Evening Star Newspaper, December 31, 1936, Page 19

STEADY INCREASE INVOLUMES CITED Attention Shifts to Means| for Avoiding Heavy Earn- ings Taxes. (By Cambridge Associates.) Big names have joined the minus- to-plus parade in 1936. In a year when sales volume has shown little esteem for seasonal influences, con- Yy tinuing to swell steadily, many com- panies of our industrial aristocracy changed red figues to black for the benefit of stockholders. Companies whose major worries 12 months ago were with declining surplus accounts were called upon to consider means to avoid huge taxes on undistributed earnings before the close of the year. Among the most important com- panies returning to the plus side of the ledger are- Bethlehem and United Btates Steel, leaders of a leading in- dustry; a large sector of the trans- portation business as represented by &uch companies as American Car & Foundry, Pullman, Inc.; Baltimore & Ohjo, Southern Railway, United Airlines and Atlantic, Gulf & West Indies Steamship Lines. Reconstruc- tion and new enterprise share, with Mack Trucks, Lehigh Portland Ce- ment and National Supply in the fore- ground. And such unrelated, but by no means unimportant, enterprises as Electric Power & Light, Curtis Pub- lishing and Pacific Mills demonstrate that the good news is spreading over a wide area. These companies stand forth the generally roseate back- ground of increasing profits, because their depression record was more pro- longed. Huge Volumes Cited. ‘The accompanying chart shows total gross sales and net profits for common stockholders for a group of 15 selected companies in 1936, compared with 1935. The average volume of sales for each of the 15 companies last year was approximately $125,000,000, indi- cating that they are among the coun= try’s largest, and each company is expected to show a profit in 1936 to compare with a deficit in 1935. Ad- mitedly not a representative list of comparnies, this group nevertheless handled an amount of business equal 4n dollars to nearly 3 per cent of our national income. The typical com- pany in this group, as can be de- duced from the chart, showed an in- crease of sales of approximately 25 per cent in 1936 and reported a net profit of 13 cents per dollar of sales, against a loss of 312 cents per dollar of sales in the preceding year. Heavy Industries in Lead. As might be expected, the greatest gains were witnessed in the so-called “heavy industries,” where the depres- sion cut deepest. Employment in this division increased 22 per cent, accord- ing to the figures of the Department of Labor, while employment for com- panies producing non-durable goods climbed over 3 per cent. The latter, 85 a whole, are operating at levels close to those of 1929, and further expan- ¢ion is defined by considerations of im- mediate capacity or limited potential use of their products. The “heavy in- dustries,” or producers of capital goods, are for the most part limited only by the duration and extent of the up- ward phase of the business cycle. Notable opportunities for further progress in the coming year are en- Jjoyed by producers of electric generat- ing equipment, rail equipment, heavy machinery and the raw material pro- ducing units serving the same. Profitless prosperity prognosticators of only a short time ago will get little | vindication from annual reports soon to be released. Despite increasing | taxes and higher wage and raw ma- terial costs, despite the threat of fur- ther rapid and perhaps indigestible social change, despite claims of senility and lack of opportunity in American business, income accounts and bal- ance sheets will reveal a state of health and heartiness too forceful to be denied. Inded, it is likely that even those industries, such as coal y@Mining and urban passenger transe “ortation, which have often been la- beled as under long-term pressure from modern inventions and develop- ments will show more than a little improvement in 1937, FURTHER RIS.E EXPECTED! IN STEEL FABRICATION By the Associated Press. NEW YORK, December 31—V. G. Iden, secretary of the American In- stitute of Steel Construction, says a further 15 per cent increase is ex- pected in 1937 in steel fabricating business. A 40 per cent gain in 1936, he potes in a review of the year, “marked the first great improvement from the depression low” of the industry. Fabricated shipments for the year, he reported, totaled about 1,500,000 tons, r s | fangled gadgets and fantastic experi- ANCIAL. T 1936 BusINESS CoMPARED WiTH 1935 Dercentage Changes in Significant Barometers BusINESS DoLLAR VoLumME EMPLOYMENT WAGES CosT oF Living Buioing FAILURES (No) PropucTION INDUSTRIAL ACTIVITY SteeL OPERATIONS ELecTrRiCc OurpPuT Auto OuTtpPuT CommoDITY PRICES Crupte OiL OutpPut DISTRIBUTION CARLOADINGS ReraIL PrRICES ReTAIL SALES MonNey GoLp ReSERVES Fep Res. Ratio Time MoNey RATE CaLL MoNEY RATE INVESTMENT - 124 W +5.9% 21 % B+3.1% I +56.2 % . -21.2% I +18.6 % +13.7% I +106% 1+2.1% . 