Document YDBkZkqgyMY3wMB30aQQKZbOy

Notes to Consolidated Financial Statements AMERICAN BRAKE SHOE COMPANY The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Depreciation has been provided by the Company and its subsidiaries generally at rates calculated to aosorb the cost of build ings 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 eamings. The reductions in lax liabilities resulting from this practice are not credited to net earnings but are accumulated in deferred income taxes, displayed separately on the consolidated balance sheet. Inventories stated on the last-in. first-out basis comprise 27% of total inventories at December 31. 1962, measured by approxi mate current cost. Such cost exceeds the last-in. first-out basis by $3,474,000. Long-term debt at December 31. -962 includes the following: American Brake Shoe Company Notes payable to banks-due 1965 ................................................ ~'A% sinking fund debentures due 1982 ..................................... 4'/r % sinking fund debentures due 1987 ..................................... Dominion Brake Shoe Company, Limited Amount due on purchase of shares of Jarry Hydraulics Limited Total long-term debt.......................................................... Due Within One Year $1,050,000 100,000 $1,150,000 Due After One Year $ 2.100.000 U.000.000 12,000,000 2,243,125 $27,343,125 Under the terms of the indentures covering the sinking fund debentures, minimum annual sinking fund payments are required as follows: 1963-1964, S250.000; 1965-1966, SS00.Q00; 1967-1971. S900.000; 1972-1981. S1.300,000; and 1982-1986,5650.000. Such payments are sufficient to retire 969c of the debentures prior to maturity. The Company has the option of increasing the annual sinking fund payments beginning in 1965. The indentures covering the debentures contain restrictions, among others, against the payment of dividends (other than stock dividends), the redemption of capital stock, and Investment in subsidiaries in areas other than the United States and Canada. The amount free of such restrictions ai December 31. 1962 under the most restrictive covenant was $7,275,000. The amount due on purchase of shares of Jarry Hydraulics Limited will become payable in January 1967 or on the death of the seller, if earlier. The purchase agreement contains certain provisions which could, and are presently expected to, result in a liability of $1,275,000 (Canadian) in addition to the amount included in the balance sheet. 5. On January 2, 1963 Universal Hydraulics GmbH, a newly organized European subsidiary, acquired for $3,000,000 all the net assets of a business in Hilden, West Germany, for the manufacture of hydraulic products. 6. Issuance of not more than 200,000 shares, in series, of cumulative preferred stock, par value $100, has been approved by the stockholders. Under the Employees' Stock Purchase and Option Plan offerings may be made at prices not less than 85% of the market price at the time of the offering. Transactions during 1962 in the 1952 plan which terminated in 1962, and in the 1957 plan, were as follows: Reserved for Shares Issuance at Subscribed December J1, Or Options 1961 Granted Purchases Cancel lations Reserved for Issuance at December 31, 1962 Number of Shares Price Per Share Shares Under Subscription 1952 Offering ........................... 1957 Offering ........................... 1961 Offering ........................... 1962 Offering........................... 1,500 18,067 2,165 -- -- -- _ 4,940 1,359 2.838 171 -- 141 1,992 271 560 -- 13,237* 1,723 4,380 -- S42.Q5 42.75 42.75 Shares Under Option 1957 Offering........................... 1959 Offering........................... 1961 Offering........................... 1962 Offering........................... 40,035 2,600 24,335 - -- _ _ 4,000 -- -- -- 1.920 -- 150 200 38,215* 2,600* 24,185 3,800 53.63 53.88-54.00 45.00 45.00 Available for Future Offerings . 10,601 S.940 -- 3,453 5,114 Totals..................................... 99,303 4,368 1.781 93,154 Subject to purchase or exercisable at December 31, 1962. met TMNtrsiSHT SCI 01880