New Accounting

When the McKesson & Robbins scandal broke last December, jittery stockholders feared that their drug firm might be busted. Approximately one fourth of its $86,556,270 assets was just figures written on the books to keep the company looking prosperous while imposing Impostor F. Donald Coster milked it. Trustee William J. Wardall, appointed by the U. S. District Court to straighten out the mess, last week mailed to stockholders his first full report of the firm's financial condition:

>> In the first five months of 1939 McKesson & Robbins made a net profit from operation of $1,336,627 (compared to $271,752 the year before).

>> By the end of 1938 Musica-Coster had inflated the firm's assets by $21,025,658. Of this amount $2,869,483 was stolen from the firm. The rest had never existed to be stolen, was an incidental figment of the Coster speculation. Ex phony items: assets on Dec. 31, 1938 were $68,953,095; liabilities, $41,657,064; net worth, $27,296,031.

>> McKesson earnings (years ending Dec. 31):

Coster counting Trusteecounting

1936 $3,286,614 $2,202,397

1937 3,667,325 2,313,662

1938 1,376,694

Recovered to date: $235,000 (including $100,000 insurance policy on Musica-Coster's life). Proceeds from sale of his yacht Carolita: $15,500.

The above figures were certified by McKesson's new accountants, S. D. Leidesdorf & Co., and its inventory at the close of ($31,366,635) was checked by Ford, Bacon & Davis, Inc. engineers.

At the 1938 rate of earnings, after fixed charges, there was $2.22 available to pay the $3 a share preferred dividend, leaving the common in the red to the tune of 78-c- per preferred share. In addition Trustee Wardall must decide how to fit 605,964 shares of no par preferred (valued on the books at $30,298,200) and 1,282,938 shares of $5 par common stock into the drug firm's $27,296,031 net worth. So someone must take a licking. SEC will be interested in this reorganization--its first big test of the Chandler Act (set up to protect small investors in reorganizations).

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