1.2% +11.0% W+1.3% N +11.0% . +18.4 % 0+3.6% No CHANGE - I +25.0% +385% ToraL New Securimies IS SN +274 % INSURANCE 1-1.8% REeSIDENTIAL BuiLoing I + 49.7 % (Ficures Mostiy on ELEVEN MoNTH BAsis) CamBRIDGE Assoaates, Boston HEAVY INDUSTRY STEPS INTO LEAD Sharp Recovery Trends of Last Year Outlined by Months. BY THOMAS E. FLANAGAN, Associated Press Financia, Writer NEW YORK, December 31.—Heavy industry drove home the rivets of business improvement in 1936 with more force than any year since 1930. Sentiment may have been warmed by sharp retail gains, by the highest electric output ever recorded, by sweep- ing wage boosts, by the sudden flood of extra and special year-end divi- dends. But nothing did so much to buttress hopes of sustained progress as the gradual mounting of the tide of orders for rails, construction steel, freight cars and locomotives. ‘The year’s business story unfolded as follows: JANUARY—Following an unexpect- edly fast December pace, industrial operations slipped back a little. Inval- idation of A. A. A. brought a passing quiver of apprehension farm prices might skid. Little happened as heavy farm surpluses had already been sharply reduced, with the exception of cotton. Heavier railroad buying helped cushion a fall in steel opera- tions occasioned by slower automobile output. FEBRUARY—Cold and blizzards boosted sales of Winter merchandise and hoisted coal production to a six- year peak, but cramped general busi- ness and blocked freight movement. Forerunner of other similar steps to| come was registration by Jones & Laughlin Steel Corp, of a $40.000,000 bond issue with the Securities Ex- change Commission, largest issue yet filed for construction funds. MARCH—Farmers' cash income swelled to $528,0000,000 for the month, from $479,000,000 in March, 1835. Floods put a drag on operations in the important industrial ragions of the Ohio River basin and New England. Steel, coal, construction and railways suffered worst. Trade in afflicted aréas slumped. Elsewhere it expanded. LUMBER RETAINS PLAGE INBUILDING Used in Four Out of Every Five Residences Built During 1936. BY WILSON COMPTON, National Lumber Manufacturers’ Association. Although 1936 was a good building year, it turned out to be a disappoint- ment to those who expected to see a residential building boom. The actual building was more in proportion to the still shrunken dimensions of the na- tional pocketbook than it was to the proportions of the dearth of housing. The will, or at least the desire, to build and buy was undoubtedly here, but the | ability to satisfy the desire was not. It begins to be apparent that booms de- pend as much on capital as on enthu- siasm. ‘The lumber industry, however, has particular cause for hopefulness by reason of the prospective national building situation. The many new- mental proposals for residential con- struction have not materially retarded the progress of the substantial build- ing industries of the country. The manifold activities of industries which would profit if this country were to become one of masonry or metals hous- ing, have been unable to shake the de- votion of Americans to lumber-built homes. As in the past, four out of every five residential units this year have been lumber built. Inasmuch as what has been done in 1936 has not yet brought the volume of the lumber bus- iness anywhere near where it was in the dying days of the last “golden era,” further expansion of activity in the lumber industry is confidently ex- pected. We look forward through 1937 to 1938, and possibly 1939, as a period likely to compare with the activity of 1925 and 1926. ‘The national lumber consumption in 1937 may reach 26 or 27 billion feet, as compared to about 12 billion feet at the lowest depression level. We expect considerable additional opportunity, much needed, for the re- employment of dependent labor. Production in 1936 is the greatest since 1930—at the rate of 22,500,000,000 board feet a year, but stocks are not heavy and the prospects for sustained activity are the best in the last eight compared with 3,300,000 in 1929. O T T e e ORGANIZED JANUARY 11th, 1814 | business curve. years. Electrical Firms On Capacity Basis As