Document 7OB715JkpeKywkdeRo4bQRz7R

they are coordinated with production sched ules of aircraft building programs. The bal ance of the backlog was normal, and the supply of our products in customers' inven tories appeared to be reasonably balanced. Capital Expenditures Capital Expenditures and Depreciation In Millions of Dollars ------------------------------------------------- 20 Capital Expenditures ------------------ !------ 15 Depreciation HJio ----------------------------- 5 1963 I 1964 1965 II 1966 1967 Capital expenditures in 1967 amounted to $12,322,000compared to $15,224,000in 1966. Expenditures were lower than originally planned because some expenditures were deferred, some new equipment was not re ceived on schedule, and initial expenditures for the start of construction of a new plant were delayed. About 40% of capital expenditures in 1967 were for expansion of capacity in several product lines. In Canada, the aerospace facil ities and a manganese steel foundry were expanded. In the United States, additions were made to the Medina, New York and Del aware, Ohio plants. Also, additional equip ment at our two friction control product plants in Ohio increased their capacity by about 20%. Capital expenditures for 1968 are planned at approximately $15,000,000, which includes about 40% for added capacity at existing plants. Initial expenditures for a new wheel plant are included also. Return on Shareholders' Equity PerCent ------------------------------------------------- 12 ------------------------ 3 9 ----------------------------- 6 ------------------------- 3 1963 III 1964 1965 1966 1962 International Operations Sales of our international divisions increased to $62,671,000 compared with $58,485,000 in the previous year. They amount to 23% of the total consolidated volume. Over-all results of our international operations improved over the previous year and we expect further pro gress in 1968. Shipments of our Canadian Aerospace Di vision increased substantially because of a strong flow of orders and expanded plant capacity. However, operating results of this division were not satisfactory. The terms of one long-running contract for military aircraft components would not allow price adjust ments to cover higher production costs. Dur ing the year, a management reorganization was necessary and the division has been in tegrated with the United States Aerospace Division. A high proportion of this division's prod ucts were shipped to United States manufac turers of military aircraft. This is in line with the Defense Department's policy of coordi nating the materiel program of this country with that of Canada. Construction and mining activity in Canada slowed down during the year. This caused a reduction in sales of manganese steel and other wear control products. Sales of auto motive brake lining held steady while ship ments of products for the railroads increased. Brake lining sales of our Mexican company increased as they have in each year since the operation was started in 1959. Shipments of our European operations were slightly higher than in the previous year re flecting an improvement in industrial activity during the latter part of the year. Sales of fluid power control products in creased; brake lining sales were lower be cause of reduced European automotive pro duction. Shipments of tire molds from the Belgian plant increased and this new plant, opened in 1966, should achieve a satisfactory operating level in 1968. Devaluation of the British pound sterling on November 18th had been anticipated and action had been taken to protect the com pany's position. Consequently, the devalua tion did not have any adverse effect upon earnings. The general economy of the Common Market countries is showing signs of renewed strength and increased activity. Most indica- e/ghteen SCI 01723