Document MJwrXnBEQeB3mmbQp2nY55Obk

1966 Annual Report SCF-ABEX-0977 SCI 01673 I Skilled hands and disciplined minds of Abex-, .' people are intangible assets not listed in the 1 columns of our financial reports. Yet, thfc.-.: 7; success of a business enterprise (s largely . dependent upon its human resources. The . people of Abex give the company life, direc- '; , tion and vitality to grow and serve. They are;. v '- . '^71 .M t '?%*** : " '; ^ V* r >* . .av 1 . ''AV*.r ''i',^r*' i14X -\ ' -* . . _ - . ' 4' ' ; -& s' -i*- /V ' - w; &** -- '*v**: ' . $ .xr.^- ;X. :rpentyviltlfrfrniltedbo or about March 2* ' 5 "iv, . T . ' k \ . 7- >' -."vf-v: ..o ..* - '' .^ SCI 01674 ABEX CORPORATION: 530 Fifth Avenue, New York, N. Y. 10036 Abex Corporation 1966 Annual Report iVJ Directors and Officers Board of Directors KEMPTON DUNN Chairman ROBERT W. BIGGS President and Director The Brush Beryllium Company TILDEN CUMMINGS President and Director Continental Illinois National Bank ' and Trust Company of Chicago DR. CARL F. FLOE - Vice President-Research Administration Massachusetts Institute of Technology ALFRED S. FOOTE . Senior Vice President and Director Morgan Guaranty Trust Company of New York ALBERT P. GAGNEBIN . ` President and Director . International Nickel Company of Canada Limited. . . ' RODNEY C GOTT . President and Director " : American Machine and Foundry ' Company - . . . KENNETH H. HANNAN Executive Vice President and Director Union Carbide Corporation DEVEREUX C. JOSEPHS Director New York Life Insurance Company WILLIAM T. KELLY, JR, President SCI 01676 ABEX CORPORATION Highlights Shipments................................................................. Net earnings............................................................. Special item --loss on sale of forging facilities less related taxes on income..................................... Net earnings from each dollar of shipments........ Shareholders' equity............................................... Net earnings per dollar of shareholders' equity .. Per common share Net earnings....................................................... Special item of loss........................................... Cash dividends................................................... Shareholders' equity......................................... 1966 $277,398,557 12,827,047 1965 $260,168,235 11,104,486 1964 $241,478,130 9,762,039 -- 4.60 121,422,501 10.90 644,012 4.30 114,968,723 9.80 _ 4.00 110,507,961 9.00 3.49 -- 1.575 33.05 3.01 .18 1.425 31.18 2.64 -- 1.25 29.84 Sales by Product Groups--1966 Amount Per Cent in Millions of Total Friction Products ................... Hydraulic Products............ ... Railroad Products.............. ... Cast Metal Products.......... ... Total......................................... ... $ 44.3 67.8 76.6 88.7 $277.4 16% 24 28 32 100% three f March 8,1967 4 To the Shareholders: Our annual report to shareholders pro vides an opportunity to review our progress during the year, to convey to you in words and pictures what the company is doing, and to indicate the direction of its future progress. Last year set new records with the highest sales and earnings in history. Sales rose for the sixth consecutive year and reached $277,399,000, a gain of 7% over the $260,168,000 reported in 1965. Net earnings increased for the fifth straight year and reached $12,827,000, up 16% from $11,104,000 in the pre ceding year. Net earnings per share rose to a new record of $3.49, com pared with $3.01 in 1965, after adjust ing for the two-for-one stock split which was authorized bythestockholders last year at the Annual Meeting. Shareholders will recall that Abex sold its forging business late in 1965. If total shipments for 1965 were re duced by the amount of forging sales in that year, the increase in shipments for 1966 would be 16% instead of 7% and the increase in earnings between the two years would remain at 16%. Dividends paid in 1966 amounted to i SCI 01678 ABEX CORPORATION $1.57'/2 compared with $1.42'/2 in 1965, adjusted for the stock split. The annual dividend rate was raised for the third consecutive year. Following the stock split, the rate on the new shares was increased in June to $1.60. The December payment was the 258th consecutive quarterly dividend since the company was established in 1902. The booming economies of the United States and Canada created a strong demand for our products and sales gains were achieved in each of our four present product groups. Or ders received duringtheyear exceeded $300,000,000 for the first time and the backlog of unfilled orders at year-end was $109,700,000, compared with $84,400,000 a year earlier. Total sales also increased in our in ternational operations, but government controls imposed in the United King dom and monetary restrictions in West Cermany slowed the pace of business in those countries which, in conjunc tion with other factors explained later in this report, adversely affected our operating results. The year's record sales required most of our plants to operate at near ca pacity. In anticipation of this demand, we initiated an expansion program in 1965. Capital expenditures