Demand Soars A. W. Robertson, chairman of the board, Westinghouse Electric & Man- ufacturing Co.. says prospects for the electrical manufacturing industry are very bright. “Practically all divisions are operat= ing at capacity, and orders in suffi- cient volume are coming to warrant an optimistic view for the next several months. Incoming business is not confined to any one type of product. The demand for household goods is | excellent and the public utilities and | industry generally are making sub- | stantial purchases. “Notwithstanding many threatening, unpredictable contingencies, there is evidence that we are moving upward | along & more or less typical American The upward swing may continue for considerable time. “It is now the problem of industry, Government and individuals to make certain that the present improvement | will be maintained, to the end that business conditions in the future will not be subject to the violent, disastrous | fluctuations experieneed in the past.” | SLOWING OF TRADE UPTURN FORESEEN| Chief of Credit Men's Association Believes Recovery Will Be on Sounder Basis. By the Associated Press. NEW YORK, December 31.—Henry H.Heimann, executive nianager of the National Association of Credit Men, foresees a slowing of the rate of busi- ness improvement in 1937, “There will continue to be much replacement of needs developed dur- ing depression years,” he says in a survey at the close of 1936. “There will also be a strong demand for ma- terials to keep abreast of current trends, particularly in machinery and housing fields. This activity will maintain production in both consumer and durable goods lines at a high rate. “If th® rate of recovery is some- what slower,” he argues, “it will be sounder. The real need is to con- tinue efforts to keep the unit price of goods as low as possible consistent with fair returns on capital. This will make possible increased consumer demand.” STEEL HEADS PUSH EXPANSION PLANS $340,000,000 Spent in Last Two Years on Better Mill Equipment. BY the Associated Press. NEW YORK, December 31.—"“Im- provement in the steel industry during 1936 lifted production to the largest total since 1929 while the number of employes and wage rates reached the highest points in the industry’s his- tory,” says Walter S. Tower, executive | secretary of the American Iron and Steel Institute. “Steel company earnings did not increase in proportion to the expansion in activities, the indicated total for | the year falling below that of 1930 although’ output was larger by a wide | margin. “Production of steel ingots for the year is estimated at 47,700,000 tons, compared with 35,900,000 in 1935. This total made 1936 the third largest | year in steel production, being ex- ceeded only in 1928 and 1929. 1929 peak was 54,900,000 tons. “For 1936, it is estimated that the steel industry’s net earnings will amount to about $150,000,000, repre- senting a return of 3 per cent on in- vested capital, compared with 4.5 per cent in 1930 and 10.4 per cent in 1929. “It has been putting its house in order for the future, spending about $340,000,000 on new construction and equipment during 1935 and 1936. “The most significant development affecting facilities has been the further construction of new continuous wide strip mills. Three of these new mills were put in operation in 1936 and con- struction is under way, or about to be started, for six more. “The industry enters 1937 in the confidence that it has not only kept The pace with its markets but that it has | foreseen future needs and has made preparations to meet them.” French Suspicious. French government policies are not trusted by the wealthy in a bid for hoarded gold. The situation is not auspicious for sale of new issue gov- ernment bonds. APRIL—A financial crisis in France | shook stocks lower. Flood losses in many sectors of industry were quickly made up. Motor sales spurted. Auto- mobile makers stepped on production accelerators. Beneficiaries were pro- ducers of steel, parts, tires, accessories and gasoline. Retailers did a brisk | Easter trade. MAY—Motor makers drove steadily along. Steel mills held gains stub- bornly. Cotton consumption hit a | peak for the month since 1929. Rail-| roads bought more equipment than in any month since 1930. JUNE—Drought threats loomed. In- dustrial production further postponed its *“normal” decline. Mailmen dis- tributed $1,600,000,000 in soldiers’ | bonus bonds, giving a fillip to trade. | JULY—Retail trade was hit in | drought regions. But farmers in other sections got scarcity prices for staples, a factor