Document XR0e2mZBGvVdMx7JwBDmMb5qg

I, The decline in earnings was caused by several factors. Start up costs at two freight car wheel plants were high during the first quarter and sufficient sales volume was not obtained to fully utilize the expanded capacity throughout the year. Unusual expenses were incurred in several areas of our hy draulics business. The Aerospace Division, created in mid-1962, was engaged in moving production of servovalves ro the Oxnard, California plant. The costs of consolidating manufacturing activi ties, and engineering and field service organizations were charged to the year's operations. In the Denison Division, start-up costs were incurred at the new Marysville, Ohio plant which went into production early in the year. During the year, Jarry Hydraulics completed moving its main manufacturing facilities into a modern building in Montreal. Mov ing and rearranging expenses, interruptions in manufacturing, and development costs in connection with certain military contracts were all high. Competition has been severe in all markets served and. as a consequence, the rate of profit on many products was low. In creased selling prices have been possible only in limited product areas and we anticipate that similar conditions will prevail throughout this year. Consequently, vigorous cost control will be maintained, and studies to effect better manufacturing and mar keting methods will have the continuous attention of division man agement people. ORDERS AND BACKLOG Total orders received in 1963 increased to $221,700,000, slightly exceeding shipments. The backlog of orders at the end of the year was $56,100,000 compared with $49,100,000 a year previously. Approximately 50 per cent of the year-end backlog was for hy draulic products, which ordinarily take a longer lead time from order to shipment, CAPITAL EXPENDITURES Capital expenditures for 1963 were $11,124,000 compared to $11,568,000 in 1962. Depreciation charges and amortization amounted to $9,646,000 for the year 1963. A major portion of capital expenditures was for cost reduction programs and necessary replacement of equipment throughout the company. In January 1963, the company purchased for $3,000,000 the net assets of a company in Hilden, West Germany which was CAPITAL EXPENDITURES AND DEPRECIATION MILLIONS OFDOLLARS IS 1954 '55 56 '57 '58 '59 '60 '61 '62 62 2 CAFITAL EXPENDITURES DEPRECIATION SCI 01892