last year amounted to $15,224,000, compared with $11,364,000 in 1965. Present plans call for capital expenditures in 1967 of about $16,000,000, compared to de preciation of $13,000,000. Stockholders voted at the Annual Meeting to change the company's name to Abex Corporation. The names of subsidiary companies in our Cana dian and International operations were changed also. We now have a world wide corporate identity that will strengthen and enhance all of our marketing and advertising programs. Changes were made during the year in the organizational and operating structure of the company. The Electro Alloys Division, a producer of heat-re sistant castings, was combined with the Engineered Products Division. This move will integrate the capabilities of the two units and provide greater over-all efficiency for the group. Our relations with employees were generally satisfactory although there were two strikes, mentioned later in this report, which involved a small number of personnel. Shareholders have been advised of the proceedings instituted by the Fed eral Trade Commission to force dives titure of The S. K. Wellman Company acquired in 1963. The Commission's Hearing Examiner issued.a ruling ad verse to the company's position in August 1966 and the case is now await ing review by the full Commission. Some Supreme Court decisions in the past few years have contributed a great deal of uncertainty in the inter pretation of the anti-trust laws, and it is not possible to predict the outcome of this case or to estimate when it will be concluded. During the year several manage ment changes occurred. John S. Hutch ins, president since 1963, was elected vice chairman in February 1966. Mr. Hutchins retired as an officer and di rector of the company at the end of 1966 after forty-one years of loyal and effective service. William T. Kelly, Jr., first vice presi dent and a director, was elected pres ident and chief operating officer in February 1966. He has been with the company since 1928. Thomas W. Russell, Jr., vice presi dent, was elected first vice president and a director in October. Mr. Rus sell has twenty-one years of service. Kenneth A. Anderson, director of personnel services, was elected a vice president of the company in Septem ber. He joined Abex in 1944. Dr. Carl F. Floe, vice presidentResearch Administration of Massachu setts Institute of Technology, was elected a director in June. Abex Corporation continued to make excellent progress in 1966. We enjoyed the benefits of the prosperous economy which this country has been experiencing for several years, and we have utilized the opportunity to live broaden the base of our products and markets. This has expanded the future earning capacity of the company. Even more important, there is an alert awareness of the vital necessity to meet and cope with the forces of change which are at work throughout the world today. We must keep pace with the social and political changes as well as the rapid advances in science and technology and their impact on the industrial world. Chairman President SCI 01680 The scope and speed of change in our times is easily seen in both urban and industrial areas. Easily seen, too, is that most of the change is attributable to science and technology. Today's greatest challenge then, is to be prepared with products and services that will meet the changing needs of tomorrow. This is our goal at Abex. seven SCI 01681 Friction Products SALES IN INDEX FIGURES ZOO 1962 '63 '6* Sales of friction products in 1966 amounted to $44,300,000, an 11% gain over 1965. Sales increases were achieved by all divisions in the group. Friction products of the type manu factured by the company are sold for three major applications--automotive, aircraft and industrial. The automotive industry experi enced another year of high production in the United States, Canada and in Europe with the exception of the United Kingdom. Consequently, our sales to vehicle manufacturers in creased, particularly the sales of disc brake lining in Europe and strips and blocks for trucks and buses in the United States. Disc brakes for the front wheels of passenger cars have become very popular on European cars, creat ing a strong demand for disc lining, and our French company has enjoyed a large share of this market. There is a significant trend toward disc brakes in '**< SCI 01682 the United States, and our American Brakeblok Division is presently supply ing disc lining to some brake manu facturers. We expect this volume to increase substantially in the next few years. The world's vehicle population now exceeds 170 million and it continues to grow, creating a larger and larger market for replacement brake lining. An important portion of our replace ment lining is distributed through more than 7,500 automotive parts wholesalers in many countries of the world. Some of these sales are under our own brand names while the bal ance is sold under numerous private brand labels. The sales of aircraft friction prod ucts continue to grow rapidly with the increased use of the airplane as a means of travel and transport. Abex pioneered in the research and devel opment of