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Full text of "Investigation of concentration of economic power. Hearings before the Temporary National Economic Committee, Congress of the United States, Seventy-fifth Congress, third Session [-Seventy-sixth Congress, third Session] pursuant to Public Resolution no. 113 (Seventy-fifth Congress) authorizing and directing a select committee to make a full and complete study and investigation with respect to the concentration of economic power in, and financial control over, production of goods and services .."

INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



A STUDY 

SUBMITTED BY THE 

FEDERAL TRADE COMMISSION 

TO THE 

TEMPORARY NATIONAL ECONOMIC COMMITTEE 
CONGRESS OF THE UNITED STATES 

SEVENTY-SIXTH CONGRESS 

THIRD SESSION 
PURSUANT TO 

Public Resolution No. 113 
(Seventy-fifth Congress) 

AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO 
MAKE A FULL AND COMPLETE STUDY AND INVESTIGA- 
TION WITH RESPECT TO THE CONCENTRATION OF 
ECONOMIC POWER IN, AND FINANCIAL CONTROL 
OVER, PRODUCTION AND DISTRIBUTION 
OF GOODS AND SERVICES 



PART 31— 31-A 



INVESTMENTS, PROFITS, AND RATES OF RETURN 
FOR SELECTED INDUSTRIES 



Printed for the use of the Temporary National Economic Committee 




UNITED STATES 
GOVERNMENT PRINTING OFFICE 
124491 WASHINGTON : 1941 



(Created pursuant to Public Res. 113, 7. r ith Cong.) 

JOSEPII C. O'MAHONEY, Senator from Wyoming, Chairman 

IIATTON W. SUMNERS, Representative from Texas, Vice Chairman 

WILLIAM H. KINO, Senator from Utah 

WALLACE H. WHITE, Jr., Senator from Maine 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL REECE, Representative from Tennessee 

THURMAN W. ARNOLD, Assistant Attorney General 

WENDELL BERQE,* Special Assistant to the Attorney General 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 

SUMNER T. PIKE,* Commissioner 

Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Commissioner 

EWIN L. DAVIS,* Chairman 

Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics 

A. FORD HINRICHS,* Chief Economist, Bureau of Labor Statistics 

Representing the Department of Labor 

JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel 

CHARLES L. KADES,* Special Assistant to the General Counsel 

Representing the Department of the Treasury 



3 



Alternates. 
II 



Representing the Department of Commerce 

Dean Henderson, Economic Coordinator 

Dewey Anderson. Executive Secretary 

Theodore J. Kreps, Economic Adviser 



REPRINTED 
BY 

WILLIAM S HEIN & CO INC 

BUFFALO, N. Y. 




1968 



CONTENTS 



Digest of studies of long-term profits of tobacco, steel, farm machinery, 

sulfur, cement, and rayon industries: Page 

Tobacco industry 17604 

Steel industry. . 1 17615 

Farm-machinery industry 17626 

Sulfur industry 1 7633 

Cement industry 17636 

Rayon industry 17638 

PART n 

Investments, profits, and rates of return for tobacco processors: 

Schedule of tables 17651 

Introduction 1 7653 

History and business of the American Tobacco Co 1 7653 

History and business of other important tobacco processors 17656 

Changes in control of manufactured products 17658 

Investments and profits for all companies combined 17661 

Goodwill, appreciation, and other intangibles 17663 

Comparison oiaverage annual investments, profits, and rates of return 

for individual companies, functionally classified , 17664 

Comparison of rates of return for individual companies, functionally 

classified 17667 

Comparison of sales and operating results 17672 

Salaries and other compensation paid to corporation officers and direc- 
tors 17680 

Stockholder's suits against American Tobacco Co., its president, George 

W. Hill, and others _ 17685 

part m 

Investments, profits, and rates of return for iron and steel manufacturers: 

Schedule of tables 2 17741 

Introduction 17745 

History and business of companies under review: 

United States Steel Corporation 17746 

Bethlehem Steel Corporation 17748 

Republic Steel Corporation 17750 

Jones & Laughlin Steel Corporation 17750 

National Steel Corporation 17750 

Youngstown Sheet & Tube Co 17751 

Inland Steel Co 17751 

American Rolling Mill Co . 17751 

Wheeling Steel Corporation 17752 

Otis Steel Co 17752 

Pittsburgh Steel Co 17752 

Comparative investments, profits, and rates of return for the principal 
steel companies: 

Summary of investments, profits, and rates of return 17752 

Goodwill, appreciation, and other intangibles • 17755 

Comparison of average annual investments, profits, and rates of return 

for individual companies 17755 

Comparative annual rates of return for individual companies 17759 

Comparison of sales and operating results 17763 

Salaries and other compensation paid to officers and directors of steel 

companies 17772 

m 



jy CONTENTS 

Investments, profits, and rates of return for United States Steel Corporation : Page 

Introduction t 17777 

Production statistics 17777 

Investments, profits, and rates of return for United States Steel Cor- 
poration 17782 

Common stock. 17788 

Preferred stock.. 17788 

Appropriated surplus 17789 

Capital surplus 17789 

Additions : 17789 

Deductions. • ,. : 17789 

Earned surplus 17789 

Contingency and Federal income and profits tax reserves 17790 

Long-term debt -. 17790 

Purchase-money obligations 17793 

Intangibles i 1 17793 

Disposition of caiptal, earnings, and other resources 17795 

Income, expenses, and surplus for United States Steel Corporation 17797 

Dividends 17805 

Principal steel producing and fabricating subsidiaries of the United 

States Steel Corporation 17805 

American Sheet & Tin Plate Co 17808 

American Steel & Wire Co 17813 

Carnegie-Illinois Steel Corporation 17818 

Carnegie Steel Co 17819 

Illinois Steel Co 17824 

Columbia Steel Co 17828 

National Tube Co 17831 

Tennessee Coal, Iron & Railroad Co 17836 

Subsidiaries other than those producing and fabricating steel 17842 

Appendix tables 1 to 21-A 17847 

PART IV 

Investments, profits, and rates of return for manufacturers of farm imple- 
ments and machines: 

Schedule of tables 17899 

Introduction 17901 

Source of information 17901 

Rates of return for all companies combined 1 7902 

Comparison of rates of return for long-line companies and short-line 

companies , 17904 

Comparison of rates of return of principal long-line companies 17907 

Comparisons of sales and operating results 17909 

International Harvester Co 17914 

Deere & Co 17921 

Allis-Chalmers Manufacturing Co 17926 

J. I. Case Co 17930 

Minneapolis-Moline Power Implement Co 17934 

B. F. Avery & Sons Co 17939 

Oliver Farm Equipment Co 17942 

The Massey-Harris Co 1 17944 

Salaries and other compensation of corporation officers 1 7945 

PART V 

Investments, profits, and rates of return for cement companies: 

Schedule of tables . U 17965 



CONTENTS 
PART VI 

I nvestments, profits, and rates of return for rayon companies: Page 

Schedule of tables 17977 

Introduction 17979 

History of rayon 17979 

Production statistics 1798 1 

Price trends 17984 

Growth of domestic corporations manufacturing rayon 17985 

Organization of American Viscose Corporation and predecessors. 17986 

History of E. I. dji Pont de Nemours & Co 17987 

Celanese Corporation of America 17987 

Industrial Rayon Corporation 17987 

Tubize-Chatillon Corporation 17987 

North American Rayon Corporation 17987 

The American Enka Corporation 17987 

American Bemberg Corporation 17987 

Investments, profits, and rates of return 17988 



Part I 

DIGEST OF STUDIES OF LONG-TERM PROFITS 

OF TOBACCO, STEEL, FARM MACHINERY, 

SULFUR, CEMENT, AND RAYON 

INDUSTRIES 



17601 



DIGEST OF STUDIES OF LONG-TERM PROFITS OF TOBACCO, 
STEEL, FARM MACHINERY, SULFUR, CEMENT, AND RAYON 
INDUSTRIES 

The Temporary National Economic Committee assigned to the Federal Trade 
Commission the study of long-term profits of industries in which there is a high 
degree of concentration of control of the business and where monopolistic practices 
have been known to exist or are suspected. The study was limited to six such 
industries, namely: tobacco, steel, farm machinery, sulfur, cement, and rayon. 
However, additional industries might have been included if time permitted. 

The results of the study of long-term profits of these six industries are presented 
in separate reports and are summarized herein. The reports deal with the invest- 
ments, profits, rates of return, and other pertinent information for the important 
companies in each industry. Altogether seven such reports are available, of which 
two relate to the sulfur industry. These two reports have already been presented 
for the record of the Temporary National Economic Committee as exhibits 388 
and 389. The reports for the six industries are as follows: 

Investments, profits, and rates of return for tobacco processors. 

Investments, profits, and rates of return for iron and steel manufacturers. 

Investments, profits, and rates of return for manufacturers of farm imple- 
ments and machines. 

Financial report, including investments, profits, and rates of return for 
Texas Gulf Sulphur Co. 

Financial report, including investments, profits, and rates of return for 
Freeport Sulphur Co. 

Investments, profits, and rates of return for cement companies. 

Investments, profits, and rates of return for rayon companies. 

v The period covered by the studies dates back 20 years or more. The informa- 
tion is presented for the principal companies as well as for a varying number of 
other companies, individually and by groups, in each industry. In each case the 
companies selected for study account for a major portion of the production or 
capacity of the industry: The basic information was obtained in part by ques- 
tionnaire and in part from reports of the Federal Trade Commission and other 
published reports. For some companies, the information was obtained by field. 
examination at their offices. The study of the cement industry was based on 
Federal income-tax returns. 

The average annual rates of return earned on the investments by the companies 
representative of each industry are as follows: 



Industry 



Maxi- 




mum 




number 


Years 


of com- 




panies ' 




13 


1917-37 


11 


1917-38 


72 


1913-37 


1 


1919-38 


1 


1919-38 


18 


1917-36 


8 


1915-38 



Rates of return on — 



Total in- 
vestment 



Stock- 
holders' 
invest- 
ment 



Common- 
stock- 
holders' 
equity 



Tobacco processors 

Iron and steel manufacturers... 
Farm machinery manufacturers 

Texas Gulf Sulphur Co 

Freeport Sulphur Co 

Cement companies 

Rayon companies 



Percent 
16.44 
6.59 
8.10 
28.75 
15.87 
(') 
13.99 



Percent 
18.22 
7.02 
8.44 
28.75 
15. 87> 
9.99 
14.18 



Percent 
21.90 
.7.03 

« . 
?8.76 

1.04 



i Not including companies acquired by merger or consolidation by existing companies during the period. 
1 Not available. 

17603 



17604 CONCENTRATION OF ECONOMIC POWER 

Tobacco Industry 

The 13 companies which are the subject of the report on investments, profits, 
and rates of return for tobacco processors produced over 97 percent of the total 
United States production of cigarettes in the year 1934, over 89 percent of the 
smoking tobacco, more than 75 percent of the chewing tobacco, and over 98 
percent of the snuff. In view of these large proportions, the operating results of 
the 13 companies are significant for the industry. The 13 companies are as 
follows: 

American Tobacco Co. 
Liggett & Myers Tobacco Co. 
P. Lorillard Co. 
. R. J. Reynolds Tobacco Co. 
American Snuff Co. 
George W. Helme Co. 
United States Tobacco Co. 
Porto Rican American Tobacco Co. 
Brown & Williamson Tobacco Co. 
Axton-Fisher Tobacco Co. 
General Cigar Co., Inc. 
Consolidated Cigar Co. 
Bayuk Cigars, Inc. 

The first eight companies listed above, together with British- American Tobacco 
Co., which controls Brown & Williamson Tobacco Co., /were controlled by the old 
American Tobacco Co. when it was ordered dissolved in 1911. In May 1911 
the Supreme Court of the United States found the American Tobacco Co. to 
be a monopoly violating the provisions of the Sherman Antitrust Act. At that 
time the company produced from more than 76 percent to over 96 percent of the 
various tobacco products, except large cigars, of which it produced nearly 14>2 
percent. In addition to monopoly in the manufacture of tobacco products, the 
company exercised control over other products, such as licorice paste used in 
chewing tobacco, and tinfoil, cotton smoking-tobacco bags, wooden shipping 
boxes, tin and pasteboard boxes, and other containers. 

The history of American Tobacco Co. dates from 1890, when the company was 
organized as a consolidation of the five prinoipal cigarette manufacturers, who, 
among them, controlled approximately 90 percent of the country's cigarette 
business. 1 

According to the Report of the Commissioner of Corporations on the Tobacco 
Industry, the American Tobacco Co. soon began to extend its dominion to cover 
other branches of the tobacco industry. From 1894 to 1897 the company de- 
veloped its plug-tobacco business by methods which succeeded in forcing its lead- 
ing competitors to combine their interests with those of the American Tobacco 
Co. This resulted, late in 1898, in the organization, substantially under its con- 
trol, of the Continental Tobacco Co. This company took over the plug-tobacco 
business of American Tobacco Co. and also that of several leading competitors, and 
shortly after its organization acquired Liggett & Myers Tobacco Co., the largest 
and most important plug-tobacco concern in the country. The Continental, by 
this and subsequent acquisitionSj acquired substantial control of the plug-tobacco 
business of the country. 

Shortly after the organization of ^he Continental Tobacco Co., the combination 
obtained control of practically all" of the leading snuff concerns of the country. 
This led to the formation of American Snuff Co. and placed the combination in a 
dominant position in the manufacture of all of the important kinds of tobacco, 
except cigars. 

The combination then turned its attention to the cigar business, at that time 
the most important of all of the branches, but also the most. difficult in which to 
effect a combination. There was a very large number of small manufacturers and 
comparatively few large ones. Except for the cheaper type of cigars, machine 
production had been of little consequence. However, in 1901 the American 
Tobacco Co. entered extensively into the cigar business by organizing the Ameri- 
can Cigar Co. The acquisition of the competing cigar companies by the American 
Cigar Co. immediately made the combination the largest single manufacturer of 

1 Report of the Commissioner of Corporations on the Tobacco Industry, pt. 3, p. 41. 



CONCENTRATION OF ECONOMIC POWER 17605 

I 

cigars in the country, but it did not then possess, and never succeeded in acquiring, 

any large proportion of the total cigar business of the United States. 

The power of American Tobacco Co. and associated companies was further 
greatly increased by the organization in 1901 of the Consolidated Tobaccc^Co., a 
holding company. The organization of this latter company was planned by 
leading interests of the combination and was the means of concentrating control 
within the combination. The stockholders of American Tobacco Co. and Con- 
tinental Tobacco Co. were induced to exchange their common stocks for bonds of 
the new company bearing a fixed rate of interest. As a result, the greatly increased 
profits in the combination's business from the reduction in the internal-revenue 
tax soon afterward, which increase the stockholders generally could not foresee, 
accrued in large part to the advantage of the inside interests as the chief holders 
of the Consolidated's stock. 

In 1904 the American, Continental, and Consolidated companies were merged 
into the present American Tobacco Co., the central concern in the combination. 
The present company formerly owned approximately two-thirds of the capital 
stock of British- American Tobacco Co., Ltd. (Imperial Tobacco Co. owning the 
other one-third), a majority of the stock of the American Cigar Co., 2 P. Lorillard 
Co., United Cigar Stores Co., R. J. Reynolds Tobacco Co., MacAndrews & Forbes 
Co., Conley Foil Co., and a majority of the common stock (but not a majority of 
all voting stock) of American Snuff Co. The American Tobacco Co. also controlled 
directly or indirectly numerous smaller concerns and owned, in fee, various plants 
and properties, which for the most part had been acquired from competitors. 
Through American Cigar Co., the company also controlled the entire capital stock 
of Federal Cigar Co., one-third of the stock of Porto Rican American Cigar Co. 
(American Tobacco Co. also owning one-third), and a majority interest in a 
number of other cigar and leaf-tobacco companies. 

The decree of dissolution provided that practically the entire business of 
American Tobacco Co. and its subsidiary and affiliated companies comprising the 
combination should be divided 'among 14 separate companies, including the 
American Tobacco Co. A portion of the assets and business of the combination 
was sold to two companies created or resurrected for the purpose, namely, Liggett 
& Myers Tobacco and P. Lorillard Co. The business of American Snuff Co. was 
divided into three parts, and the ownership of the company was detached from the 
control of the American Tobacco Co. American Snuff Co. retained a part of the 
business, while the rest was apportioned between George W. Helme Co. and 
Weyman-Bruton Co. (now United States Tobacco Co.), two new companies or- 
ganized for this purpose. 

The businesses of R. J. Reynolds Tobacco Co., British- American Tobacco Co., 
Porto Rican American Tobacco Co., and United Cigar Stores Co. remained 
intact, though their stocks, so far as held by American Tobacco Co., were dis- 
tributed to the common stockholders of that company. This detached the com- 
panies from the corporate control of American Tobacco Co. 

The segregation of the assets of the combination resulted in radical changes in 
the proportions of the various products formerly produced by American Tobacco 
Co. and its subsidiaries and affiliates, as compared with the business remaining 
with that company after its reorganization. The division of the combination's 
business not only involved the readjustment of the financial structure but also the 
distribution of brands and plants to the various companies which were to carry 
on the business. There also have been important changes in the proportions of 
the various branches of the business carried on by individual companies since 
that time. 

There has been a marked change in the proportions of leaf tobacco used in the 
manufacture of cigars, cigarettes, and other tobacco products since 1910. Ir^ 
1937 nearly 55 percent of the total leaf tobacco used was consumed in the manu- 
facture of cigarettes, as compared with only 6 percent in 1910. On the other 
hand, leaf tobacco used in the manufacture of cigars declined from 27 percent in 
1910 to less than 15 percent in 1937, and during this period leaf tobacco used in 
the manufacture of smoking and chewing tobacco and snuff declined from 67 
percent in 1910 to 30 percent in 1937. 

The four largest tobacco processors, from the standpoint of invested capital and 
volume of sales, are American Tobacco Co., Liggett & Myers Tobacco Co., R. J. 
Reynolds Tobacco Co., and P. Lorillard Co. Together, these companies in 1934 

1 Now known as American Cigarette & Cigar Co., subsidiary of American Tobacco Co, 



17606 



CONCENTRATION OF ECONOMIC POWER 



sold 84.2 percent of the total United States production of cigarettes, 74.1 percent 
of the smoking tobacco, and 70.4 percent of the chewing tobacco. The net 
changes in the control of manufactured products by these four companies from 
1910 (when they were units of the tobacco combination) to 1934 are as follows: 





Percentage of United States total production 




Cigarettes 


Smoking tobacco 


Chewing 


tobacco i 




1910 


1934 


1910 


1934 


1910 


1934 




38.8 
29.1 


27,2 
27.3 
25.6 
4.1 


32.0 

19.4 
2.6 
22.1 


19.7 
21.9 
23.2 
9.3 


25.4 
35.7 
17.7 
5.4 


1.6 




26.5 




25.1 


P. Lorillard Co 


15.9 


17.2 






Total 


83.8 


84.2 


76.1 


74.1 


84.2 


70.4 







' Includes plug and twist and fine-cut chewing tobacco. 

Notwithstanding the shifts in the proportions of the various products manu- 
factured by the individual companies, the only important change in the combined 
control of the products by the four companies was in chewing tobacco, which fell 
from 84.2 percent for the four companies which were units of the tobacco combina- 
tion in 1910 to 70.4 percent in 1934. 

With the tremendous growth in the consumption of cigarettes since the dissolu- 
tion of the Tobacco Trust in 1911, these four companies have actively developed 
the cigarette phase of their businesses. They have been aided in the maintenance 
of their dominant positions in the tobacco industry by ownership of established 
brands and the financial resources at their command. The difficulty, uncertainty, 
and cost of popularizing new brands have been important deterrents to new 
competition. 

Over 98 percent of the United States production of snuff in 1934 was produced 
by American Snuff Co., George W. Helme Co., and the United States Tobacco Co. 
This high degree of concentration of this branch of the business represents a con- 
tinuation of the almost complete control of the tobacco combination which was 
partitioned among these three companies pursuant to the dissolution decree in 
1911. The continuation of this control has been materially aided by the same 
factors applying to the cigarette branch of the business. The current trend toward 
concentration of cigar manufacture and fewer companies is due in part to the intro- 
duction of cigar-making machinery, to the gradual decrease in cigar consumption, 
and to the use of national and regional advertising promotion in the merchandising 
of this product. 

In the Federal Trade Commission's report on agricultural income inquiry, it is 
stated at pages 550 and 551 : 

"The inquiry has disclosed that four brands of cigarettes dominate the cigarette 
industry; that the manufacturers of those brands, with minor exceptions, main- 
tain identical prices on them; and that the prices are almost simultaneously 
changed upward or downward with little regard to leaf tobacco or general com- 
modity price levels. The history of the price changes on the four leading brands 
demonstrates the exercise of the power concentrated in the hands of the manu- 
facturers of those brands. The sales volume of 10-cent cigarettes indicates the 
existence of a popular demand for them. It is believed that competition within 
the cigarette industry would be increased by popular cigarettes selling in various 
price ranges and that new or more important competition in manufacturing 
would result in increased competition in the purchase of leaf tobacco. The 
uniform internal-revenue tax of $3 per thousand on small cigarettes has tended to 
restrict the most active and substantial new competition that has manifested itself 
in the industry in many years. It is, therefore, recommended that Congress 
consider the advisability of levying a graduated tax on cigarettes in lieu of the 
present uniform tax. It is further recommended that the graduated scale be 
based upon the manufacturers' net selling prices." 

Rates of return on the combined investments of all companies for which infor- 
mation was available are shown for each of the years 1917 to 1937 in the following 
tabulation. Rates of return were computed on three bases of investment; namely, 
the total investment, stockholders' investment, and the common stockholders' 
equity, before deducting provisions for Federal income and profits taxes from earn- 
ings, and after eliminating goodwill, appreciation, and other intangibles from 



CONCENTRATION OF ECONOMIC POWER 



17607 



investments. The amount deducted from investments for such intangibles ranged 
from $154,349,900 at the beginning of 1917 down to $66,055,602 at the end of 
1937. The investments on which rates of return were computed are the average 
of the investments at the beginning and ena of each year for each company. 





Num- 
ber of 
com- 
panies 


Rates of return on- 


Year 


Num- 
ber of 
com- 
panies 


Rates of return on — 


Year 


Total in- 
vestment 


Stock- 
holders' 
invest- 
ment 


Common 
stock- 
holders' 
equity 


Total in- 
vestment 


Stock- 
holders' 
invest- 
ment 


Common 
stock- 
holders' 
equity 


1917 

1918 

1919 

1920 

1921 

1922 _. 

1923 

1924 

1925 


9 
10 
11 
12 
12 
12 
12 
12 
12 
12 
12 
13 


Percent 
21.70 
23.64 
16.87 
16.17 
17.54 
18.64 
17.23 
17.00 
18.14 
18.23 
17.86 
16.38 


Percent 
26.43 
30.21 
21. 52 
19.99 
20.54 
21.00 
19.09 
18.54 
19.75 
19.90 
19.39 
17.85 


Percent 
55.72 
54.33 
33.75 
29.46 
29.48 
29.47 
25.60 
24.02 
24.44 
23.87 
23. 27 
21.28 


1929. __ 

1930 

1931 

1932 

1933 

1934 

1935 

1936 

1937... 

Averape 


13 
13 
13 
13 
13 
13 
13 
13 
13 


Percent 
17.41 
18.77 
19.08 
17.94 
10.07 
13.32 
13.40 
15. 58 
15.12 


Percent 
18.85 
20.45 
20.56 
19.27 
10.59 
14.21 
14.26 
16.72 
16.21 


Percent 
22.26 
23.85 
23.72 
21.99 
11.50 
15.84 
15.52 
18.89 
18.29 


1926 

1927. 

1928 




16.44 


18.22 


21.90 



The table shows that during the 21-year period, 1917-37, all companies as a 
group averaged 16.44 percent on the total investment, 18.22 percent on the 
stockholders' investment, and 21.9 percent on the common stockholders' equity. 
It will be observed that consistently high rates of return were earned on each 
basis of investment during each year. The lowest returns in any year were 
earned in 1933 when 10.07 percent was earned on the total investment, 10.59 
percent on the stockholders' investment, and 11.5 percent on the common stock- 
holders' investment. Exceptionally high rates of return were earned on each 
basis of investment in every other year, particularly during 1917 and 1918. 
While the returns for the lastfew years were not as high as those for the previous 
years, the trend has been upward. 

The following tabulation compares the average annual rates of return during 
the years 1917-37 on each basis of investment for the individual companies, 
classified according to their primary functions: 



Average annual rates of return on- 



Total 
investment 



Stock- 
holders' 
investment 



Common 
stock- 
holders' 
equity 



Manufacturers of cigarettes and other tobacco products: 

The American Tohacco Co -..- 

Liggett & Myers Tobacco Co , 

R. J. Reynolds Tobacco Co 

Total (Big Three) » 

P. Lorillard Co.. 

Axton-Fisher Tobacco Co 

Brown & Williamson Tobacco Co 

Total cigarette and tobacco manufacturers 

Cigar manufacturers: 

General Cigar Co., Inc -. 

Porto Rican American Tobacco Co 

Consolidated C igar Co. - 

Bayuk Cigars, Inc 

Total 

Snuff manufacturers: 

United States Tobacco Co... 

American Snuff Co -- 

George W. Helme Co 

Total 1 

Total 



Percent 
17.16 
16.70 
23.05 



Percent 
17.91 
20.31 
23.27 



Percent 
24.20 
24.60 
24.10 



18.81 

10.31 

' 19. 57 

•8.66 



20.29 

16.66 

' 19. 57 

» 18. 95 



24.26 

14.86 

' 24. 62 

> 21. 13 



17.34 



19.55 



23.39 



12.86 
»2.25 
«9.78 
10.67 



13.59 

«.57 

«9.93 

10.78 



16.30 

«.57 

12.85 

12.87 



9.32 



9.66 



10.82 



14.86 
19.22 
17.36 



14.86 
19.22 
17.36 



17.00 
26.23 
2?. 31 



16.68 



1 Annual averages for 1918-37. 
1 Annual averages for 1928-37. 



> Annual averages for 1920-37. 
* Annual averages for 1919-37. 



17608 



CONCENTRATION OF ECONOMIC POWER 



The above table shows that as a group the manufacturers of cigarettes and 
other tobacco products had the highest average annual rates of return during the 
period under review, followed closely by the snuff manufacturers. The operations 
of the cigar manufacturers were very much less profitable, their returns averaging 
only a little over half of those for the other two groups. Their average profits 
were equivalent to 9.32 percent of the total investment, 9.66 percent of the stock- 
holders' investment, and 10.82 percent of the common stockholders' equity, as 
compared with 17.34 percent, 19.55 percent, and 23.39 percent of the respective 
investments of the manufacturers of cigarettes and other tobacco products, and 
16.68 percent, 16.68 percent, and 20.54 percent, respectively, for the snuff 
manufacturers. 

The showing for all companies as a group is influenced considerably by the pre- 
ponderant investments and large profits of the three largest manufacturers. For 
example, on the basis of total investment, the combined investments of American 
Tobacco Co., Liggett & Myers Tobacco Co., and R. J. Reynolds Tobacco Co. 
averaged nearly 70 percent of the investments of all companies combined, and 
over 80 percent of the investments of the companies comprising the cigarette 
manufacturers. The 'relative importance of the various groups of manufacturers 
from the standpoint of investment is shown as follows: 

Ratios of total investment 





Annual average 
1917-37 


Average, 
1937 


Manufacturers of cigarettes and other tobacco products: 

Big Three 


Percent 

67.88 
14.04 


Percent 

68.50 


Little Three 


14.30 






Total 


81.92 
10.60 
7.48 


82.80 




9.32 




7.88 






Total _ '. 


100.00 


100.00 








$598, 300, 727 


$736, 643, 988 







It will be observed that there was comparatively little change in the relative 
proportions of the combined investments for each group during the two periods 
shown in the tabulations, the decline in the 1937 proportion for the cigar com- 
panies being offset by slight increases in the proportions for each of the other 
groups during that year. The tabulation which follows presents a similar com- 
parison for the individual companies within each group and shows the deviations 
of their relative proportions in 1937 from those based on the average of the 
annual investments throughout the entire period. 



CONCENTRATION OF ECONOMIC POWER 

Ratios of total investment 



17609 





Annual average, 
1917-37 


Average, 1937 


Manufacturers of cigarettes and other tobacco products: 


Percent 
33.03 
24.68 
25.15 


Percent 

31.74 




27.91 




23.07 






Total (Big Three) - 


82.86 
12.32 
'.58 
M.24 


82.72 


P. Lorillard Co - 


9.03 




1.16 




7.09 






Total ,... - 


100.00 


100.00 








$490, 147, 166 

Percent 

37.53 

»22.88 

'27.76 

11.83 


$609, 955, 640 


Cigar manufacturers: 


Percent 

35.73 




26.76 




22.65 


Bayuk Cigars, Inc - - 


14.86 


Total 


100.00 


100.00 








$63, 389, 990 

Percent 
4P. 18 
25.51 
28.31 


$68,612,389 


Snuff manufacturers: 


Percent 

47.90 




26.06 


George W. Helme Co - - 


26.04 






Total 


100.00 


100.00 








$44, 763, 571 


$58, 075, 959 







' Annual average, 1918-37. 
J Annual average, 1928-37. 
i Annual average, 1920-37. 
* Annual average, 1919-37. 

The above tabulation shows that the combined investments for each group in 
1937 exceeded the average of the annual investments for each group during the 
period 1917-37. This is indicative of the general growth of the companies 
throughout the period under review. For example, the combined investments of 
the three largest companies, which account for the greater portion of the total 
investments for all companies, increased over 200 percent from $165,485,477 in 
1917 to $504,588,788 in 1937. The combined investments of these three com- 
panies increased steadily from 1917 to 1933, reaching a maximum of $560,755,492 
in the latter year, then decreasing each year to $504,588,788 in 1937. 

Further indication of the relative importance and profitableness of the various 
companies is presented below from the standpoint of sales and operating results. 

The tabulation immediately following summarizes the net sales, net income, 
dividend payments, and net increase in surplus for each of the 13 companies. The 
upper part of the table gives the total for each item for all years for which the 
information was available during the period 1917-37. The lower part of the table 
gives for each company the annual averages of the net sales, net income, dividend 
payments, and net income remaining after the payment of dividends. 



17610 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



17611 



The table shows that American Tobacco Co., Liggett & Myers Tobacco Co., 
and R. J. Reynolds Tobacco Co. were also the largest from the standpoint of sales. 
During the 21 years 1917-37, the sales of the Reynolds Co. were largest, amounting 
to nearly 4% billion dollars, followed by American Tobacco Co., with a little over 
$4,000,000,000, and Liggett & Myers with nearly $4,000,000,000 of sales. It will 
be noted that in the order of profits American Tobacco Co. was first with a little 
over one-half billion dollars, followed closely by the Reynolds Co. with almost 
the same amount, and Liggett & Myers with one-third of a billion. These 
profits represent the net income after providing for all of the costs of doing busi- 
ness, including provisions for Federal income and profits taxes. 

American Tobacco Co. and R. J. Reynolds Tobacco Co. each paid out about 
the same amount in dividends during the period. American Tobacco Co. paid 
out a total of $474,397,942, as compared with $474,631,250 for the R. J. Reynolds 
Co. The total for Liggett & Myers was $261,408,812. After taking into account 
other charges to surplus, the net increase in surplus during the period was 
$22,942,603 for American Tobacco Co., $29,165,235 for Liggett & Myers Tobacco 
Co., and $24,103,293 for R. J. Reynolds Tobacco Co. These net increases, 
together with the amounts for dividends paid in common stock on common stock, 
reflect earnings retained in the business by each company in the amount of 
$85,699,739 for American Tobacco Co., $40,507,985 for Liggett & Myers Tobacco 
Co., and $104,103,293 for R. J. Reynolds Tobacco Co. The comparatively 
smaller amount for Liggett & Myers is accounted for by the fact that the com- 
pany reduced the value at which it had been carrying goodwill and other in- 
tangibles on its balance sheet to $1 by charges to surplus of $40,709,710 in 1929 
and $55,000 in 1935. 

The reinvested earnings contributed importantly to the growth of each of the 
three companies. During the period under review they amounted to nearly 80 
percent of the net increase in capitalization of American Tobacco Co. and about 
90 percent of the net increase for R. J. Reynolds Tobacco Co. For Liggett & 
Myers Tobacco Co. they amounted to nearly half the net increase before any 
adjustments for goodwill, appreciation, and other intangibles prior to the time 
they were written off by the company as explained above. 

Throughout the period under review the annual sales of the three largest com- 
panies averaged 73 percent of the sales for all companies and 88 percent of the 
combined sales of the manufacturers of cigarettes and other tobacco products. 
The relative importance of the various groups of manufacturers from the stand- 
point of sales is shown by the following tabulation, which compares the sales for 
each group in 1937 with the average of the annual sales for the years 1917 to 
1937, inclusive: 

Ratios of sales 





Annual aver- 
age, 1017-37 


Total, 


1937 


Manufacturers of cigarettes and other tobacco products: 

Big Three... 


Percent 

72.97 
15.44 


Pert 


ent 
73.93 


Little Three 


18.37 






Total 


88.41 
8.02 
3.57 




92.30 


Cigar manufacturers (4 companies) 


4.74 


Snuff manufacturers (3 companies) 


2.96 






Total 


100. 00 




100.00 






Combined sales . 


$830, 883, 994 


$1, 063, 


327, 917 







It will be noted that there was comparatively little change in the relative pro- 
portions of the combined sales of the three largest companies in the two periods 
shown in the tabulation, but the 1937 proportion of the combined sales of the three 
smaller manufacturers of cigarettes and other tobacco products was somewhat 
higher than their proportion based on the average of the annual sales throughout 
the period. The sales of the manufacturers of cigarettes and other tobacco prod- 
ucts amounted to 92.3 percent of the total sales of the companies in all groups 
during the year 1937, as compared with 88.41 percent of the average for the years 
1917-37. On the other hand, the sales for each of the groups of cigar and snuff 
manufacturers were proportionately smaller in 1937 than for the entire period. 
The tabulation which follows presents a similar comparison for the individual com- 
panies within each group and shows the deviations of their relativeVproportions 

124491— 41— pt. 31 2 



17612 



CONCENTRATION OF ECONOMIC POWER 



in 1937 from those based on the average of the annual sales throughout the perio 
1917-37. 

Ratios of sales 





Annual aver- 
age 1917-37 


Total 1937 


Manufacturers of cigarettes and other tobacco products: 
American Tobacco Co 


Percent 

26.00 
25.84 
30.70 


Percent 

24 72 


Liggett & Myers Tobacco Co 


24 50 


R. J. Reynolds Tobacco Co..'. 


30.88 






Total (Big Three) 


82.54 

9.70 

>6.59 

»1.17 


80 10 


P. Lorillard Co 


7 74 


Brown & Williamson Tobacco Co 


10 20 


Axton-Fisher Tobacco Co 


1 96 






Total 


100.00 


100 00 






Combined sales 


$734, 590, 892 

Percent 

50.04 

'25.37 

16.44 

<8. 15 


$981, 506, 371 

Perrent 

43 10 


Cigar manufacturers: 

General Cigar Co., Inc 


Consolidated Cigar Co 


21.83 


Bayuk Cigars, Inc 


32 48 


Porto Rican American Tobacco Co 


2 59 






Total. 


100.00 


100 00 






Combined sales 


$66, 603, 201 

Percent 

48.75 
27.09 
2117 


$50, 399, 958 

Percent 

57 21 


Snuff manufacturers: 

United States Tobacco Co 


American Snuff Co.. 


24 03 


George W. Helme Co... 


18.76 






Total 


100.00 


100 00 






Combined sales. _ . ... 


$29,689,901 


$31,421,588 





1 Annual average, 1928-37. 
3 Annual average, 1918-37. 
3 Annual average, 1919-37. 
1 Annual average, 1920-37. 

Costs, expenses, and profits per dollar of net sales were substantially the same 
in 1937 as for the entire period 1917-37. The significant ratios, expressed in cents 
per dollar of net sales, for the various groups for each period are summarized as 
follows : 

Ratios of sales 





Operating 
costs and 
expenses 


Profits ap- 
plicable to 

total in : 
vestment ' 


Net 
income ' 




Average, 1917-37 


Manufacturers of cigarettes and other tobacco products: 

Big Three 


Cents 
88.17 
88.87 
91.04 
79.10 


Cents 
12.60 
11.85 
8.87 
25.15 


Cents 
10.52 


All companies 3 . . ._ 

Cigar manufacturers < 


9.73 
7.05 


Snuff manufacturers «_ . 


21.34 








Year 1937 


Manufacturers of cigarettes and other tobacco products: 

Big Three ..: 


88.89 
90.28 
91.81 
79.95 


11.66 
10.12 
8.34 
24.88 


9.70 




8.31 




6.39 


Snuff manufacturers 8 


21.49 







1 Before provisions for interest payments on long-term debt and Federal income and profits taxes. 
' After provision for interest on long-term debt and Federal income and profits taxes. 
' 6 companies. 

* 4 companies. 

• 3 companies. 



CONCENTRATION OF ECONOMIC POWER 



17613 



As shown above, the margins of profits in relation to sales were outstanding for 
the snuff manufacturers. Throughout the period under review their margin of 
net income of 21 cents out of every dollar of net sales was twice that of the three 
largest cigarette manufacturers as a group and three times that of the cigar manu- 
facturers. However, despite this showing in comparison with the margins for 
the other groups, their profits in relation to investment were somewhat smaller 
than those of the cigarette companies but nearly twice those of the cigar compan- 
ies and indicates that the volume of business done per dollar of investment was 
much lower than for the other groups. 

The relationship of the above factors is interestingly brought out in the follow- 
ing tabulation which shows for each group the total investment, sales, ratio of 
sales to investment, or capital turn-over, and the manner in which the profits per 
dollar of net sales applicable to the total investment is related, through the turn- 
over, to rates of return on the investment. The upper part of the tabulation 
gives the information on the basis of the average of the annual investment and 
sales for 1917-37, and the lower part of the table gives the information for the 
year 1937 alone. 

Correlation of capital turn-over to rates of return 



Total invest- 
ment 



Net sales 



Rate of 
capital 
turn-over 
in terms 
of sales 



Profit 
per dollar 
of sales 



Rate of 
return on 
invest- 
ment 



Average, 1917-37 



Manufacturers of cigarettes and other to 

bacco products: 
Big Three - 

. All companies ' 

Cigar manufacturers 2 

Snuff manufacturers 3 



Manufacturers of cigarettes and other to- 
bacco products: 

Big Three 

All companies '. 

Cigar manufacturers 

Snuff manuf a ct urers .__ 



$406, 136, 489 
490, 147, 166 
63, 389, 990 
44, 763, 571 





Times 


Cents ' 


$606, 303, 987 


1.49 


12.60 


734, 590, 892 


1.50 


11.85 


66, 603, 201 


1.05 


8.87 


29, 689, 901 


.66 


25.15 



Percent 
18.81 
17.34 
9.32 
16.68 



Year 1937 



$504, 588, 788 

609, 955, 640 

68, 612, 389 

58, 075, 959 



$786, 147, 107 


1.56 


11.66 


981, 506, 371 


1.61 


10.12 


50, 399, 958 


.73 


8.34 


31, 421, 588 


.54 


24.88 



18.17 
16.29 
6.12 
13.46 



1 6 companies. 
'' 4 companies. 
8 3 companies. 

The capital turn-over reflects the time required for the sales to equal the 
investment. On the average, the sales of the three largest companies as a group 
equaled the amount of their investment about once every 8 months as compared 
with once every 11 months for the cigar companies and once every 18 months for 
the snuff companies. The tabulation shows the influence of the rapidity of turn- 
over on the rates of return on investment when related to margins of profits on 
sales. For example, twice the margin of profit was required for the slower 
moving products of the snuff companies than for the three largest companies in 
order to produce comparable rates of return on investment. 

Large cash salaries and bonuses were received by the executives of some of the 
companies in this profitable industry, particularly by those of American Tobacco 
Co. During the years 1935-38, the three highest-paid officers of this company 
received an average total compensation of $600,000 per annum. This amount 
was two and one-half times the next largest amount paid by Liggett & Myers To- 
bacco Co., and from about four to nearly six times the average amount paid by 
most of the other companies. The following tabulation shows the aggregate 



17614 



CONCENTRATION OF ECONOMIC POWER 



compensation received by the three highest-paid officers of each company for 
which the information was available during the years 1935-38: 

Aggregate compensation l received by the S highest paid officers during the years 

1935-38 



American Tobacco Co 

Liggett & Myers Tobacco Co 

R.J. Reynolds Tobacco Co 

P. Lorillard Co.,-Inc 

Axton-Fisher Tobacco Co 

General Cigar Co 

Porto Rican American Tobacco Co 
Consolidated Cigar Corporation... 

Bayuk Cigars, Inc , 

United States Tobacco Co__ 

American Snuff Co 

George W. Helme Co 



1935 



$423, 237 
203, 020 
145, 000 
132,500 

20, 125 
150, 364 

89,666 
135,500 

79, 851 
146, 851 
112,240 
143, 409 



1936 



$497, 607 
280, 449 
145,000 
110,000 

39, 855 
119,757 

66,000 
107, 375 
118,479 
191, 670 
103, 210 
129, 716 



$794, 146 
251, 134 
143, 750 
95,000 
36,000 
73, 808 
66,000 
114,666 
116,205 
154, 872 
115,000 
108, 645 



$685, 016 
241, 519 
175,000 
90,000 
66, 393 
76,000 
51,063 
102, 100 
146, 447 
151, 609 
108, 891 
115, 510 



Average 



$600,001 
244, 030 
152, 187 
106, 875 

40, 593 
104, 982 

68,182 
114,910 
115,245 
161, 250 
109,835 
124,320 



1 Includes cash salaries and bonuses. 

The highest-paid individual officer of any of the companies named in the 
above tabulation was the president of American Tobacco Co., followed by the 
president of Liggett & Myers Tobacco Co. and by the chairman of the board of 
R. J. Reynolds Tobacco Co. Although these three companies are of about the 
same relative importance and size, American Tobacco Co. paid its president, 
George W. Hill, an average of $292,624 during the years 1935-38. This amount 
is more than three times the average compensation of $86,899 received by the 
president of Liggett & Myers Tobacco Co. during these years, and more than 
four times the average amount of $72,500 received by the chairman of the board 
of Reynolds Tobacco Co. 

During each of the years 1935-38, the total compensation received by George 
W. Hill, president of American Tobacco Co., was $212,199 in 1935, $246,173 in 
1936, $380,976 in 1937, and $331,348 in 1938. These amounts while large do not 
compare with the compensation he received from the company in some of the 
earlier years. For instance, in 1929, he received $605,613; in 1930, $1,010,567; 
and in 1931, $1,051,630. ' The huge salaries and bonuses received by Mr. Hill and 
other officers of the company, together with other emoluments received by them 
under an "employees' stock subscription plan," gave rise to a series of stockholders' 
suits. These suits were instituted in 1931 by Richard Reid Rogers, a stockholder 
of the company, who complained that for many years the officers of the company 
had received large annual fixed salaries as well as large annual cash, profit-sharing 
bonuses paid under a bylaw adopted in 1912. He maintained that the bylaw 
was invalid and that even if valid the amounts paid in accordance with its pro- 
visions were unreasonably large and therefore subject to revision by the courts. 

Rogers also sought to restrain the company from issuing stock pursuant to the 
"employees' stock-subscription plan." Under this plan which was adopted at a 
stockholders' meeting on July 30, 1930, 56,712 shares of unissued common stock 
B of the corporation were distributed in accordance with the recommendations- 
made by the president of the company. Of this number, 32,370 were allotted to 
the officers and directors, of which 13,440 shares, or 24 percent, of the total were 
allotted to the president. The remaining 24,342 shares were allotted in relatively 
small amounts to 525 employees. The subscription price was the par value of 
the stock, $25 a share. On June 28, 1931, when the allotment of stock was made, 
its market price was $112 per share, more than four times the subscription price. 
Valuing the subscription privilege by the difference between the subscription 
price and the market value of the stock, Hill received by the allotment $1,169,280 
in addition to his annual compensation of more than a million dollars in that year. 
The stock-subscription rights awarded the five vice presidents of the company, 
similarly valued, amounted to $1,451^595. 

The stockholders' suits were carried to the Supreme Court of the United States, 
which reversed the decree of the circuit court of appeals and remanded the case 
to the district court of New York. 

According to the New York Times of July 14, 1933, litigation over the bonuses 
and stock allotments ended July 13 when compromise settlements were reached. 
Under the settlements it was stated that the allotment of American Tobacco 
Co.'s stock to officers and employees was to be rescinded and the profit-sharing 



CONCENTRATION OF ECONOMIC POWER 



17615 



plan under which bonuses had been paid to the officers of the company was to be 
modified. 

Former Judge Martijn T. Manton, who wrote the decisions by the circuit court 
of appeals favoring the company and its officers in these suits, was convicted in 
June 1939 of the charge of conspiracy to sell justice and was sentenced to 2 years 
in jail and fined $10,000. According to the press, Manton testified that while 
the suits were pending in his court he approached Louis Sampter Levy, formerly 
of the law firm of Chadbourne, Stanchfield & Levy, counsel for the tobacco 
company in the suits, for a loan of $25,000 and subsequently received the better 
part of a loan in 10 times that amount from Lord & Thomas, advertising agents 
for American Tobacco Co., through James J. Sullivan, an associate in some of 
his business ventures. It was also stated that. Albert D. Lasker, president of 
Lord & Thomas, declared that he provided the $250,000 for the loan at the request 
of Levy and Paul M. Hahn, attorney and vice president of American Tobacco 
Co., unaware of the true nature of the loan and with the understanding that it 
would be repaid by American Tobacco Co. This loan was never repaid. 

These revelations led to disbarment proceedings against Levy and Hahn and, 
according to the New York Times of November 15, 1939, Judge John C. Knox 
directed that Levy be disbarred from practice before the Federal bar. 

Steel Industry 

The price relationships existing in the steel industry through the basing-point 
system and other evidence of monopolistic practices are a matter of record before 
the Temporary National Economic Committee. Therefore, the summary deals 
only with the financial aspects of the inquiry into this industry. 

The report on investments, profits, and rates of return for iron and steel man- 
ufacturers presents information concerning the operations of 11 companies, 
which supply the bulk of the demand for iron and steel products. Their operations 
constitute integrated systems from raw material to finished product and include 
the production of iron ore, pig iron, coal, limestone, crude steel, castings, and a 
great variety of semifinished and finished steel products. These companies own 
84 percent of the steel making capacity of the country. The annual capacity in 
gross tons for each company and its subsidiaries and the percentage of each com- 
pany's capacity of the total for the industry are as follows: 



Name of company 



Annual ca- 
pacity i 



Percent 
of total 
for in- 
dustry 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation 

Jones & Laughlin Steel Corporation 

National Steel Corporation 

Youngstown Sheet & Tube Co 

Inland Steel Co 

American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co 

Pittsburgh Steel Co 

Total 



790,000 
042,000 
500,000 
671, 200 
400,000 
120,000 
760,000 
603, 500 
750,000 
872,000 
810,000 



35.31 
13.75 
8.90 
5.03 
4.65 
4.27 
3.78 
3.56 
2.39 
1.19 
1.11 



61, 318, 700 



83.94 



1 Annual capacities in gross tons of steel ingots and steel for castings as reported for the industry in the 
1938 edition of the Iron and Steel Works Directory of the United States and Canada. Total capacity for 
the industry reported to be 73,047,892 gross tons. 

As shown above, the production capacity of United States Steel Corporation 
is two and one-half times as large as that of the next largest company, Bethlehem 
Steel Corporation. In terms of capacity and production, United States Steel 
Corporation has dominated the industry since its formation in 1901. At that 
time it produced about 43 percent of the pig-iron production of the country, 
65 percent of the production of steel ingots and castings, and 50 percent of the 
production of all kinds of finished roll products. Although the corporation has 
increased both its productive capacity and investment since that time, its partici- 
pation in the industry with respect to production has steadily declined, however, 
particularly with regard to steel ingots and castings. For example, by 1938, its 
participation in the industry had fallen to 33 percent of the production of steel 
ingots and castings and 29 percent of the production of finished rolled products. 



17616 CONCENTRATION OF ECONOMIC POWER 

According to the Report of the Commissioner of Corporations on the Steel 
Industry, 3 the formation of United States Steel Corporation was the culmination 
of a. consolidation movement which was begun in the late nineties. Great con- 
solidations, one after the other, were effected in the principal branches of the 
industry. This movement toward industrial centralization was characterized 
by the restriction of competition through combination, the integration of produc- 
tive processes through acquisition under one control of raw materials and manu- 
facturing plants, and the creation of large amounts of inflated securities and 
attendant promotional profits. 

According to the report, the three great companies dominating the production 
of crude and semifinished steel at the time of the organization of the United 
States Steel Corporation were the Carnegie Co., Federal Steel Co., and National 
Steel Co. Six other large concerns — American Steel & Wire Co., American Sheet 
Steel Co., American Tin Plate Co., American Steel Hoop Co., American Bridge 
Co., and National Tube Co. — controlled the lighter finished products. Not one 
of these companies was entirely self-sufficient. The secondary group was depend- 
ent upon the primary group for its crude steel, and the primary group was largely 
dependent upon the secondary group for a market for its products. 

These great concerns almost simultaneously began a movement for self- 
sufficiency. The secondary group began acquiring ore reserves and crude-steel 
plants; and the primary group, finding their chief customers turning into rivals, 
began the manufacture of finished products. These efforts toward integration 
threatened to result in great duplication of steel producing and finishing capacity 
of the country and to involve them also in the invasion of each other's business. 
In 1900 the Carnegie Co. threatened to erect a great tube plant near Cleveland, 
thus invading the field of finished manufacture. Steel men and associated 
financial interests regarded this situation as dangerous and efforts were begun to 
merge the conflicting interests into a great corporation and avert a threatened 
"steel war." This led to the formation of United States Steel Corporation with 
a total capitalization of over $1,402,000,000 to acquire the capital stocks of the 
following companies and to provide it with working capital: 

Carnegie Co. 

Federal Steel Co. 

National Steel Co. 

American Steel Wire Co. 

American Sheet Steel Co. 

American Tin Plate Co. 

American Steel Hoop Co. 

American Bridge Co. 

National Tube Co. 

Shelby Steel Tube Co. 

Lake Superior Consolidated Iron Mines. 

The report of the Commissioner of Corporations also states that the actual 
value of the United States Steel Corporation's entire tangible properties at its 
formation was not more than $700,000,000, or about one-half its capitalization. 
The report also states that enormous profits were made from the flotation of 
securities of the new company. The underwriting syndicate alone, of which J. P. 
Morgan & Co. were the managers, cleared a cash profit of about $62,500,000. 

The company and its subsidiaries constitute a highly integrated unit from ore 
to finished products. Through its subsidiaries, the company owns vast natural 
resources including coal, limestone, and high-grade iron ore. It operates railroads, 
shipyards, and steamship lines. It manufactures all kinds of iror and steel 
products and cement, with emphasis on the ordinary open-hearth trade steel for 
the railroad construction and other capital goods industries. It is also engaged 
.in the fabrication of a wide variety of finished products including bridges, ships, 
barges, railroad, and oil-well equipment. The principal producing center has 
always been in Pittsburgh, but important plants are also located in Gary, Cleve- 
land, Youngstown, Chicago, Birmingham, San Francisco, and Milwaukee. 

Since its organization, United States Steel Corporation has continued to act 
solely as -a holding company and has acquired numerous competing and other 
concerns of which the more important were Union Steel Co. in 1902, Clairton 
Steel Co. in 1904, Tennessee Coal Iron & Railroad Co. in 1907, and Atlas Portland 
Cement Co. and Columbia Steel Co. in 1930 

3ethlehem Steel Corporation, the second largest company in the industry, had 
particularly rapid growth during and immediately following the World War. 

»Pt. 1, 1911. 



CONCENTRATION OF ECONOMIC POWER 17617 

This company was organized in 1904 to acquire control of a number of companies 
engaged in shipbuilding and the manufacture of ordnance and specialty steel 
products. Charles M. Schwab, who was one of the organizers of United States 
Steel Corporation promoted the organization of Bethlehem Steel Corporation. 
For some years prior to the formation of Bethlehem he desired to go into the steel 
business on his own account and the acquisition of the capital stocks of one of 
the constituent companies in 1901 gave him the opportunity. 

Bethlehem Steel Corporation has since become a thoroughly integrated con- 
cern from raw materials to finished products through the acquisition of numerous 
iron ore, coal, and limestone deposits and competing iron and steel and ship- 
building companies. Among other acquisitions, the company acquired control 
of Pennsylvania Steel Co. and Baltimore Sheet & Tin Plate Co. in 1916. During 
1921, 1922, and 1923, it also acquired a number of important companies includ- 
ing Baltimore Drydocks & Shipbuilding Co., Lackawanna Steel Co. and Midvale 
Steel & Ordnance Co. and its subsidiary, Cambria Steel Co. 

The company and its subsidiaries own extensive raw-material resources, to- 
gether with manufacturing properties, railroads and fleets of ocean and lake 
steamers. The business includes the manufacture of all kinds of iron, steel, and 
related products. It also includes the fabrication and erection of steel for build- 
ings, bridges, and other structures, the construction of railroad cars for passenger 
and freight transportation and the building and repairing of naval and commercial 
vessels. Producing plants are located in Pennsylvania, Maryland, New York, 
Washington, and California. Important steel fabricating works are located in 
Pennsylvania, New York, New Jersey, Illinois, and California. Shipbuilding 
and ship repair plants are located at Baltimore and Sparrows Point, Md.; Boston, 
Quincy and Braintree, Mass.; and San Francisco, Alameda, and San Pedro, Calif. 

Like the United States Steel Corporation, the bulk of Bethlehem's business has 
always been in steels for the railroad and building industries. 

Republic Steel Corporation, the third largest company in the industry, has had 
a particularly rapid growth through acquisition of competing companies since its 
organization in 1930. This company had its beginning in 1899 as Republic Iron 
& Steel Co. In 1930 the latter company and four other large companies — Central 
Alloy Steel Corporation, Donner Steel Co., Berger Manufacturing Co., and Bourne- 
Fuller Co. — were merged to form Republic Steel Corporation. Among the more 
important acquisitions of Republic Steel Corporation, since that time were the 
Corrigan, McKinney Steel Co., Newton Steel Co., and Truscon Steel Co. in 1935; 
Canton Tin Plate Corporation in 1936; and Gulf States Steel Co. in 1937. 

The corporation and its subsidiaries is fairly well integrated and owns large 
coal and iron reserves, the latter in both the Lake Suj erior and Birmingham dis- 
tricts. Its principal plants are located in Cleveland, ^ oungstown, Warren, Niles, 
and Canton, Ohio; Buffalo, N. Y.; Chicago, 111.; and Birmingham, Ala. The 
company and its subsidiaries are largely producers of alloy steels and among the 
leaders in capacity for stainless steel production. They rank high in the produc- 
tion of tin plate but have little or no capacity in heavier steels such as rails and 
structurals. Their largest single customer is the automobile industry. 

Jones & Laughlin Steel Corporation is the fourth largest steel producer in the 
country and with its subsidiaries forms an integrated system with works at 
Pittsburgh and Alquippa, Pa., coal properties on the upper Monongahela River 
and interests in iron ore, steamship, and railroad properties. Although the com- 
pany manufactures a diversified line of iron and steel products, its major product 
is pipe, structural, and railway steel. The company was incorporated in Penn- 
sylvania in 1922 as successor to Jones & Laughlin Steel Co. which had been in- 
corporated in Pennsylvania in June 1902 as successor to the former partnership 
of Jones & Laughlin, Ltd., established in 1850. 

The National Steel Corporation, the fifth largest company, was incorporated 
in 1929 as a holding company. It acquired capital stocks giving control of Weirton 
Steel Co., Great Lakes Steel Corporation and certain subsidiaries of the M. A. 
Hanna Co. which owned large ore reserves in the Lake Superior district, freighters 
for the transportation of the ore and plants for the manufacture of iron and steel. 
The acquisition of these companies together with erection of a large plant in the 
Detroit industrial area make National Steel a well-integrated unit ranking fifth in 
ingot capacity and about third in the production of tin plate. Its plants in the 
Detroit area produce steel bars, strip, sheets, and related products while its other 
main plant at Weirton, W. Va., produces primarily tin plate and "heavy" steel, 
such as shapes, plates, and structural steel. The company does a substantial 
business with the automobile industry. 



17618 CONCENTRATION OF ECONOMIC POWER 

Youngstown Sheet & Tube Co., the sixth largest company, had its beginning in 
1900 as Youngstown Iron Sheet & Tube Co., the name of which was changed to 
the present title in 1905. 

About two-thirds of the capacity is centralized in the Youngstown district of 
Ohio and the remainder in the Chicago area. The company is well integrated 
and controls substantial coal, iron ore, and limestone reserves. The company 
produces a diversified line of steel products and has expanded its business in recent 
years into the "light" steel lines, notably in sheet and strip steel for the auto- 
mobile and household equipment industries. 

Inland Steel Co. has been the most profitable of any of the companies under 
review. This company was established in 1893. It is fully integrated with 
operations varying from the production of raw material requirements to the fab- 
rication and distribution of rfinished products. The principal ore and steel-pro- 
ducing properties are located along the southern shore of Lake Michigan and 
Indiana Harbor, Ind., in the Great Chicago-Gary industrial area. The company 
is equipped to manufacture a diversified line of products. It is estimated that 
approximately 60 percent of the finished steel products capacity is available for 
the production of so-called "light" products such as sheets, strip, tin plate, bars, 
etc., and 40 percent is available for the production of the so-called "heavy" 
products, such as shapes, plates, rails, etc. In recent years the company has ex- 
panded its operations through a program of construction of plant and facilities 
and the acquisition of the capital stocks giving control of other companies, notably 
Joseph T. Ryerson & Son, Inc., Chicago, 111., fabricators and distributors of steel 
products and Milcor Steel Co., Milwaukee, Wis., manufacturers and fabricators 
of miscellaneous building materials from steel sheets. 

American Rolling Mill Co., which was incorporated in 1917, specializes in pro- 
ducing high-quality steel, iron sheets, and light plates. It has little or no capacity 
for heavy products such as rails and structural^. Its main outlet is the auto- 
mobile industry while other important consumers include jobbers and the road 
construction, refrigerator and electrical equipment industries. Fully integrated 
plants are located in Ashland, Ky., on the Ohio waterway and Middletown, Ohio, 
near Cincinnati. Finishing mills are located in the Pittsburgh district and at 
Kansas City. 

Wheeling Steel Corporation was organized in 1920 to consolidate the properties 
of a number of old-established companies. It is one of the small but well integrated 
units in the steel industry. It owns 14 manufacturing plants along the Ohio 
River Valley in the States of West Virginia and Ohio; iron ore properties in Minne- 
sota; interests in Great Lakes steamers; coal properties in Pennsylvania, West 
Virginia, and Ohio; and interests in railroad and river transportation. It is 
reported that more than 70 percent of the corporation's output in recent years has 
consisted of sheets, tin plate, and strips. The company's largest customer is 
the automobile industry which takes from 20 to 25 percent of the total output. 

Otis Steel Co. was incorporated in 1912 to acquire the property and assets of an 
English corporation of the same name registered in 1895. The company's plants 
are well located geographically on lake and river frontage in Cleveland permitting 
transportation by water of raw materials and of finished steel to Detroit and other 
points. The company specializes in the manufacture of automobile steel and sells 
about one-half of its finished output to the automobile industry. About 17 percent 
of the company's capacity is in structural and other heavy steels. 

Pittsburgh Steel Co., the smallest company for which financial information is 
presented, was organized in 1901. The company and its subsidiaries engage 
chiefly in the manufacture and sale of pig iron and a wide variety of semifinished 
and finished steel products. Plants are located along the Monongahela River and 
the company controls coal and iron ore reserves and through its subsidiaries 
operates a railroad and fleet of barges. 

Rates of return on the combined investments of all companies under review are 
shown below for each of the years 1917-38, on three bases of investment, namely, 
the total investment, stockholders' investment, and common stockholders' equity, 
before deducting provisions for Federal income and profit taxes from earnings 
and after eliminating appreciation and other intangibles from investments. 
The aggregate amount of appreciation and other intangibles deducted from 
investments range from $580,098,176, in 1917, down to $268,565,845 in 1937 and 
$18,337,800 in 1938. On the average, about 85 percent of the appreciation 
pertained to United States Steel Corporation. The amounts applicable to the 
United States Steel Corporation ranged from $522,609,129 in 1917 down to 
$249,583,149 in 1937. In 1938, the company wrote off all but $1 of the latter 
amount. The bulk of the remainder of appreciation pertained to Bethlehem 



CONCENTRATION OF ECONOMIC POWER 



17619 



Steel Corporation and Republic Steel Corporation. The maximum amounts of 
intangibles applicable to these companies were $14,083,793 for Bethlehem, and 
$32,996,728 for Republic. 





Num- 
ber of 
com- 
panies 


Rates of return on 


Year 


Num- 
ber of 
com- 
panies 


Rates of return on- 


Year 


Total 
invest- 
ment 


Stock- 
holders' 
invest- 
ment 


Common 
stock- 
holders' 
equity 


Total 
invest- 
ment 


Stock- 
holders' 
invest- 
ment 


Common 
stock- 
holders' 
equity 


1917 

1918 

1919 

1920 

1921.. 

1922 

1923 

1924 

1925 

1926.. 

1927. 

1928 


9 
9 
10 
10 
10 
10 
10 
10 
10 
10 
10 
10 


Percent 
31.86 
21.95 
9.75 
11.52 
3.12 
4.20 
8.68 
6.45 
7.34 
8.77 
6.72 
8.27 


Percent 
46.17 
29.51 
11.74 
14.26 
2.23 
3.78 
10.09 
6.91 
8.18 
10.10 
7.22 
9.29 


Percent 
63.85 
37.36 
13.39 
16.83 
.42 

2.51 
11.02 

6.61 

8.56 
11.08 

7.26 
'10.08 


1929 

1930 

1931 

1932 

1933 

1934 

1935 

1936 

1937 

1938.. 

Average- 


10 


Percent 

11.53 

5.47 

.58 

i 2.96 

i 1.03 

.41 

2.42 

5.52 

8.16 

.90 


Percent 

13.17 

5.50 

1.27 

M.50 

i 2.21 

1.50 

1.86 

5.72 

9.02 

.02 


Percent 

14.91 

5.13 

i 2.05 

17.54 

■4.78 

i 2.64 

.39 

5.44 

9.76 

i 2.06 




6.59 


7.02 


7.03 



■ Denotes loss. 

The tabulation indicates that profits were earned on each basis of investment in 
all years prior to 1931 and high returns were earned during the years 1917-20 and 
again in 1929, although substantial returns were earned during the intervening 
years. Losses sustained during the depression years and the relatively small 
profits earned in most of the succeeding years were such that the results of opera- 
tions were decidedly less favorable as a whole since the beginning of 1931 than for 
the period prior thereto. For example, the average return on the total invest- 
ment for the years 1917-30 was 9.87 percent as compared with 1.68 percent for 
the years 1931--38. The average return of 6.59 percent for all years on this basis 
of investment was higher than for any year during the latter period, except in 
1937, when 8.16 percent was earned. It will be noted that while the trend in 
earnings was upward following 1932, there was a sharp reversal in 1938 when only 
nine-tenths of 1 percent was earned on the total investment. 

The following tabulation compares the average annual rates of return during 
the years 1917-38 on each basis of investment for individual companies and 
their subsidiaries: 



Total 
invest- 
ment 



Stock- 
holders' 
invest- 
ment 



Common 
stock- 
holders' 
equity 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation 

Jones & Laughlin Steel Corporation 

Youngstown Sheet & Tube Co 

National Steel Corporation 

Inland Steel Co 

American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co 

Pittsburgh Steel Co 

Combined 



Percent 
7.33 
4.53 
3.84 
6.03 
6.45 
8.17 
10.18 
6.53 
6.09 
4.18 
4.92 



Percent 
7.97 
4.09 
3.14 
6.15 
7.05 
9.46 
11.97 
6.90 
6.20 
3.04 
4.69 



Percent 
8.31 
3.29 
1.58 
5.79 
7.16 
9.46 
12.17 
7.17 
4.72 
1.75 
3.68 



6.59 



7.02 



7.03 



' Denotes loss. 



The tabulation shows that the returns for only 3 of the 1 1 companies exceeded 
the average returns for the 11 companies combined; namely, those for United 
States Steel Corporation, National Steel Corporation, and Inland Steel Co. The 
average returns for the 2 smaller companies were greater than for United States 
Steel Corporation or any of the other companies shown in the tabulation. Ex- 
cept for the Steel Corporation, the returns earned by the larger companies were 



17620 



CONCENTRATION OP ECONOMIC POWER 



less favorable on the whole than for the smaller companies. Republic Steel Cor- 
poration, the third largest company in the industry earned an average return of 
3.84 percent on its total investment which was the lowest return earned by any 
of the companies. Bethlehem Steel Corporation, the second' largest company, 
earned an average return of 4.53 percent on its total investment which was the 
next smallest return, except for Otis Steel Corpoartion, one of the smaller com- 
panies, which earned an average return of 4. 18 per ent on its total investment. 

The showing for all companies as a group is, of course, influenced considerably 
by the magnitude of the investment and operations of United States Steel Cor- 
poration. During the years under review, profits were earned by the corporation 
in all years prior to 1931 equivalent to 10.77 percent on the total investment, 
13.08 percent' on the stockholders' investment, and 15.43 percent on the common 
stockholders' equity. During the subsequent years, earnings applicable to the 
total investment and stockholders' investment were slightly in excess of losses to 
the extent of 0.87 percent and 0.59 percent, respectively, of each basis of invest- 
ment; but with respect to the common stockholders' equity, losses exceeded 
profits equivalent to 1.34 percent of the investment. 

The average of the Steel Corporation's total investment for the 22-year period 
was 55 percent of the total for the 11 companies, which was 3% times larger than 
the average of the next largest company, Bethlehem Steel Corporation. The 
tabulation which follows shows the relative importance of each of the 11 com- 
panies from the standpoint of total capital investment on the basis of their 
average investments for the period urider review and for the year 1938: 



Average total investment- 



1917-38 



Percent 
of total 



Amount 



Percent 
of total 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation 

Jones & Laughlin Steel Corporation 

Youngstown Sheet & Tube Co 

National Steel Corporation... . 

Inland Steel Co 

American Rolling Mill Co 

Wheeling Steel Corporation . 

Otis Steel Co 

Pittsburgh Steel Co.. 

Total... 



$1, 760, 
528, 
148, 
182, 
165, 
i 144, 
80, 
61, 
84, 
»29, 
39, 



820, 526 
805, 568 
335, 836 
959, 802 
650, 756 
350, 340 
407, 561 
995, 249 
723, 458 
650, 862 
298, 408 



54.56 
16.39 
4.60 
5.67 
5.13 
4.47 
2.49 
1.92 
2.63 
.92 
1.22 



$1, 557, 
655, 
322, 
207, 
212, 
179, 
147, 
123, 
105, 
34, 
37, 



164, 621 
782, 528 
329, 168 
196, 670 
984, 832 
009, 187 
494, 335 
510, 197 
501, 517 
813, 722 
258, 963 



43.46 
18.30 
9.00 
5.78 
5.94 
5.00 
4.12 
3.45 
2.94 
.97 
1.04 



3, 226, 998, 366 



100.00 



3, 583, 045, 740 



100.00 



1 Annual average, 1930-38. 
1 Annual average, 1919-38. 

The tabulation shows that the deviation in investments from the 1917-38 
average was greatest for United States Steel Corporation. In 1938 its propor- 
tion of 43 ){ percent of the combined investments of all 11 companies was 11 per- 
cent less than for the 1917-38 average. Except for Pittsburgh Steel Co., the 
trend for all other companies was in the opposite direction, the most rapid growth 
being indicated for Republic Steel Corporation. The decline in the Steel Cor- 
poration's position is accounted for principally by a reduction in surplus of 
$270,000,000 in 1935 when that amount was transferred to depreciation reserves 
to make good a deficiency in the amount reserved for depreciation and depletion. 

On the 3 bases of investment on which rates of return were computed, about 
77 percent of the average of the total investment for the 11 companies during the 
period under review- consisted of the stockholders' investment and nearly 60 per- 
cent consisted of the common stockholders' equity. In other words, about 23 
percent of the average of the total investment consisted of long-term debt as a 
source of capital funds and about 17' percent of the total consisted of preferred 
stocks. However, the earnings on that part of the capital obtained from those 
sources were on the average, only slightly in excess of the interest cost on the debt 
and dividend payments on the preferred as indicated by the fact that the average 
returns for all companies in the tabulations were less than one-half of 1 percent 
higher on the common stockholders' equity than on the total investment. 

There were quite wide variations in the returns for individual companies 
throughout the years under review, although in general they followed uniform 



CONCENTRATION OF ECONOMIC POWER 



17621 



trends. The following tabulation affords a comparison of the annual rates of 
return on the total investment for each of the 11 companies during the years 
1917-38. 



