- many illnesses and absences, especially facturing facilities in China, specializes for girls. “e customers we took with us to see in wireless technology for the booming To help fight this problem, GP Cellulose these schools were overwhelmed by the smart phone market. SDP also provides launched the Green Hand™ Project in experience,” Boushka said. “You really satellite technology and military applica- 2013 with the U.S. fund for UNICEF, a can’t help but be inspired.” tions, such as isolators, couplers, lters business-to-business initiative that www.greenhandproject.com and waveguide assemblies. helps fund UNICEF’s efforts to provide water, 4 JAN2 WTI crude oil trades for $95.14 per barrel. 4 FHR announces it will cease crude oil refining at its North Pole facility in Alaska. 10 Molex celebrates two grand openings FEB in Asia: the Molex Korea Plant and the 20 FHR sponsors Junior Achievement’s Job Global Tooling Center in Chengdu, China. Shadow Lunch for South students interested in engineering.

January 10

March 26

3 Koch Fertilizer changes its name to 14 Optimized Process Designs is awarded its Koch Ag & EnergyMAR Solutions. first major gas plant project in the booming Bakken Shale area of North Dakota. 21 FHR gives a $1 million gift to the Texas State Aquarium to help create a new Center for 28 Koch Fertilizer Trading announces the Excellence in Science, Technology, Engineering opening of a new bonded warehouse in the and Math. port of Paranaguá, Brazil. 26 INVISTA hosts a groundbreaking ceremony for its new HMD and nylon 6,6 polymer plants at the Shanghai Park. APR 5 6 INVISTA announces the availability of LYCRA® fiber produced with a renewable, bio-based raw material. MAY 14 Koch Pipeline Company announces the addition of a new, 24-mile pipeline in South Texas capable of carrying about 200,000 barrels of Eagle Ford crude oil daily.

27 Molex acquires the heavy-duty connector business of Italy-based Westec s.r.l. 29 Georgia-Pacific announces plans to invest about $40 million in new plate- making technology and equipment at its Dixie® plant in Fort Smith, Arkansas.

May 14

June 11

6 Koch Industries and the Charles Koch Foundation announce a $25 million grant to the United Negro College Fund. JUN11 At a ceremony in London, KS&T’s global gas business receives the House of the Year Award from Energy Risk magazine. 19 GP Professional acquires SPG Holdings LLC, a manufacturer that specializes in products for the foodservice industry, such as sandwich-wrapping paper. 30 Koch Minerals completes its 40 percent investment in Big River Steel, a $1.6 billion greenfield “mini-mill” in Osceola, Arkansas, that will convert recycled scrap into high-quality steel.

31 John Zink Hamworthy Combustion acquires ETI, a supplier of custom-engineered oil and gas processing equipment. 1 Koch Agronomic Services acquires Polyon®, 6 Koch Nitrogen announces a $1.3 billion expansion Duration® and other turf and ornamental project at its Enid, Oklahoma, plant — the largest products from Agrium. construction projectAUG in Koch history. When completed in three years, it will increase production 16 FHR completes its largest-ever acquisition: capacity by more than 1 million tons per year. the $2.1 billion purchase of PetroLogistics LP, owner of the 18 GP announces $65 million in planned investments only propylene at its Madison, Georgia, plywood facility. dehydrogenation 26 Koch Agronomic Services introduces two additions plant in the U.S. to its portfolio: AGROTAIN® ADVANCED and AGROTAIN® JUL DRI-MAXX stabilized nitrogen.

September 9

5 Koch Equity Development partners with Goldman Sach’s merchant banking division to acquire Flint Group, a Europe-based supplier of printing inks and packaging products. SEP 9 David and celebrate the opening of the new plaza at the Metropolitan Museum of Art in New York, funded by his $65 million gift. 12 INVISTA’s Seaford, Delaware, plant celebrates its 75th anniversary. This facility was the world’s first nylon plant.

23 Founder’s Day — Koch unveils an interactive audio guide and app enabling employees to take a self-guided tour through the company’s history.

8 6 FHR and Stabilis Energy announce joint venture plans for a production facility in Odessa, Texas, to OCTserve the Permian Basin. 16 GP announces plans to invest $37 million at its Gurdon, Arkansas, lumber operations to expand production capacity by about 60 percent. 31 Molex wins Chicago Innovation Award for its contribution to the groundbreaking DOW POWERHOUSE™ Solar Shingles, residential roof shingles that turn sunlight into power.

October 31

December 16

3 Koch Pipeline Company releases a first-of-its-kind 2 FHR breaks ground on a $600 million project to process mobile app for providing helpful pipeline information. more domestic crude at its Corpus Christi West Refinery.

19 Koch announces a definitive agreement to 4 Koch Agronomic Services acquires the biological research acquire Oplink, a California company that designs, business of Mendel Biotechnology, Inc. manufactures and supplies fiber-optic products and 16 Koch Industries and the Fred & Mary Koch Foundation services for the telecommunications industry. announce the largest-ever donation to the Wichita State University Foundation: $11.25 million. NOV 31 WTI crude oil trades for $59.10,DEC down 38 percent for the year. 8 8 Using less resources

A key part of Koch Industries’ Vision From 2010 to 2013, the site reduced can make a big dierence. As a result of involves “using less resources” while energy intensity by 22.5 percent  improvements in the site’s steam system, providing the products and services that helping make progress on its goal to re- energy intensity dropped by 65 percent help people improve their lives. duce overall energy intensity 20 percent while throughput doubled. At the 2014 Koch Industries Energy by the year 2020. Employees bene ed from training Conference  held last September in e INVISTA facility in Chaanooga, classes that developed their knowledge Wichita  KII chairman and CEO Tennessee, was also recognized for its and skills, and the site has been able Charles Koch re-emphasized this point achievement in this category. From to sustain its improvements with only during his opening remarks. 2010 to 2013, it reduced energy inten- minimal steam system maintenance. Speaking to the 180 Koch company em- sity by 30 percent. Sustaining ployees who aended, Koch said: “We Continuous improvement need to use resources more eectively In 1992, when Dixie® built a new facility and more eciently than our competi- In Foshan, China, INVISTA operates in Bowling Green, Kentucky, it wanted a tors. Ecient energy consumption is a one of the newest and most energy- world-class manufacturing site. huge part of conserving resources.” ecient plants in the world. Dixie® utilized the most advanced paper e team at that site proved it’s also pos- During the three-day conference, sev- plate technology, combined with a high- sible to improve energy performance in performance work system and facility eral Koch companies were recognized a big way at very modern facilities. for their success in reducing energy designs that emphasized optimized intensity, applying innovations and sus- At INVISTA’s Qinglon site in Qingpu, energy use. taining results. eir accomplishments China, the company aggressively fo- roughout 23 years of operation and bene t both the environment and the cused on reducing energy waste, which two changes in ownership, the Bowling boom line. lowered energy intensity by 24 percent Green plant managed to maintain its en- versus the site’s historic baseline rate. ergy assets near the optimized base case. Energy intensity reductions Koch is not alone in applauding both of What its employees didn’t do, however, INVISTA was the leader in the Im- these accomplishments. was sele for that level of performance. proved Energy Intensity category, with In 2013, the Foshan site received four sites earning recognition for signi - By upgrading lighting, improving energy improvement recognition from control strategies and making other cant reductions in the amount of energy the Sanshui district, Foshan City and required to produce products. changes, employees in Bowling Green Guangdong province. at same year, have pushed down the average energy In Waynesboro, Virginia, one of the lo- the Qinglon site was recognized as an usage per machine every year for the cations where INVISTA makes LYC® Excellent Energy Management Com- past 11 years. ber, the site energy team decided to pany by local ocials. In fact, from 2000 to 2013, energy focus on improving the eciency of Halfway around the world in Stevens centralized utility systems. consumption for the Bowling Green site Point, Wisconsin, FHR’s ter- dropped by 13.6 percent o its already minal proved that even a small facility ecient baseline. Rather than set- tling for what used to be best in class, GP employees at this site continue to search for other innovations and initiatives that will improve energy ef- ciency even more. GP’s Cellulose operation in Bruns- wick, Georgia, was another winner Chattanooga – This INVISTA plant has already achieved its goal of Foshan, China – This plant, one of INVISTA’s newest, found ways to in the Sustaining reducing overall energy intensity 20 percent by the year 2020. improve its already high energy efficiency. category. 9 5 Attendees and award-winners at the 2014 Koch Industries Energy Conference, held in Wichita, Kansas. The three-day event attracted 180 attendees.

Over the past ve years, the Brunswick anks to its continuous eorts, the e number of lighting xtures needed site has improved its use of self-gener- energy team at Seaford led the way in dropped from 1457 to 1188, leading ated fuels by nearly 3 percent and of reducing the amount of energy con- to not only energy savings but main- purchased fuels by over 23 percent. sumed by 25 percent between 2010 and tenance savings  all while providing Key to Brunswick’s improvement was June 2014. more and brighter light in work areas. the establishment of an energy leader Innovation is project was part of an overall pro- and energy team in 2008. eir eorts gram that saved GP $6.5 million in 2012 have resulted in several capital invest- GP had two sites and INVISTA had and 2013. one in the Innovation category (making ments (large and small) as well as waste Rounding out the group of sites rec- elimination initiatives. INVISTA the company with the highest overall number of sites recognized). ognized at the energy conference was at focus and ownership helped this INVISTA’s Kingston, Ontario, plant, Georgia-Paci c facility enjoy ongoing, In addition to winning in the sustaining which makes ber for airbags. sustained improvement. category, GP-Brunswick was recognized for a rst-of-its-kind application within INVISTA relied on heightened em- Another facility recognized in this the company. ployee engagement to complete a category was INVISTA’s La Porte, Texas, co-generation project early, which plant, which produces intermediate By using an available oxygen supply to resulted in signi cant cost savings. chemicals and polymers used in making displace air in a lime kiln, GP reduced By scheduling the overhaul in mid- spandex bers, polyurethane, pharma- the energy needed and eliminated the summer rather than spring (a change ceuticals and many engineering . use of #6 fuel oil, saving about $1 mil- that required signi cant rescheduling lion annually. As of May 2014, the La Porte site had of shis), INVISTA was also able to succeeded in lowering energy intensity e environmental bene ts are also reduce energy charges. by almost 12 percent since 2010. impressive. ey include less dust formation, reduced sulfur emissions and Conclusion What makes this accomplishment even important process bene ts. In his comments at the 2014 Energy more impressive is the fact that the facil- Conference, Dave Robertson, KII’s ity team relied on process optimization In keeping with MBM®, knowledge about this innovation was quickly president and COO, exhorted aendees rather than capital spending to generate “to keep pushing, to innovate and to that improvement. shared with other mill sites, allowing them to replicate the idea and multiply nd further improvements. Two other INVISTA sites were also the bene ts. “I really believe that will be a big factor recognized in this category. Energy leaders at GP’s facility in Camas, in how successful we are in the future. A combination of optimization and Washington, which makes paper towels “We de nitely need to continue to nd capital investment helped the May- and oce paper, earned recognition for ways to be beer than our competitors,” down, U.K., site achieve a more than 20 rethinking the plant’s lighting arrays. Robertson said. “And energy consump- percent reduction in energy intensity for tion is clearly a way to do that.” the 2008-2013 time period. Aer extensive planning, the plant team had decided to use induction lighting as Koch company employees can watch Also earning recognition for sustaining a way of saving energy. But aer further videos of the general presentations its energy performance was INVISTA’s investigation and a few experiments, the from the 2014 Energy Conference at: Seaford, Delaware, site  home of the plant decided to install advanced LED http://2014energyconference world’s rst nylon production plant. technology instead. 9 5 10 Looking Back