friction products for air craft, and our products are qualified on most of the world's major air planes. The outlook is bright for this product line. Industrial friction products are vital parts in transmissions, clutches and brakes for mobile equipment used in construction, mining, materials hand ling, farming and many other activities. The products are of both metallic and non-metallic type, depending upon the application and customer prefer- The world's rapidly expanding vehicle population creates greater demand lor the brake, clutch and transmission products made by Abex. Farms are run with fewer people and more machines-- a growing market for the clutch and transmission parts we manufacture. Boeing 727's are among the Increasing number of commercial and military aircralt which utilize our friction products and hydraulic equipment. ABEX CORPORATION nine SCI 01683 ABEX CORPORATION ence. With the constantly increasing use of machines to do more and more of the world's work, the market for our friction products grows each year. We have developed and patented a new non-metallic friction product which provides higher energy absorp tion and other favorable characteris-. tics for especially severe service. It went into volume production in 1966. Industrial friction products are sold to many equipment manufacturers and to an ever increasing replacement market. S. K. Wellman Division sells replacement parts through a system of independent wholesalers in the United States, Canada and other countries. commercial aircraft, coupled with high sales for industrial equipment in the United States. The unprecedented demand for all types of military and commercial air craft and the high level of activity in the aerospace industry resulted in rec ord orders and shipments of our aero space hydraulic products. Abex participates in this marketwith several important product lines--a variety of pumps, motors and sub systems; hydraulic control equipment including servovalves, servoactuators and flight control systems; and with landing gear and machined structural components. Our products are used on most of the new commercial and military air planes and helicopters in the United States, Canada and Europe. They are also on many missiles and space vehicles. The backlog of orders on the books Hydraulic Products -:rar:-^sw^S5ri..-.r!5 . --v-hsearil'fiS':' Sales of hydraulic products in 1966 amounted to $67,800,000, a 27% gain over 1965. This unusually large in crease in shipments was caused by large requirements for military and SCI 01684 of the aircraft manufacturers is so great that it will require several years to produce these planes. A large por tion of this backlog is for commercial planes, and our sales for these have been increasing rapidly. This industry situation will create a strong demand for Abex aerospace products for sev eral years. Our aerospace hydraulic manufac turing facilities are operating at full production, and expansion of capacity "1 ? SCI 01685 is planned for 1967. The outlook for the aircraft industry and our products is excellent. Our industrial hydraulic products include pumps, motors, controls and systems which have wide application in a number of industries. Many types of machinery used in construction, mining, metalworking, marine and a myriad of other industries use hy draulic power to actuate certain work ing parts of the machines. In the latter part of the year, Deni son Division received the largestgroup of orders in its history. It was awarded contracts for hydraulic equipment to facilitate cargo handling on several United States naval vessels. These orders included unique hydraulic winch machinery which compensates for the motion of ships while transfer ring cargo by cable between two ves sels at sea. Most of this equipment is scheduled for delivery in 1967. The development of new and more efficient products is always necessary. A new pump has been developed and patented in recent years which has a novel design and method of actuating the vanes. This unit, which went into volume production in 1966, provides distinct advantages on certain types of tractors and other mobile machinery, The continuous upward trend of mechanization and automation brings increasing use of hydraulic power for actuation and control. We are firmly established in the major markets for our products in the United States and Europe and we expect that our sales of these products will continue to increase. Railroad Products dH qtz: SALES IN INDEX FIGURES m iso 4125 ... . . ...1961s, 'iJ-'...-'64 '65 '66-. ^ -; ,i,_o. ..... Sales of products for the railroads in the United States and Canada amounted to $76,600,000. This was a 13% gain over the preceding year and the fifth consecutive year of rising volume. About 85% of our shipments to rail roads are for the replacement of wear ing parts, and the high level of opera tions created a strong demand for them. A greater number of new freight cars and locomotives was built in 1966 than in 1965, which also helped sales. Shipments of both metal and com position brake shoes were up over the preceding year, and for the first time in several years, the percentage of new freight cars equipped with metal shoes increased. ' Our new brake shoe, which provides a wholly new type of friction material combining the best characteristics of both composition and metal, went into limited commercial service dur ing the year. The initial customer ac- SC1 01686 ABEX CORPORATION ceptance is very encouraging. Orders for our new freight car brake are progressing at a satisfactory rate and it is planned to introduce another model during 1967. Sales of freight car wheels also in creased, and our three wheel plants operated at near capacity. Orders and backlog for wheels continue at high levels. Sales of trackwork and related spe cialty products rose as increased traffic necessitated additional track mainte nance and the roads spent more to improve operating efficiency and reduce costs. Three new "Economatic" freight yard installations were completed in 1966 and a large number of individual components were installed in existing yards. The "Economatic" yard consists of electronic speed and weight-sens ing car retarders which are hydrau lically powered. Centrally controlled switching machines, also operated by hydraulic power, switch rolling cars onto the desired tracks, then the re tarder slows the car to a predetermined speed in order to control impact at coupling. The system saves manpower, speeds operation and reduces damage to freight. The existing installations have all proven to be both practical and economical and we expect that this product line will continue to gain acceptance. Sales of both solid and SKF roller bearings increased in 1966. Our mar keting arrangement with SKF Indus tries, Inc., which is the world's largest manufacturer of roller bearings,- is proving to be mutually beneficial. SCI 01687 The new generation of railroad leaders is bringing creative manage ment, innovation and new technology to the industry. Unit trains, specialized cars, automatic car identification and weighing, computerization and faster handling through yards are only a few of the approaches that will ultimately revolutionize the railroad industry. Furthermore, many mergers of rail roads which have been accomplished or which are in the making will help to strengthen the combined roads. The long-range outlook for the railroads is excellent. Cast Metal Products m SALES IN INDEX FIGURES 4 175 . . . 150 \ 125 1962 .'63 '64 '65. r- . \\f l'. ' tw psfi Sales of cast metal products amounted to $88,700,000. Shipments of products now included in this group increased 14% over 1965 although shipments for the group as a whole, were reduced because of the disposal of our forging business in late 1965. However, earn ings and the return on investment by this group improved substantially. The strong demand for cast metal products in 1966 reflected the high level of activity in steel, mining, auto motive, construction and other capital goods industries. This product group is now efficiently organized into two divisions with nineteen manufacturing plants in the United States, Canada and Europe. Shipments by Engineered Products Division of tire molds of all types in creased. With the new tire mold plant in Belgium, we now have mold plants strategically located to serve the tire manufacturers in this country, Canada, England and continental European countries. Tire mold sales will increase with the world-wide growth of auto motive vehicles and rubber-tired mo bile equipment. This division also produces a broad group of highly specialized castings in iron,steel and non-ferrous alloys.Their uses are many and varied, ranging from television tube molds to blast furnace parts, from bearings to heatresistant tubing, and as components for many types of machinery. Most of these castings demand a high degree of engineering and metallurgical know-how plus unusual production skill and close quality control. The Amsco Division produces a fourteen SCI 01688 Molds to make tires lor passenger cars, trucks, buses and off-highway equipment represent a growing market lor Abe* in North .America and Europe. is$<*' t.'V; ABEX CORPORATION rf l From blast furnace to rolling mill the steel Industry depends on Abex for ferrous and copper-base castings to fight heat, ' wear, impact and abrasion. Lean taconlte ore requires a great deal more processing than the rich Iron ore formerly mined at Mesabl. These grinding mills are lined with Abex castings of abrasion-resistant alloy. filtten SCI 01689 Machine tools, compressors, turbines and many other types of industrial machinery utilize a large volume of specialized Abex castings. broad line of wear-resistant alloys which are used where service condi tions are severe. These products are used in equipment for mining, earthmoving and steel-making, and include dredge pumps and dippers for power shovels. The division also has a line of specialty welding products which are used in allied applications. The de mand for these products was strong last year and was given impetus by the increased mining and processing of taconite ore in Minnesota. The division's new plant at Two Har bors, Minnesota, was constructed dur ing 1966. This additional capacity, close to the Iron Range, will