Rates of return on total investment for the principal stee 


companies, 1917-38 


Year 


United 
States 
Steel 
Corpo- 
ration 


Bethle- 
hem Steel 
Corpo- 
ration 


Republic 
Steel 
Corpo- 
ration 


Jones & 
Laughlin 
Steel 
Corpo- 
ration 


Youngs- 
town 
Sheet & 
Tube Co. 


Nationa' ' 
Steel 
Corpo- 
ration 


1917 


Percent 

30.94 

24.60 

9.28 

10.65 

4.39 

4.65 

9.32 

7.55 

7.84 

9.23 

7.25 

8.71 

12.18 

6.16 

.95 

«3.52 

«1.75 

♦.81 

.63 

4.56 

8.64 

.22 


Percent 
20.89 
9.52 
11.00 
7.52 
6.13 
3.69 
5.69 
3.88 
5.07 
6.05 
4.90 
5.48 
8.93 
4.71 
1.10 
2.03 
«.41 
1.21 
1.97 
3.72 
6.92 
1.97 


Percent 

40.74 

18.75 

4.34 

13.83 

<6.75 

2.04 

11.32 

4.26 

6.89 

8.56 

5.82 

7.29 

11.52 

.24 

<2. 21 

<3.90 

«.53 

«.08 

3.75 

6.35 

5.65 

<.95 


Percent 
33.69 
13.55 
14.90 
18.49 

* 1.44 
3.87 
7.78 
6.20 
6.85 
9.74 
7.10 
9.26 

11.56 

5.06 

«.84 

♦3.89 

* 2.24 
< 1.34 

.06 

2.95 

3.47 

«1.79 


Percent 

55.62 

18.09 

9.40 

10.26 

*. 17 

5.13 

11.26 

6.83 

10.23 

11.03 

5.49 

7.69 

12.92 

5.19 

< 1.22 

<4.07 

«1.93 

.90 

3.12 

7.50 

8.49 

1.33 


Percent 


1918 




1919 




1920 




1921 

1922 






1923 




1924 - 




1925 




1926 




1927 




1928 -- 




1929 




1930 - 


9.85 


1931 --- 


5.78 


1932 


2.83 


1933 


3.85 


1934 


6.66 


1935 


10.33 


1936 -. 


11.38 


1937 


15.44 


1938 ... 


5.98 








7.33 


4.53 


3.84 


6.03 


6.45 


8.17 






Year 


Inland 
Steel 
Co. 


American 
Rolling 
Mill Co. 


Wheeling 
Steel 
Corpo- 
ration 


Otis 
Steel 

CO.2 


Pitts- 
burgh 
Steel 
Co." 


Com- 
bined 


1917 


Percent 
52.79 
26.05 
10.41 
11.86 

«.95 

.44 

10.95 

9.67 

8.43 
10.40 

9.96 
13.88 
16.63 

8.95 
. 3.44 
♦1.39 

2.40 

6.73 
12.82 
14.20 
13.15 

5.37 


Percent 

28.65 

42.50 

13.61 

3 19. 89 

«8.00 

8.02 

10.82 

8.78 

8.83 

11.98 

9.97 

13.96 

10.46 

2.37 

«.81 

.24 

1.78 

4.04 

7.93 

9.68 

9.37 

«.60 


Percent 

53.49 

27.40 

9.28 

38.70 

2.89 

1.33 

7.57 

2.70 

6.63 

7.62 

6.33 

8.78 

9.61 

4.05 

< 1.61 

<2.80 

.77 

2.13 

5.46 

6.06 

5.84 

1.99 


Percent 


Percent 

36.90 

25.49 

9.49 

7.98 

5.92 

2.05 

7.63 

6.08 

3.65 

8.55 

5.66 

.3.87 

10.93 

4.90 

«2.09 

<3.86 

«.3.89 

* 1.84 

<2.85 

..60 

5.18 

.57 


Percent 
31.86 


1918 .." . 




21.95 


1919 ... 


8.68 

7.47 

* 22. 20 

«.02 

5.90 

«2. 43 

7.36 

8.67 

7.23 

13.12 

13.06 

4.61 

<2.44 

<6.77 

<2.79 

4.92 

11.24 

10.95 

10.44 

<1.60 


9.75 


1920 .___• .... 


11.52 


1921 


3.12 


1922 


4.20 


1923 


8.68 


1924____ 


6.45 


1925... : 


7.34 


1926 


8.77 


1927 . 


6.72 


1928 _ 


8.27 


1929 _ 


11.53 


1930... 


5.47 


1931.. 


.58 


1932 


«2.96 


1933 


<1.03 


1934 


.41 


1935 


2.42 


1936 


5.52 


1937 


8.16 


1938 


.90 








10.18 


6.53 


6.09 


4.18 


4.92 


6.59 







1 Data are not available prior to 1930. 

1 Data are not available prior to 1919. 

3 Rate of return for 18 months; on a mathematical ratio it would be 13.26 percent for .12 months. 

* Denotes loss. 

Vp to this point operating results have been discussed primarily in terms of 
percentages of profit on investment. For the purpose of indicating the volume 
of business, net income and surplus accumulation of the various companies, their 
net sales, net income, dividend payments and surplus have been summarized and 
are presented in the following tabulation. The upper part of the table gives the 
total for each item for each of the 11 companies for all years during which the 
information was available within the period, 1917-38. The lower part of the 
table shows the annual averages of their net sales, net income, dividend payments 
and net income remaining after dividend payments. 



17622 



CONCENTRATION OF ECONOMIC POWER 



3 w 



II 



S3'C 

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N 



CONCENTRATION OF ECONOMIC POWER 



17623 



The table shows that United States Steel Corporation was also dominant with 
respect to volume of business. Its total ne.t sales of $26,000,000,000 during the 
22 years 1917-38 was 5 times the volume of the next largest company, Bethlehem 
Steel Corporation, and its average sales amounted to nearly 60 percent of the 
average for all 11 companies. In 1917, its sales amounted to 70 percent of the 
combined sales for 9 of the companies for which the information was available in 
that year. In 1938, however, its proportion of the combined sales for the 9 
identical companies had declined to about 50 percent. 

The table shows that the Steel Corporation's net income for the 22-year period 
amounted to $1,670,058,253 after providing for all costs and expenses of 
doing business, including provisions for the payment of Federal income and 
profits taxes. Of this amount, $1,427,971,442 was either paid out in cash 
or appropriated for dividends. Cash dividends of $554,832,894 were paid on the 
outstanding cumulative preferred stock at the rate of 7 percent per annum, and 
cash dividends amounting to $669,817,548 were paid on the common stock at 
varying rates. The remainder of the dividend payments, amounting to $203,- 
321,000, represents earnings retained in the business through capitalization of a 
40-percent common-stock dividend declared in 1927 on the common stock. 

The stock dividend of $203,321,000, together with accumulated earned 
surplus of $108,941,900, accounts for at least $312,262,900 of reinvested earnings. 
Other principal sources of funds to the Steel Corporation during the 22-year 
period originated from the sale or issue of common stock for $239,954,000 and 
the retention within the business of asset values represented by the increase 
in depreciation had depletion reserves of $1,061,170,000. The disposition of 
these resources, aggregating $1,613,386,900, is accounted for principally by the 
expenditure during the period of $426,425,000 in retirement of funded debt and 
by a net increase in investment in property of $1,265,918,000. 

As indicated above, the whole of the increase in depreciation reserves flowed 
into the property account and does not take into account the replacement of 
property actually retired with property of equal cost. During the period the 
corporation's capital expenditures aggregated over a billion and a half dollars 
and it expended in excess of 2 billion dollars for repairs, maintenance, and 
extraordinary replacements. 

In general, the provisions for annual depreciation and obsolescence of steel 
plants and equipment are made on the straight-line method and are arrived at 
by applying against the investment cost of each facility a rate to provide for its 
depreciation and obsolescence based upon the life expectancy of the facility. 
Large amounts have been provided annually for depreciation and obsolescence, 
which, according to the experience of the various companies, were deemed to be 
sufficient to equal, on the average, the gross book'value of the property, less 
salvage, as and when such properties were to be withdrawn from service. The 
amounts so provided ranged from 33 to 50 percent of the total recorded values 
of the respective properties of the 11 companies at December 31, 1938, as shown 
by the following tabulation : 



Property 



Depreciation and 

depletion 

reserves 



Percentage 
of reserves 
to pioperty 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation 

Jones & Laughlin Steel Corporation 

Youngstown Sheet & Tube Co 

National Steel Corporation 

Inland Steel Co 

American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co 

Pittsburgh Steel Co 



$2, 344, 316, 958 
758, 386, 677 
384, 506, 096 
251, 753, 555 
254, 353, 983 
213, 867, 076 
165, 825, 925 
123, 437, 777 
124, 156, 073 
42,814,957 
45, 352, 084 



$1, 177, 797, 445 
306, 367, 631 
145, 632, 568 
94,311,256 
123, 672, 860 
70, 189, 566 
60, 797, 700 
44, 094, 549 
52, 285, 296 

17. 161, 183 

20. 162, 239 



50.24 
40.40 
37.88 
37.46 
48.62 
32.81 
36.66 
35.72 
42.11 
40.08 
44.46 



For the period covered by this study, United States Steel Corporation has 
controlled as many as 259 subsidiary companies. However, numerous consoli- 
dations and transfers of properties within the system has materially reduced the 
number. For example, at December 31, 1937, the corporation controlled 137 
subsidiaries, of which 15 were engaged primarily in the production of steel and 
steel products; 10 were engaged in related' manufacturing activities, including 
shipbuilding, bridge building, and cement production; 49 were ore-mining com- 
panies; 8 were coal and coke companies; 27 were transportation companies; and 



17624 



CONCENTRATION OF ECONOMIC POWER 



28 were engaged in a variety of other activities, such as real estate, merchandising, 
and community utility services. 

During the last 14 or 15 years eight of the steel-producing companies accounted 
for substantially all of the system's raw, semifinished, and finished iron and steel 
products and accounted for more than half the investment and nearly half the 
income of United States Steel Corporation as a consolidated system. An analysis 
was made of the investments and operating results of these eight companies, 
together with those of the transportation companies and three of the principal 
manufacturing or fabricating companies, all of which accounted for 70 percent of 
the net income and represented 78 percent of the investment for the system during 
the years 1925-37. The relative proportions, including rates of return, are as 
follows: 



Percent of 

investment 

to total • 



Percent of 

income to 

total I 



Average 
rate of 
return 

percent 



United States Steel Corporation— Consolidated 

Principal steel-producing companies _ 

Transportation companies " 

Universal-Atlas Cement Co 

American Bridge Co 

Federal Shipbuilding & Dry Dock Co 

Total 



100. 00 



100. 00 



4.69 



55. 86 

16. 17 

1.88 

4.22 

.38 



44.07 

22.81 

3.04 

1.24 

a. 28 



3.70 
6.62 
7.58 
1.38 
2 3.48 



78.51 



70.88 



1 Based ton average investment of $1,778,646,089 and average net income of $83,476,428, excluding 
intangibles. 
1 Denotes loss. 

The earnings of all other companies in the system, constituting 22 percent of 
the consolidated investment, were equivalent to about 3 percent of their com- 
bined investment. 

The yearly rates of return on total investment for the subsidiaries as classified 
above is shown in the following tabulation for all years during the period 1917-38 
for which the information is available. 



Rates of return on total investment 



Year 


Principal 
steel-pro- 
ducing sub- 
sidiaries i 


Transpor- 
tation sub- 
sidiaries 2 


Federal 
Shipbuild- 
ing & Dry 
Dock Co. 


American 
Bridge Co. 


Universal 

Atlas 
Cement Co. 


1917 - 


Percent 


Percent 
8.76 
8.61 
6.64 

10.91 
6.69 

10.05 

12.50 
6.20 
9.66 

11.06 
7.63 
9.68 

11.68 
6.80 
1.64 
3 1.57 
2.34 
1.97 
4.56 

10.38 

12.64 


Percent 


Percent 
12.67 
8.64 
7.28 
3.38 
1.77 
3.68 
3.48 
3.06 
4.43 
4.89 
2.90 
3.49 
3.74 
3.76 
1.73 
.26 
3 1.52 
3 3.28 
3 3.59 
3.75 
.48 


Percent 
23.34 


1918 




46.28 

3 2.65 

3 5.51 

'6.70 

3 13. 98 

3 5.15 

'10.31 

3 8.75 

3 8.43 

3 15. 90 

3 8.40 

2.28 

11.74 

4.00 

3.92 

3 17. 71 

3 4.97 

14.87 

3.79 


14.78 


1919 . 




37.94 


1920 ' _ 




15.29 


1921 - 




20.28 


1922 




24.43 


1923 




37.45 


1924 




32.19 


1925 -- 


8.50 

10.48 

7.12 

9.24 

13.77 

3.86 

3 3.03 

3 4.37 

3 2.60 

3.50 

.74 

1.68 

6.36 

8 2.31 


27.59 


1926 


24.45 


1927 


19.62 


1928 .. _ 


20.14 


1929 - 


13.44 


1930 - 


14.23 


1931 


3 6.80 


1932 


3 7.65 


1933 --- 


3 2.18 


1934 . i 


1.45 


1935 ,. 


.65 


1936 


9.35 


1937 


7.44 


1938 
















3.23 


7.36 


.19 


2.53 


11.11 







i Includes from 6 to 8 companies. 
J Includes from 25 to 30 companies. 
1 Denotes loss. 



CONCENTRATION OF ECONOMIC POWER 



17625 



Carnegie-Illinois Steel Corporation is the largest steel-producing unit in the 
United States Steel Corporation system. It was formed in 1935 by consolidation 
of Carnegie Steel Co. with the principal plants of Illinois Steel Co. A year later, 
American Steel & Tin Plate Co. was added, with the result that in 1939 Carnegie- 
Illinois Steel Corporation's steel-ingot capacity was approximately 77 percent of 
the total for the system. 

The annual rates of return for this company and the others comprising the 
returns for the steel-producing group shown above are presented in the following 
tabulation for each company separately. The tabulation also affords a com- 
parison of the annual returns of these companies as a group with the annual 
returns for the system as a whole because of the influence they exercise on the 
over-all operating results. 



Rates of return on 


otal investment 






Year 


American 

Sheet & 

Tin Plate 

Co.i 


American 
Steel & 
Wire Co. 


Carnegie- 
Illinois 
Steel Cor- 
poration ' 


Carnegie 
Steel Co.' 


Illinois 
Steel Co.' 


1925 


Percent 
5.32 
4.70 
.30 
2.07 
8.30 
3. 17 

2 2.7? 

2 1.68 
1.65 
2.36 
3.93 


Percent 
3.42 
3.81 
2.24 
4.25 
6.52 
.23 

2 3.25 

2 3.94 
2.90 

2 1.86 
2.73 
2.48 
.39 

2 6.81 


Percent 


Percent 

1.68 

5.96 

3.59 

8.34 

14.48 

3.80 

2 3.02 

2 5.37 

2 5.86 

2 2.42 


Percent 
23 52 


1926 




30 13 


1927 




22 80 


1928 . 




27 47 


1929 ..- 




30 96 


1930 




10 15 


1931 




2 4 21 


1932 : 




2 5 57 


1933 




2 3 55 


1934 




74 


1935 - 


2 1.67 

.02 

6.77 

2 3.66 




1936 _. 


1 63 


1937 






2 81 


1938 






1 97 










Average. .:. 


2.13 


.52 


.32 


2.38 


9.30 


Year 


Columbia 
Steel Co. 


National 
Tube Co. 


Tennessee 

Coal Iron 

& R. R. 

Co. 


Principal 
steel pro- 
ducing 
subsidiaries 
combined 


United 
States 
Steel Cor- 
poration 
consoli- 
dated 


1925 


Percent 


Percent 

11.40 

11,42 

7.94 

7.65 

13.98 

4.47 

2 2.04 

»2.50 

2 1.11 

.05 

1.53 

5.51 

9.60 

1.71 


Percent 

8.96 

9.04 

7.42 

5.11 

6.16 

2.16 

2 2.94 

2 7.71 

2 4.36 

.22 

2.41 

3.77 

9.74 

1.45 


Percent 

8.30 

10.48 

7.12 

9.24 

13.77 

3.86 

2 3.03 

2 4.37 

2 2.60 

2.50 

.74 

1.68 

6.36 

2 2.31 


Percent 


1926. ... 






1927 






1928.. 






1929 






1930 


.24 

2 2.45 

2 2.13 

.65 

2.07 

3.65 

6.22 

- 5. 96 

1.64 


6.16 


1931 


1932 


2 3.52 
2 1.75 

2.81 

.63 
4.56 
8.64 


1933 


1934 


1935 


1936 


1937 


1938 






Average 


1.82 


4.67 


2.90 


3.23 


4.39 



' In 1935, principal plants of Illinois Steel Co. were merged with Carnegie Steel Co. to form Carnegie- 
Illinois Steel Corporation. In 1936, American Sheet & Tin Plate Co. was added. 
2 Loss. 



17626 



CONCENTRATION OF ECONOMIC POWER 



Large cash salaries and other compensation were paid to the executives of 
United States Steel Corporation and to the executives of most of the other com- 
panies under review. The following tabulation gives the aggregate, compensation — 
cash salaries and bonuses — received by the three highest paid officers of each 
company during the years 1935-38. 

Aggregate compensation l received by the S highest paid officers during the years 

19S5-S8 



1935 


1936 


1937 


1938 


$382, 353 


$367,922 


$410, 457 


$379, 897 


473, 332 


450, 000 


728, 962 


708, 308 


275,240 


335,000 


350,000 


320, 832 


135, 587 


187, 217 


238, 333 


220,833 


120,400 


122,720 


180, 070 


175, 166 


430,280 


460,220 


474, 446 


362, 700 


163, 980 


177, 400 


179,500 


160,750 


183, 765 


269, 346 


319,441 


298, 220 


140,000 


140,000 


125,000 


109,999 


111,250 


148, 000 


190,800 


118,800 


79, 934 


55, 890 


71, 980 


96,000 



Average 



United States Steel Corporation 

Bethlehem Steel Corporation -____ 

Republic Steel Corporation. 

Jones and Laughlin Steel Corporation 

Youngstown Sheet & Tube Co 

National Steel Corporation 

Inland Steel Co 

The American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co '. 

Pittsburgh Steel Co 



$385, 157 
590,150 
320,268 
195, 492 
149, 589 
431,911 
170, 407 
267, 693 
128, 749 
142, 712 
75, 951 



• Includes cash salaries and bonuses. 

It will be noted that the highest paid officers of United States Steel Corporation 
did not receive as much compensation on the average as did those of Bethlehem 
Steel Corporation and National Steel Corporation. 

In 1938, the highest paid officer of any of the companies was Eugene G. Grace, 
president of Bethlehem Steel Corporation, who received $378,698 followed by 
Charles M. Schwab, chairman of the board of directors of that company, who 
received $180,000. Three other officers of that company each received $149*610. 
The highest paid officer of United States Steel Corporation in that year was 
William A. Irvin, vice-chairman of the board of directors, who received $140,070 
and the next highest paid was Benjamin F. Fairless, president, who received 
$135,344. Ernest T. Weir, chairman of the board of directors, and George R. 
Fink, president, were the highest paid officers of National Steel Corporation in 
1938, each receiving $147,900 and $150,400, respectively. In the 2 previous 
years, each received over $200,000 per annum. Other high paid officers of other 
companies were T. M. Girdler, president of Republic Steel Corporation, who 
received $160,416 in 1938, and Charles R. Hook, president of American Rolling 
Mill Co., who received $134,846 in that year. 

Farm Machinery Industry 

Information concerning investments, profits, and rates of return is presented 
for a varying number of companies in each of the years 1913-37 in the report 
on Investments, Profits, and Rates of Return for Manufacturers of Farm Imple- 
ments and Machines. The companies for which the information is presented 
account for most of the business of the industry since they include all of the 
larger companies and their predecessors for all years. For example, in 1914 all 
of the companies under review accounted for 93 percent of the total value of 
farm machinery produced and in 1936 their total sales represented over 95 per- 
cent of the total domestic and export sales of farm machinery. 

During the 25-year period, the bulk of the farm-machinery business has been 
in the hands of a few companies. This concentration, accompanied by price 
leadership, has come about and continues to increase largely as a result of con- 
solidations of competing concerns to form larger units such as International 
Harvester Co., Minneapolis-Moline Power Implement Co., and Oliver Farm 
Equipment Co.; and of the acquisition of independents by International Har- 
vester Co., Deere & Co., Allis-Chalmers Manufacturing Co., and J. I. Case Co. 
These companies, together with B. F. Avery & Sons Co. and the Massey-Harris 
Co. comprise the full or long-line manufacturers of farm implements and 
machines. 

The full or long-line manufacturers are those who manufacture various types 
and sizes of farm tillage implements, seeding and planting machines, farming 
and hauling equipment, and farm power-developing machines. The remainder 
of the companies for which information is presented comprise the short-fine 
manufacturers of one or more of these kinds of implements, but not a complete 
line. 



CONCENTRATION OF ECONOMIC POWER 



17627 



From the standpoint of capital investment and volume of sales, International 
Harvester Co. dominates the industry. The operations of this company and if 
closest competitor, Deere & Co., have been highly profitable and their rates oi 
return have generally been much higher than for other companies. 

The report of the Federal Trade Commission on the Agricultural Implement 
and Machinery Industry states 5 that International Harvester Co. and Deere & 
Co. have established the price levels for the great majority of agricultural im-. 
piemen ts and machinery; that the large advance in the great majority of farm- 
machinery prices as compared with the prices of other manufactured products 
since the origin of the International Harvester Co.; the. profits of this company; 
the high degree of rigidity in farm-machinery prices during the depression; the 
swift rebound of farm-machinery prices after the 3 severest years of the depres- 
sion, 1931, 1932, and 1933, to levels exceeding those of 1929, one of the years of 
highest prices in the history of this industry, and in industry generally; ' the 
raising of this company's farm-machinery prices in 1938 over those of 1937 in 
the face of the company's remarkable earnings in this latter year; the continued 
dominant position Of the International Harvester Co. since 1902 in the farm- 
machinery industry; the exchange of price lists among farm-machinery manu- 
facturers; evidence of dealer coercion; and the typical monopolistic behavior of 
the Intranational Harvester Co.'s business operations during the depression when 
there was only a relatively slight percentage of decline in its farm-machinery 
prices but a sharp percentage decline in its volume of production and employ- 
ment as contrasted with the behavior of industries known to be competitive 
where the percentage in the decline of prices was greatest and the declines in the 
volume of production and employment, were less in the opinion of the Commis- 
sion, indicate the existence of a serious monopolistic condition in the farm- 
machinery industry. 

Rates of return on the combined investments of all companies for whicn the 
information was available are shown for each of the years 1913-37 in the follow- 
tabulation on the basis of total investment and stockholders' investment before 
deducting provisions for Federal income and profits taxes, and after eliminating 
appreciation and other intangibles from investments. The investments on which 
rates of return were computed are the average of the investments at the beginning 
and end of each year from each company, except in some years that part of the 
investment represented by borrowed funds was averaged monthly. 





Number 
of com- 
panies 


Rates of return on— 


Year 


Number 
of com- 
panies 


Rates of return on — 


Year 


^Total 
invest- 
ment 


Stock- 
holders' 
invest- 
ment 


Total 
invest- 
ment 


Stock- 
holders' 
invest- 
ment 


1913 


26 
26 
26 
26 
26 
22 


Percent 
9.44 
6.16 
6.58 
9.66 
14.97 
17.57 


Percent 
9.84 
6.01 
7.12 

10.94 
16.47 
118. 47 


1927 


59 
63 
67 
69 
70 
71 
71 
72 
71 
70 


Percent 

14.38 

16.99 

16.46 

8.52 

'.02 

'4.52 

i 1.80 

3.58 

10.77 

» 14. 20 


Percent 


1914.. 


1928 


17.82 
17.44 
8.94 


1915.. .—.'.... 


1929 


1916 


1930 


1917 


1931 


1918 


1932 


1 5 57 






'2.42 
3 51 


Average, 




10.74 


11.79 


1934 


1913-18 


1935 


11 30 








'14.98 


1919 


16 
16 
18 
19 
19 
19 
19 
20 


'10. 72 
10.88 
' .09 
1.39 
5.24 
«.41 
12. 25 
15.22 


10.75 
10.92 
'.45 
'.78 
5.09 
6.34 
12.48 
15.46 


Average, 
1927-36 


1920 

1921 




7.51 
« 15. 13 


7.67 


1922 

1923 


1937 

Average, 
1913-37 


17 


*15.77 


1924 




8.10 




1925 


8.44 


1926 








Average, 
1919-26 




7.56 


7.57 








1 





1 Denotes loss. 

' Due to change in fiscal year closings the returns reflect n months operations for one company, vie, 
International Harvester Co. 

3 For the same reason the returns reflect 10 months operations for two companies, viz, J. I. Case Co., Oliver 
Farm Equipment Co. 

« 1037-1038. 



17628 



CONCENTRATION OF ECONOMIC POWER 



It will be noted that the rates of return on the stockholders' investment were 
only slightly higher on the average than the rates of return on the total investment. 
This is accounted for by the fact that the differences between the amounts of 
stockholders' investment and total investment, including borrowed funds, were 
relatively small. Most of the capital of the farm-machinery manufacturers was 
obtained from the issuance of stock and reinvested earnings. 

The showing for all companies as a group for each year is influenced by the 
preponderant investments and profits of the relatively few full or long line manu- 
facturers. On the basis of total investment, their investments, or those of their 
predecessors, averaged 85.13 percent of the total for all companies under review 
during the years 1913-18; 93.29 percent of the total for the years 1919-26; 87.02 
percent of the total for the years 1927-36; and 98.15 percent of the total for the 
year 1937. If the investment of one large company, namely, Caterpillar Tractor 
Co., is eliminated from the comparison for the years 1927-36, for the reason that 
a considerable portion of its investment is devoted to the manufacture of products 
other than those for agricultural purposes, the combined investments of the long- 
line companies would average 92.09 percent of the total for all companies, exclud- 
ing this company. 

The following tabulation shows the ratios of the combined investments of all 
companies for each period for the long-line companies individually and as a group 
and for the short-line companies as a group. 

Ratios of total investment 





Annual aver- 
age 1913-18 


Annual aver- 
age 1919-26 


Annual aver- 
age 1927-36 


Annual 

average 

1937 




$395, 776, 346 

Percent 
59.79 
13.65 


$364, 463, 677 

Percent 
63.90 
14.61 


1 $644, 330, 289 

Percent 
55.53 
11.63 
8.09 
6.57 


$620, 352, 684 




Percent 
58.76 




14.06 




12.82 


J. I. Case Co 




7.55 
5.59 


6.40 




5.54 






5.20 
2.72 
1.48 

.87 


3.89 




5.27 




2.22 








B. F. Avery & Sons Co..- 


.88 


1.64 










85.13 
14.87 


93.29 
6.71 


92.09 
7.91 


98. 15 




1.85 






Total 


100.00 


100.00 


100.00 


100.00 







1 Does not include Caterpillar Tractor Co. 

1 Acquired by J. I. Case Co. in 1928. 

3 The ratios for 1913-18 are for the predecessor, Moline Plow Co. 

The rates of return for each of the long-line companies shown above appear in 
the following table for all years for which information was available. The table 
shows that International Harvester Co. and Deere & Co., the two largest com- 
panies, earned an average return throughout the 25-year period of 9.62 percent 
and 11.10 percent, respectively, on total investment, which were higher than for 
any of the other long-line manufacturers. 

Comparison of rates on return on total investment for each of the principal long-line 
farm-machinery manufacturers, 1913-37 



Year 


Inter- 
national 
Harvester 
Co. 


Deere & 
Co. 


Allis- 
Chalmers 
Manu- 
facturing 
Co. 


J. I. Case 
Co.' 


Emerson- 
Brant- 
ingham 

Corpora- 
tion i 


1913 


Percent 
10.95 
7.74 
8.28 
11.48 
17.15 
17.86 


Percent 
9.65 
5.63 
7.41 
10.61 
15.94 
17.76 


Percent 


Percent 


Percent 
6.14 


1914 






3.45 


1915 






1.27 


1916. 






1.82 


1917 






5.07 


1918 






9.03 




12.34 


10.89 






3.73 










See footnotes at end of table. 













CONCENTRATION OF ECONOMIC POWER 



17629 



Comparison of rates of return on total investment for each of the principal long-line 
farm-machinery manufacturers, 1913-37 — Continued 



Year 


Inter- 
national 
Harvester 
Co. 


Deere & 
Co. 


Allis- 
Ohalmers 

Manu- 
facturing 
Co. 


J. I. Case 
Co. 


Emerson- 
Brant- 
ingham 

Corpora- 
tion 


1919 


Percent 
8.32 
11.13 
2.26 
1.74 
6.85 
8.62 
14.03 
15.85 


Percent 
19.25 
12.21 
8 3.74 
3.3. 15 
4.79 
4.99 
10.89 
18.56 


Percent 


Percent 

12.64 

13.29 

3 2.07 

1.21 

2.4"2 

.57 

13.09 

17. 10 


Percent 
6.77 


1920 




4.95 


1921 




3.52 


1922 




3 8.42 


1923 




8 9.25 


1924 -^ 




3 8.04 


1925 




3 4.10 


1926 - 




»1.29 










8.74 


7.70^ 




7.43 


31.83 








1927 


14.41 

17.03 

17.20 

8.62 

.05 

3 2.51 

.34 

6.01 

12.40 

* 13. 34 


21.80 
25.80 
28.93 
15.95 
.74 
3 7.07 
3 6.29 
1.72 
14.68 
22.66 


8.63 
9.39 

12.12 
9.34 
3.98 

3 3.91 

3 3.97 
8.46 
6.06 

11.01 


17.16 

17.46 

9.20 

6.73 

.17 

3 4.88 

3 3.55 

3.52 

7.02 

9.36 




1928 








1930 




1931 








1933 




1934 




1935 














8.76 
13.18 


11.51 
24.91 


5.05 
13.88 


5.40 
»14.68 




1937 . — 






9.62 


11.10 


6.22 


6.59 


.66 






Year 


Oliver 
Farm 
Equip- 
ment 


Minne- 
apolis- 
Moline 
Power 
Imple- 
ment 
Co.» 


The 

Massey- 

■ Harris 

Co. 


B. F. 

Avery & 
Sons Co. 


Long-line 
farm-ma- 
chinery 
manufac- 
turers 
combined 


1913 


Percent 


Percent 
7.31 
3.79 
. 3.33 
5.48 
9.42 
10.21 


Percent 


Percent 
7.06 
9.12 
1.11 
7.66 
13.98 
25.46 


Percent 
10. Ot 


1914 






6.62 


1915 






7.30 


1916 






10.32 


1917 






15.72 


1918 -- 






16.92 






6.65 




11.30 


11.18 










1919 








21.55 
18.67 
3 3.24 
3 12. 76 
2.65 
5.96 
4.14 
6.40 


10.43 


1920 








11.14 


1921 








.61 


1922 








.07 


1923 








5.12 


1924_._ 








6.47 


1925 








12.56 


1926 - 








15.61 




















4.89 


7.77 












1927 1. 






0.71 

3 2.05 
.61 

3 5.44 

8 5.20 
8 10. 70 
3 11.16 
3 11.96 
8 11.56 

3 2.75 


6.26 

11.09 

4.38 

3 11.70 

8 19.23 

8 5.28 

1.20 

7.14 

8.17 

14.79 


14.55 


1928 






17.02 


1929 


7.25 
1.32 
.04 

s'9.54 
3 7.84 
3 8.68 
3 2.50 
5.81 


8.93 

2.33 

3 6. 51 

3 11.19 

3 8.04 
3 7.59 

'.14 

5.12 


16.23 


1930 


8.26 


1931 


.01 


1932 


3 4.28 


1933 :. 


8 2.04 


1934 


3.11 


1935 


10.64 


1936 


13.66 








1.54 
14. 62 


8 2.00 
» 16. 98 


3 5.54 


1.11 


7.40 


1937 


15.10 












3.55 


2.63 


8 5.54 


4.26 


7.69 







1 Rates of return for J. I. Case Threshing Machine Co., a predecessor company, 1919 to 1928, inclusive, 
and for Emerson-Brantingham Corporation consolidated with J I. Case Co. in 1928. 
J Rates of return for Moline Plow Co., i predecessor company, 1913 to 1918, inclusive. 
8 Loss. 

' Based on net profit for 11 months. 
» Based on net profit for 10 months. 



17630 



CONCENTRATION OF ECONOMIC POWER 



Throughout the 25-year period, rates of return were higher for the long-line 
manufacturers as a group than for the short-line manufacturers as a group. 
During this period the average return on the basis of total investment was 7.69 
percent for the long-line manufacturers as compared with 4.57 percent for the 
short-line manufacturers. The following tabulation compares the rates of return 
for each group for each of the years 1913-37. 

Comparison of rates of return on total investment for long-line and short-line farm- 
machinery manufacturers, 1913-37 1 





Number of farm- 
machinery man- 
ufacturers in 
each class 


Rates of return on 
total investment 


Year 


Number of farm- 
machinery man- 
ufacturers in 
each class 


Rates of return on 
total investment 


Year 


Prin- 
cipal 
long- 
line 
manu- 
fac- 
turers 


Short- 
line 
manu- 
fac- 
turers 


Prin- 
cipal 
long- 
line 
manu- 
fac- 
turers 


Short- 
line 
manu- 
fac- 
turers 


Prin- 
cipal 
long- 
line 
manu- 
fac- 
turers 


Short- 
line 
manu- 
fac- 
turers 


Prin- 
cipal 
long- 
line 
manu- 
fac- 
turers 


Short- 
line 
manu- 
fac- 
turers 


1913 


5 
5 
5 
5 
5 
5 


21 
21 

21 
21 
21 
17 


Percent 
10.09 
6.62 
7.30 
10.32 
15.72 
16.92 


Percent 
6.06 
3.54 
2.46 
5.90 
10.60 
21.75 


1919-26 K 

1927 

1928 

1929 

1930 

1931 

1932 

1933 

1934 

1935 

1936 

1927-36 «. 
1937 

1913-37 2. 






Percent 
7.77 


Percent 
4.61 










1915 

1916 

1917 

1918 


6 
6 

8 
8 
8 
8 
8 
8 
8 
8 


52 
56 
58 
60 
61 
62 
62 
63 
62 
61 


14.55 
17.02 
16.23 

8.26 

.01 

M.28 

3 2.04 

3.11 

10.54 

i 13. 56 


4.59 
7.09 
6.30 
1.01 
8 4. 77 
3 8 00 


1913-18J. 






11.18 


8.17 








3 2.58 
2.14 
5.57 
8.71 


1919 

1920 

1921 


5 
5 
5 
5 
5 
5 
5 
5 


11 

11 
13 
14 
14 
14 
14 
15 


10.43 
11.14 
.61 
8 .07 
5.12 
6.47 
12.56 
15.61 


14.90 
7.30 
' 9. 45 
3 4. 90 
7.01 
5.49 
7.87 
9.84 


1923 






7.40 
i 15. 10 


1.78 


1924 


6 


11 


16.73 


1926 






7.69 


4.57 











1 Due to change in fiscal year closings the return for 1936 reflects 11 months operations for International 
Harvester Co.; and for 1937 the return reflects 10 months operations for J. 1. Case Co. and Oliver Farm 
Equipment Co. 

' Annual average. 

' Denotes loss. 

Attention is called to the fact that Caterpillar Tractor Co. is not included in 
this tabulation, since it could not be classified in either group without distortion 
because so much of its large investment is devoted to the manufacture of products 
other than those for agricultural purposes. The tabulation shows that for each 
period throughout the years 1913-37 the returns for the long-line manufacturers 
as a group were larger thaD those for the short-line manufacturers except for the 
year 1937, when the returns for the short-line manufacturers were somewhat 
higher than those for the'long-line manufacturers. This is accounted for by the 
fact that the returns for the short-line manufacturers in that year are materially 
influenced by the profits of 1 company, namely, New Idea, Inc., whose profits 
were equivalent to 30.49 percent of its investment. Excluding this company, 
the returns for the other 10 short-line companies as a group would average 11.15 
percent in that year. 

Many of the companies under review are engaged in operations other than 
the manufacture of farm implements and machines. For a number of these 
companies, including Caterpillar Tractor Co. and Allis-Chalmers Manufacturing 
Co., the manufacturing business other than the farm-machinery business could 
not be segregated as to investments and profits for the purpose of showing rates 
of return on the farm machine business only. However, for those companies 
for which such a segregation could be made, rates of return are presented in the 
following tabulation for each of the years 1927-36 for the long-time companies 
as a group and for the short-line companies as a group. 



CONCENTRATION OF ECONOMIC POWER 



17631 



Rates of return on investment in farm-machinery business only for long-line and 
short-line manufacturers 1927-36 





Long-line com- 
panies 


Short-line com- 
panies 


Total 


Year 


Number 
of com- 
panies 


Rate 
return 


Number 
of com- 
panies 


Rate 
return 


Number 
of com- 
panies 


Rate 
return * 


1927 _ - 


5 
5 
7 
7 
7 
7 
7 
7 
7 
7 


Percent 

16.12 

20.03 

18.41 

9. 14 

.40 

> 5.71 

13.06 

3.43 

12.31 

15.62 


47 
50 
52 
51 

55 
56 
56 
57 
56 
55 


Percent 
3.58 
7.41 
5.53 
1.37 

i 6.28 
i 10. 68 

i 4.18 
1 79 
6.01 
8.57 


52 
55 
59 
61 
62 
63 
63 
64 
63 
62 


Percent 
14.98 


1928... 


18.90 


1929 


17.52 


1930. 


8.52 


1931.. . 


1.09 


1932 


16.07 


1933 


J 3. 14 


1934.. 


3.31 


1935 


11.90 


1936 


15.25 










8.50 




.91 




7.98 













i Denotes loss. 

The degree of concentration of the farm-machinery business from the stand- 
point of volume of sales is indicated in the following tabulation. This tabulation 
presents the results of an analysis of the sales of 63 companies for the year 1936 
in order to determine the amounts of their sales of farm machinery only. The 
tabulation shows the relative importance of the farm-machinery sales of each of 
the long-line companies and compares their total sales with the total for the short- 
line companies for which the information was available: 



Net sales of 
farm machin- 
ery, 1936 



Percent of 
total net 
sales of 
63 com- 
panies 



International Harvester Co 

Deere & Co 

J. I. Case Co 

Oliver Farm Equipment Co 

Allis-Chalmers Manufacturing Co 

Minneapolis-Moline Power Implement Co 

Massey-Harris Co 

B. F. Avery & Sons Co 

Total 8 long-line companies 

Total 55 short-line companies 

Total 63 companies, 1936 



$124, 832, 407 
64, 985, 395 
21,905,648 
18, 171, 169 
31, 440, 290 
10, 419, 474 
4, 955, 029 
2, 797, 918 



41.26 
21.48 
7.24 
6.01 
10.39 
3.44 
1.64 
.92 



279, 507, 330 
23, 064, 579 



92.38 
7.62 



302, 571, 909 



100. 00 



The figures for International Harvester Co. do not include its sales of motor- 
trucks and binder twine. Although these products are used on the farm, a 
considerable portion of International's sales are for industrial use primarily. 
Since this company is the only one for which the figures are submitted who manu- 
factures these products, its sales of motortrucks and binder twine were not 
included in order to afford a better comparison of the farm machinery sales of all 
companies. If the sales of these products were included, International's sales 
would represent 56.43 percent of the total for the long-line companies and 52.99 
percent of the total for all companies, instead of 44.66 percent and 41.26 percent, 
respectively, as shown in the tabulation. However, on either of the bases of 
comparison, it is evident that International Harvester Co. sales predominate. 
That its sales have predominated throughout the period under review is indicated 
by the fact that its total sales of all products averaged 58.68 percent of the total 
sales for all companies under review during the years 1913-18; 69.29 percent of 
the total for the years 1919-26; 57.86 percent of the total for the years 1927-36, 
excluding the sales of Caterpillar Tractor Co. for the reasons already given; and 
55.94 percent of the total sales for all companies in the year 1937. 



17632 



CONCENTRATION OF ECONOMIC POWER 



•Further indication of the relative importance and profitableness of the two 
largest companies — International Harvester Co. and Deere & Co. — is presented 
from the standpoint of sales and operating results. The following tabulation 
summarizes the net sales, net income, dividend payments, and net increase in 
surplus for each of these companies. The upper part of the tabulation gives the 
totals for these items for all of the years 1913-37. The lower part of the tabula- 
tion gives for each company the annual averages of the net sales, net income, divi- 
dend payments, and net income remaining after the payment of dividends. 

Total and average of annual net sales, net income, dividend payments, and changes 
in surplus of International Harvester Co. and Deere & Co., 1918-87 





International 
Harvester Co. 


Deere & Co. 


Total for entire period 1913-37: 


i $4, 630, 842, 896 


$992, 818, 891 








564, 109, 599 


135, 580, 344 








118,990,049 
149, 621, 548 
29, 758, 924 


59, 064, 885 


Cash dividends on common stock 


6, 000, 619 
11, 139, 267 








298, 370, 521 


76, 204, 771 








265, 739, 078 
222, 537, 521 


59. 375, 573 




44,995,399 








43, 201, 557 


14, 380, 174 






Annual average: 


i 185, 233, 716 


39, 712, 756 








22, 564, 384 


5, 423, 214 








4, 759, 602 
5, 984, 862 
1, 190, 357 


2, 362, 595 




240, 025 




445, 571 








11,934,821 


3, 048, 191 








10, 629, 563 


2,375,023 







Includes sales of all products. 

The tabulation shows that during the 25-year period the reinvested earnings 
remaining in the surplus account of International Harvester Co. were $43,201,557 
at the end of 1937; and for Deere & Co. the amount remaining in its surplus ac- 
count' at the end of that year was $14,380,174. However, stock dividends paid 
by International Harvester Co. in the amount of $29,758,924, together with 
$66,137,770 of surplus transferred to capital-stock account during the period, 
account for at least $139,098,251 of earnings reinvested in that company's business. 
The net increase in surplus of $14,380,174 for Deere & Co., together with $11,- 
139,267 of stock dividends paid by that company during the period, account for 
at least $25,519,441 of earnings reinvested in its business. The reinvested earnings 
of these companies accounted for about 86 percent of the net increase in total 
investment since 1913 in the case of International Harvester Co. and about 58 
percent of the net increase in total investment since that date in the case of Deere 
& Co. 



CONCENTRATION OF ECONOMIC POWER 



17633 



An analysis of salaries and other compensation paid to executives of the prin- 
cipal companies in the industry during the years 1927-36 developed that the 
average compensation paid by International Harvester Co. and Deere & Co. was 
higher than for any of the other companies. The average per officer compensa- 
tion paid by the principal companies during these years was as follows: 



Average 





Num- 


Amount 


ber of 




officers 


$71, 074 


13 


32, 062 


7 


24, 712 


6 


23, 540 


12 


19,012 


9 


18, 271 


7 


17, 025 


8 


12, 685 


4 



International Harvester Co 

Deere & Co 

Oliver Farm Equipment Co 

Caterpillar Tractor Co 

Allis-Chalmers Manufacturing Co 

Minneapolis-Moline Power Implement Co 

J. I. Case Co 

B. F. Avery & Sons Co 



The average per officer compensation was highest for International Harvester 
Co. in all years except 1931, 1932, and 1933, when it was highest for Oliver Farm 
Equipment Co. The average total compensation per.officer paid by International 
Harvester Co. was $142,940 in 1927, $147,524 in 1928, $161,193 in 1929, $124,674 
in 1930, $26,329 in 1934, $24,307 in 1935, and $37,259 in 1936. Oliver Farm 
Equipment Co. paid average total compensation per officer of $36,265 in 1931, 
$35,652 in 1932, and $27,947 in 1933. Deere & Co. also paid substantial compen- 
sation per officer during the years 1927-30. These payments averaged $31,171 
in 1927, $55,314 in 1928, $75,867 in 1929, and $59,838 in 1930. 

The largest amount paid to any individual officer of the companies referred to 
herein was paid by International Harvester Co. in the years 1927-30 and 1935-36 
and by Oliver Farm Equipment Co. in the years 1931-34. International Har- 
vester Co. paid its president $353,386 in 1927, $405,909 in 1928, and $412,860 in 
1929. In 1930 it paid its first vice president $252,460. In 1935 and 1936 it 
paid its president $54,033 and $94,812, respectively. Oliver Farm Equipment 
Co. paid its president $148,031 in 1931, $115,980 in 1932, $81,270 in 1933, and 
$76,152 in 1934. 

Sulfur Industry 

At hearings before the Temporary National Economic Committee, 3 it was 
developed that only four companies, namely, Texas Gulf Sulphur Co., Freeport 
Sulphur Co., Jefferson Lake Oil Co., and Duval Texas Sulphur Co. produce 
practically all of the sulfur mined in the United States. In terms of production, 
capital investment, and volume of sales, the first two companies have dominated 
the industry for many years. During the past 10 years the two major companies 
have produced about 90 percent of the total production of sulfur by the four 
companies. In 1937 Texas Gulf Sulphur Co. and Freeport Sulphur Co. produced 
about 90 percent of the United States production of sulfur and over 70 percent 
of the world production of sulfur. Texas Gulf Sulphur Co., operating two prop- 
erties, both in Texas, produced 1,743,829 long tons, and the Freeport Sulphur 
Co., operating one property in Texas and one in Louisiana, produced 711,520 
long tons. The total for the two companies amounted to 2,455,349 long tons 
out of 2,741,970 long tons produced in the United States in that year. 

In addition to this high degree of concentration in the business by the two 
major companies, it was also developed that rigid prices for the product were 
maintained for a considerable time even in the face of large stock surpluses during 
the prolonged business depression, and exceptionally large profits were earned by 
these companies for many years. 

Financial reports for Texas Gulf Sulphur Co. and Freeport Sulphur Co. were 
prepared by the Federal Trade Commission from data secured from the compa- 
nies' files and were offered for the record as exhibits 388 and 389 at the hearings. 
The significant features of these reports relative to investments, profits, and 
rates of return for each company are summarized below. 

3 Investigation of Concentration of Economic Power, pt. V, pp. 1983-2009 and 2200-2275. 



17634 



CONCENTRATION OF ECONOMIC POWER 



Texas Gulf Sulphur Co. was organized in 1909 as Gulf Sulphur Co., the name of 
which was changed to the present title in July 1918. The company has been 
actively engaged in the production of sulfur since March 1919. The following 
tabulation summarizes the investments, profits, and rates of return for that com- 
pany for each of the years 1919 to 1938, inclusive. 



Year 



1919 
1920 
1921 
1922 
1923 
1924 
1925 
1926 
1927 
1928 
1929 
1930 



Average • 
invested 
capital 



$5,158,964 
8, 981, 444 
11, 260, 709 
12, 193, 447 
12, 867, 376 
13, 224, 287 

13, 259, 8lV 

14, 789, 940 
17, 686, 647 
21, 672, 752 
27, 588, 956 
33, 271, 583 



Profit » 



$993, 605 
519, 138 
941, 499 
998, 978 
972,240 
088, 585 
027, 637 
036, 033 
109, 692 
661, 051 
624, 073 
100, 977 



Rate of 
return on 
invest- 
ment 



Percent 
19.26 
39.18 
17.24 
32.80 
38.64 
38.48 
45.46 
67.86 
74.12 
72.26 
63.88 
45.39 



1931 

1932 

1933 

1934 

1935 

1936. 

1937.... 

1938 

Annual aver- 



Average ' 
invested 
capital 



790, 836 
179, 402 
506, 165 
238,364 
739, 207 
132, 509 
130, 899 
353, 227 



Profit » 



Rate of 
return on 
invest- 
ment 



$9, 772, 047 
6, 373, 813 
7, 956, 893 
7, 336, 795 
8, 178, 017 
10, 843, 015 
12, 864, 281 
7, 633, 633 



8, 451, 600 



Percent 
27.30 
17.62 
21.21 
14.90 
13.69 
18.34 
21.76 
12.86 



1 Average of investment at beginning and end of year. 

> Before deducting provisions for Federal income and profits taxes. 

The tabulation shows that the company earned an average rate of return on the 
investment of 28.75 percent during the 20 years 1919-38. It will be noted that 
the company's operations were profitable in every year during this period and 
reflect rates of return ranging from highs of 67.86 percent in 1926, 74.12 percent 
in 1927, 72.26 percent in 1928, and 63.88 percent in 1929 to a low of 12.86 percent 
in 1938. 

The tabulation shows that the average invested capital increased from 
$5,158,964 in 1919 to $59,353,227 in 1938, an increase of $54,194,263. The aver- 
age invested capital shown in the tabulations for each year represents the total 
investment consisting of common stock, earned surplus, and surplus reserves. 
The increase ; n average invested capital during the period is accounted for prin- 
cipally by inci eases of $30,737,215 in earned surplus and $19,825,000 in outstand- 
ing stock. This stock, together with $650,000 in cash, was issued in 1934 in pay- 
ment for sulfur properties and contract rights acquired under an agreement with 
Delaware Gulf Oil Co. 

The following summarizes the income and expenses, dividend payments, and 
surplus of Texas Gulf Sulphur Co. during the period under review: 





Total for years 
1919-38 


Annual aver- 
age, 


Percent- 
age of 
sales 


Net sales. 


$297, 051, 729 
131, 445, 993 


$14, 852, 586 
6, 572, 299 


100 00 


Costs and expenses. . 


44.25 






Net profit from sales 


165, 605, 736 
3, 426, 26Q 


8, 280, 287 
171,313 


55.75 


Miscellaneous income 


1.15 






Net income before Federal taxes 


169, 032, 002 
13, 209, 359 


8,451,600 
660, 468 


56.90 


Provision for Federal taxes.. . 


4.45 






Net income 


155, 822, 643 
124,117,500 


7, 791, 132 


52.45 


Dividend payments 










Surplus Dec. 31, 1938.... 


31, 705, 143 













As indicated above, costs and expenses average 44.25 cents out of every dollar 
of sales, net profits from sales averaged 55.75 cents per dollar of sales, and net 
income averaged 52-45 cents per dollar of sales. Stated in another way, the aver- 
age net profit from sales was 126 percent of costs and expenses, and the average 
net income was 119 percent of costs and expenses. The only other large company, 
Freeport Sulphur Co., was organized in 1913 as Freeport Texas Co., the name of 
which was chan,£ed to the present title in 1936. In addition to its sulfur opera- 
tions, the con.ps.oy in 1931 acquired control of Cuban-American Manganese 



CONCENTRATION OP ECONOMIC POWER 



17635 



Corporation, which is engaged in the production of manganese from properties 
located near Santiago, Cuba. The following tabulation summarizes the invest- 
ments, profits, and rates of return for the company and its subsidiaries for each of 
the years 1919 to 1938, inclusive: 



Year 


Average 
invested 
capital i 


Profit > 


Rate of 
retum 
on in- 
vest- 
ment 


Year 


Average 
invested 
capital ' 


Profit » 


Rate of 
return 
on in- 
vest- 
ment 


1919 . 


$9, 631, 671 
8,406,008 
8, 466, 241 
10, 004, 790 
12, 174, 607 
12, 277, 902 
11, 772, 321 
12, 566, 491 
13,829,505 
13, 318, 283 
11, 621, 350 


$1, 184, 625 

981, 884 

' 181, 407 

U15,653 

1, 013, 225 

162, 465 

891, 172 

1, 919, 552 

4, 001, 381 

3, 645, 047 

• 5,080,777 


Percent 

12.30 

11.68 

»2. 14 

»1.16 

8.32 

1.32 

7.57 

15.28 

29.37 

27.37 

* 43. 72 


1930 


10, 453, 528 
10, 634, 791 
11,452,762 
13, 837, 058 

15, 465, 861 
45, 635, 913 

16, 587, 844 

17, 756. 282 
17,974,093 


3, 456, 569 
2, 635, 343 
2, 443, 098 
2,773,840 
1,625,089 
1, 642, 108 
2, 487, 969 
2, 897, 690 
1, 677, 630 


Percent 
33.07 


1920 _- 


1931 

1932 


24.78 


1921 ... 


21.33 


1922 


1933 


20.05 


1923 


1934.. 

1935. 


10.51 


1924.... 


10.50 


1925 


1936 _ 

1937 

1938 

Annual average- 


15.00 


1926 


16.32 


1927. 


9.33 






1929 


12, 693, 365 


2, 014, 120 


15.87 







1 Average of total investment at beginning and end of year, consisting of common and preferred stocks 
surplus, and surplus reserves. 
' Before deducting provisions for Federal income and profits taxes. 
» Denotes loss. 
« 13 months. 

The tabulation shows that during the 20 years 1919-38 the company earned 
average rate of return of 15.87 percent on the investment. The operations of the 
company were profitable in all years except 1921 and 1922 when losses were sus- 
tained equivalent to 2.14 percenf and 1.16 percent, respectively, on the invest- 
ment. During the years 1927-31 large profits were earned equivalent to 29.37 
percent on the investment in 1927; 27.37 percent in 1928; 43.72 percent in 1929 
(13 months); 33.07 percent in 1930; and 24.78 percent in 1931. Thereafter the 
rates of return declined to 10.50 percent in 1935, then increased to 16.32 percent 
in 1937 and again declined to 9.33 percent in 1938. 

A summary of the income and expenses, dividend payments, and surplus of 
Freeport Sulphur Co. follows : 





Total for 
years 1919-38 


Annual aver- 
age 


Percentageof 
. sales 




$174,546,023 
135, 351, 195 


$8, 727, 301 
6,767,660 


100.00 




77.64 








39, 194, 828 
1, 087, 576 


1, 959, 741 
54,379 


22.46 




.62 








40, 282, 404 
4, 452, 254 


2, 014, 120 
222, 613 


23.08 




2.65 








35, 830, 150 
7, 663, 780 


1, 791, 507 


20.53 












Total 


43, 493, 930 
28, 147, 584 




















8, 081, 659 












Total 


7, 264, 787 













Unlike Texas Gulf Sulphur Co., the costs and expenses for Freeport Sulphur Co. 
contain large amounts for royalties under sulfur leases. In connection with the 
two properties from which sulfur is now produced, Freeport Sulphur Co. paid 
royalties to the Texas Co. during the years 1924-38 of $29,046,250 relating to the 
Hoskins Mound property in Texas, and paid royalties to Gulf' Refining Co. of 
Louisiana, Shell Petroleum Corporation, and Humble Oil & Refining Co. during 
the years 1934-38 aggregating $4,144,979 relating to the lease of ^properties at 
Grand Ecaille in Louisiana. These latter payments were in addition to ft Oftflh 
consideration aggregating $500,000 for this lease. 



17636 CONCENTRATION OF ECONOMIC POWER 

Cement Industry 

The report on "Investments, Profits, and Rates of Return for Cement Com- 
panies" deals with the operating results of a representative group of 18 cement 
companies which had 59 percent of the cement-producing capacity of the country in 
1938. Seven of the larger companies account for approximately 45 percent of the 
total capacity of the industry. This concentration has come about through con- 
solidations, mergers, and acquisitions of competing companies. The 18 com- 
panies are as follows : 

Aetna Portland Cement Co. 

Alpha Portland Cement Co. 

Great Lakes Portland Cement Co. 

Huron Portland Cement Co. 

Ideal Portland Cement Co. ° 

Lawrence Portland Cement Co. 

Lehigh Portland Cement Co. 

Lone Star Cement Corporation. 

Marquette Cement Manufacturing Co. 

Medusa Portland Cement Co. 

Missouri Portland Cement Co. 

Nazareth Cement Co. 

North American Cement Co. 

Oregon Portland Cement Co. 

Pennsylvania-Dixie Cement Corporation. 

Riverside Cement Co. 

Superior Portland Cement, Inc. 

Universal-Atlas Cement Co. 
All of these companies or their subsidiaries, and other members of the Cement 
Institute, were charged with certain monopolistic practices by the Federal Trade 
Commission in a complaint served July 2, 1937. The Commission's complaint 
charges, in part: 

«* * * p or more than 8 years past, respondents have maintained and now 
have in effect a combination among themselves to hinder, lessen, restrict, and 
restrain competition in prcie, among producing respondents in the course of their 
aforesaid commerce among the States * * *." 

In the past certain trade practices in the industry have also been the subject 
of investigation by the Federal Trade Commission which are set forth in two 
reports; namely, Price Bases Inquiry, the Basing- Point Formula and Cement 
Prices, 1932; and Cement Industry, 1933. These reports deal largely with cement 
prices including uniformity and inflexibility of delivered prices and pricing policies. 
The financial information which is the basis for the present study was obtained 
from the files of the Income Tax Unit of the Bureau of Internal Revenue, except in 
some instances when published reports were used, largely because of the inability 
to obtain information on a consolidated basis from the tax returns of some of the 
companies and their subsidiaries in the later years. Since the information was 
obtained primarily from tax returns, the operating results for the individual 
companies are presented in such a manner as to avoid disclosure of identity in 
view of the regulations of the Treasury Department governing the publicity of 
tax returns. 

Rates of return on invested capital have been computed for each of the years 
1917-36, on two bases; namely, the stockholders' investment and the common 
stockholders' equity after deducting appreciation. The combined stockholders' 
investments of all companies as a group increased each year from $104,608,687 
in 1917 to $269,996,548 in 1929. Thereafter the trend was downward to 
$170,471,267 in 1936. The annual average was $188,407,014. The trend in 
common stockholders' equity followed that for the stockholders' investment, the 
annual average being $154,712,804. The amounts of investments on which 
rates of return were computed are the average of the investments at the beginning 
«,nd end of each year for each company. The'amount of appreciation which was 
eliminated in arriving at investment ranged in the aggregate from $12,734,344 
in 1917 to $52,401,690 in 1929, and to $49,989,789 in 1936. 

The profits used in computing rates of return represent the taxable net income as 
finally determined by the Bureau of Internal Revenue in all cases where tax 
returns were used. In those instances where the basic information was obtained 
from published reports, the net income as reported by the companies in such 
reports, before provisions for Federal taxes, was used. 

Rates of return on the investments of all companies combined, for which infor- 
mation is available, are presented for each of the years 1917-36, in the following 
tabulation: 



CONCENTRATION OF ECONOMIC POWER 



17637 



Year 


Number 
of com- 
panies 


Rate of 
return on 
the stock- 
holders' in- 
vestment 


Rate of 
return on 
the com- 
mon stock- 
holders' 
equity 


Year 


Number 
of com- 
panies 


Rate of 
return on 
the stock- 
holders' in- 
vestment 


Rate of 
return on 
the com- 
mon stock- 
holders' 
equity 


1917 


28 
28 
28 
24 
24 
24 
25 
25 
26 
21 
22 


Percent 
14.35 

9.47 
12.66 
12.86 

7.66 
14.22 
25. 04 
21.82 
20.38 
16.66 
13.14 


Percent 
15.76 
10.00 
13.52 
13.41 
7.74 
15.12 
27.08 
23.22 
22.10 
18.74 
14. 53 


1928 


22 
19 

18 
18 
18 
18 
18 
18 
18 


Percent 

11.94 

10.24 

9.04 

12.36 

'8.04 

13.30 

2.53 

.07 

11.05 


Percent 
12 93 


1918 


1929 


11.42 


1919. . 


1930 


10 32 


1920 .- 


1931 


i 4 65 


1921.. 


1932 

1933 

1934 

1935 


• 12.44 


1922 


■ 5 45 


1923 


2.21 


1924 


1.70 
12 99 


1925... 


1936 

Average- 






1927 


-— 


9.99 


11.04 







■ Indicates loss. 

As shown above, the average annual returns earned by the companies as a 
group were approximately 10 percent on the stockholders' investment and 11 
percent on the common stockholders' equity during the 20-year period. Except 
for the depression years when losses were sustained, which reduced the averages 
for the period, high returns were earned in most years. 

Prior to 1931, the first year in which losses were sustained, the average return 
on the stockholders' investment during the years under review was 14.32 percent 
as compared with a loss of 0.27 percent for the later years. Likewise, during the 
years 1917-30, the average return on the common stockholders' equity for the 
companies as a group was 15.72 percent as compared with a loss of 1.47 percent 
for the years 1931-36. The slightly higher average returns on the common 
stockholders' equity than on the stockholders' investment are accounted for by 
the fact that the margin of capital represented by preferred stock produced 
earnings in excess of the dividends paid or accrued thereon. It was not practicable 
to compute rates of return on the total investment including long-term debt 
because of the inability to segregate interest charges on such debt from total 
charges for all interest payments reported on tax returns. However, it appears 
that the proportion of long-term debt to the total capitalization was not large so 
that the average return on the total investment would not be materially lower, than 
the average return on the stockholders' investment. 

It will be noted in the preceding tabulation that the number of companies for 
which returns were computed range in number from 28 in 1917 down to 18 in 1936. 
The larger number of companies in the earlier years included those acquired by 
merger or consolidation during the 1920's by a number of the 18 companies. 
HoVever, in the following tabulation, all such predecessor companies have been 
grouped according to their present affiliation in order to show comparative returns 
for each company and its predecessors throughout the 20-year period under 
review. The average returns earned during the period by each company and 
its predecessors, designated by number, in order to avoid disclosure of identity, 
are as follows: 

Average annual rate of return during 20-year period 1917-36 



Company No. 


On stock- 
holders' 
invest- 
ment 


On com-" 
mon 
stock- 
holders' 
equity 


C -/inpany No. 


On stock- 
holders' 
invest- 
ment 


On com- 
mon 
stock- 
holders' 
equity 


1 


Percent 
6.81 

c> ». 

14.98 
7.80 
9.02 
15.63 
22.67 
10.82 
4.56 
7.28 


Percent 
6.31 
0) 
24.15 
7.80 

22.67 
11.35 

4.56 
7.55 


11 


Percent 
6.88 
12.07 
15.02 
13.23 
7.79 
7.22 
8.74 
15.21 


Percent 
6.65 


2... 


12 


12.07 


3 


13 


31.03 


4..:.. 


14 . 


13.51 


5 


15 

16 


7.87 


6 


7.25 


7 


17 


9.12 


8 


18 


15.98 


9 






10 


9.99 


11.04 











' Omitted to avoid disclosure of identity since company No. 2 was not in operation during all of the years 
1917-36. However, the results of its operations are reflected in the annual averages for the 18 companies. 
' Not available. 



17638 



CONCENTRATION OF ECONOMIC POWER 



The tabulation shows that on the average substantial returns were earned by 
each of the 17 companies and their predecessors, despite losses sustained during 
the depression years. On the basis of stockholders' investment, the lowest 
average return earned by any company during the 20-year period was 4.56 percent 
and the highest return was 22.67 percent. The next highest returns were earned 
by four other companies averaging approximately 15 percent per annum; 
four earned from 9 to over 14 percent; and seven earned from nearly 6 to 8% 
percent. As a group all companies earned an average return of about 10 percent. 
On the basis of common stockholders' equity the respective returns were higher, 
averaging just over 11 percent. 

While the returns of the respective companies and their predecessors indicate 
substantial variation, the returns are quite comparable when the companies are 
grouped by size. On-the basis of plant capacity, the 18 companies represented 
59 percent for the industry in 1938. Each of 3 of the 18 companies represented 
over 5 percent of the total capacity for the industry; 4 represented from 3 to 
5 percent each; 6 represented from 1 to 3 percent each; and 5 represented under 
1 percent each. According to this grouping, the 2 groups of medium-sized 
companies earned higher average returns than either of the other 2 groups, fol- 
lowed by the group of largest companies. The average returns earned by each 
group during the 20-year period, 1917-36, are as follows: 

Average annual rates of return, 1917-36 





On stock- 
holders' 
invest- 
ment 


On com- 
mon 

stock- 
holders' 

equity 


Group 1. 3 companies each with over 5 percent of total plant capacity. . 


Percent 
9.71 
10.65 
10.43 
8.26 


Percent 
10.19 


Group 2. 4 companies each with from 3 to 5 percent of total plant capacity 

Group 3. 6 companies each with from 1 to 3 percent of total plant capacity 
Group 4. 5 companies each with under 1 percent of total plant capacity 


12. 57 
12.53 
8.73 






All groups with 59 percent of total plant capacity in 1938... 


9.99 


11.04 



Rayon Industry 

The report on investments, profits, and rates of return for rayon companies 
deals with the operating results of eight of the principal rayon companies, their 
position in the industry, the tremendous growth in the use of the product, and 
the price trends of this and competitive yarns. The eight companies are as follows : 

American Viscose Corporation. 

E. I. du Pont de Nemours & Co. (Rayon department), 

Celanese Corporation of America. 

Industrial Rayon Corporation. 

The American Enka Corporation. 

North American Rayon Corporation. 

Tubize-Chatillon Corporation. 

American Bemberg Corporation. 

American Viscose Corporation, the largest producer in the industry, had a 
monopoly of the rayon business in this country prior to 1920 through control of 
patents on manufacturing processes. After the expiration of these patents other 
companies entered this field so that in 1938 there were 29 rayon yarn and staple 
fiber producers. However, these eight companies were the principal producers. 

There has been a remarkable growth in the production of rayon yarn and staple 
fiber. The last year that American Viscose Corporation was the sole producer 
was 1919 when over 8,000,000 pounds were produced. Thereafter, the domestic 
production increased rather consistently to 342,000,000 pounds in 1937 and 
decreased to about 288,000,000 pounds in 1938. Although other companies 
entering the field have accounted for a substantial portion of the increase, American 
Viscose Corporation remained the principal producer. Its proportion of the total 
had decreased from time to time to 30 percent of the domestic productior in 1938. 

In 1938 the eight companies under study produced 91 percent of the total United 
States produc&qn of rayon yarn and staple fiber by all processes. Three of the 



CONCENTRATION OP ECONOMIC POWER 



17639 



largest companies accounted for 67 percent of the total. The following tabulation 
shows the proportions of the annual domestic production since 1919 of each of the 
three largest companies and of the five smaller companies as a group. Prior to 
1920 American Viscose Corporation accounted for all of the production. 

Proportion of the total United States production of rayon yarn and staple fiber by 
all processes accounted for by each of the 3 large companies and by 6 smaller com- 
panies combined, from 1920 to 1938, inclusive 



Year 


Number of 
companies 


American 
Viscose 
Corpo- 
ration ' 


E.I. 

du Pont 

de Nemours 

&Co. 


Celanese 
Corpo- 
ration of 
America 


5 smaller 
companies 
combined ! 


Combined 

percentage 

of total 

United 

States 

production 


1920—- ..- 


1 
4 

5 
5 
5 
6 
6 
7 
7 
9 
8 
8 
8 
8 
8 
8 
8 
8 
8 


Percent 
99 
92 
82 
78 
73 
68 
59 
54 
56 
52 
42 
39 
34 
35 
34 
35 
33 
32 
30 


Percent 


Percent 


Percent 


Percent 

99 


1921 


2 
6 
8 
10 
13 
17 
20 
19 
21 
17 
17 
16 
16 
20 
20 
21 
22 
22 




4 
12 
13 
17 
16 
16 
16 
14 
17 
26 
28 
29 
25 
27 
23 
23 
20 
24 


98 


1922 




100 


1923 




99 


1924 •_ 




100 


1925 -. 


1 
1 
3 
3 
4 
5 
6 
7 
10 
11 
14 
14 
14 
15 


98 


1928. _. 


93 


1927 


93 


1928.... .... 


92 


1929 


94 


1930 


90 


1931 


90 


1932 


86 


1933 


86 


1934... 


92 


1935.. 


92 


1936 


91 


1937 


88 


1938 


91 







1 Prior to 1920, American Viscose Corporation produced 100 percent of the total domestic production. 

* 5 companies combined include Industrial Rayon Corporation, 1922-38; the American Enka Corporation, 
1929-38; North American Rayon Corporation, 1929-38; American Bemberg Corporation, 1927-38; and 
Tubize-Chatillon Corporation, 1930-38; together with the latter company's predecessors, namely, Tubize 
Artificial Silk Co. and American Chatillon Corporation from 1921 to 1929, inclusive. 

Rayon is a synthetic textile fiber, that for many years was referred to as artificial 
silk, and whose basic raw material is cellulose. The principal commercial sources 
of cellulose are spruce, western hemlock and cotton linters, although it may be 
obtained from many other less economical sources. Rayon is produced by chemi- 
cal and mechanical processes which first make a fine filament that is spun into 
yarns suitable for weaving into many kinds of fabrics. For many years, rayon 
was primarily a substitute for silk but recently a staple fiber has been developed 
which can be used in woven and knit goods similar to wool in heavier fabrics. 

Experiments were first made as early as 1735 to manufacture a textile fiber 
but it was not until about 1890 that successful processes were developed. The 
nitrocellulose and cuprammonium process were perfected first and soon thereafter 
the viscose process was discovered. The latter process became the most widely 
used. Another process, namely, the acetate process, was not discovered until 
the time of the World War, but in recent years the production of rayon by this 
process has become increasingly important. 

The following tabulation indicates the tremendous growth in the industry and 
shows that the domestic production of rayon yarn and staple fiber combined 
increased from 363,000 pounds in 1911 to 287,749,000 pounds in 1938. Produc- 
tion in 1936 and 1937 exceeded the production for the year 1938. 



17640 



CONCENTRATION OF ECONOMIC POWER 



United States production of rayon yarn and staple fiber, 1911-38 (units are thousands 

of pounds) 1 



Year 


Viscose, 
cuprammo- 
niura and 
nitrocellu- 
lose yarns » 


Acetate 
yarn 


Total rayon 
yarn 


Staple 
fiber 


Total rayon 

yarn and 
stable fiber 


1911 L- 


363 

1,111 

1,816 

2,422 

3,885 

5,778 

6,644 

5,846 

8,228 

10,005 

14,866 

23,947 

34,839 

36,208 

49,429 

60, 073 

70, 408 

91,232 

112, 954 

117, 643 

135, 249 

116,379 

172, 402 

170, 307 

202, 010 

214. 926 

239, 316 

181,795 




363 
1,111 

1,816 

2,422 

3,885 

5,778 

6,544 

5,846 

8,278 

10, 125 

14, 986 

24,067 

34, 959 

36,328 

51, 049 

62, 693 

75, 555 

97,232 

121, 399 

127, 333 

150, 879 

134, 670 

213, 498 

208, 321 

257,557 

277, 638 

321, 681 

257, 916 




363 


1912 






1,111 


1913 _ 






1,816 


1914 






2,422 
3,885 
5,778 
6,544 
5.846 


1915 






1916 






1917 






1918 






1919 


50 

120 

120 

120 

120 

120 

1,620 

2,620 

5,147 

6.000 

8,445 

9,790 

15,630 

18.291 

41,096 

38, 014 

55, 547 

62, 712 

82, 365 

76, 121 




8,278 
10, 125 


1920 .._. 




1921.. . 




14, 986 
24,067 


1922 .. 




1923 




34, 959 


1924 




36,328 
51, 049 
62, 693 
75, 555 
97, 397 
121 899 


1925 




1926 




1927. 




1928 


165 

500 

350 

880 

1,100 

2,100 

2,200 

4,600 

12,300 

20,244 

29,833 


1929 


1930 


127, 683 
151, 759 
135, 770 
215, 598 
210 521 


1931.. „ 


1932 


1933 


1934 


1935 


262, 157 


1936 


289,938 


1937 


341, 925 
287, 749 


1938 







1 Source: Textile Economics Bureau, Inc., Rayon Organon. 
' Production of nitrocellulose yarn was discontinued in 1934. 

In 1938 acetate yarn accounted for 29.5 percent of the total domestic rayon 
yarn, but accounted for a lesser proportion of the world production. Rayon 
yarn produced by this process has accounted for a larger proportion of the total 
each year. The production of rayon staple fiber has not been as extensively 
developed in this country as in other countries, particularly Italy, Germany, 
and Japan. In 1930 the world production of rayon yarn amounted to 451,000,000 
pounds and the rayon staple fiber amounted to 6,000,000 pounds, whereas in 
1937 the world rayon-yarn production was 1,205,000,000 pounds as compared 
to 618,000,000 pounds of rayon staple fiber. In 1938 the world production of 
staple fiber practically equaled the yarn production, as estimated figures give 
the world production of rayon yarn as 975,000,000 pounds and of rayon staple 
fiber as 925,000,000 pounds. This compares with the domestic production of 
rayon yard of 258,000,000 pounds and of rayon staple fiber of 30,000,000 pounds 
Thus, it is -evident that rayon staple fiber, which to some extent is a substitute 
for cotton and wool, is used more widely in other countries than in the United 
States. The domestic production of staple fiber does not equal the consumption 
although there has been a continuous increase in the domestic production. For 
mstance, in 1938 the domestic production increased nearly 50 percent over 1937, 
whereas imports increased only about 15 percent. In 1938 the imports of rayon 
staple fiber amounted to about 24,000,000 pounds as compared to 30,000,000 
pounds of domestic production. 

The remarkable growth of the domestic use of rayon as compared to other 
textiles is illustrated heretofore in the production data and is also forcefully por- 
trayed in the following chart, showing the quantities consumed of rayon yarn 
and competing yarns. In recent years there have been relatively small amounts 
of rayon yarn exported or imported, except there have been some imports of 
staple fiber. Thus, the relative quantities of domestic production and consump- 
tion in the aggregate are not greatly different. However, sometimes there were 
rather large differences between the annual amounts produced and the amounts 
consumed, for the reason that in certain years the anticipated demand did not 
materialize and part of the production was carried over to the next year. The 
following chart shows the pounds consumed domestically of cotton, wool, rayon, 
and silk, from 1920 to 1938, inclusive. 



CONCENTRATION OF ECONOMIC POWER 17641 



Chart UNITED STATES CONSUMPTION OF COTTON, 
WOOL, RAYON AND SILK FIBERS 



1920-1938 



Millions of Pounds Annually 



4500 
4000 
3500 

3000 
2500 

2000 
400 

300 

200 
150 

100 
90 
80 
70 
60 
50 

40 
30 

20 































TOTAL 
























\ 








COTTON \ 





























10 





























wool\ 




































RAYON 






















































'SILK^ 


\ 












/ 








V 


^ 








/ ,-— — 
/ / 
/ / 












*>-^ 


X 

f 


__ „ 


f/ 














1 
1 
1 

1 


















> — 

/ 


















/ 





































1920 1922 1924 1926 1928 1930 1932 1934 1936 1938 



17642 



CONCENTRATION OF ECONOMIC POWER 



It is of interest to correlate the consumption of rayon, shown in the foregoing 
chart, and the production of rayon, shown heretofore, with the price of rayon 
yarn. The trend of the price of rayon yarn definitely reflects the influence of 
the earlier monopolistic position of American Viscose Corporation and the later 
competitive conditions in the industry. Prior to 1920, there were only moderate 
increases in production which never exceeded 10,000,000 pounds annually. Dur- 
ing the period from 1911 to February 1920, the list price of rayon yarn, 150 denier, 
increased from $1.85 to $6 per pound. From February 1920 to October 1920, 
the list price dropped from $6 to $2.55 and from 1921 to 1932, inclusive, ranged 
downward from $2.80 to 55 cents. From 1933 to 1938, inclusive, the list price 
ranged from 49 cents to 65 cents per pound. After 1920, the growth in produc- 
tion of rayon was sensational, increasing from 10,125,000 pounds in 1920 to 341,- 
925,000 pounds in 1937. There was a considerable decline in 1938 production 
but there was an increase in consumption over 1937. 

It is also of interest to compare the wholesale prices of cotton, wool, silk, and 
rayon yarns. It will be noted from the following tabulation that the trends of 
prices of rayon and siik were quite comparable and even cotton followed somewhat 
the same trend. The following tabulation is copied from page 26 of a report 
on Development and Use of Rayon and Other Synthetic Fibers by Bureau of 
Agricultural Economics. 

Prices and index numbers x of cotton, wool, silk, and rayon yarns, United Stales, 

1921 to 1987 



Calendar year 


Cotton J 


Wool 3 


Silk< 


Rayon » 


Price 


Index 


Price 


Index 


Price 


Index 


Price 


Index 


192l 


Dollars 
per pound 
0.66 
.72 
.77 
.72 
.70 
.58 
.55 
.54 
.54 
.47 
.37 
.31 
.41 
.46 
.45 
.42 
.44 


Percent 
90 
99 
106 
99 
96 
79 
75 
74 
74 
64 
51 
42 
56 
63 
62 
58 
60 


Dollars 
per pound 
1.18 
1.41 
1.73 
1.69 
1.72 
1.44 
1.37 
1.55 
1.49 
1.24 
1.00 
.84 
1.08 
1.25 
1.13 
1.31 
1.38 


Percent 
69 
82 

101 
99 

100 
84 
80 
91 
87 
72 
58 
49 
63 
73 
66 
77 
81 


Dollars 
per pound 
6.57 
7.65 
8.65 
6.25 
6.57 
6.19 
5.44 
5.07 
4.93 
3.42 
2.40 
1.56 
1.61 
1.30 
1.63 
1.77 
1.86 


Percent 
92 
107 
121 
87 
92 
86 
76 
71 
69 
48 
34 
22 
22 
18 
23 
25 
26 


Dollars 

per pound 

2.67 

2.80 

2.80 

2.11 

2.00 

1.81 

1.49 

1.50 

1.24 

1.05 

.75 

.64 

.61 

.59 

.57 

.59 

.62 


Percent 
116 


1922 


122 


1923 ... 


122 


1924 


92 


1925 


87 


1926 


79 


1927 


65 


1928 


65 


1929 


54 


1930 


46 


1931 


33 


1932 


28 


1933 


26 


1934 


26 


1935 


25 


1936 


26 


1937 


27 







' Base is the average of the 3 years' 1923, 1924, and 1925. 

• Average midmonth contract prices of 40's single combed peeler yarn, New York. 

• Worsted yarn, 32's white, crossbred stock, factory. 

1 Japanese silk yarn, 78 percent, crack, xx, 13/15 denier, white, New York. 

• A grade, 150 denier, continuous filament rayon, first quality, New York. 

Source: Bureau of Agricultural Economics. Prices are Bureau of Labor Statistics wholesale prices except 
cotton-yarn prices. 

American Viscose Corporation or its predecessor company, was originally formed 
in 1909, by Courtauld's, Ltd., and has since been controlled by that firm. Prior 
to 1915, it used patented processes owned by Courtauld's, Ltd., and paid royalties 
for their use but in 1915, those patents were acquired outright for $5,000,000. 
American Viscose Corporation is engaged almost solely in the production of rayon 
yarns and staple fiber by the viscose and acetate processes. Prior to 1920, this 
company had a monopoly in this country in the production of rayon yarn. This 
company is still the largest producer but now accounts for only about 30 percent 
of the total. 

E. I. du Pont de Nemours & Co. is the second largest producer of rayon yarn. 
Its rayon business, however, is only a small portion of its total business. The his- 
tory of this company's business extends back to 1802 but its rayon business was 
not started until 1920. This company produces rayon yarn and staple fiber by 
the viscose and acetate processes. From 1926 to 1933, inclusive, this company 
was the only domestic producer of staple fiber. It has recently completed a plant 
for the production of "Nylon" yarn, an extremely tough synthetic material, that 



CONCENTRATION OF ECONOMIC TOWER 



17643 



has many uses, such as for hosiery, sheets, and other fabrics, for which rayon yarn 
is not adaptable. 

Celanese Corporation of America was incorporated in 1918 but was not very 
active in this field until 1925 and has since become the third largest producer. 
This company makes rayon yarn and staple fiber by the acetate process and claims 
to have recently developed a new yarn, four or five times as strong as rayon for 
use in hosiery and tire fabrics. 

The profitableness of the rayon producers, expressed in rates of return on invest- 
ments, are presented for all eight companies under review, individually and as a 
group, from 1915 to 1938, inclusive, on two bases; uamely, total investment and 
stockholders' investment, before deducting provisions for Federal income taxes 
from earnings. The total investment consists of long-term borrowings, stocks 
outstanding, surplus, and surplus reserves. The stockholders' investment 
included all these items except long-term borrowings. Inasmuch as some of these 
rayon companies had only small bond issues or other long-term debt, the total 
investment is only slightly greater than the stockholders' investment and the 
rates of return are only slightly higher on the stockholders' investment. 

Since American Viscose Corporation was the only domestic producer prior to 
1920 by reason of its patent monopoly, it is the only company for which rates of 
return are presented prior to that time. Following that time, rates of return are 
presented for other companies as they entered the business. The following tabula- 
tion gives the rates of return on the basis of total investment and stockholders' 
investment for the companies as a group in all years for which the information 
was available during 1915-1938: 





Number 
of com- 
panies 


Rates of return on- 


Year 


Number 
of com- 
panies 


Rates of return on — 


Year 


Total in- 
vestment 


Stock- 
holders' 
invest- 
ment 


Total in- 
vestment 


Stock- 
holders' 
invest- 
ment 


1915 


1 
1 
1 
1 
1 
1 
2 
2 
2 
2 
3 
4 
4 


Percent 
26.32 
109. 19 
95.96 
69.49 
97.02 
64.21 
41.99 
50.12 
43.15 
26.73 
30.60 
20.14 
25.76 


Percent 
► 26.32 
109. 19 
95.96 
69.49 
97.02 
64.21 
41.99 
50.12 
43.15 
26.73 
31.00 
20.46 
26.07 


1928 


5 
6 
7 
7 
7 
3 
8 
8 
8 
8 
8 


Percent 
24. 49 
18. 05 
4.96 
3.35 
1.47 
12.16 
6.88 
6.74 
11.47 
12.14 
2.52 


Percent 
24. 57 


1916 

1917.. 


1929 

1930. 


18.07 
4.96 


1918 


1931 

1932 


3.35 


1919... 


1.46 


1920 

1921... 


1933 

1934 


12.21 
6.91 


1922 


1935. : 


6.80 


1923 


1936 

1937 


11.65 


1924 


12. 31 


1925... 


1938 


2.44 






1927 




13.99 


14. 18 











The tabulation shows that all eight companies as a group earned profits equiva- 
lent to approximatelv 14 percent on each basis of investment during the 24-year 
period. Exceptionally high rates of return were earned from 1916 to 1920, in- 
clusive, ranging from 64.21 to 109.19 percent on the total investment and the 
same on the stockholders' investment. During the period from 1921 to 1929, 
inclusive, they ranged from 18.05 percent to 50.12 percent on the total invest- 
ment. The returns decreased to 4.96 percent in 1930 and continued to decline 
to 1.47 percent in 1932. They recovered sharply in 1933 when 12.16 percent 
was earned on the total investment. During the next 2 years the returns were 
6.88 percent and 6.74 percent of the total investment, while during 1936 and 1937 
they were 11.47 percent and 12.14 percent, respectively. During 1938, profits 
were much lower, amounting to 2.52 percent on the total investment and 2.44 
percent on the stockholders' investment. 

The annual and average returns earned by each company during the years 
1915-38 are given in the two tabulations which follow. These tabulations show 
that the average returns earned by each of the three largest companies were higher 
than for any of the other eight companies, and the returns for American Viscose 
Corporation, the largest company, were considerably higher than for any of the 
other companies. On each basis of investment the average profits of American 
Viscose Corporation were euqivalent to 21.27 percent. This high average return 
is attributable to the phenomenal profits earned dunne the earlier years when the 
company held the patent monopoly. The next largest two companies, the du 



124491— 41— pt. 31- 



17644 



CONCENTRATION OF ECONOMIC POWER 



Pont Co. and Celanese Corporation of America, followed in the order of high 
returns. The average return earned by the rayon department of the du Pont 
Co, was 11.52 percent on each basis of investment, and the average return earned 
by the Celanese Corporation of America was 9.75 percent on the total investment 
and 10.19 percent on the stockholders' investment. Good returns were earned 
by each of the other companies except American Bemberg Corporation, the 
smallest company. Its average return was only moderate being slightly over 
3 percent on each basis of investment. 

However, this is not to say that the smaller companies were the least profitable 
under normal competitive conditions. Most of the smaller companies had higher 
rates of return during 1936, 1937, and 1938 than did the larger companies; and 
the smallest company had the highest rates of return of any of the companies in 
1937 and 1938. In those years its returns were over 29 and 18 percent, respec- 
tively, on each basis of investment. The tables show that the returns for the 
respective companies during recent years were completely contradictory to the 
annual averages. An impelling factor for the higher average returns for the 
larger companies was the larger profits earned during the earlier years when they 
had the field to themselves. 



Annual rate 


of return on total investment for 


principal rayon companies, 1915-88 


Year 


Amer- 
ican 
Viscose 
Corpor- 
ation 


Rayon 
depart- 
ment of 
E. I. du 
Pont de 
Nemours 

& Co. 


Cela- 
nese 
Corpor- 
ation of 
America 


Indus- 
trial 
Rayon 
Corpor- 
ation 


The 

Amer- 
ican 
Enka 

Corpor- 
ation 


North 
Amer- 
ican 
Rayon 
Corpor- 
ation 


Tubize- 
Cha- 
tillon 

Corpor- 
ation 


Amer- 
ican 
Bem- 
berg 

Corpor- 
ation 


Average 

for 
group 


1915. r 


Percent 

26.32 

109.19 

96.96 

69.49 

97.02 

64.21 

44.62 

51.16 

43.47 

26.63 

32.39 

21.75 

26.19 

28.79 

23.43 

8.07 

4.44 

2.35 

10.55 

6.97 

6.53 

9.67 

10.16 

i 1.66 


Percent 


Percent 


Percent 


Percent 


Percent 


Percent 


Percent 


Percent 
26.32 


1916 . - 
















109.19 


1917 ... 
















95.96 


1918 
















69. 46 


1919 . 








.% 








97.02 


1920— 
















64.21 


1921.... 


12.13 

34.11 

38.91 

27.88 

34.19 

16.23 

27.01 

26.63 

19.04 

'.90 

4.45 

1.21 

12.65 

8.58 

5.27 

11.00 

13.10 

4.15 














41.99 


1922... 














50.12 


1923 














43.15 


1924.... 














26.73 


1925 . . 


1.15 
12.60 
20.76 
9.09 
9.88 
5.98 
3.03 
3.47 
20.37 
10.91 
12.13 
11.98 
10.96 
6.00 












30.60 


1926 


12.80 

26.48 

22.03 

12.42 

13.38 

6.43 

2.10 

14.35 

9.33 

4.25 

9.66 

1.68 

1.67 










20.14 


1927. . 










25.76 


1982 








8.34 

'.04 

■7.25 

•9.72 

i 10. 43 
14.64 
■9.90 

i 11. 10 
17.27 
■29.45 
18.44 


24.4H 


1929 




10.96 
1.30 
1.32 
'3.50 
12.58 
5.88 
10.06 
21.75 
24.75 
4.48 




18.05 


1930 . 


14.28 
1.-65 
L29 
8.86 
1.84 
5.03 
17.12 
21.19 
8.46 




4.96 


1931 




3.35 


1923 




1.47 


1933 


4.73 
i.27 
5.86 
12.27 
16.60 
3.55 


12.16 


1934 


6.88 


1935 


6.74 


1936 


11.47 


1937 


12.14 


1938 


2.52 






Average... 


21.27 


11.62 


9.75 


8.37 


6.31 


7.33 


6.82 


3.15 


13.99 



i Denotes loss. 



CONCENTRATION OF ECONOMIC POWER 



17645 



Annual rate of return on stockholders' investment for principal rayon companies, 

1915-88 



Year 


Amer- 
ican 
Viscose 
Corpor- 
ation 


Rayon 
depart- 
ment of 
E. I. du 
Pont de 
Nemours 

& Co. 


Cela- 
nese 
Corpor- 
ation of 
America 


Indus- 
trial 
Rayon 
Corpor- 
ation 


The 

Amer- 
ican 
Enka 

Corpor- 
ation 


North 
Amer- 
ican 
Rayon 
Corpor- 
ation 


Tubize- 
Cha- 
tillon 

Corpor- 
ation 


Amer- 
ican 
Bem- 
berg 

Corpor- 
ation 


Average 

for 
group 


1915 


Percent 

26.32 

109. 19 

95.96 

69.49 

97.02 

64.21 

44.62 

51.16 

43. 47 

26.63 

32.39 

21.75 

26.19 

28.79 

23.43 

8.07 

4.44 

2.35 

10.55 

6.97 

6.53 

9.67 

10.16 

' 1.66 

21.27 


Percent 


Percent 


Percent 


Percent 


Percent 


Percent 


Percent 


Percent 
26.32 


1916.... 
















109.19 


1917 
















95.96 


1918 
















69.49 


1919 
















97.02 


1920. 
















64.21 


1921 


' 2.13 

34.11 

38.91 

27 88 

34.19 

15.23 

27.01 

26.63 

19.04 

1.90 

4.45 

1.21 

12.65 

8.58 

5.27 

11 00 

13.10 

4.15 

11.52 














41.99 


1922.... 














50.12 


1923 














43.15 


1924 














26.73 


1925 


0.36 
13.68 
22. 1-1 
9.09 
9.88 
5.98 
3.03 
3.47 
20.37 
11.18 
12.98 
13.07 
11.87 
6.63 












31.00 


1926 


18.47 

33.81 

23.43 

12.61 

13.56 

6.45 

2.08 

14.41 

9.33 

4.25 

9.66 

1.67 

1.16 










20.46 


1927 










26.07 


1928.:. 








8.45 

'.25 

'7.42 

'9.77 

' 10. 49 
14.68 
'9.96 

' 11.17 
17.32 
29.84 
18.48 


24.57 


1929 




10.96 

1.30 

'.32 

' 3.51 

12.58 

5.88 

10.07 

21.76 

24.57 

4.48 




18.07 


1930 


•4.28 
'1.55 

i 1.29 
8.86 
1.84 
5.03 

17.12 

21.19 
8.46 




4.96 


1931 




3.35 


1932.... 




1.46 


1933 


4.36 
' 1.47 

6.10 
12.75 
17.08 

3.02 


12.21 


1934 


6.90 


1935 


6.80 


1936 


11.65 


1937 


12.31 


1938 


2.44 






Average... 


10.19 


8.55 


6.31 


7.33 


6.87 


3.14 


14.18 



1 Denotes loss. 

The rank in size of the various companies under review has been indicated in 
terms of production. "The following tabulation shows the position of each of the 
eight companies in terms of investment, and also shows the deviations of the 
relative proportions of their combined investments in 1938 from those based on 
the 1915-38 average. 

Ratios of total investment 



Annual 
average 
1915-38 



Average 
1938 



Combined investments 

American Viscose Corporation 

Rayon department of E. I. du Pont de Nemours & Co 

Celanese Corporation of America 

Industrial Rayon Corporation ^ 

The American Enka Corporation 

North / merican Rayon Corporation 

Tubize-dhatillon Corporation 

American Bemberg Corporation. 

Total 



$206, 493, 948 

Percent 
41.74 
14.63 
15.66 
6.51 
7.49 
5.74 
5.52 
2.71 



100.00 



$298, 603, 637 

Percent 

38.30 
20.65 
18.02 
7.90 
5.63 
4.09 
3.79 
1.62 

100.00 



17646 



CONCENTRATION OF ECONOMIC POWER 



The investments shown above include quite large amounts that were not de- 
voted directly to the rayon business with respect to American Viscose Corpora- 
tion. This company reinvested a substantial proportion of its earnings from time 
to time in stocks and bonds of other companies and nontaxable Government 
securities and obligations, particularly the latter. These outside investments 
averaged $41,738,385 for the years 1915-38 and $42,078,381 in 1938. The return 
on such investments was much lower than the investment in the rayon business. 
This is indicated in the following tabulation which shows that the average return 
to the company on that portion of its capital devoted solely to the rayon business 
was 37.52 percent as compared with average earnings from all sources equivalent 
to 21.27 nercent on the entire investment. 

Rates of return 



Year 


On total 
invest- 
ment i 


On invest- 
ment in 

the rayon 
business 


Year 


On total 
invest- 
ment i 


On invest- 
ment in 

the rayon 
business 


i915 

1916 

1917 

1918 ... 


Percent 
26.32 
109. 19 
95. 96 
69.49 
97.02 
64. n 
44.62 
51.16 
43.47 
20. 63 
32.39 
?1. 75 
26.19 


Percent 
26.32 
109. 19 
95. 96 
100. 56 
268. 96 
156. 83 
87. 16 
97.00 
88.13 
54. 18 
72.64 
46. 01 
52.82 


1928 

1929 , 

1930 

1931 


Percent 

28.79 

23.43 

8.07 

4.44 

2.35 

10.55 

6.97 

8.53 

J. 67 

10.16 

•' 1. 66 


Percent 

59.36 

44. 55 

10.95 

4.83 


1919 


1932.-. 


1. .42 


1920 


1933 


17.01 


1921 


1934 


10. 12 


1922 


1935 


9.22 


1923 


1936 


14.78 


1921 


1937 . 


15 36 


1925 

1926 


1938 

Average ... . 


M.34 


1927_„ 


21.27 


37 52 







' Total investment and stockholders' investment are identical. 
' Denotes loss. 

The table indicates strikingly the effects of competition on the operating re- 
sults of American Viscose Corporation as other companies entered the business 
following the expiration of its patent monopoly. Prior to 1920 it was the sole 
producer and the entrance of other companies thereafter was gradual. This is 
reflected in exceptionally high net returns for the company during the earlier 
years and in lower returns in later years. This is emphasized in the following 
tabulation which summarizes the company's investments, profits, and rates of 
return, on the basis of its total investment and on the basis of its investment in 
the rayon business only, for the years 1915-20, 1921-29, and 1930-38: 

American Viscose Corporation 





Based on 

total 

investment 


Based on 
investment 
in rayon 
business 
. only 


Average annual investments: 

1915 to 1920 


$20, 516, 262 
100, 845, 419 
115,341,886 


$11,886 090 


1921 to 1929 


45, 580, 834 


1930 to 1938 


65, 057, 559 






1915 to 1938 


86, 199, 305 


44, 460, 920 




Average annual net profit: 

1915 to 1920 


15,919,824 

30, 940, 201 

7, 328, 580 


15 479 808 


1921 to 1929 


28, 633, 845 
5, 534, 835 


1930 to 1938 




1915 to 1938 


18, 330, 749 

Percent 
77.60 
30.68 
6.35 


16, 6S3, 207 

Percent 
130 23 


Average annual rate of return: 

1915 to 1920 _ 


1921 to 1929 


62.82 


1930 to 1938... 


8.51 






1915 to 1938. _ 


21.27 


37 62 







CONCENTRATION OP ECONOMIC POWER 



17647 



During the 24-year period the net sales of American Viscose Corporation 
amounted to $1,024,509,135, an annual average of $42,687,881. In 1938 its 
sales amounted to $42,074,969. The average of the annual net sales of the next 
largest company — du Pont— since its entry into the business in 1920 was a little 
less than half the average sales of the Viscose Corporation. However, its sales 
in 1938 moie nearly approximated those of the Viscose Corporation, amounting 
to $34,525,988. In that year the sales of the third largest outstanding com- 
pany — Celanese Corporation of America— amounted to $28,685,282. 

The profitableness of the American Viscose Corporation to its organizers and 
owners is further emphasized in the following tabulation which summarizes the 
company's net sales, net profits after providing for the payment of Federal 
income and profits taxes, dividend payments, and surplus for the period 1915-38: 

American Viscose Corporation 



Total, 1915-38 



Annual average 



Net sales 

Net profit after provision for Federal income tax. 

Dividends paid: 

In cash on preferred stock 

In cash on common stock 

Stock dividends consisting of preferred stock issued to common 
stockholders later retired for cash. 

Total dividends - - 

Net profit after dividends 

Surplus transferred to surplus reserves .-. 

Surplus transferred to capital stock 

Amortization of goodwill 

Premium and dividends on stock repurchased 

Other additions to surplus— net 

Balance in surplus at the end of 1938. 



$1,024,609,135 
354, 455, 728 


$42, 687. 881 
14, 768. 989 


13. 689, 696 
182, 472, 299 

40, 568, 456 


570.404 
7, 603, 012 

1, 690, 353 


236, 730, 451 


9, 863, 769 


117,725,277 


4, 905. 220 


42, 000, 000 

20,914,789 

25, 682, 470 

7, 029, 482 

284, 798 













22, 383, 334 



In 1915, when the predecessor company of American Viscose Corporation was 
formed, the net worth of the assets of the original American Viscose Co. was 
$3,632,082. This amount represents practically all the capital invested at that 
time or since by Courtaulds, Ltd., in American Viscose Corporation. At Decem- 
ber 31, 1938, the invested capital consisting of common-stock holders' equity 
amounted to $113,538,834. About 95 percent of the common stock is still re- 
tained by Courtaulds, Ltd. Practically all of the $113,538,834 represents rein- 
vested earnings, with the exception of the $3,632,082 previously mentioned and 
it is very probable that a substantial portion of this amount consisted of rein- 
vested earnings as the original company had been organized in 1909 and had 
been operating successfully. The invested capital at the end of 1938, amount- 
ing to $113,538,834, consisted of $49,155,500 of common stock, $22,383,334 of 
surplus, and $42,000,000 of surplus reserves. The latter amount includes reserve 
for fire insurance of $25,000,000 and reserve for contingencies, etc., of 
$17,000,000. 

The preceding tabulation illustrates the source of the reinvested earnings clas- 
sified as surplus and surplus reserves. Also from that tabulation it may be seen 
that $25,682,470 was used to write off goodwill which originally had been re- 
flected in the capital stock account and that $20,914,789 of surplus was trans- 
ferred to the capital stock account. These amounts plus the original $3,632,082 
more than account for the capital stock amounting to $49,155,500; the difference 
may be accounted for by repurchases by the company of small amounts of capital 
stock for cash. 

On the original investment of $3,632,082, in 1915, the investors — primarily 
Courtaulds Ltd. — received $236,730,451 of dividends in cash and in preferred, 
stock, later redeemed for cash, together with $7,029,482 premium anu accrued 
dividends on the stock redeemed, and they also retained an equitv in the business 
valued at $113,538,834 at the end of 1938. 



Part II 

INVESTMENTS, PROFITS, AND RATES OF RETURN 
FOR TOBACCO PROCESSORS 



17649 



SCHEDULE OF TABLES 



TEXT TABLES 

Page 

1. Summary of investments, profits and rates of return on the total in- 

vestment, stockholders' investment and common stockholders' 
equity for tobacco processors, 1917-37 17662 

2. Comparison of average annual investments, profits, and rates of re- 

turn for the period 1917-37 for individual tobacco processors, func- 
tionally classified . 1 7665 

3. Comparison of rates of return on total investment for individual com- 

panies, functionally classified, 1917-37 17667 

4. Comparison of rates of return- on stockholders' investment for indi- 

vidual companies, functionally classified, 1917-37 17669 

5. Comparison of rates of return on common stock equity for individual 

companies, functionally classified, 1917-37 17671 

6. Summary of net sales, net income, dividends, and net increase in sur- 

plus for all years within the period 1917-37, and the annual aver- 
ages thereof for individual companies, functionally classified 17673 

7. Comparison of ratios of costs, expenses, and profits to net sales for the 

years 1917-37, expressed in cents per dollar of net sales, for indi- 
vidual companies functionally classified 17677 

8. Comparison of ratios of costs, expenses, and profits to net sales for the 

year 1937, expressed in cents per dollar of net sales," for individual 
companies functionally classified 17678 

9. Total salaries and other compensation paid to officers and directors of 

principal tobacco processors, 1935-38 17680 

10. Salaries and other compensation paid to principal officers of the 

American Tobacco Co., 1935-38 , 17682 

1 1 . Salaries and other compensation paid to principal officers of Liggett & 

Myers Tobacco Co., 1935-38 17682 

12. Total compensation paid to principal officers, R. J. Reynolds Tobacco 

Co., 1935-38. 17683 

13. Total compensation paid to principal officers of P. Lorillard Co., Inc., 

1935-38. -- 17683 

14. Total compensation paid to principal officers of Axton-Fisher Tobacco 

Co., 1935-38 17684 

15. Total compensation paid to principal officers of General Cigar Co., 

1935-38 .___--- 17684 

16. Total compensation paid to principal officers of Porto Rican- American 

Tobacco Co., 1935-38 17684 

17. Total compensation paid to principal officers of Consolidated Cigar 

Corporation, 1935-37 17684 

18. Total compensation paid to principal officers of Bayuk Cigars, Inc., 

1935-38 --.- 17684 

19. Salaries and other compensation paid to principal officers of United 

States Tobacco Co., 1935-38 17685 

20. Total compensation paid to principal officers of American Snuff Co., 

1935-38 : 17685 

21. Total compensation paid to principal officers of George W. Helme 

Co., 1935-38 17685 

APPENDIX TABLES 

1. Summary of investments, profits, and rates of return for the American 

Tobacco Co., 1917-37 ■___ 17688 

1-a. Summary of income, expenses, and surplus for the American Tobacco 

Co., 1917-37 17690 

2. Summary of investments, profits, and rates of return for Liggett & 

Myers Tobacco Co. and subsidiaries, 1917-37 ----- 17692 

17651 



17652 CONCENTRATION OF ECONOMIC POWER 

Page 
2-a. Summary of income, expenses, and surplus for Liggett & Myers 

Tobacco Co. and subsidiaries, 1917-37 17694 

3. Summary of investments, profits, and rates of return' for R. J. 

Reynolds Tobacco Co., 1917-37 '. 17696 

3-a. Summary of income, expenses, and surplus for the R. J. Reynolds 

Tobacco Co., 1917-37 17698 

4. Summary of investments, profits, and rates of return for P. Lorillard 

Co., 1917-37 17700 

4-a. Summary of income, expenses, and surplus for P. Lorillard Co., 

1917-37 .' 17702 

5. Summary of investments, profits, and rates of return for Axton- 

Fisher Tobacco Co., 1918-37 17704 

5-a. Summary of income, expenses, and surplus for Axton-Fisher Tobacco 

Co., 1918-37 17706 

6. Summary of investments, profits, and rates of return for Brown & 

Williamson Tobacco Co., 1928-37 17708 

6-a. Summary of income, expenses, and surplus for Brown & Williamson 

Tobacco Co., 1928-37 17709 

7. Summary of investments, profits, and rates of return for General 

Cigar Co., Inc., 1917-37 . 17710 

7-a. Summary of income, expenses, and surplus for General Cigar Co., 

Inc., 1917-37 17712 

8. Summary of investments, profits, and ' rates of return for Porto 

Rican American Tobacco Co., 1920-37 17714 

8-a. Summary of income, expenses, and surplus for Porto Rican American 

Tobacco Co., 1920-37 17716 

9. Summary of investments, profits, and rates of return for Con- 

solidated Cigar Co., 1919-37 17718 

9-a? Summary of income, expenses, and surplus for Consolidated Cigar 

Co., 1919-37 17720 

10. Summary of investments, profits, and rates of return for Bayuk 

Cigars, Inc., 1917-37 1. 17722 

10-a. Summary of income, expenses, and surplus for Bayuk Cigars, Inc., 

1917-37 17724 

11. Summary of investments, profits, and rates of return for United 

States" Tobacco Co., 1917-37 71726 

il-a. Summary of income, expenses, and surplus for United States 

Tobacco Co., 1917-37 , 17728 

12. Summarv of investments, profits, and rates of return for American 

Snuff Co., 1917-37 17730 

12-a. Summary of income, expenses, and surplus for American Snuff Co., 

1917-37 ■_.: 17732 

13. Summary of investments, profits, and rates of return for George 

W. Helme Co., 1917-37 17734 

13-a. Summary of income, expenses, and surplus for George W. Helme 

Co., 1917-37 17736 



INVESTMENTS PROFITS, AND RATES OF RETURN FOR 
TOBACCO PROCESSORS 

Introduction 

This report deals with the investments, profits, and rates of return of the 
princir. -1 tobacco processors engaged in the manufacture and sale of tobacco 
products, such as cigarettes, cigars, smoking and chewing tobacco, and snuff. 
The companies concerned include the American Tobacco Co., Liggett & Myers 
Tobacco Co., R. J. Reynolds Tobacco Co., P. Lorillard Co., Brown & Williamson 
Tobacco Co., the Axton-Fisher Tobacco Co., American Snuff Co., George W. 
Helme Co., United States Tobacco Co., General Cigar Co., Inc., Porto Rican 
American Tobacco Co., Consolidated Cigar Corporation, and Bayuk Cigars, Inc. 

The investments, profits, and rates of return are presented for these companies 
individually and by groups for all years during the period 1917-37, for which the 
information is available. Comparisons are made of the investments, sales, and 
operating results for all companies combined, and for individual companies 
functionally grouped according to (1) those who manufacture and sell on a large 
scale, cigarettes and other tobacco products, (2) those who are primarily cigar 
manufacturers, and (3) those who are primarily snuff manufacturers. The 
relative importance of the various companies is pointed out and the degree of 
concentration of the business indicated. Information concerning salaries and 
other compensation paid to officers of the larger companies is presented for the 
more recent years. 

The financial information, which is the basis for the discussion of investments, 
profits, and rates of return, was obtained from certified written reports submitted 
by the companies in answer to questionnaires. Such information for the years 
1917-28 and 1935-37 was obtained by questionnaire specifically for use in this 
inquiry, and the information for the intervening years was obtained from reports 
submitted by the companies in connection with the Federal Trade Commission's 
agricultural income inquiry. 

History and Business of the American Tobacco Co. 

The history of the American Tobacco Co. dates from 1890, when the company 
was organized as a consolidation of the five principal cigarette manufacturers who 
among them controlled approximately 90 percent of the country's cigarette 
business. 1 

According to the report of the Commissioner of Corporations on the tobacco 
industry, the American Tobacco Co., in 1891, extended its business along other 
lines by acquiring two important smoking tobacco concerns and by entering the 
plug and cheroot branches of the business. From 1894 to 1897, the company 
developed its plug tobacco business by methods which succeeded in forcing its 
leading competitors to combine their interests with those of American Tobacco Co. 
This resulted late in 1898 in the organization, substantially under its control, of 
the Continental Tobacco Co. This company took over the plug tobacco business 
of American Tobacco Co. and also that of several leading competitors, and 
shortly after its organization acquired Liggett & Myers Tobacco Co., the largest 
and most important plug tobacco concern of the country. 

The Continental, by this and subsequent acquisitions, acquired substantial 
control of the plug-tobacco business of the country. The acquisition of Liggett & 
Myers Tobacco Co. brought into the combination another group of powerful 
financial interests. 

Shortly after the organization of Continental Tobacco Co., the combined 
interests obtained control of practically all of the leading snuff concerns of the 
country. This led to the formation of American Snuff Co. and placed the com- 
bination in a dominant position in the manufacture of all of the important kinds of 
tobacco except cigars. In 1900 the combination had 62 percent of the national 

1 Report of the Commissioner of Corporations on the Tobacco Industry, pt. Ill, p. 41. 

17653 



17654 CONCENTRATION OF ECONOMIC POWER 

output of plug tobacco and 59.2 percent of smoking tobacco, and in 1901, the first 
full year of American Snuff Co., it had 80.2 percent of the total output of snuff. 
Moreover the combination still retained ai* almost complete monopoly of the 
cigarette business. 2 

The combination then turned its "attention to the cigar business, at that time 
the most important of all the branches, but also the most difficult one in which to 
effect a combination. There were a very large number of small manufacturers 
and comparatively few large on es. Except for the cheaper type of cigars, machine 
production had been of little consequence. However, in 1901 the American 
Tobacco Co. entered extensively into the cigar business by organizing the Ameri- 
can Cigar Co. The acquisition of competing cigar companies by the American 
Cigar Co. immediately made it the largest single manufacturer of cigars in the 
country, but it did not then possess and never succeeded in acquiring any large 
proportion of the total cigar business of the United States. 

The report of the Commissioner of Corporations on the tobacco industry also 
states that the power of the American Tobacco Co. and associated companies 
was further greatly increased by the organization in 1901 of the Consolidated 
Tobacco Co., a holding company. The Consolidated was the means of concen- 
trating control within the combination. It acquired practically all of the com- 
mon stock of the American and Continental companies in exchange for bonds. 
The report states that the organization of Consolidated Tobacco Co. was planned 
by leading interests in the American and Continental tobacco companies. The 
stockholders of these companies were induced to exchange their common stock 
for bonds of the new company bearing a fixed fate of interest. The report further 
states that as a result the greatly increased profits in the business from the reduc- 
tion in the internal-revenue tax soon afterward, which increase the stockholders 
generally could not foresee, accrued in large part to the advantage of the inside 
interests as the chief holders of the Consolidated stock. 

In 1904, the American, Continental, and Consolidated companies were merged 
into the present the American Tobacco Co., the central concern of the combina- 
tion. The company formerly owned approximately two-thirds of the capital 
stock of the British-American Tobacco Co., Ltd. (the Imperial Tobacco Co. own- 
ing the other one-third) ; a majority of the stock of the American Cigar Co., the 
P. Lorillard Co., United Cigar Stores Co., the R. J. Reynolds Tobacco Co., the 
Mac Andrews & Forbes Co., the Conley Foil Co., and a majority of the common 
stock (but not a majority of all voting stock) of the American Snuff Co. The 
American Tobacco, also owned in fee various plants and properties, which 
for the most part had been acquired from competitors, and controlled, directly 
or indirectly, a number of small concerns. Through the American Cigar Co., 
the company also controlled the entire capital stock of Federal Cigar Co., one- 
third of the stock of the Puerto Rican American Tobacco Co. (American Tobacco 
Co. also owning one-third), a majority of the common stock of Havana Tobacco 
Co. (now Cuban Tobacco Co., Inc.), and of American Stogey Co., and one-half 
the stock of Puerto Rican Leaf Tobacco Co. 

In May 1911 the Supreme Court of the United States found the American 
Tobacco Co. to be a monopoly violating the provisions of the Sherman Anti- 
trust Act. At that time the company produced from more than 76 to over 96 
percent of the various tobacco products except large cigars, of which it pn-oduced 
nearly 14}4 percent. 3 In addition to monopoly in the manufacture of tobacco • 
products, the company exercised control over other products such as licorice 
paste, used in chewing tobacco; and tinfoil, cotton smoking-tobacco bags, wooden 
shipping boxes, tin, and pasteboard boxes and other containers. 

A decree of dissolution handed down by the Circuit Co,urt for the Southern 
District of New York in November 1911 provided that practically the entire 
business of the American Tobacco Co. and its subsidiary and affiliated companies, 
comprising the combination, should be divided among 14 separate companies. 
The apportionment of the assets and business among the 14 companies was 
devised with the express intention that no company should obtain a controlling 
position in any of the chief branches of the business. Stock ownership of the 14 
companies was so arranged by the terms of the decree that none of the stock of 
any of the 14 corporations was to be owned by any other of the 14. The 14 
companies, with the nature of the business of each, were as follows: 

1. The American Tobacco Co. — General tobacco manufacturing business 
(except snuff). 

1 Report of the Commissioner of Corporations on the Tobacco Industry, pt. Ill, p. 41. 
3 Report of the Commissioner of Corporations on the Tobacco Industry, pt. Ill, pp. 192, 221. 250, 295. 
307, 322, and 352. 



CONCENTRATION OF ECONOMIC POWER 17655 

i 

2. Liggett & Myers Tobacco Co. — General- tobacco manufacturing business 
(except snuff) . 

3. P. Lorillard Co. — General tobacco manufacturing company (except snuff). 

4. R. J. Reynolds Tobacco Co. — General tobacco manufacturing business 
(except snuff, cigars, and cigarettes). 

5. American Snuff Co. — Snuff-manufacturing business. 

6. George W. Helme Co. — Snuff-manufacturing business. 

7. Weyman-Bruton Co. (now United States Tobacco Co.) — Snuff manufactur- 
ing business. 

8. British-American Tobacco Co., Ltd. — General manufacturing business 
(foreign). 

9. Porto Rican-American Tobacco Co. — Cigar manufacturing business (Porto 
Rican and foreign). 

10. MacAndrews & Forbes Co. — Licorice-paste-manufacturing business. 

11. J. S. Young Co. — Licorice-paste-manufacturing business. 

12. The Conley Foil Co. — Tinfoil manufacturing business. 

13. The Johnston Tin Foil & Metal Co. — Tinfoil manufacturing business. 

14. United Cigar Stores Co.— General retail tobacco business. 

The businesses of R. J. Reynolds Tobacco Co., British- American Tobacco Co., 
Porto Rican-American Tobacco Co., and United Cigar Stores Co. remained intact, 
though their stocks, so far as held by American Tobacco Co., were distributed to 
the common stockholders of that company. This detached the companies from 
the corporate control of American Tobacco Co. 

The business of American Snuff Co. was divided into three parts, and the 
ownership of the company was detached from the control of American Tobacco Co. 
American Snuff Co. retained a part of the business, while the rest was apportioned 
between the George W. Helme Co. and Weyman-Bruton Co. (now United States 
Tobacco Co.), two new companies organized for this purpose. 

The business of MacAndrews & Forbes Co., which had control of the licorice 
branch of the combination's business, was divided into two parts. One part was 
transferred to the J. S. Young Co., a new company organized for the purpose, and 
the remainder was retained by MacAndrews & Forbes Co. 

The business of the Conley Foil Co. was divided into two parts. One part was 
retained by that company and the rest was assigned to the Johnston Tin Foil & 
Metal Co., which previously had been a subsidiary of the Conley Foil Co, 

The American Cigar Co., though not detached from the control of American 
Tobacco Co., was required to transfer part of its business to other defendant 
companies. 

Practically all of the remainder of the assets of the combination that was 
applicable to the business of manufacturing tobacco for the domestic market, 
except for snuff, was divided between the American Tobacco Co., R. J. Reynolds 
Tobacco Co., Liggett & Myers Tobacco Co., and P. Lorillard Co. The last two 
companies were newly organized for the purpose. 

The American Tobacco Co. formerly owned the entire capital of the Tin Decor- 
ating Co. of Baltimore, with a factory in that city manufacturing plain and 
lithographed containers, tags, etc., but the assets of this company were sold as of 
December 31, 1935. The company also owns the stock of the Golden Bell 
Manufacturing Co. of Durham, N. C, manufacturers of cotton bags and pure 
silk hosiery. The company likewise owns a majority interest in the American 
Cigarette & Cigar Co. (formerly American Cigar Co.), which controls the Cuban 
Tobacco Co., Inc. 

On October 26, 1923, the Tobacco Products Corporation leased and licensed 
all of its brands of cigarettes and smoking tobacco to the American Tobacco Co. 
for a period of 99 years, commencing November 1, 1925, for which it was paid 
$2,500,000 annually until January 31, 1935, when the lease was commutated 
and the American Tobacco Co. became the owner of the brands previously 
leased, for an outlay of $36,748,873. At the time the lease was executed the 
American Tobacco Co. acquired all of the tangible manufacturing assets of the 
Tobacco Products Corporation, including leaf tobacco, machinery and plants, 
for an approximate sum of $12,000,000. Tobacco Products Corporation had 
been organized in 1912 by United Cigar Stores interests to build up a large 
cigarette manufacturing business. According to the Federal Trade Commission's 
Agricultural Incorne Inquiry Report, 4 Tobacco Products Corporation soon ac- 
quired a large part of the "independent" cigarette output through acquisitions 
of many tobacco-manufacturing concerns. The history of the corporation with 

« Pp. 274-275. 



17656 CONCENTRATION OF ECONOMIC POWER 

the United Cigar Stores was one of complicated financial manipulation. Among 
the leading brands acquired by American Tobacco Co. from the corporation were 
Herbert Tareyton and Melachrino. 

Effective January 1, 1932, the American Tobacco Co. leased the business of 
American Cigar Co. (the name was changed to American Cigarette & Cigar Co. 
in 1936), together with its plants, and manufacturing facilities and real estate 
(except that located in Missouri and Connecticut) and its brands, trade-marks, 
etc., and purchased from American Cigar Co. all leaf tobacco, tobacco in process, 
manufactured tobacco, supplies, accounts receivable, treasury stock, and the 
investment of American Cigar Co. in Porto Rican Leaf Tobacco Co., and certain 
other assets, including real estate in Missouri. The term of the lease was 99 
years, at an annual rental of $1,800,000, plus insurance and taxes on the leased 
property. For its assets thus sold American Cigar Co. received 70,500 common 
shares and 129,500 common B shares of American Tobacco Co., and $11,672 
in cash. In addition, the American Tobacco Co. assumed debts of American 
Cigar Co. amounting to $13,024,727. 

At December 31, 1937, the American Tobacco Co. directly owned or con- 
trolled the following active subsidiaries: 

Name of company Nature of business 

American Cigarette & Cigar Co Cigars and cigarettes. 

Golden Belt Manufacturing Co Cloth bags and silk hosiery. 

The American Tobacco Co. of the Pacific Distributors of tobaccos and cig- 

Coast. arettes. 

The American Tobacco Co. of the Orient, Buyers, handlers, and shippers, of 

Inc. Turkish leaf tobacco. 

American Suppliers, Inc Buyers, handlers, and shippers of 

domestic leaf tobacco. 
De Mauduit Paper Corporation Importers and distributors of cig- 
arette papers. 

The Hatheway-Steane Corporation Growers, handlers, and shippers of 

domestic cigar leaf. 
2 foreign subsidiaries 1 

• The company considers the disclosure of'the names of these foreign subsidiaries would be prejudicial to 
the interest of its stockholders and states that its investment in and advances to these subsidiaries are not 
considered to be of significant amount in relation to the consolidated balance sheet of the company and its 
subsidiaries. Likewise, that the operations of these foreign subsidiaries are not considered significant in 
relation to the consolidated income account of the company and its subsidiaries. 

At December 31, 1937, the company's principal plants for the manufacture of 
cigarettes were located in Richmond, Va., and Reidsville and Durham, N. C. 
Plants for the manufacture of cigars were located in Charleston, S. C, Phila- 
delphia, Pa., and Trenton, N. J. Plants for the manufacture of other tobacco 
products were located in Louisville, Ky., Nashville, Tenn.; Richmond, Va.; and 
Durham, N. C. 

The company's principal brands include Lucky Strike, Sweet Caporal, Omar, 
Lord Salisbury, Melachrino, Herbert Tareyton, and Johnny Walker cigarettes; 
Blue Boar, Half and Half, Tuxedo, Bull Durham, Ivanhoe, Long Cut, Lucky 
Strike, U. S. Marine, and Old English Curve Cut smoking tobaccos; American 
Navy, Battle Ax, Boot Jack, Penn's Natural Leaf, Piper Heidsieck, Red J, 
Spear Head, Square Deal, and Town Talk, plug cut tobaccos; and Cremo, Anto- 
nio y Cleopatra, Chancellor, and El Roi Tan cigars. 

History and Business of Other Important Tobacco Processors 

In addition to the American Tobacco Co., this report deals with 12 other im- 
portant companies, of which 5 are engaged in the manufacture and sale of ciga- 
rattes and other tobacco products, 3 are snuff companies, and 4 are cigar com- 
panies The 5 companies referred to. include Liggett & Myers Tobacco Co., 
R. J. Reynolds Tobacco Co., P. Loriliard Co., Axton-Fisher Tobacco Co., and 
Brown & Williamson Tobacco . Corporation. The 3 snuff companies include 
American Snuff Company, United States Tobacco Co., and' George W. Helme Co. 
The 4 cigar manufacturers are PoHo Rican American Tobacco Co., General Cigar 
Co., Inc., Consolidated Cigar Co., and Bayuk Cigars, Inc. From the standpoint 
of investments and sales, American Tobacco Co., Liggett & Myers Tobacco Co., 
and R. J. Reynolds Tobacco Co. are the largest of the companies included for 
discussion. 

As previously explained, Liggett & Myers Tobacco Co. was organized in 1911 to 
acquire certain assets of the American Tobacco Co. as provided for by the court 



CONCENTRATION OF ECONOMIC POWER 17657 

decree ordering the segregation of the assets of the latter company. Liggett & 
Myers Tobacco Co. owns, directly or indirectly, plants for the manufacture of its 
tobacco products, located in Durham, N. C., Richmond, Va., Chicago, 111., 
Toledo, Ohio, and San Francisco, Calif. The brands manufactured include 
Chesterfield, Fatima, and Piedmont cigarettes, Dukes' Mixture, Velvet, and 
Granger smoking tobaccos, and Star, Horseshoe, Masterpiece, Drummond Natu- 
ral Leaf, Tinsley's Natural Leaf, and Spark Plug chewing tobaccos. 

R. J. Reynolds Tobacco Co. w r as organized in April 1899. It manufactures 
and sells cigarettes, smoking tobaccos, and chewing tobaccos. It was formerly 
a subsidiary of American Tobacco Co. but control was relinquished by the latter 
company under the court decree. In addition, the Reynolds Co. received certain 
assets of the combination to round out its business, but no cigarette business. 
However, in 1913 and 1914 it entered the cigarette business and introduced its 
immensely popular Camel cigarettes. Other tobacco brands manufactured by 
the company include Prince Albert, George Washington, Stud, and Our Adver- 
tiser smoking tobaccos, and Apple, Brown's Mule, Day's Work, Torchlight, 
Schnapps, Mickey, Reynold's Sun Cured, and Sweepstakes chewing tobaccos. 
The company's plants are located at Winston -Salem, N. C, Richmond, Danville, 
and South Boston, Va., and Louisville, Lexington, and Marysville, Ky. 

The business of P. Lorillard Co. was established in 1760, but it was part of 
American Tobacco Co. at the time of the reorganization of that company under the 
court decree. However, under the decree, a new P. Lorillard Co. was organized 
to which was transferred certain assets of American Tobacco Co. The company 
manufactures cigarettes, cigars, and smoking and chewing tobacco at its various 
plants. Its principal brands include Old Gold, Sensation, Deities, Murad, Hel- 
mar, and Tally-ho cigarettes Union Leader, Brigg's Pipe Mixture, Friends, 
Ripple, Tiger, and Century smoking and fine cut tobaccos, Beech-Nut, Havana 
Blossom, Bagpipe, Climax, and Planet chewing and plug tobaecos, VanBibber, 
Between the Acts, Lyceum, Royal Bengals, and LeRoy Majors little cigars, 
Muriel, Rocky Ford, New Currency, and Old Virginia Cheroots cigars. Its sales 
of cigarettes account for about one-half of its revenues. 

The Axton-Fisher Tobacco Co., Inc., was incorporated March 1, 1928, in 
Kentucky and took over the assets and business of Axton-Fisher Tobacco Co. 
which was organized in 1905, succeeding the Axton-Hilton Tobacco Co. During 
1928, the company acquired all of the assets, except real estate, of Smith & Scott 
Tobacco Co. of Paducah, Ky. The company, in its plant at Louisville, Ky., 
manufactures various brands of pipe and chewing tobacco, among which are Old 
Hillside, Old Loyalty, White Mule, Booster, Axton Natural Leaf, 8 Hour, Wage 
Scale, and Hummer; also Clown, Spud, and Twenty Grand cigarettes. The 
company has had a rapid growth in recent years. It is controlled by the Standard 
Commercial Tobacco Co., Inc. 

Brown & Williamson Tobacco Corporation was incorporated March 16, 1927, 
in Delaware, and acquired by purchase certain assets and the brands and goodwill 
of an earlier company of that name which was dissolved. The present company 
was organized and is controlled by the British-American Tobacco Co., Ltd. Its 
growth since organization has been rapid. Its sales of cigarettes, like those of 
American Tobacco, Liggett & Myers, Reynolds, and Axton-Fisher account for 
the bulk of its revenues. Its leading cigarette brands include Raleigh, Wings, 
and Kool. 

American Snuff Co., was organized in March 1900 by the tobacco combination 
interests to acquire the business of manufacturing and selling snuff previously 
carried on by American Tobacco Co., Continental Tobacco Co., P. Lorillard Co., 
and certain other companies. This centered the combination's snuff business in 
American Snuff Co., which in 1901, the first full year of its operation, had about 
80 percent of the country's output of snuff. As previously explained, the control 
of American Snuff Co., was detached from American Tobacco Co. under the court 
decree and part of its assets were transferred to two new companies organized for 
the purpose, namely, the George W. Helme Co. and Weyman-Bruton Co. The 
name of the latter company was changed to United States Tobacco Co. in 1922. 
At the present time the American Snuff Co., George W. Helme Co., and United 
States Tobacco Co., together account for nearly all of the country's output of 
snuff. The sole product of American Snuff Co. and George W. Helme Co. is 
snuff. In addition to snuff the United States Tobacco Co. manufactures smoking 
tobaccos. 

Porto Rican American Tobacco Co. was organized in 1899 and was controlled 
by American Tobacco Co. up to the time of the segregation of the assets of the 
latter company in 1911 pursuant to the decree of dissolution. As previously 
stated, the stocks of Pcrto Rican American Tobacco Co. held by American 



17658 CONCENTRATION OF ECONOMIC POWER 

Tobacco Co. were distributed pro rata to the holders of the common stock of the 
latter company as a result of the court decree. Porto Rican American Tobacco 
Co. sells cigars, cigarettes, and little cigars manufactured by a wholly owned 
subsidiary, Porto Rican American Tobacco Co. of Delaware. The latter company 
operates factories in Puerto Rico and carries on the local business there. Its 
best known brands of cigars are Ricora, El Toro, Portina, Nurica, and La Restina, 
which are widely distributed in the United States by the parent company. The 
parent company also controls the Congress Cigar Co., Inc., makers of La Palina 
cigars and Waitt & Bond, Inc., makers of Blackstone cigars. 

General Cigar Co., Inc., was organized in 1906 as United Cigar Manufacturing 
Co. Its name was changed to the present title in 1917. Its controls the General 
Cigar Co. of Cuba, Ltd., which is engaged in buying, packing, and stripping 
tobacco. The parent company manufactures and distributes cigars including 
the following brands: Robert Burns, White Owl, Van Dyck, William Penn, 
Little Bobbie, and Laddies. 

Consolidated Cigar Corporation was organized in 1915 to acquire the business 
and properties of E. M. Schwarz & Co., Inc., and T. J. Dunn & Co., New York; 
Lilies Cigar Co., Detroit; and Jose Lavera Co., L. Sidelo Cigar Co., and Samuel I. 
Davis Co., Tampa, Fla. The company has since acquired other companies in 
other cities. It manufactures a number of popular brands of cigars, including 
Henry George, Harvester, El Sidelo, Mozart, Adlon, El Producto, La Azora, 
Dutch Masters, and 44. 

Bayuk Cigars, Inc., was incorporated in 1920 as Bayuk Bros., Inc., to acquire 
the property and business of Bayuk Bros., Co., Mapacuba Cigar Co., and Mer- 
chants Real Estate Co. 'The name was changed to the present one in July 1923. 
The brands of cigars manufactured in the company's numerous plants include 
Bayuk Phillies, Havana Ribbon, Mapacuba, Charles Thomson, Little Phillies, 
and Prince Hamlet. 

Changes in Control of Manufactured Products 

The segregation of the assets of the combination under the decree of dissolution 
resulted in radical changes in the proportions of the various products formerly 
produced by American Tobacco Co. and its subsidiaries as compared with the 
business remaining with that company after -its reorganization. The division of 
the combination's business not only involved the readjustment of the financial 
structure but also the distribution of brands and plants to the various companies 
which were to carry on the business. There have also been important changes in 
the proportions of the various branches of the business carried on by individual 
companies since that time. 

At the time of the dissolution of the combination, American Tobacco Co. and 
subsidiaries produced about 84 percent of the country's output of cigarettes, 
76 percent of the output of smoking tobacco, over 84 percent of the output of 
chewing tobacco, more than 96 percent of the output of snuff, and nearly. 14}4 
percent of the cigar business. 5 

The cigarette business was divided between American Tobacco Co., Liggett & 
Myers Tobacco Co., and P. Lorillard Co. On the basis of total cigarette sales in 
the United States in 1910, 38.8 percent of the cigarette business went to American 
Tobacco Co., 29.1 percent to Liggett & Myers Tobacco Co., and 15.9 percent to 
P. Lorillard Co. 

The smoking tobacco business was divided between four companies, of which 
American Tobacco Co. received the equivalent of 32 percent of the country's 
output, Liggett & Myers Tobacco Co. received 19.4 percent, P. Lorillard Co. 
received 22. 1 percent, and R. J. Reynolds Tobacco Co. received 2.6 percent. 

The chewing tobacco business was divided, 25.4 percent to American Tobacco 
Co., 35.7 percent to Liggett & Myers Tobacco Co., 5.4 percent to P. Lorillard Co., 
and 17.7 percent to R. J. Reynolds Tobacco Co. 

As previously explained, the combination's snuff business was divided between 
American Snuff Co., George W. Helme Co., and Weyman-Bruton Co. (now 
United States Tobacco Co.). The snuff business of the combination, which was 
over 96 percent of the country's output, was divided between these three com- 
panies in the proportion of 34.8 percent for American Snuff Co., 33.5 percent for 
George W. Helme Co., and 31.7 percent for Weyman-Bruton Co. 

The combination's cigar business, which, it will be noted, was relatively small in 
relation to the country's output, was retained in part by American Tobacco Co., 

8 Report of the Commissioner of Corporations on the Tobacco Industry, pt. Ill, pp. 192, 221, 250 295, 
307, 322, and 352. 



CONCENTRATION OF ECONOMIC I'OWEH 



17659 



part was allotted P. Lorillard Co., and the remainder was sold to outside interests. 
Of the total cigar business formerly carried on by the combination, 45.4 percent 
went to American Tobacco Co. and 42.8 percent to P. Lorillard Co. 

There has been a marked change in the proportions of leaf tobacco used in the 
manufacture of cigars, cigarettes, and other tobacco products since 1910. The 
following tabulation shows the quantity of leaf tobacco used in the production of 
cigarettes, cigars, and smoking and chewing tobacco and snuff in 1910 and 1937, 
and indicates the changes in the habits of the American public with regard to the 
use of tobacco. 





1937 


1910 




Pounds leaf 
tobacco used ' 


Percent of 
total 


Pounds leaf 
tobacco used ' 


Percent of 
total 




479, 961, 364 
128, 653, 260 
264, 309, 344 


54.98 
14.74 
30.28 


31, 272, 319 
141, 116, 460 
350, 480, 900 


5.98 




26 99 




67.03 






Total '. 


872, 923, 968 


100.00 


522, 869, 679 


100.00 



' From annual reports of the Commissioner of Internal Revenue, 1937 figures are from p. 114 of 1938 report 
and 1910 figures are from p. 150 of 1914 report. 

The tabulation shows that the increase in the use of leaf tobacco for cigarettes, 
cigars and other tobacco products occurred in the manufacture of cigarettes. 
In 1937, nearly 55 percent of the total was used in the manufacture of cigarettes 
as compared with 6 percent in 1910. On the other hand, leaf tobacco used in the 
manufacture of cigars declined from 27 percent in 1910 to less than 15 percent in 
1937, and during this period leaf tobacco used in the manufacture of smoking and 
chewing tobacco and snuff declined from 67 percent in 1910 to 30 percent in 1937. 

According to the latest available information, the 13 manufacturers covered 
by this inquiry sold over 97 percent of the total United States production of 
cigarettes in the calendar year 1934, over 89 percent of the smoking tobacco, 
over 75 percent of the chewing tobacco, and over 98 percent of the snuff. 6 The 
combined cigar sales of the 13 companies, while large in the aggregate, were small 
in relation to the total United States production. As previously indicated, the 
cigar business is a rather highly decentralized industry carried on by many separate 
establishments, and because of the nature of the business the old tobacco combina- 
tion and its succes'sors never succeeded in acquiring any large proportion of the 
total cigar business of the country. 

The four largest tobacco processors, from the standpoint of invested capital 
and sales, are American Tobacco Co., Liggett & Myers Tobacco Co., R. J. Rey- 
nolds Tobacco Co., and P. Lorillard Co. Together, these companies in 1934 sold 
84.2 percent of the total United States production of cigarettes, 74.1 percent of 
the smoking tobacco, and 70.4 percent of the chewing tobacco. The net changes 
in the control of manufactured products from 1910 to 1934 of these four companies 
as they appear at page 275 of the Federal Trade Commission's report on the Agri- 
cultural Income Inquiry are presented below: 

Percent of United States total production 





Cigarettes 


Smoking tobacco 


Chewing tobacco ' 




1910 


1934 


1910 


1934 


1910 


1934 


American Tobacco Co 


38.8 
29.1 


27.2 
27.3 
25.6 
4.1 


32.0 

19.4 

2.6 

22.1 


19.7 
21.9 
23.2 
9.3 


25.4 
35.7 
17.7 
5)4 


1 6 


Liggett & Myers Tobacco Co 


26 5 


R. J. Reynolds Tobacco Co 


25 1 


P. Lorillard Co 


15.9 


17 2 






Total 


83.8 


84.2 


76.1 


741 . 


84.2 









Includes plug and twist and fine-cut chewing tobacco. 



6 Report of the Federal Trade Commission on the Agricultural Income Inquiry, pt. 1, pp. 260-2&1. 



124491— 41— pt. 31- 



17660 CONCENTRATION OF ECONOMIC POWER 

In regard to the above comparisons in the foregoing tabulation, it should be 
noted that in 1910 all four companies were units of the tobacco combination. 
Therefore, the reductions in the proportion of the total business of American 
Tobacco Co. from 1910 to 1934 were not merely from 38.8 to 27.2 percent on 
cigarettes, for example, but were 83.8 to 27.2 percent. Nevertheless, the figures 
in the tabulation do represent the proportions of the total production by lines or 
brands of products. Thus, the 38.8 percent shown for cigarettes produced by 
American Tobacco Co. in 1910 represents the production in the lines of cigarettes 
which were retained by American Tobacco Co. after the dissolution. These 
companies show that the proportion of production decreased in each line retained 
by American Tobacco Co. and that there was a marked decrease in the chewing 
tobacco lines. The principal change in the lines of business assigned to Liggett 
& Myers Tobacco Co. was in the chewing-tobacco lines which decreased from 35.7 
to 26.5 percent. 

It will be noted that the most striking change in the proportions of the business 
of any of the companies occurred in the cigarette business of R. J. Reynolds To- 
bacco Co. which grew from nothing in 1910 to 25.6 percent of the total cigarette 
production in 1934. This company received no cigarette business under the de- 
cree of dissolution of the tobacco combination. It entered the cigarette business 
in 1913 and 1914 and introduced its Camel brand of cigarettes which has become 
immensely popular. The company, with its popular brand of Prince Albert 
smoking tobacco, increased its proportion of the total production of smoking to- 
bacco from 2.6 percent in 1910 to 23.2 percent in 1934. It also substantially in- 
creased its proportion of the total production of chewing tobacco during this 
period. 

The tabulation also shows that P. Lorillard Co. 's proportion of the total cigarette 
business decreased to one-fourth of its 1910 proportion and its smoking tobacco 
business decreased to less than one-half. On the other hand, its chewing tobacco 
business increased to more than three times its 1910 proportion. The falling off 
in this company's proportion of the total cigarette business was due primarily to 
the decrease in the demand for Turkish cigarettes following the World War in 
favor of blended cigarettes of predominantly domestic tobacco. This company's 
leading brands were of Turkish tobacco which was difficult to obtain during the 
war. Because of this difficulty, and the resulting increase in the price of such 
cigarettes, there was a tremendous increase in demand for blended cigarettes. 
Advantage of this situation was taken by the Reynolds Co. with its Camels, 
Liggett & Myers with its Chesterfields and American Tobacco Co. with its Lucky 
Strikes, which were already on the market, whereas it was not until 1926 that the 
Lorillard Co. introduced its Old Golds. 

Notwithstanding the shifts in the proportions of the various products manufac- 
tured by the individual companies, the only important change in the combined 
control of the production of any of the products by the four companies was in chew- 
ing tobacco, which fell from 84.2 percent in 1910 to 70.4 percent in 1934. The 
tabulation shows that in cigarettes th^ir combined business amounted to 83.8 
percent of the total production in 1910 and 84.2 percent ot the total in 1934; in 
smoking tobacco the proportion was 76.1 percent of the total in 1910 and 74.1 per- 
cent of the total in 1934. There were fluctuations in the proportions from year 
to year, however, which are not reflected in the tabulation. The proportion of the 
cigarette business of the four companies, for example, was considerably higher 
before the rapid growth in this field in recent years of Brown & Williamson To- 
bacco Co. and Axton-Fisher Tobaeco Co. with their 10-cent cigarettes and other 
popular brands. 

However, with the tremendous growth in the consumption of cigarettes since 
the dissolution of the tobacco trust in 1911, these four companies have actively 
developed the cigarette phase of their businesses. They have been aided in the 
maintenance of their dominant positions in the tobacco industry by ownership of 
established brands and the financial resources at their command. The difficulty, 
uncertainty,. and cost of popularizing new brands have been important deterrents 
to new competition. 

As previously stated, over 98 percent of the United States production of snuff 
in 1934 was produced by American Snuff Co., George W. Helme Co., and the 
United States Tobacco Co. This high degree of concentration of this branch of 
the business represents a continuation ot the almost complete control by the to- 
bacco combination which was partitioned among these three companies pursuant 
to the dissolution decree in 1911. The continuation of this control has been 
materially aided by the same factors applying to the cigarette branch of the busi- 
ness. The current trend toward concentration 1 of cigar manufacture and fewer 



CONCENTRATION OF ECONOMIC POWER 17661 

companies is due in part to the introduction of cigar-making machinery, to the 
gradual decrease in cigar consumption, and to the use of national and regional 
advertising promotion in the merchandising of this product. 

In the Federal Trade Commission's report on Agricultural Income Inquiry, it 
is stated at pages 550 and 551: 

"The inquiry has disclosed that four brands of cigarettes dominate the cigarette 
industry; that the manufacturers of those brands, with minor exceptions, maintain 
identical prices on them; and that the prices are almost simultaneously changed 
upward or downward with little regard to leaf tobacco or general commodity 
price levels. The history of the price changes on the four leading brands demon- 
strates the exercise of the power concentrated in the hands of the manufacturers 
of those brands. The sales volume of 10-cent cigarettes indicates the existence 
of a popular demand for them. It is believed that competition within the ciga- 
rette industry would be increased by popular cigarettes selling in various price 
ranges and that new or more important competition in manufacturing would 
result in increased competition in the purchase of leaf tobacco. The uniform 
internal revenue tax of $3 per thousand on small cigarettes has tended to restrict 
^he most active and substantial new competition that has manifested itself in the 
industry in many, years. It is, therefore, recommended that Congress consider 
the advisability of levying a graduated tax on cigarettes in lieu of the present 
uniform tax. It is further recommended that the graduated scale be based upon 
the manufacturers' net selling prices." 

Investments and Profits for All Companies Combined 

As explained in the preceding pages, the 13 manufacturers which are the 
subject of this report produced over 97 percent of the total United States produc- 
tion of cigarettes in the year 1934, over 89 percent of the smoking tobacco, more 
than 75 percent of the chewing tobacco, and over 98 percent of the snuff. In 
view of these large proportions, the operating results of the 13 companies are 
significant for the industry. Analysis of the financial information obtained from 
these companies shows that as a group their operations have been highly profitable 
over a long period of time. 

Table 1, which follows, summarizes the investments, profits, and rates of return 
for the 13 companies as a group for the years 1917 to 1937, inclusive. Rates of 
return have been computed on three bases of investment; namely, the total invest- 
ment, the stockholders' investment, and the common stockholders' equity, before 
deducting provisions for Federal income and profits taxes from earnings and 
after eliminating goodwill, appreciation, and other intangibles from investments. 

The total investment includes the outstanding common and preferred stocks 
and long-term debt, surplus, surplus and contingency reserves, and reserves for 
Federal income and profits taxes. The stockholders' investment includes all of 
these elements except long-term debt. The common stockholders' equity is 
made up of the outstanding common stocks, surplus, surplus and contingency 
reserves, and reserves for Federal income and profits taxes. On each basis, the 
investments were averaged as of the beginning and end of the year and they do 
not include goodwill, appreciation, and other intangibles. 

The profits used in computing the rates of return shown in the table are before 
deductions for Federal income and profits taxes, since such taxes are wholly 
contingent upon profits and represent, a division of the earnings of the business. 
Subject to this qualification, the profits applicable to the total investment repre- 
sent the net income from all sources before deducting interest on long-term debt. 
The profits applicable to the stockholders' investment represent the net income 
after deducting interest on iong-term debt. The further deduction of dividends 
on preferred stocks gives the net income applicable to the common stockholders'/ 
equity. 



17662 



CONCENTRATION OF ECONOMIC POWER 






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CONCENTRATION OF ECONOMIC ROWER 17663 

The table shows that during the 21-year period 1917-37, all companies as a 
group averaged 16.44 percent on the total investment, 18.22 percent on the 
stockholders' investment, and 21.9 percent on the common stockholders' equity. 
Consistently high rates of return were earned on each basis of investment during 
each year under review. The lowest returns in any year were earned in 1933 when 
10.07 percent was earned on the total investment, 10.59 percent on the stock- 
holders' investment, and 11.5 percent on the common stockholders' investment. 
It will be noted that exceptionally high rates of return were earned on each basis 
iof investment in every other year, particularly during 1917 and 1918. While the 
returns for the last few years were not as high as those for the previous years, the 
trend has been upward. 

Good Will, Appreciation, and Othek Intangibles 

As previously explained, deductions were made for good will, appreciation, and 
other intangibles in computing rates of return on each basis of investment. The 
amount deducted from investments for such intangibles ranged from $154,349,900 
at the beginning of 1917 down to $66,055,602 at the end of 1937. The amounts 
deducted from investments in each of the years 1917-37 were as follows: 

Year— Continued. Amount 



1928 $136,330,180 

1929 95,616,191 

1930 95,050,936 

1931 94,539,210 

1932 90,078,832 

1933 66,106,752 

1934 66,107,801 

1935 66,052,861 

1936 66,052,861 

1937 66,055,602 



Year: Amount 

1917 $154,592,860 

1918 154,636,493 

1919 155,129,407 

1920 155,227,690 

1921 157,072,039 

1922 152,757,185 

1923 152,704,943 

1924 152,708,514 

1925 152,485,526 

1926 137,545,606 

1927 136,344,487 

As indicated above, the companies have written off in recent years a substantial 
portion of the good will, appreciation, and other intangibles carried on their 
books. Most of the amounts shown above were carried on the books of the 
successor companies to the old American Tobacco Co. and originated many years 
ago. The distribution of the assets of the American Tobacco Co., under the 
dissolution decree, was based on their book values, both tangible and intangible. 
According to the report of the Commissioner of Corporations on the tobacco 
industry, over one-half of the amount for good will and other intangibles trans- 
ferred to the successor companies represented appreciation and overvaluation, 
which occurred principally in connection with four specific transactions:- (a) The 
organization of the American Tobacco Co. in 1890; (2) the acquisition of the 
Union Tobacco Co. by the American Tobacco Co. in 1899, (3) the organization 
of the Continental Tobacco Co. in 1898 and its acquisition of Liggett & Myers 
Tobacco Co. in 1899; and (4) the merger of Consolidated Toabcco Co. and the 
American and Continental Tobacco Cos. in 1904. 

Obviously such appreciation and overvaluation did not represent actual invest- 
ment and should not be considered in computing rates of return. Also, the invest- 
ment value of the good will, as represented by the purchase cost, should long since 
have been amortized. According to good accounting practice, the cash purchase 
cost of good will and other intangibles should be amortized as rapidly as possible 
to conform to the process of valuation employed in setting up the charges. If 
such a schedule of amortization had been followed, all of the good will would have 
long since been written off. For this reason the entire amount for good will, 
appreciation, and other intangibles shown above for each of the years 1917-37 
was eliminated from the investments in computing rates of return. 

On the average, nearly 90 percent of the amounts shown in the preceding tabu- 
lation for the years 1917-25 and nearly all of the amounts thereafter represented 
goodwill, appreciation, and other intangibles on the books of the successor com- 
panies. The remainder of such amounts, applying to companies which had no 
connection with the old tobacco combination, for the most part did not appear to 
reflect actual investment. Also, in no case did any of the companies for which 
the amounts apply follow any plan for periodically amortizing such intangibles. 
The reductions in the amounts shown in the tabulation reflected lump-sum 
write-offs, occurring principally in 1926, 1929, and 1933, by some of the companies 
and indicates their recognition, even if belated, of the propriety of writing off 
intangibles as rapidly as possible. 



17664 CONCENTRATION OF ECONOMIC POWER 

The amounts shown in the tabulations do not include all of the goodwill and 
other intangibles carried on the books of all of the 13 companies covered by this 
inquiry. In those cases where such intangibles reflected actual investment as 
nearly as could be determined and where such investment was being amortized 
periodically, the unamortized portion was not deducted from investments in 
computing rates of return. However, such unamortized portions represented a 
relatively small part of the total for all companies in any year. 

Appendix tables 1 to 13, which summarize the investments, profits, and rates 
of return for individual companies for the years 1917-37, show the amounts of 
goodwill, appreciation, and other intangibles deducted from the investments of 
each company in computing rates of return. 

COMPARISON OF AVERAGE ANNUAL INVESTMENTS, PROFITS, AND 
RATES OF RETURN FOR INDIVIDUAL COMPANIES, FUNCTION- 
ALLY CLASSIFIED 

In table 1 preceding, the investments, profits, and rates of return for ail com- 
panies combined for which the information was available were presented for each 
of the years 1917 to 1937, inclusive, on the basis of the total investment, stock- 
holders' investment, and common stockholders' equity. The table shows that 
the average of the annual profits during the 21 -year period for all companies com- 
bined was equivalent to 16.44 percent on the total investment, 18.22 percent on 
the stockholders' investment, and 21.9 percent on the common stockholders' equity. 

Table 2, which follows, -compares the average annual investments, profits, and 
rates of return during the period under review on each basis of investment for the 
individual companies, classified according to the principal products manufactured. 



CONCENTRATION OF ECONOMIC TOWER 



17665 



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17666 



CONCENTRATION OF ECONOMIC POWER 



Table 2 shows that as a group the manufacturers of cigarettes and other tobacco 
products had the highest average annual rates of return during the period under 
review, followed closely by the snuff manufacturers. The operations of the cigar 
manufacturers were very much less profitable, their returns averaging only a 
little over half of those for the other two groups. Their average profits were 
equivalent to 9.32 percent of the total investment, 9.66 percent of the stockholder's 
investment, and 10.82 percent of the common stockholder's equity, as compared 
with 17.34 percent, 19.55 percent, and 23.39 percent of the respective investments 
of the manufacturers of cigarettes and other tobacco products, and 16.68 percent, 
16.68 percent, and 20.54 percent, respectively, for the snuff manufacturers. 

The showing for all companies as a group is influenced considerably by the 
preponderant investments and large profits of the three largest manufacturers. 
For example, on the basis of total investment, the combined investments of 
American Tobacco Co., Liggett & Myers Tobacco Co., and R. J. Reynolds Tobacco 
Co. averaged nearly 70 percent of the investments of all companies combined and 
about 80 percent of the investments of the companies comprising the manu- 
facturers of cigarettes and other tobacco products. The relative importance of 
the various groups of manufacturers from the standpoint of investment is shown 
as follows: 

Ratios of total investment 





Annual aver- 
age, 1917-37 


Average, 
1937 


Manufacturers of cigarettes and other tobacco products: 

Big Three 


Percent 
67.88 
14.04 


Percent 

68. 50 


Little Three 


14.30 






Total 


81.92 
10.60 

7. -IS 


82.80 




9.32 




7.88 






Total '.... 


100.00 


100.00 




$598, 300, 727 


$736, 643, 988 







It will be observed that there was comparatively little change in the relative 
proportions of the combined investments for each group during the two periods 
shown in the tabulation, the decline in the 1937 proportion for the cigar companies 
being offset by slight increases in the proportions for each of the other groups 
during that year. The tabulation which follows presents a similar comparison 
for the individual companies within each group and shows the deviations of their 
relative proportions in 1937 from those based on the average of the annual in- 
vestments throughout the entire period. 

Ratios of total investment 



Manufacturers of cigarettes and other tobacco products: 

American Tobacco Co 

Liggett & Myers Tobacco Co 

R. J. Reynolds Tobacco Co 

Total (Big Three) 

P. Lorillard Co 

Axton-Fisher Tobacco Co 

Brown & Williamson Tobacco Co 

Total 

Combined investment 

Cigar manufacturers: 

General Cigar Co., Inc 

Porto Rican American Tobacco Co 

Consolidated Cigar Co 

Bayuk Cigars, Inc 

Total... j 



Combined investment 

Snuff manufacturers: 

United States Tobacco Co. 

American Snuff Co 

George W. Helme Co 

Total 

Combined investment 



Annual aver- 
age, 1917-37 



Percent 


Percent 


33.03 


31.74 


24.68 


27.91 


25.15 


23.07 


82.86 


82.72 


12.32 


9.03 


1.58 


1.16 


M.24 


7.09 


100.00 


100.00 



$190, 147, 166 

Percent 

37.53 

3 22. 88 

<27. 76 

11.83 



loo.oo 



$63, 389, 990 

Percent 

46.18 

25.51 

28.31 



100.00 



$44, 763, 571 



Average, 1937 



$609, 955, 640 
Percent 

35. 73 
26.76 
22. 65 
14.86 



100.00 



$68,612,389 

Percent 

47.90 
26.06 
26.04 

100.00 



$58, 075, 959 



1 Annual average, 1918-37. 
> Annual average, 1928-37. 



* Annual average, 1920-37. 

* Annual average, 1919-37. 



CONCENTRATION OF ECONOMIC POWER 



17667 



The above tabulation shows that the combined investments for each group in 
1937 exceeded the average of the annual investments for each group during the 
period 1917-37. This is indicative of the general growth of the companies 
throughout the period under review. For example, the combined investments of 
the three largest companies, which account for the greater portion of the total 
investments for all companies, increased over 200 percent, from $165,485,477 in 
1917 to $504,588,788 in 1937. The combined investments of these three com- 
panies increased steadily from 1917 to 1933, reaching a maximum of $560,755,492 
in the latter year, then decreasing "each year to $504,588,788 in 1937. The year- 
to-year changes for these and all of the other companies, together with'a break- 
down of the investments, appear in appendix tables 1 to 13, which summarize the 
investments, profits, and rates of return for individual companies for the years 
1917-37. 

Comparison op Rates op Return for Individual Companies, 
Functionally Classified 

The preceding table 2 compared the average annual investments, profits, and 
rates of return for the years 1917-37 for individual companies, functionally 
classified. Tables 3, 4, and 5, which follow, show for each company the rates of 
return for each year during this period on the basis of the total investment, the 
stockholders' investment, and the common stockholders' equity. As previously 
explained, the total investment includes all classes of outstanding stocks and 
long-term debt, surplus, surplus and contingency reserves, and reserves for 
Federal income and profits taxes. The stockholders' investment includes all 
these elements, except long-term debt. The common stockholders' equity 
consists of the common stocks, surplus, and the reserves referred to above. 

Table 3, immediately following, compares the rates of return on total invest- 
ment for each of the years 1917-37 for individual companies, functionally classified. 

Table 3. — Percentage comparison of rates of return on total investment for individual 
companies, functionally classified, 1917-37 





1917 


1918 


1919 


1920 


1921 


1922 


1923 


1924 


Manufacturers of cigarettes and other to- 
bacco products: 


17.61 
20.85 
33.17 


22.91 
22.71 
28.10 


15.61 
12.95 
21.03 


14.94 
16.86 
15.38 


16.94 
17.28 
24.53 


17.28 
16.81 
23.64 


16.07 
15.99 
23.31 


17 50 




17 71 




19 71 








21.99 


24.12 


16.33 


14.78 


19.45 


19.32 


18.65 


18 37 






P. Lorillard Co 


23.48 


21.01 
21.96 


14.99 
15.58 


17.17 
12.20 


15.34 
18. 71 


16.08 
21.30 


12.05 
14.32 


12 42 




13 19 


Brown & Williamson Tobacco Co 
























Average for cigarette and tobacco 


22.25 


23.62 


16.14 


15.12 


18.84 


18.82 


17.63 


17 52 






Cigar manufacturers: 


17.83 


25.54 


25.89 


24 13 
13.19 
25.48 
25.56 


13.61 

'31.88 

3.01 

23.89 


17.07 
i 2.29 
13.59 
37.85 


14.70 
6.61 
5.48 

21.02 


13 55 




1 15 








13.07 
21.40 


12 20 


Bayuk Cigars, Inc 


24.00 


18.80 


15.63 


Average 


18.48 


24.80 


22.58 


22.19 


2.13 


14.25 


12.11 


11 86 






Snuff manufacturers: 

United States Tobacco Co 


16.28 
22.77 
17.11 


24.15 
26.56 
19.31 


20.05 
26.83 
18.51 


18.25 
27.59 
20.52 


17.93 
24.74 
19.48 


16.69 
28.69 
21.45 


15.76 
23.65 
20.60 


15.14 
20.39 


American Snuff <"!o 




20.89 








18.78 


23.40 


21.63 


21.64 


20.34 


21.48 


19.37 


18.27 






Average for all manufacturers 


21.76 


23.64 


16.87 


16.17 


17.54 


18. G4 


17.23 


17.00 



1 Denotes loss. 



17668 



CONCENTRATION OF ECONOMIC POWER 



Table 3. — Percentage comparison of rates of return on total investment for individual 
companies, functionally classified, 1917-37 — Continued 





1925 


1926 


1927 


1928 


1929 


1930 


1931 


Manufactures of cigarettes and other tobacco prod- 
ucts: 
The American Tobacco Co . 


18.68 
18.23 
22.17 


18.75 
19.07 
23.71 


18.46 
18.78 
24.07 


18.87 
17.94 
22.24 


19.65 
19.58 
26.82 


23.79 
19.29 
28.88 


24.44 


Liggett & Myers Tobacco Co . 


17.15 


R. J. Reynolds Tobacco Co 


29.07 






Average (Big Three) 


19.78 


20.53 


20.51 


19.76 


21.91 


23.92 


23.55 






P. Lorillard Co 


13.26 
31.37 


10.31 
30.12 


6.77 
52.24 


5.54 

9.69 

'33.58 


4.49 
22.68 
'56.67 


7.19 
28.71 
' 37. 36 


9.10 


Axton-Fisher Tobacco Co 


21.93 


Brown & Williamson Tobacco Co 


' 2.48 












Average for cigarette and tobacco manufac- 


18.93 


19.21 


18.68 


17.12 


18.39 


20.73 


21.34 






Cigar manufacturers: 

General Cigar Co., Inc 


13.25 

8.50 
15.37 
10.41 


12.81 
4.81 
13.57 
13.81 


15.97 
5.93 
13.19 
15.34 


14.34 
5.02 
13.95 
11.88 


17.09 
7.13 
12.44 
11.76 


11.86 
6.71 
9.17 
5.31 


9.82 




3.07 


Consolidated Cigar Co 


8.40 


Bayuk Cigars, Inc 


2.34 






Average 


12.75 


12. 40 


13.30 


11.87 


12.70 


9.04 


6.97 






Snuff manufacturers: 

United States Tobacco Co -. 


14.45 
18.04 
19.76 


14.25 
18.10 
19.29 


14,14 
20.56 
19.31 


13.02 
21.95 
18.94 


12.41 
19.03 
18.58 


12.15 
16.92 
17.61 


12.46 
17.26 


George W. Helme Co 


15.45 






Average ' 


16.96 


16.69 


17.17 


16.80 


15.63 


14.67 


14.37 






A vpmgA fnr «11 manufacturers 


18.14 


18.23 


17.86 


16.38 


17.41 


18.77 


19.08 









1932 


1933 


1934 


1935 


1936 


1937 


Aver- 
age 


Manufacturers of cigarettes and other tobacco prod- 
ucts: 


21.53 
16.84 
26.11 


8.37 
12.33 
12.41 


12.21 
14.60 
17.67 


12.93 
12.25 
20.74 


12.20 
17.62 
25.02 


16.35 
15.52 
23.87 


17.16 


Liggett & Myers Tobacco Co 


16.70 


•R. J. Reynolds Tobacco Co 


23.05 






Average (Big Three) 


21.42 


10.70 


14.45 


14.82 


17.53 


18.17 


18.81 








8.69 
39.20 
24.42 


5.36 
33.59 
14.88 


7.17 
74.70 
16.27 


7.61 
8.20 
14.64 


8.47 
8.46 
17.81 


6.13 
3.42 
9.42 


10.31 


Axton-Fisher Tobacco Co _. 


19.57 




8.66 






Average for cigarette and tobacco manufac- 
turers 


20.17 


10.47 


13.95 


14.07 


16.61 


16.29 


17.34 






Cigar manufacturers: 

General Cigar Co., Inc 


7.91 

1.41 

4.14 

' 12. 16 


3.04 

.88 

3.33 

7.18 


10.36 

.60 

5.17 

10.90 


9.69 
2.07 
3.96 
12.27 


8.51 

.63 

6.39 

12.28 


7.97 

'.63 

7.15 

12.27 


12.86 


Porto Rican American Tobacco Co 


2.25 




9.78 


Bavuk Cigars, Inc 


10.67 






Average 


2.90 


3.05 


6.57 


6.63 


6.42 


6.12 


9.32 






Snuff manufacturers: 

United States Tobacco Co 


14.69 
16.30 
14.15 


13.85 
17.16 
14.67 


14.09 
16.30 
15.03 


14.85 
13.35 
14.15 


17.65 
13.18 
14.22 


14.41 
12.35 
12.83 


14.86 


American Snuff Co_ 


19.22 




17.36 






Average 


14.92 


14.83 


14.90 


14.28 


15.59 


13.46 


16.68 






Average fnr (\ll manufacturers 


17.94 


10.07 


13.32 


13.40 


15.58 


15.12 


16.44 







> Denotes loss: 

Table 3 shows exceptionally high rates of return on the total investment for 
each year by the manufacturers of cigarettes and other tobacco products as a 
group, and by the snuff manufacturers as a group. The operations of the cigar 
companies as a group were less profitable throughout the period under review, 
although high rates of return were earned by some of these companies during 
certain years. 



CONCENTRATION OF ECONOMIC POWER 



17669 



The returns for American Tobacco Co., Liggett & Myers Tobacco Co., and 
R. J. Reynolds Tobacco Co., the three largest companies, as a group averaged 
18.81 percent for the years 1917-37, and the returns for all manufacturers of 
cigarettes and other tobacco products averaged 17.34 percent during this period. 
For individual companies the highest average return was earned by R. J. Reynolds 
Tobacco Co. with 23.05 percent, followed by Axton-Fisher Tobacco, the smallest 
of any of the companies in the group, with 19.57 percent, American Tobacco Co. 
with 17.16 percent, Liggett & Myers Tobacco Co. with 16.70 percent, P. Lorillard 
Co. with 10.31 percent, and Brown & Williamson Tobacco Co. with 8.66 percent. 

For the snuff manufacturers, the highest average rates of return were earned 
by American Snuff Co., followed by Geo. W. Helme Co. and United States Tobacco 
Co. The returns for these companies averaged 19.22 percent, 17.36 percent, and 
14.86 percent, respectively, the average for the group being 16.68 percent. 

For the cigar companies, the average returns in the order of size were 12.86 
percent for General Cigar Co., Inc., 10.67 percent for Bayuk Cigars, Inc., 9.78 
percent for Consolidated Cigar Co., and 2.25 percent for Porto Rican American 
Tobacco Co., the average for the group being 9.32 percent. 

The average rate of return on total investment for all companies in all groups 
was 16.44 percenjt for the period. It will be noted that exceptionally high rates 
of return were earned in each of the years 1917-32 by all companies combined, 
the highest being 23.64 percent in 1918 and the lowest being 16.17 percent in 
1920. In 1933, however, the average return dropped to a low of 10.07 percent 
as compared with 17.94 percent for the previous year, but increased thereafter 
to 15.58 percent in 1936 and fell off slightly to 15.12 percent in 1937. However, 
as previously explained; these high returns were considerably influenced by the 
preponderent investments and large profits of the three largest manufacturers. 

The stockholders' investment for all companies combined averaged about 
86 percent of the total investment during the 21-year period. However, the 
margin of capital represented by long-term debt produced earnings in excess of 
the interest cost thereof, so that the average of the annual returns on the stock- 
holders' investment for all companies was generally higher than -were the returns 
on the total investment. 

Table 4, which follows, compares the rates of return on the stockholders' invest- 
ment for individual companies, functionally classified, for each of th« vears 
1917-37. 

Table 4.— Percentage comparison of rates of return on stockholders' investment for 
individual companies, functionally classified, 1917-37 





1917 


1918 


1919 


1920 


1921 


1922 


1923 


1024 


Manufactures of cigarettes and other tobacco 
products: 


17.94 
47.41 
33.17 


26.91 
50.82 
28.10 


19.16 
25.13 
22.70 


17.56 
25.47 
17.20 


19.32 
26.79 
26.25 


18.83 
23 73 
23.82 


16.80 
21.88 
23.31 


17.64 




23.45 




19.71 








25.84 
49.49 


30.93 
35.08 
21.96 


21.33 

21.99 
15.58 


18.68 
25.02 
12.20 


23.24 
21.00 
18.71 


21.<?V 
21.89 
21.30 


20.31 
15.47 
14.32 


19.58 


P. Lorillard Co 


16.14 




13.19 








Average for cigarette and tobacco 


28.12 


31.40 


21.41 


19.45 


22.95 


21.69 


19.74 


19.21 






Cigar manufacturers: 


17.83 


25.54 


25.89 


24.13 
13.19 
25.75 
25.83 


13.61 

'40.33 

2.93 

24.12 


17.07 
i 7.31 
13.77 
38.05 


17.43 
5.88 
5.46 

21.06 


16.32 




■ 1. 37 








13.07 
21.40 


12. 3 X 




24.00 


18.89 


15.64 








18.48 


24.80 


22.58 


22.26 


1.78 


14.72 


13.44 


13.03 






Snuff manufacturers: 


16.28 
22.77 
17.11 


24.15 
26.54 
19.31 


20.05 
26.83 
18.51 


18.25 
27.59 
20.52 

21.64 


17.93 
24.74 
19.48 


16.69 
28.69 
21.45 


15.76 
23.65 
20.60 


15.14 




20.39 




20.80 








18.78 


23.40 


21.63 


20.34 


'21.48 


19. 37 


18.27 








26.43 


30.21 


21.52 1 


19.99 


20.54 


21.00 


19.09 


18.54 











' Deficit. 



17670 



CONCENTRATION OF ECONOMIC POWER 



Table 4. — Percentage comparison of rates of return on stockholders' investment for 
individual companies, functionally classified, 1917-37 — Continued 





1925 


1926 


1927 


1928 


1929 


1930 


1931 


Manufacturers of cigarettes and other tobacco 
products: 


18.83 
22.92 
22.17 


18.89 
23. 36 
23.71 


18.57 
22.62 
24.07 


18.98 
21.29 
22.24 


19.52 
23.17 
26.82 


23.88 
22.38 
28.88 


24.51 




19.48 




29.07 








21. 04 
17.39 
31.37 


21.78 
12.68 
30.12 


21.66 
7.37 
52.24 


20.80 
5.24 
9.69 


22.94 
3.31 
22.68 


25.04 
8.06 
28.71 


24.56 




10.28 




21.93 






Average for cigarette and tobacco manufac- 


20.71 


20.93 


20.43 


18.82 


20.11 


22.89 


23.25 






Cigar manufacturers: 


15.69 
8.49 
15.94 
10.76 


14.79 
3.71 
18.25 
14.23 


18.54 
3.26 
13.56 
15.72 


16.28 
4.14 
14.07 
12.08 


19.03 
7.46 
12.54 
11.91 


12.58 
6.84 
9.22 
5.29 


10.19 




1.74 




8.43 




2.25 








14.08 


14.61 


14.17 


12.84 


13.63 


9.39 


7.05 






Snuff manufacturers: 


14.45 
18.04 
19.76 


14.25 
18.10 
19.29 


14.14 
20.56 
19.31 


13.02 
21.95 
18.94 


12.41 
19.03 
18.58 


12.15 
16.92 
17.61 


12.46 




17.26 




15.45 








16.96 


16.69 


17.17 


16.80 


15.63 


14.67 


14.37 








19.75 


19.90 


19.39 


17.85 


18.85 


20.45 


20.56 










1932 


1933 


1934 


1935 


1936 


1937 


Aver- 
age 


Manufacturers of cigarettes and other tobacco 
products: 


21.58 
18.91 
26.11 


8.34 
13.44 
12.41 


12.23 
15.99 
17.67 


13.43 
13.24 
20.74 


13.43 
19.45 
25.02 


18.00 
17.00 
23.87 


17.91 




20.31 




23.27 








22.23 
9.54 
39.20 


10.92 
5.14 
33.59 


14.84 

7.53 

24.70 

169. 74 


15.49 
8.11 
8.20 

24.91 


18.85 
9.20 
8.46 

20.86 


19.48 
6.18 
3.42 

10.97 


20.29 


P. Lorillard Co 


16.65 




19.57 




18.95 










Average for cigarette and tobacco manufac- 
turers 


21.89 


11.10 


15.02 


15.14 


18.06 


17.71 


19.55 


Cigar manufacturers: 


7.79 

'.44 

4.11 

■12.56 


3.04 
»1 13 
3.26 
7.20 


10.36 

i 1.41 

5.12 

10.98 

6.63 


9.69 

.78 

3.96 

12.37 


8.51 

'.86 

6.39 

12.29 


7.97 
' 2.25 

7.15 
12.30 


13.59 




.57 




9.93 




10.78 








2.51 


2.80 


6.68 


6.45 


6.14 


9.66 






Snuff manufacturers: 


14.69 
16.30 
14.15 


13.85 
17.16 
14.57 


14.09 
16.30 
15. 03 


14.85 
13.35 
14.15 


17.65 
13.18 
14.22 


14.41 
12.35 
12.83 


14.86 




19.22 


George W. Helme Co 


17.36 




14.92 


14.83 


14.90 


14.28 


15.59 


13.46 


16.68 








19.27 


10.59 


14.21 


14.26 


16.72 


16.21 


18.22 











' Deficit. 

Table 4 shows that the average rates of return on the stockholders' investment 
for the years 1917-37 were 19.55 percent for the manufacturers of cigarettes 
and other tobacco products as a group, 16.68 percent for the snuff manufacturers 
and 9.66 percent for the cigar manufacturers, the average for all groups being 
18.22 percent. It will be noted that the average return for the three largest com- 
panies was the highest of any group, being 20.29 percent for the period. The 
returns for these companies were unusually high in every year during 1917-32, 
the highest being 30.93 percent in 1918 and the lowest 38.68 percent in 1920. 
Earnings declined sharply in 1933 as compared with previous years so that the 
average return for the three companies in that year fell to 10.92 percent as com- 



CONCENTRATION OF ECONOMIC POWER 



17671 



pared with 22.23 percent for the year before. However, the rates of return 
increased in each subsequent year to 19.48 percent in 1937. 

The investment of the common stockholders alone averaged about 65 percent 
of the total investment for all companies combined. However, that part of the 
total investment represented by preferred stock and long-term debt produced 
earnings in excess of dividend payments on the preferred and interest cost on the 
debt so that the average of the annual returns on the common stockholders' 
equity for all companies was generally higher than were the returns on the total 
investment. For example, throughout the years 1917-37, the returns for the 
three largest companies combined averaged 24.26 percent on the common stock- 
holders' equity as compared with 18.81 percent on the total investment. Table 
2, which has been presented and commented upon, compares the average of the 
annual returns for individual companies on each basis of investment, and table 3, 
when compared with table 5, which follows, shows the differences on a yearly basis. 

Rates of return on the common stockholders' equity for individual companies, 
functionally classified, are presented on the following table 5 for each year during 
the period 1917-37. This table shows that throughout this period all companies 
earned an average of 21.90 percent on the common stockholders' equity, and 
that the earnings of the respective groups were equivalent to 23.39 percent for 
the manufacturers of cigarettes and other tobacco products, 20.54 percent for the 
snuff manufacturers and 10.82 percent for the cigar manufacturers. As was the 
case for the other two bases of investment, the- average return on this basis for 
the three largest companies combined was higher than that for any group, amount- 
ing to 24.26 percent for the period. During 1917-32, the average returns for 
these companies ranged from highs of 53.35 percent and 56.22 percent in 1917 
and 1918 to 24.19 percent in 1928. In 1933 the average return was 11.66 percent 
as compared with 24.86 percent for the preceding year, but increased each year 
thereafter to 21.99 percent in 1937 

Table 5. — Percentage comparison of rates of return on common stock equity for 
individual companies, functionally classified, 1917-87 





1917 


1918 


1919 


1920 


1921 


1922 


1923 


1924 


Manufacturers of cigarette and other tobacco 
products: 


41.10 


59.01 
383.89 
32.74 


36.49 
94.27 
25.39 


30.33 
62 68 
19.08 


31.77 
49.29 
31.59 


30.25 
39.77 
27.85 


25 32 

34.18 
26.78 


25. 8.5 




33:40 


R. J. Reynolds Tobacco Co 


38.37 


22.08 






Average (Big Three) 


53.35 
215. 53 


56.22 
63.53 
21.95 


33.56 
32.82 
15.58 


27.50 
36.06 
12.20 


34.02 
27.88 
18.71 


30.39 
28.73 
27.83 


27.33 
19.23 
18.46 


25.29 


P. Lorillard Co 


20.38 


Axton-Fisher Tobacco Co 


16.69 


























Average for cigarette and tobacco 
manufacturers 


61.37 


56. 98. 


.33.41 


28.58 


33.16 


30.17 


26.35 


24.78 






Cigar manufacturers: 

General Cigar Co., Inc ' 


32.27 


45.51 


48.92 


45.51 
13.19 
43.38 
41.81 


20.93 
'40.33 
i 1.33 
90.60 


27.26 
'7.31 

24.68 
96.77 


25.46 
5.88 
4.34 

38.08 


22.90 




' 1.37 


Consolidated Cigar Co 






17.33 
21.40 


15.88 


Bayuk Cigars, Inc.— 


24.00 


18.89 


24.43 








30.47 


40.06 


37.26 


32.92 


> 2.48 


21. 64 , 


17.81 


16.62 






Snuff manutacturers: 

United States Tobacco Co 


31.26 
40.57 
29.72 


42.58 
46.39 
32.34 


29.93 
45 43 
28.87 


25.21 
45.49 
31.16 


24.28 
39.21 
27.92 


22.15 
44.65 
29.91 


20.40 
34.97 
v 27.71 


18.95 




29.21 


George W. llelme Co 


27.50 








34.30 


40.69 


34.17 


32.50 


29.36 


30.47 


26.42 


24.15 






Average for all manufacturers '. 


55. 72 


54.33 


33.76 


29.46 


29.48 


29.47 


25.60 


24.02 




1925 


1926 


1927 


1928 


1929 


1930 


1931 


Manufacturers of cigarette and other tobacco prod- 
ucts: 


27.53 
29.63 
22.86 


27.22 
28.99 
23.71 


26.18 
27.42 

21.07 


26.34 
25.34 
22.24 


25.51 
27.43 
26.82 


30.17 
25.85 
28.88 


30.58 




21. 9li 


R. J. Reynolds Tobacco Co 


29.07 








Average (Big Three) 


25.76 


26.00 


25.49 


24.19 


26.53 


28.61 


27:70 



1 Denotes loss. 



17672 



CONCENTRATION OF ECONOMIC POWER 



Table 5. — Percentage comparison of rates of return on common stock equity for 
individual companies, functionally classified, 1917-37 — Continued 





1925 


192G 


1927 


1928 


1929 


1930 


1931 


Manufacturers of cigarette and other tobacco pro 
ducts — Continued. 
P. Lorillard Co.. 


22.12 
42.42 


15.13 
32.39 


7.52 
71.89 


4.53 
13.69 


2.04 
35.01 


8.37 
41.09 


11.15 


Axton-Fisher Tobacco Co 


28.63 


Brown & Williamson Tobacco Co. 




















Average for cigarette and tobacco manufac- 
turers . 


25.47 


25.07 


24.13 


22.14 


23.50 


26.48 


26.64 






Cigar manufacturers: 

General Cigar Co., Inc 


21.00 
8.49 
18.14 
13.99 


19.24 
3.71 
15.10 
20.97 


23.08 
3.26 
19.32 
24.70 


19.04 
4.14 
21.46 
15.88 


21.97 
7.46 
18.03 
14.55 


13.73 
6.84 

11.51 
4.47 


10.83 


Porto Rican American Tobacco Co 


1.74 


Consolidated Cigar Co 


9.93 


Bayuk Cigars, Inc 


.01 






Average 


17.01 


15.55 


18.09 


15.82 


16.45 


10.33 


7.15 






Snuff manufacturers: 

United States Tobacco Co 


17.57 
25.21 
25.64 


16.98 
25.13 
24.69 


16.54 
28.62 
24.46 


14.82 
30.02 
23.71 


13.86 
25.16 
23.10 


13.41 
21.92 
21.65 


13.81 


American Snuff Co 


22.34 


George W. Helme Co . 


18.50 






Average 


21.80 


21.09 


21.43 


20.54 


18.68 


17.24 


16.71 






Average for all manufacturers 


24.44 


23.87 


23.27 


21.28 


22.26 


23.85 


23.72 








1932 


1933 


1934 


1935 


1936 


1937 


Aver- 
age 


Manufacturers of cigarette and other tobacco prod- 
ucts: 
The American Tobacco Co_ - 


26.25 
21.15 
26.11 


9.02 
14.59 
12.41 


14.14 
17.55 
17.67 


16.06 
14. 32 
20.74 


16.62 
21.52 
25.02 


23.31 
18.65 
23.87 


24.20 


Liggett & Myers Tobacco Co 


24.60 


R. J. Reynolds Tobacco Co 


24.10 






Average (Big Three) 


24.86 
10.31 
54.65 


11.66 
4.77 
45.28 


16.27 
7.69 
30.61 


17.13 
8.43 

8.77 
15.24 


21.23 
9.84 
9.08 

22.70 


21.99 
5.49 
4.30 

11.54 


24.26 


P. Lorillard Co 


14.86 


Axton-Fisher Tobacco Co 


24.62 


Brown & Williamson Tobacco Co 


21.13 












Average for cigarette and tobacco manufac- 
turers 


24.84 


12.02 


16.67 


16.34 


20.33 


19.94 


23.39 






Cigar manufacturers: 

General Cigar Co., Inc 


7.94 
1.44 
1.08 
21.92 


2.21 
i 1.13 
'3.73 

7.35 


10.32 

i 1.41 

2.16 

12.56 


10.36 

.78 

1 1.30 

14.20 


8.89 

'.86 

6.00 

13.95 


8.22 
' 2.25 

8.15 
13.71 


16.30 


Porto Rican American Tobacco Co 


.57 


Consolidated Cigar Co 


12.85 


Bayuk Cigars, Inc :.. . 


12.87 






Average 


.95 


1.29 


6.22 


6.65 


6.35 


5.93 


10.02 






Snuff manufacturers: 

United States Tobacco Co. 


15. 48 
20.73 
16.66 


14.56 
21.69 
18.03 


14.90 
20.23 
18.57 


15.66 
16.09 
17.06 


18.63 
15.77 
17.16 


15.09 
14.59 
15.31 


17.00 


American Snuff Co . 


26.23 


George W. Helme Co . . 


22.31 






Average 


16.83 


16.90 


16.97 


16.09 


17.62 


15.03 


20.54 






A verage for all manufacturers 


21.99 


11.50 


15.84 


15.52 


18.89 


18.29 


21.90 







1 Denotes loss. 



Comparison of Sales and Operating Results 



Further indication of the relative importance and profitableness of the various 
companies is presented below from the standpoint of sales and operating results. 

Table 6, immediately following, summarizes the net sales, net income, dividend 
payments, and net increase in surplus for each of the 13 companies. The upper 
part of the table gives the total for each item for all years for which the information 
was available during the period 1917-37. The lower part of the table gives for 
each company the annual averages of the net sales, net income, dividend pay- 
ments, and net income remaining after the payment of dividends. 

The information in table 6, including the information on which the succeeding 
tables of operating ratios are based, appears in greater detail for each company 
in appendix tables 1 to 13 and la to 13a, which summarize for each company 
the details of investments and costs and profits for each year during the period 
1917-37. 



CONCENTRATION OF ECONOMIC POWER 



17673 



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17674 



CONCENTRATION OF ECONOMIC POWER 



Table 6 shows that American Tobacco Co., Liggett & Myers Tobacco Co., and 
R. J. Reynolds Tobacco Co. were also the largest from the standpoint of sales. 
During the 21 years, 1917-37, the sales of the Reynolds Co. were largest, amount- 
ing to nearly 4% billion dollars, followed by American Tobacco Co. with a little 
over 4 billion dollars, and Liggett & Myers with nearly 4 billion dollars of sales. 
It will be noted that in the order of profits, American Tobacco Co. was first with 
a little over one-half billion dollars, followed closely by the Reynolds Co. with 
almost the same amount and Liggett & Myers with one-third of a billion. These 
profits represent the net income after providing for all of the costs of doing business, 
including provisions for Federal income and profits taxes. 

American Tobacco Co. and R. J. Reynolds Tobacco Co. each paid out about 
the same amount in dividends during the period. American Tobacco Co. paid 
out a total of $474,397,942 as compared with $474,631,250 for the R. J. Reynolds 
Co. The total for Liggett & Myers was $261,408,812. After taking into account 
other charges to surplus, the net increase in surplus during the period was 
$22,942,603 for American Tobacco Co., $29,165,235 for Liggett & Myers Tobacco 
Co., and $24,103,293 for R. J. Reynolds Tobacco Co. These net increases, 
together with the amounts for dividends paid in common stock on common stock, 
reflect earnings retained in the business by each company in the amount of 
$85,699,739 for American Tobacco Co., $40,507,985 for Liggett & Myers Tobacco 
Co., and $104,103,293 for R. J. Reynolds Tobacco Co. The comparatively 
smaller amount for Liggett & Myers is accounted for by the fact that the com- 
pany reduced the value at which it had been carrying goodwill and other in- 
tangibles on its balance sheet to $1 by charges to surplus of $40,709,710 in 1929 
and $55,000 in 1935. 

The reinvested earnings contributed importantly to the growth of each of the 
three companies. During the period under review they amounted to nearly 
80 percent of the net increase in capitalization of American Tobacco Co. and 
about 90 percent of the net increase for R. J. Reynolds Tobacco Co. For Liggett 
& Myers Tobacco Co. they amounted to nearly half the net increase before any 
adjustments for goodwill, appreciation, and other intangibles prior to the time 
they were written off by the company as explained above. Further details 
concerning invested capital, including earnings, for these and all other companies 
under review appear in appendix tables 1 to 13 and la to 13a. 

Throughout the period under review, the annual sales of the three largest 
companies averaged 73 percent of the sales for all companies and 88 percent of 
the combined sales of the manufacturers of cigarettes and other tobacco products. 
The relative importance of the various groups of manufacturers from the stand- 
point of sales is shown by the following tabulation which compares the sales for 
each group in 1937 with the average of the annual sales for the years 1917 to 1937 

Ratios of sales 





Annual average 
1917-37 


Total 1937 


Manufacturers of cigarettes and other tobacco products: 

Big Three 


Percent 
72.97 
15.44 


Percent 

73.93 


Little Three 


18.37 






Total 


88.41 
8.02 
3.57 


92.30 


Cigar manufacturers 


4.74 


Snuff manufacturers 


2.90 






Total 


100.00 
$830,883,994 


100.00 


Combined sales 


$1, 063, 327, 917 





CONCENTRATION OF ECONOMIC POWER 



17675 



It will be noted that there was comparatively little change in the relative pro- 
portions of the combined sales of the three largest companies in the two periods 
shown in the tabulation, but the 1937 proportion of the combined sales of the three 
smaller manufacturers of cigarettes and other tobacco products was somewhat 
higher than their proportion based on the average of the annual sales throughout 
the period. The sales of all manufacturers of cigarettes and other tobacco prod- 
ucts amounted to 92.3 percent of the total sales of all companies during the year 
1937 as compared with 88.41 percent of the average of the annual sales for all of 
the companies throughout the years 1917-37. On the other hand the sales 
for each of the groups of cigar and snuff manufacturers were proportionately 
smaller in 1937 than for the entire period. The tabulation which follows presents 
a similar comparison for the individual companies within each group and shows 
the deviations of their relative proportions in 1937 from those based on the aver- 
age of the annual sales throughout the period 1917-37. 

Ratios of sales 





Annual aver- 
age 1917-37 


Total 1937 


Manufacturers of cigarettes and other tobacco products: 


Percent 

26.00 
25.84 
30.70 


Percent 

24.72 




24.50 




30.88 






Total (Big Three) 


82.54 
' 9.70 
'6.69 
* 1.17 


80.10 


P. Lorillard Co . 


7.74 




10.20 




1.96 






Total - 


100.00 


100.00 








$734, 590, 892 

Percent 

50.04 

>25.37 

16.44 

•8.15 


$981, 506, 371 


Cigar manufacturers: 


Percent 

43.10 




21.83 


Bayuk Cigars, Inc 


32.48 
2.59 






Total 


100.00 


100.00 








$66, 603, 201 

Percent 

48.74 
27.09 
24.17 


$50, 399, 958 


Snuff manufacturers: 

United States Tobacco Co 


Percent 

57.21 




24.03 


George W. Helme Co - - . 


18.76 






Total... 


100.00 


100.00 






Combined sales 


$29, 689, 901 


$31,421,588 





1 Annual average 1928-37. 
• Annual average 1918-37. 
' Annual average 1919-37. 
« Annual average 1920-37. 



124491— 41— pt. ::i- 



17676 



CONCENTRATION OF ECONOMIC POWER 



The average of the annual sales of the three largest companies amounted to 
$606,303,987, which was equivalent to 82# percent of the average for all manu- 
facturers of cigarettes and other tobacco products and about 73 percent of the 
average, for all companies covered in the inquiry. The annual'sales of the three 
companies averaged $225,523,584 for R. J. Reynolds Tobacco Co., $190,999,785 
for American Tobacco Co. ; and $189,780,618 for Liggett & Myers Tobacco Co. 
The following comparison gives the sales for these companies for each of the years 
1917-37 and indicates the trends throughout the period. Such information for all 
manufacturers appears in appendix tables la to 13a. 

Net sales 



Year 


R. J. Reynolds 
Tobacco Co. 


American 
Tobacco Co. 


Liggett & Myers 
Tobacco Co. 


1917 


$83, 537, 850 
128,496,211 
188, 115, 324 
195, 312, 210 
187, 730, 156 
190, 658, 527 
233, 516, 345 
238, 745, 043 
255, 986, 334 
279, 815, 715 
281, 623, 053 
262, 257, 472 
265, 909, 101 
266, 591, 068 
258, 077, 426 
192,714,619 
166, 344, 014 
217, 616, 507 
250, 635, 962 
289, 313, 165 
302, 999, 161 


$83, 636, 850 
137, 854, 588 
141,639,435 
138, 530, 584 
151, 103, 825 
138, 961, 567 
134, 292, 159 
149, 208, 903 
152, 088, 201 
149, 446, 876 
166, 068, 673 
202, 293, 220 
246, 688, 380 
288, 167, 322 
300, 962, 646 
278, 215, 273 
230, 317, 190 
225, 646, 543 
220, 264, 060 
232, 964, 682 
242, 644, 515 


$82, 897, 952 


1918. 


123, 698, 335 


1919 _ 


134, 697, 886 


1920 


151,503,211 


1921 


152,072, 155 


1922 

1923 


145, 051, 719 
156,100,000 


1924 .-. 


180, 475, 851 


1925.. 


203,113,016 


1926 


227, 703, 529 


1927. _ _ 


235, 722, 589 


1928 


216, 188, 517 


1929 


232, 936, 301 


1930 


226,558,711 


1931. 


206, 741, 789 


1932.... 


190, 726, 536 


1933 _ 


197, 953, 018 


1934.. 


226, 123, 458 


1935 


219, 732, 636 


1936 ._ 


234, 892, 347 


1937 


240, 503, 431 








225, 523, 584 


190, 999, 785 


189, 780, 618 







The comparative profits of these three companies and of others in relation to 
investment have been indicated. The relation of profits to sales is indicated in 
tables 7 and 8 which follow. These tables compare ratios of costs, expenses and 
profits to net sales, expressed in cents per dollar of net sales, for individual com- 
panies, functionally classified. Table 7 presents such information on the basis of 
total sales for each company during the years 1917-37, and table 8 presents the 
information on the basis of operations during the year 1937. These ratios have 
been computed from information contained in appendix tables la to 13a which 
give the details of income and expenses for each company for each year during 
1917-37. 



CONCENTRATION OF ECONOMIC POWER 



17677 



Table 7. — Comparison of ratios of costs, expenses, and profits to net sales for the years 
1917-37, expressed in cents per dollar of net sales, for individual companies func- 
tionally classified 



Company 


Total net sales 
1917-37 


Operating 
costs and 
expenses 


Net 

profit 

on sales 


Other 

income 

net 


Total 
income 
before 
interest 
and Fed- 
eral 
taxes 


Interest 

on long- 

torm 

debt 


Provision 
for Fed- 
eral in- 
come and 
profits 
taxes 


Net 
income 


Manufacturers of ciga- 
rettes and other to- 
bacco products: 
The American To- 
bacco Co -. 

Liggett & Myers 

Tobacco Co 

R.J. Reynolds To- 
bacco Co 


Amount 
$4, 010, 995, 492 

3, 985, 392, 987 

4,735,995,263 


Cents 
87.35 

89.69 

87. 58 


Cents 
12.65 

10.31 

12.42 


Cents 
1.90 

.33 

.18 


Cents 
14.55 

10.64 

12.60 


Cents 
0.26 

.95 

.04 


Cents 
1.70 

1.32 

1.99 


Cents 
12.59 

8.37 

10.57 


Total (Big Three). 

P. Lorillard Co 

Brown & William- 
son Tobacco Co.' 
Axton-Fisher To- 
baccoCo. ' 


12, 732. 383, 742 
1,496,946,247 

484, 171, 335 

171, 732, 375 


88.17 
91.98 

96.08 

93.88 


11.83 
8.02 

3.92 

6.12 


.77 
.72 

s.20 

.29 


12.60 
8.74 

3.72 

6.41 


.39 
1.83 

.73 


1.69 
.98 

.89 

.84 


10.52 
5.93 

2.10 

5.57 


Total— cigarette 
and tobacco 
manufacturers. 


14, 885, 233, 699 


88.87 


11.13 


.72. 


11.85 


.54 


1.58 


9.73 


Cigar manufacturers: 
General Cigar Co., 


699, 959, 347 

321, 015, 895 
229, 903, 074 

97, 712, 404 


91.08 

87.40 
92.36 

99.61 


8.92 

12.60 
7.64 

.39 


.26 

8 2.41 
2.34 

5.62 


9.18 

10.19 
7.30 

6.01 


.45 

.35 
.07 

4.90 


1.25 

1.14 
1.18 

.14 


7.48 


Consolidated Cigar 
Co.* 


8.70 


Bayuk Cigars, Inc.. 
Porto Rican Amer- 
ican Tobacco Co. s 


6.05 
.97 


Total 


1, 348, 590, 720 


91.04 


8.96 


J. 09 


8.87 


.69 


1.13 


7.05 






Fnuff manufacturers: 
United States To- 
bacco Co 

American Snuff Co. 

George W. Helme 

Co 


303, 902, 835 
168, 885, 836 

150, 699, 289 


81.45 
79.45 

73.96 


18.55 
20.55 

26.04 


2.68 
6.74 

4.62 


21.23 
27.29 

30.66 




3.30 
4.07 

4.56 


17.93 
23.22 

26.10 






Total 


623, 487, 960 


79. 10 


20.90 


4.25 


25.15 




3.81 


21.34 







1 Includes years 1928-37. 
1 Denotes loss. 
3 Includes years 1918-37. 
1 Includes yearl919-37. 
' Includesyears 1920-37. 



17678 



CONCENTRATION OF ECONOMIC POWER 



Table 8. — Comparison of ratios of costs, expenses, and profits to net sales for the 
year 19S7, expressed in cents per dollar of net sales, for individual companies 
functionally classified 



Company 


Total net sales 
1937 


Operating 
costs and 
expenses 


Net 

profit 

on sales 


Other 

income 

net 


Total 
income 
before 
interest 
and Fed- 
eral 
taxes 


Interest 
on long- 
term 
debts 


Provision 
for Fed- 
eral in- 
come and 
profits 
taxes 


Net 
income 


Manufacturers of ciga- 
rettes and other to- 
bacco products: 
The American To- 
bacco Co 

Liggett & Myers 

Tobacco Co 

R. J. Reynolds To- 
bacco Co 


Amount 
$242, 644, 515 

240, 503. 431 

302,990,161 


Cents 
88.06 

89.77 

88.85 


Cents 
1!.94 

10.23 

11.15 


Cents 
1.11 

.76 

'.06 


Cents 
13.05 

10.99 

11.09 


Cents 
0.30 

.55 


Cents 
1.77 

1.55 

1.78 


Cents 
10.98 

8.89 

9.31 


Total (Big Three). 

P.LoririardCo---. 

Brown <fe William- 
son Tobacco Co.. 

Axton-Flsher To- 
bacco Co 


786, 147, 107 
75,962,586 

100, 141, 863 

19, 254, 815 


88.89 
95.83 

95.34 

98.84 


11.11 
4.17- 

4.66 

1.16 


.55 
.27 

'.59 

.09 


11.66 
4.44 

4.07 

1.25 


.26 
.93 

.54 


1.70 
.50 

.64 

.01 


9.70 
3.01 

2.89 

1.24 


Total cigarette 
and tobacco 
manufacturers. 


981, 506. 371 


90.28 


9.72 


.40 


10.12 


.34 


1.47 


8.31 


Cigar manufacturers: 

General Cigar Co., 


21, 723, 667 

11,001,394 
16, 372, 273 

1, 302, 624 


91.35 

87.75 
93.35 

114.34 


8.65 

12.25 
6.65 

' 14. 34 


.34 

12.15 
1. 00 

5.40 


8.99 

10.10 
7.65 

>8.94 


16.53 


1.29 

1.99 
1.63 


7.70 


Consolidated Cigar 
Co 


8.11 


Bayuk Cigars, Inc. 
PortoRican Amer- 


6.02 
■ 26.47 








Total 


50, 399, 958 


91.81 


8.19 


.15 


8.34 


.43 


1.52 


6.39 






Snuff manufacturers: 
United States To- 
bacco Co 

AmericanSnufT Co. 

George W. Helme 

Co 


17, 976, 214 
7, 550, 634 

5, 894, 740 


80.60 
82.80 

74.29 


19.40 
17.20 

25.71 


2.90 
7.55 

7.20 


22.30 
24.75 

32.91 




3.04 
17.20 

4.44 


19.26 
7.55 

28.47 






Total 


31, 421, 588 


79.95 


20.05 


4. S3 


24.88 




3.39 


21.49 







■ Denotes loss. 



Tables 7 and 8 show that the ratios of costs, expenses, and profits to net sales 
were substantially the same in 1937 as for the entire period 1917-37. The 
significant ratios, expressed in cents per dollar of net sales, for the various groups 
for each period are summarized as follows - 



CONCENTRATION OF ECONOMIC POWER 
Ratios to sales 



17679 



Net in- 
come ' 



Manufacturers of cigarettes and other tobacco products 

Big Three 

AH companies ' ... 

Cigar manufacturers * 

Snuff manufacturers • 



Manufacturers of cigarettes and other tobacco products: 

Big Three - . 

All companies 3 

Cigar manufacturers 4 

Snuff manufacturers • 




9.70 
8.31 
6.39 
21.49 



1 Before provision for interest payments on long-term debt and Federal income and profits taxes. 
' After provision for interest on long-term debt and Federal income and profits taxes. 

3 6 companies. 

4 4 companies. 
■ 3 companies. 

As shown above, the margins of profits in relation to sales were outstanding for 
the snuff manufacturers. Throughout the period under review their margin of 
net income of 21 cents out of every dollar of net sales was twice that of the three 
largest manufacturers of cigarettes and other tobacco products as a group and 
three times that of the cigar manufacturers. However, despite this showing in 
comparison with the margins for the other groups, their profits in relation to in- 
vestment were somewhat smaller than those of the cigarette companies but nearly 
twice those of the cigar companies and indicates that the volume of business done 
per dollar of investment was much lower than for the other groups. 

The relationship of the above factors is interestingly brought out in the follow- 
ing tabulation which shows for each group the total investment, sales, ratio of sales 
to investment, or capital turn-over, and the manner in which the profits per dollar 
of net sales applicable to the total investment is related, through the turn-over, to 
ratio of return on the investment. The upper part of the tabulation gives the in- 
formation on the basis of the average of the annual investment and sales for 
1917-37, and the lower part of the table gives the information for the year 1937 
alone. 



Total 
investment 



Net sales 



Rate of 
capital 

turn- 
over in 
terms of 

sales 



Profit 
per 
dollar 
of sales 
appli- 
cable to 
total 
invest- 
ment 



Rate of 
return on 
invest- 
ment 



Average, 1917-37 



Manufacturers of cigarettes and other tobacco 
products: 

Big Three 

All companies ' 

Cigar manufacturers ' 

Snufl manufacturers > 



Manufacturers of cigarettes and other tobacco 
products: 

Big Three.. 

All companies • 

Cigar manufacturers 

Snuff manufacturers 



1 6 companies. 



$406, 136, 489 
490, 147, 166 
63, 389, 990 
44, 763, 571 





Times 


Cents 


$606, 303, 987 


1.49 


12.60 


734, 590, 892 


1.50 


11.85 


66, 603, 201 


1.05 


8.87 


29, 689, 901 


.66 


25.15 



Year 1937 



504, 588, 788 
609, 955, 640 
68, 612, 389 
58, 075, 959 



1 4 companies. 



786, 147, 107 


1.56 


11.66 


981, 506, 371 


1.61 


10.12 


50, 399, 958 


.73 


8.34 


31,421,588 


.54 


24.88 



Percent 
18.81 
17.34 
9.32 
16.68 



18.17 
16.29 
6.12 
13.46 



J 3 companies. 



17680 



CONCENTRATION OF ECONOMIC POWER 



The capital turn-over reflects the time required for the sales to equal the invest- 
ment. On the average, the sales of the three largest companies as a group equaled 
the amount of their investment about once every 8 months as compared with once 
every 11 months for the cigar companies and once every 18 months for the snuff 
companies. The tabulation shows the influence of the rapidity of turn-over on the 
rates of return on investment when related to margins of profits on sales. For 
example, twice the margin of profit was required for the slower moving products of 
the snuff companies than for the three largest companies in order to produce 
comparable rates of return on investment. 

Salaries and Other Compensation Paid to Corporation Officers and 

Directors 

Information concerning salaries and other compensation paid to the principal 
officers of important tobacco manufacturers was obtained from annual reports of 
the companies on file with the Securities and Exchange Commission. Such infor- 
mation was obtained for the years 1935 to 1938, inclusive, with regard to American 
Tobacco Co., Liggett & Myers Tobacco Co., R. J. Reynolds Tobacco Co., P. 
Lorillard Co., Axton-Fisher Co., General Cigar Co., Inc., Porto Rican American 
Tobacco Co., Consolidated Cigar Co., Bayuk Cigars, Inc., United States Tobacco 
Co., American Snuff Co., and George W. Helme Co. 

Table 9, which follows, shows for each company for each of the years 1935-38 
the total salaries and other compensation paid to officers and directors, the number 
of officers and directors, and the average compensation per officer and director. 

Table 9. — Total salaries and other compensation paid to officers and directors of 
. principal tobacco processors, 19S5-3S 





Manufacturers of cigarettes and other tobacco products 




American 

Tobacco 

Co 


Liggett & 

Myers 

Tobacco 

Co. 


R. J. Rey- 
nolds 
Tobacco 
Co. 


P. Loril- 
lard Co. 


Axton- 
Fisher 
Tobaccc 
Co. 


Total salaries and other compensation: 
1935 


$J, 020. 776 
1, 123, 189 
1,409,863 
1, 379, 606 


$539, 645 
709, 017 
704,971 
682, 638 


$299,499 
300,999 
304, 749 
326,000 


$306,926 
275,000 
279, 918 
245, 353 


$38, 448 


1936 


61,440 


1937 

1938 


49, 115 
85, 393 






Annual average 

Number of officers and directors: 

1935 


1. 233, 108 

19 
19 
17 
17 


659, 067 

12 
12 
12 
12 


307,811 

12 
12 
12 
12 


276,799 

16 

14 
14 
14 


58, 599 


1936 

1937 


11 

7 


1938 


p 


Average compensation per officer and di- 
rector: 
1935. 


53, 725 
59. 115 
82, 933 
81,091 


41,970 
59, 081 

58,747 
56, 886 


24, 958 
25,083 
26, 395 
27,166 


19, 182 
19, 642 
19,994 
17, 525 


5,492 


1936 


6,585 


1937 


7,016 


1938 


9,488 






Annual average (weighted^ 


68, 506 


54,922 


25, 651 


19,090 


6.894 







CONCENTRATION OF ECONOMIC POWER 



17681 



Table 9. — Total salaries and other compensation paid to officers and directors of 
principal tobacco processors? 1985-88 — Continued 





Cigar manufacturers 


-Snuff manufacturers 




General 
Cigar Co. 


Porto 

Rican 

American 

Tobacco 


Consoli- 
Cigar 

Corpora- 
tion 
Co. 


Bayuk 

Cigars, 

Inc. 


United 

States 

Tobacco 

Co. 


American 
Snuff Co. 


George W. 

Helme 

Co 


Total salaries and other 
compensation: 
1935 


$236, 576 
190,756 
131,029 
130,630 


$124. 279 
80,000 
80,000 
89.836 


$167, 906 
154, 474 
129, 789 
135, 420 


$143, 481 
185, 962 
189, 106 
199, 973 


$358,202 
448,928 
348,284 
343, 308 


$213, 820 
209,282 
222,000 
260,320 


$194,311 


1936 


185. 575 


1937 - 


167, 314 


1938 


175,911 






Annual average. . . 
Number of officers and 
directors: 
1935 


172,247 

11 
11 
11 
10 


93,528 

10 
8 
8 

12 


146,897 

12 

13 
13 
13 


179, 630 

12 
11 
11 
10 


374, 680 

11 
11 
11 
11 


226, 355 

10 
10 
10 
15 


180, 777 
9 


1936 

1937 


9 
9 


1938 


9 






Average compensation 
per officer and direc- 
tor: 
1935 


21,506 
17, 341 
11,911 
13.0G3 


12,427 
10,000 
10,000 
7,486 


13,992 
11,882 
9,983 
10. 417 


11,956 
16,907 
17, 191 
19,997 


32,563 
40,811 
31,662 
31,209 


21,382 
20,928 
22,200 
17,534 


21,590 


1936 


20, 916 


1937 


18,590 


1938... 


19,545 






Annual average 
(weighted) 


16,023 


9,845 


11, 521 


16, 330 


34,062 


20,120 


20,080 



Table 9 shows that for the three largest companies the average aggregate remu- 
neration to the officers and directors of American Tobacco Co. of $1,233,108 during 
the 4 years 1935-38 was nearly twice the average amount paid by Liggett & Myers 
Tobacco Co., and about four times the amount paid by R. J. Reynolds Tobacco Co. 
In terms of total compensation per officer and director, the average amount paid 
by these companies was $68,506 for American Tobacco Co., $54,922 by Liggett & 
Myers, and $25,651 by the Reynolds Co. It will be noted that the average total 
compensation per officer and director of each of these companies was larger than 
for any of the other companies shown in the table. 

It has been explained that each of the three largest companies are of about the 
same relative importance and size, and during the year 1937 their combined sales 
amounted to 74 percent of the total sales of all companies covered in the inquiry. 
It was also pointed out that the average rate of profit on total investment for each 
company during the years 1917-37 was 23.05 percent for R. J. Reynolds Tobacco 
Co., 17.16 percent for American Tobacco Co., and 16.7 percent for Liggett & Myers 
Tobacco Co. The following additional comparison' is therefore significant with 
regard to the total compensation paid by each of these companies to its highest- 
paid officer during each of the years 1935-38: 

Total salaries and other compensation 



Year 


President, 1 

American 

Tobacco Co. 


President,' 
Liggett & 
Myers To- 
bacco Co. 


Chairman » 
of the board, 

R. J. Rey- 
nolds Tobac- 
co Co. 


1935. 


$212. 199 
246. 173 
380, 976 
331, 348 


$74,340 
95. 705 
90,378 
87. 173 


$60,000 


1936 


60,000 


1937 


70,000 


1938 


160,000 






Average 


292, 674 


86,899 


72,500 







' George W. Hill. 

' C. W. Toms for 1935, and J. W. Andrews thereafter 

J S. Clay Williams. 



17682 



CONCENTRATION OF ECONOMIC POWER 



The payments shown above for George W. Hill, president of American Tobacco 
Co., while large, do not compare with the compensation he received from the 
company in some of the earlier years. For instance, in 1929, he received $605,613; 
in 1930, $1,010,567; and in 1931, $1,051,630. The huge salaries and bonuses 
received by Mr. Hill and other officers of the company, together with other 
emoluments received by them under an "employees' stock subscription plan" 
gave rise to a series of stockholders' suits as explained hereinafter. 

The files of the Securities and Exchange Commission, from which the salary 
data for the years 1935-38 were obtained, did not give the segregation of the 
total remuneration paid to all of the officers and directors of the various companies 
as between salaries and other compensation. However, such a segregation was 
available in some instances for each person among the officers and directors 
receiving one of the three largest aggregate amounts of remuneration. Tables 10 
to 21, which follow, show for each officer and director of each company for which 
the information was available the salaries and other compensation paid during 
the years 1935-38. 



Table 10. 



-Salaries and other compensation paid to principal officers of the 
American Tobacco Co., 1935-38 



Name and position 


1935 


1936 


1937 


1938 


George W. Hill, president: 


$120, 000 
92,199 


$120,000 
126, 173 


$120,000 
260,976 


$120,000 




211,348 








212. 199 


246,173 


380,976 


331,348 


Thomas Taylor, vice president and auditor: > 


50,000 
55,669 


























105. 669 








Charles F. Neiley, vice president: 


50,000 
55,369 


50,000 
75,692 


50,000 
166,585 














105, 369 


125, 692 


206,585 




Paul M. Habn, vice president: 




50,000 
75, 742 


50,000 
156,685 


50,000 






126,869 












125, 742 


206,585 


176,859 


Vincent Riggio, vice president: 








50,000 










126,809 




















176,809 













' Resigned June 17, 1936. 

Table 11. — Salaries and other compensation paid to principal officers 
Liggett & Myers Tobacco Co., 1935-38 



Name and position 


1935 


1936 


1937 


1938 


C. W. Toms, president: 1 


$35,000 
39,340 










$44,914 














74, 340 


44, m 






J. W. Andrews, vice president: 5 


25,000 
39,340 


28,333 
C7, 372 


$3*, 000 
56,378 


$35,000 




52, 173 








64.340 


95, 705 


90,378 


87, 173 


W. D. Carmlchael, vice president: 


25,000 
39, 340 


25,000 
67. 372 


25,000 
55, 378 


25,000 




52, 173 








64,340 


92, 372 


80,378 


77, 173 



> Deceased. 

a Became president in 193C.. 



CONCENTRATION OF ECONOMIC POWER 



17683 



Table 11. — Salaries and other compensation paid to principal officers 
Liggett & Myers Tobacco Co., 1935-38 — Continued 



Name and position 


1935 


1936 


1937 


1938 


W. W. Flowers, vice president: 3 


$25, 000 
39. 340 










$44, 914 














64, 340 


44,914 






E. H. Thurston, vice president: 


25, 000 
39, 340 


25, 000 
67, 372 


$25. 000 
55, 378 


$25, 000 




52, 173 






Total - 


64, 340 


92. 372 


80, 378 


77, 173 






Q. VV. Whitaker, vice president: 


25, 000 
39, 340 


25, 000 
67, 372 


25,000 
55, 378 


25, 000 




52, 173 






Total - 


64,340 


92, 372 


80, 378 


77, 173 












25,000 
55, 378 






25.000 






30, 457 


52, 173 








Total -.. 




30, 457 


80. 378 


77, 173 


B. F. Few, vice president: 






25.000 

55, 378 


25,000 








52, 173 










Total 






80, 378 


77, 173 











3 Became chairman of the board in 1936. 

'* Was vice president in 193(3 and became vice president and treasurer in 1937. 

Table 12. — Total compensation paid to principal officers, R. J. Reynolds Tobacco 

Co., 1935-38 



Name and position 



B. Clay Williams, chairman of board . 

las. A. Gray, president 

T. H. Kirk, vice president ' _ 

J. W. Glenn, vice president 



$60, 000 
50,000 
35, 000 



$60, 000 
50, 000 
35,000 



$70,000 
50, 000 
23, 750 



$100, 000 
50,000 



25,000 



1 Diseased. 



Table 13. Total compensation paid, to principal officers of 1\ Lorillard Co., 

Inc., 1935-38 



Name and position 



Benjamin L. Belt, president '-_ 

IX H. Ball, vice president 2 

Everett Meyer, vice president 3 

G. H. Hummell, vice president 

E. J. Bush, vice president and comptroller. 



$50, 000 
30, 000 
52, 500 



$50, 000 
30, 000 



,$37, 500 



30, ono 
27,500 



1938 



$30, 000 



30,000 
30, 000 



1 Mr. Belt died Sept. 15, 1937, and in accordance with the custom of the company it paid his widow $25,000. 

2 Elected president, 1938. 

3 Resigned, 1935. 



17684 



CONCENTRATION OF ECONOMIC TOWER 



Table 14. — Total compensation paid to principal officers of Axton-F isher Tobacco 

Co., 1935-38 



Name and position 



E. D. Axton, president and secretary and treasurer 

E. J. Helck, vice president-- 

R. L. Axton, sales manager : 

M. Amando, vice president 

E. Q. Weymouth, vice president 

C. Palmer Parker, treasurer .. 



$8, 625 
5,750 
5,750 



$13, 421 
13,421 
13,013 



$12,000 
12,000 
12,000 



$22, 131 
22, 131 
22, 131 



Table 15. 



■Total compensation paid to principal officers of General Cigar Co., 
1935-38 



Name and position 



Fred Hircbhorn, president ' 

William Best, vice president 

Bernhardt O. Meyer, vice president J . 

Milton H. Esberg, vice president 

Richard C. Bondy, Jr., vice president. 



$75, 182 
37, 591 
37, 591 
37, 591 
36, 935 



$59, 879 
29, 939 
29, 939 
29, 939 
29, 939 



$22, 738 
23, 452 
26, 904 
23, 452 
23, 452 



$20,000 
24,000 
28,000 
24,000 
24, 000 



1 Became chairman of board, 1937. 

2 Became president, 1937. 



Table 16. 



Total compensation paid to principal officers of Porto Rican American 
Tobacco Co., 1935-38 



Name and position 



W. E. Waterman, chairman, board of directors. 
J. M. Porter, president 

C. H. Knapp, vice president 

T. C. Breen, president ' 

D. A. Jenks, vice president .. 



$31,666 
40,000 
18,000 



$25, 000 
25,000 
16,000 



$25, 000 
25, 000 
16,000 



$12, 797 



20, 850 
17,416 



1 Became president, 1938. 



Table 17. 



-Total compensation paid to principal officers of Consolidated Cigar 
Corporation, 1935-38 



Name and position 



1938 



Julius Lichte^atein, president 

Frank P. Will, executive vice president 

Louis Cahn, vice president and secretary 

Duncan Cameron Menzies, general sales manager . 
Alfred M. Silverman, treasurer.. 



$90,000 
32,000 
13,500 



$67,500 
29,000 
10, 875 



$60,000 
28, 000 



$60, 000 
28,000 



Table 18. 



-Total compensation paid to principal officers of Bayuk Cigars, Inc., 
1935-38 



Name and position 



Harry S. Rothchild, president 

Samuel Bayuk, chairman, board of directors . 

Harry P. Wurman, vice president 

A. Joseph Newman, vice president 

Harry C. Carr, vice president 



$36, 120 
22, 153 
21, 578 



$50, 448 



36, 161 
31, 870 



$46, 032 



38, 053 
32, 120 



$55, 125 



56, 407 
"34~915 



CONCENTRATION OF ECONOMIC POWER 



17685 



Table 19. — Salaries and other compensation paid to principal officers of United 
States Tobacco Co., 1935-38 



Name and position 


1935 


1936 


1937 


1938 


John M. Devoe, president: 


$35,000 
30, 463 


$35, 000 
47, 246 


$35,000 
32, 839 


$35,000 




31, 349 






Total - 


65, 463 


82, 246 


67,839 


66, 349 






J. W. Peterson, vice president: 


' 39, 564 


10,000 
45, 852 


11,696 
31,841 


12,412 




30, 424 








Totai 


39, 564 
i 41, 824 


55, 852 

20,500 
33, 072 


43, 537 
i 43, 496 


42, 836 


0. C. Hank, vice president: 


i 42, 424 














Total 


41,824 


53, 572 


43, 496 


42, 424 







' No segregation between salaries and other compensation. 

Table 20. — Total compensation, paid to principal officers of American Snuff Co., 

1935-38 



Name and position 



Martin J. Condon, president 

W. C. Hunt, vice president 

F. N. Smith, vice president 

James E. Harwood, assistant manager 

Gilbert B. Wilson, Jr., department manager. 

Joseph Trinner, Jr., department manager 

M. E. Finch, vice president 

J. Q. Brown, assistant auditor _.. 



$54, 080 

29,080 

29, 080 

7,500 

8,350 

8,350 



$51,070 
26, 070 
26, 070 
9,000 
8, 350 
8,350 



$50,000 



25,000 
9,000 
8,350 
8,350 

40, 000 



$51, 297 



26, ^97 



8,900 
8,900 
31, 297 
8,020 



Table 21.- 



Total compensation paid to principal officers of George W. Helme Co., 
1935-38 



Name and position 



John C. Flynn, president 

C. W. Bumstead, president and vice president '. 

L. A. Bengert, vice president and treasurer 

O. A. Jenny, vice president 



$56, 705 
45, 102 
41,602 



1936 



$60, 858 
36, 929 
31,929 



$50,323 
31,661 
26, 661 



$54, 755 
33, 877 
26, 878 



1 Became president, 1937. 

Stockholder's Suits Against American Tobacco Co., Its President, George 

W. Hill, and Others 

In 1931 Richard Reid Rogers, a stockholder, instituted a series of suits pro- 
testing the huge bonuses paid to George W. Hill and other officers of American 
Tobacco Co. and to a plan which had been initiated by them for the allotment of 
stock to them and other worthy employees, as determined by the president, under 
an "Employees' stock-subscription plan." 

The stockholder complained that for many years the officers of the company 
had received large annual fixed salaries as-well as large annual cash profit-sharing 
bonuses paid under a bylaw of the company adopted in 1912. The stockholder 
maintained that the bylaw was invalid and that even if valid the amounts paid in 
accordance with its provisions were unreasonably large and therefore subject to 
revision by the courts. He contended that the courts should determine the fair 
and reasonable compensation of each of the individual defendants for the years 
1921-30, and that each be compelled to account for and pay over to the company 
any amounts received in excess of fair and reasonable compensation. 

Rogers also sought to restrain the company from issuing stock pursuant to the 
employees' stock subscription plan. This plan was adopted at a stockholders' 
meeting on July 30, 1930; and the resolution of thr board of directors recommend- 



1768G CONCENTRATION OF ECONOMIC POWER 

ing a reduction in the par value of the common stock from $50 per share to $20 
per share was also adopted. 

Under the stock-subscription plan, 56,712 shares of unissued common stock B of 
the corporation were distributed in accordance with the recommendations made 
by the president of the company. Of this number 32,370, or nearly 60 percent 
of the total, were allotted to the officers and directors, of which 13,440 shares, 
or 24 percent of the total, were allotted to the president. The remaining 24,342 
shares were allotted in relatively small amounts to 525 employees. The subscrip- 
tion price was the par value of the stock, $25 a share. On January 28, 1931, when 
the allotment of stock was made, its market price was $112 per share, more than 
four times the subscription price. It was then paying and has since paid dividends 
at the annual rate of $5 per share, sufficient to pay the subscription price in 5 
years. Valuing the subscription privilege by the difference between the sub- 
scription price and the market value of the shares, the president received by the 
allotment $1,169,280 in addition to his annual compensation of more than a 
million dollars. The stock subscription rights awarded the five vice presidents of 
the company, similarly valued, amounted to $1,451, 595. 7 

The stockholder's suits were carried to the Supreme Court of the United States. 
In the case of Rogers v. Hill et al., with regard to the validity of the bylaw under 
which a percentage of the profits were paid as a bonus to officers of the company, 
the Supreme Court of the United States held (289 U. S. 591, 592) : 

While the amounts produced by the application of the prescribed percentages 
give rise to no inference of actual or constructive fraud, the payments under the 
bylaw have by reason of increase of profits become so large as to warrant investi- 
gation in equity in the interest of the company. Much weight is to be given to 
the action of the stockholders, and the bylaw is supported by the presumption of 
regularity and continuity. But the rule prescribed by it cannot, against the 
protest of a shareholder, be used to justify payments of sums as salaries so large 
as in substance and effect to amount to spoliation or waste of corporate property. 
The dissenting opinion of Judge Swan indicates the applicable rule: "If a bonus 
payment has no relation to the value of services for which it is given, it is in reality 
a gift in part and the majority stockholders have no power to give away corporate 
property against the protest of the minority."' * * * The facts alleged by 
plaintiff are sufficient to require that the district court, upon a consideration of all 
the relevant facts brought, forward by the parties, determine whether and to what 
extent payments to the individual defendant under the bylaw constitute misuse 
and waste of the money of the corporation. * * * 

The decree of the circuit court of appeals is reversed, the decree of the district 
court dismissing the bills on the merits is vacated, and the case is remanded to the 
district court with directions to reinstate its decree granting injunction pendente 
lite and for further proceedings in conformity with this opinion. 

In the case of Rogers v. Guaranty Trust Company of New York, et al., Trustees, 
the stockholder sought to enjoin the defendants from carrying out the employees' 
stock subscription plan and having the transaction declared void and canceled 
and restitution made to American Tobacco Co. The district court of New York 
dismissed the complaint without prejudice on the grounds that it did not have 
jurisdiction since American Tobacco Co. was a New Jersey corporation doing 
business in that State (60 Fed., 2d. 106). On appeal it appears that the circuit 
court of appeals decided the case on its merits and said the bill of complaint was 
properly dismissed by the district court (60 Fed., 2d, 114). The Supreme Court 
of the United States reversed the circuit court of appeals so far as its judgment on 
the merits of the case was concerned and affirmed the judgment of the district 
court that it was without jurisdiction. The Supreme Court of the United 
States held (288 U. S. 133) : 

"* * * As the circuit court of appeals considered and decided the merits of 
the case, its judgment is reversed, the judgment of the district court entered upon 
its mandate is vacated and the case will be remanded to the district court with 
directions to reinstate the earlier judgment dismissing the bills of complaint 
without prejudice." 

According to the New York Times of July 14, 1933, litigation over the bonuses 
and stock allotments ended on July 13 when compromise settlements were reached. 
Under the settlements, it was stated that the allotment of 27,500 shares of the 
American Tobacco Co.'s stock to officers and employees was to be rescinded and 
the profit-sharing plan under which bonuses had been paid to the officers was to 

7 Dissenting opinion uf Mr. Ju tiee Stone in Rog-rs v. luarantee Trust Company, et at., United States 
Reports, vol. 288, p. 133. 



CONCENTRATION OF ECONOMIC POWER 17687 

be modified. This modification provided for a graduated scaling down of the 
bonuses based on profits in the future. 

Former Judge Martin T. Manton, who wrote the decisions by the circuit court 
of appeals favoring the company and its officers in these suits, was convicted 
in June 1939 of the charge of conspiracy to sell justice and was sentenced to 2 years 
in jail and fined $10,000. According to the press, Manton testified that while the 
suits were pending in his court hs approached Louis Sampter Levy, formerly of 
the law firm of Chadbourne, Stanchfield & Levy, counsel for the tobacco compan}' 
in the suits, for a loan of $25,000 and subsequently received the better part of a 
loan in 10 times that amount from Lord & Thomas, advertising agents for Ameri- 
can Tobacco Co., through James J Sullivan, an associate of Manton's in certain 
business ventures. 

These revelations led to disbarment proceedings against Levy and Paul M. 
Hahn, attorney and vice president of American Tobacco, who it is stated arranged 
for the loan to Manton. It was also stated in the press that Albert D. Lasker, 
president of Lord & Thomas, declared that he provided the $250,000 for the loan 
at the request of Levy and Hahn, unaware of the true nature of the loan and with 
the understanding that it would be repaid by American Tobacco Co. The loan 
was never repaid according to a statement of John T. Cahill, United States prose- 
cuting attorney. 

In the disbarment proceedings it appears that Hahn testified that American 
Tobacco Co. spent almost $1,000,000 in settlement of the stockholder's suits 
against the company. He explained that $263,000 was paid by the company to 
Mr. Rogers, who brought the suits, and an additional $262,601 was placed in 
escrow by the company to cover his income tax, and that $320,000 was paid to the 
firm of Chadbourne, Stanchfield & Levy, counsel for the company. 



17688 



CONCENTRATION OF ECONOMIC POWER 








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CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC TOWER 



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CONCENTRATION OP ECONOMIC POWER 



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CONCENTRATION OP ECONOMIC POWER 



17715 



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17716 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



17717 





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Part III 

INVESTMENTS, PROFITS, AND RATES OF RETURN 
FOR IRON AND STEEL MANUFACTURERS 



17739 



124491— 41— pt. 31 10 



SCHEDULE OF TABLES 



TEXT TABLES 

Page 

1. Participation by subsidiaries of United States Steel Corporation in the 

total United States production of steel ingots and castings, finished 
rolled products, and certain other products, for each of the years 
1913-38 • 17747 

2. Summary of investments, profits and rates of return on the total in- 

vestment, stockholders' investment, and common stockholders' 
equity for the principal steel companies, each year, 1917-38, inclu- 
sive 17754 

3. Comparative average annual investments, profits, and rates of return 

for the period 1917-38, for the principal steel companies 17756 

4. Sources of invested capital oLJbhe principal steel companies in 1917 and 

1938 17757 

5. Rates of return on total investment for the principal steel companies, 

1917-38 - 17760 

6. Rates of return on stockholders' investment for the principal steel 

companies, 1917-38 17761 

7. Rates of return on common stockholders' equity for the principal steel 

companies, 1917-38 17762 

8. Summary of net sales, net income, dividends, and net changes in sur- 

plus for all years within the period 1917-38, and annual averages 
thereof, for the principal steel companies 1 7764 

9. Consolidated net sales by the principal steel companies, 1917-38 17766 

10. Ratios of costs, expenses, and profits to net sales, expressed in cents 

per dollar of net sales, for the principal steel companies for 1936, 

1937, and 1938, and for the period 1917-38 17767 

11. Aggregate remuneration, including salaries and bonuses, paid to offi- 

cers and directors of the principal steel companies, 1935-38 17772 

12. Compensation of the three highest paid officers and directors of United 

States Steel Corporation, 1935-38 17773 

13. Compensation of the highest paid officers and directors of Bethlehem 

Steel Corporation, 1935-38 17774 

14. Compensation of the three highest paid officers and directors of Re- 

public Steel Corporation, 1935-38 17774 

15. Compensation of the highest paid officers and directors of Jones & 

Laughlin Steel Corporation, 1935-38 17774 

16. Compensation of the highest paid officers and directors of Youngstown 

Sheet & Tube Co., 1935-38 17775 

17. Compensation of the three highest paid officers and directors of Na- 

tional Steel Corporation, 1935-38 17775 

18. Compensation of the highest paid officers and directors of Inland Steel 

Co., 1935-38 17775 

19. Compensation of the three highest paid officers and directors of the 

American Rolling Mill Co., 1935-38 17775 

20. Compensation of the three highest paid officers and directors of Wheel- 

ing Steel Corporation, 1935-38 17776 

21. Compensation of the three highest paid officers and directors of Otis 

Steel Co., 1935-38 I ■___ 17776 

22. Compensation of the highest paid officers and directors of Pittsburgh 

Steel Co., 1935-38 - 17776 

23. Summary of production of raw, semifinished, and finished products of 

United States Steel Corporation, 1928-38, inclusive 17778 

24. Summary of production of rolled and finished steel products for sale 

for the steel producing and fabricating subsidiaries of the United 
States Steel Corporation, 1917-38, inclusive 17779 

25. Comparison of capacities of United States Steel Corporation and its 

steel producing and steel fabricating subsidiaries in 1917 and 1939- . 17781 

17741 



17742 CONCENTRATION OF ECONOMIC TOWER 

Page 
26. Summary of investments, profits, and rates of return for United States 

Steel Corporation and subsidiaries, 191-7-38 17783 

27 ; Total intangible value included in the assets of United States Steel 
Corporation and the manner in which such value has been written 
off 17794 

28. Statement of disposition of capital, earnings, and other resources of 

the United States Steel Corporation and its subsidiaries for the 
period from January 1, 1917, to December 31, 1938, with effect of 
all intangible values eliminated 17795 

29. Summary of income,' expenses, and surplus for United States Steel 

Corporation, 1917-38 . 17798 

30. Summary of capital expenditures made by United States Steel Cor- 

poration and subsidiaries, 1917-38 17804 

31. Summary of average investment, annual net income, and rates of 

return for the principal steel subsidiaries of the United States Steel 
Corporation, 1 925-38 17806 

32. Summary of investments, profits, and rates of return for the American 

. Sheet & Tin Plate Co., 1925-36 J 17809 

33. Summary of income, expense, and surplus for the American Sheet & 

Tin Plate Co., 1925-36 17811 

34. Summary of investments, profits, and rates of return for the American 

Steel & Wire Co., 1925-38 . 17814 

35. Summary of income, expense, and surplus for the American Steel & 

Wire Co., 1925-38. 17816 

36. Summary of investments, profits, and rates of return for the Carnegie- ' 

^ Illinois Steel Corporation, 1935-38 17818 

37. Summary of income, expenses, and surplus for the Carnegie-Illinois 

Steel Corporation, 1935-38 ,17819 

38. Summary of investments, profits, and rates of return for Carnegie 

Steel Co., 1925-34 17820 

39. Summary of income, expenses, and surplus for Carnegie Steel Co., 

1925-34 1 17822 

40. Summarv of investments, profits, and rates of return for Illinois Steel 

Co., 1925-38 17825 

41. Summarv of income, expenses, and surplus for Illinois Steel Co., 

1925-38 . 17826 

42. Summary of investments, profits, and rates of return for the Columbia 

Steel Co., 1930-38 J 17828 

43. Summary of income, expense, and surplus for the Columbia Steel Co., 

1930-38 17830 

44. Summary of investments, profits, and rates of return for National 

Tube Co., 1925-38 _" . 17832 

45. Summary of income, expenses, and surplus for National Tube Co., 

1925-38 17834 

46. Summary of investments, profits, and rates of return for the Ten- 

nessee Coal, Iron & Railroad Co., 1925-38 17837 

47. Summary of income, expenses, and surplus for the Tennessee Coal, 

Iron & Railroad Co., 1925-38 17839 

48. Summary of investment, net income, and rates of return for trans- 

portation companies and certain other subsidiaries of the United 
States Steel Corporation, 1917-37, inclusive 17845 

APPENDIX TABLES 

1. Active subsidiaries of United States Steel Corporation at December 

31, 1937 17847 

2. Active subsidiaries of Bethlehem Steel Corporation at December 

31, 1937 17848 

3. Active subsidiaries of Republic Steel Corporation at December 31, 

1937. ...i 17849 

4. Active subsidiaries of Jones & Laughlin Steel Corporation at 

December 31, 1937 17850 

5. Active subsidiaries of National Steel Corporation at December 31, 

1937 17850 

6. Active subsidiaries of Youngstown Sheet & Tube Co. at December 

31, 1937 - 17851 

7. Active subsidiaries of Inland Steel Co. at December 31, 1937 17851 



CONCENTRATION OF ECONOMIC POWER 17743 

Page 

8. Active 'subsidiaries of the American Rolling Mill Co. at December 

31, 1937 17852 

9. Active subsidiaries of Wheeling Steel Corporation at December 31, 

1937 •__ 17852 

10. Active subsidiaries of Otis Steel Co. at December 31, 1937 17853 

11. Active subsidiaries of Pittsburgh Steel Co. at December 31, 1937 17853 

12. Summary of investments, profits, and rates of return for Bethlehem 

Steel Corporation and subsidiaries, 1917-38 17854 

12-a. Summary of income, expenses, and surplus for Bethlehem Steel Cor- 
poration and subsidiaries, 1917-38 17856 

13. Summary of investments, profits and rates of return for Republic 

Steel Corporation and subsidiaries, 1917-38 17859 

13-a. Summary of income, expenses, and surplus for the Republic Steel 

Corporation and subsidiaries, 1917-38 17861 

14. Summary of investments, profits, and rates of return for Jones & 

Laughlin Steel Corporation and subsidiaries, 1917-38 17863 

14-a. Summary of income, expenses, and surplus for Jones & Laughlin 

Steel Corporation and subsidiaries, 1917-38 ■_ 17865 

15. Summary of investments, profits, and rates of return for National 

Steel Corporation, 1930-38- 17868 

15-a. Summary of income, expenses, and surplus for National Steel Cor- 
poration, 1930-38 17869 

16. Summary of investments, profits, and rates of return for Youngs- 

town Sheet & Tube Co. and subsidiaries, 1917-38 17870 

16-a. Summary of income, expenses, and surplus for Youngstown Sheet 

& Tube Co. and subsidiaries, 1917-38 17872 

17. Summary of investments, profits, and rates of return for the Inland 

Steel Co. and subsidiaries, 1917-38 _- 17874 

17-a. Summary of income, expenses, and surplus for the Inland Steel Co. 

and subsidiaries, 1917-38 17876 

18. Summary of investments, profits, and rates of return for the Ameri- 

can Rolling Mill Co. and subsidiaries, 1917-38 ' 17878 

18-a. Summary of income, expenses, and surplus for the American Roll- 
ing Mill Co. and subsidiaries, 1917-38 17880 

19. Summary of investments, profits, and rates of return for Wheeling 

Steel Corporation and subsidiaries, 1917-38 17883 

19-a. Summary of income, expanses, and surplus for Wheeling Steel Cor-. 

poration and subsidiaries, 1917-38 17885 

20. Summary of investments, profits, and rates of return for Otis Steel 

Co. and subsidiaries, 1919-38 17888 

20-a. Summary of income, expenses, and surplus for Otis Steel Co. and 

su bsidiaries, 1919-38 1 7890 

21. Summary of investments, profits, and rates of return for Pittsburgh 

Steel Co. and subsidiaries, 1917-38 17892 

21-a. Summary of income, expenses, and surplus for Pittsburgh Steel 

Co. and subsidiaries, 1917-38 17894 



INVESTMENTS, PROFITS, AND RATES OF RETURN FOR IRON 
AND STEEL MANUFACTURERS 

Introduction 

This report deals with the investments, profits, and operations of 11 companies 
which supply the bulk of the demand for iron and steel products. Their opera- 
tions constitute integrated systems from raw material to finished product, and in- 
clude the production of iron ore, pig iron, coal, limestone, crude steel, castings, 
and a great variety of semifinished and finished steel products. These com- 
panies are United States Steel Corporation, Bethlehem Steel Corporation, Re- 
public Steel Corporation, Jones & Laughlin Steel Corporation, National Steel 
Corporation, Youngstown Sheet & Tube Co., Inland Steel Co., American Rolling 
Mill Co., Wheeling Steel Corporation, Otis Steel Co., and Pittsburgh Steel Co. 

The investments, profits, and rates of return for these companies, individually 
and as a group, are presented for each of the years 1917-38 for which the informa- 
tion was available. Comparisons are made of returns on investments and of 
sales and operating results for the respective companies; and their position in the 
industry is indicated in terms of production, capacity, investment, and volume of 
business. Information is also presented with respect to salaries and other com- 
pensation paid in recent years to officers and directors of these companies. 

The financial information, which is the basis for the discussion of investments, 
profits, and rates of return, was obtained from certified written reports submitted 
by the companies in answer to questionnaires, and from their published annual 
reports. In the case of United States Steel Corporation, the dominant company 
in the industry, the study was supplemented by an extensive field examination at 
the offices of the company. For this reason a separate section of this report is 
devoted to the investments, profits, and operations of this company and its 
subsidiaries. 

History ^nd Business of Companies Under Review 

The 11 companies whose operations are the subject of this report own 84 per- 
cent of the steel-making capacity of the country. The annual capacity in gross 
tons for each company and its subsidiaries and the percentage of each company's 
capacity of the total for the industry arenas follows: 



Name of company 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation 

Jones & Laughlin Steel Corporation 

National Steel Corporation 

Youngstown Sheet & Tube Co 

Inland Steel Co 

American Rolling Mill Co , 

Wheeling Steel Corporation 

OtisSteelCr, . 

Pittsburgh Steel Co 

Total 



Annual ca- 




61, 318, 70C 



Percent 
of total 
for in- 
dustry 



i Annua) capacities in gross tons of steel ingots and steel for castings as reported for the industry in the 
1938 edition of the Iron and Steel Work? Directory of the United States and Canada. Total cap; ■<■■ 
ttie industry reported to be 73,047,892 gross tons. 



The history and nature of the business conducted by each of the companies 
listed above are briefly set forth below. 

17745 



17746 CONCENTRATION OF ECONOMIC POWER 

UNITED STATES STEEL CORPORATION 

The United States Steel Corporation, the dominant company in the industry, 
was "incorporated in New Jersey on February 25, 1901, as a holding company 
to acquire the capital stocks giving control of the following companies: 

Carnegie Co. 

Federal Steel Co. 

National Steel Co. 

American Steel and Wire Co. 

American Sheet Steel Co. 

American Tin Plate Co. 

American Steel Hoop Co. 

American Bridge Go. 

National Tube Co. 

Shelby Steel Tube Co. 

Lake Superior Consolidated Iron Mines 

According to the report of the Commissioner of Corporations on the steel 
industry, • the formation of United States Steel Corporation was the culmination 
of a consolidation movement which was begun in the late 90's. Great consolida- 
tions, one after another, were effected in the principal branches of the industry. 
This movement toward industrial consolidation was characterized by the restric- 
tion of competition through combination, the integration or linking up of produc- 
tive processes through acquisition under one control of raw materials and manu- 
facturing plants, and the creation of a large amount of inflated securities and 
attendant promotional profits. 

According to the report, the three great companies dominating the production 
of crude and semi-finished Heel at the time of the organization of United States 
Steel Corporation were the Carnegie Co., the Federal Steel Co , and National 
Steel Co. Six other large concerns, the American Steel & Wire Co., American 
Sheet Steel Co., American Tin Plate Co., American Steel Hoop Co., American 
Bridge Co., and National Tube Co. controlled the lighter finished products. Not 
one of these concerns was entirely self-sufficient. The secondary group was 
dependent upon the primary group for its crude steel, and the primary group was 
largely dependent upon the secondary group for a market for is products. 

These great concerns almost simultaneously began a movement for self-suffi- 
ciency. The secondary group began acquiring ore reserves and crude steel plants 
and the primary group, finding their chief customers turning i»to rivals, began the 
manufacture of finished products. These efforts toward integration threatened 
to result in great duplication of steel producing and finishing capacity of the 
country and to involve them also in the invasion of each other's business. In 1900 
the Carnegie Co. threatened to erect a great tube plant near Cleveland, thus 
invading the field of finished manufacture. Steel men and associated financial 
interests regarded this situation as dangerous and efforts were begun to merge the 
conflicting interests into a great corporation and avert a threatened "steel war." 
This led to the formation of United States Steel Corporation with a total capitali- 
zation of over $1,402,000,000 to acquire the capital stocks of the companies listed^ 
above and to provide it with working capital. 

The report of the Commissioner of Corporations also states that the actual value 
of the Steel corporation's entire tangible properties at its formation was not more 
than $700,000,000, or about one-half its capitalization. More specifically it was 
estimated that of the total capitalization of the company at its formation, $720,- 
846,817 represented intangible values, and $682,000,000 represented tangible 
assets. Recognition was given to this estimate as evidenced by the following 
statement appearing in the annual report of the United States Steel Corporation 
to its stockholders for the year 1938: 

"As far back as 1917 when the war-time excess-profits tax laws were in force, 
the Internal Revenue Department in its calculations to determine and verify 
invested capital for tangibles accepted a plan designed to fix such investment 
values at the date of the formation of the corporation on April 1, 1901. This plan 
was based upon values appraised some years prior to 1917 by the United States 
Department of Commerce and Labor, Bureau of Corporations. With the enact- 
ment of the Federal Securities Exchange Act of 1934 and the regulations promul- 
gated thereunder, the necessity developed for a segregation in the accounts of the 
intangible values. Accordingly, the plan accepted by the Internal Revenue 

' Part 1, 1911. 



CONCENTRATION OF ECONOMIC POWER 



17747 



Department, as above outlined, was utilized as the initial basis from which to 
obtain this separation of intangible values." 

By December 31, 1938, the United States Steel Corporation had written down to 
a nominal value of $1 all of the $720,846,817 of intangible values included in its 
assets at the time of its organization together with $47,824,205 of additional 
intangible values resulting from subsequent acquisition. 

Enormous profits were made from the flotation of securities of United States 
Srteel Corporation at the time of its organization. The underwriting syndicate 
alone, of which J. P. Morgan & Co. were the managers, cleared a cash profit of 
about $62,500,000. 

As a result of this great industrial combination, there was centered in one 
concern approximately 43 percent of the pig iron production of the country, 
65 percent of the production of steel ingots and castings, and 50 percent of the 
production of all kinds of finished rolled products. 2 However, the position of 
United States Steel Corporation with respect to its participation in the industry 
has steadily declined since that time, particularly with regard to the production 
of steel ingots and castings. For example, by 1938 its participation in the industry 
had fallen to 33 percent of the* production of steel ingots and castings and 29 
percent of the production of finished rolled products. 

Table 1, which follows, gives the steel corporations participation in the industry 
with regard to the production of steel ingots and castings, finished rolled products, 
and certain other products, for each of the years 1913-38. The source of the 
information for the percentages shown in the table was the annual statistical 
reports of the American Iron and Steel Institute. 



Table 1. — Participation by subsidiaries of United Stales Steel Corporation in the 
total United States production of steel ingots and castings, finished rolled products 
and certain other products, for each of the years 1918-88 





Steel 
ingots 
and 
cast- 
ings 


Finished rolled steel products 


Tin 
plate 

and 
terne 
plate 


Wire 
nails 




Year 


Steel 
rails 


Struc- 
tural 
shapes 


Plates 


Sheets, 
black 
plate, 
strip ' 


Wire 
rods 


Other 
finished 
rolled 
prod- 
ucts i 


Total 
finished 
rolled 
prod- 
ucts 


Tubes 
and 
pipe i 


1913 

1914.. 

1915. 

1916 

1917 

1918 

1919 

1920 

1921 

1922.. 

1923 

1924 

1925 

1926 ... 

1927 

1928 

1929 

1930 

1931 

1932 

1933 

1934 

1935 

1936 

1937 

1938 


Per- 
cent 
53.2 
50.3 
50.9 
48.9 
45.0 
44.1 
49.6 
45.8 
55.4 
45.2 
45.2 
43.4 
41.6 
42.1 
41.1 
39.0 
38.8 
41.2 
38.9 
36.0 
34.6 
33.2 
32.6 
35.4 
36.6 
33.2 


Per- 
cent 
55.5 
50.6 
51.8 
54.4 
54.8 
58.3 
62.0 
58.1 
68.2 
56.9 
57.3 
57.6 
55.0 
55.3 
53.3 
52.1 
50.6 
51.2 
52.0 
46.9 
56.3 
52.2 
58.8 
54.9 
52.8 
54.5 


Per- 
cent 
54.0 
47.5 
46.1 
49.4 
47.9 
48.4 
43.8 
43.9 
47.5 
46.3 
48.0 
42.8 
40.7 
39.9 
38.8 
39.9 
41.8 
44.6 
45.4 
43.9 
39.1 
42.2 
40.4 
43.6 
44.7 
44.4 


Per- 
cent 
53.1 
47.3 
49.8 
51.5 
46.9 
50.0 
50.2 
46.4 
56.5 
51.6 
54.9 
54.4 
51.1 
52.0 
52.4 
49.8 
51.9 
54.5 
50.0 
41.7 
30.6 
33.4 
33.5 
36.8 
39.8 
30.6 


Per- 
cent 
44.8 
39.3 
41.0 
42.8 
39.0 
33.9 
37.7 
32.9 
39.5 
31.4 
31.5 
27.0 
26.1 
28.3 
26.4 
26.0 
22.8 
23.7 
20.8 
19.9 
23.3 
22.5 
21.9 
22.3 
24.2 
24.3 


Per- 
cent 
58.4 
56.9 
60.3 
58.9 
57.8 
56.5 
55.4 
56.0 
55.1 
50.6 
51.9 
48.5 
47.4 
49.6 
47.4 
46.5 
45.7 
46.1 
45.3 
44.2 
41.6 
40.6 
40.1 
39.5 
36.9 
31.0 


Per- 
cent 
39 9 
37.9 
37.8 
37.0 
34.8 
33.8 
38.7 
35.9 
45.8 
39.6 
37.7 
35.8 
34.7 
34.1 
33.2 
29.9 
31.7 
32.2 
31.3 
26.6 
26.9 
23.7 
24.2 
27.6 
29.2 
27.5 


Per- 
cent 
47.8 
44.1 
44.6 
44.4 
42.0 
41.7 
44.6 
41.6 
50.5 
43.0 
42.9 
40.2 
38.4 
38.9 
37.7 
35.2 
35.4 
?0.6 
34.1 
29.6 
29.0 
28.4 
27.7 
29.7 
31.3 
29.2 


Per- 
cent 
58.6 
53.6 
54.0 
40.3 
48.6 
48.3 
48.4 
45.1 
48.8 
43.5 
50.1 
45.3 
46.3 
46.6 
40.1 
39.9 
38.8 
37.5 
32.4 
30.4 
34.0 
34.1 
34.1 
32.5 
32.5 
35.5 


Per- 
cent 
44.6 
46.5 
47.6 
54.4 
54.5 
53.3 
51.9 
54.0 
48.1 
45.1 
45.9 
40.2 
40.8 
45.4 
42.0 
39.6 
39.0 
44.6 
43.4 
42.4 
37.6 
40.6 
40.1 
38.6 
39.1 
34.3 


Per- 
cent 
50.4 
44.8 
45.5 
47.1 
45.5 
46.1 
46.4 
43.4 
46.8 
39.4 
41.7 
40.5 
39.2 
40.6 
41.0 
35.9 
34.8 
36.1 
35.1 
28.5 
29.3 
28.4 
27.8 
31.8 
31.5 
29.-3 



1 In production statistics prior to year 1929; strip was not clearly classified, and accurate figures are not 
available. Apparently, the greater part of strip as defined in recent years was included in "Other finished 
finished rolled products." For years 1929 to 1938, strip production is included with sheets. 

2 Electric welded pipe not included. 



s Computed from tonnages appearing in annual statistical report of the American Iron and Steel Institute 
for 1917, p. 67. 



17748 



CONCENTRATION OF ECONOMIC POWER 



The tonnage basis for the percentages of production of steel ingots and castings 
and for the percentages of production of total finished rolled products is given in 
the following tabulation. This tabulation compares the tonnage production of 
the subsidiaries of the United States Steel Corporation of steel ingots and castings 
and of finished rolled steel products with such production for the industry as a 
whole for each of the years 1913 to 1938. 

Comparison of production of steel ingots and steel for casting, and production of rolled 
and finished products for the steel industry and for the United States Steel Corpora- 
tion, 1913-38 



• 


Production of steel 
ingots and castings 


Production of finished 
rolled steel products 


Year 


Total for 
the indus- 
try 


United 
States Steel 
Corporation 


Total for 
the indus- 
try 


United 
States Steel 
Corporation 


1913 -. : : ■ . 


Tons 
31,300,874 
23, 513, 030 
32,151,036 
42, 773, 680 
45, 060, 607 
44, 4132, 432 
34, 671, 232 
42, 132, 934 
19, 783, 797 
35, 602, 926 
44, 943, 696 
37, 931, 939 
45, 393, 524 
48, 293, 763 
44, 935, 185 
51, 544, 180 
56, 433, 473 
40, 699; 483 
25, 945, 501 
13,681,162 
23, 232, 347 
26, 055, 289 
34, 092, 594 
47, 767, 856 
50, 568, 701 
28, 349, 991 


Tons 
16, 656, 361 
11, 826, 476 

16. 376. 492 
20, 910, 589 
20, 285, 061 

19. 583. 493 
17, 200, 373 
19, 277, 960 
10, 966, 347 
16, 082, 385 
20, 329, 950 
16, 478, 857 
18, 898, 697 
2C, 306, 668 
18, 486, 444 
20, 105. 749 
21, 868, 816 
16, 726, 472 
10, 082, 398 

4, 929, 236 
8, 046, 995 
8, 660, 309 
11,130,942 
16, 907, 996 
18, 532, 278 
9, 397, 371 


Tons 
24, 791, 243 
18, 370, 196 
24, 392, 924 
32,380,389 
33, 067, 700 
31, 155, 754 
25, 101, 544 
32, 347, 863 
14, 774, 006 
26, 452, 004 
33, 277, 076 
28, 086, 435 
33, 386, 960 
35, 495, 892 
32, 879, 031 
37, 662, 916 
41,069,416 
29, 513, 007 
19, 175, 894 
10,451,088 
16, 735, 086 
18, 969, 506 
23, 964, 552 
33, 801, 379 
36, 766, 389 
20, 985, 563 


Tons 
11,853,639 
8, 101, 228 


1914... 


1915 


10, 870, 446 
14, 365, 342 
13, 894, 521 
12, 991, 829 


1916 

1917 . 

1918. 


1919 

1920 _ 


11,195,303 
■» 13, 457, 171 


1921 . 


- 7, 454, 986 


1922 


11,360,826 


1923....: 

1924 


14, 287, 025 
11,281,441 


1925... 


12, 825, 933 


1926 


13, 817, 820 


1927 


12, 395, 226 


1928 


13, 263, 468 


1929 


14, 531, 358 


1930 


10, 804, 241 


1931... 


6, 538, 980 


1932 


3, 093, 522 


1933 


4, 853, 175 


1934. 


5, 387, 340 


1935 

1936 

1937 


6, 638, 181 
10, 039, 010 
11,507,880 


1938 


6, 127, 784 







Since its organization, United States Steel Corporation has continued to act 
solely as a holding company and has acquired numerous competing and other 
concerns of which the more important were Union Steel Co. in 1902, Clairton 
Steel Co. in 1904, Tennessee Goal, Iron & Railroad Co. in 1907, and Atlas Portland 
Cement Co. and Columbia Steel Co. in 1930. The company and its subsidi- 
aries constitute a highly integrated unit from ore to finished products. 

Through its susbidiaries the company owns vast material resources, including 
coal, limestone, and high-grade iron ore. It operates railroads, shipyards, and 
steamship lines. It manufactures all kinds of iron and steel products, including 
cement, with emphasis on the ordinary open-hearth trade steel for the railroad, 
construction, and other capital goods industries. It is also engaged in the fabri- 
cation of a wide variety of finished products, including bridges, ships, barges, 
railroad, and oil well equipment. The principal producing center has always 
been in Pittsburgh, but important plants are also located in Gary, Cleveland, 
Youngstown, Chicago, Birmingham, San Francisco, and Milwaukee. 

Further details concerning the nature of the operations of the company and its 
subsidiaries appears in the section of the report devoted to the investments, profit, 
and rates of return for the United States Steel Corporation and subsidiaries. 

BETHLEHEM STEEL COEPORATION 

Bethlehem Steel Corporation is the second largest steel company in the United 
States. The first company to bear the name of Bethlehem Steel Gorporation was 
incorporated on December 10, 1904, in New Jersey as successor to United States 
Ship Building Co. This latter company had been organized in 1902. .and owned 
the capital .stock of an old established concern known as Bethlehem Steel Co. and 
the capital stocks of a number of shipbuilding companies specializing in naval 



CONCENTRATION OF ECONOMIC POWER 17749 

vessel construction for the United States and foreign governments. Bethlehem 
Steel Co. specialized in the manufacture of armor plate, gun forgings, and steel 
forgings for marine and stationary engines. 

Charles M. Schwab, who was one of the organizers of United States Steel Cor- 
poration and its first president, promoted the organization of Bethlehem Steel 
Corporation in 1904. For some years prior to that time he desired to go into the 
steel business on his own account and the acquisition of the capital stock of 
Bethlehem Steel Co. in 1901 gave him the opportunity. This led to the organi- 
zation of United States Shipbuilding Co. a year later and in turn to the organiza- 
tion of Bethlehem Steel Corporation in 1904. 

Bethlehem Steel Corporation has since become a thoroughly integrated concern 
from raw materials to finished products. The company expanded rapidly. New 
plants were constructed and numerous competing and other concerns were ac- 
quired from time to time. In 1908 the company organized Iron Mines Co. for 
the purpose of acquiring, holding, mining, and operating iron-ore properties. 
Soon thereafter other companies having iron-ore deposits in Chile and Cuba were 
acquired. In 1913, the company acquired Fore River Shipbuilding Co., Quincy, 
Mass., and Titusville Forge Co., Titusville, Pa., which enabled the company to 
build complete battleships at the Quincy plant. Earlier the company had ex- 
panded shipbuilding operations on the Pacific coast through the subsidiary, Union 
Iron Works Co. 

Substantial growth of Bethlehem Steel Corporation occurred during the World 
War. In 1916 controlling equities in the stocks of Pennsylvania Steel Co. and 
Baltimore Sheet & Tin Plate Co. were acquired. Pennsylvania Steel Co., or its 
predecessors, began operations in 1866 and owned important plants, including the 
Sparrows Point plant, for the manufacture of various types of steel and iron 
products. It also owned blast furnaces, coke ovens, coal properties, and ore 
deposits. Pennsylvania Steel Co. controlled Maryland Steel Co. and other impor- 
tant subsidiaries. 

Late in 1916 and early in 1917 Bethlehem Steel Corporation acquired American 
Iron & Steel Manufacturing Co., Lackawanna Iron & Steel Co., and Lehigh Coke 
Co. 

For the purpose of consolidating the shipbuilding operations the company 
formed, in 1917, Bethlehem Shipbuilding Corporation, Ltd., which took over the 
plants of various shipbuilding companies. About the same time the domestic 
mining operations were consolidated into the newly formed Bethlehem Mines 
Corporation. 

In July 1919 the capital stocks of Cornwall Railroad Co. and Cornwall Iron Co. 
were purchased by Bethlehem Steel Corporation. Elkins Coal & Coke Co., in 
West Virginia, was acquired in 1919 and additional coal lands in West Virginia 
were purchased in 1920. 

Bethlehem Steel Corporation acquired a number of important companies during 
1921, 1922, and 1923. Those acquisitions included Baltimore Dry Docks & Ship- 
building Co., Lackawanna Steel Co., and Midvale Steel & Ordnance Co. and its 
subsidiary, Cambria Steel Co. 

In January 1930 all the plants and business of Pacific Coast Steel Co. and South- 
ern California Iron & Steel Co. were acquired. The fabricating properties of 
McClintic- Marshall Corporation were purchased in 1931. Also during that year 
Bethlehem Steel Corporation purchased the fabricating plants and properties of 
Levering & Garrigues Co., Hay Foundry & Iron Works, Hedden Iron Construc- 
tion Co., and Kalman Steel Co. In 1932 the property of Seneca Iron & Steel Co. 
were purchased. The properties and assets of Williamsport Wire Rope Co. were 
acquired in 1937. 

In a program to consolidate subsidiaries in the interests of economies in manage- 
ment and savings in taxes a merger was effected in 1936 of Bethlehem Steel Cor- 
poration and three of its subsidiaries "with Pacific Coast Steel Corporation. The 
latter company had been incorporated in Delaware in 1919 and at the time of 
the merger its name was changed to Bethlehem Steel Corporation so that the pres- 
ent company is a Delaware corporation, successor to the New Jersey corporation 
of the same name. 

The company and its subsidiaries own extensive ore, coal, and limestone re- 
sources, together with manufacturing properties, railroads, and fleets of ocean 
and lake steamers. The business includes the manufacture of all kinds of iron, 
steel, and related products. It also includes the fabrication and erection of steel 
*or buildings, bridges, and other structures, the construction of railroad cars for 
passenger and freight transportation, and the building and repairing of naval 
and commercial vessels. Producing plants are located in Pennsylvania, Mary- 



17750 CONCENTRATION OF ECONOMIC POWER 

land, New York, Washington, and California. Important .steel-fabricating works 
for the erection of buildings, bridges, and other structures are located in Penn- 
sylvania, New York, New Je'sey, Illinois, and California. Shipbuilding and ship 
repair plants are located at Baltimore and Sparrows Point, Md. ; Boston, Quincy, 
and Braintree, Mass.; and San Francisco, Alemada, and San Pedro, Calif. 

Like the Steel Corporation the bulk of Bethlehem's business has always been 
in steels for the railroad and building industries. 

REPUBLIC STEEL CORPORATION 

Republic Steel Corporation is the third largest steel company and had its begin- 
ning in 1899 as Republic Iron & Steel Co. In 1930 this company and four other 
large companies — Central Alloy Steel Corporation, Donner Steel Co., Berger 
Manufacturing Co., and the Bowine-Fuller Co. — were merged to form Republic 
Steel Corporation. 

The company has had a rapid growth since its organization in 1930, particularly 
with regard to the acquisition of other companies, among the more important of 
which were the Corrigan, McKinney Steel Co., Newton Steel Co., and Truscon 
Steel Co. in 1935, Canton Tin Plate Corporation in 1936, and the Gulf States 
Steel Co. in 1937. 

The corporation and its' subsidiaries are large producers of alloy steels and are 
among the leaders in capacity for stainless steel production. They manufacture 
steel pipe by the electric welding process on a large scale and rank high in the 
production of tin plate, but have little or no capacity in heavier steels, such as 
rails and structurals. Their largest single customer is the automobile industry. 
The system is fairly well integrated and owns huge coal and iron reserves, the 
latter in both the Lake Superior and Birmingham districts. Its principal plants 
are located in Cleveland, Youngstown, Warren, Niles and Canton, Ohio; Buffalo, 
N. Y.; Chicago, 111.; and Birmingham, Ala. 

JONES & LAUGHLIN STEEL CORPORATION 

Jones & Laughlin Steel Corporation was incorporated in Pennsylvania in 
December 1922 as successor to Jones & Laughlin Steel Co., which had been in- 
corporated in Pennsylvania in June 1902 as successor to the former partnership of 
Jones & Laughlins, Ltd., established in 1850. 

The company is the fourth largest steel producer in the country and with its 
subsidiaries forms an integrated system with works at Pittsburgh and Aliquippa, 
Pa., coal properties on the upper Monongahela River, and interests in iron ore, 
steamship, and railroad properties. Although the company manufactures a 
diversified line of iron and steel products, its major product is pipe, structural, and 
railway steel. In May 1939 the company announced an important discovery 
of a method to obtain a uniform quality Bessemer steel with the aid of photo- 
electric cells. 

NATIONAL STEEL CORPORATION 

National Steel Corporation was incorporated in Delaware in November 1929 
as a holding company. It acquired the capital stocks giving control of Wcirton 
Steel Co., Great Lakes Steel Corporation, and certain subsidiaries of the M. A. 
Hanna Co., which owned large ore reserves in the Lake Superior district, freighters ' 
for the transportation of the ore, and plants for the manufacture of iron and steel. 

Weirton Steel Co. had its beginning in 1905 as Phillips Sheet & Tin Plate Co. 
The company's principal producing plants were located in West Virginia and it 
specialized in the manufacture of sheet and tin plate products for all purposes. 
At the time of its acquisition by National it had developed a substantial business 
with the automobile industry. 

Great Lakes Steel Corporation was incorporated in February 1929 for the pur- 
pose of carrying on a steel business in plants to be erected on a tract of land which 
the company owned in the Detroit industrial area. This program was carried 
out and this company's properties, together with those of other subsidiaries of 
National Steel Corporation, constitute the only integrated steel producing unit 
in the Detroit area. 

The acquisition of these companies and their subsequent growth make National 
Steel a well-integrated unit, ranking fifth in ingot capacity and about the third 
largest producer of tin plate. Its plants in the Detroit area produce steel bars, 
strip, sheets, and related products, while its other main plant at Weirton, W. Va., 
produces primarily tin plate and "heavy" steel, such as shapes, plates, and struc- 
tural steel. 



CONCENTRATION OF ECONOMIC POWER 17751 

YOUNGSTOWN SHEET & TUBE CO. 

Youngstown Sheet & Tube Co. was incorporated in 1900 as Youngstown Iron 
Sheet & Tube Co. The name of the company was changed to the present title 
on May 5, 1905. 

Youngstown Sheet & Tube Co. is about the sixth largest domestic steel producer 
in terms of ingot capacity. About two-thirds of the capacity is centralized in 
the Youngstown district of Ohio and the remainder in the Chicago area. The 
company is well integrated and controls coal, iron ore, and limestone reserves 
which are reported to be sufficient to last about 35 years. 

The company's operations were expanded considerably in 1923 by the acquisi- 
tions of plants and other assets of Brier Hill Steel .Co. and Steel & Tube Co. 
of America. A considerable amount has also been spent on plant improvements 
and new equipment in the last few years with the expansion of the business into 
the "light" steel lines, notably sheet and strip steel for the automobile- and house- 
hold-equipment industries. It is estimated that pipe and conduit make up 31 
percent of capacity; sheets and strip, 34 percent; tin plate, 7 percent; plates, 3 
percent; merchant bars, light structural shapes, railroad tie plates, and track 
spikes, 15 percent; wire rods and other wire products, 8 percent; and slabs, billets, 
skelp, and sheet bars, 2 percent. 

INLAND STEEL CO. 

Inland Steel Co. was incorporated in Delaware in February 1917 as successor 
to an Illinois company of the same name established in 1893. 

The company is fully integrated, with operations varying from the production 
of raw material requirements to the fabrication and distribution of finished prod- 
ucts. The principal iron and steel producing properties are located along the 
southern shore of Lake Michigan at Indiana Harbor, Ind., in the great Chicago- 
Gary industrial area. The company also owns or controls important iron ore, 
coal, and limestone properties as well as facilities for the fabrication and distri- 
bution of a diversified line of products. It is estimated that approximately 60 
percent of the finished steel products capacity is available for the production of 
so-called light products, such as sheets, strip, tin plate, bars, etc., and 40 percent 
is available for the production of the so-called heavy products, such as shapes, 
plates, rails, etc. 

In recent years the company has expanded its operations through a program of 
construction of plant and facilities and the acquisition of the capital stocks giving 
control of other companies, notably Joseph T. Ryerson & Son, Inc., Chicago, 
111., fabricators and distributors of steel products, and Milcor Steel Co., Mil- 
waukee, Wis., manufacturers and fabricators of miscellaneous building materials 
from steel sheets. 

AMERICAN ROLLING MILL CO. 

American Rolling Mill Co. was incorporated in Ohio in June 1917 to acquire 
the businesses and assets of American Rolling Mill Co., incorporated in New 
Jersey, and Columbus Iron & Steel Co. The predecessor American Rolling Mill 
Co. had been engaged primarily in the manufacture of specialty "Armco" ingot 
iron sheets and steel sheets and had purchased substantially all of its pig-iron re- 
quirements from Columbus Iron & Steel Co., a company producing pig iron only. 

At present the company specializes in producing high quality steel, iron sheets, 
and light plates. It has little or no capacity for heavier products such as rails 
and structurals. Its main outlet is the, automobile industry, while other important 
consumers include jobbers, and the road-construction, refrigerator, and electrical- 
equipment industries. 

The company's patented continuous rolling process has been licensed on a 
royalty basis since 1927 to United States Steel, Republic, Youngstown Sheet & 
Tube, and other domestic and foreign manufacturers. The company is reported 
to have evolved a method of spirally welding pipe and a new process for enameling 
iron. It has been active in alloy and stainless steels. Recent developments are 
said to have included a new kind of galvanized roofing and the perfection of a 
new type of zinc-coated sheet steel. Fully integrated plants are at Ashland, 
Ky., on the Ohio waterway, and Middletown, Ohio, near Cincinnati. Finishing 
mills are located in the Pittsburgh district and at Kansas City. 



17752 CONCENTRATION OF ECONOMIC POWER 

WHEELING STEEL CORPORATION 

Wheeling Steel Corporation was organized in June 1920 to consolidate the 
properties and businesses of LaBelle Iron Works, founded in 1852; Whitaker- 
Glessner Co., which had its beginning in 1875; and Wheeling Steel & Iron Co., 
incorporated in 1892. 

Wheeling Steel Corporation is one of the smaller but well-integrated units in 
the steel industry. It owns 14 manufacturing plants along the Ohio River Valley 
in the States of West Virginia and Ohio; iron ore properties in Minnesota; in- 
terests in Great Lakes steamers; coal properties in Pennsylvania, West Virginia, 
and Ohio; and interests in railroad and river transportation. It is reported that 
more than 70 percent of the corporation's output in recent years has consisted of 
sheets, tin plate, and strips. The company's largest customer, the automobile 
industry, takes from 20 to' 25 percent of the total output. 

OTIS STEEL CO. 

Otis Steel Co. was incorporated in January 1912 in Ohio, and acquired the 
property and assets of Otis Steel Co., Ltd., an English corporation registered in 
1895. The company is engaged chiefly in the production of sheets, plates, and 
strips. Plants are well located geographically on lake and river frontage at 
Cleveland, permitting economical transportation of raw materials, and of finished 
steel to Detroit and other points by water. The company specializes in the manu- 
facture of automobile steel and sells about half of its finished output to the auto- 
mobile industry. About 17 percent of the company's capacity is in structural 
and other heavy steels. 

PITTSBURGH STEEL CO. 

Pittsburgh Steel Co. was incorporated in July 1901 and acquired the Pittsburgh 
Steel Hoop Co. which had been organized in July 1899. The company and its 
subsidiaries engage chiefly in the manufacture and sale of pig iron and semi- 
finished and finished steel products. The most important finished steel products 
include a wide variety of seamless steel tubes ranging from one-half-inch to 14 
inches in diameter, and a diversified line of wire and wire products, including 
laths, nails, fence and reinforcing material for building construction. Plants are 
located along the Monongahela River, and the company controls coal and iron 
ore reserves and through its subsidiaries, operates a railroad and a fleet of barges. 

The subsidiaries of this company and of all other companies under review are 
listed in appendix tables 1 to II. These tables list the names of the active sub- 
sidiaries of each company at December 31, 1937, the nature of the business in 
which they are engaged, and the percentage of control by the holding company. 

COMPARATIVE INVESTMENTS, PROFITS AND RATES OF RETURN 
FOR THE PRINCIPAL STEEL COMPANIES 

Summary of Investments, Profits, and Rates of Return 

It has been shown heretofore that the 11 steel companies, for which data are 
available, represent a substantial portion of the industry. Based upon capacity, 
the 11 companies and their subsidiaries have 84 percent of the steel-making ca- 
pacity of the country. Thus it is evident that the operating results for the 11 
companies, individually and combined, are significant indices of the trends of 
the industry. 

Rates of return on investment have been computed on three bases, namely, 
the total investment, the stockholders' investment, and the common stock- 
holders' equity. A summary of the investments, profits, and rates of return on 
each basis of investment for all 11 companies combined, for the years 1917-38, 
is presented in the following table 2. 

The total investment includes the outstanding common and preferred stocks 
and long-term debt, surplus, surplus and contingency reserves, and reserves for 
Federal income and profits taxes. The stockholders' investment includes all of 
these elements except long-term debt. The stockholders' equity consists of the 
outstanding common stocks, surplus, surplus and contingency reserves, and 
reserves for Federal income and profits taxes. On each basis, the investments 
were averaged as of the beginning and end of each year, after deducting goodwill, 
appreciation and other intangibles. 



CONCENTRATION OF ECONOMIC POWER 17753 

The profits used in computing rates of return are before deductions for Federal 
income and profits taxes, since such taxes are wholly contingent upon profits and 
represent a division of the earnings of the business. Subject to this qualification, 
the profits applicable to the total investment represent the net income from all 
sources before deducting interest on long-term debt. The profits applicable to 
the stockholders' investment represent the net income after deducting interest on 
long-term debt. The profits applicable to the common stockholders' equity were 
determined by deducting the dividends paid or accrued on the preferred stocks 
from the income applicable to the stockholders' investment. In order to arrive 
at the profits applicable to the common stockholders' investment it was necessary 
to adjust the profits of some of the companies by the amounts of accrued divi- 
dends on the preferred stocks which were in arrears. For some of the companies 
the preferred dividends in arrears extended over several years, especially during 
the depression years. 



17754 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



17755 



Table 2 shows that during the 22 years, 1917-38, all companies as a group 
earned an average of 6.59 percent on the total investment, 7.02 percent on the 
stockholders' investment, and 7.03 prcent on the common-stock holders' equity. 
On each basis of investment returns were highest in 1917 when 31.86 percent was 
earned on the total investment, 46.17 percent on the stockholders' investment and 
63.85 percent on the common-stock holders' equity. Returns were lowest in 1932 
when losses were sustained equivalent to 2.96 percent on the total investment, 
4.5 percent on the stockholders' investment, and 7.54 percent on the common- 
stock holders' equity. 

The table shows that profits were earned on each basis of investment in all 
years prior to 1931 and that the high returns earned during the years 1917-20 
were not equalled until 1929, although substantial returns were earned during the 
intervening years. Losses sustained during the depression years and the rela- 
tively small profits earned in most of the later years were such that the results of 
operations were decidedly less favorable than for the period prior to 1931. For 
example, the average return earned on the total investment for the years 1917-30 
was 9.87 percent as compared with 1.68 percent for the years 1931-38. The 
average return of 6.59 percent for all years on this basis of investment was higher 
than for any year during the latter period, except in 1937 when 8.16 percent was 
earned. It will be noted that while the trend in earnings was upward following 
1932 there was a sharp reversal in 1938 when only nine-tenths of 1 percent was 
earned on the total investment. 

Goodwill, Appreciation, and Other Intangibles 

It has been explained that deductions were made for goodwill, appreciation, and 
other intangibles in computing rates of return on each basis of investment. The 
aggregate amounts deducted from investments for each of the years 1917-38 
were as follows : 



1917 $580, 098, 176 

1918 575, 988, 166 

1919 567, 655, 407 

1920 559, 637, 619 

1921 556, 303, 836 

1922 547, 904, 451 

1923 u 541, 972, 811 

1924 . . 532, 598, 775 

1925 521, 914, 295 

1926 -* 466, 634, 633 

1927 1 456, 048, 066 



1928-. $413, 986, 724 

1929 325,520,837 

1930 324, 723, 807 

1931 324,601,493 

1932 324, 672, 006 

1933 324, 122, 565 

1934 324,018,073 

1935 298, 860, 813 

1936 . 277,988,471 

1937 268, 565, 845 

1938 18, 337, 800 



On the average about 85 percent of the amounts shown above pertain to 
United States Steel Corporation. The bulk of the remainder was deducted from 
the investments of Bethlehem Steel Corporation and Republic Steel Corporation. 
The minimum amounts of intangibles applicable to these companies were 
$14,083,793 for Bethlehem and $32,996,728 for Republic. 

The amounts of appreciation deducted from the investments of the Steel Cor- 
poration ranged from $522,609,129 in 1917 down to $249,583,149 in 1937. In 
1938 the company wrote off all but $1 of the latter amount. It has been explained 
that the Bureau of Corporations found that the actual value of the tangible 
properties of the steel corporation at the time of its formation in 1901 was not 
more than $700,000,000, or about one-half of its capitalization. Further details 
concerning the appreciation in the company's accounts appear in the section of 
this report devoted to the investments, profits and rates of return of United 
States Steel Corporation and subsidiaries. 

Comparison of Average Annual Investments, Profits, and Rates of 
Return for Individual Companies 

Table 2 summarized the investments, profits, and rates of return for all 1 1 com- 
panies, combined, for each of the years 1917-38 on the basis of the total invest- 
ment, the stockholders' investment and the common stockholders' equity. Table 
3, immediately following, compares the average annual investment, profits and 
rates of return for each company and compares the returns earned by each 
company in relation to the average return for the period under review for all 
companies combined. 



124491— 41— pt. 31- 



17756 



CONCENTRATION OF ECONOMIC POWER 



Table 3. — Comparative average annual investments, profits, and rates of return for 
the period 1917-38, for the principal steel companies 



Companies 



Average annual investment 



Total invest- 
ment 



Stockholders' 
investment 



Common stock- 
holders' equity 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation 

Jones & Laughlin Steel Corporation 

Youngstown Sheet & Tube Co 

National Steel Corporation 2 

Inland Steel Co 

American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co. 3 

Pittsburgh Steel Co 

Combined 



$1, 760, 820, 526 
528, 805, 568 
148, 335, 836 
182, 959, 802 
165, 650, 756 
144, 350, 340 
80, 407, 561 
61, 995, 249 
84, 723, 458 
29, 650, 862 
39, 298, 408 



$1, 388, 291, 953 
369, 365, 951 
107, 949, 709 
165, 448, 278 
112,131,517 
102, 956, 812 
59, 522, 984 
45, 121, 565 
63, 618, 249 
20, 906, 075 
34, 497, 146 



•$1, 028, 010, 853 
291, 686, 021 
72, 628, 392 
124, 516, 912 
98, 797, 945 
102, 956, 812 
57, 250, 257 
37, 170, 674 
35, 967, 172 
10, 799, 879 
24, 007, 243 



3, 226, 998, 366 



2, 469, 810, 239 



1, 883, 792, 160 



Companies 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation 

Jones & Laughlin Steel Corporation 

Youngstown Sheet & Tube Co 

National Steel Corporation 2 

Inland Steel Co__. 

American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co. 3 

Pittsburgh Steel Co 

Combined 



Average annual profit ' applicable to 



Total invest- 
ment 



$129, 020, 924 

23, 947, 750 

5, 700, 718 

11, 039, 140 

10,688,035 

11, 781, 262 

8, 187, 736 

4, 045, 371 

5, 161, 605 

1, 240, 364 

1, 933, 327 



212, 754, 232 



Stockholders' 
investment 



$110,663,394 

15, 099, 429 

3, 387, 167 

10, 168, 753 

7, 905, 486 

9, 735, 132 

7, 124, 658 

3,111,614 

3, 945, 083 

635, 874 

1, 618, 890 



173, 395, 480 



Common stock- 
holders' equity 



$85, 443, 717 
9, 595, 779 
1, 144, 771 
7, 212, 944 
7, 076, 256 
9, 735, 132 
6, 965, 567 
2, 665, 658 
1, 698, 980 
* 80, 959 
884, 429 



132, 342, 274 



Companies 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation 

Jones & Laughlin Steel Corporation 

Youngstown Sheet & Tube Co 

National Steel Corporation » 

Inland Steel Co 

American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co. 3 

Pittsburgh Steel Co 

Combined 



Average annual rate of return on- 



Total in- 
ment 



Percent 
7.33 
4.53 
3.84 
6. Q3 
6.45 
8.17 
10.18 
6.53 
6.09 
4.18 
4.92 



6.59 



Stock- 
holders' 
invest- 
ment 



Percent 
7.97 
4.09 
3.14 
6.15 
7.05 
9.46 
11.97 
6.90 
6.20 
3.04 
4.69 



7.02 



Common 
stock- 
holders' 
equity 



Percent 
8.31 
3.29 
1.58 
5.79 
7.16 
9.46 
12.17 
7.17 
4.72 
<.05 
3.68 



7.03 



1 Net profit before deducting Federal income and profits taxes. 
1 Annual average for period from 1930 to 1938, inclusive. 
3 Annual average for period from 1919 to 1938, inclusive. 
* Denotes loss. 



Table 3 shows that for all 11 companies the average annual return for the 
year 1917-38 was 6.59 percent of the total investment, 7.02 percent on the 
stockholders' investment, and 7.03 percent on the common stockholders' equity. 
The returns for only 3 of the 11 companies exceeded these averages, namely those 
for United States Steel Corporation, National Steel Corporation and Inland 
Steel Co. 



CONCENTRATION OF ECONOMIC POWER 



17/57 



It will be noted that Inland Steel Co. was the most profitable. Its average 
earnings were equivalent to 10.18 percent on the total investment, 11.97 percent 
on stockholders' investment, and 12.17 percent on the common stockholders' 
equity. National Steel Co. was next with average returns of 8.17 percent on 
the total investment and 9.46 percent on each of the other two bases of invest- 
ment. Throughout the period, United States Steel Corporation's earnings 
averaged 7.33 percent on the total investment, 7.97 percent on the stockholders' 
investment and 8.31 percent on the common stockholders' equity. 

Except for the Steel Corporation, the returns earned by the larger companies 
were less favorable on the whole than for the smaller companies. Republic 
Steel Corporation, the third largest company in the industry earned on average 
return of 3.84 percent on its total investment, which was the lowest return for 
any of the companies shown on the table. Bethlehem Steel Corporation, the 
second largest company, earned an average return of 4.53 percent on its total 
investment, and was the next smallest return, except for Otis Steel Corporation, 
the smallest company shown in the table. This company earned an average 
return of 4.18 percent on its total investment. 

It will be noted that on the average, the investments of United States Steel 
Corporation are far in excess of those for any of the other companies. Its total 
investment amounts to 55 percent of the total for all companies shown in the table 
and is 334 times larger than that of Bethlehem Steel Corporation, the next largest 
company. 

Table 4, which follows, compares the total investments of each company in 
1938 with their respective investments in 1917, or the earliest subsequent year 
for which the information was available, and indicates the source of invested 
capital for each company in the respective years. 



Table 4.- 



-Sources of invested capital of the principal steel companies in 1917 [and 
1938 





United States 
Steel Corpo- 
ration 


Bethlehem 
Steel Cor- 
poration 


Republic 
Steel Cor- 
poration 


Jones & 
Laughlin 
Steel Cor- 
poration 




$1,603,088,695 

Percent 
31.71 
22.47 
39.60 


$227, 819, 516 

Percent 
13.07 
16.31 
32.64 


$65,041,857 

Percent 
38.44 
41.80 
45.73 


$141, 507, 560 


RATIOS TO TOTAL INVESTMENT 

Preferred stock , 


Percent 




20.50 




63.78 








93.78 
32.83 


62. 02 
6.18 


125. 97 
50.72 


84.28 










Stockholders' investment 


60.95 


55. 84 


75.25 


84.28 


Minority equities in subsidiaries.. 


i„ 


Long-term debt, less discount, etc 


39.05 


44.16 


24.75 


15.72 






Average total investment, 1917 


100.00 


100.00 


100.00 


100.00 




$1, 557, 164, 621 

Percent 
48.91 
23.14 
24.27 


$655, 782, 528 

Percent 
17.09 
46.13 
11.12 


$322, 329, 168 

Percent 
12. 47 
40.10 
20.01 


$207, 196, 670 

Percent 
28.34 


RATIOS TO TOTAL INVESTMENT 

Preferred stock 


Common stock 


27.81 


Surplus, including reserves 


24.26 






Total capital stock and surplus 


96.32 
8.02 


74.34 


72.58 


80.41 


Less intangibles 














88.30 


74.34 

.02 

25.64 


72.58 

.06 

27.36 


80.41 


Minority equities in subsidiaries 


io!$6 


Long-term debt, less discounts, etc 


11.70 


Average total investment, 1938 


100.00 


100.00 


100.00 


100.00 







17758 



CONCENTRATION OF ECONOMIC POWER 



Table 4. — Sources of invested capital of the principal steel companies in 1917 and 

1938 — Continued 





Youngstown 
Sheet & 
Tube Co. 


National 
Steel Cor- 
poration 


Inland Steel 
Co. 


American 

Rolling Mill 

Co. 


Average total investment, 1917 

RATIOS TO TOTAL INVESTMENT 

Preferred stock 


$70, 033, 685 

Percent 
14.21 
26.11 
59.95 


i $104,249, 526 
Percent 


$41, 805, 773 
Percent 


$13, 943, 619 

Percent 
5.74 




50.61 
45.35 


41.85 
44.24 


52.78 


Surplus, including reserves 


37.08 






Total capital stock and surplus 


100.27 
.44 


95.96 
5.83 


86.09 


95.60 


Less intangibles... , 


8.49 








Stockholders' investment 


99.83 


90.13 
.26 
9.61 


86.09 


87.11 


Minority equities in subsidiaries ._ _ 




Long-term debt, less discount, etc 


.17 


13.91 


12.89 






Average total investment, 1917 


100.00 


i 100. 00 


100. 00 


100 00 






Average total investment, 1938 


$212, 984, 832 

Percent 
7.04 
49.23 
10.42 


$179,009,187 
Percent 


$147, 494, 335 
Percent 


$123, 510, 197 

Percent 
36.44 


RATIOS TO TOTAL INVESTMENT 

Preferred stock 


Common stock.. 


30.49 
39.46 


38.91 

25.87 


58 08 


Surplus, including reserves ... ... 


10 08 






Total capital stock and surplus 


66.69 
.13 


69.95 
3.39 


64.78 


104 60 


Less intangibles.. . 


6 70 








Stockholders' investment 


66.56 

.02 

33.42 


66.56 


64.78 


97 90 


Minority equities in subsidiaries 


.01 


Long-term debt, less discounts, etc 


33.44 


35.22 


2 09 






Average total investment, 1938 


100.00 


ioo no 


100.00 


100 00 




1 






Wheeling 
Steel Cor- 
poration 


Otis Steel 
Co. 


Pittsburgh 
Steel Co. 


Average total investment, 1917 . . . 


$24, 356, 275 

Percent 
40.71 
40.71 
41.81 


2 $12,585, 313 

Percent 
28.62 
27.26 
43.46 


$26, 110, 535 

Percent 
40.21 


RATIOS TO TOTAL INVESTMENT 

Preferred stock I 


Common stock .. 


26 81 


Surplus, including reserves 


31.34 








Total capital stock and surplus. .. 


123.23 
35.13 


99.34 


98.36 


Less intangibles 


2 93 










Stockholders' investment . 


88.10 


99.34 


95 43 


Minority equities in subsidiaries.. 




Long-term debt less discount, etc.. 


11.90 


.66 


4.57 








Average total investment, 1917. 


100.00 


2 100. 00 


100 00 








Average total investment, 1938... 


$105, 501, 517 

Percent 
36.09 
26.75 
10.70 


$34, 813, 722 

Percent 
30.14 
13.02 
18.28 


$37, 258, 963 


RATIOS TO TOTAL INVESTMENT 

Preferred stock 


Percent 
31 04 


Common stock 


9 72 


Surplus, including reserves 


44 67 








Total capital stock and surplus 


73. 54' 
3.72 


61.44 


85 43 


Less intangibles _»_ 


.31 










Stockholders' investment... 


69.82 


61.44 


85 12 


Minority equities in subsidiaries.. 




Long-term debt, less discounts, etc... 


30.18 


38.56 


14 88 








Average total investment, 1938.. 


100.00 


100.00 


100 00 







' Data are for year 1930, the first year for which data are available. 
» Data are for year 1919, the first year for which data are available. 



CONCENTRATION OF ECONOMIC POWER 17759 

Table 4 shows that there were marked increases in the total investments of all 
companies, except United States Steel Corporation, since 1917, or the earliest 
subsequent year for which the information appears. The steel corporations' 
average investment in 1938 of $1,557,104,621, it will be noted, was slightly less 
than in 1917. On the other hand, the average total investment of $655,782,582 
for Bethlehem Steel Corporation in 1938 was almost three times the investment 
in 1917. Most of the other companies also indicate considerable growth since 
1917. 

The table also shows the marked shifts in the sources of invested capital of the 
different companies between 1938 and the earlier years. In 1938. the ratio of 
the stockholders' investment to total capitalization, excluding intangibles, was 
greater than in 1917 for United States Steel Corporation, Bethlehem Steel Corpo- 
ration, and American Rolling Mill Co. On the other hand, the proportions of the 
stockholders' investments in the other eight companies was much less in most 
cases in 1938 than for the earlier years. In other words, the three companies 
mentioned relied less on long-term debt as a source of capital funds in 1938 as 
compared with 1917, while for the other eight companies the shift was in the other 
direction. 

In 1938, the stockholders' investment, exclusive of intangibles, comprised 88 
percent of the capitalization of United States Steel Corporation as 'compared 
with 61 percent of the total in 1917. For Bethlehem Steel Corporation, the stock- 
holders' investment was 74 percent of its total investment in 1938 as compared 
with 56 percent in 1917, and for American Rolling Mill Company, the stock- 
holders' investment in 1938 was 98 percent of its capitalization as compared with 
87 percent in 1917. 

Comparative Annual Rates of Return for Individual Companies 

A comparison of the average annual investments, profits, and rates of return 
for the period 1917-38 for individual companies was provided by table 3. Such 
information is presented in detail for each year during the period under review 
for each company, except United States Steel Corporation, in appendix tables 
12 to 21-a. The information for the Steel Corporation is presented in the section 
of the report devoted to the investments, profits, and rates of return for that 
company and its subsidiaries. 

The annual rates of return for the individual companies on the basis of the total 
investment, stockholders' investment, and common stockholders' equity appear 
in the following tables 5, 6, and 7. These tables also show the annual return for all 
companies combined, the averages of the annual returns for the individual com- 
panies, and the average of the annual return for all of the companies combined. 

The tables show that for all 11 companies combined, the average annual return 
was 6.59 percent on the total investment, 7.02 percent on the stockholders' invest- 
ment, and 7.04 percent on the common stockholders' equity. It has already been 
pointed out that the returns for only 3 of the 11 companies exceeded these aver- 
ages, namely those for United States Steel Corporation, National Steel Corpora- 
tion, and Inland Steel Co. 

For all companies the most profitable years were 1917 and 1918. The next 
most profitable years for most companies were 1920, 1929, and 1937. A number 
of the companies lost money in 1938 and the earnings of the others were only 
moderate. Losses during the depression years and small earnings during most of 
the subsequent years were such that the operating results since 1930 were on the 
whole very much less favorable than for the prior years shown in the tables. For 
example, on the basis of total investment, the average of the annual return for 
all companies was 9.87 percent during the years 1917-30 and only 1.68 percent 
for the years 1931-38. 



17760 



CONCENTRATION OF ECONOMIC POWER 






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CONCENTRATION OF ECONOMIC POWER 17763 

Comparison of Sales and Operating Results 

Significant statistics on sales, ratios of costs to sales and distribution of profits 
will be presented to further describe the operations of the steel companies. Here- 
tofore, the trends of net profits were expressed in rates of return on the total 
investment, stockholders' investment, and common stockholders' equity. 

Table 8, immediately following, summarizes the net sales, net income, divi- 
dend payments, and net charge on surplus for each of the 11 companies and 
their subsidiaries. The upper part of the table gives the total for each item for 
all years for which the information was avilable during the period 1917-38. 
The" lower part of the table presents for each company the annual averages of 
their net sales, net income, dividend payments, and net income remaining after 
dividend payments. It should be noted that Federal income and profits taxes 
have been deducted in arriving at the net income shown on the table so that these 
amounts of net income differ from those used in computing rates of return by 
the amounts of such taxes. 

The information in this table, together with the information, in the succeeding 
tables of operating statistics, are based on the details appearing in appendixes 
12 to 21 and 12rA to 21-A, which summarize for each company except United 
States Steel Corporation the investments, and costs and profits for each year 
during the period under review. Such information for the Steel Corporation 
appears in the section of the report dealing with the investments, profits, and 
rates of return for that company and its subsidiaries. 



17764. 



CONCENTRATION OF ECONOMIC POWER 






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CONCENTRATION OF ECONOMIC POWER 17765 

Several of the steel companies paid dividends in excess of net income but not in 
excess of the net income and other additions to surplus during the entire period 
under Teview. For example, table 8 shows that Republic Steel Corporation had 
total net income of $45,842,492 and distributed cash dividends amounting to 
$50,448,550, but other additions to surplus amounted to $45,081,080, so that the 
net increase in the surplus account during the period was $40,475,031. Other 
companies whose aggregate cash and stock dividends exceeded net income were 
American Rolling Mill Co., Wheeling Steel Corporation, Otis Steel Co., and Pitts- 
burgh Steel Co. Four of the steel companies had smaller balances in their surplus 
at the end of 1938 than at the beginning of 1917. However, for two of these 
companies, namely, United States Steel Corporation and Bethlehem Steel Cor- 
poration, the decreases in surplus were not equal to the amounts transferred from 
surplus to capital stock through the issuance of stock dividends. 

It will be noted that United States Steel Corporation is also dominant with 
regard to volume of business. During the 22 years, 1917-38, its total sales ex- 
ceeded 26 billions of dollars, which was five times the total for the next largest 
company, Bethlehem Steel Corporation. During the period the Steel Corpora- 
tion's net income amounted to $1,670,058,253; and it paid dividends of 
$1,427,971,442, of which it paid cash dividends on preferred stock of $554,832,894, 
cash dividends on the common stock of $669,817,548, and stock dividends on the 
common stock of $203,321,000. 

The following table 9, gives the annual sales of each of the 1 1 companies and their 
subsidiaries during the years 1917-38, together with the combined sales of all 
companies on each year and the average of the annual sales for each company. 
The average of the annual sales ranged from $1,188,007,575 for United States 
Steel Corporation to $21,712,069 for Otis Steel Co. 

The Steel Corporations' sales in 1917 amounted to 70 percent of the combined 
sales of the nine companies including that company for which the information was 
available for that year. By 1938, however, its proportion of the combined sales 
for the nine identical companies had declined to 49 percent. 

The comparative profits of each of the 11 companies in relation to investments 
have been indicated. The relation of profits to sales is indicated in table 10, 
which follows. This table gives a comparison of the ratios of costs, expenses, and 
profits to net sales, expressed in cents per dollar of net sales, for each of the 11 
companies for each of the years 1936, 1937, arid 1938, arid for the entire period 
1917-38. 



I77f>fi 



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CONCENTRATION OF ECONOMIC POWER 



17767 



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17768 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



17769 



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17770 



CONCENTRATION OP ECONOMIC POWER 



Table 10 shows that in the year 1937, when sales were larger than 1936 or 1938, 
the operating costs and expenses were smaller for each dollar of net sales than for 
the other 2 years. For instance, in 1938 the ratios of costs and expenses to net sales 
increased over those of 1937 by amounts ranging from 3.56 cents per dollar of 
net sales for Wheeling Steel Corporation to 15.03 cents per dollar of net sales for 
Otis Steel Co. The increase for United States Steel Corporation was 9.28 cents 
per dollar of net sales. This increase in relative costs when the sales volume 
declines is largely caused by nonvariable expenses that cannot be proportionately 
contracted as business decreases. Over the 22-year period, or the portion thereof 
for which data are available for each company, the operating expenses ranged 
from 85.41 cents per dollar of net sales for Inland Steel Co. to 96.71 cents per dollar 
of net sales for Republic Steel Corporation. 

Throughout the period under review, the ratio of total net profit, before deduc- 
tion of interest on long-term debt or Federal income and orofits taxes, ranged 
from 3.27 cents per dollar of net sales for Republic Steel Corporation to 15.40 
cents per dollar of net sales for Inland Steel Co. It was 10.86 cents per dollar of 
net sales for United States Steel Corporation and 9.44 cents per dollar of net sales 
for Bethlehem Steel Corporation. 

The table also shows that substantial provisions out of income have been made 
by the steel companies for depreciation and depletion. Throughout the period 
under review these provisions ranged from 3.57 cents per dollar of sales for Otis 
Steel Co. to 6.49 cents per dollar of sales for Republic Steel Corporation. For 
United States Steel Corporation they amounted to 4.35 cents per dollar of sales, 
and for Bethlehem Steel Corporation they amounted to 5.52 cents per dollar 
of sales. Large amounts have been provided annually for depletion, depreciation 
and obsolescence, which, according to the experience of the various companies, 
were deemed to be sufficient to equal, on the average, the gross book value of the 
property, less salvage, as and when such properties were to be withdrawn from 
service. 

In general, the provisions for annual depreciation and obsolescence of steel 
plants and equipment are made on the straight-line method and are arrived at 
by applying against the investment cost of each facility a rate to provide for its 
depreciation and obsolescence based upon the life expectancy of the facility. The 
provisions for depletion of ore. coal, limestone, and other natural resource prop- 
erties are generally arrived at by dividing the total estimated recoverable quantity 
in the respective properties in operation into the total investment cost of same. 
The annual provision is then determined by applying the resultant rate to the 
actual quantity of raw materials removed during the year. 

The following tabulation shows that the depreciation and obsolescence reserves 
of the various companies, at December 31, 1938, ranged from 33 to 50 percent of 
the total recorded values of their respective properties: 



Dec. 31, 1938 



Property 



Depreciation 

and depletion 

reserves 



Percentage of 
reserves to 
property- 



United States Steel Corporation 
Bethlehem Steel Corporation... 

Republic Steel Corporation 

Jones & Laughlin 

Youngstown Sheet & Tube Co.. 

National Steel Corporation 

Inland Steel Co 

American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co 

Pittsburgh Steel Co_ 



$2, 344, 316, 958 
758, 386, 677 
384, 506, 096 
251, 753, 555 
254, 353, 983 
213,897,076 
165, 825, 925 

123, 437, 777 

124, 156, 073 
42,814,957 
45, 352, 084 



$1, 177, 797, 445 

305, 367, 631 

145, 632, 568 

94,311,256 

123, 672, 860 

70, 189, 566 

60, 797, 700 

44, 094, 549 

52, 285, 296 

17, 161, 183 

20, 162, 239 



50.24 
40.40 
37.88 
37.46 
48.62 
32.81 
36.66 
35.72 
42.11 
40.08 
44.46 



CONCENTRATION OF ECONOMIC POWER 



17771 



With respect to the largest company in the industry, the question of obsolescence 
has been given very careful consideration. This is indicated by the fact that 
United States Steel Corporation, as far back as 1928, began an extensive survey 
of all of its operating properties, showing the age, condition, and adequacy of 
the facilities. The survey was carried forward by the company's engineers until 
1935. Their findings were so extensive and involved expenditures of such mag- 
nitude that it was decided to employ outside opinion. To this end the firm of 
Ford, Bacon & Davis, appraisal engineers, was employed to study all of the 
properties, methods, personnel, and markets. The extent of this firm's appraisal 
may be indicated by the fact that during the years 1935-38 they received over 
$3,000,000 from the Steel Corporation for their services. 

In connection with these studies the corporation also made capital expenditures 
during recent years of nearly $400,000,000. It also expended nearly $500,000,000 
for repairs, maintenance, and extraordinary replacements, and provided more 
than $650,000,000 for depreciation and depletion. 

Atter^ion is now directed to the relation of margins of profits on sales for the 
various companies with their returns on investment. This is indicated in the 
following tabulation which shows for each company, for the period 1917-38, its 
average total investment, sales, ratio of sales to investment, or capital turn-over, 
and the manner in which the average profits per dollar of sales is related, through 
the turn-over, to the average rates of return on investment. 

The turn-over of capital is indicated by the ratio of sales to investment and 
reflects the time required for the sales to equal the investment. The tabulation 
shows that the average turn-over for all companies combined, throughout the 
years under review, was 62 times. This means that on the average 19.5 months 
was required for the sales to equal the investment in order to produce one turn- 
over of capital. This indicates the large amount of capital investment required 
in the steel business per dollaf~of sales and the slow moving nature of its products 
As a result, margins of profits on sales are necessarily higher, in all instances, than 
the percentages of profits on investment. 

Relation of margins of profit, through capital turn-over, to rates of return on investment 
for principal steel companies, 1917-88 



Average 1917-38 



Total invest- 
ment 



Net sales 



Rate of 
capital 
turn-over 
in terms 
of sales 
(times) 



Profit on 
sales 



Rate of 
return 
on in- 
vestment 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation ' 

Jones & Laugblin Steel Corporation 

Youngstown Sheet & Tube Co 

National Steel Corporation * 

Inland Steel Co 

American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co.* 

Pittsburgh Steel Co 

Combined 



, 760, 820, 526 

528, 805, 568 

148.335,836 

182. 959, 802 

165, 650, 756 

144,350,340 

80, 407, 561 

61, 995, 249 

84, 723, 458 

29, 650. 862 

39, 298, 408 



SI, 188.007,575 
253, 694, 696 
86. 725, 821 
91,385,476 
99, 152,647 
85, 500, 203 
53, 175,448 
45. 936, 457 
59, 966, 385 
21, 71^, 069 
25.509, 155 



0.67 
.48 
.58 
.50 
.60 
.59 
.66 
.74 
.71 
.73 
.65 



Percent 
10. 86 
9.44 
6.57 
12.08 
10.78 
13.79 
15.40 
8.81 
8.61 
5.71 
7.58 



3, 226. 998, 366 



2,010.765,935 



.62 



10. 58 



Percent 
7.33 
4.53 
3.84 
6.03 
6.46 
8.17 
10.18 
6.53 
6.09 
4.18 
4.92 



6.59 



i Net sales are for years 1917-27 and 1932-3 
' Data are for years 1930-38. 
> Data are for years 1919-38 



121101 11 i, t 31- —12 



17772 



CONCENTRATION OF ECONOMIC POWER 



Salaries and Other Compensation Paid to Officers and Directors 
of Steel Companies 

Data regarding the compensation — salaries and bonuses — paid to officers and 
directors of some of the prnicipal steel companies are presented to show the 
trends in recent years of the remuneration for their services. The amounts of 
compensation paid were obtained from reports submitted by the companies 
to the Securities and Exchange Commission for the years 1935 to 1938, inclusive, 
for United States Steel Corporation, Bethlehem Steel Corporation, Republic 
Steel Corporation, Jones & Laughlin Steel Corporation, Youngstown Sheet & 
Tube Co., National Steel Corporation, Inland Steel Co., the American Rolling 
Mill Co., Wheeling Steel Corporation, Otis Steel Co., and Pittsburgh Steel Co. 

Table 11, which follows, shows the annual aggregate remuneration paid to all 
officers and directors and aggregate remuneration of the three highest paid officers 
and directors, of each company, during 1935 to 1938, inclusive, it also shows the 
total number of officers and directors. 



Table 11. — Aggregate remuneration, including salaries and bonuses, paid to officers 
and directors of the principal steel companies, 1935-38 



Company 



1935 

United States steel Corporation. .. 
Bethlehem Steel Corporation 
Republic Steel Corporation 
] »nes & Laughlin Steel Cor | 
Youngstown Sheet & Tube Co 
National Steel Corporation . . 

Inland Steel Co 

The American Rolling Mill o 
Wheeling Steel Corporation 

Otis Steel Co ... 

Pittsburgh Steel Co... . . 



1936 

United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation . 
Jones & Laughlin Steel Corporation. 

Youngstown Sheet <fe Tube Co 

National Steel Corporation,- . 

Inland Steel Co 

The American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co.... 

Pittsburgh Steel Co 



1937 



United States Steel Corporation 

Bethlehem Steel Corporation 

Republic Steel Corporation . ... 
Jones & Laughlin Steel Corporation. 

Youngstown Sheet & Tube Co 

National Steel Corporation. _ 

Inland Steel Co - 

The American Rolling Mill Co .. 

Wheeling Steel Corporation 

Otis Steel Co . 

Pittsburgh Steel Co 7 



1938 



United States Steel Corporation 

Bethlehem Steel Corporation.. 

Republic Steel Corporation _ 

Jones & Laughlin Steel Corporation 
Youngstown Sheet & Tube Co 

National Steel Corporation 

Inland Steel Co 

The American Rolling Mill Co 

Wheeling Steel Corporation 

Otis Steel Co 

Pittsburgh Steel Co 





Aggregate remuneration (salaries 






and bonuses) 


Number o( 








officers and 








directors 


All officers 

and 
directors 


3 highest 

J 'aid 


\ |] others 


28 


$855,614 




$473,261 


! 


1, 029. -195 


1 


• 


23 


544, 189 




269. 249 


15. 


399, 350 


135, J87 


263, 763 


24 




120,400 


■ 


15 


496, 379 




66,099 


18 


479, 165 


, 180 


315, 185 


19 


432, 887 


183, 765 


249,. 1 22 


22 


265. 620 


140,000 


125. 620 


18 


152, 44* 







16 


150,928 




70, 994 


30 


B61, 138 


367, 922 


493, 416 


24 


- 




533, 413 


20 


607, 531 


335, 00<) 


1 


15 


452, 679 


187, 217 


265, 162 


22 


12 


122,720 


206,032 


15 


578, 865 


460, 220 


li 


18 


637, 469 


1 77, 400 


460, 069 


21 


■524, 221 


269, 346 


254, 878 


23 


283, 796 


140, 000 


143,796 


17 


176, 539 


148,000 


28, 239 


19 


116,259 


55, 890 


60, 369 


31 


1,240,032 


410,457 


829, 575 


23 


1, 754, 659 


728, 962 


1, 025, 697 


20 


649, 198 


350,000 


299, 198 


14 


571, 880 


23S, 333 


333, 547 


22 


440,917 


180,070 


260, 847 


15 


564, 075 


474, 446 


89,629 


18 


668, 420 


179, 500 


488,920 


20 


576, 420 


319,441 


256, 979 


23 


264, 860 


1 25. 000 


139, 860 


17 


229, 877 


190, 800 


39, 077 


17 


136, 725 


71,980 


64, 745 


25 


1,019,484 


379, 897 


639, 587 


22 


1, 676, 359 


708,308 


968, 051 


n 


574, 549 


320, 8.32 


253, 717 


12 


361, 732 


220, 833 


140, 899 


22 


436, 460 


175, 156 


261,294 


14 


434, 803 


362, 700 


72, 103 


18 


577, 309 


160, 750 


416, 559 


20 


532.506 


298,220 


234, 288 


21 


241, 940 


109, 999 


131,941 


16 


144, 879 


118,800 


26. 079 


20 


190,602 


96,000 


94,602 



CONCENTRATION OF ECONOMIC POWER 



17773 



It was not possible from the records of the Securities and Exchange Commission 
to segregate the total compensation paid to officers and directors so as to show 
the compensation received by those who were both officers and directors and those 
who functioned as directors only. Therefore, in comparing the aggregate remu- 
neration of all officers and directors of one company with another consideration 
should be given to the fact that some directors receive only a nominal compen- 
sation for part-time services. For this reason altogether valid comparisons 
cannot be made of the per officer and director compensation paid by the various 
companies shown in the table. 

However table 11 shows that there were fewer officers and directors of Bethlehem 
Steel Corporation than of United States Steel Corporation but that in the aggre- 
gate they received more compensation. In 1938 United States Steel Corporation 
had 25 officers and directors who received total compensation of $1,019,484, while 
22 officers and directors of Bethlehem Steel Corporation received compensation 
aggregating $1,076,359. During the same year the officers and directors of 
Republic Steel Corporation, Jones & Laughlin Steel Corporation, Youngstown 
Sheet & Tube Co., National Steel Corporation, Inland Steel Co., and the Ameri- 
can Rolling Mill Co. received aggregate remuneration ranging from $361,732 to 
$577,309. 

The aggregate remuneration of the three highest-paid officers and directors 
combined during 1938 ranged from $96,000 for Pittsburgh Steel Co. to $708,308 
for Bethlehem Steel Corporation. The three highest-paid combined received 
$379,897 from United Srates Steel Corporation, $362,700 from National Steel 
Corporation, and $320,832 from Republic Steel Corporation. 

The highest-paid officers of United States Steel Corporation did riot receive as 
much compensation in 1938 as the highest-paid officer of some of the other steel 
companies. For example, the highest-paid officer of United States Steel Cor- 
poration in 1938 was William A. Irvin, vice chairman of the board of directors, 
who received $140,070, and the next highest paid was Benjamin F. Fairless, 
president, who received $135,344. There were rive officers or directors of Beth- 
lehem Steel Corporation each of whom received compensation ranging from 
$149,610 to $378,698, which larger amount was paid to Eugene G. Grace, presi- 
dent, in 1938. T. M. Girdler, president of Republic Steel Corporation, received 
$160,416 in 1938, while George R. Fink, president of National Steel Corporation, 
recieved $150,400, and Charles R. Hook, president of the American Rolling Mill 
Co., received $134,846 in that year. 

Tables 12 to 22, which follow, show the compensation, including salary and 
bonuses, paid to each of the higher-paid officers and directors of II of the principal 
steel companies. It will be noted that for some years no amounts of •ompen- 
sation are shown for certain officers or directors. This did not necessarily mean 
that they were no longer connected with the corporation, but it indicates that 
those officers or directors were not among the 3 highest paid during the year. 

Table 12. — Compensation of the 3 highest-paid officers and directors of United 
States Steel Corporation, 1935-38 



Name 


Position 


1935 


1936 


1937 


1938 




Chairman of the board of directors. . 
Director, and president 1935, 1936, 

and 1937; and vice chairman of the 

board of directors, 1938. 
Director and president, 1937 and 

1938. 
Chairman, finance committee, and 

director. 

do.. 

do 


$166, 785 
124, 513 


$166, 892 
130, 310 


$167 662 

141, 795 

101,000 




William A. Irvin. ... 

Benjamin F. Fairless... 

William J Filbert 


$140, 070 
135, 344 


91, 055 








70,750 










104, 483 















1 Chairman of the board of directors in 1938. 



17774 



CONCENTRATION OF ECONOMIC POWER 



Table 13. — Compensation of the highest-paid officers and directors of Bethlehem 

Steel Corporation, 1935-38 



Name 


Position 


1935 


1936 


1937 


1938 


Charles M. Schwab ' 


Chairman of the board of directors. . 


$203, 332 
180,000 
90,000 
90,000 


$180, 000 
180, 000 
90,000 
90,000 


$180,000 
394, 586 
154, 376 
154, 376 
154, 376 


$180, 000 
378, 698 






149, 610 


C. Austin Buck ' * . 


do 


149, 610 


Paul Mackall '» 


...do 


149, 610 













1 Also an officer' and/or a director of one or more of the company's subsidiaries, and the aggregate remu- 
neration shown is for all capacities. 

2 Compensation for 1937 and 1938 includes bonuses of $214,586 and $198,698, respectively. 
s Compensation for 1937 and 1938 includes bonuses of $64,37»; and $59,610, respectively. 



Table 14. 



-Compensation of the 3 highest-paid officers and directors of Republic 
Steel Corporation, 1935-38 



Name 


Position 


1935 


1936 


1937 


1938 


T. M. Girdler > 


Chairman of the board of directors 

and president. 
Director, vice president, and general 

manager. 

Director and vice president 

Director and vice president in charge 

of finance. 


$140, 779 
69, 769 
64, 692 


$175, 000 
85,000 


$175, 000 
100,000 


$160, 416 


R.J. Wysor 2 


91, 666 


B. F. Fairless 




Myron A. Wick 


75,000 


75,000 


68, 750 









' Resigned as president Apr. 17, 1937. 
> Elected president Apr. 17, 1937. 



Table 15. — Compensation of the highest-paid officers and directors of Jones & 
Laughlin Steel Corporation, 1935-38 



Name 


Position 


1935 


1936 


1937 


1938 


Q. M. Laughlin, Jr. 1 


Chairman of the board of directors 
and member of executive com- 
mittee. 

President, director, and member of 
executive committee. 

Vice, president, director, and mem- 
ber of executive committee. 
do. 


$49, 609 

49,609 

36, 369 

36, 369 
36, 369 

36, 369 








S. E. Hacket > 

W. C. Moreland > 


$66, 666 


$75,000 


» $86, 458 


Frederick E. Fieger* 


45, 552 






William D. Evans 


Director, general counsel, and mem- 
ber of executive committee. 

Vice president, director, and mem- 
ber of executive committee. 

President, chairman of the board of 
directors, and member of execu- 
tive committee. 

Vice president, director, and mem- 
ber of executive committee. 






W. J. Creighton 


45, 552 
74,999 




42, 361 


H. E. Lewis* 


100,000 
63, 333 


92, 014 


William B. Todd « 




L. M. Parsons 






41, 667 















1 Resigned as chairman of the board Apr. 7, 1936. but continued in his capacity as a director. 

1 Resigned as president, director, and member of executive committee Feb. 14, 1938. Remuneration as 
shown above is for services rendered as such and includes additional compensation for valuable services 
rendered covering a period of approximately 22 years. 

1 Resigned as vice president and member of executive committee but continued in his capacity as a direc- 
tor. 

* Resigned as vice president and member of executive committee Mar. 22, 1937. 

> Elected Feb. 14, 1938. 

8 Resigned as vice president Nov. 11, 1937. 



CONCENTRATION OF ECONOMIC POWER 



17775 



Table 16. 



-Compensation of the highest-paid officers and directors of Youngstown 
Sheet & Tube Co., 1935-S8 



Name 


Position 


1935 


1936 


1937 


1938 


H. O. Dalton.. 


Chairman of the board of directors 
and member of the executive com- 
mittee. 

Director, president, and member of 
the executive committee. 


$30,200 

60,200 

30,000 
30,000 








Frank Purnell 

W. B. Oillies.. 


$42, 720 

40,000 
40,000 


$60, 070 

60,000 
60,000 


$54,500 
60, 333 


\V. E. Watson 


... do . 


60, 333 







Table 17.- 



- Compensation of the 3 highest-paid officers and directors of National 
Steel Corporation, 1935-38 



Name 


Position 


1935 


1936 


1937 


1938 


Ernest T. Weir > 


Chairman of the board of directors; 
also chairman of the board of 
directors, Weirton Steel Co., 
Great Lakes Steel Corporation, 
and Hanna Furnace Corporation 
(New York). 

President and director; also presi- 
dent, Great Lakes Steel Corpora- 
tion. 

Vice president and director; also 
president, Weirton Steel Co., 
We.irton Coal Co., and Hanna 
Furnace Corporation (New York). 


$160, 100 

160, 120 
110,060 


$200, 120 
200,100 


$200, 340 
200,340 


$147,900 
150,400 


George R. Fink > 


John C. W.Uliams'... 






60,000 73,766 


(34,400 


Weirton Coal Co. 







i Compensation for 1935, 1936, 1937, and 1938 includes bonuses of $100,000, $100,000, $100,000, and $47,500, 
rGSDGCtivslv. 

2 Compensation for 1935, 1936, 1937, and 1938 includes bonuses of $100,000, $100,000, $100,000, and $50,000, 
respectively. 

3 Compensation for 1935 includes bonus of $50,000. Mr. Williams died on June 1, 1936. 

* Compensation for 1937 includes bonus of $30,000. Elected director Weirton Steel Co., 1937. 

Table 18.— Compensation of the highest-paid officers and directors of Inland Steel 

Co., 1936-38 



Name 



Position 



1938 



Leopold E. Block 

Philip D. Block 

Wilfred Sykes.. 

Edward M. Adams ' 

Edward L. Reyerson, Jr 

J.H.Walsh 



Director and chairman of the board 

of directors. 

Director and president.. _ 

Director and assistant to president.. 

Director and first vice president 

Director and vice chairman of the 

board of directors. 
Work manager 



$60,000 

60,000 
43,980 
42,000 



$62,500 | $62,500 



62,500 
52, 400 



62,500 
.54, 500 



.556,250 



56, 250 
48,250 



54,500 
54,500 



48,250 
48,250 



Deceased. 



Table 19. — Compensation of the 8 highest-paid officers and directors of the American 
Rolling Mill Co., 1935-38 



Name 


Position 


1935 


1936 


1937 


1938 




Chairman of the board of directors. . 
Director, president, and •general 

manager. 
Director, executive vice president, 

and assistant general manager. 


$69,124 
65, 510 

49, 131 


$69,883 
114, 692 

84,771 


$74, 937 
141, 060 

103,444 


$64, 487 


Charles R. Hook i • 


134, 846 


Calvin Verity • 


98,887 







' Compensation for 1936, 1937, and 1938 includes bonuses of $39,817, $60,775, and ! 
* Compensation for 1937 and 1938 includes bonuses of $44,568 and $48,218. 



,752, respectively. 



17776 



CONCENTRATION OF ECONOMIC POWER 



Table 20. — Compensation of the 8 highest-paid officers and directors of Wheeling 

Steel Corporation, 1985-38 



Name 


Position 


1935 


1936 


1937 


1938 


Alexander Glass 


Chairman of the board of directors 
and chairman of executive com- 
mittee. 


$50,000 


$50,000 


$35,000 


$27, 500 


William W. Halloway 


Director, president, and member of 
executive committee. 


50,000 


50,000 


50,000 


45, 833 


Archie J. McFarland 


Director, first vice president, and 
member of executive committee. 


40,000 


40,000 


40, 000 


36,666 



Table 21 . — Compensation of the 8 highest-paid officers and directors of Otis Steel 

Co., 1985-38 



Name 


Position 


1935 


1936 


1937 


1938 






$42, 650 
3,600 


$61,400 
3,600 


$81,400 
3,600 


$46,400 


E. J Kulas - 


< President, Cuyahoga Valley Ry. 
{ Co.' 


3,600 


Total 


46, 250 
48,000 


65,000 
55,000 


85,000 
71,000 


50,000 




Vice president and general manager. . 


48,000 








16,700 
300 








F E Allen ' 


^Vice president, Otis Steel Co. of 
I Canada, Ltd. >» ' 
















Total 


17,000 






















27,550 
450 


34,200 
600 


20,200 




<Vice president, Otis Steel Co. of 
| Canada, Ltd. 1 




600 








t ii.,; 




28,000 


34,800 


20,800 











' Subsidiary company. 

2 Served the company during entire year but served as such officer during only part of the year; said 
remuneration is that paid to him for full year 1935 as such employee and officer. 

Table 22. — Compensation of the highest-paid officers and directors of Pittsburgh 

Steel Co., 1935-88 



Name 


Position 


1935' 


19361 


1937' 


1938' 


6 

montbs , 

1938 2 




President, director, and member 
of executive committee. 

Vice president, director, and mem- 
ber of executive committee. 

President, director, and member 
of executive committee. 

Director and executive vice presi- 
dent in charge of operations. 

Director, vice president, treasurer, 
and member of executive com- 
mittee. 

Director, vice president, secretary 
and member of executive com- 
mittee. 

Director and executive vice presi- 
ident. 

Director, vice president in charge 
of operations. 


$48,304 
16,502 

15,128 
12, 379 

12, 379 


$26, 250 
















Henry A. Roemer • . _ 

William C. Sutherland 5 _. 


15,000 
14,640 
11,980 

11,980 


$36,000 
IS, 980 


$36,000 
20.000 


$18,000 










Alexander E . Walker 6 

J H. Carter * 


'20,000 


40,000 
16,000 


20,000 
15,000 













1 Fiscal year ending June 30 of each year. 

2 6-months period ending Dec. 31, 1938 

3 Resigned as president, director, and member of executive committee, Jan. 13, 1936. 

< Elected president, director, and member of executive committee Jan. 13, 1936; officer of certain subsid- 
iaries at various times between Jan. 13, 1936 and Jan. 27, 1936. 
8 Resigned as executive vice president in charge of operations May 31, 1938. 
8 Elected director Oct. 26, 1937, and executive vice president Jan. 1, 1937. 
' Remuneration shown is for period Jan. 1, 1937, to June 30, 1937. 
» Elected vice president in charge of operations May 31, 1938. 



CONCENTRATION OF ECONOMIC TOWER 17777 

INVESTMENTS, PROFITS, AND RATES OF RETURN FOR UNITED 
STATES STEEL CORPORATION 

Introduction 

The United States Steel Corporation has dominated the steel industry since its 
in 1901 At that time, the corporation produced 43 percent of all 
pig iron produced in United States, 65 percent of all steel ingots and steel castings, 
and 50 percent of all kinds of finished rolled products The United States Steel 
Corporation continues to dominate the industry M is approximately two and a 
half times as large in productive capacity as the next, largei t companj , the Beth- 
lehem Steel Corporation. However, the United States Steel Corporation lias 
declined in relative importance in the industry: this in spite of the fact that the 
corporation has increased both its productive capacity and investments since 
1901. The industry has grown at a more rapid pace. At the end of 1938, the 
Steel Corporation produced 33 percent of all steel ingots and castings, and 29 
percent of all kinds of finished rolled products. 

For the period covered by this study the United States Steel Corporation of 
New Jersey controlled through stock ownership 259 subsidiary companies. 
Classified by groups as follows: 

Manufacturing companies 65 

Coal and coke companies 13 

Ore mining companies 84 

Transportation 44 

Miscellaneous 53 

Total 259 

A few of the companies included in the above tabulation were inactive during 
the period under review. 

The manufacturing companies were engaged principally in producing pig iron, 
ingots, castings, and rolled and finished steel products for sale. In addition to 
the companies so engaged there was a number of other large closely related manu - 
facturing concerns which built bridges, produced cement, etc., included in the 
group. 

The coal and coke, ore mining, and transportation companies were engaged 
chiefly in United States Steel Corporation activities indicated by their respective 
classifications. 

The group of companies classified as "miscellaneous^ includes real estate, 
. merchandising and various other concerns engaged i ies somewhat 

\ ed froir those directly connected with producing and disposing of iron and 

A detailed analysis was : approximately 40 c ■ which are not 

primarily engaged in the production oi iron and steel lor sale in order to compare 
the results of the operations, of ■panics with those of the concerns more 

directly engaged in the pi 

hi ' 

While income, investment, and rates of return are measures of the activity and 

38 of a business, such information presents only one phase of the history of a 

• ss. The things which a business produces is of real importance in describ- 

businesE life. 1 able 23 immediately following seeks to present such a 

This information has been compiled from production data appearing ir, 

nual reports of the United States Steel Corporation The wide variations 

in the production of the various products of the United States Steel Corporation 

are apparent lrom this table. For example, the annual production of ore mined 

uas followed a most erratic course. In 1917, some 31,781,000 tons of ore was 

mined. Mining of ore fell oft steadilv the next few years, reaching a low in 1921 

of 16.422,000 tons. Production of ore recovered rapidly and by 1923, 31,015,000 

was mined. For the next 6 years, production fluctuated at levels somewhat 

below that of 1923 without snowing any definite trend. The next period, 1929-38, 

is characterized by a sh"arp ; and precipitous decline to 1932, when only 3616, 000 

tons of ore were mined as compared with 30,540,000 tons in 1929 Recovery 

from this low was rapid, though less so than the fall. Bv 1937 production regained 

.,29 level with the mining ot 30,428,000 tons of'ore 1938 saw, however, 

the sharpest decline in ore production of the whole 22-year period. Production 

of ore in 1938 was but slightly more than one-third that of the ore mined in 1937 



17778 



CONCENTRATION OF ECONOMIC POWER 



As to be expected, production of steel ingots and castings, blast furnace produc- 
tion, and production of rolled and finished steel products for sale followed a course 
almost identical to that of ores mined, though the percentage variations in the 
production of ores mined was somewhat greater than in the case of the other stages 
of production. 

Similarly, the production of coal and coke, since it enters so intimately in the 
manufacture of steel, follows with fairly close correlation the production of the 
products mentioned above. An inspection of the yearly totals reveals, however, 
that the changes from year to year, for the most part, have been less violent than 
in the case of ores mined. 



Table 23. 



-Summary of production of raw, semifinished and finished products of 
United States Steel Corporation 1928-88, inclusive 



Products 



1938 



1937 



1936 



1935 



1934 



1933 



Ores mined (tons) 

Limestone quarried 
(tons) 

Coal mined (tons)... 

Coke manufactured 
(tons) 

Blast furnace produc- 
tion (tons) 

Steel ingots and cast- 
ings (tons)... 

Rolled and finished 
steel products for 
sale (tons) 

Other (tons). 

Portland cement (bar 
rels) 



10, 984, 471 

6, 980, 314 
13, 841, 727 

7, 005, 696 

6, 814, 252 

9, 397, 371 



6, 562, 948 
413, 085 



10, 695, 500 



30, 428, 301 

13, 121, 491 
24, 503, 805 

14, 189, 725 

14, 438, 549 

18, 532, 278 



12, 762, 267 
616, 378 



12, 731, 347 



10,742,061 
23, 581, 476 

12, 034, 398 

12, 054, 347 

16,907,996 



11,029,616 
544,025 



12,113,649 



11, 437, 501 

7, 002, 036 
15,094,540 

7,328,083 

7,417,089 

11,130,942 

7, 474, 213 
381, 221 

8, 184, 463 



10, 074, 431 

6,043,323 
11, 724, 183 

5, 382, 345 

5, 512, 805 

8, 660, 309 

6, 004, 585 
272,812 

7, 260, 600 



8, 345, 767 

5, 410, 752 
10, 227, 230 

4, 879, 785 

5, 026, 209 

8, 046, 995 



5, 536, 322 
265, 771 



6, 957, 100 



3, 616, 319 

3, 203, 029 
7, 046, 770 

2, 966, 483 

3,122.930 

4, 929, 236 



3,591,474 
157, 341 



',113.300 



13,600,716 

7, 673, 718 
15, 779, 298 

7, 040, 832 

7, 021, 507 

10, 082, 398 



7, 196, 017 
377, 699 



15,050,996 



Products 



Ores mined (tons) 

Limestone quarried (tons) 

Coal mined (tons) 

Coke manufactured (tons) 

Blast-furnace production (tons) 
Steel ingots and castings (tons) 
Rolled and finished steel prod- 
ucts for sale (tons) 

Other (tons) 

Portland cement (barrels) 



24,. 295, 103 
14,611,927 
25, 388, 265 
13,113,382 
12, 758, 333 
16, 726, 472 

11,609,265 

851, 099 

24, 294, 154 



30, 540, 565 
14, 763, 412 
31, 826, 634 
17, 355, 036 
16, 484, 985 
21. 868, 816 

15, 302, 669 

611,600 

11,549,000 



26, 633, 554 
14, 600, 181 
28, 691, 024 
15,993,373 



25, 645, 927 
4,656,150 
27, 430, 329 
14, 506, 'W0 



15, 237, 717 13, '84, 226 
20, 105, 749 18 486, 444 



13, 972, 388 

595, 653 

11.957,000 



12, 979, 282 

484, 719 

15, 425, 000 



1926 



29, 262, 741 
5,513,739 

34, 294, 657 
17,336,334 
15. 705, 301 
20, 306, 668 



14,334,412|13,271,010 

490,724 462,372 

14,526.000 15,722,000 



1925 



27, 996, 845 
5, (44 893 

31, 475, 568 
16, 301, 224 

14, 79* \M 
18, 898, 597 



1924 



24. 744, 541 
5, 033, 889 
27,738,007 
14, 108, 041 
12, 683, 729 
16,478,837 

11. 722, 908 

15,156,000 



Products 



1918 



1917 



Ores mined (tons)... 

Limestone quarried (tons) 

Coal mined (tons).. 

Coke manufactured (tons) 

81ast-furnace production (tons) 
Steel ingots and castings (tons). 
Rolled and finished steel prod- 
ucts for sale (tons) ... 

Other (tons) 

Portland cement (barrels) 



31,015,109 
6, 571, 486 
35, 289, 901 
18,837,631 
16, 729, 226 
20,329,950116,082,385 



21, 778, 179 
5, 633, 186 
23, 293, 471 
13, 237, 058 
12. 027, 163 



14, 721, 469 

411,872 

14, 440, 000 



11,785,331 

355, 027 

13. 168, 000 



16, 422, 682 
4, 607. 486 

21, 627, 939 
9, 825, 264 
8, 678, 262 

10, 966, 347 

7, 860, 334 

306,923 

12, 499, 000 



27,021,009 
5, 981, 022 
30, S28, 334 
16,208,111 
14, 532, S46 
19, 277, 960 

14, 228, 502 

376, 351 

11,960,000 



25, 423, 093 
6 835, 289 
28, 893, 123 
15,463,649 
13, 637, 504 
17, 200, 373 

11, 997, 935 

105, 596 

9,112,000 



28, 332, P39l.11, 781, 769 



6, 141, 365 
31, 748, 135 
17, 757, 636 
15, 340, 954 
19, 583, 493 

13, 849. 483 

96,058 

7, 287, 000 



6,494,917 
31,496,823 
17, 461, 675 
15, 553, 928 
20,285,061 

14,942,911 

122, 934 

10, 917, 000 



CONCENTRATION OF ECONOMIC POWER 



17779 



Because of the importance of rolled and finished steel products to the United 
States Steel Corporation, an analysis of such production by the steel-producing 
and fabricating subsidiaries for the years 1917-38 is set forth in table 24. While 
the table furnishes a measure of the relative size of the various steel-producing 
units of the United States Steel Corporation, it should be pointed out that certain 
of the units such as Carnegie Steel Co. and the Illinois Steel Co. and their suc- 
cessor, the Carnegie-Illinois Steel Corporation, devote a substantial proportion of 
their productive capacity to the production of basic stce 1 products which require 
further processing by other units in the group. The tons produced for further 
conversion within the United States Steel Corporation by the companies listed 
in table 24 are not included in this table nor in table 23. 



Table 24. — Summary of production of rolled and finished steel products for sale for 
the steel-producing and fabricating subsidiaries of the United Stales Steel Corpora- 
tion, 1917-38, inclusive 





Total 


1938 


1937 


1936 


1935 


1931 


1933 


1932 


American Sheet & Tin 
Plate Co-.. 


Tons 
26, 794, 163 

30, 114, 607 

19, 647, 182 
65/346,951 
44, 656, 905 
1, 789, 289 
25, 892, 954 

15, 298, 784 
13, 194, 506 


Tons 


Tons 


Tons 


Tons 
1, 273, 591 

1, 115, 523 


Tons 
1, 004, 496 

784, 119 


Tons 
969, 166 

927, 413 


Tons 
536, 799 


American Steel & Wire 
Co.. 


805, 083 
3, 862, 840 


1,325,915 
8, 593, 417 


1, 373. 933 
1 7, 190, 925 


622, 904 


Carnegie-Dlinois Steel 
Co 




Carnegie Steel Go 


1. 942, 888 

1,538,371 

236, 767 

545, 729 

563, 285 
258, 059 


1,628,513 

1, 135, 773 

194, 601 

484, 322 

516,967 
255. 794 


1,607,119 
853,416 
172, 090 
377, 754 

422, 940 
206, 424 


1, 002 874 


Illinois Steel Co .. - 








516, 546 


Columbia Steel Co 

National Tube Co 

Tennessee Coal, Iron & 
R. R. Co. 


225, 498 
625, 717 

759, 847 
283, 963 


264, 327 
1,111,126 

1, 009, 292 
458, 190 


310, 136 
973, 010 

816,811 
364, 801 


88, 020 
263, 537 

242, 378 


Other 


318. 416 






Total 


242, 735, 341 


6, 562, 948 


12, 762, 267 


11,029,616 


7, 474, 213 


6, 004, 585 


5, 536, 322 


3, 591, 474 













1931 


1930 


1929 


1928 


1927 


1926 


1925 


1924 


American Sheet & 

Tin Plate Co 

American Steel & 

Wire Co 

Carnegie Steel Co 

Illinois Steel Co 

Columbia Steel Co._. 


Tons 
900, 405 

922, 556 

2, 064, 398 

1, 281, 073 

122, 107 

735, 538 

555, 982 
613, 958 


Tons 
1, 384, 156 

1, 185, 717 
3, 357, 747 
2, 414, 376 
175, 743 
1, 395, 740 

718, 106 
977, 680 


Tons 
1, 982, 896 

1, 593, 298 
4, 659, 280 
3, 512, 580 


Tons 
1, 866, 153 

1, 603, 992 
4,049,212 
3, 233, 365 


Tons 
1, 586, 054 

1, 463, 678 
3, 710, 066 

2, 776, 801 


Tons 
1, 848, 027 

1, 513, 907 
4, 193, 965 
3, 059, 501 


Tons 
1, 638, 719 

1, 534, 341 
3, 925, 212 
2, 985, 455 


Tons 
1,411,126 

1,390,796 
3, 648, 778 
2, 452, 383 


National Tube Co... 
Tennessee Coal, Iron 

& R. R. Co 

Other 


1, 631, 429 

929, 436 
993, 750 


1, 578, 030 

822, 108 
819, 528 


1, 744, 560 

918, 636 
779, 487 


1, 822, 647 

1, 052, 275 
844, 090 


1, 503, 779 

950, 303 
733, 201 


1, 353, 835 

812,415 
653, 575 






Total 


7,196,017 


11,609,265 


15, 302, 669 


13, 972, 388 


12, 979, 282 


14, 334, 412 


13, 271, 010 


11, 722, 908 











American Sheet & Tin Plate 

Co 

American Steel & Wi.-e Co 

Carnegie Steel Co 

Illinois Steel Co... 

National Tube Co 

Tennessee Coal, Iron & R. R. 

Co 

Other 

Total 



1923 



1, 774, 468 
1, 780, 019 
4, 693, 691 
3, 270, 573 
1, 665, 696 

776, 725 
760, 297 



14, 721, 469 



1, 504, 125 
1,563,839 
3, 686, 737 
2, 619, 238 
1, 283, 380 

639, 353 

488, 659 



11,785,331 



1921 



1,024,643 
1,013,708 
2, 209, 589 
1,772,691 
1,069,780 

441,728 
328, 195 



7, 860, 334 



1, 610, 536 
2, 029, 731 
4, 682, 568 
3,086,011 
1,534,028 

660, 720 
624, 90S 



14, 228, 502 



1919 



1,381,528 
1, 654, 615 
4, 259, 377 
2, 293, 880 
1, 324, 900 

534,291 
549, 344 



11,997,935 



1918 



1,356,120 1,741,155 

1,749,397 2,160,123 

4,911,986 5,112,951 

2,913,220 2,941,652 

1,457,392 1,411,025 



544, 355 
917,013 



13, 849, 483 



610,831 
965, 174 



14,942,911 



1 Includes production of American Sheet & Tin Plate Co. and Illinois Steel Co. 



17780 



CONCENTRATION OF ECONOMIC POWER 



An excellent measure of growth in the steel industry is the capacity to produce 
steel and steel products. The following tabulation compares the capacities of the 
United States Steel Corporation and the steel industry to produce steel ingots and 
castings from 1917 to 1939, inclusive: 

Comparison of the capacities of the United States Steel Corporation and the steel in- 
dustry in the production of steel ingots and castings, 1917-89 



Year' 


Total for 
industry 2 


U. S. Steel 
Corpora- 
tion 


Percentage 
of corpor- 
ation to 
total 


Year* 


Total for 
industry * 


U. S. Steel 
Corpora- 
tion 


Percentage 
of corpor- 
ation to 
total 


1917 

1918 

1919 

1920 

1921 

1922 

1923. 

1924 ,.. 

1925 

1926 

1927 

1928 


Tons 
49, 613, 88S 
52, 541, 445 

54, 482, 740 

55, 637, 135 
57, 376, 810 
58, 416, 680 

58, 644, G55 

59, 431, 710 
61, 136, 805 
57,812,531 

60, 032, 247 
61,465,100 


Tons 
22, 009, 300 
22, 163, 000 
22, 295, 500 
22, 303, 300 
22, 649, 800 
22, 650, 200 
22, 740, 000 

22, 758, 400 

23, 067. 700 

22, 692, 000 
23,119,800 

23, 713, 000 


44.4 
42.2 
40.9 
40.1 
39.5 
38.8 
38. 8 
38.3 
37.7 
39.3 
38.5 
38.6 


1929 

1930 

1931 

1932 

1933 

1934.. 

1935 

1936 

1937 

1938 

1939. 


Tons 
63, 784, 389 
65, 165, 541 

68, 980, 181 

70, 340, 101 
70,191,431 

69, 755, 371 
70, 046, 366 
69, 789, 554 
69, 775, 334 

71, 594, 320 
73,061,569 


Tons 
24, 150, 000 
25, 085, 000 

25, 997, 000 
27, 766, 300 
27, 341, 900 
27, 341, 900 

27, 341, 900 

26, 657, 000 
25, 772, 400 
25, 790, 000 

28, 885, 000 


37.9 
38.5 
37.7 
39.5 
40.0 
39.2 
39.0 
38.2 
36.9 
36.0 
39.5 



1 Totals as of January 1. 

s From Annual Reports of the. American Iron and Steel Institute (Summary of Production of Iron and Steel 
Products), 1917-39. 

In 1917 the capacity of the corporation amounted to 44.4 percent of the total 
capacity for the industry. In terms of tonnage in 1917 the corporation had a 
rated capacity of 22,009,300 tons of steel ingots and castings as compared with a 
capacity for the industry of 49,613,888 tons. In 1939 the industry had a capacity 
of 73,061,569 tons, while the corporation had a capacity of 28,885,000 tons, or 
39.5 percent of the total. In other words, while the corporation increased its 
capacity during the period 6,875,700 tons, the capacity of the industry increased' 
23,447,681 tons. The decrease of approximately 5 percent in the corporation's 
participation in total capacity as the result of the more rapid increases in the 
capacity of the industry, represents a fairly gradual decline. This trend was inter- 
rupted when the corporation made slight recoveries to its former position. In 
1926 the corporation's percent of participation increased to 39.3, a gain of 1.6 per- 
cent over the previous year. Again, in 1933, the corporation possessed 40.0 per- 
cent of total capacity, a gain of 2.3 percent over the preceding 2 years. Finally 
in 1939 the corporation's percentage of total capacity jumped 3.5 percent over the 
preceding year. 

The following table 25 compares the capacities of the United States Steel Cor- 
poration and .its steel subsidiaries in 1917 with its capacities in 1939.. Since the 
relative loss of the corporation's participation in the production of steel has been 
gradual, without violent changes, it is perhaps unnecessary to account-for the 
changes in capacities in the years intervening between 1917 and 1939. This table 
also shows the capacities of the subsidiaries for rolled and pther iron and steel 
products. It will be noted that the total capacity of the corporation for the pro- 
duction of these products increased from 44,302,600 tons in 1917 to 55,818,025 tons 
in 1939. Most of this increase represents capacity for the conversion of steel 
within the corporation. The classification of rolled and other iron and steel prod- 
ucts comprises several stages in the production of steel. This explains why with 
an increase in the capacity of these products of 11,515,425 tons, the capacity in 
the production of such products for sale to interests outside the corporation in- 
creased only 3,675,210 tons. In other words, an increasing amount of semi- 
finished steel produced by the corporation was further processed by it into finished 
products. 



CONCENTRATION OP ECONOMIC POWER 



17781 



Table 25. — Comparison of capacities of United States Steel Corporation and its 
steel-producing and steel-fabricating subsidiaries in 1917 and 1989 







Jan. 1 


1939 






Total steel in- 
gots and cast- 
ings 


Rolled and other iron and steel products 




Total tonnage 


Less tonnage 
for reconver- 
sion within 
each company 


Net tonnage 
for sale 


Carnegie-Illinois Steel Corporation: 


11,885,000 

9, 988, 000 

20,700 

403, 000 


17, 723, 460 

11, 790, 400 

54, 300 

6, 935, 500 


9, 208, 400 

4,601,200 

2,660 

3, 943, 800 


8, 515, 060 




7, 189, 200 




51, 640 


Ameiican Sheet & Tin Plate ' 


2, 991, 700 








17, 756, 060 
3, 401, 970 


18, 747, 600 


Less reconversion of tonnage between 






3, 401, 970 










Total Carnegie-Illinois Steel Cor- 


22, 296, 700 

1, 251, 000 

2, 825, 000 

494, 500 

2, 017, 800 


36, 503, 660 
6, 760, 635 
6, 154, 000 
1, 089, 700 
4, 513, 250 
687, 080 
109, 700 


21, 158, 030 

4, 622, 010 

3, 470, 000 

710, 760 

3, 080, 900 

19, 800 

1,700 


15, 345, 630 




2, 138, 595 


NationalTube Co 


2, 684, 000 




378, 940 


Tennessee Coal, Iron & R. R. Co 


1, 432, 350 
667, 280 


Other l '..-. 




108, 000 















33, 063, 230 
2, 995, 795 


22, 754, 795 


Less reconversion of tonnage between 






2, 995, 795 










Total for United States Steel Cor- 


28, 885, 000 


55,818,025 


36, 059, 025 


19, 759, 000 










Jan. 1 


1917 






Total steel in- 
gots and cast- 
ings 


Rolled and c 


ther iron and steel products 




Total tonnage 


Less tonnage 
for reconver- 
sion within 
each company 


Net tonnage 
for sale 


Carnegie-Illinois Steel Corporation: 


10, 145, 000 
5, 565, 300 


15, 489, 100 

7, 542, 500 

52, 120 

3, 626, 100 


8, 080, 780 

3, 224, 700 

1,065 

1, 692, 400 


7, 408, 320 




4, 317, 800 




51,055 


American Sheet & Tin Plate ' 


288, 000 


1, 933, 700 












Less reconversion of tonnage between 




















Total Carnegie-Illinois Steel Cor- 


15, 998, 300 
2, 294, 000 
2,027,000 


26, 709, 820 
9, 416, 350 
4, 796, 000 


12,998,945 
6, 751, 830 
2, 923, 800 


13, 710, 875 




2, 664, 520 




1, 872, 200 








Tennessee Coal, Iron & R. R. Co 


950, 000 
240, 000 
500,000 


1, 415, 000 

1, 160, 430 

805, 000 


704, 500 
373, 920 
430, 000 


710, 500 
786, 510 


Other — 


375,000 






Total 






24, 182, 995 
4, 035, 815 


20,119,605 


Less reconversion of tonnage between 






4, 035, 815 










Total for United States Steel Cor- 


22, 009, 300 


44, 302, 600 


28, 218, 810 


16, 083, 709 







1 I"n 1917 these divisions of Carnegie-Illinois were completely separate companies. In 1935 Carnegie Steel 
Co. and Illinois Steel Co. were merged to form the Carnegie-Ulinoks Steel Corporation. In 1936 the Ameri- 
can Sheet & Tin Plate Co. was added. 



17782 CONCENTRATION OF ECONOMIC POWER 

Investments, Profits, and Rates of Return for United States Steel 

Corporation 

The following table summarizes the investments, profits, and rates of return 
for United States Steel Corporation and subsidiaries on a consolidated basis, for 
the period 1917 to 1938, inclusive. 

Rates of return are computed on three bases of investments, namely the total 
investment, the stockholders? investment, the common stockholder's equity. The 
total investment includes preferred and common stocks, long-term debt, surplus, 
surplus reserves, and reserves for Federal income and profits taxes. The stock- 
holders' investment includes all of these items except long-term debt. The 
common stockholders' equity consists of the outstanding common stocks, surplus, 
surplus reserves, and reserves for Federal income and profits taxes. On each 
basis the investments were averaged as of the beginning and end of the year after 
the elimination of appreciation and other intangibles. 

The profits used in computing rates of return in the table are before deductions 
for Federal income and profits taxes, since such taxes are wholly contingent upon 
profits and represent a division of the earnings of the business. Subject to this 
qualification, the profits applicable to the total investment represent the net in- 
come from all sources before deducting interest on longrterm debt. The profits 
applicable to the stockholders' investment represent the net income after deducting 
interest on long-term debt. The further deduction of dividends paid or accrued 
on preferred stock gives the net income applicable to the common stockholders' 
equity. 



-ri_:~ i» ia »<i w^inmck ^r»ntairiQ mnrp than 



CONCENTRATION OP ECONOMIC POWER 



17783 



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CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



17785 



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17786 



CONCENTRATION OF ECONOMIC POWER 



Table 26 shows that rates of return based on the total investments, stock- 
holders' investment, and common stockholders' equity were 30.94, 47.58, and 
71.28 percent, respectively, for 1917. Rates of return were approximately one- 
third less for 1918 applicable to all classes of investment. The rates of return 
declined to 9.28, 11.50, and 13.46 percent, respectively, for 1919. Rates of return 
remained approximately the same for 1920 and then declined to 4.39, 4.13, and 
2.84 percent, respectively, for 1921. The three classes of rates of return remained 
approximately the same for 1922, but there was a substantial increase in rates of 
return in 1923. Returns on all classes of investment continued at a high level 
thereafter through 1930. During the period 1923-30 rates of return were highest 
in 1929 and lowest in 1930. In 1929, earnings were equivalent to 12.18 percent 
on the total investment, 13.57 percent on the stockholders' investment, and 15.45 
percent on the common stockholders' investment; in 1930 they were equivalent to 
6.16 percent on the total investment, 6.29 percent on the stockholders' invest- 
ment, and 6.11 percent on the common stockholders' equity. 

Losses during the depression years and the moderate earnings in most of the 
other years were such that the results of operations since 1930 were decidedly 
less favorable on the whole than for the earlier years. This is evident from the 
following tabulation of rates of return for the two periods: 





Rates of Return 








1917-1930 


1931-1938 




Percent 
10.77 
13.08 
15.43 


Percent 
0.87 




.59 


On|common stockholders' equity 




i 1.34 



1 Loss. 

Rates of return were lowest in 1932 where losses were sustained on each basis 
of investment. For the following 5 years there was gradual recovery and in 1937 
the returns were higher than for any year since 1929. In 1938 however, the trend 
was sharply reversed, the decline being greater than for any year since 1921. 

The following chart 1, indicates graphically the trend in rates of return on each 
basis of investment from 1917-38. 

Table 26 shows that the total investment increased from $1,770,265,768 in 1917 
to $1,994,662,712 in 1930, when it began a steady decline reaching $1,455,527,445 
at the close of 1935, largely resulting from unprofitable operations, caused by 
Unfavorable business conditions during this latter period. Following 1935 there 
was a steady increase in total investment to $1,584,116,450 as at December 31, 
1938. 

As shown elsewhere in this report intangible values included in the assets of 
the United States Steel Corporation, amounting to $529,866,362.10 as at the 
beginning of 1917 were gradually written down to the end of 1937, when a balance 
of $249,583,148.86 remained. All of this later amount was written off in 1938 
with the exception of $1 . By reference to the table above referred to it may be 
noted that the intangible value was deducted in determining the total investment. 
Other details of the changes in total investment follow. 



CONCENTRATION OF ECONOMIC POWER 



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124491— 41— pt. 31- 



-13 



17788 CONCENTRATION OF ECONOMIC POWER 

Common Stock 

Common stock as at December 31, 1916, amounted to $508,302,500 and 
increased to $652,743,900 as at December 31, 1938. This net increase of 
$144,441,400 resulted from the issuance of 3,620,227 shares of the par value of 
$100 per share, and the reduction of the par value of the common stock by 
$217,581,300 in 1938, when the stock was changed from a par value of $100 to a 
stated value of $75 per share. 

The common stock, issued during the period 1917 to 1938, inclusive, was for the 
consideration set forth in the following tabulation: 

Common stock issued by United Stales Steel Corporation and consideration therefor, 

1917-38 





Par value 


Consideration 


Reduction 


Year issued 


Cash 


Property 


Stock divi- 
dend 


from par to 
stated value 


1917-26 


0) 

$203, 321, 000 

101, 660, 500 

3 55, 459, 500 

1,581,700 

7 217, 581, 300 










1927 






$203,321,000 




1929 


2 $142, 697, 625 
* 3, 029, 873 
6 2, 653, 889 






1930 _. 


« $91, 570, 335 






1931 . 






1938 






$217, 581, 300 












Total _ 




148, 381, 387 
43, 323, 487 


91, 570, 335 
37, 926. 535 


203, 321, 000 


217, 581, 300 


Less premium credited to capital 
















144,441,400 


105, 057, 900 


53, 643. 800 


203, 321, 000 


217,581,300 







1 None Issued. 

2 Includes $41,037,125 premium. 

3 Includes $1,815,700 par of stock sold to employees. 

* Includes $1,214,172. 

« Includes $37,926,535 premium. 

• Includes $1,072,189 premium. 
7 Denotes deduction. 

The tabulation shows that there was a net increase in outstanding common 
stock of $144,441,400 during the years 1917-38. This increase, together with 
$508,302,500 of outstanding common at December 31, 1916, accounts for 
$652,743,900 of outstanding common stock at December 31, 1938, without par 
value, represented by 8,703,252 shares of the stated value of $75 per share. 

The property acquired for stock issued in 1930 consisted of the assets and 
business of Atlas Portland Cement Co., Columbia Steel Corporation, and Oil 
Well Supply Co. In consideration therefor, United States Steel Corporation 
issued 536,438 shares of its common stock of the par value of $100 per share, of 
which 176,265 shares were issued for the assets of Atlas Portland Cement Co., 
251,771 shares were issued for the assets of Columbia Steel Corporation, and 
108,402 shares were issued for the assets of Oil Well Supply Co. The cash value 
of the assets acquired were stated to be $91,570,335 and reflected the market value 
of the stock issued at the time of purchase. The difference between this amount 
and the par value of the United Staues. Steel Corporation's stock issued therefor 
was credited to capital surplus. 

The stock issued in payment of dividends amounting to $203,321,000 in 1927 
represented a 40 percent stock dividend from undivided surplus. 

As previously explained, the common stock of United States Steel Corporation 
was changed from shares of the par value of $100 to shares without par value. 
This resulted in a reduction of the value of 8,703,252 outstanding shares from 
$870,325,200 to $652,743,900 in 1938. This reduction of $217,581,300 was 
(charged to the capital stock account and credited to the capital surplus account. 

Preferred Stock 

The United States Steel Corporation has authorized the issuance of but one 
class of preferred stock, namely; 4,000,000 snares of 7 percent cumulative preferred. 
This stock with a par value of $100 per shpre has equal voting power with the 
common stock. In addition it has preference as to any assets and dividends, 
being entitled in any liquidation to $100 per slrare and accrued dividends. 



CONCENTRATION OP ECONOMIC POWER 



17789 



The records of this company show that there have been issued and outstanding 
during the entire period covered by this report 3,602,811 shares, with a par value 
of $360,281,100. 

Appropriated Surplus 

The balance in the appropriated surplus account as at December 31, 1916, 
amounted to $55,000,000 to which amount additions were made from earned 
surplus to cover capital expenditures, as follows: 



1917 

1918.. 

1919 

1920.... 

1921 and 1922 
1923 



Balance 
Jan. 1 



$55, 000, 000 
110,000,000 
110, 898, 914 
110,898,914 

0) 
140, 898, 914 



Net addi- 
tions dur- 
ing year 



$55, 000, 000 
898,914 

30," 600,"660 

(') 
40, 000, 000 



Balance 
Dec. 31 



$110,000,000 
110,898,914 
110,898,914 
140, 898, 914 

(>) 
180, 898, 914 



1924... 
1925... 
1926.... 
1927-34 
1935.... 



Balance 
Jan. 1 



$180,898,914 

200,898,914 

240, 000, 000 

(') 

2 270, 000, 000 



Net addi- 
tions dur- 
ing year 



$20, 000, 000 

39, iOl, 086 

30, 000, 000 

(') 



Balance 
Dec. 31 



$200, 898, 914 

240, 000, 000 

270, 000, 000 

(>) 



' No change. 

» In 1935 the balance in the appropriated surplus of $270,000,000 was transferred to depreciation res' rves. 
This was the result of a detailed and extensive survey by the corporation of its depreciable property which 
revealed that depreciation reserves were inadequate by this amount. 

Capital Surplus 

At December 31, 1938, the amount of capital surplus recorded on the company's 
books was $38,462,801. The additions and deductions accounting for this balance 
in this s Qount are as follows: 

ADDITIONS 

Difference between proceeds and par value of 1,016,605 shares of 
common stock of the par value of $*100 per share issued for cash 
in 1929 $41,037, 125 

Difference between proceeds and par value of 18,157 shares of 

common stock issued for cash in 1930 1, 214, 172 

Excess of cash value of assets of Atlas Portland Cement Co., 
Columbia Steel Corporation, and Oil Well Supply Co. over par 
value of 536,438 shares of common stock issued therefor in 1930.- 37, 926, 535 

Difference between proceeds and par value of 15,817 shares of 

common stock issued for cash in 1931 .1, 072, 189 

Surplus arising from reduction in 1938 of the value of 8,703,252 
shares of outstanding common stock from shares of the par value 
of $100 each to shares without par value, but to whic'h a stated 
value of $75 per share was assigned ..^ — 217, 581, 300 

Total . 298,831,231 



DEDUCTIONS 

Amount applied in 1938 to the reduction of appreciation and other 

intangibles *_ _ _ . 260, 368, 520 

Balance, capital surplus Dec. 31, 1938 38, 462, 801 

Earned Surplus 

Earned surplus decreased from $356,360,913 at December 31, 1916, to $247,- 
419,013 at December 31, 1938, as follows: 

Balance Dec. 31, 1916 $356, 360, 913 

Net income (1917-38) 1, 670, 058, 253 

Total 2,026,419, 166 

Acquisition of assets and securities of other companies 12, 876, 706 

Reversal of reserves no longer required 97, 098, 546 

Refund of prior years, Federal income and profits tax 90, 780, 939 

Refund of railroad recapture payments 6, 355, 750 

Total... 3,233,531, 107 



17790 



CONCENTRATION OF ECONOMIC POWER 



Less dividends: 

Common stock: 

Gash 1 $669, 817, 548 

Stock 203,321,000 

Preferred cash 554, 832, 894 

Total 1, 427, 971, 442 

Transfers to: 

Depreciation reserves 60, 427, 303 

Appropriated surplus 211, 669, 422 

Amortization of intangibles 236, 269, 067 

Premiums paid on bonds retired 40, 841, 224 

Miscellaneous 8, 933, 636 

$1, 986, 112, 094 

Balance, Dec. 31, 1938 247, 419, 013 

Contingency and Federal Income and Profits Tax Reserves 

The balance in the reserves to provide for general contingencies, accident, and 
hospital expenditures, extraordinary expenses in specified operations, and for 
special purposes amounted to $31,949,585 at the end of 1938. The balance -in 
this account varied from $64,363,259 in 1921 to $18,398,749 in 1933. The yearly 
balances carried in this reserve appear in table 26. 

The balance in the reserve for Federal income and profits taxes amounted to 
$9,547,713 at the end of 1938. The amounts reserved for this purpose were 
largest in 1917 and 1918, amounting to $245,406,350 and $307,161,192, respec- 
tively. During these years the company realized large war profits and undoubt- 
edly accrued these reserves to provide for large war-profits taxes. The reserves 
in these years, as shown by the table referred to above, were relatively small. 
Net income dropped very decidedly for 1919 and subsequent years and likewise 
smaller amounts were reserved in anticipation of Federal income and profits 
taxes. 

Long-Term Debt 

Bonded, debenture, and mortgage indebtedness decreased from $603,736,905 
as at December 31, 1916, to $231,574,257 as at December 31, 1938, as follows: 

Bonded, debenture, and mortgage debt 





Total liability 
• Jan. 1 


Amounts is- 
sued or lia- 
bility assumed 


Amounts re- 
tired 


Total liability 
Dec. 31 


Supple- 
mentary 
adjust- 
ments 


1917 . 


$603, 736, 905 

586, 949, 949 

582, 916, 274 

568, 964, 621 

555, 066, 402 

540, 874, 768 

539, 740, 268 

527, 159, 730 

511, 272, 930 

509, 479, 578 

492, 689, 353 

475, 174, 529 

456, 602, 415 

112, 257, 978 

101..820, Ul 

98,887,29* 

95, 950, 285 

93, 179, 824 

95, 663, 689 

93, 551, 890 

98, 251, 474 

107, 489, 624 


$1,000 

8. 148, 273 

709, 000 

29,250 

310, 000 

15,781,000 

806,000 

1, 202, 700 

15:412,000 

92,775 


$16, 760, 188 

12, 156, 179 

14, 630, 885 

13, 899, 701 

14, 473, 866 

16, 905, 500 

13, 386, 538 

17, 089, 500 

17, 186, 852 

16, 869, 000 

17,514,824 

18,572,114 

344, 344, 437 

10, 905, 500 

2,932,817 

2, 937, 039 

2, 770, 431 

2, 256, 535 

2,111,799 

1,860,416 

10, 186, 917 

8, 072, 367 


$586, 949, 949 

582,916,274 

568, 964, 621 

555, 066, 402 

540, 874, 768 

539, 740, 268 

527, 159, 730 

511,272,930 

509, 479, 578 

492, 689, 353 

475, 174, 529 

456, 602, 415 

112,257,978 

101,820,111 

98, 887, 294 

95, 550, 255 

93,179,824 

95, 663, 689 

93, 551, 890 

98, 251, 474 

107, 489, 624 

231, 574, 257 


$27,768 


1918 


25,769 


1919 


29,768 


1920 - 


27,768 


1921 


27,768 


1922 


10,000 


1923 




1924 




1925 


18, 500 


1928 


14,000 


1927 




1928 






1929 






1930 


425. 933 


-41, 700 


1931 .. 




1932 






1933 






1934 ... 


4, 740. 400 




1935 




1936... 


6, 560, 000 
19, 425, 067 
132,157,000 




1937 




1938 









CONCENTRATION OF ECONOMIC POWER 17791 

The preceding tabulation shows that the principal reductions in bonded in- 
debtedness occured in 1929 when the corporation retired its 50-year 5-percent 
gold bonds of 1951, and its 10-60-year 5-percent bonds of 19G3. Of these issues 
there were outstanding at January 1, 1929, exclusive of bonds previously pur- 
chased and in the treasury, $134,830,000 and $136,632,000, respectively. The 
50-year gold 5's of 1951 were called for payment September 1, 1929, at 115 and 
interest, and the 10-60-year sinking-fund gold 5's of 1963 were called for pay- 
.inent November 1, 1929, at 110 and interest. During 1929 $265,455,000 of these 
Ibonds were retired. 

Of the total amount of 50-year 5-percent gold bonds, outstanding as above in- 
dicated, $58,368,000 were of the noncallable series. The greater part of such 
bonds were held by a few interests with whom arrangements were made to turn 
in their bonds for redemption at the call price for the callable series. 

Of the remaining 78,887,437 of bonds retired during 1929, $45,918,000 repre- 
sented cancelation of bonds previously redeemed and held in the treasury. Bonds 
of subsidiary companies, principally those of the Indiana Steel Co. and the Na- 
tional Tube Co. in the amount of $32,971,437 make up the balance of these bonds 
retired. 

The cash funds required in retiring these bonds were supplied from cash resources 
on hand, representing surplus and surplus reserves, and in part from proceeds of 
sale of additional shares of common stock. 

The principal issuance of bonds, between January 1, 1917, and December 31, 
1938, the period covered by this report, occurred during 1938 when $100,000,000 
of United States Steel Corporation 10-year 3%-percent debentures and $30,000,000 
first -mortgages 3}4 percent Duluth, Missabe & Iron Range Railway Co. were 
issued. 

The 10-year 3>4 percent debentures of United States Steel Corporation, dated 
June 1, 1938, mature June 1, 1948. On June 7, 1938, these bonds were sold through 
a syndicate, headed by Morgan, Stanley & Co., Inc., at a price equal to 98J4 per- 
cent of the principal amount thereof, plus accrued interest. The aggregate cash 
proceeds derived by United States Steel Corporation from such sale was $98,250,- 
000. 

To the extent of $50,000,000 these proceeds were used for the repayment of 
bank loans incurred in February 1938, the remainder being available, among other 
things, for expenditures for modernization, extension and replacement of various 
manufacturing plants of the subsidiaries. The detail by companies, issues, balance 
outstanding, December 31, 1938, maturity and interest is shown in the following 
tabulation. 



17792 



CONCENTRATION OF ECONOMIC POWER 



United Stales Steel Corporation and subsidiary companies' bonded, mortgage, and 
debenture debt outstanding, Dec. 81, 1938 









Interest 


Company and issue 


Balance out- 
standing 


Maturity 














Rate 


Payable 








Pet. 




United States Steel Corporation 10- 


$100,000,000.00 


June 1, 1948' 


VA 


June and Decem- 


year 3V£-percent debentures. 








ber. 


Subsidiary companies' bonds guaran- 










teed by United States Steel Corpora- 
tion: 
American Steel & Wire Co. of Ala- 










» 964, 000. 00 


Nov. 1, 19463 


5 


May and No- 


bama first-mortgage gold bonds. 








vember. 


Carnegie-Illinois Steel Corporation 


100,000.00 


Aug. 1, 1939... 


5 


February and 


bonds — St. Clair Furnace Co. 








August. 


first-mortgage gold bqnds. 










Elgin, Joliet & Eastern Ry. Co. 










bonds: 










Joliet equipment trust regis- 


375, 000. 00 


$125,000 each Jufy 1... 


5 


January and 


tered gold bonds*. 








July. 


Chicago. Lake Shore & Eastern 


9, 000, 000. 00 


June 1, 1969 


4M 


June and De- 


Ry: Co. first-mortgage gold 








cember. 


bonds. 










H. C. Frick Coke Co.— Pitts- 
burgh— Monongahcla first lien 


3, 537, 000. 00 


($589,000 each July 1 to 
< 1943. inclusive. 


!* 


January and 


purchase money gold coupon 
bonds. 




($562,000 July 1, 1944.. 


i 


July. 


Illinois Steel Co. debenture gold 


18, 500, 000. 00 


Apr. 1, 1940 


* l A 


April and Octo- 


bonds of 1940. 








ber. 


Union R. R. Co. bonds: 










Gold debentures 


5, 900, 000. 00 


Sept. 1, 1946 


6 


June and De- 




cember. 


Monongahcla Southern R. R. 










Co. bonds: 










First mortgage 50-year gold 
bonds. 


3, 000, 000. 00 




5 


April and, Octo- 
ber. 








General mortgage gold 


2, 500, 000. 00 


do 


6 


Do. 


bonds. 










St. Clair Terminal R. R. Co. 


1,129,000.00 


Mar. I, 1950 


5 


March and Sep- 


bonds — general mortgage 30-year 








tember. 


gold bonds. 










Subsidiary companies' bonds not guar- 










anteed by United States Steel Cor- 










poration: 










Bessemer & Lake Erie R. R. Co. 










bonds: 










Bessemer & Lake Erie equip- 
ment trust certificates of 1936. 


6, 060, 000. 00 


($470,000 each Nov. 1 
\ to 1950, inclusive. 
[$420,000 Nov. 1, 1951.. 


1 2H 


May and. No- 
vember. 


Bessemer & Lake Erie R. R. 


6, 030, 000. 00 


$670,000 each Mar. 1„_ 


Vi 


March and Sep- 


equipment.trust of 1937. 








tember. 


rittsburg, Bessemer & Lake Erie 










R. R. Co. bonds: 










Consolidated first-mortgage 50- 


9, 554, 000. 00 


Jan. 1, 1947 


5 


January and 


ycar gold bonds. 








July. 


The Pittsburgh, Shenango & 










Lake Erie R. R. Co. bonds: 










First-mortgage gold loan of 


68,000.00 


Oct. 1, 1940 


5 


April and Octo- 


1890. 








ber. 


Consolidated first - mort- 


378, 000. 00 


July 1, 1943.. 


5 


January and 


gage 50-year gold bonds. 








iiy. 


Duluth, Missabe '& Iron Range 


28, 800, 000. 00 


Oct. 1, 1962 < 


3H 


April and Octo- 


Ry. Co. first-mortgage bonds. 








ber. 


Duluth, Missabe & Northern Ry. 


3, 528, 000. 00 


$252,000 each Mar. 1... 


iVi 


March and Sep- 


equipment trust of 1937. 








tember. 


Elgin, Joliet & Eastern Ry. Co. 










bonds: 










First-mortgage gold bonds 


10, 000, 000. 00 


May 1, 1941 


5 


May and No- 










vember. 


Elgin, Joliet & Eastern Ry. 


2, 100, 000. 00 


$150,000 each Mar. I... 


VA 


March and Sep- 


equipment trust of 1937. 








tember. 


Tennessee Coal, Iron & R. R. Co. 


» 11,276,000.00 


July 1, 1951 e „ 


5 


January and 


general mortgage gold bonds. 








July. 


Birmingham Southern R. R. equip- 


720, 000. 00 


$90,000 each Dee. 1 


3H 


June and De- 


ment trust of 1936. 








cember. 



1 Sinking fund of $2,500,000 due each June and Dec. 1, 1939 to 1947, account retirement of these bonds. 

> In addition, $1,236,000 of this issue are held alive in sinking fund. 

3 $44 000 per annum payable to sinking-fund trustees plus interest on bonds in sinking fund for redemption 
of bonds. 

* Sinking fund to retire $600,000 principal amount of bonds each Apr. and Oct. 1 to 1962, inclusive. 

8 $5,225,000 of these bonds arc guaranteed by United States Steel Corporation under a special nonassign- 
able guaranty to their present holders. 

6 Annunl sinkine fund equals $119,360. If bonds are notoffered to trustees at 105 or less, within 20 days of 
first publication of offer to purchase, amount of unused installment is returned by trustees to company. 



CONCENTRATION OF ECONOMIC POWER 



17793 



United Stales Steel Corporation and subsidiary companies' bonded, mortgage, and 
debenture debt outstanding, Dec. 81, 1988— Continued 





Balance out- 
standing 


Maturity 


Interest 


Company and issue 


Rate 


Payable 


Subsidiary companies' bonds not guar- 
anteed by United States Steel Cor- 
poration—Continued. 
Union Railroad Co. bonds: 

First-mortgage gold bonds _ ... 

Union equipment trust certifi- 
cates of 1936. 
Union R. R. equipment trust 
of 1937. 
Subsidiary companies' real-estate 

mortgages. 
Purchase money obligations issued 
in the acquirement of fixed prop- 
erty. 


$2, 000, 000. 00 

2, 340, 000. 00 

2, 210, 000. 00 

93, 890. 60 

1,106,366.57 


Sept. 1, 1946 

$180,000 each Nov. 1... 
$170,000 each Mar. I... 


Pet. 

5 


March and Sep- 
tember. 

May and No- 
vember. 

March and Sep- 
tember. 














Total 


231,269.257.17 








Apr. 1, 1951. 






Bonds to cover payment of which cash 
funds are specially deposited with 
trustee: United States Steel Corpora- 
tion 50-year gold bonds, noncallable 
series. 
Matured and called bonds unpresented 
for payment funds to redeem which 
are held by trustees: 
United States Steel Corporation 
10-60 year sinking fund gold 
bonds. 
Indiana Steel Co. first-mortgage 

gold bonds. 
Duluth & Iron Range R. R. Co. 


269, 000. 00 

8, 000. 00 

3,000.00 
2,000.00 
23, 000. 00 


5 


February, April, 




June, August, 
October, and 
December. 














first-mortgage bonds. 
Other matured bonds unpresented 
for payment. 
















305, 000. 00 














Grand total as per balance sheet. 


231, 574, 257. 17 













Purchase Money Obligations 

The item styled purchase monev obligations decreased from $25,561,968 at 
January 1, 1917, to $12,138,082 at December 31, 1938. During 1917 the balance 
in this account representing principally existing mining royalty obligations was 
substituted for subsidiary companies' non-interest-bearing notes, maturing over a 
period of 39 years. 

The net liability as at the close of each year 1917 to 1938, inclusive, representing 
this item is shown in table 26. 

Intangibles 

The total assets of the United States Steel Corporation at the time of its or- 
ganization in 1901 were capitalized at an amount far in excess of the value of 
the physical assets acquired. The book value of these assets in 1901 amounted 
to $1,402,846,817. In 1911 the Bureau of Corporations estimated that of this 
amount $720,846,817 represented intangible value; the remaining $682,000,000 
representing tangible assets. Subsequent to 1901, the United States Stee' Cor- 
poration acquired three large steel compel! s which resulted in the inclusion of 
additional water or intangible value in Ine assets of the United States Steel Cor- 
poration. The Union Steel Co. was taken over in 1902, the Clairton Steel Co. 
in 1904, and the Tennessee Coal, Iron & Railroad Co. in 1907. These acquisi- 
tions raised the total of intangible value originally included in the assets of the 
United States Steel Corporation to $768,671,021.53. 

In recognition of the desirability of eliminating this intangible value from 
their accounts, the United States Steel Corporation has written the- entire 
$768,671,021.53 of intangible value down to the nominal amount of $1. Table 
27, immediately following, shows how the reduction was accomplished. 



17794 



CONCENTRATION OF ECONOMIC POWER 



Table 27. — Total intangible value included in the assets of United States Steel 
Corporation and the manner in which such value has been written off 





Total intan- 
gible value 

(2) 


Amounts written off or provided for amortization of intangibles- 




Years 
(1) 


From surplus 

invested in 

property 

account 

(3) 


From bond 

sinking fund 

reserve 

account 


From capital 
surplus 
account 

(5) 


Total 
(6) 


Balance of 

intangible 

value 

(7) 


1901-16 


$768,671,021.53 


$163, 694, 423. 55 


$75,110,235.88 
7, 257, 233. 41 
7,520,801.64 
7, 831, 975. 64 
8, 349, 913. 51 
8,768,701.17 
9, 180, 562. 92 
9, 589, 593. 55 
10, 088, 601. 29 
10, 502, 062. 25 
10, 907, 687. 30 
11,316,038.00 
11,456,371.63 
4, 998, 428. 48 


* 


$238, 804, 659. 43 

7, 257, 233. 41 
6,621,887.54 
7, 831, 975. 64 

8, 349, 913. 51 

8, 768, 701. 17 
9, 180, 562. 92 

9, 589, 593. 55 
10, 088, 601. 29 
10, 502, 062. 25 
54, 863, 865. 23 
12, 272, 920. 30 
41,661,447.86 
93, 294, 448. 57 


$529, 866, 362. 10 


1917 




522,609,128.69 


1918 




i 898, 914. 10 




515,987,241.15 


1919 .. 






508, 155, 265. 51 


1920 . 








499, 805, 352. 00 


1921 








491,036,650.83 


1922 




" r 




481, 856, 087. 91 


1923 .. 








472, 266, 494. 36 


1924 








462, 177, 893. 07 


1925 








451, 675, 830. 82 


1926 




43, 956, 177. 93 

956, 882. 30 

30, 205, 076. 23 

88, 296, 020. 09 




396,811,965.59 


1927 






384, 539, 045. 29 


1928 






342, 877, 597. 43 


1929 




249, 583, 148. 86 


1930 . 






249, 583, 148. 86 


1931 












249, 583, 148. 86 


1932 












249,583,148.86 


1933. __._ 












249, 583, 148. 86 


1934 












249, 583, 148. 86 


1935 












249, 583, 148. 86 


1936 ... 












249, 583, 148. 86 


1937 












249,583,148.86 


1938 






' 10, 785, 372. 67 


260, 368, 520. 53 


249, 583, 147. 86 


- 1.00 










Total 




362, 209, 666. 00 


182, 092, 834. 00 


260, 368, 520. 53 


768, 671, 020. 53 









• Deduction. 

The United States Steel Corporation effected the amortization of intangibles 
through two amortization reserve accounts. The principal reserve account was 
called "Surplus invested in property." This account appears only on the books 
of the subsidiary companies. Column 3 sets forth the amounts credited to this 
account. The balance in the individual accounts of the various subsidiaries of 
the United States Steel Corporation was deducted directly from their property 
accounts. The property accounts of the subsidiary companies as thus reduced 
were incorporated in the consolidation statements of the United States Steel 
Corporation. So far as the consolidated statement is concerned, these amounts 
were effectively written off against the property account. Since 1916, the prin- 
cipal amounts credited to this account were transferred from free surplus. How- 
ever, $43,956,177.93 and $956,882.30 were transferred from "Depreciation 
reserves" in 1926 and 1927, respectively. 

The second amortization reserve account was called "U. S. Steel Corp. bond 
sinking fund reserve." This reserve was built up by annual charges against 
income. These yearly amounts are shown in column 4. The actual yearly 
balance of the sinking fund reserve is not given in the tabk\. In the consolidated 
statement, the balance in the reserve has been combined with other deprecia- 
tion, depletion, and amortization reserves. The resulting total was then 
deducted from the "Property investment account" so as to show the net property 
investment. 

The important thing about this particular method of amortization of intangi- 
ble values, is the fact that it has been built up through charges against income. 
H:;d these intangibles never been brought on the books of the United States 
Steel Corporation, the yearly income would never have been burdened with 
charges for their amortization. Therefore in order to arrive somewhat nearer 
to the true income of the United States Steel Corporation, the income has been 
increased each year by the amounts shown in column 4. The income during 
this' period has been adjusted by {117,767,971. The United States Steel Cor- 
poration decided that of f his amount $10,785,372.67 represented excessive pro- 
vision from income for amoition on f intangibles. This latter amount, shown 
as a deduction in column 4, was transferred from "Bond sinking fund reserve" 
to repair certain net shoitages in the "Depreciation reserves" of certain sub- 
sidiary companies. The net amount of $106,982,598 represents the amount of 



CONCENTRATION OF ECONOMIC POWER 17795 

"Bond sinking reserve" which the United States Steel Corporation actually used 
to amortize intangibles. 

In order to" maintain the correct yearly balances of surplus, the free surplus 
was charged with the same amounts which were thus credited to income. In 
other words, no part of the intangibles should be written off through charges to 
income; all such charges should be against some capital account. 

In 1938, the United States Steel Corporation in one final act squeezed the last 
remaining intangible values from their assets. At the annual stockholders meet- 
ing in April 1938, the common stock was changed from stock having a par value 
of $100 per share, to stock of no-par value. The no-par stock was then given a 
stated value of $75 per share. This resulted in a decrease of the capital value 
of the common stock of $217,581,300 which amount increased the capital surplus 
from $81,250,621.42 to $298,831,321.42. Of this capital surplus $260,368,520.53 
was applied aganst the remaining intangibles value in the "Property investment 
account." 

Disposition of Capital, Earnings, and Other Resources 

The following table 28 indicates the main sources of funds and the manner in 
which such funds-were used during the period from January 1, 1917, to December 
31, 1938, for the United States Steel Corporation and its subsidiaries as a con- 
solidated group. This summary does not, of course, purport to show total gross 
funds available and their disposition. Receipts from sales and from other similar 
sources are not included here. Nor are the disbursements for expenses properly 
chargeable against income included; However, net income for the period gives 
effect to these factors, since it, together with the depreciation and similar reserves 
created by charges against income during the period, is a measure of the net 
funds available to the management as the result of the operation of the business. 
In other words, for the purpose of this statement which is designed to show long- 
time changes of a more permanent nature, manufacturing costs, distribution and 
administrative expenses, Federal income and profits taxes, interest on long-term 
debt have already been deducted from gross income. These amounts are shown 
in table 29, "Summary of income, expenses, and surplus," for the United States 
Steel Corporation 1917-38. 

Table 28 has been prepared so as to eliminate the effect of intangible values. 
The December 31, 1916, consolidated balance sheet for the United States Steel 
Corporation and its subsidiaries includes among its assets some $529,866,000 of 
intangibles which have been entirely eliminated from the consolidated balance 
sheet for December 31, 1938. The writing off of this intangible value against 
various capital accounts does not, of course, affect the amounts of funds available 
to the United States Steel Corporation or the manner of their disposition. There- 
fore, in order to put the 1916 statement on a comparable basis with the 1938 
statement, the $529,S66,000 of intangibles has been deducted from the 1917 
statement. 

Table 28. — Statement of disposition of capital, earnings, and other resources of the 
United States Steel Corporation and its subsidiaries for the period from Jan. 1, 
1917, to Dec. 31, 1988, with effect of all intangible values eliminated 

Capital, earnings, and other resources: 

Net ineome.lor period _ $1,670,058,000 

Reversals of excessive contingent, insurance, and miscella- 
neous reserves ;•____ $97„098,O00 

Refund of Federal income and excess-profits taxes 90,780,000 

. 187, 878, 000 

1,857,936,000 
Less: Transfers from surplus repair deficiencies in deprecia- 
tion reserves: 

From undivided surplus... '282,881,000 

From appropriated surplus ' 55, 000,000 

337, 884,000 

Net income for period as adjusted $1,520,055,000 

Increase in provision for depreciation and depletion 1, 061, 170, 000 

Common stock: 

Increase in par or stated value of common stock. $158,702,000 

Increase in premiums on common stock 81,252,000 

239, 954, 000 

1 Of this amount, $211,669,122 was transferred by the corporation through the appropriated surplus 
account. 
3 Balance prior to 1917. 



17796 CONCENTRATION OF ECONOMIC POWER 

Table 28. — Statement of disposition of capital, earnings, and other resources of the 
United States Steel Corporation and its subsidiaries for the period from Jan. 1, 
1917, to Dec. SI, 1988, with effect of all intangible values eliminated — Continued 

Reduction in prepayments of mining royalties ..'. $42, 021, 000 

Increase in contingent, insurance, and miscellaneous operating reserves 28,924,000 

Reduction in working capital - 25,334,000 

2,917,458,000 

Disposition of above resources: 

Increase in investment in property - 1, 265,918,000 

Cash dividends: 

Common $6o9, 818, 000 

Preferred - 554,832,000 

1, 224, 650, 000 

Net amount expended in retirement of funded debt: 

Decrease in bonded debt and purchase-money obligations 385, 584, 000 

Premium on bonds retired 40, 841,000 

426, 425, 000 

Other (net) 465.000 

2, 917, 458, 000 

The principal source of funds during this period was net income as adjusted. 
The adjustments reveal additions of $187,878,000 and deductions of $337,881,000 
to net income as set forth in the table 28. A certain small, though indeterminate, 
portion of these additions and deductions are applicable to the period prior to 
1917. Subject to this qualification, net income supplied $1,520,055,000. Most 
of this amount was distributed in the form of cash dividends to the stockholders. 
These cash dividends amounted to $1,224,650,000, $669,818,000 going to the 
common stockholders and $554,832,000 to preferred stockholders. Income 
retained in the business after the distribution of cash dividends amounted to 
$295,405,000. 

The next most important source of funds was obtained by the retention within 
the business of asset values represented by the increase in depreciation and 
depletion reserve during this period of $1,081,170,000. The whole of this increase 
flowed into the property account. From 1917 to 1938, the United States Steel 
Corporation increased its investment in property before deduction of reserves for 
depreciation and depletion from $1,078,399,000 to $2,344,317,000. The net 
increase amounts to $1,265,918,000. Attention should be called to the fact that 
all intangible values have been eliminated from this comparison. 

Thus all but $204,748,000 of the net increase in property during this period was 
accounted for by the increase in the depreciation and depletion reserves. 

A summary follows of the funds not yet accounted for. 

Source: Amounts available 

Balance of net income as adjusted $295, 405, 000 

Issuance of common stock 239, 954, 000 

Reduction in prepayments of mining royalties 42, 021, 000 

Reduction in working capital 25, 334, 000 

Increase in contingent, insurance, and miscellaneous oper- 
ating reserves 28, 924, 000 

Total 631, 638, 000 

Dispositions: Amounts 

Retirement of bonded debt • $426, 425, 000 

Increase in investment in property not accounted for 204, 748, 000 

Other (net) 465,000 

Total 631,638,000 

The bulk of the funds available, as shown above, was used to retire bonded 
debt. The above amount of funded debt represents the net decrease in the 
funded debt and the cost of such retirement from 1917 to 1938. In 1917, the 
funded debt and purchase money obligations amounted to $629,296,000; in 1938 
it totaled $243,712,000. This is a net decrease of $385,584,000. An additional 
$40,841,000 in the form of a premium on bonds was required to be disbursed in the 
retirerient of these bonds. Thus, to effect a net decrease of $385,584,000 in the 
funded debt, total funds of $426,425,000 were required. These funds were sup- 
plied principally from accumulated net income and the issuance of common stock. 



CONCENTRATION OF ECONOMIC POWER 



17797 



It should be pointed out in this connection that the increase in funds available 
through the issuance of common stock is exclusive of the common-stock increase 
through stock "dividends. This increase has not been shown since it does not 
represent a source of funds in itself, but simply is a device for holding within the 
business funds previously accumulated. It should also be emphasized that the 
increase in the investment in property represents a net increase, and does not take 
into account the replacement of property actually retired with property of equal 
eost. 

Income, Expenses, and Surplus for United States Steel Corporation 

Table 29, which follows, summarizes the income, expenses, and surplus of the 
United States Steel Corporation and its subsidiaries on a consolidated basis for 
each year during 1917-38, and accounts for the profits applicable to each basis 
of investment on which rates of return were computed. 

Net sales during the 22-year period, from 1917-38 aggregated $26,136,166,672. 
Total operating expenses amounted to $23,632,819,197. This resulted in a net 
income from operations of $2,503,347,475, before deducting Federal income and 
excess-profits taxes which totaled $764,536,417. Adding income derived from 
all other sources' and deducting interest paid on funded debt, a total of 
$1,670,058,253 was earned during the 22-year period, 1917-38. 

The relation of costs, expenses, and profits is further emphasized in the following 
tabulation which shows the yearly averages and the percentage of costs, expenses, 
and net income to sales for the United States Steel Corporation and its subsidiaries 
for the 22-year period 1917-38. 



Yearly average 



Percent of 
net sales 



Net sales . ... _ 

Cost of goods sold - .. ._., 

!>istribution and administrative expenses, 

Provision for depreciation and depletion.. 

Total operating expense -._ 

Net income from operations 

Other income (net) 

Net income applicable to total investment 

Less interest on long term debt 

Net income applicable to stockholders' investment 
Less provision for Federal income and profit taxes 

Net income for year 



$1, 188, 007, 575 

947, 937, 547 

74, 610, 397 

51,671,110 



1, 074, 219, 054 



$113,788,521 
15, 232, 402 



129, 020, 923 
18, 357, 529 



110,663,394 
34, 751, 656 



75, 911, 738 



100.00 
79.79 
6.28 
4.35 



90.^2 



9.68 
1.28 



10.86 
1.65 



9.31 

2.92 



V- i .ages are rather deceptive in an industry whose business fluctuates so 
violently as the steel industry. It does, however, indicate a rough norm about 
which the business of the steel company may be said to fluctuate. 



17798 



CONCENTRATION OF ECONOMIC POWER 





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and MANUFACTURING COSTS for 






























THE UNITED STATES STEEL CORPORATION 
1917-1938 






















































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1938 [ 1937 1 1936 1 1935 | 1934 1 1933 


1932 Il9 


\\ [ 1930 1 1929 | 1926 [ 1927 | T926 |l925 | 1924 [ 1929 | 1922 | 1921 j 1920 JI9I9|I9I8|I9I7 



124491 — 41 — pt. 81 (Face p. 17801) 



CONCENTRATION OF ECONOMIC POWER 



17801 



Reference to table 29 shows that net sales has followed an extremely erratic 
course during the whole of the 22-year period. During the period from 1917 to 
1929 sales fluctuated violently about a slight downward trend. Sales declined 
from a near high in 1917 to $1,706,356,000 to a low for this period in 1921 of 
$997,127,000. Sales recovered erratically to $1,502,211,000 in 1929. In addition 
to the inability of net sales to maintain any definite trend from year to year, it 
should be pointed out that the most precipitious drop in the period occurred 
between 1920 and 1921, when sales fell from $1,756,667,000 to $997,127,000. 

The period 1929-38 witnessed a sharp and continuous decline from $1,502,- 
211,000 in 1929 to $354,693,000 in 1932. The following 5 years show that net 
sales recovered nearly all of this decline without break, reaching $1,395,550,000 
in 1937. This upward trend was completely reversed in 1938. Sales plunged 
downward to $766,674,000. 

While net sales during the whole period from 1917 to 1938 was characterized 
by a complete lack of stability, manufacturing costs, and total operating expenses 
fluctuated in surprising agreement with the fluctuations of net sales. This high 
degree of correlation is evident from chart 2, which follows. 

It is to be noted that it is a peculiarity of the ratio paper on which this graph is 
charted that the slope of a line measures its rate of change. Thus equal slopes of 
lines, regardless of the numerical amounts which they represent, indicate equal 
rates of change. 

The correlation between net sales and total operating expenses is somewhat less 
than the degree of correlation existing between manufacturing costs and net sales. 
This is explained by the greater lack of correlation between depreciation, distribu- 
tion and administrative expenses with net sales. 

In the case of distribution and administrative expenses the trend was almost in 
direct reverse of that of net sales. These expenses started in 1917 at the low for 
the period of $45,122,000, and with some variation increased to a high of $111, 
609,000 in 1937. Depreciation and depletion, however, followed in a general way 
net sales, though much more loosely than did manufacturing costs. It should 
be mentioned here that depreciation for blast furnace relining and renewals is 
included by the United States Steel Corporation in manufacturing costs. How- 
ever, the amounts so included are not sufficiently large to alter materially the 
amount of depreciation and depletion set forth in table 29. 

While there was excellent correlation between total operating expenses and sales, 
expenses varied less widely than did sales. This resulted in larger fluctuations in 
income than occurred in either of the other factors. Net income applicable to 
total investment, stockholders' investment and common stockholders' equity, 
varied closely with one another, except in the early years 1917-20. This is 
explained by the fact that during this period, the earnings applicable to the com- 
mon stockholders' equity was much larger than the payments for the use of funds 
supplied by either the bondholders or the preferred stockholders. After 1920, 
these income totals moved closely together. 

Attention is now directed to the relation of net income, after deducting interest 
on long-term debt and Federal income and profit taxes, with charges for deprecia- 
tion and depletion, capital expenditures, and expenses for repairs, maintenance, 
and extraordinary replacements. This relationship is graphically portrayed in 
chart 3, which follows. 

It will be observed that capital expenditures followed net income more closely 
than either of the other factors, though from 1920 to 1930 capital expenditures 
lag somewhat behind net income. Repairs, maintenance and extraordinary, de- 
preciation and depletion shows a less close relationship. 

The following tabulation sets forth a comparison of capital expenditure, repairs 
and maintenance and extraordinary replacements, and charges for depreciation 
and depletion of the United States Steel Corporation for the periods indicated. 



Period 


Capital 
expenditures 


Repairs, main- 
tenance and 
extraordinary 
replacements 


Depreciation 
and depletion 


1917-38 


$1, 584, 393, 100 
399, 563, 931 
646, 647, 797 
538, 181, 372 


$2, 078, 222, 328 
497, 233, 471 
934, 037, 606 
646,951,251 


1 $1,467, 191.735 


1938-31 . 


> 678, 852, 254 


1930-23 


'433,624,281 


1922-17 „-. 


<354, 715. 200 



1 Includes $330,427,303 transferred from surplus. 
1 Includes $291,000 000 transferred from surplus. 
3 Includes $33,844,889 transferred from surplus. 
1 Includes $5,582,414 transferred from surplus 



17802 



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CONCENTRATION OF ECONOMIC POWER 17803 

n.r tabulation reveals particularly that in the 8-year period terminating with 
the depression in the steel industry in 1930, the United States Steel Corporation 
spent $683,888,001 more for capital expenditures, and repairs, maintenanci 
extraordinary replacements than it did in the 8 years following 1930. Approxi- 
mately two-thirds of this decrease occurred in expenditures for repairs, main- 
tenance and extraordinary replacements which were cut almost in half. 

Credits to depreciation and depletion reserves- during the 1923-30 period were 
$245,227,973 less than for the period, 1931-38. However, of the $678,85 
credited to the depreciation and depletion reserves in the years 1931 38, $291,- 
000,000 represented charges against surplus. These charges providing for 
additional depreciation, were made necessary by inadequate annual depreci 
charges against income. In 1935, $270,000,000 was transferred from surplus to 
depreciation reserves to repair deficiencies in the reserves. An extensive survey 
by the United States Steel Corporation of all. its operating properties fi 
purpose of determining the age, condition, and adequacy of its facilities n 
the existence of these deficiencies. This survey, undertaken in L928, was carried 
forward by the company's engineers until 1935. Their findings \v ( re so extei 
and involved expenditures of such magnitude that it was decided to empl >y out- 
ipinion. To this end the firm of Ford, Bacon, and Davis, appraisal engi- 
neers, was employed. The extent of this firm's appraisal is indicated by the fact 
that during the years 1935-38 they received $3,037,157.76 from the Steel Cor- 
poration for their services. 

The depreciation and depletion of $678,852,254 charged during the 1931-38 
period, together with the amounts charged during the prior periods shown in the 
above tabulation, resulted in a rmge increase in the depreciation and depletion 
reserves of the United States Steel Corporation. These reserves increased from 
$271,004,251.99 in 1917 to $1,177,797,445 in 1938. The property account in- 
creased by a somewhat larger amount. In December 31, 1938, the investment 
in property account amounted to $2,344,316,958. The depreciation and d< ple- 
tion reserves as of December 31, 1938, amounted to 50.24 percent of the property 
account. 

Table 30 immediately following contains a summary of capital expenditures 
made by the United States Steel Corporation and subsidiaries, during the period 
1917 to 1938, inclusive. 



J^i 191 — 11 - j.t si 14 



17804 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 
Dividends 



17805 



Table 29 shows that of the net income of $1,670,058,253 earned for the period 
1917-38, dividends in the amount of $1,427,971,442 were distributed to the 
stockholders. The dividends, together with the net deductions of $351,028,711 
from surplus, account for the reduction in surplus from $356,360,913 at the begin- 
ning of 1917 to $247,419,013 at the end of 1938. 

Dividends amounting to $1,224,650,442 were distributed in the form of cash to 
the stockholders. The common stockholders received $669,817,548 and the pre- 
ferred stockholders received $554,832,894. The remaining dividends of $203,- 
321,000 represents a distribution of a 40 percent common stock dividend which 
was declared in 1927 on the common stock. 

The dividend rate on the common and preferred stock follows. This rate is 
based on the par value of each class of stock. It has been already pointed out 
that in 1938, the common stock was changed from shares with par value of $100 
each to hares without par value to which a stated value of $75 a share has been 
assigned. It will be observed in the yearly rates in the preferred stock which 
follow that the United States Steel Corporation did not maintain a dividend rate 
of 7 percent for every year on the preferred stock. However, as of 1938, all 
arrears on the 7 percent cumulative preferred have been remedied. 



Years 


Rate on 
common 
stock i 


Rate on 

7 percent 

cumulative 

preferred 

stock i 


Years 


Rate on 

common 

stock ' ' 


Rate on 

7 percent 

cumulative 

preferred 

stock > 


1917 .... 

1918.. 


Percent 
18 
14 
5 
5 

5 

5?'4 

7 

7 

- . 7 

7 


Percent 
7 

7 

7 
7 
7 
7 
7 
7 
7 
7 


1928. 

1929 


Percent 
7 
8 
8 
4J-S 


Percent 

7 
7 


1919.. 


1930.-. 


7 


1920. _. 


1931 _... 

1932 


7 


1921 


3H 


1922 


1933. .. 




2 


1923 _. 


1934 




2 


1924 


1935. . 




2 


1925 


1936 




14 


1926 

1927 


1937.-. 

1938-. 


1 


16H 

7 











1 Par value $100 a share. 

Principal Steel Producing and Fabricating Subsidiaries of the United 
States Steel Corporation 

A study was also made of the financial statements of the principal producing 
and fabricating subsidiaries of United States Steel Corporation for the period 
1925 to 1938, inclusive. Eight of these companies produced substantially all of 
the raw, semifinished, and finished iron and steel products for sale of the total 
produced by the system. These companies are as follows: 

American Sheet & Tin Plate Co. 

American Steel & Wire Co. 

Carnegie-Illinois Steel Corporation. ' 

Carnegie Steel Co. 

Illinois Steel Co. 

Columbia Steel Co. 

National Tube Co. 

Tennessee Coal, Iron & Railroad Co. 

At December 31, 1938. the total investments of these companies aggregated 
$1,059,574,541. This aggregate investment accounts for substantially 60 percent, 
of the investment of United States Steel Corporation, as a consolidated basis, in ' 
that year. 

Table 31, which follows, shows the investment, profits and rate of return for 
each of the subsidiaries for each of the years 1925-38 on the basis of average 
investment. 



17806 



CONCENTRATION OF' ECONOMIC POWER 



Table 31. — Summary of average investment, annual net income, and rates of return 
for the principal steel subsidiaries of the United States Steel Corporation, 1925-38 





Average 


1938 


1937 


1936 


1935 


AVERAGE INVESTMENT 

American Sheet & Tin Plate Co : 


$99, 732, 633 
150, 421, 342 
489, 965, 061 
250, 244, 060 
1 15, 436, 508 

52, 244. 224 
177,653,773 

92, 946, 370 






$96, 753, 137 
122, 881, 199 
437, 139, 312 


$88,117,253 


American Steel and Wire Co 

Carnegie-Illinois Steel Corporation. .. 


$125, 162, 141 
591, 138, 344 


$123,418,303 
514,068,350 


119,671.193 
417,514,240 


Illinois Steel Co . 


42,330, 199 

56,175,771 
164, 335. 273 
80. 352, 161 


71,910, 182 
54,811,912 
166,272, 123 
78, 143, 014 


95, 055, 776 
52, 780, 107 
172, 365, 514 
76, 308. 523 


155,809,870 
51,992,559 
189 353 301 


Columbia Steel Co, 


Tennessee Coal, Iron & R. R. Co 


88,021,287 


Total 


14, 059, 702, 374 
1,0*14,264,455 


1, 059, 493, 889 1, 008, 623, 884 


1,053.343,568 


1, 110, 569, 703 


A verage . ; ._ . . 










NET INCOME 

n Sheet & Tin Plate Co 


2, 121,334 

776,064 

1,561,796 

5,95(1,417 
13, 532, 451 
948, 703 
8, 290, 997 
2, 696, 028 






1,036,589 

' 593,154 
85, 14S 


3. 160, 956 


American Steel & Wire Co 


i 8. 520, 879 
121,655,462 


484, 909 
34, 798, 351 


i 877, 034 


Carnegie-Illinois Steel Corporation.. 
Carnegie Steel Co 


l 6,981,153 




833 798 ni7 531 


■ ,'l 

3, 284, 276 
9, 490 : 7 
2, 877, 431 


5,667,991 
1,899,877 

2, 898, 932 
2, 124, 801 


Columbia Steel Co. . 

National Tube Co... 

Tennessee Coal, Iron, & R. R. Co... 


918, 826 
2, 813, 836 
1, 164, 043 


3, 267, 237 
15,960,633 

7,611,874 


Total _ 

Average 


453, 883, 253 
. 120, 232 


' 24, 445, 838 


64,140,535; 17,730,866 


S, 200, 370 










RATES OF RETURN ON TOTAL INVEST- 
MENT 

American Sheet <k Tin Plate Co. 
(percent) 


2. 13 
.52 

.32 
2.38 
9.30 
1.82 
4.67 

2.90 






1.07 
g 

. 02 


3.93 


American Steel & Wire Co. (percent) 
Carnegie-Illinois Steel Corporation 

(percent) 

Carnegie Steel Co. (percent) _. 


'■ 6. 81 
13^06 


- 1 
6.77 


' .73 
l 1.67 


[Hinois Steel Co. (percent) 

Columbia Steel Co. (percent). 

National Tube Co. (percent) ... 

Tennessee Coal, Iron, & R. R. Co. 
(percent) 


1.64 

1.71 

1.45 


2.81 
5.96 
9.60 

9.74 


1.63 
6. 22 
5.51 

3.77 


I B4 
3.65 
1.53 

2.41 


Average (percent) . 


3.23 


' 2.31 


6.36 


1.68 


.74 



AVERAGE INVESTMENT 



American Sheet & Tin Plate Co 

American Steel & Wire Co 

Carnegie-Illinois Steel Corporation. 

Carnegie Steel Co 

Illinois Steel Co 

Columbia Steel Co 

National Tube Co 

Tennessee Coal, Iron & R. R. Co... 



Total- 
Average 



$92, 988, 602 
122, 494, 230 



21^214, 212 
218, 470, 576 

50, 645, 805 
199, 870, 556 

88, 352, 488 



991, 036, 469 



1933 



$99, 125, 066 
135, 879, 293 



230, 558, 960 
209, 645, 540 

49,981,842 
195.801,004 

90, 237, 159 



1,011,228,870 



$110,393,936 
150. 733, 888 



251,443,598 
199, 506, 828 

50, 265, 979 
192, 450, 496 

96, 033, 380 



$105, 703, 874 
169, 223, 560 



271,342,738 
187, 509. 549 
51,451,692 
189, 977, 955 
103,381,322 



$105, 849, 407 
177, 275, 456 



279, 533, 053 
158,850,698 
52, 092, 352- 
183, 576, 972 
107, 356. 225 



1, 041, S28, 105 1, 078, 590, 690 1, 064, 534, 163 



NET INCOME 



American Sheet & Tin Plate Co 

American Steel & Wire Co 

Carnegie-Illinois Steel Corporation . 

Carnegie Steel Co 

Illinois Steel Co 

Columbia Steel Co 

National Tube Co 

Tennessee Coal, Irn, & R. R. Co 



i 330. 262 
1 2, 279, 852 



1, 640, 434 
' 1,218,300 



' 1, 702, 347 
i 5, 944, 765 



i 2, 876. 1 13 
' 5, 497, 509 



3. 357, 530 
409,806, 



5, 275, 063 
1,612,238 

1,047.497 
109, 666 
197, 098 



i 13,517,324 

' 7, 451, 301 

327, 365 

i 2, 169, 586 

i 3,931,459 



' 13, 494, 725 
I 11, 104, 17S 
i 1,073,032 
•l 4,813,940 
' 7, 399, 399 



' 8, 192, 574 
i 7, 894, 963 
' 1,259,321 
' 3, 868, 489 
i 3,011,040 



10,611,144 

16,124,933 

125,603 

8, 196, 784 

2,317,074 



Total- 
Average 



' 4, 918, 6781 ' 26, 320, 171 



' 45, 532, 386 



32, 630, 009 



41,142,874 



1 Denotes loss. 



rONCKNTRATION OF ECONOMIC POWER 



17807 



Table 31. — Summary of average investment, annual net income, and rat 
id urn for the -principal steel subsidiaries of tin United States Ste< rat on 

1925-38— Continued 





1934 


1933 


1932 


1931 


1930 


KATES OF RETURN ON TOTAL INVESTMENT 

American Sheet & Tin Plate Co. (per- 
cent) ... 

American Sheet & Wire Co. (percent) . . . 
Carnegie-Illinois Steel Corporation 

(percent) ... . , . 


'0.36 
> 1.86 


1.65 

' .90 


i 1.68 
i 3.94 


i 2.72 
' 3. 25 


3.17 

.2:3 


Carnegie Steel Co. (percent 1 ).. . 

Illinois steel Co. (percent). 

Columbia Steel Co. (percent)... 

National Tube Co. (percent) ... 

Tennessee Coal, Iron. & R. R. Co. (per- 
cent) 


2.42 
.74 

2.07 
.55 

.22 


i b a 

' 3 ' 

65 
' Ml 

' 4.36 


: 1 
i 5.57 
'■ 2. 13 
■ 2.50 

17.71 


• 3.02 
14.21 
i 2. 45 
i 2.04 

i 2.94 


10.15 
.24 

2.16 




'.50 


'2.60 


■4.37 


■ 3. 03 


3 86 







AVERAGE INVESTMENT 


1929 


1928 


1927 


1926 1925 


American Sheet & Tin Plate Co 


$103, 910, 085 
175, 393, 551 


$104, 960, 477 
169, 800, 490 


$103,129,366 
170, 230, 309 


$98, 0^7, 979 $96, 792, 412 


American Steel & Wire Co. ... ..... 

Carnegie Illinois Steel Corporation... 


P ''"I. 533(171.763,638 




278,611,514 
140, 430, 264 

176, 339, 921 
105, 825. 936 


26S 339,751 

136, 683, 638 

160. 31" 753 
102, 136, 071 


249, 227, 245 
143, 593, 156 

166, 391, 293 
99, 156. 793 


231. 847. 699 220. 321, 828 


Illinois Steel Co . 

National Tube Co 


140,658.654,133,566,189 

162.295,332 158,807,33< 
95. 164, 067 ' 90 720,769 


Tennessee Coal, Iron, & R. R. Co 


Total 


980, 511, 271 


953, 236, 180 


931, 728. 162 


903, 005 254 --"I 972 166 






NET INCOME 

American Sheet & Tin Plate Co... . 


8, 629, 686 
11. 130, 597 

40. 345. 455 
43. 480, 573 

24, 660, 403 

6, 513. 977 


2. 167, 693 
7, 223, 738 

22. 384, 539 
38,094,919 

12,951,981 
5, 219, 743 


307, 237 
3. 817, 605 

8. 947, 612 
32. 735. 384 

13, 205, 278 
7. 356, 081 


4.607,644! 5,150,963 
6. 554. 272! B. 875. 464 


American Steel & Wire Co 


Carnegie Illinois Steel Corporation. ... .. 






Carnegie Steel Co . 

Illinois Steel Co 


13 987 032 

42 376, SOI 

18, 530, 276 
S. 603. 852 


3,708,075 

31,410 707 


Columbia Steel Co 

National Tube Co .. 


IS, 107, 756 


Tennessee Coal, Iron & R. R. Co 


8, 130.317 


Total 


135, 060, 691 


88,042/643 


66, 369, 197 


94, 659, 877 


72, 383, 282 




RATES OF RETURN ON TOTAL LNVESTMENT 

American Sheet & Tin (percent).. 
\ merican Steel & Wire Co. (percent) 
Carnegie Illinois Steel < - io i 'cent) 


8.30 
6.52 


2.07 
4.25 


.30 
2.24 


4.70 
3.81 


5.32 




30. 90 


8.34 

27.47 


22.80 


5. 96 
30. 13 


23 52 


Columbia Steel r o. (percent) .. 




Tennessee ('oal, Iron & R. Ii. Co. (percent). 


13 98 

6.16 


7.65 
5.11 


7.94 
7.42 


11.42 

9.04 


11.40 
8.96 




13.77 


9.24 


7.12 


10.48 


8 30 







■ Denotes loss. 

Table 31 shows that average rates of return for all companies for the period 
1925 to 1938, inclusive, ranged from a low of 0.32 percent for Carnegie-IlliiMiis 
Steel Corporation to a high of 9.30 percent for Illinois Steel Co. Without excep- 
tion profits were realized by all companies in each of the years 1925 to 1930, 
inclusive. The lowest rate of return for all the companies during this 6-year 
period was 0.23 percent. This rate was earned by the American Steel & Wire 
Co. in 1930. The highest rate during the same period was realized bv the Illinois 
Steel Co. which earned 30.96 percent in 1929. 

PJach oT the companies operated at a loss for the years 1931 and 1932. The 
greatest percent of loss during this period was the 7.71-percent loss sustained by 
Tennessee Coal, Iron & Railroad Co. in 1932 and the lowest percent of loss was 
1,68 percent sustained by American Sheet & Tin Plate Co. for 1932, 



17808 CONCENTRATION OF ECONOMIC POWER 

Moderate profits or small losses occurred intermittently during the years 1933 
to 1938, inclusive. The greatest percentage of loss during this period was 6.81 
percent. This loss was sustained by American Steel & Wire Co. in 1938. The 
largest rate of return in these later years was earned by the Tennessee Coal, Iron 
& Railroad Co., which realized 9.74 percent on its total investment in 1937. 

The table shows that for all companies the most profitable years were those 
from 1925 to 1929, inclusive. During these years, profits for all companies 
ranged from 7.12 percent of total investment in 1927 to 13.77 percent of total 
investment in 1929. Following this period, the next most profitable year was 
in 1937 when all companies combined averaged 6.36 percent of total investment. 

The average rate of return for all companies throughout the entire period, 
1925-38, was 3.23 percent This compares with an average return of 3.66 percent 
on total investment of United States Steel Corporation and subsidiaries, on a 
consolidated basis, during this period. For the sake of comparability, this 
average return for the system as a whole is based on investment including intan- 
gibles, since it was not practicable to eliminate intangibles from the investments 
of the subsidiaries. Excluding intangibles, the average return for the system 
during these years was 4.39 pex-cent. 

Attention should be called to the fact that intercompany profits have been 
eliminated in arriving at the average return for the system, but this was not 
feasible in arriving at the average return for the subsidiaries. However, it is 
believed that the validity of the above comparison of rates of return is not materi- 
ally affected in view of the fact that the averages are based on the results of opera- 
tions over a 14-year period. 

The investments, profits, and rates of return for each principal producing and 
fabricating subsidiary for each of the years during the period 1925-38 are shown 
in greater detail below, together with a brief account of the history and business 
of each company. 

AMERICAN SHEET & TIN PLATE CO. 

According to the report of the commissioner of corpo rations on the steel 
industry, 3 American Sheet & Tin Plate Co. was organized in 1903 as an inter- 
company consolidation of American Sheet Steel Co. and American Tin Plate 
Co., two of the companies acquired by United States Steel Corporation at its 
formation in 1901. In June 1936 American Sheet & Tin Plate Co. was merged 
with Carnegie-Illinois Steel Co. 

The investments, profits, and rates of return for American Sheet & Tin Plate 
Co. for each of the years 1925-36, together with a summary of its income, ex- 
penses, and surplus for these years, are set forth in tables 32 and 33, which follow. 
Rates of return have been computed on the basis of total investment and stock- 
holders' investment for each company and show thai during the period an average 
return of 2.13 percent was earned on the total investment and 2.10 percent was 
earned on the stockholders' investment. Returns were highest in 1929 when 
8.30 and S.71 percent, respectively, was earned in that year. Returns were 
lowest in 1931 when losses were sustained equivalent to 2.72 and 2.92 percent, 
respectively, on the total investment and stockholders' investment. 

3 Pt. 1, Report of Commissioner of Corporations on the Steel Industry, p. 275. 



CONCENTRATION OF ECONOMIC POWER 



17809 





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CONCENTRATION OF ECONOMIC POWER 17813 

AMERICAN STEEL AND WIRE CO. 

This company was organized in 1899 under the laws of New Jersey, and was 
one of the impoitant acquisitions by United States Steel Corporation at its forma- 
tion in 1901. 

Plants of the American Steel & Wire Co. are located in Cleveland, Ohio; Donora, 
Pa.; Joliet, 111.; Worcester, Mass.; Waukegan, 111.; and Duluth, Minn. This 
subsidiary also has plants located at De Kalb, 111.; Anderson, Ind.; Allentown and 
Rankin, Pa.; Jackson, Mich.; New Haven, Conn.; and Trenton, N. J. The 
company manufactures large quantities of coke, iron, wire rods, wire nails, wire 
fences, etc. 

The details of investments, profits and rates of return on the basis of the total 
investment and stockholders' investment are presented for American Steel <fc 
Wire Co. for each of the years 1925-38, together with a summary of its income, 
expenses and surplus for these years in tables 34 and 35 immediately following. 
During the period 1925 to 1938, inclusive, the average rates of return on total 
investment and stockholder's investment were 0.52 percent and 0.53 percent, 
respectively. 

Rates of return were highest on both classes of investment during 1929 when 
6.52 percent and 6.55, respectively, were realized. Rates of return were lowest 
on both classes of investment during 1938 when losses 6.81 and 8.70, respectively, 
were sustained. 



17814 



CONCENTRATION OF ECONOMIC POWER 





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17818 



CONCENTRATION OF ECONOMIC POWER 



CARNEGIE-ILLINOIS STEEL CORPORATION 

During 1935 Carnegie Steel Co and the Illinois Steel Co., two important 
subsidiaries of United States Steel Corporation, were brought into a single operat- 
ing organization under the name of Carnegie-Illinois Steel Corporation. The 
principal iron and steel producing plants of the Illinois Steel Co. were absorbed by 
the Carnegie-Illinois Steel Corporation. However, the Illinois Steel Co. continued 
to operate as a separate corporate entity. A corporate merger as of June 1, 1936, 
united the American Steel & Tin Plate Co. with the Carnegie-Illinois Steel Cor- 
poration, the latter being the surviving corporation. 

As of 1937 the plants of Carnegie-Illinois Steel Corporation had approximately 
75 percent of the total rated pig-iron capacity and approximately 77 percent of 
the total rated annual steel-ingot capacity of the subsidiaries of the corporation. 
The more important manufacturing properties of this subsidiary are located at 
Gary, Ind. ; South Chicago, 111.; in an area near Pittsburgh, Pa.; and the Mahoning 
Valley in Ohio. 

There is set forth below tables 36 and 37 which summarize investments, income, 
expenses, profits, and rates of return based on the total investment and stock- 
holders' investment of the Carnegie-Illinois Steel Corporation for the years 1935 
to 1938, inclusive. 

The tables show that since 1935 Carnegie-Illinois Steel Corporation had only 
1 year of profitable operations; namely, in 1937, when returns of 6.77 and 8.01 
percent were earned, respectively, on the total investment and stockholders' 
investment. It will be noted that net profit applicable to total investment 
averaged only 0.32 percent for the 4 years, while a net loss equivalent to 0.11 
percent was sustained on the stockholders' investment for the same years. 

Table 36. — Summary of investments, profits, and rates of return for the Carnegie- 
Illinois Steel Corporation 1985-38 



Capital stock — common 

Capital surplus 

Surplus. . 

Surplus and contingency re- 
serves 

Long-term debt 

Reserve for Federal income 
and profits taxes 



Total investment. 



A verage of total investment . . 

Net income applicable to total 
investment 

Rate of return on total invest- 
ment (percent) 

Total investment 

Long-term debt 

Total stockholders' in- 
vestment 

Average of stockholders' in- 
vestment._ 

Net income applicable to 
stockholders' investment- . . 

Rate of return on stockhold- 
ers' investment (percent). _- 



Average 



$489, 965, 062. 00 



1,561,796.09 

0.32 

2,056,555,313. 97 
686, 759, 616. 36 



1,369,795,697.61 



340, 139, 517. 00 

3 366, 551. 38 

3 0.11 



1938 



1937 



$93, 368, 000. 00 $93, 368, 000. 00 

2 184, 972, 680. 82 185, 037, 336. 28 

56, 405, 692. 52 79, 475, 156. 39 



1936' 



275, 700, 000. 00 
458, 000. 00 



610„904,373.34 



591,138,344.00 



3 21. 655, 461. 85 

3 3.66 
$610, 904, 373. 34 
275, 700, 000. 00 



335, 204, 373. 34 



348, 626, 433. 00 

3 22, 847, 881. 12 

3 6.55 



209, 323, 823. 26 
4, 168, 000. 00 



571,372,315.93 
514, 068, 350. 00 



34, 798, 351. 31 

6.77 
$571,372,315.93 
209, 323, 823. 26 



362, 048, 492. 67 



358,931,106.00 

28, 735, 675. 79 

8.01 



$93, 368, 000. 00 
185, 046, 717. 53 
77, 372, 298. 15 



100, 950, 665. 14 
71,704.00 



456, 764, 384. 8 
437, 139, 312. 00 



85, 447. 

0.02 

+456,764,384. 82 
100, 950, 665. 14 



355,813,719.68 



336,271,416.00 

3 45, 028. 52 

3 0.01 



$75, 000, 000. 00 
153, 358, 670. 00 
14, 520, 441. 92 

73, 850, 000. 00 
100, 785, 127. 96 



417, 514, 239. 88 



417,514,240.00 



3 6,981,153.05 

3 1.67 
$417,514,239.88 
100,785,127.96 



316,729,111.92 



316,729,111.92 

3 7, 308. 971. 60 

3 2.31 



1 As of June 1, 1936, the American Sheet & Tin Plate Co. was absorbed by the Carnegie-Illinois Co. 

' Includes the following amounts: 

Capital surplus through merger and other sources $98, 361, 726.48 

Capital contributions by stockholders... 20,662, 542.40 

Premium on capital stock. .. 65,899,563.69 

Qapital increment surplus accrued prior to Mar. 1, 1913 45,848. 25 

Total 184,972,680.82 

• Denotes loss. 



CONCENTRATION OF ECONOMIC POWER 



17819 



Table 37. 



-Summary of income, expenses, and surplus for the Carnegie-Illinois 
Steel Corporation, 1935-38 





Total 


1938 


1937 


1936 


1935 




$1,418,662,229.85 


$273, 230, 604. 85 


$596, 865, 209. 00 


$396, 533, 014. 00 


$152, 033, 402. 00 






Less- 
Cost of goods sold 

Depreciation and de- 


1, 244, 555, 867. 98 
65, 974, 596. 78 

107, 818, 526. 28 


248, 518, 732. 99 
19, 873, 659. 08 

27, 764, 852. 01 


501,427,775.83 
21,895,653.40 

40, 400, 129. 26 


353, 739, 209. 45 
17, 178, 706. 97 

27, 747, 844. 56 


140, 870, 149. 71 
7, 026, 577. 33 


Distribution and ad- 
ministrative ex- 
penses and taxes 


11,905,700.45 


Total operating 


1,418,348,991.04 


296, 157, 244. 08 


563, 723, 558. 49 


398, 665, 760. 98 


159, 802.' 427: 49 






Net income from opera- 


313,238.81 
5, 933, 945. 58 


i 22, 926, 639. 23 
1, 271, 177. 38 


33, 141, 650. 51 
1, 656, 700. 80 


i 2, 132, 746. 98 
2, 218, 194. 96 


i 7, 769. 025. 49 




787, 872. 44 






Net income applic- 
able to total in- 


6, 247, 184. 39 
7, 713, 389. 94 


' 21,655,461.85 
1, 192, 419. 37 


34, 798, 351. 31 
6, 062, 675. 52 


85, 447. 98 
130, 476. 50 


16,981,153.05 


Less interest on long-term 
debt 


327, 818. 55 






Net income applic- 
able to stockhold- 
ers' investment- .- 
Less provision for Federal 
income and profits taxes. 


i 1, 466, 205. 55 
4,191,000.00 


i 22, 847, 881. 22 


28, 735, 675. 79 
4, 168, 000. 00 


i 45, 028. 52 
23, 000. 00 


i 7, 308, 971. 60 










i 5, 657, 205. 55 
21, 829, 413. 52 


i 22, 847, 881. 22 
79,475,156.39 


24, 567, 675. 79 
77, 327, 298. 15 


i 68, 028. b-J. 
14,520,441.92 


i 7, 308, 971. 60 


Surplus at beginning of 


21, 829, 413. 52 






Total 


16, 172, 207. 97 
23, 342, 000. 00 


56, 627, 275. 17 


101, 894, 973. 94 
23, 342, 000. 00 


14, 452, 413. 40 


14,520,441.92 














Total 


i 7, 169, 792. 03 


56, 627, 275. 17 


78, 552, 973. 94 


14, 452, 413. 40 








Other net additions or de- 
ductions: 
Transferred from ap- 


44, 385, 023. 56 

17, 596, 889. 32 
1, 593, 571. 67 






44, 385, 023. 56 

17, 596, 889. 32 
892, 971. 87 




Transferred from 
American Sheet & 
Tin 








Other 


2 221, 582. 65 


922, 182. 45 








Total 


63, 575, 484. 55 


2 221, 582. 65 


922, 182. 45 


62, 874, 884. 75 








Surplus at end of year . . . 


56, 405, 692. 52 

- 


56, 405, 692. 52 79, 475, 156. 39 


77, 327, 298. 15 


14, 520, 441 92 



1 Denotes loss. 

• Denotes red figures. 



CARNEGIE STEEL CO. 



The Carnegie Co. of New Jersey was formed in March 1900, as a reorganiza- 
tion and merger of the various Carnegie interests and the H. C. Frick Coke Co. 
On April 1, 1903, the Carnegie Co. of New Jersey, the National Steel Co.,. and the 
American Steel Hoop Co., which had been acquired by United States Steel Cor- 
poration at its formation in 1901, were merged to form the Ctrnegie Steel Co. 4 
In 1935 Carnegie Steel Co. and Illinois Steel Co. were merged under a singly 
operating organization under the name of Carnegie-Illinois Steel Corporation. 

Tables 38 and 39, set forth on the two following pages, summarize investments, 
profits, and rates of return, based on total investment and stockholders' invest- 
ment of the Carnegie Steel Co. for the years 1925 to 1934, inclusive. 

Rates of return for the Carnegie Steel Co. averaged 2.38 and 1.8JL percent, 
respectively, on total investment and stockholders' investment during the years 
1925-34. Rates of return were highest on both classes of investment during 
1929, when 14.48 and 17.26 percent, respectively, were realized; and returns were 
lowest during 1933, when losses of 5.86 and 9.47 percent were sustained on total 
investment and stockholders' investment, respectively. 

* Report of the Commissioner of Corporations on the Steel Industry, pt., I, pp. 85 and 273. 



124491— 41— pt. 31- 



15 



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17824 -CONCENTRATION OF ECONOMIC POWER 

ILLINOIS STEEL CO. 

The Illinois Steel Co. was organized in 1889 as a consolidation of the North 
Chicago Rolling Mill Co. (with plants at North Chicago, South Chicago, and 
Milwaukee), the Union Steel Co., and certain property of the Joliet Steel Co. 1 
In 1935 the principal iron and steel producing plants of the Illinois Steel Co. 
were merged with the Carnegie Steel Co. to form the Carnegie-Illinois Steel 
Corporation. 

' Tables 40 and 41, which follow, summarize the investment, profits, and rates 
of return based on the total investment and stockholders' investment for the 
period 1925 to 1938. inclusive. 

The operations of this company were more profitable during the period under 
review than for any other of the principal producing and fabricating subsidiaries 
of the Steel Corporation. During the years 1925-38, this company's net income 
was equivalent to 9.30 percent on the total investment and 13.84 percent on 
the stockholders' investment. Exceptional'y high returns were earned in each 
of the years 1925-29.; On the basis of total investment the returns during these 
years amounted to 23.52 percent in 1925; 30.13 percent in 1926; 22.80 percent in 
1927; 27.47 percent in 1928 and 30.96 percent in 1929. Comparatively high 
returns, were also earned in 1930. In that year 10.15 percent was earned on the 
total investment. However, on this basis of investment losses were sustained 
in 1931, 1932, and 1933, and only moderate profits were earned thereafter. 

« Report of the Commissioner of Corporations on the Steel Industry Dt. I, p. 120. 



CONCENTRATION OF ECONOMIC POWER 



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17828 



CONCENTRATION OF ECONOMIC POWER 



COLUMBIA STEEL CO. 

This company was organized by the United States Steel Corporation in 1930, 
as the result of the purchase of the properties, assets, and business of the Columbia 
Steel Corporation. This latter corporation was incorporated in Delaware in 
1922 for the purpose of carrying on a completely integrated steel business from 
ore to finished product. In return for the assets and business of the Columbia 
Steel Corporation valued at not less than $41,370,000, the United States Steel 
Corporation issued 251,771 shares of common stock of $100 par value per share. 
The market price of the stock so issued by the United States Steel Corporation 
reflects substantially the value of the properties acquired in this exchange. 

The business and resources of the Columbia Steel Co. are located primarily in 
the Pacific coast region; its works being located at Ironton, Utah; and Pittsburg, 
Los Angeles, and San Francisco, Calif. It produces iron ore, steel ingots, castings, 
blooms billet, structural shapes, bars, rods, nails, fences, and other steel products. 

Tables 42 and 43, immediately following, summarize investments, profits and 
rates of return on total investment and stockholders' investment for the period 
1930 to 1938, inclusive. 

Returns on the total investment and stockholders' investment average 1.79 
and 1.81 percent, respectively, during the 3 r ears 1930-38. On both basis of 
investment, returns were highest in 1936 and 1937 and lowest in 1931. For 
example, on the total investment, earnings in 1936 and 1937 were equivalent to 
6.22 and 5.96 percent, respectively, and in 1932, losses were sustained equivalent 
to 2.45 percent. 



Table 42.- 



-Summary of investments, profits, and rates of return for the Columbia 
Steel Co., 1930 l -S8 



Average 



1938 



Capital stock, common 

Premium on capital stock 

Surplus 

Surplus and contingency reserve 

Long-term debt 

Reserve for Federal income and profit 
tax.. - 



$32, nno, 

19,861, 

346. 

100, 

3, 000, 



000. 00 
886. 74 
970. 51 
294. 04 
000. 00 



$32, 000, 

19,861, 

377, 

110, 

4, 043, 



000. 00 
886. 74 
559. 72 
751.10 
364.89 



$32, 000, 

19, 861, 

186, 

122, 

20, 



000 00 
886.74 
869. 31 
203.41 
000.00 



136, 648. 09 



512, 180. 23 



Total investment 

Average of total investment 

Net income applicable to total invest- 
ment 

Rate of return on total investment 
_■ .percent. 



Total investment. 
Long-term debt... 



$52, 244, 224. 00 

$934, 747. 20 

1.79 



55, 445, 
56, 175, 



799. 38 
771.00 



56, 905, 
54,811, 



742. 68 
912. 00 



, 825. 52 
1.64 



3, 267, 237. 25 
5.96 



52, 718, 
52, 780, 

3, 284, 



080. 73 
107.00 



275. 91 
6.22 



$55, 445, 
3, 000, 



799. 38 

ODD. 00 



$56, 905, 
4, 043, 



742. 68 
304. 89 



$52,718 
20 



080. 73 
000. 00 



Total stockholders' investment.. 

Average of stockholders' investment.. 

Net income applicable to stockholders' 
investment 

Rate of return on stockholders' invest- 
ment percent. 



$51,583,711.00 

$932, 036. 45 

1.81 



52, 445, 
52, 654, 



790. 38 
089. 00 



52, 862, 
52, 780, 



377. 79 
229. 00 



52, 698, 
52, 755, 



080. 73 
107. 00 



, 825. 52 
1.46 



, 237. 25 
6.19 



, 275. 91 
6.23 



•July 1 to Dec. 31, 1930. 



CONCENTRATION OF ECONOMIC POWER 



17829 



Table 42.- — Summary of investments, profits, and rates of return for the Columbia 
Steel Co., 1930-38— Continued 



1932 



Capital stock, common- 

Premium on capital stock 

Surplus - 

Surplus and contingency reserve 

Long-term debt ... 

Reserve for Federal Income and profit 
tax 

Total investment 

Average of total investment 

Net income applicable to total invest- 
ment --. -.- 

Rate of return on total investment 
percent. 

ToUl investment 

Long-term debt... 

Total stockholders' investment. . 

Average of stockholders' investment. . 

Net income applicable to stockholders' 
investment 

Ppte of return on stockholders' invest- 
ment... percent. 



$32,000, 

19, 861. 

639, 

38, 

30, 



000.00 
886.74 
425. 19 
972. 47 
000.00 



$32,000, 

19,861, 

'1,012, 

49, 

38, 



000.00 
886. 74 
179.87 
865. 01 
881.74 



$32, 000, 000. 00 
19, 861, 886. 74 

» 1, 820, 685. 84 
57, 32?. 46 
50, 000. 00 



$32, 000, 000. 00 
19, 861, 886. 74 

» 2, 143, 571. 57 
38, 741. 66 
60,000.00 



52, 842, 
51,992, 



133.49 
559.00 



51, 142 
60,646 



, 876. 76 
3.65 



983 52 
805. 00 



, 497. 25 
2.07 



60,148,626.36 
49, 981, 842. 00 



327, 365. 26 
0.66 



49,815,056. 73 
50, 265, 979. m 



> 1,073,031.98 
'2.13 



$52, 842, 
30, 



133. 49 
000. 00 



$61,142, 
38, 



983. 52 
881.74 



$50, 148, 626. 36 
50.000.00 



$49,815,056.73 
60,000.00 



52, 812, 
51, 958, 



133. 49 
117.00 



, 876. 76 
3.66 



51, 104, 
50,601, 



1, 047, 



101.78 
364.00 



497. 25 
2.07 



60, 098, 626. 36 
49, 928, 841. 00 



327, 366. 26 
0.66 



49,766,056.73 
60,199,604.00 

'1,073,031.98 

'2.14 



1929 



Capital stock, common. 

Premium on capital stock ., 

Surplus ...J 

Surplus and contingency reserve 

Long-term debt 

Reserve for Federal income and profit tax 

Total investment 

Average of total investment 

Net income applicable to total investment 

Rate of return on total investment percent . 

Total investment 

Long-term debt 



$32, 000, 000. 00 

19, 861, 88e. 74 

' 1, 256, 494. 08 

38, 758. 62 

72, 760. 00 



$32,000,000.00 
19, 861, 886. 74 
126,603.24 
65, 409. 45 
85, 600. 00 
48,084.07 



50,716,901.28 

61,451,692.00 

' 1,259,321.14 

2 2.45 



62, 186, 483. 60 

52,092,362.00 

•125,603.24 

0.48 



» 61, 998, 220. 81 



$50,716,901.28 
72, 750. 00 



$52T86, 483. 50 
85,600.00 



$51, 998, 220. 81 
88,250.00 



Total stockholders* investment 

Average of stockholders' investment 

Net income applicable to stockholders' investment 

Rate of return on stockholders' investment percent. 



50, 644, 151. 28 

61, 372, 667. 00 

•1,269,321.14 

'2.45 



52,100,983.60 

52, 005, 477. 00 

125,603.24 

0.48 



61, 909, 970. 81 



' July 1 to Dec. 31, 1930. 

' Denotes deduction. 

' Investment July 1, 1930. 

* Net income July 1 to Dec. 31, 1930. 



17830 



CONCENTRATION OF ECONOMIC POWER 



Table 43. — Summary of income, expense, and surplus for the Columbia Steel Co., 

1930 l ~S8 





Total 


1938 


1937 


1936 




$155,443,581.72 


$24, 974, 650. 72 


$31, 208, 252. 00 


$29, 411, 922. 00 




122, 344, 653. 49 

18, 653, 015. 00 
7, 117, 351. 83 


20, 436, 224. 90 

3, 022, 022. 14 
1,088,312.62 


23, 451, 590. 47 

3, 635, 708. 85 
924, 454. 51 


22, 506, 318. 31 


Distributive and administrative ex- 


2, 739, 905. 88 




970, 040. 60 






Total operating expense 


148, 115, 020. 47 
7, 328, 561. 25 
1, 084, 163. 58 


24, 546, 559. 66 
428, 091. 06 
490, 734. 46 


28, 011, 753. 83 

3, 196, 498. 17 

70, 739. 08 


26, 216, 264. 79 
3, 195, 657. 21 




88, 618. 70 






Net income applicable to total invest- 


8, 412, 724. 83 
150, 000. 00 


918, 825. 52 
150, 000. 00 


3, 207, 237. 25 


3, 284, 275. 91 












Net income applicable to stock- 
holders' investment 

Less Federal income and excess-profit 


8, 262, 724. 83 
1, 688, 328. 58 


768, 825. 52 
136, 648. 09 


3, 267, 237. 25 
512, 180. 23 


3, 284, 275. 91 
527, 121. 27 




6, 574, 396. 25 
125, 603. 24 


632, 177. 43 
377, 559. 72 


2, 755, 057. 02 
186, 869. 31 


2, 757, 154. 64 


Surplus at beginning of year.. 


639, 425. 19 


Total - 


6, 699, 999. 49 
6, 480, 000. 00 


1, 009, 737. 15 
720, 000. 00 


2, 941, 9?6. 33 
2, 560, 000. 00 


3, 396, 579. 83 




3, 200, 000. 00 






Total 


219, 999. 49 
126,971 02 


289, 737. 15 
57, 233. 36 


381, 926. 33 
' 4, 366. 61 


196, 579. 83 




2 9,710.52 








346. 970. 51 


346, 970. 51 


377, 559. 72 


186, 869. 31 









1935 


1934 


1933 




$22, 676, 004. 00 


$15,095,347.00 


$13. 802. 574. 00 








17, 753, 481. 99 

2, 194, 324. 72 

903, 193. 00 


11, 413, 955 79 

1, 865, 887. 24 

849, 623. 80 


11, 161, 742. 87 




1, 551, 329. 10 




815, 398. 82 








20, 849, 001. 71 

1, 827, 002. 29 

72, 874. 47 


14, 129, 466. 83 

965, 880. 17 

81, 617. 08 


13, 528, 470. 79 


Net operating profit 


274. 103. 21 
53, 262. 05 








1, 899, 876. 76 


1, 047, 497. 25 


327, 365. 26 














Net income applicable to stockholders' investment. 


1, 899. 876 76 
271.849.09 


1, 047, 497. 25 
240, 529. 90 


325, 365. 26 








1, 628. 027. 67 
1 1, 012, 179. 87 


806. 967. 35 
2 1, 820. 585. 84 


327,365 26 




2 2, 143, 571. 57 






Total 


615, 847. 80 


' 1,013,618.49 


• > 1, 816, 206. 31 
















615,847.80 
23, 577. 39 


2 1,013,618.49 
1, 438. 62 


2 1, 816, 206. 31 
2 4, 379 53 








639, 425. 19 


2 I, 012, 179.87 


2 1 820 585 84 







•July 1 to Dec. 31, 1930 
'Denotes deduction. 



CONCENTRATION OF ECONOMIC POWER 



17831 



Table 43. 



-Summary of income, expense, and surplus for the Columbia Steel Co., 
1930-88 — Continued 





1932 


1931 


1930' 




$7, 790, 743. 00 


$10, 484, 089. 00 


$14, 249, 436. 00 








6, 706, 252. 43 

16, 46, 233. 92 

616, 468. 15 


8, 917, 084. 73 

1, 997. 603. 30 

949, 860. 33 


12, 601, 560. 27 




1,129,917.14 




475, 413. 58 








8, 968, 954. 50 

2 1,178,211.50 

105, 179. 5? 


11,864.548.36 

2 1,380,459.36 

121, 138. 22 


14, 206, 890. 99 




42, 545. 01 




83, 058. 23 








2 1, 073, 031. 98 


2 1, 259, 321. 14 


125, 603. 24 














Net income applicable to stockholders' investment - 


2 1, 073, 03 1. 98 


' 1, 259, 321. 14 


125. 603. 24 












2 1,073,031.98 
2 1, 256, 494. 08 


2 1, 259, 321. 14 
125. 603. 24 


125, 603. 24 










Total .-- 


2 2, 329, 526. 06 


2 1, 133, 717. 90 
















Total 


2 2, 329, 526. 06 
185, 954. 49 


2 1, 133,717.90 
2 122, 776. 18 














2 2, 143, 571. 57 


2 1, 256, 494. 08 


125, 603. 24 







' July 1 to Dec. 31, 1930. 
2 Denotes deduction. 



National Tube Co. 



The National Tube Co. was organized in 1899 and commenced business on 
July 1 of that year. It was acquired by the United Steel Corporation in 1901. 

The principal plants of the National Tube Co. are located at Lorain, Ohio, 
and at McKeesport, Versailles, and Christy Park. Pa. The company produces 
large quantities of coke, iron, steel, ingots, tubular goods, and various other 
products. 

Tables 44 and 45, which follow, summarize investments, profits, and rates of 
return based on the total investment and stockholders' investment for the period 
1925 to 1938, inclusive. 

The tables show that during the years 1925-38, rates of return on total invest- 
ment and stockholders' investment were 4.67 and 5.62 percent, respectively. 
Again rates of return were highest in 1929 and lowest in 1932. In 1929 the 
company's net income was equivalent to 13.98 percent on the total investment 
and 16.96 percent on the stockholders' investment. During 1932 losses were 
sustained equivalent to 2.50 percent on the total investment and 3.38 percent 
on the stockholders' investment. 



17832 



CONCENTRATION OF ECONOMIC POWER 






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-16 



17836 CONCENTRATION OF ECONOMIC POWER 

TENNESSEE COAL, IRON & RAILROAD CO. 

The Tennessee Coal, Iron & Railroad Go. was organized under the laws of 
Tennessee in 1860 as the Tennessee Coal & Railroad Co. and the'name was changed 
to the present title in 1881. This is the leading concern in the southern iron and 
steel district and was acquired by the United States Steel Corporation in the latter 
part of 1907. 

The iron and steel producing and manufacturing plants of this subsidiary are all 
located near Birmingham, Ala. The company produces coke, iron, ferro-man- 
ganese, ingots, castings, rails, blooms, billets, plates, and bars. During 1938 
a new 48-inch continuous hot strip mill and a complete new plant, with an esti- 
mated capacity for the annual production of 200,000 tons of cold reduced tin 
plate were added, including 4-high cold reduction mills with annealing, pickling, 
and tinning facilities. 

Tables 46 and 47, which follow, summarize investments, profits and rates of 
return for Tennessee Coal, Iron & Railroad Co., based on the total investment and 
stockholders' investment for the period 1925 to 1938, inclusive. 

This company's operations were profitable in all years during the period under 
review except for 1931 to 1934, inclusive. For all years, 1925-38, the average net 
income was equivalent to 2.90 and 2.63 percent, respectively, of the total invest- 
ment and stockholders' investment. The most profitable year for this company 
was 1937 when earnings were equivalent to 9.74 percent on the total investment 
and 10.92 percent on the stockholders' investment. This was unusual as 1929 
was the most profitable year for most of the other subsidiaries. However, as 
in the case of a number of the other subsidiaries, returns for this company were 
lowest in 1932, when losses were sustained equivalent to 7.71 percent on the total 
investment and 9.50 percent on the stockholders' investment. 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



17839 





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17840 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC; POWER 



17841 



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17842 



CONCENTRATION OF ECONOMIC POWER 



Subsidiaries Other Than Those Producing and Fabricating Steel 

While the steel subsidiaries form the most important group in the United States 
Steel Corporation, they by no means account for all the business in the system. 
Ore, coal and coke, transportation, manufacturing companies other than steel- 
producing or fabricating, and miscellaneous companies have represented during 
the period 1925-37 more than half the investments and have produced more than 
half the income for the United States Steel Corporation as a consolidated system. 

Some indication of the extent of these subsidiaries is furnished by the following 
tabulation of the subsidiary companies by groups which were in existence as of 
December 31, 1937. 

Number 
of 
Group - . companies 

Steel 15 

Manufacturing other than steel 10 

Ore mining 49 

Coal and coke _ 8 

Transportation 27 

Miscellaneous ' 28 

Total 137 

A much better indication of the relative importance to the system as a whole of 
the various groups of subsidiaries is afforded by the following summary of income, 
investments, and rates of return of the United States Steel Corporation and 
subsidiaries for the period 1925-37, inclusive. 

Comparison of the relative importance of income, investments, and rates of return for 
• the United States Steel Corporation and subsidiary groups for the period 1925-37, 
inclusive 





Total net 
income 


Average net 
income 


Average 
investment 


Average 
rate of 
return 


Group in- 
come to 
total 


Group in- 
vestment 
to total 


United States Steel Cor- 
poration and subsid- 


$1, 036, 012, 977 

478, 203, 492 
247, 585, 805 
310, 223, 680 


$79, 693, 305 

36, 784, 884 
19, 045, 062 
23, 863, 359 


$2, 072, 657, 841 

993, 562, 963 
287, 594, 925 
791, 499, 953 


Percent 
3.84 

3.70 
6.62 
3.01 


Percent 
100.00 

46.16 
23.90 
29.94 


Percent 
100.00 


Qroups: 

Steel. 


47.94 


Transportation 

All other 


13.87 
38.19 






Total 


1, 036, 012, 977 


79, 693, 305 


2, 072, 657, 841 




100.00 


100.00 









i Represents consolidated figures. Income and investments have not been adjusted for intangibles. 

The transportation group, constituting some 14 percent of the investment and 
24 percent of the income of the United States Steel Corporation for the 13-year 
period, 1925-37, did noticeably better than either of the other two groups. The 
average rate of return for the transportation companies was 6.62 percent. The 
steel group, comprising 48 percent of the consolidated investment, earned 3.70 
percent. The all-other group for the same period earned only 3.01 percent. 

The effect of intangible value has not been eliminated from any of the figures 
in the table. While it has been possible to make this adjustment in the consoli- 
dated records of the United* States Steel Corporation, no such elimination of 
intangibles from the records of the subsidiaries is feasible. Therefore, for com- 
parative purposes, the intangibles not actually deducted by the United States 
Steel Corporation itself are included in the consolidated figures. 

Were it possible to eliminate intangibles from both the consolidated company 
and the subsidiaries, it is probable that the relative importance of the groups in 
regard - to investments would be altered somewhat. According to the Bureau 
of Corporations report ' in 1811, the bulk of the intangibles included in the 
capitalization of the United States Steel Corporation in 1901 was contained in 
assets of the ore companies. It, therefore, follows, that were the intangibles 
eliminated in this comparison, the ore companies would show to better advantage. 
This would be reflected in a higher rate of return for the all-other group. - How- 
ever, relationships of these groups would not be radically changed as the result 

> P. 36, Report of the Commissioner of Corporations in the Steel Industry, pt. I. 



CONCENTRATION OF ECONOMIC POWER 



17843 



of the elimination of intangibles. This contention is borne out by a comparison 
of the rates of return for the consolidated company over the period 1925-37 with 
and without intangible values included. 



United States Steel Corporation 


Average 
income 


Average of 
total invest- 
ment 


Average 
rate of 
return 




$79, 693, 305 
83, 476, 428 


$2, 072. 657, 841 
. 1, 778, 646, 089 


Percent 
3.84 


Company statements adjusted by elimination of intangibles. 


4.69 



The average rate ©f return on total investment for this period is raised 85 of 
1 percent by the elimination of intangible values. 

Income and investments for the group comprising all other companies represent 
for the most part a derived figure obtained by deducting from the consolidated 
figures for the United States Steel Corporation the amounts shown for the steel 
and transportation groups. The figures for the steel and transportation groups 
represent a summary of data compiled from balance sheets and income statements 
of the individual companies within these groups. 

With the exception of the following manufacturing companies, no company 
listed in the all-other group were so examined. These manufacturing companies 
were the Universal Atlas Cement Co., American Bridge Co., and the Federal 
Shipbuilding & Dry Dock Co. Their importance in this group isindicated by the 
following tabulation which covers the period 1925-37, inclusive: 

Comparison of relative importance of income, investments and rates of return for 
other steel producing and transportation subsidiaries, 1925-37 



All-other group 


Total net 
income 


Average net 
income 


Average in- 
vestment 


Average 
rate of 
return 


Income 
to total 


Invest- 
ment to 
total 


Universal Atlas Cement Co. . . 


$32, 932, 201 
13, 477, 048 

i 3, 032, 869 


$2, 533, 246 
1, 036, 696 

i 233, 298 


$33, 436, 735 
75, 106, 557 

6, 703, 729 


Percent 
7.58 
1.38 

1 3.48 


Percent 
10.62 
4.34 

'.98 


Percent 
4.22 
9.49 


Federal Shipbuilding & Dry 
Dock Co . 


1.85 






Total 


43, 376, 380 
266, 847, 300 


3, 336, 644 
20, 526, 715 


115,247,021 
676, 252, 932 


2.90 
3.04 


12.07 
87.93 


14.56 


Remainder. 


85.44 






Total 


310, 223, 680 


23, 863, 359 


791,499,953 


3.01 


100.00 


100.00 







1 Loss. 

Responsible officials of the United States Steel Corporation stated that of the 
companies included in the remainder of the all-other group, the ore-mining com- 
panies constituted the great bulk from the point of view of investment and income 
produced. 

Average figures for the period 1925-37 have been used without any attempt to 
show the relative importance of these groups by years. This procedure has been 
occasioned by the fact that the figures for the United States Steel Corporation are 
consolidated figures, with all intercompany items eliminated. These intercom- 
pany items are included in the records of the individual subsidiary companies. 
The most important of these intercompany items which affect the income and in- 
vestment of the subsidiaries is intercompany profits. Such profits arise from sales 
of goods at more than cost from one subsidiary to another. From the point of 
view of the Steel Corporation as a whole, profits can only be realized when sales ' 
above cost are made to outside interests. 

Consolidated income for the United States Steel Corporation varies from the 
sum of the income for all its subsidiaries by as much as $50,000,000 in some years. 
However, this effect is not cumulative, and over the 13-year period total and aver- 
age income figures are not material^ affected. 

While it is true that the effect of intercompany profit is relatively unimportant 
when a sufficiently -long period is averaged, comparison of the yearly income and 
investment, total for the individual companies with those of the consolidated com- 
pany are liable to serious error. Consequently the annual totals in the following 



17844 CONCENTRATION OF ECONOMIC POWER 

table 48 cannot be related with any precision to the totals for the United States 
Steel Corporation. This table shows the average income, investment and rates 
of return for the transportation companies and the principal subsidiaries not pri- 
marily connected with the production of steel, if we include the mining of ore, coal, 
and the manufacture of coke within this latter term. This should be further 
amended since the American Bridge Co. processes some of the steel required in its 
own business. 

The transportation companies, as a group, earned 7.36 percent on their invest- 
ment during the period 1917-37. Although 30 companies are included in this 
group, 7 companies account for 85.3 percent of the average investment and 96.9 
percent of the average income of the whole transportation group during this 
22-year period. These 7 companies, together with their average rates of return, 
follow : 

. . . . Average rates 

Principal transportation companies of return 

(percent) 

(1) Duluth, Missabe & Northern Railway Company ' 11. 92 

(2) Bessemer & Lake Erie R. R. Co 10. 29 

(3) Duluth & Iron Range R. R. Co . 6.32 

(4) Elgin, Joliet & Eastern R. R. Co „ 4. 96 

(5) Chicago, Lake Shore & Eastern R. R . Co 7. 55 

(6) Pittsburg, Bessemer & Lake Erie R. R. Co 1 4. 39 

(7) Union R. R. Co 5. 56 

Average for above companies 7. 98 

1 Name changed in 1937 to Duluth, Missabe A Iron Range R. R. Co. 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 
APPENDIX TABLES 



17847 



\."pendix Table 1. — Active subsidiaries of United States Steel Corporation at 

Dec. SI, 19S7 > 



Name 



Kind of business in which 
engaged 



Percent of 
control 



Adams Mining Co 

Agate Land Co - 

Interstate Transfer Ry. Co 

Agawem Iron Mining Co 

Alpha Ore Co 

Ambridge Iron Mining Co 

American Bridge Co 

American Improvement Co.- 

Etna and Montrose R. R. Co.- - 

Wissahickon Bridge Co 

American Steel & Wire Co. of New Jersey, The. 

Angus Land Co 

Athens Land Co 

Bessemer &. Lake Erie R. R. Co. - 

Beta Ore Co 

Bishop Iron Co 

Blue Earth Land Co.. 

Bradley Transportation Co. . 

Cambridge Iron Mining Co 

Carnegie-Illinois Steel Corporation 

Carnegie Land Corporation 

Carnegie Natural Gas Co 

Chapin Mining Co.. 

Chicago, Lake Shore & Eastern Railway Co 

Chippewa Iron Co., The.. 

Clarion Iron Mining Co 

Cloquet Iron Mining Co 

Columbia Steel Co.. 

Companhia Meridional de Mineracao 

Crawford Iron Mining Co.. 

Cumberland Iron Mining Co 

Cyclone Fence Co 

Duluth, Missabe & Iron Range Ry. Co 

Duquesne Iron Mining Co 

Elein. Joliet & Eastern Ry. Co 

Essex Iron Co 

Federal Coke Corporation 

Federal Shipbuilding & Dry Dock Co 

H. C. Frick Coke Co. 

Gary Land Co 

Genoa Iron Co.. 

Great Northern Mining Co 

Hemlock Land Co 

Hugo Iron Co 

Illinois Steel Co 

Isthmian Steamship Co 

Jena Mining Co. 

Joliet & Blue Island Ry. Co., The 

Kentucky Fire Brick Co., The 

Lafayette Fluorspar Co.. 

Lake Superior Consolidated Iron Mines 

Lake Terminal R. R. Co., The. 

Lancaster Iron Mining Co 

Lebanon Iron Mining Co 

Ligonier Iron Mining Co 

Michigan Limestone & Chemical Co 

Mingo Coal Co 

Mingo Iron Mining Co...l .. 

Minnesota Iron Co .... 

Minnesota Steel Co.. 

Monessen Iron Mining Co.. 

Mometa Improvement Co i 

Monongahela Iron Mining Co 

Morewood Iron Mining Co 

Mountain Iron Co 

Munhall Iron Mining Co 

National Mining Co 

National Tube Co 

Neville Iron Mining Co... 

Northern Development Co.. '. 

Oil Well Supply Co 

Oliver Iron Mining Co 

Pencoyd Iron Mining Co 

Pennsylvania and Lake Erie Dock Co 

Piloto Mining Co.. 



Iron ore 

Real estate 

Transportation 

Iron ore 

.—do 

....do 

Steel fabrication _. 

Real estate 

Transportation 

Toll bridge ., 

Steel and steel products. 

Iron ore 

do...., 

Transportation 

Iron ore 

....do-.. 

do. 

Transportation. 

Iron ore 

Steel and steel products. 

Real estate 

Natural gas... 

Iron ore 

Transportation 

Iron ore 

do 

do 

Steel and steel products . 



Iron ore 

....do.. 

Steel and steel products. 

Transportation 

Iron ore 

Transportation 

Iron ore.. 

Coal 

Shipbuilding. 

Coal.. 

Real estate 

Iron ore.. 

.-.do. 

do 

.—do 

Steel and steel products. 

Transportation 

Iron ore 

Transportation 

Refractory brick 

Fluor spar 

Iron ore 

Transportation 

Iron ore 

do ... 

....do_ 

Limestone 

Coal... 

Iron ore 

....do 

Steel and steel products . 

Iron ore 

....do 

—.do.... 

—do 

....do. „ 

do 

....do 

Steel and steel products. 

Iron ore _ 

do 

Steel and steel products . 

Iron ore. .- 

.... do... 

Docks 

Iron ore 



1 This list does not include many subcompanies of these subsidiaries and does not include many iron ore 
and other companies In which U S. Steel Corporation held only a minority equity 



17848 



CONCENTRATION OF ECONOMIC TOWER 



Appendix Table 1. — Active subsidiaries of United States Steel Corporation at 
Dec. 31, 1937— Continued 



Kind of business in which 



Percent of 
control 



Pittsburgh, Bessemer & Lake Erie Ry. Co., The. 

Pittsburgh & Conneaut Dock Co., The 

Pittsburgh Limestone Corporation 

Youngstown & Northern R. R. Co., The 

Pittsburgh Steamship Co 

Pittsburgh Supply Co 

Proctor Water & Light Co -. 

Rathbun Iron Mining Co 

Saranac Iron Mining Co.__ : 

Scully Steel Products Co 

Seventy-one Broadway Corporation , 

Sharon Coal & Limestone Co 

Shaw Iron Co 

Somerset Iron Mining Co 

Spruce Mining Co 

Standard Fence Co__ 

Tennessee Coal, Iron & Railroad Co. 

Birmingham Southern R. R. Co 

Chickasaw Shipbuilding & Car Co 

Fairfield Steel Co 

Tennessee Land Co — 

Virginia Bridge Co 

Trotter Water Co 

Union Railroad Co 

Union Supply Co . _ - - 

United States Coal & Coke Co 

United States Fuel Co 

United States Steel Corporation of Delaware 

United States Products Co ■- 

United Supply Co., The 

Universal-Atlas Cement Co 

Hannibal Gonnectine R. R. Co . 

Northampton & Bath R. R. Co _ 

Universal Exploration Co r 

Connellsville & Monongahela Ry. Co . .. 

Westmoreland Iron Mining Co 

Youghiogheny Northern Ry. Co., The 



Transportation 

Docks 

Limestone 

Transportation 

do 

Ship chandlery 

Village utility services. . 

Iron ore 

do ._ 

Warehousing.. 

Real estate 

Coal and limestone 

Iron ore 

do 

do 

Steel and steel products . 

do 

Transportation 

Shipbuilding 

Steel and steel products. 

Real estate 

Steel fabrication 

Water 

Transportation 

Merchandise 

Coal. 

do 

Service company. _ 

Export sales. __ 

Merchandise 

Cement 

Transportation 

do.... 

Zinc ore 

Transportation 

Iron ore 

Transportation 



57 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 



Appendix Table 2. 



-Active subsidiaries of Bethlehem Steel Corporation at Dec. 
31, 1937 • 



Name 


Kind of business in which engaged 


Percent 
of con- 
trol 






100 


Bethlehem-Cuba Iron Mines Co.- 

Bethlehem Shipbuilding Corporation, Ltd 

Bethlehem Steel Co. (Pennsylvania) 


Mining iron ore, owns coal and limestone prop- 
erties. 


100 
100 


Manufacture of iron and steel products, fabri- 
cated structural material, etc. 


100 
100 


Bethlehem Land & Improvement Corporation- 
Northampton County Water Co 


do 


100 




100 




100 


Dundalk Sewerage Co., The 

Johnstown Water Corporation . ... 

Johnstown Water Co 

Conemaugh & Franklin Water Co... 

Lebanon Consolidated Water Co. 

Mahoning Ore & Steel Co 

Manufacturers Water Co., The 

Penn Iron Mining Co. (Michigan) 

Penn Iron Mining Co. of Wisconsin.. _ 




100 




100 


Supph'es water to steel plant of Bethlehem 
Steel Co. and to public. 


98 
100 


Supplies water to steel plant of Bethlehem 
Steel Co. and to public. 


100 
51 


Sunplies water to steel plant of Bethlehem 
Steel Co. and to public. 


100 
100 




100 



i This list does not include 7 iron ore companies listed below in which Bethlehem Steel Corporation held 
from 22 to 50 percent minority equity, nor does it include Cambria Iron Co. which is leased for 999 years to 
this corporation: 

Bennett Mining Co. (22 percent). 
Hoyt Mining Co. (45 percent). 
Negaunee Mine Co. (50 percent). 
Odanah Iron Co. (50 percent). 
Plymouth Mining Co. (40 percent). 
Vermillion Mining Co. (25 percent) 
Verona Mining Co. (50 percent) . 



CONCENTRATION OF ECONOMIC POWER 



17849 



Appendix Table 2. — Active subsidiaries of Bethlehem Steel Corporation at Dec. 

31, 1937— Continued 



Name 



Kind of business in which engaged 



Percent 
of con- 
trol 



Bethlehem Steel Co. (Delaware) 

Bethlehem Steel Export Corporation . . . 
Bethlehem Supply Corporation . _ 

Bethlehem Transportation Corporation 

Buena Vista Iron Co — 

Calmar Steamship Corporation .. 



Campania de Mines de Fierro, "LosTruchas' 
S. A. 

Comemaugh and Black Lick R. R. Co 

Cornwall R. R. Co. 

Fore River R. R. Corporation 

Fore River Shipbuilding Corporation 

Industrial Collieries Corporation 



Iron Mines Co. of Venezuela . 

Jurague Iron Co 

Ore Steamship Corporation.. 



Patapsco & Black Rivers R. R. Co 

Philadelphia Bethlehem & New England R. R. 

Co. 
Service Stores Corporation (Pennsylvania) 

Service Stores Corporation (Michigan) 

South Buflalo Ry. Co 

Steelton & Highspire R. R. Co.. 

Sunday Lake Iron Co., The 

Cambria Steamship Co. 

Corsica Iron Co - 

Cuyuna Ore Co 

Farmers' & Merchants' Bank 

Hobart Iron Co -- 

Mahoning Steamship Co 

Palmer Mining Co -- 



Selling company, also operates fabricating 
works and warehouses and erects structural 

- steel. 

Selling company, all foreign countries 

Selling company, operates supply stores and 
storage yards. 

Operates vessels on Great Lakes principally to 
transport raw materials to stee 1 plants of 
Bethlehem Steel Co. 

Owns iron ore lands 

Operates vessels in intercoastal service, prin- 
cipally to transport products of steel plants 
to Pacific coast. 

Owns mineral rights. „_.. 



Common carrier ._ 

do..^ 

do 

Owns property leased to another subsidiary 

Manages the mining of coal for account of con- 
suming subsidiary company. 

Iron ore development in Venezuela 

Mining iron ore 

Operates vessels in coastwise and foreign trade 
transporting raw materials from properties 
of subsidiary companies. 

Common carrier... _. 

do 



Retail .merchandising serving employees and 
the public. 

do 

Common carrier 

do _ 

Mining iron ore 

Transportation 

Mining iron ore.. 

do 

Banking 

Mining iron ore 

Transportation -. 

Mining iron ore 



100 



100 
100 



100 



100 
100 



100 

100 

100 
100 
100 
100 

100 
100 
100 



100 
100 



100 
100 
100 
100 
62 
67 
60 
100 
67 
53 
51 



Appendix Table 3. — Active subsidiaries of Republic Steel Corporation at Dec. 

31, 1937 » 



Kind of business in which engaged 



Percent 
of con- 
trol 



Beaver Falls Water Power Co 

Berger Manufacturing Co. of Mass., The 

Columbia Land Co., The.. 

Dormer Mining Co -.... 

Howard Supply Co — — 

Newton Steel Co., The 

Upper Mahoning Land Co., The 

Penokee Ore Co 

Republic Collieries Co. , 

Republic Steel Corporation of Delaware 

Republic Supply Co 

Searight Supply Co 

Steel & Tubes, Inc '. 

Ohio Tubular Products Company, The. 

Truscon Steel Co. 

Union Drawn Steel Co., Ltd 

Vance Iron & Steel Co . 



Metal office equipment. 



Fabricated steel products. 



67 
67 
100 
100 
94 
81 
100 
100 
00 
00 
85 
00 
100 
75 
97 
100 
100 



Company also held minority equities in the following companies: 

Donner-Hanna Coke Corporation (50 percent). 
Fretz-Moon Tube Co., Inc. (50 percent). 
Susquehanna Ore Co. (59 percent). 
Lake Erie Limestone Co. (57 percent). 
Mahoning Ore & Steel Co. (6 percent). 
Mesaba-Clifls Mining Co. 



17850 



CONCENTRATION OF ECONOMIC POWER 



Appendix Table 4. — Active subsidiaries of Jones & Laughlin Steel Corporation at 

Dec. SI, 1987 



Name 


Kind of business in which engaged 


Percent 

of 
control 






100 


Vesta Coal Co., The 




100 




do 


100 






100 




do. 


100 




Transporting iron ore on the Great Lakes . . 
Operating steam railroad 


100 


Monongahela Connecting R. R. Co., The 


100 




do .. 


100 


Woodlawn & Southern Motor Coach Co .. 


Operating motor coaches _ 


100 


Harbor Land Co., The : _.'...... 


Owns harbor facilities on Lake Erie. _ ... 


100 






100 


Woodlawn Land Co 


Purchase, rental, and sale of real estate 

Water supply 

Merchandising iron and steel products 

Structural steel fabricating shop and ware- 
house. 

Erecting bridges, buildings and other struc- 
tures. 

Merchandising iron and steel products. 

Merchandising oil well, mill and mine supplies. 


100 
100 




100 




100 




100 




100 




79 







Appendix Table 5. 



-Active subsidiaries of National Steel Corporation at Dec. St, 
1937 1 



Name 


Kind of business in which engaged 


Percent 

of 
control 


Weirton Steel Co 




100 






100 






91 


Oak Hill Supply Co - 




95 






100 






100 






100 






100 




do _ 


100 




do 


100 




do... .- 


70 




do 


67 




.do... ---.- 


100 


Weirton Coal Co 




100 









i Minority equities are held in the following iron ore companies: 

Mahoning Ore & Steel Co. (7 percent). 
Mesaba Cliffs Mining Co. (11 percent). 
Nokay Iron Co. (67 percent) . 
Susquehanna Ore Co. (25 percent). 



CONCENTRATION OF ECONOMIC POWER 



17851 



Appendix Table 6. — Active subsidiaries of Youngstowri Sheet & Tube Co. at Dec. 

31, 1937 • 



Kind of business in which engaged 



Percent 
of 

control 



Vinegar Hill Zinc Co 

Youngstown Metal Products Co. 

Youngstown Mines Corporation, The. 

Buckeye Coal Co., The 

Buckeye Land Co., The 

Nemacolin Ferry Co., The 

Nemacolin Supply Co 

Youngstown Steel Products Co., The . 

Mayville Iron Co., The 

Delotex Co., The 



Continental Supply Co., The.. 

Continental Emsco Co.. Inc 

Sheet and Tube Employees Stores Co., The... 

Mahoning Insurance Co .. 

Biwabik Mining Co,. The. 

Balkan Mining Co., The 

Crete Mining Co 

Century Zinc Co., The _. 

Mahoning Mining Co 



Zinc and lead 

Stamping plant 

Iron ore and coal •_ 

Bituminous coal mining: 

Real estate.. .. 

Ferry transportation 

General merchandise. 

Merchandising iron and steel products.. 

Timber and farm lands 

Lessor of oil and gas properties 

Merchandising oil and gas well supplies. 

do.. * 

General merchandising _ 

General Are insurance *.. 

Iron ore 

do 

do 

Zinc and lead 

Fluorspar.. 



95 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
75 
67 
60 
60 
60 



' Other companies in which minority equities are held are listed here: 

Bennett Mining Co. — iron ore (33 percent). 

Campbell Mining Co. — iron ore (33 percent). 

Cuyuna Ore Co.— iron ore (20 percent). 

Hoyt Mining Co.— iron ore (10 percent). 

Mahoning Ore & Steel Co. — iron ore (12 percent). 

Palmer Mining Co. — iron ore (15 percent). 

Plymouth Mining Co.- -iron ore (20 percent). 

Vermillion Mining Co. — iron ore (37 percent). 

Volunteer Ore Co. — iron ore (33 percent). 

Carbon Limestone Co.— limestone quarry (18 percent). 

Cambria Steamship Co. — Great Lakes transportation (12 percent). 

Interlake Steamship Co.— Great Lakes transportation (10 percent). 

Mahoning Steamship Co.— Great Lakes transportation (6 percent). 

Chicago Short Line Ry. Co.— belt line railway (49 percent). 

Direct Current Welding Co. — holds welding patents (50 percent). 

Pennsylvania & Lake Erie Dock Co. — docks (4 percent). 

Youngstown Steel Door Co. — steel doors and specialties for railroad cars (8 percent). 

Appendix Table 7. — Active subsidiaries of Inland Steel Co. at Dec. 31, 1937 l 



Name 


Kind of business in which engaged 


Percent 

of 
control 


Joseph T. Ryerson & Son, Inc 


Fabricator and distributor of steel products 

Manufacturer and fabricator of miscellaneous 
building materials from steel sheets. 


100 
100 




100 




Building and renting of houses to employees . . 
Manufacturers of steel sheets — plant now dis- 
mantled. 


100 




100 


Inland Tar Co 


100 









1 Other iron ore companies in which minority equities are held are listed here: 



Mahland Ore Co. (50 percent). 
Susquehanna Ore Co. (25 percent). 
Michigan Mineral Land Co. (50 percent). 
Mesaba Cliffs Mining Co. (14 percent). 



124491 — 41— pt. 31- 



-17 



17852 



CONCENTRATION OF ECONOMIC POWER 



Appendix Table 8. — Active subsidiaries of The American Rolling Mill Co, at 

Dec. 81, 1987 » 



Name 



Kind of business in which engaged 



Percent 

of 
control 



Sheffield Steel Corporation 

Armco International Corporation, The* 

Armco Railroad Sales Co 

American Rolling Mill Co. of California, The. 

California Corrugated Culvert Co.. 

Western Metal Manufacturing Co. (of 
Arizona). 

Dakota Culvert & Pipe Co.. 

Dixie Culvert & Metal Co., The 

Dixie Culvert & Pipe Co., The.. 

Fort Worth Tank & Culvert Co 

R. Hardesty Manufacturing Co., The 

Harry Bros. Co. of Louisiana 

Iowa Culvert & Pipe Co 

Lyle Culvert & Pipe Co 

Maryland Culvert & Pipe Co., The 

Missouri Culvert & Pipe Co 

Montana Culvert & Pipe Co 

Nebraska Culvert & Pipe Co., ^he 

W. Q. O'Neall Co. of Illinois, The... 

Pure Iron Culvert & Manufacturing Co 

Road Supply & Metal Co., The 

Virginia Culvert Corporation 

Washington Corrugated Culvert Co 

Western Metal Manufacturing Co. of Texas.. 

Canada Ingot Iron Co., Ltd., The 

Drainage Engineering Co. of Canada, Ltd 

F. K. Simonds Co. 

Armco Coal Mining Corporation 

Nellis Coal Corporation 

Manchester Hotel Co., The 

Boyd County Realty Co 

Aruzen Co 

Middletown Realty Co., The 

Middletown Airport, Inc 



Manufacture and sale of iron and'steel 

Exporters of iron and steel— holding company. 

Sale of iron and steel products .. 

Wholesale dealers in sheet iron and steel 

Manufacture anci sale of metal culverts. 

Sale of metal culverts 



Manufacture and sale of metal culverts.. 

...do .... 

...do 

....do 

do 

Jobbers and fabricators of iron and steel. 

Manufacture and sale of metal culverts.. 

do... 

do 

do 

do 

do.. 

do 

do 

do 

do......... 

do 

do 

do 

Jobbers of iron and steel products . . 

Foundry iron castings 

Coal mining 

do.. 

Operates hotel 

General real estate. . 

Rolling mill development company 

General real estate 

Airport 



IOC 
100 
100 
IOC 
100 
100 

100 
10C 
100 
100 
100 
100 

95 
100 
100 
100 
100 
100 
100 
100 
10C 
100 
100 
100 
100 

85 
100 
100 
100 
100 
100 

51 
100 

58 



> A minority equity of 47 percent is held in Rustless Iron & Steel Corporation and minority equities 
were held of from 15 to 33 percent in the following iron ore companies: 

Hanna Ore Mining Co. 
Castile Mining Co. 
Fortune Lake Mining Co. 
Richmond Iron Co, 
St. James Mining Co.- 

s The names of 10 foreign subsidiaries of The Armco International Corporation are not included here. 

Appendix Table 9. — Active subsidiaries of Wheeling Steel Corporation at Dec. 

SI, 1987 l 



Name 


Kind of business in which engaged 


Percent 

of 
control 


Wheeling Corrugating Co ,.- 


Manufactures and sells sheet steel and formed 
products. 


100 


Consolidated Expanded Metal Co., The 


100 


A"**rn»nn Manufacturing Co 




100 






100 


Emperor Coal Co.". 


do 


100 






100 






100 


LaBelle Steamship Co 




53 









i Minority equities are held ranging from 15 to 37 percent" in 4 iron ore companies not listed here. 



CONCENTRATION OF ECONOMIC POWER 17853 

Appendix Table 1(L — Active subsidiaries of Otis Steel Co. at Dec. 31, 1937 



Name 



Kind of business in whicn-engaged 



Percent 

of 
control 



Cuyahoga Valley Ry. Co., The... 

Beelick Knob Coal Co., The. 

Otis Steel Co. of Canada, Ltd 

Cleveland Lime & Transport Co. 



Owns and operates connecting railroad . 
Coal mining.. a 



Limestone property. 



100 
100 
100 

75 



Appendix Table 11. — Active subsidiaries of Pittsburgh Steel Co. at Dec. 31, 1937 ' 



Name 


Kind of business in which engaged 


Percent 

of 
control 






100 






100 


Pittsburgh Steel Sales Co 




100 









> Company also held minority equities in the following iron ore companies: 

Bennett Mining Co. (2256 percent). 
Mesaba-Cliffs Mining Co. (16 percent). 
Plymouth Mining Co. (10 percent). 



17854 



CONCENTRATION OF ECONOMIC POWER 



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CONCENTRATION OF ECONOMIC POWER 



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& Laughlin Steel 
d in exchange for 
ones & Laughlin 
ssor) on basis of 2 
stock and 2 shares 
or 1 share of com- 
ecessor company, 
jnes & Laughlin 

nr deductions 








00 


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ipital stock, Jones 
Corporation, issue 
capital stock of J 
Steel Co. (predece: 
shares of preferred 
of common stock f 
mon stock of pred 
apital stock of Ji 
Steel Co., retired, 
ther net additions 

Surplus end of 






ost of goods sold... 
istribution and a 

expenses -. 

rovision for depr 


Total operatin 
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2 

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interest 3 . 





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CONCENTRATION OF ECONOMIC POWER 



17867 



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Jones & Laughton 
ation, issued in ex- 
pital stock of Jones 
Steel Co. (prede- 
asis of 2 shares of 
ck and 2 shares of 
ck for 1 share of 
ck of predecessor 

f Jones & Laughiin 

ired 

tions or deductions. 


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.u o)dft ooP i or" 




5 x 

— CS 
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£ 2 


S-2 

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"3, 
g 


Total., 
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Part IV 

INVESTMENTS, PROFITS, AND RATES OF RETURN 
FOR MANUFACTURERS OF FARM IMPLE- 
MENTS AND MACHINES 



17897 



SCHEDULE OF TABLES 

TEXT TABLES 

Page 

1. Summary of investments, profits, and rates of return on the stock- 

holders' investment and the total investment for all farm-machinery 
manufacturers for which the information was available, 1913-37 17903 

2. Comparison of rates of return on total investment for the principal 

long-line farm-machinery manufacturers, and for all other short-line 
farm-machinery manufacturers, 1913-37 17905 

3. Comparison of rates of return on total investment for each of the prin- 

cipal long-line farm-machinery manufacturers, 1913-37 17908 

4. Costs, expenses, and profits or losses per dollar of net sales applicable to 

the entire business for all farm-machinery manufacturers for which 

the data are available, 1927-36 17911 

5. Costs, expenses, and profits or losses per dollar of net sales, applicable 

to the farm-machinery business of long-line and short-line farm- 
machinery manufacturers for which the information was available 
1927-36 - --- 17912 

6. Summary of investments, profits, and rates of return for International 

Harvester Co. and subsidiaries, 1913-37 17916 

7. Summary of investments, profits, and rates of return on the United 

States farm-machinery, motor-truck, and binder-twine businesses of 
International Harvester Co., 1927-36 17918 

8. Summary of net sales, net income, dividends paid, and surplus for 

International Harvester Co. and subsidiaries, 1913-37 17918 

9. Summary of income and expenses per dollar of net sales for Interna- 

tional Harvester Co. and subsidiaries, 1927-37 17919 

10. Net sales and margins of profits applicable to various classes of sales 

applicable to the United States farm-machinery, motor-truck and 
binder-twine businesses of International Harvester Co. for the years 

1929, 1932, 1933, 1935, and 1936 17920 

11. Summary of investments, profits, and rates of return for Deere & Co. 

and subsidiaries, 1913-37 17922 

12. Summary of net sales, net income, dividends, and surplus for Deere & 

Co. and subsidiaries, 1913-37 17924 

13. Summary of income and expenses per dollar of net sales for Deere & Co. 

and subsidiaries, 1927-37 17925 

14. Summary of investments, profits, and rates of return for Allis-Chalmers 

Manufacturing Co., 1927-37 -. 17927 

15. Summary of income and expenses per dollar of net sales for Allis- 

Chalmers Manufacturing Co., 1927-37 - 17928 

16. Net sales and margins of profits applicable to the farm-implement and 

tractor division of Allis-Chalmers Manufacturing Co. for the years 

1930, 1932, 1933, 1935, and 1936 17930 

17. Summary of investments, profits, and rates of return for J. I. Case Co., 

1927-37 : 17931 

18. Summary of net sales, net income, dividends paid, and surplus for J. I. 

Case Co., 1919-37 17932 

19. Summary of income and expenses per dollar of net sales for J. I. Case 

Co., 1927-37 , 17933 

20. Summary of investments, profits, and rates of return for Minneapolis- 

Moline Power Implement Co., 1929-37 17937 

21. Summary of investments, profits, and rates of return for B. F. Avery & 

Sons Co., 1927-36 17940 

22. Summary of investments, profits, and rates of return for Oliver Farm 

Equipment Co., 1929-37 17942 

23. Summary of investments, profits, and rates of return for the Massey- 

Harris Co., 1927-36 17945 

24. Total salaries and other compensation paid to officers of principal cor- 

porations engaged in manufacturing farm implements and machines, 
1927-36 17946 

17899 
124491— 41— pt. 31 20 



17900 CONCENTRATION OF ECONOMIC POWER 

Page 

25. Number of officers and average total compensation paid to officers of 

principal corporations engaged in manufacturing farm implements 

and machines, 1927-36 ' 17947 

26. Salaries and other compensation paid to officers of International Har- 

vester Co., 1927-36 17949 

27. Salaries and other compensation paid to officers of Deere & Co., 

1927-36 17953 

28. Salaries and other compensation paid to officers of Allis-Chalmers 

Manufacturing Co., 1927-36 J 17954 

29. Salaries paid to officers of Minneapolis- Moline Power Implement Co., 

1929-36 - ^ 17956 

30. Salaries and other compensation paid to officers of Oliver Farm Equip- 

ment Co., 1929-36 17957 

31. Salaries paid to officers of the Massey-Harris Co., 1927-36 . 17958 

32. Salaries paid to officers of Caterpillar Tractor Co., 1927-36 17959 

33. Salaries and other compensation paid to officers of J. I. Case Co., 

1927-36 - 17960 



INVESTMENTS, PROFITS, AND RATES OF RETURN FOR 
MANUFACTURERS OF FARM IMPLEMENTS AND MACHINES 

Introduction 

This report deals with the financial aspects of manufacturers of farm implements 
and machines. Information concerning investments, profits, and rates of return 
are presented for important companies in the industry for the years 1913 to 1937, 
inclusive. The information is presented with regard to the source of the mater- 
ial and extent of the industry represented, and summaries and comparisons of in- 
vestments, profits, and rates of return are made for individual companies and 
groups of companies. Rates of return are presented for the entire period for all 
companies combined for whicn the information was available, and comparisons 
are made of the returns for the full-line or long-line companies individually and 
as a group, and for short-line companies as a group. Comparisons are also made 
of the investments, sales, and operating results of individual companies, and the 
degree of concentration of the business in the hands of a relatively few companies 
is indicated. Information concerning salaries and other compensation paid to 
officers o f the principal corporations in the industry is presented for the years 1927 
to 1936, inclusive. The development and operations of each of the long-line com- 
panies is discussed separately. 

The full- or long-line companies are those who manufacture a variety of types 
and sizes of farm tillage implements, seeding and planting machines, cultivators, 
harvesting machines, farm hauling equipment, and farm power-developing ma- 
chines. The short-line manufacturers are those who manufacture implements of 
one or more of these lines but not a complete line. The long-line companies in- 
clude International Harvester Co., Deere & Co., J. I. Case Co., Allis-Chalmers 
Manufacturing Co., Oliver Farm Equipment Co., Minneapolis-Moline Power 
Implement Co., Massey-Harris Co., Inc., and B. F. Avery & Sons Co. These 
companies do the bulk of the farm-machinery business in this country. Of these. 
International Harvester Co. is by far the most important. From the standpoint 
of capital invested and volume of sales, it dominates the industry. The operations 
of this company and its closest competitor, Deere & Co., have been highly profit- 
able and their rates of return on investment were generally much higher than 
for other companies. 

Reference is made to the report of the Federal Trade Commission on the agri- 
cultural implement and machinery industry in which statements ' are made to 
the effect that International Harvester Co. and Deere & Co. have established the 
price levels for the great majority of agricultural implements and machinery; and 
that the exchange of price lists among farm-machinery manufacturers, evidence of 
dealer coercion, and the continued dominant position of International Harvester 
Co. since its organization in 1902 together with the typical monopolistic behavior 
of its business operations during the depression when there was only a relatively 
slight percentage of decline in its farm-machinery prices but a sharp percentage 
decline in its volume of production and employment as contrasted with the be- 
havior of industries known to be competitive where the percentage in the decline 
of prices was greatest and the declines in the volume of production and employ- 
ment, were less in the opinion of the Commission, and the raising of its farm- 
machinery prices in 1938 over those of 1937 in the face of profitable earnings in 
the latter year, indicate the existence of a serious monopolistic condition in the 
farm-machinery industry. 

Source of Information 

The financial data, which are the basis for the discussion of investments, profits, 
and rates of return, were obtained for the more important farm-machinery manu- 
facturers from various sources. Such information was obtained for the most im- 
portant companies for each of the years 1913 to 1937, inclusive, and for a varying 
number of years during this period for the other companies. 

1 Pp. 1037-1038. 

17901 



17902 CONCENTRATION OF ECONOMIC POWER 

The source of the information from 1913 to 1918, inclusive, was a report of the 
Federal Trade Commission on the causes of high prices of farm implements, 
while the source of data from 1927 to 1936?- inclusive, was another report of the 
Federal Trade Commission on the agricultural implement and machinery in- 
dustry. For the intervening period from 1919 to 1926, inclusive, and for the year 
1937 "the information was assembled from reports submitted by the companies in 
answer to a questionnaire, or from published reports. For the reason that the 
financial data were obtained from several sources, there are varying numbers of 
manufacturers represented in the combined statistics. For instance, during the 
earlier period, there were 26 companies for which data were assembled, and during 
the period from 1919 to 1926 the number varied from 16 to 20 companies, while 
for the period from 1927 to 1936, inclusive, the number varied from 59 to 72 com- 
panies. During the year 1937 data were obtained for only 17 companies. 

While it may appear that the number of companies for which data are assembled 
is smallf nevertheless the proportion of the industry covered is very large because 
the most, important companies are included in the combined statistics. Census 
reports issued as early as 1849 showed that 1,333 establishments manufactured 
agricultural implements. The totjal number of establishments decreased steadily, 
reaching a low of 170 intl933. ,, : 

While- there are considerably more companies listed -by the census as farm- 
machinery manufacturers than *are included in this report, the total volume of 
business of those companies . not included was relatively small. The farm- 
machinery manufacturers for which information is presented herein represent a 
substantial proportion of the industry. This is indicated by the fact that during 
1914 the companies covered accounted for 93 percent of the total value of farm 
machinery produced. In 1936 the sales of the companies covered represented 
over 95 percent of the total domestic and export sales of farm machinery as 
reported to the Census. 

Rates of Return fob all Companies Combined 

The investments and profits of the farm-machinery manufacturers are cor- 
related and expressed in rates of return based Upon the actual investment after 
deducting all appreciation, goodwill, and other intangibles insofar as could be 
determined. 

Table 1 which follows, summarizes the investments, profits, and rates of return 
for each of the years 1913 to 1927, inclusive, for all companies combined for which 
the information was available. Rates of return have been computed on the basis 
of the stockholder's investment and the total investment. 

The stockholder's investment consists of the capital stocks outstanding, sur- 
plus, surplus reserves, and reserves for Federal income and profits taxes. The 
total investment includes the stockholder's investment plus borrowed funds. 
The investments- were averaged at the beginning and end of each year, except for 
borrowed funds, other than long-torm debt, which generally were averaged 
monthly. 

The profits used in computing rates of return on the stockholder's, investment 
represent the net income from all sources after deducting all costs and expense 
of doing business, but before deducting provisions for Federal income and profits 
taxes. The net income, before deducting interest on borrowed funds and provi- 
sions for Federal income and profits taxes, was used in computing rates of return 
on the total investment. 



CONCENTRATION OF ECONOMIC POWER 



17903 



Table 1. — Summary of investments, profits, and rates of return on the stockholders' 
investment and the total investment for all farm-machinery manufacturers for which 
the information was available, 1913-87 





Number 
of com- 
panies 


Average Investment > 


Net profits* applicable 
to— 


Rates of return 
on- 


Year 


Stock- 
holders' 


Total 


Stock- 
holders' 
invest- 
ment 


Total 
invest- 
ment 


Stock- 
holders' 
invest- 
ment 


Total 
invest- 
ment 


1913 


26 
26 
26 
26 
26 
22 
16 
16 
18 
19 
19 
19 
19 
20 
59 
63 
67 
79 
70 
71 
71 
72 
71 
70 
17 


$293, 234, 875 
305, 495, 437 
309,901,895 
319, 705, 153 
340, 252, 108 
368, 634, 304 
366, 879, 066 
374, 259, 342 
365, 415, 102 
342, 840, 846 
333, 386, 678 
333, 522, 358 
344, 990, 404 
367, 802, 126 
498, 691, 014 
540, 279, 861 
670, 188, 640 
712, 398, 516 
690, 642, 596 
635, 828, 234 
592, 966, 495 
578, 725, 500 
595, 551, 402 
645, 307, 508 
589, 394, 055 


$367, 546, 631 
402, 529, 421 
408, 319, 226 
395, 758, 408 
392, 817, 068 
407, 697, 335 
372, 777, 929 
380, 082, 840 
378, 262, 881 
359, 465, 699 
348, 945, 831 
347, 887, 932 
354, 667, 518 
373, 618, 801 
530, 254, 755 
579, 619, 078 
732, 287, 183 
803, 188, 443 
766,975,913 
703, 469, 977 
647, 705, 672 
622, 039, 065 
639, 772, 166 
691, 367, 517 
620, 352, 685 


$28. 861, 469 

18, 349, 227 

22, 050, 849 

34, 983, 632 

56, 027, 757 

68, 101, 587 

39, 449, 053 

40, 885, 449 

3 1, 648, 800 

3 2, 680, 772 

16, 977, 361 

21, 146, 343 

43, 058, 000 

56, 844, 438 

74, 500, 659 

96, 263, 457 

116,864,992 

63, 681, 402 

3 4, 268, 155 

3 35,387,302 

3 14, 346, 551 

20, 303, 990 

67, 297, 098 

* 96, 692, 480 

•92,957,763 


$34, 700, 776 
24, 799, 691 
26, 849, 980 
38,211,052 
58, 790, 767 
71, 625, 663 
39,962,117 
41, 350, 001 
3 388. 887 
3 1, 408, 095 
18, 301, 787 
22, 283, 874 
43, 430, 311 
56, 864. 965 
76, 235, 383 
98, 490, 343 

120, 514, 779 

68, 445, 282 

3 134, 894 

3 31,824,610 

3 11,655,712 
22, 275, 245 
68, 896, 288 

4 98, 143,887 
•93,870,038 


Percent 

9.84 

6.01 

7.12 

10.94 

16.47 

18.47 

10.75 

10.92 

1 .45 

3.78 

5.09 

6.34 

12.48 

15.46 

14.94 

17.82 

17.44 

8.94 

3 .62 

3 5.57 

3 2.42 

3.51 

11.30 

* 14. 98 

• 15. 77 


Percent 
9.44 


1914 


6. 16 


1915 


6.58 


1916 


9.66 


1917 - 


14.97 


1918 


17.57 


1919 


10.72 


1920 


10.88 


1921 


3 .09 


1922 


• .39 


1923 


5.24 


1924 


6.41 


1925 .. 


12.25 


1926 


15.22 


1927 


14.38 


1928 _ 


16.99 


1929 


16.46 


1930 


8.52 


1931 


3.02 


1932... 


3 4.52 


1933 


3 1.80 


1934 


3.58 


1935 


10.77 


1936 


1 14.20 


1937 


« 15. 13 







1 Investments were averaged at beginning and end of year, except in some years borrowed funds were 
averaged monthly, after deducting appreciation and intangibles. 
1 Profits are before provisions for Federal income and profits taxes. 

* Loss. 

* For 1 company, the profits for 1936 were for 11 months only because of a change in fiscal closing dates. 

' For 2 companies, the profits for 1937 were for 10 months only because of change from calendar to fiscal 
year basis. 

The table shows that the number of companies whose financial data were com- 
bined to obtain the rates of return for the years 1913 to 1937, inclusive, varied 
from 16 to 72. However, it should be noted that the more important companies 
were included for the full period, or for each of the years for which they were in 
operation. For instance, International Harvester Co. and Deere & Co. were in 
operation for the entire period, and the data for these companies are included 
for each year. Some of the companies for which information was obtained for 
the earlier years discontinued operations or were consolidated or merged with 
other companies whose data are presented for the later period. Also, other com- 
panies began operations during the period, and data are presented for those 
companies for the period for which they were available. 

The table shows that the rates of return on both bases of investment fluctuated 
widely throughout the 25-year period. For example, the rate of return on the 
total investment for all companies combined was 9.44 percent in 1913. It was 
less in 1914 and 1915, and during the years 1916-18, increased to 17.57 percent, 
the highest rate of return for any year throughout the period. The years 1921 
and 1922 and the years 1931, 1932, and 1933 were unprofitable. Profits ranging 
from 12.25 percent to 16.99 percent were earned during the years 1925-28, and 
during the years 1935, 1936, and 1937 rates of return of 10.77 percent, 14.20 
percent, and 15.13 percent, respectively, were earned on the total investment. 

It will be noted that the rates of return on the stockholder's investment were 
only slightly higher for most years than the years of return on the total investment. 
This is accounted for by the fact that the differences between the amounts of 
stockholders' investment and total investment were relatively small in each year. 
Most of the capital of the farm-machinery manufacturers was obtained from the 
issuance of stock and from the reinvestment of earnings. For example, it was 
found that during the years 1927 to 1936, inclusive, borrowed funds accounted for 
only from 5.55 percent to 10.98 percent of the total investment. 



17904 CONCENTRATION OF ECONOMIC POWER 

Comparison of Rates of Return for Long-Line Companies and Short- 
Line Companies 

Daring the period under review, the bulk of the farm-machinery business has 
been in the hands of a few companies. In terms of capital invested and volume of 
sales these companies have dominated the industry. This concentration has 
come about, and continues to increase largely as the result of consolidations of 
competing concerns to form larger units such as International Harvester Co., 
Minneapolis- Moline Power Implement Co. and Oliver Farm Equipment Co.; 
and of the acquisition of independents by International Harvester Co., Deere & 
Co., Allis-Chalmers Manufacturing Co., and J. I. Case Co. These companies, to- 
gether with B. F. Avery & Sons Co. and the Massey-Harris Co., comprise the 
long-line manufacturers of farm implements and machines. 

The full-line or long-line manufacturers are those who manufacture farm tillage 
implements, seeding and planting machines, farm hauling equipment, and farm 
power developing machines of various types and sizes. The short-line companies 
are those who manufacture implements of one or more of these lines, but not a 
complete line. 

The influence of the long-line companies in the summary of investments, profits, 
and rates of return in the preceding table for all companies combined is indicated 
by the fact that during the years 1913- 18 their combined investments, or those -of 
their predecessor companies, averaged 85.13 percent of the total for all companies; 
for the years 1919-26 their investments averaged 93.29 percent of the total; or 
the years 1927-36 their investments averaged 87.02 percent of the total; and for 
the year 1937 their combined investments averaged 98.15 percent of the total. 
If the investment of one large company, namely, Caterpillar Tractor Co., is 
eliminated from the comparison for the years 1927-36 for the reason that much of 
its investment is devoted to the manufacture of products other than those for 
agricultural purposes, the combined investments of the long-line companies 
would average 92.09 percent of the total for all companies, excluding this company. 

The following table 2 compares the annual rates of return for the principal long- 
line companies combined and for the short-tine companies combined for the years 
1913 to 1937, inclusive. 



CONCENTRATION OF ECONOMIC POWER 



17905 



Table 2. — Comparison of rales of return on total investment for the principal long- 
line farm- machinery manufacturers, and for all other l short-line farm-machinery 
manufacturers, 1913-37 





Year 


Number of farm-machinery companies 
combined 


Rates of return on total investment 




Principal 
long-line 
manufac- 
turers 


All other ' 
short-line 
manufac- 
turers 


All farm- 
machinery 
manufactur- 
ers combined 


Principal 
long-line 
manufac- 
turers ' 


All other i 
short-line 
manufac- 
turers 


All farm- 
machinery 
manufactur- 
ers combined 


1913 


5 
5 
5 
5 
5 
5 


21 
21 
21 
21 
21 
17 


26 
26 
26 
26 
26 
22 


Percent 
10.09 
6.62 
7.30 
10.32 
15.72 
16.92 


Percent 
6.06 
3.54 
2.46 
5.90 
10.60 
21.75 


Percent 

9.44 


1914 ... 


6.10 


1915 


6. 5K 


1916 


9.66 


1917 . 


14.97 


1918 


17.57 




Annual average, 
1913-18 












11.18 


8.17 


10.74 














1919. 


5 
5 
5 
5 
5 
5 
5 
5 


11 
11 
13 
14 
14 
14 
14 
15 


16 
16 
18 
19 
19 
19 
19 
20 


10.43 
11.14 
.61 
3.07 
5.12 
6.47 
12.56 
15.61 


14.90 
7.30 
3 9.45 
3 4.90 
7.01 
5.49 
7.87 
9.84 


10.72 


1920 


10.88 


1921. 


3.09 


1922 _ 


3.39 


1923 -- 


5.24 


1924 


6.41 


1925 


12.25 


1926 


15.22 




Annual average, 
1919-26 












7.77 


4.61 


7.56 














1927 


6 

6 
8 
8 
8 
8 
8 
8 
8 
8 


52 
56 
58 
60 
61 
62 
62 
63 
62 
61 


59 
63 
67 
69 
70 
71 
71 
72 
71 
71 


14.55 
17.02 
16.23 

8.26 

.01 

3 4.28 

3 2.04 

3.11 

10.54 

* 13. 56 


4.59 

7.09 

6.30 

1.01 

'4.77 

3 8.00 

3 2.58 

2.14 

5.57 

8.71 


14.38 


1928 


16.99 


1929 --- 


16.46 


1930... ._ 


8.52 


1931. . 


3.02 


1932.-- 


3 4.52 


1933 




3 1.80 


1934. 




3.58 


1935 


10.77 


1936.-. 


14.20 




Annual average, 
1927-36 . 












7.40 


1.78 


7.51 














1937 


6 


11 


17 


« 15. 10 


« 16. 73 


15.13 




Annual average, 
1913-37- 












7.69 


4.57 


8. 10 















' All other short-line farm-machinery manufacturers included all companies for which data were available 
other than those companies included as long-line manufacturers and other than Caterpillar Tractor Co., 
1927 36, inclusive, which is included in the total but is not included either as a short-line or lone-line manu- 
facturer for the reason that its size and type of products manufactureddistorted the figures for the individual 
classes of farm-machinery manufacturers. 

'The principal long-line manufacturers included are, as follows International Harvester Co.. 1913-37; 
Deere & Co., 1913-37, Emerson-Brantingham Co., 1913-26; Moline Plow Co., 1913-18; Allis-Chalmers 
Manufacturing Co., 1913-37; J. I. Case Co., 1919-37; Oliver Farm Equipment Co., 1929-37; Minneapolis- 
Moline Power Implement Co., 1929-37: the Massey-Harris Co., 1927-36; and B. F. Avery * Sons Co., 
1913-36. 

3 Loss. 

' For 1 company, namely, International Harvester Co., the profits were based on 11-month? operations. 

* For 2 companies, J. I. Case Co. and Oliver Farm Equipment Co., the profits were from 10-months 
operations. 

• Includes New Idea, Inc., which had a rate of return of 30.49 percent while all other short-line companies 
except N'ew Idea, Inc., had a rate of return of 11.15 percent. 



17906 



CONCENTRATION OF ECONOMIC POWER 



Table 2 shows that for the entire period from 1913 to 1937, inclusive, the an- 
nual average rate of return on the total investment for the long-line manufacturers 
combined was 7.69 percent as compared with 4.57 percent for the short-line 
manufacturers combined. For the years 1913-18, the rates of return averaged 11.18 
percent for the long-line companies as compared with 8.17 percent for the short- 
line companies. For the years 1919-26, the annual returns were less, averaging 
7.77 percent for the long-line companies and 4.61 percent for the short-line 
companies. For the years 1927-36, the returns averaged 7 40 percent for the 
long-line companies and 1,78 percent for the short-line companies. For the year 
1937 the returns averaged 15.10 percent for the long-line companies and 16.73 
percent for the short-line companies. The rate of return for the short-line manu- 
facturers is materially influenced during this year by the profits of one company, 
namely, New Idea, Inc., which had investments of $3,304,053 and profits of 
$1,007,269, resulting in a rate of return of 30.49 percent for the year 1937. Thus, 
excluding New Idea, the other 10 short-line manufacturers combined, with invest- 
ments of $8,144,673 and profits of $908,502 and a rate of return of only 11.15 
percent, which was less than the average rate of return for the long-line companies. 

It will be noted that the average rates of return for all companies combined 
were higher for the entire period and for the years 1927-36 than the average re- 
turns for either of the groups of long-line or short-line companies. This is ac- 
counted for by the inclusion in the combined figures for all companies of the 
investments and profits of Caterpillar Tractor Co. which were not used in com- 
puting the rates of return for each group separately. Much of this company's 
business is devoted to the manufacture and sale of road machinery and industrial 
tractors. Therefore, to have included the data for this company with either 
group would have distorted the comparisons. This company's operations were 
highly profitable, averaging 18 percent on an average total investment of $37,- 
538,8»2 for the years 1927-36. 

For a number of these companies, including Caterpillar Tractor Co., Allis- 
Chalmers Manufacturing Co. and others, the manufacturing business other than 
the 1 arm-machinery business could not be segregated as to investments and 
profits for the purpose of showing rates of return on the farm-machinery business 
only. However, for a number of companies the investments, profits, and rates of 
return applicable to the farm-machinery business are available. The following 
tabulation shows a comparison of rates of return on the total investment in the 
farm-machinery business for long-line and short-line manufacturers for the years 
1927 to 1936, inclusive. It will be noted that the rates of return for all companies 
were slightly higher on the farm-machinery business than on the total investment. 

Comparison of rates of return on the investment in the farm-machinery business for 
long-line and short-line companies with the returns for both classes of companies 
combined 1927-36 





Long-line companies 


Short-line 


companies 


Total 


Year 


Number of 
companies 


Rate of 
return 


Number of 
companies 


Rate of 
return 


Number of 
companies 


Rate of 
return 


1927 


5 
5 
7 
7 
7 
7 
7 
7 
7 
7 


Percent 
16.12 
20.03 
18.41 

9.14 

.40 

' 5.71 

13.06 

3.43 
12.31 
15.62 


47 
50 
52 
54 
55 
56 
56 
57 
56 
55 


Percent 
3.58 
7.41 
6.35 
1.37 

16.28 
i 10.68 

M.18 
1.79 
6.01 
8.57 


52 
65 
69 
61 
62 
63 
63 
64 
63 
62 


Percent 
14.98 


1928 


18.90 


1929 .- 


17.52 


1930 


8.52 


1931 


i.09 


1932 


i 6.07 


1933 


> 3.14 


1934 


3.31 


1935 


11.90 


1936 -- 


15.25 










8.50 




.91 




7.98 













■ Denotes loss. 



CONCENTRATION OF ECONOMIC POWER 



17907 



This comparison of rates of returns for long-line and short-line companies 
indicates that from the farm-machinery business only, the long-line companies 
were much more profitable than the short-line companies. For the 10-year period 
the rates of return on the farm-machinery business for the long-line companies 
averaged annually 8.5 percent as compared with less than 1 percent for the short- 
line companies. 

Comparison of Rates of Return of Principal Long-Line Companies 

It has been explained that the investments of the long-line companies as a group 
averaged 85.13 percent of the total for all companies during the years 1913-18, 
93.29 percent of the total for the years 1919-26, 92.09 percent for the years 1927- 
36, excluding Caterpillar Tractor Co., and 98.15 percent for the year 1937. The 
following tabulation indicates the relative importance of each of the long-line 
companies from the standpoint of size of investments. 

Comparison of ratios of total investments for the principal long-line manufacturers 
to the combined total investments 1 for various periods from 1918 to 1937, inclusive 





Annual 
average 
1913-18 


Annual 
average 
1919-26 


Annual 
average 
1927-36 


Annual 

average 

1937 




Percent 
59.79 
13.65 


Percent 
63.90 
14.61 


Percent 
55.53 
11.63 
8.09 
6.57 


Percent 

58.76 




14.06 




12.82 


3. 1. Case Co 




7.55 
5.59 


6.40 




5.54 






5.20 

2.72 

1.48 

.87 


3.89 




5.27 




2.22 








B. F. Avery & Sons Co. . 


.88 


1.64 










85.13 
14.87 


93.29 
6.71 


92.09 
7.91 


98.15 




1.85 






Total 


100.00 


100. 00 


100.00 


100.00 







i For all companies for which the information was available, except Caterpillar Tractor Co. 
» Moline Plow Co., 1913-18. 

It has been shown that the long-line manufacturers as a group generally had 
higher rates of return than the short-line manufacturers. It is significant that of 
the long-line manufacturers, the two most important companies, namely, Inter- 
national Harvester Co. and Deere & Co., whose operations extended throughout 
the period from 1913 to 1937, inclusive, had higher rates of return than any of the 
other long-line manufacturers. For instance, the rate of return on the total invest- 
ment for International Harvester Co. averaged 9.62 percent and for Deere & Co., 
11.10 percent. These rates of return compare with 6.22 percent for Allis-Chalmers 
Manufacturing Co., 6.59 percent for J. I. Case Co., 2.63 percent for Minneapolis- 
Moline Power Implement Co., and 4.26 percent for B. F. Avery & Sons Co. 
For Oliver Farm Equipment Co. and the Massey-Harris Co., the losses exceeded 
the profits for the periods covered so that the average annual rates of loss on the 
total investment were 0.55 percent for Oliver Farm Equipment Co. and 5.54 per- 
cent for the Massey-Harris Co. Comparisons of the annual rates of return based 
on the total investment for each of the principal long-line farm-machinery manu- 
facturers from 1913 to 1937, inclusive, are presented in the following table 3. 



17908 



CONCENTRATION OF ECONOMIC POWER 



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17909 



Comparisons of Sales and Operating Results 

The concentration of the business in the hands of a few farm machinery manu- 
facturers is further indicated by the volume of sales of the group of long-line com- 
panies as compared with the combined sales of all other companies for which the 
information is available. During the years 1913-18, the combined sales of all 
companies averaged $232,910,470 per annum, and ranged from $184,150,089 in 
1915 to $326,636,666 in 1918. During the years 1919-26, the annual average 
sales for all companies amounted to $255,535,094. The sales decreased from 
$341,271,658 in 1920 to $169,710,816 in 1921, and increased thereafter to $33,301,- 
277 in 1926. For the years 1927-36, the total sales averaged $387,237,715 annu- 
ally. The greatest volume of sales during this period was for the year 1929 in the 
amount of $634,400,846, decreasing thereafter to a low of $145,353,371 in 1932 and 
increasing thereafter to $521,070,464 in 1936. For the year 1937 the sales for all 
companies included in the sample amounted to $610,425,375. During these 
periods information was available on the volume of sales for a maximum of 26 
companies during 1913-18, 16 companies during 1919-26, 72 companies during 
1927-36, and 17 companies during 1937. 

During the years 1913-18, the sales of International Harvester Co. alone aver- 
aged 58.68 percent of the total sales for all companies for which the information 
was available. During the years 1919-26, this company's sales averaged 69.29 
percent of the total, and for the years 1927-36, its total net sales averaged 57.86 
percent of the total, excluding the sales of Caterpillar Tractor Co. for the reasons 
already given. In 1937 International's net sales amounted to 55.94 percent of 
the total sales for all companies included in the sample for that year. 

However, it should be borne in mind that the net sales of International Har- 
vester Co. included domestic and foreign sales of products manufactured in this 
country and abroad and large amounts for motortrucks which are used primarily 
for industrial purposes. The comparisons also include the net sales of products 
other than farm implements and machines for Allis-Chalmers Manufacturing Co. 
and for some of the larger short-line companies. The comparisons of sales, there- 
fore, are not strictly confined to the farm-machinery business of the companies. 
Because of the multiplicity of operations in some of the companies, it was not 
possible to segregate definitely the farm-machinery operations from other opera- 
tions for all years. However, a study was made of the sales of 63 companies for 
the year 1936 in order to determine as accurately as possible the sales applicable 
to the farm-machinery business only. The relative importance of the farm- 
machinery sales for each of the long-line companies is indicattd in the following 
tabulation, which compares the sales of the long-line companies individually and 
as a group, and of the short-line companies as a group for the year 1936. 



Company 



Net sales of 
farm ma- 
chinery, 1936 



Percentage of 
sales of long- 
line com- 
panies 



Percentage of 
sales of long- 
line and short- 
line com- 
panies com- 
bined 



International Harvester Co 

Deere & Co 

J. I. Case Co 

Oliver Farm Equipment Co 

Allis-Chalmers Manufacturing Co 

Minneapolis-Moline Power Implement Co 

Massey-Harris Co.-. 

B. F. Avery & Sons Co 

Total long-line companies - 

Total short-line companies 

Total 



$124, 832, 407 
64, 985, 395 
21,905,648 
18, 171, 169 
31, 440, 290 
10, 419, 474 
4, 955, 029 
2, 797, 918 



Percent 
44.66 
23.25 
7.84 
6.50 
11.25 
3.73 
1.77 
1.00 



279, 507, 330 
23, 064, 579 



302, 571, 909 



Percent 

41.26 
21.48 
7.24 
6.01 
10.39 
3.44 
1.64 
.92 



92.38 
7.62 



17910 



CONCENTRATION OF ECONOMIC POWER 



The figures for International Harvester Co. do not include its sales of motor- 
trucks and binder twine, although these products are used on the farm; a con- 
siderable portion of its sales are for industrial- use primarily. Since this company 
is the only one for which the figures are submitted who manufactures these 
products, its sales of motortrucks and binder twine were not included in order to 
afford a better comparison of the farm-machinery sales of all companies. If tht 
sales of these products were included, International's sales would represent 56.42 
percent of the total for the long-line companies and 52.99 percent of the total for 
all companies, instead of 44.66 and 41.26 percent, respectively, as shown in the