Fair View

We have audited the books and accounts of John Doe, Inc. and we certify that the accompanying Balance Sheet and Profit & Loss Statement are correct and, in our opinion, exhibit a fair view of the corporation's affairs.

Auditors' certificates like the foregoing are appended to the financial reports of almost every big U. S. corporation. Contrary to popular belief, accounting is not an exact science. Charges, reserves, write-offs, appraisals, etc. are matters of opinion. Though profits or losses are calculated to the last digit, even the smartest auditor cannot predict the precise day when a lathe will cease to turn or a truck wear out. Best he can do is to estimate, with the management's help, the probable life of plant & property, set aside an approximate sum for depreciation. Having done this and all the other duties of a good auditor, he fixes his hand to a "fair view" of the company's business.

Last week Big Business and its staff of auditors bustled to present a fair view of profits & losses for the March 1934 quarter. Shot with good accounting practice was the report of U. S. Steel. From actual operations Big Steel had cleared $6,578,000. Interest and extraordinary expenses (representing its share of overhead for ore and shipping properties) ate up some $2,700,000. Steel would still have been able to report a profit had it not then deducted a walloping $10,795,000 for depreciation & depletion. This, of course, was not money out of its big pocket, but eventually those plants and mines must be replaced. Net result was a $6,989,000 loss for the first quarter against a $16,730,000 loss for the same period last year when Steel's operations really meant money out of pocket. Noteworthy was an increase in efficiency. Steel shipped 18% less tonnage in the first quarter than in the previous quarter, yet its operating profit was up a flat $1,000,000.

The steel industry as a whole has stepped up operation in the last month from 48% capacity to 56% of capacity. But Big Steel, whose share of the automobile patronage is relatively small, is running at only 38%. "There are some indications that this rate . . . will be continued and possibly exceeded during the second quarter," said Steel's finance committee whose members could never be accused of brashness.

Other steel companies reported deficits pared or eliminated compared with the first quarter of 1933. Bethlehem reported a loss of $902,000 against a $5,769,000 loss last year. Youngstown whittled a 1933 loss of $3,473,000 to $1,423,000. Inland reported a $1,104,000 profit against a 1933 loss of $1,012,000. Republic Steel Corp. ("Rebecca" to Wall Street) lost $58,000 against $2,521,000. Wheeling also lost $58,000 but that was a big slice off last year's $802,000.

National, only major steel company to pay common dividends throughout Depression, continued to shame its competitors. A first quarter profit of $1,642,000 against $280,000 in the same period of 1933 was more than the total amount paid out in dividends all last year. One good reason for National's amazing record is the strategic location of some of its plants in the centre of the Detroit automobile industry. Questioned about a report that he had been offered a $1,000,000 annual salary from another steel company, Chairman Ernest Tener Weir last week refused to name the bidder, but declared: "I'm glad I didn't accept it."*

General Foods' per share earnings were up from 61-c- to 70-c-. "Case sales for the first quarter of this year showed an improvement of 28%," declared President Colby M. Chester Jr. "While such an increase in sales would normally mean larger proportionate earnings, the increase in earnings has been kept down due to higher commodity and manufacturing costs and increased taxation. There also have been price reductions on some . . . products." G.F.'s big rival Standard Brands reported profits up 35% to $4,302,000. Loose-Wiles Biscuit upped its earnings from 58-c- per share to 67-c-, United Biscuit from 41-c- per share to 52-c-. National Biscuit held even with earnings at 42-c- per share for both quarter years.

General Motors, which always tells all, did not wait to issue a formal statement. President Sloan announced that first quarter earnings amounted to 63-c- per share against 11-c- in the same period of 1933. At the quarter's end G.M.'s cash & securities stood at $153,000,000, its working capital at $262,000,000. During the first three months it sold to foreign and domestic dealers 316,000 automobiles and trucks against 199,000 last year. "The quarter's operations were distinguished by subnormal shipments during January and February, resulting from delays in getting into quantity production," said Mr. Sloan. "There existed during the entire quarter an acute shortage of practically all lines of General Motors cars at distributing points, which prevented the corporation from obtaining its full sales possibilities and capitalizing the competitive strength of its products."

Electrical Equipment. Big General Electric's first quarter upped earnings from 8-c- per share to 14-c-. Billings jumped from $26,101,000 in the first three months of 1933 to $34,936,000 for the same period in 1934. Westinghouse orders climbed from $12,847,000 to $20,237,000, but there was still a loss of $1,776,000 to report. In its release Westinghouse gave voice to what many another maker of durable goods bitterly feels: "The improvement in business is most encouraging but we would view the future with more optimism if the present restrictions curtailing and almost preventing the use of long-time credit were removed. The business of the Westinghouse company consists primarily of durable or capital goods which are paid for in normal times by money obtained by our customers from the sale of securities. At the present time little, if any, money is moving into industry from this source due not only to restrictions on loans but also to a psychology which tends to discourage investment in improvements and betterments. It is a strange but significant fact that we are living in an age when any reputable citizen can borrow money with which to buy an automobile but cannot borrow money with which to buy or build a home."

Rails. With a 21% increase in gross revenues for the first quarter, New York Central R. R. reported a 129% increase in net operating income--$8,211,000 against $3,536,000 in 1933. The first 65 carriers to report March earnings showed a 33% average increase in gross revenues and net railway operating income up 396% from the March before. Operating net for all class 1 roads was estimated to be $51,000,000, best figure for the month since 1930.

Other typical first quarter reports:

(000 omitted)

1934 1933

Air Reduction $ 994 $379

Consolidated Gas (Baltimore) 1,707 1,510

Curtis Publishing 1,449 957

National Distillers 3,832 195

Phillips Petroleum 726 2,179 (L)

Stewart-Warner 167 775(L)

William Wrigley Jr. 1,875 1,801

L = loss

*A steelmaster's hero for his embattled stand against the labor provision of the Street Code, Chairman Weir was also glad last week when Secretary Ickes approved a contract of $47,402.89 let to National's subsidary Weirton by New York Central R. R. for spikes and tie plates. Pending in a Wilmington, Del. Federal court is the Government's action against Weirton for violation of the labor section of the National Industrial Recovery Act.

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