enable us to serve our customers more efficiently and improve deliveries from other Amsco plants, which were operating at peak capacity during the entire year. The performance of the cast metal products group has improved greatly in the last five years. This is the result of careful selection of special products requiring higher grade materials and greater technological content, and the pruning of less desirable business. The broad diversity and growth prospects of its customer industries are reflected now in bright prospects for this group's future. . sixteen SCI 01690 ABEX CORPORATION 1966 Review Sales and Earnings Consolidated sales of the company in 1966 were $277,399,000, up from $260,168,000 in 1965, and the sixth consecutive year in which an increase was achieved. During the five years-- 1962-1966--our sales have grown at an annual compound rate of 11%, while the growth of all durable goods indus tries has been at the rate of 8% in this same period. Net .earnings for the year 1966 amounted to $12,827,000 compared with $11,104,000 in 1965 and showed an increase for the fifth consecutive year. Earnings have increased at a faster pace than sales, the growth hav ing averaged almost 19% per year over the last five years. These advances in sales and earnings have been made during a period when the economies of the developed coun tries of the free world were on a rising trend. While there is some uncertainty about economic conditions in the im mediate future, there is little doubt about the upward trend in the years ahead. Consequently, it seems reason able to believe that the company will maintain, over the long term, its recent average annual sales growth of about 10%. An important fact about our sales is that a high percentage of our output is for replacement parts in contrast to parts for original equipment. Although there is no available means of obtain ing precise data, our estimate is that replacement business amounts to about 70% of our total volume. This provides a built-in stability factor that can lessen the adverse effect on the company of a general business decline. 1966 Shipments Earnings per share 1965 Shipments Earnings per share First Quarter Second Quarter Third Quarter Fourth Quarter $ 67,054,000 71,651,000 66,039,000 72,655,000 $ .87 1.02 .59 1.01 $ 64,738,000 69,400,000 59,583,000 66,447,000 $ .76 .85 .50 .90 Orders and Backlog Reach New Records Total orders received in 1966 amounted to $307 million and they were in good balance among the four major prod uct groups. The backlog of orders at year-end stood at a record $109,700, 000 up 30% from $84,400,000 at the end of last year. About 30% of this backlog was for aerospace hydraulic products for both military and com mercial planes and these orders have a long lead time from receipt of order to delivery because they are scheduled to coordinate with future production of the various aircraft. Profitability Yardsticks Improve Earnings before taxes as a per cent of sales increased to 9.5% from 8.3%, de spite rising costs of both labor and materials during the year. This came about because of higher volume, im proved efficiency, and some price in creases. The net return on sharehold ers' equity amounted to 10.9%, a gain over the 9.&% return in 1965. Financial Position is Strong Total $277,399,000 $3.49 $260,168,000 $3.01 The company's financial position con tinued strong. The ratio of current as- i seventeen SCI 01691 . ./* ; Earnings from Operations per.Common-Share: ' .. 320 - j 280 . 240> - ' :' ! U.s>3 ---------- - -----1 L-r . 1 . Capital Expenditures and Depreciatiop^'.Y ; ' In Millions, r-- --................. of Dollars '......... v *" " ' Depreciation - '55 :V?3 JW; Capital Expenditures 1962 ' . AViv* '.-y-cas eighteen - y^y'-r1'|?pi MiiV-,-. ::.K5S| SCI 01692 sets to current liabilities was 3.03 com pared with 3.86 at the end of 1965. Inventories increased to $48,596,000 at year-end compared to $43,161,000 at the beginning of the year. Most of the increase was in aerospace products where the work in process and back log of orders increased and the inven tories were necessarily higher. Capital Expenditures Were High Capital expenditures amounted to $15,224,000 in 1966, compared with $11,364,000 in the preceding year. De preciation amounted to $11,114,000 compared to $10,533,000 in 1965. An expansion program was initiated in 1965 to increase capacity in sev eral product lines, including industrial hydraulic equipment, tire molds, fric tion products and certain types of castings. These additions have been mostly completed and the facilities are now in production. Capital expenditures in 1967 are planned at approximately $16,000,000. About 40% of the funds will be spent for added capacity at a number of ex isting plants. The balance of the capital funds will be spent on replacing and modernizing present machinery and equipment, and installing new equip ment for cost reduction programs. United States Operations Sales of the United States divisions amounted to $218,914,000 represent ing 79% of the consolidated total. Defense business for our United States divisions amounted to about 10% of their volume. Although