Put that in your pipe Noteworthy For years, Fred Koch was fascinated with competition. at’s why we need to encour- the possibilities of berglass. Some of age all ideas  bad as well as good, since his earliest experiments with the product we won’t get any ideas at all if we discourage Four years ago, the MBM® team began included pop-up camping trailers and what we think are bad ideas.” producing a series of videos highlight- cooling towers (a forerunner of central RAPTOR™ nylon pipe ing MBM case studies. Each video air conditioning units). Last year, 30 years after Koch exited the fi- lasts about 30 minutes and includes e company started researching resin berglass pipe business, INVISTA introduced interviews with employees who were pipe in 1957 and began manufactur- a new twist on an old idea: RAPTOR™ ny- directly involved in applying MBM to ing berglass pipe and pipe ings lon pipe, made from corrosion- and impact- their business. for oil eld use in 1959. Compared to resistant nylon 6,6 e fourth video in this MBM series of traditional steel pipes, these products polymer. case studies is now available. were lighter and easier to install, resisted corrosion beer, usually lasted longer e company’s “e Transformation of Corpus Christi” slogan for the new describes the improvement and tremen- and cost less. In 1968, the year aer Fred died, Koch product is: Made dous growth of FHR’s Texas re nery of Tough.™ complex as a result of employees apply- Fiberglass began marketing its Blue ing MBM. Streak brand of berglass pipe and t- “In 2012, we tings, ranging from an inch and a half to discovered there In the video, KII’s chairman, Charles four feet in diameter. was a strong need Koch, points out that transformation is Koch Fiberglass nally turned a pro t in for line pipe that nothing new for Corpus Christi. is was tough enough facility has, he notes, “been transformed 1972. Unfortunately, that pro tability for the oil patch Only one line pipe can take what you or the oil patch can dish out. And only one is made of extra-tough, Nylon 6,6. Corrosion, impacts and didn’t last. leaks will have to fi nd somewhere else to play. The bottom of the ditch not once, but three times since we has a new king –RAPTOR™ nylon pipe – It’s Made of Tough.™ but much easier RAPTORNYLONPIPE.COM acquired it in 1981. In 1984, Koch Fiberglass was sold to to install than tra- See INVISTA for warranty terms and conditions. Raptor is a trademark of INVISTA. ©2014 INVISTA. “MBM has enabled us to improve the Milwaukee-based A. O. Smith Corpora- ditional options,” plant’s competitive position, guided it tion, then sold again in 2000 to Varco said Vikram Gopal, INVISTA’s vice presi- through some very tough times, spurred International of Houston. dent of technology and the lead developer tremendous growth and inspired em- e year Koch Fiberglass was sold, of PTOR™ nylon pipe. ployees across Koch to work together to Charles Koch stressed the importance “We believed that our experience with nylon capture a major business opportunity of innovations like Blue Streak  even 6,6 could meet that need.” involving Eagle Ford crude.” though it was ultimately unsuccessful. When tested, PTOR™ nylon pipe resist- e word “transformation” is not used “New ideas, good and bad,” Koch said, ed corrosion and abrasion beer than steel casually by Koch. “are the lifeblood of our company and and had much beer impact resistance than “When MBM is applied as a lens to en- must be encouraged and recognized at berglass or high-density polyethylene. all levels and from all our people. vision a new model for a business and as “It provides exibility, is economical and a guide to put it into eect,” Koch said, “Without the constant ow of new ideas, can be installed using existing equipment,” “it can be transformative.” we won’t continue to be beer than our Gopal said. e Corpus Christi case study is avail- “With shale gas production in- able to Koch company employees as a creasing across North Amer- streaming video or in DVD format. ica, our PTOR™ nylon pipe has become an aractive wellhead option for transport- ing oil, gas or water.” “The life of the nation is secure only To watch a promotional video of INVISTA’s PTOR™ while the nation is honest, truthful, nylon pipe in action, visit: and virtuous.” www.raptornylonpipe.com Too True Too – Frederick Douglass 1983 – This photo was used in marketing materials promoting Koch Fiberglass products, some of which were four feet wide. 11 Charles Koch Perspective Chairman and CEO, Koch Industries, Inc.

