The Red & the Black

Businessmen last week took a deep breath, and looked apprehensively at the first big batch of first quarter earnings. Then they relaxed somewhat. Despite the steel and coal strikes, rising costs and OPA ceilings, many a company had managed to earn a heart-warming amount of folding money. One big reason was that consumer spending for goods and services in the first quarter, according to a Commerce Department estimate, was at the record rate of $120 billion a year (1945 total: $103.6 billion).

Out of 213 of the first companies reporting, 127 did better in 1946 than in 1945; 86 did worse. But there were plenty of surprises. Whether they were pleasant or unpleasant depended on whether earnings had 1) plummeted under strikes or 2) soared because of the end of the excess-profits tax. (Greatest surprise of all would have been a strike for lower wages.)

The Losses of War. Prime example of what strikes had done was the steel industry. Bethlehem Steel actually lost about $6,200.000 in the first quarter, compared to a profit of $7,695,909 last year. By transferring $11,000.000 from reserves, it was able to report a "profit" of $4,804,438. It also stirred up a controversy on whether it is good bookkeeping to charge strike losses against reconversion reserves.

U.S. Steel was expected to do better. Big Steel's profits were estimated by Wall Streeters at around $10,000,000 v. $15,000,000 in 1945, thanks to a busy March which made up much of the strike loss.

But in many another industry, strikes turned black into red. Libby-Owens-Ford Glass Co. lost $450,445 v. a net profit of $1,903,464 last year. Nash-Kelvinator, with a loss of $1,152,775 compared to last year's $510,258 profit, showed what suppliers' strikes had done to the auto industry. Hardest hit of all was General Electric. President Charles E. Wilson gave out the black-bordered facts: a loss of $13,701,580, first deficit since 1922, v. last year's net profit of $11,762,662.

The railroads, even though they escaped strikes, were far from happy in the squeeze between rising costs and falling traffic. Example: the Pennsylvania's net operating income of $26,346,219 in 1945's first quarter dropped way down to $2,809,926.

The Profits of Peace. In the repeal of the excess-profits tax, industry found the bonanza it had hoped for. Chicago's Marshall Field & Co. listed a 1946 profit of $3,210,000 v. $1,336,000 for 1945. Standard Brands, Inc., with sales down 3% and income-before-taxes down a big 34%, was still able to report a net income of $3,667,555 v. $2,699,400, because taxes had been cut 65%. International Business Machines did better. So did Monsanto Chemical, which doubled its earnings. Montgomery Ward & Co. climbed up from $4,768,000 to $14,000,000.

Nor did the utilities lag. Example: Commonwealth & Southern turned in $20,488.698--up nearly $5 million.

In short, many a company found that, with taxes lightened, it could outfoot rising costs. And in the booming market, it could sell all it could make, do better than it had hoped. For those who had been struck into the red, this was a cheering note. Before the year is ended, they too might make up what was lost at the start.

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