gov ernment expenditures for defense in creased materially in 1966, our aero space products were the only ones that were significantly affected. Most of the plants operated at very high levels of production and, in many instances, we were hampered by a shortage of skilled and semi-skilled workers. Increased overtime and the Distribution of the Income Dollar nineteen * expense of hiring, training and super the United States with that of Canada. tire mold plant in Belgium is progres vising many new employees increased The backlog of orders indicates a con sing on schedule. Most of the start-up costs. Nevertheless, the high volume, tinuing high level of production in costs in this plant have been absorbed. plus our continuing investment in cost 1967. The condit ions described above, plus reduction equipment and efforts to in Business activity and industrial pro the amortization of intangibles and a crease manufacturing efficiency, re duction were strong in Canada in write-off of goodwill had an over-all sulted in increased profitability. 1966, particularly in mining and con adverse effect upon operating results Abex has numerous licensees in for struction. Consequently, sales of our of the Canadian and International divi eign countries and several new ones manganese and other alloy castings sions. Improvement is expected in the with significant potentials were added increased to a record high. Shipments current year. in 1966. Agreements were reached of railroad products also improved. with companies in West Germany and Sales of automotive friction prod Employee Relations France for the manufacture of our steel ucts in Europe rose substantially, re The number of employees at year-end freight car wheels. Income from licens flecting the impact on sales of disc had increased to 14,800 from 13,600 ing activities has been increasing, and brake lining. Shipments of brake lin a year previously. Employees in the there are additional opportunities in ings also increased in Mexico. United States totaled 9,800. In the many countries which are being ex Shipments of industrial hydraulic Canadian and International divisions plored. equipment increased in France and they numbered 5,000. Canadian and International Belgium but economic stagnation in During 1966 the company negoti England resulted in a sharp reduction ated twenty union agreements at Operations I in industrial output during 1966. This plants in the United States and Canada. Sales of ourCanadian and International caused adecline inoursales. England's There were two strikes during the year, divisions were $58,485,000, amounting problems are formidable and the gov one of twelve weeks involving a small to 21% of total consolidated volume. ernment has indicated that the period number of employees in a brake shoe Shipments of hydraulic equipment of "severe restraint" will continue in foundry on the West Coast and the I' by the Jarry Hydraulics Division of 1967. other, of shorter duration, involving Canada were much higher than in the In West Germany our sales declined about 150 employees in a friction preceding year because of the in as the country's production slowed products plant in Ohio. Both strikes creased demand for military aircraft, considerably in 1966 under conditions were settled on essentially the same but operating results were not satis of tight money and high interest rates. terms the company offered before the factory. A very high proportion of this The outlook for 1967 is uncertain until strike. division's products are for the United the policies of the new government States military. This is consistent with are established. the Defense Department's policy of co Shipments of tire molds in Europe ordination of the materiel program of increased, and production in the new i twenty SCI 01694 .>*; ~7V Statement of Consolidated Earnings Years Ended December 31,1966 and 1965 INCOME Shipments ................................................................. Other income--net (note 2)................................... TOTAL............................................................. 1966 $277,398357 2,295,402 279,693,959 1965 $260,168,235 561,738 : 260,729,973. ft COSTS AND EXPENSES Materials, wages, and other costs........................... Selling, administrative, and research expense .... Depreciation and amortization of intangibles;... Repairs and maintenance of plant and equipment Property, excise, and miscellaneous taxes ............. Interest ...............-............................................ TOTAL...........-------------------------------------- 1. EARNINGS BEFORE TAXES ON INCOME:..y................... Provision for taxes on income(ndte3) :........ ..........;. 253;36&,91 V;V :2g3ggM^W : J33G0C " NET EARNINGS ;....... ............ 7-; V-..................... SPECIAL ITEM Loss on sale of forging facijitfes fess related taxes on income<7v .......... NET EARNINGS AND SPEQ/^ ; ..i.7. ".. 7 PER SHARER AT END 1 . -. >. - - : . ^^N^tOUTSTANDING Net* Specii ./l* . . '' V.WcSiV m$UPffS ..'7 ;'v %!