So one morning there was a radio report in Detroit that the contract was to be canceled. We sent a messenger over to the station and asked them for the report and where they got it. They told us they got it from the War Department. They gave us the copy. I brought it to Senator Ferguson's office. Senator Ferguson called up the War Department and asked them if anybody had been issuing this kind of publicity. They sent a man over who said they had not. Well, the Senator told me his answer to them was, "If you did not do it, just see that you do not do it again." He never disclosed the fact that he had this record of what they did in his desk. I say, Senator George expressed his opinion on what should be done about this. And, in spite of that fact, why, the bill went through. I have a number of the trade paper releases, and that sort of thing, all of which said at that time that some action was going to be taken to stop the injustice, but after this report this high official made to Congress, he said he would stand or fall on the need for renegotiation because of this contract which, as I say, 5 days later he was forced to approve without the change of a word. Draw your own conclusions from that. As far as the Timken-Detroit Axle Co. is concerned, Senator, I would like to give you these statistics. We published a 10-year report. Our fiscal year ends June 30; therefore, the first year shown is the year ending June 30, 1941. That is 5 months before Pearl Harbor. In that fiscal year, ending June 30, 1940, we had sales of $68,000,000 on which we showed a net profit of 8 percent after taxes. The first full war year, ending June 30, 1943, under our fiscal set-up, shows double sales at $140,000,000, and by that time the Government was demanding everything we had, as they are right today. We only got 3 percent on net sales which was, of course, a greatly reduced income to stockholders before the personal taxes, which were raised very high. So you can see what happened to the stockholders. And then I say to you, how could anyone call that war profiteering? This high official declared that we had no postwar conversion problem; that we could go right back to making our peacetime products. That only demonstrated his ignorance of what we were doing. I can prove that by the fact in 1945-that is, the fiscal year, you know, ending in June-the first postwar year, our sales dropped $100,000,000, and profits were barely half of those in 1940. He stood up here as an expert and said that we would not stand any reduction in business at all; therefore, should be given no credit for that. In 1947, under the most competitive conditions in the automobile business, the sales rose to $89,000,000 and profits were $3,000,000 higher than they were in 1943. The sales were still way under the 1943 figure, but profits were still $3,000,000 higher in 1947. These figures answer all charges of profiteering and prove that we were penalized and punished in 1943. And, I think, as an expert he is completely discredited by these figures. I shall offer this report for the record. The CHAIRMAN. Very well. (The report referred to follows:) ANNUAL REPORT OF THE TIMKEN-DETROIT AXLE Co., DETROIT, MICH., for THE YEAR ENDED JUNE 30, 1950 REPORT TO SHAREHOLDERS There is submitted herewith the forty-first annual report of your company, including financial statements certified by our auditors, Ernst & Ernst, which is for the year ended June 30, 1950. This report goes to the largest number of shareholders in your company's history; the 2,172,343 outstanding shares are now held by approximately 13,540 individuals, companies, and trusts. Net sales for the year amounted to $74,913,368 and the net profit, after audit and year-end adjustments, amounted to $3,732,873, equivalent to $1.72 per share of outstanding capital stock and 4.98 percent to net sales. This compares to net sales of $89,628,142 for the year ended June 30, 1949, on which the net profit amounted to $5,057,949, equivalent to $2.33 per share and 5.64 percent to net sales. The reduction in sales was due to a general decline in the motortruck industry extending through the first 8 months of our fiscal year. Your company's working capital position increased during the year from $22,678,602 at June 30, 1949, to $25,081,468 at June 30, 1950. Expenditures for plant, machinery, and equipment during the year amounted to $1,420,432, which was $123,890 in excess of the depreciation provided on such facilities. The program of relocation of plants and manufacturing facilities begun in 1946 in accordance with the recommendation of the National Security Resources Board has proceeded satisfactorily during the year and we now have in operation eight manufacturing plants located in five States. It will be of interest to the shareholders that we have achieved a substantial diversification in our products and that during the year 321⁄2 percent of our total sales were nonautomotive in character. Our automotive sales are in no part to the passenger car field, but entirely to the truck, truck-trailer, and bus industries. As a result of experimental work carried on since the end of World War II, we are now in volume production on axles and transfer cases for the M-34 21⁄2-ton 6 x 6 army truck. We also have received orders for units of similar design for the larger army M-41 5-ton 6 x 6 truck, and for units required for military vehicles used by other branches of the armed services. While our incoming orders in all divisions of the company since July 1 have shown a decided increase, assuring capacity operations, increased taxes, which appear to be inevitable together with possible restrictions imposed by Government regulations, could be an important and undeterminable factor in the results of future operations. However, our strong financial position, large order backlog, and constant program of product development and improvement constitute a bulwark against eventualities that may arise. Respectfully submitted. W. F. ROCKWELL, Chairman of the Board. WALTER F. ROCKWELL, OCTOBER 7, 1950 President. Consolidated balance sheet, June 30, 1950, the Timken-Detroit Axle Co. and subsidiaries ASSETS Current assets: United States Government securities-at cost.. Trade accounts, notes, and contracts receivable. Trade notes and contracts receivable_-_. Total__. Less allowance. Inventories at lower of cost (first-in, first-out basis) or market. Less allowance__. Total current assets_. Other assets: Renegotiation rebates resulting from accelerated amortization adjustments... Miscellaneous investments and accounts, less allowances of $6,050_.. Expense advances and other accounts-officers and employees.. Property, plant, and equipment-at cost: Land Buildings, machinery, and equipment_ Total... Dies, jigs, fixtures, and patterns, less amortization. 'Good will, patents, and license agreements: At cost, less amortization.. Prepaid expenses_ Total_ 14, 479, 318 346, 305 220, 105 48, 320, 556 LIABILITIES Current liabilities: Trade accounts payable... Customers' and employees' deposits and credit balances. Taxes, including taxes withheld from payrolls Federal, State, and Canadian taxes on income $4,926, 976 291, 633 1, 226, 279 742, 673 estimated.. $2,805, 999 Less United States Treasury savings notes to be Reserves for warranties, employer's self-insurance, and other The assets and liabilities of the Canadian subsidiary have been included herein on the basis of the official rate of exchange at June 30, 1950, except for equipment which has been included at rates of exchange prevailing at dates of acquisition. On this basis the subsidiary's net current assets amounted to $291,601 and other assets, principally equipment, aggregated $52,277. Consolidated profit and loss statement, year ended June 30, 1950 Costs and expenses for the year reflect the following charges: Amortization of good will, patents, and license agreements.--. 934, 052 1, 296, 542 69, 483 The operations of the Canadian subsidiary are included herein on the basis of the official rate of exchange, except as to provisions for depreciation and amortization, and resulted in a net profit of $166,866 for the year. Consolidated statement of surplus, year ended June 30, 1950 Capital surplus: Balance at July 1, 1949, and June 30, 1950----. Earned surplus: Balance at July 1, 1949. Net profit for the year.. Deduct cash dividends paid-$1.25 a share_ Balance at June 30, 1950- - - . $3, 249, 920 BOARD OF DIrectors, ACCOUNTANTS' REPORT The Timken-Detroit Axle Co., Detroit, Mich.: We have examined the consolidated balance sheet of the Timken-Detroit Axle Co. and its subsidiaries as of June 30, 1950, and the related consolidated statements of profit and loss and surplus for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet and statements of profit and loss and surplus present fairly the consolidated financial position of the TimkenDetroit Axle Co. and its subsidiaries at June 30, 1950, and the consolidated results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. DETROIT, MICH., September 13, 1950. ERNST & ERNST, Certified Public Accountants. |