Last year was Koch Indus- those with radically dierent points of Free markets, undistorted by subsidies tries’ third-best ever, trail- view, some of whom endorse violence or anticompetitive regulations, trans- ing only 2013 and 2012 in and terrorism, while others promote mit knowledge of how best to satisfy terms of net income. over-reaching policies that lead to de- people’s needs through a system of e value of the company creasing freedom and opportunity, and prices and pro t and loss. has now grown 4,600-fold increasing dependency and poverty. Incentives is the h dimension. When since 1961, including Contrary to these viewpoints, societ- individuals are rewarded for helping oth- distributions. By compar- ies that are organized around a vision ers improve their lives, people through- ison, the S&P 500 is up of freedom have proven to be the most out society bene t. Whether someone’s just 160-fold (on the same basis) during successful at enabling widespread well- motives are altruistic, self-interested or that same period. being, especially for the least fortunate. a mixture of both, free societies encour- I aribute much of our growth to the Second is the dimension of culture. A age this mutually bene cial behavior. understanding and application of Mar- free society requires a culture based ey discourage individuals from ket-Based Management®. By providing on principled entrepreneurship, in aempting to gain at the expense of oth- employees throughout the company which people succeed by helping others ers by cheating or manipulating the laws with principles and tools for capturing improve their lives. ey are cultures of and regulations. opportunities and solving problems to integrity, responsibility and tolerance. beer serve our customers, MBM® has e foundation of such a culture is Framework for a Free Society helped us grow exponentially. respect for the moral dignity of all e widespread adoption of its ve people, no maer what their race, creed Vision dimensions has made the company beer or station in life may be. A free society Culture  not only more productive, but more requires and reinforces the qualities of Individual Rights principled. Similarly, I believe society personal responsibility and self-control. Free Speech and Market Signals as a whole would bene t from having a Individual rights is the third dimen- comparable framework and set of tools sion. Foundational to free societies Incentives for evaluating institutions and policies. are secure individual rights, including Although the idea that such a frame- property rights, with equal protection work could bene t our country may for everyone under the law. ey must Applying this framework seem improbable, this approach is one remain so to encourage the eorts and As with MBM, all ve of the dimensions that has been validated in our company investments that make free societies so in this framework must be applied ho- for decades. innovative and productive. listically to achieve meaningful results. MBM is based on the principles of a e role of government is limited to e best incentives in the world can’t free society and I am con dent that those activities for which coercion oset a lack of vision, and society as a a systematic application of the same works beer than voluntary cooperation whole loses if the law treats one group principles in society can have a bene - and competition. is includes protect- dierently than another. cial and transformative eect on overall ing our persons and property, defending For decades, I have studied what condi- well-being. the country against foreign aggression, tions, culture and structure bring about Five dimensions enforcing legal decisions and contracts, the most bene t for all. I’ve learned that and protecting against signi cant exter- governments and organizations, like As with MBM, the framework for a free nalities such as epidemics. people, should stick to their compara- society has ve dimensions, beginning e fourth dimension involves free tive advantages. with vision and ending with incentives. speech and market signals. e open To advance a free and ourishing soci- Just as we have established visions for ow of knowledge leads to innovations ety, I believe we need a framework like KII and each Koch company, we need and the best use of resources, increasing the one outlined above. To make it a re- to articulate a vision for a free and our- well-being throughout society. ality, we need to encourage people from ishing society. A free society is rooted Realizing these bene ts requires an en- all walks of life to join us in the eort. in a complex and inter-related set of vironment that fosters learning through As Frederick Douglass said 160 years ideas and values that provide long-term freedom of speech and thought. is peace, civility and well-being. ago, “I would unite with anybody to do cannot exist if we are prevented from right; and with nobody to do wrong.” I Today (and throughout history) these challenging the status quo or stopped would like to see all of us devote our- ideas and values are under aack from from voicing our dissent. selves to doing what is right. 12