* '-;f t - r,,- CVmc By Ip^Vy' `f:\y- /*** SCI 01695 Consolidated Balance Sheet December 31.1966 and 1965 '' Assets CURRENT ASSETS 1966 196S Cash .................................................................................. Short term investments--at cost (approximates market). : Accounts receivable $ 10,027,766 $ 8,103,3259,916,367 Ar 14,049,306 Raw materials and supplies............................. ... ... Finished product and work in process . .:Vi.,-v' - 31 TOTAL CURRENT ASSETS .. ... V.^. .'ivY^Cvlt# PROPERTY, PLANT, AND EQUIPMENT Buildings and equipment--at cost . Less depreciation ........... ... TOTAL PROPERTY, PLANT, AND OTHER ASSETS : Prepaid ex Investmen . Patent^ar|doth;efe ----------------- - .-C./v..--;- . .. , ,. ----------------------------------r SCI 01696 ABEX CORPORATION' Liabilities CURRENT LIABILITIES 1966 1965 Current maturities on long term debt fnote 6)............ Notes payable to banks by Canadian subsidiaries...... $ 3,787,393 4,162,506. $ 456,424 Notes payable to bajnnks by European subsidiaries .... . ' ' 3,92T,67T; ,. 2,245355 Accounts payable ;;. ........ ;...._____ 1.,;. 9;458)$50^^: Accrued accounts .. JVri Accrued taxes on income . . .;;------;> . - TOTAL CURRENT LIABILITIES ..;. . LONGTERM LIABILITIES v-V ;v"v Long term debt (note 6) Deferred income taxes (note-3}"/:- Ji.-j ]J /,. .TOTAtLbNGTERMUABIUtlES:: .`riV^iifeo^S>S ... ..r " CAPITAL STbcte'friotes-4,:7^anlMl . y. . - v ~ . - y. :treasu^y;'. y'.^ , Outstanding^^ EARNINGS REM TOl P,r,v.-; v, SCI 01697 Consolidated Statement of Source and Disposition of Funds Years Ended December31,1966 and 1965 SOURCE OF FUNDS Net earnings {less special item in 1965).................. Depreciation and amortization of intangibles___ Increase in long term liabilities............................... Retirement of property, plant, and equipment--net TOTAL............................................................. 1966 1965 $12,827,047 $10,460,474 11,113,521 10,532,612 3,360,400 1,626,798 555,377 ^4,144>496<-:.-.Vvg'va 27,856^45^:-^6,764,~380: - > "Slf DISPOSITION OF FUNDS Expenditures forproperty, plant, and equipment ,. . " ' Dividends paid......................................................... Common stock purchases less sales to employees Retirement of long term liabilities ` Increase in other assets........ .................... Increase in working capital,, excluding, cash and - ; equivalent ' ''v total.......... ................................ . 30 * * ....................' . *. INCREASE/DEGREASf IN CASH AND EQUIVALENT. .... . CASH AND EQUIVALENT - - -............. --- -w. s--,-. ' jtMi-jM- ..S'I `' J ^3 Accountants! Opinion SCI 01698 Notes to Consolidated Financial Statements '' - ftttftjde &ieaceounfi'df'the Company and Its wholly- owned Canadian and International subsidiaries. The net assets of such subsidiaries including loans and advances from the Company amounted to $34,503,389 at December 31,1966 and $32,158,796 at December 31, 1965. For the year ended December 31,1966 the net losses of such subsidiaries were $2,148,046 after amortization of intangibles and a write-off of goodwill amounting to $1,407,384 and the payment of technical service fees, administrative charges, and interest to the Company totalling SI,648,025. In the year ended December 31,1965 the net earnings of these sub sidiaries were $886,328 after amortization of intangibles amounting to $230,46S and the payment of technical service fees, administrative charges, and interest to the Company totalling $955,654. 2. Included in the caption Other income-net on the Statement of Consolidated Earnings in the year ended December 31, 1966 are gains which arose upon the disposition of securities previ ously held for investment amounting to $1,515,1S5. and a write-off amounting to $800,000 which represents the Company's estimate of the decline in value of purchased goodwill. 3. Depreciation has been provided by the Company and its subsidiaries generally at rates calcu lated to absorb the cost of buildings and equipment during the period of their useful lives. Where permitted by income tax laws, the Company and certain of its subsidiaries deduct larger amounts of depreciation for income tax purposes than are charged against net earnings. The reductions v& in tax liabilities resulting from this practice are not credited to net earnings but are accumulated in deferred income taxes, displayed separately on Ihe consolidated balance sheet. -r-fi 4. The financial data In this report have been adjusted to reflect the increase in authorized shares.i/-^ to 6,000,000 and the two-for-one stock split approved by the shareholders on April 26 1966. 5. At December 31, 1966, 25% of total inventories, measured by approximate current cosfare^ stated on the last-in, first-out basis. Such cost exceeds the last-in, first-out value by $4,742,000.' 6. Long term debt at December 31,1966 includes the following:. 1 . . ' * *. ;; \t. AbexCorporation 4'/j% sinking fund debentures due 1982 ..:-------------'. 4'/% sinking fund debentures due 1987 ...'........... .. .... * .DueWithin One Yet* '. . $' -- -- Canadian Subsidiaries .' ' Amount due January 16,1967on purchase.of r~ Jarry Hydraulics Limited .'.... .. - ^ ' . \ V- ' ---------.r.,',.:;'.' 