which helped offset losses in blistered districts. Industry continued to fight off Summer drowsiness. Threats of conflict between workers | and employers in steel and other in- dustries cast a shadow. | -AUGUST—Vacation slackening of | trade and industry was smaller than | | usual. There was no seasonal drop in | steel operations. Cotton manufactur- ing ran at the highest Summer rate | on record. Miscellaneous demand for ' steel held steel operations at more than 70 per cent of capacity. SEPTEMBER—Cotton goods sales boomed, moving swiftly into consump- | tion channels. Automobile operations slid further as the 1936 season ended. | Industrial demand helped steel opera- tions jump to 75 per cent of capacity, | a new top for the year. Many indus- tries took steel in advance of expected | price increases. OCTOBER — New model motors swung off production lines. United States Steel Corp. put its preferred stock back on a regular dividend basis and announced a big construction project for a subsidiary. The cotton goods industry did an enormous busi- |ness. Commodity prices advanced, | some to recovery peaks. NOVEMBER—Wage increases were posted for the entire steel industry, for motor and textile workers, and many others. Wage bonuses spread. A burst of extra and special year end | “surplus profits tax” dividends sluiced more than $800,000,000 into the hands of shareholders. Bethlehem Steel an- nounced major construction plans. DECEMBER—Railroads, with earn- ings swelled by the best carloadings since 1930, bought heavily of locomo- tives, cays, rails and other equipment. Electric power output hit unprece- dented peaks. Retailers prepared for the best Christmas trade in six years or longer. HE EVENING STAR, WASHINGTON, D. C, THURSDAY, DECEMBER 31, 1935: MANY BIG FIRMS JOIN 1936 PARADE FROM DEFICITS TO PROFITS Year End Riddles For Business Men By the Assoclated Press. NEW YORK, December 31.— Some of the questions asked by business and finance at the year end: Has recovery proceeded too fast? . ‘Will a substitute N. R. A. be enacted? How much longer will interest rates hold at record low levels? Is inflation under way, and, if 80, can it be checked from de- veloping into another specula- tive boom? How many unemployed remain and how rapidly can they be put back to work? RAILROADS AIDED BY TRAFFIC SPURT Income for First 10 Months of 1936 Up 32 Per Cent Over 1935. (By Cambridge Associates.) “Undue and unwarranted pessimism has colored much of the public com- ment and discussion of railroads in | the United States.” Such was the statement of J. J. Pelley, president of | the Association of American Railroads, in an address in Chicago last July. Considering that Pelley had risen to | his post from the presidency of the | | New York, New Haven & Hartford, | since placed in receivership, his state- ment might have been regarded as | whistling in the dark. | It is not likely, however, that his | audience believed that to be the case. | Despite the fact that over 20 per cent of the railroad industry’s funded debt has defaulted since 1929, the record of the industry as a whole in cutting costs and improving service has been little rhort of pheromenal. Returning traffic levels to the tune of approxi- mately 15 per cent in 1936, in conse- quence, brought operations back into the black for the majority of railroads, even though rail freight transporta- tion is still 30 per cent below that of 1929. From this point on, every mod- | erate increase in revenue will be mag- | nified in net income because addition- al volume is transportable at rell-l tively small increase in cost. Even the recent refusal of the I. C.| C. to grant an extension of freight surcharges beyond the close of 1936 | fails to take the bloom from the rose. | For railroad executives, while they may lament the loss of income, must | admit that the lower rates make n‘ less likely that other forms of trans- portation will divert traffic, SALARIES INCREASED. NEW YORK, December 31 (#).