Corporations

Last week the following newsworthy corporations made the following news: Yankee Brass. The banking house of Kidder, Peabody & Co. tried to break the capital market logjam with an offering of $8,000,000 of industrial bonds--biggest since 1931.

The market was ripe for bond flotations but the success of the Kidder, Peabody issue was due in large measure to the name the bonds bore: Scovill Manufacturing Co. of Waterbury, Conn., oldest and one of the largest brass companies in the U. S. It was not new financing; the last thing that rock-sound old Connecticut company needs is money.

Scovill issued the bonds in 1930 to buy A. Schrader's Son. Inc. of Brooklyn (tire valves), and Kidder, Peabody bought them from onetime Schrader stockholders. Since the bonds were outstanding when the Securities Act was passed, they did not have to be registered. Founded in the second year of President Jefferson's first term (1801-05), Scovill is the epitome of all good things Yankee. It was started as a brass-button factory. Scovill buttons and Scovill notions were the best stock-in-trade of every 19th Century peddler from Bangor to the Yazoo Delta. Scovill made plates for daguerreotypes. Scovill made the Queen Anne burners for the lamps Rockefeller filled with kerosene. Scovill made time fuses, bullet jackets, shell cases in the War. And today the average U. S. citizen seldom goes from dawn to dusk without using a half-dozen Scovill products.

No household word is Scovill because the company deals largely with other manufacturers. It makes parts for radios, watches, clocks, electric fixtures, razors, surgical instruments, automobiles, oil burners, typewriters, umbrellas, overalls, suspenders, locomotives, bicycles. Its own line, beside buttons, includes pipes, rods, sheets, plumbing fixtures, electric motors, blow torches, bolts, screws, nuts, food-mixers, condenser tubes, soda fountain equipment, vacuum cleaners, divers' helmets, 80% of the world's tire valves, 55% of all U. S. pins.

Shrewd Yankee management has kept Scovill, with 300,000 items in its inventory, from missing a dividend in any year since 1855. It never duplicated its Wartime peak of $13,000,000 in profits when its enormous Waterbury plant was completely converted to munitions making but with ultra-conservative accounting it made $4,000,000 in 1929, about $1,000,000 last year.

Only Scovill left in Scovill is H. Lamson Scovill, a director. The $40,000,000 company is completely dominated by the sons and grandsons of the late Chauncey Porter Goss, who went into Scovill as an errand boy during the Civil War, was president from the turn of the Century to the end of the War. Present head of Scovill is Edward Otis Goss, an affable hard-headed Yankee of 69 who is Waterbury's first citizen and a peer in the Connecticut industrial realm. Below him are four Goss vice presidents, most important of whom is his brother John, Scovill's general manager. And below the official Gosses are countless lesser Gosses learning the business.

The Gosses are a clannish family living modestly and quietly in various parts of Connecticut but there is not a trace of nepotism in the old family concern. From the president down, salaries are low and the everlasting watchword is tight-fisted efficiency.

Morrow Castle. "Twenty-two years ago this month the greatest catastrophe in the history of the seven seas shocked the civilized world. The S.S. Titanic . . . struck a monster iceberg. The tragedy chilled our blood and stirred our hearts. Twenty-two hundred and eight human souls were on board; 1,501 were lost. . . . The great Captain E. J. Smith, as befits the heroism of the sea, stuck to the finish and went down with the ship. . . . His refusing to [save himself] gave even death a redeeming feature."

This piece of rhetoric was not a quotation from an inquiry into the burning of the Mono Castle or any other maritime disaster but a high-flown attack on William Walker McLellan, an aging Scot from Glasgow. About a year after the Titanic sank, Mr. McLellan bought a small chain of stores in North Carolina.

A frugal hustler, he expanded until McLellan Stores was operating some 275 5-c--to-$1 units throughout the land. Sales ranged as high as $24,000,000 a year, profits as high as $1,200,000. Then early in 1933 McLellan Stores went to the wall because the banks would not renew its loans. By last spring, when it was time to put McLellan Stores on the auction block, it was evident that the chainstore was still a moneymaker.

A great lamentation arose from the common stockholders. Before a dignified Federal referee the chairman of the protective committee, Peter M. Leavitt, drew an ugly comparison between the way the Titanic's captain conducted himself in an emergency and the way Mr. McLellan behaved in the foundering of his company. In Mr. Leavitt's welter of metaphors drawn from King Solomon, medicine and the sea it was never quite clear just how Mr. McLellan did behave, but one thing was certain: Founder McLellan was supporting the principal bidder for the property. Indirectly the bidder was George Keenan Morrow, who with Gold Dust Corp., United Cigar Stores and his Brother Frederick, comprise the "Morrow interests." There was never any doubt that the Morrows intended to add another turret to their merchandising castle, for their proposal included a plan whereby they would ultimately obtain one-half the common stock.

The Morrows as well as their ally Mr. McLellan suffered from Mr. Leavitt's verbal barrage, but heavier with the Federal referee weighed the fact that the chain-store's sales and profits were on the rise. Upshot was a postponement of the sale until next January when full-year reports would be in. Meantime McLellan stock began to rise from the low of $1 per share. By last fortnight it was selling at $12.50 and for several days was the most active issue on the New York Stock Exchange. These fireworks caught the eagle eye of the Securities & Exchange Commission (which has lately hired expert tape-readers to spot pools on the ticker). Last week in giving McLellan stock a clean bill of health, SEC reported that "a very large proportion of the purchases . . . represented an accumulation . . . for an individual and his associates."

The individual was George Keenan Morrow. And the "accumulation" was working control of McLellan Stores. In a rare interview in 1929 George Morrow, who was born in Canada but has spent the last 20 years in Manhattan, remarked that "like Tunney, we have never been beaten." At the time the statement was correct.*

But the creators of the greater Gold Dust Corp. have since taken two drubbings: United Cigar Stores went into bankruptcy and a whirl at running Ward Baking Corp. was far from successful. Having scored a knockout in the McLellan bout, the Morrows seemed ready for another try at a merchandising title. Royal Mail.

In 1931 Owen Cosby Philipps. Knight of Justice of St. John of Jerusalem., first Baron Kylsant of Carmarthen, master of Royal Mail Steam Packet Co. and "Lord of the Seven Seas" was unceremoniously clapped into a British jail for issuing a false and misleading securities prospectus. Royal Mail was reorganized and White Star, its big subsidiary, was merged with Cunard. But the world's biggest shipping company continued to go from bad to worse. Last week its deputy chairman, Brig.-General Sir Arthur Maxwell, regretfully informed his stockholders that the deficit had mounted from -L-9,000,000 to -L-11,300,000 (about $56,000,000) in the past year. "Even at the new total the amount of this deficiency does not yet represent the full extent of losses which have been or will be sustained by the company," Sir Arthur reported. "In view of the state of the company's affairs, you, as stockholders, should not expect any return, and it may be necessary very shortly to consider winding up the company."

*Except that Mr. Tunney was once quite badly mauled by the late Harry Greb.

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