3,020,378 Amount due Canadian governmentob purchase of equipment;:^;-n/'-'-,; :>i,993 Due Aftethtff One Year. V^ $ 9,533,( 11,127,0 . 157.S European Subsidiaries ' Notes payable (3.8%-7%Ldue1967-i986.v.^/.v,-:i..V.i;Li:;,vv^r?MiW>22. : 6,573,5. * ' . . ` ' " t >. . >- ,Vfr.- -- TTaot>alI Ilonnnag ftearrmm /dfeablttt * ' - , ____. ` . ` * &.&i&5:v- S$! 27,39t;53j .. .: . . . ;. -' . . V; .. Under the terms'of the indentures;'cove'rihg sinking.fund debenttM timum' annual-sin fund payments are required/:as^follpWS:'1968;. $71(kOOOL.-.1ft6^:|9if^;J!900/)00; 1972r19fl . $..1..,.3...0..0..,.0..0..0..;..1..9..8...2..,..$..1..,.1..5..O..--,00Q--t98v3L---1?8'6;*$--650,~000O;; and ......................... ....... C 'r The indentures covering thedebentures contain restrictidnsJIamdhgTaihe^^gainst the pa' ' of dividends (other than^stock"diftlSehtR); the.redemption-of,ca^Ctj^A^kj,add investments .subsidiaries In areas other thanJfte.United States and CanadajVThffiar^unWreeoLsuchresH tionsatDecembeF;3i,1966;u^d^i,tfm^t.Testrfctli^,cJirtttm^ffi^^^0Qf:.. ,.. ' issuance of not mbre'thanfeOP.OQC&lwii^ par vd^j " . ;': 'ii-' $100, has'been approved by the shareh6ltjrdri,l,>vX : ; ' .. . " "" '- ' .'- ' ^ssV''a*"AL' 11 lOCC. nntnm6`kuA/eLAfitcfanfllno.' fA ntifraabk-IK QvdnthftffiS'w COJ pycV.-^-the plan at'a total-purchase prke..of$422jj1vat)d:ppddijS(JtJRjSra ' - leaving 74,423 shares under opdbn'at December were available for the granting -of adclltlbtilk^liWiSa^Wfifif!^ ' '-----L - 'gsglyi excisable. No shan }.^6ar.\ ... $59,219,17^ 10,460,474?^ 9^3 . 69,679,6 . 5^271,iSf SiQ'18'-- $64,408,C akCommission pro twenty-fike " ` SCI 01699 Ten Year Review Earnings and Dividends Shipments ......................................................... Earnings before taxes........;.................................... Per cent of shipments.......................................... Per cent of capital employed .............................. Net earnings.................... ;.................................... Per cent of shipments ; -. .V............................... Per cent of common stock<equity ................... Per common share.>... .\Vv'........................ . Dividends paid:.... i Per cent of net eamingsQ^v;': ............. 1966 277,399 26,327 9.5 17.5. 12,827*] ..Aft,i 10i^ 3-..54y&j S;79i 45,: 14,8 Total , -i Sire* "<>vV'V.ut.. t.v.,.-. , ijS-*'-: 101,$ . , - Shipments, per errip , ^Capital.employe^ : Dlvidehofeperco ' , -Xii* K^>, 7- '< * Vt r,V<lh mm&rs cvy-:H i;.y. ' -V:iHfc-d: In 1961 there was a. speciabjiedi^q Irom an excess, profits tax TjsSffii yean 1950-1953 amounting tiS995'i The year 1963 Includesjtj S. K. Weffman Cbq year In.a In purposes was', terestr. ' < In 1965 lherq$ amounting to' I ' Income, resultin facilities. '' Common" shares i mpn share- figures for-a^Jfeasi^^beSi . adjusted tp reflect a Iwo-looin^stri^ti'^O^ ; . mC'itj- iSrWisJiL. ` 2: *v " A`-v`. , *^.yUiy^^Y* \***>:$* r- .1'-:-'. flsi.i v&js w&&j SCI 01700 S^iSWcv---: * l\:.U---4^cif-r-v' v- .: V.!. -l- . sfp^'-cORPORlATION^P^ Dollars expressed in thousands except per common share and per employee figures 1964 1963 241,478 19,662 8.1 14.0 9,762 4.0. 9.0 2.64 4,642 _;.;.47.6 . 13,53S>.:. 214,669 14,741 6.9 10.9 7/441 3.5 7.1 2.00 4/453 59.9 12,869 1962 194,892 15,454 7.9 12.9 6,954 3.6 7.4 2.13 3,913 56.3 11,622 1961 165,504 11,270 6.8 10.2 5,370 3.2 5.9 1.64 3,915 72.9 10,680 -- `? -'..83725- :' -rllvW' 78,208 10760? . 74,063 10^17 88,968,-i ,<84,380 . 64,910 8,323 73,233 13.8;..:. . i3.9 . >i839t:V^ -.10720 .- .;? w-'s^Kja : . v: .-! 2%bk#&. >1>20 ' 12.8 17,478 10,709- .. 1.20 53,528 6.967 60,495 13.0 . 16,216 10706 1 T.20 .. >s _ SCI 01701 Products and Divisions Friction Products Aircraft, automotive and industrial friction products for braking and power transmission applications. AMERICAN BRAKEBLOK DIVISION, Troy, Michigan MAYNARD B. TERRY, President Plants: United States, Canada, France, Mexico S. K. WELLMAN DIVISION, Bedford, Ohio GEORGE L. ROMINE, President Plants: United States, Canada Hydraulic Equipment Hydraulic systems, pumps, motors, valves, controls, presses, aircraft landing gear, actuators and structural components; strain gage transducers. AEROSPACE DIVISION, Oxnard, California GEORGE N. DECKER, President Plants: United States, West Germany DENISON DIVISION, Columbus, Ohio PAUL W. NORRIS, President Plants: United States, Belgium, England, France, Japan, West Germany DYNISCO DIVISION, Cambridge, Massachusetts WILLIAM P. MUNGER, Division Director JARRY HYDRAULICS DIVISION, Montreal, Canada ALLAN C. MAC DONALD, President Railroad Products Brake shoes, bearings, freight car wheels, components and special systems for railroad track and yards. RAILROAD PRODUCTS DIVISION, New York, N. Y. RAYMOND A. FRICK, President Plants: United States, Canada Cast Metal Products Manganese and alloy steel castings, dredge pumps, welding products; precision ferrous and non-ferrous castings, tire molds and bearings. AMSCO DIVISION, Chicago, Illinois GILFRY WARD, President Plants: United States, Canada, Mexico ENGINEERED PRODUCTS DIVISION, New York, N. Y. N. GEORGE BELURY, President Plants: United States, Canada, Belgium, England J twenty-eight Primed mtiSA SCI 01702 SCI 01703