— Great Western Sugar Co. announced & salary increase of 5 per cent and a bonus distribution, to be made next month, of 5 per cent of 1936 salaries. HOME LOANS to build or refinance INTEREST 5 % as low as PAYMENTS as low as per $1,000 COLUMBIA BUILDING ASSOCIATION 716 11th St. N.W. * Season’s Greetings FINANCIA NEW RECORD SET " BY POWER USERS Utilities Industry Expects Continued Growth Despite New Regulations. By Cambridge Associates. At the close of a new record high year, with evidence that the long- term trend of growth of electric power consumption has been resumed at the same rate existing before the depres- sion, optimism prevails in the utility industry. Plans are going forward for the construction of additional fa- cilities in many parts of the country. For regardless of the restrictive legis- lation of the last four years it is quite evident that the industry will continue to grow for a number of years. In addition to the increased use of power, there is a growing tendency to apply reason and logic te the prob- lems that have been brought to ate tention by inquiry and legislation. Instead of the general antagonism on | both sides which stirred the early days of regulatory legislation, there have rece?uy been “gestures” toward at least a'co-operation in the solution of mutual problems. The Government is interested in providing as much electric power to as many people as possible; the utilities are mainly con- cerned with undertaking that which will produce a profit. Directions of Attack. Briefly, there are four directions to the attack on utility companies at the present time, for two of which there is some hope of relief by Su- | preme Court decision: 1. The public utility holding com- pany act of 1935. This requires reg- > ON IMPROVED L £ B-$§ Gay Emphasizes Dangers of Rapid Credit Expansion BY the Associated Press. NEW YORK, December 31.—Charles R. Gay, president of the New York Stock Exchange, in a year-end state- ment today said the chief problem facing the Nation was to avold “too sudden or too full use” of its swollen bank deposits and credit resources. His comment reminded financial observers of recent discussion on ap- plying Federal controls to prevent an- other speculative boom based on credit expansion from use of a vast supply of idle bank funds. Gay pointed out that rising security prices, although accomplished sub- stantially without use of bank loans, have been “sufficiently impressive to give concern in some quarters lest the problems of the previous era of pros- perity might reappear.” | voting stock of another company. It requires further that dissolution. of | the holding - company relationship shall have been completed by Jan- uary 1, 1940, unless the company is specifically exempted by the commis- sion. And finally it prohibits profits on intercompany services, requiring them to be furnished at cost to sys- tem members. 2. Grants of funds to municipali= ties by the P. W. A. for construction |of municipally owned power plants. A case on this point has reached the Supreme Court, but was tossed out on |a technicality. Meanwhile, no such ! loans can be extended. 3. Entrance of the Government into the power business as a result of river and harbor improvement, flood | control or conservation. It has been | definitely established that the Gove | ernment has a right to do this, 4. Compulsory reductions of rates. Appeals to the Federal Power Come mission on adverse rulings by State commissions have in most cases | istration with the Securities and Ex« | decided against the utility compan‘es. change Commission of all companies holding more than 10 per cent of the % | % No constitutional question appears to be involved here. LOANS D. C. PROPERTY Immediate attention on your ap- plication for buying, rebuilding or refinancing. Loans payable monthly. No charge for appraisal if loan is not made. Interest charged only on unpaid balance of principal. EQUITABLE CO-OPERATIVE BUILDING ASSOCIATION 915 F STREET N.W, Organized 1879 increasing to all of N\ay the New Year 937 prove to be an era of opti- mism, opportunity and prosperity our cus- tomers and to "The Oldest National Bank in the District of Columbia ++ . in addition to transacting a general banking business, serves in all Trust capacities . . . main- taining an efficiently equipped— our native land APPRECIATION T The Yuletide Season affords a timely occasion for us to bespeak our appreciation of the confidence reposed in us by our Banking Clientele and by the Investing Public in general, and to pledge anew our untiring efforts to cone tinue to merit that confidence. We have realized the past year the largest volume of business ene joyed by our company since its organization. THE WASHINGTON LOAN and TRUST COMPANY TRUST DEPARTMENT SAVINGS DEPARTMENT SAFE-DEPOSIT DEPARTMENT REAL ESTATE DEPARTMENT The First National Bank in the United States to be granted Trust Powers under the Federal Reserve Bank Act. The National Metropolitan Bank HARRY G. MEEM ROBERT C. JONES & CO. President I ' 15th and Eye Sts. N.W. Member of Federal Deposit Insurance Corporation 15th Street, Opposite U. S. Treasury Member Federal Deposit Insurance Corporatios