The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1913-05-13
STATEMENT ISSUED
ON RUMtLY MATTER
Difficulty Was Result of a
Too Rapid Expansion of
the Business.
(Nationa1 News Association

(Nationa1 News Association)
NEW YORK, May 13.-William Sal
ONION e. