The Richmond Virginian. (Richmond, Va.) 1910-1920, 1913-03-03


ger for s675.000, of which 100000
was paid in notes. were valued for
purposes of consolidation, after de-
duction of this Indebtedness, at no
1 less than S7,933.000. The price paid
F by the behring's was rather more than
/ the current average value of Mesabi
leases at the time. 1t is claimed that
/ during the period that the behring's
! had owned these leases there had
/ been some increase in the estimated
tonnage of these ore properties, but
no evidence was produced to indicate
any great increase in their value.
! However, in order not to undervalue
/ them; the bureau arbitrarily allowed
/ an increase OF 100000. and also
added about 100000 expended for
! improvements. etc. This is probably
too liberal. but the resulting net
valuation is over $7.000,000 less than
that claimed by the International
Harvester company. The high valua-
tions placed on these ore properties
caused much dissatisfaction among
the combining interests themselves,
/ especially on the part of the McCor-
micks. The banking interests back
of the International Harvester COM
apny, however. had only few weeks
earlier claimed an eXtravagant value
( for ore in defending the capitalization
Z
in important litigation then uending
and they were therefore In no position
to deny excessive valuations Cor this
! Deering ore.
In several other respects the APP
praisal valuations were clearly Excess
sive. However, after deducting such
| excuses. the bureau, as Indicated,
found that the value of the physical
properties plus the working capital
covered substantially 80 per cent of
the capital stock issued. The COM
pany claimed a large value for good
will. but has not entered any good
| will value in its accounts. 1t is not
unlikely that a fair valuation for
good will would have covered the diff
ference between the original CapitaN-
zation and the tangible assets.
A much larger capitalization was at
one time contemplated For purposes
of consolidation, the fixed properties,
good win, and inventories, exclusive
Of working capital, were nominally
valued in the first instance at $132,-
10000 This figure. however, was
grossly excessive. Furthermore, the
/ subsequent appraisal value of the
physical properties (exciuding good
! WHY OF s67 600, above noted, was
/ later written down to $50, 00o, 600, In
/ this connection it may be noted that
4
$25, 555, 600 were later reduced for
! trading purposes to $1S.155, 900.
In 1907 the capital stock was re-
arranged by making $50, 900, 600 a 7
per cent preferred issue. leaving the
common stock at $50, 900 600. III
1910 $40. 600, 900 additional common
stock was issued as a stock dividend,
making the total capitalization $l4Q,
Gee 600.
The stock Of the company has been
closely held by the former interests.
i The Mccormick and Deering families
have throughout held n large ma
iority of the total stock while con-
siderable amounts have also been re-
tanned by a few other stockholders.
This fact assumes especial Importance
in view Of the pending dissolution
suit of the government against the
company
Recently, as a result Of this suit.
the company has been split into two
corporations, one of which, the Inter
national Harvester company of New
Jersey, retains the old harvesting
machine plants and related business;
the other, the international Harves-
ter corporation, takes over the new
lines and foreign business. Each of
these concerns is capitalized at $50,
000,0 If this is intended as paw
~
of the combination. in the opinion of
the bureau it is unsatisfactory.
Profits.
There has been a marked increase
in the earnings of the International
Harvester company. From a distinct
~ low rate early in It's organization
they have risen to a rather high rate
in recent years. For the entire period
1902 to 1911 the average rate of net
/ too 4
by the bureau exclusive of good
WHY, is Ia per cent. However, for
the three years 1909 TO 1911 the
average was IL 1-2 per cent. AS COM
puted by the company on capital stock
and surplus, the average for the en-
tire period is IL per cent. and for
the years 1909 to 1911, 10 IL per
cent The rate in 1911 was somewhat
less than in 1909. Returns for 1912
are not yet available.
The increase in recent years is
more significant because in certain
of the new lines. which the company
has been pushing aggressively. the
rate of return Is comparatively low.
This means that the rate of return
on some Of the older monopolized
lines has been very high. Thus, the
rate of profit for grain and grass har
vesting machines is very much higher
wagons and manure spreaders, where
the company encounters a greater de-
gree of competition; and the same
is true Of Irvine The rate on some
of the new lines, however, has been
liberal
Generally speaking, the prices OBJ
tanned by the company on foreign
sales are relatively higher than those
in the domestic market, but claims
made by the company that the net
return is invariably greater were not
sustained by its records; in some r~l7
portant instances at least the foreign
MEETINGS were lower than the domes-
tic.
Conclusion.
1t appears, therefore. that the In
rernaronal Harvester Companys posi-
ton in the industry is chiefly attribu-
table to a monopolistic combination
in the harvesting machine business
certain unfair competitive methods
and superior command of capital
Very respectfully.
z NTH COMA Mt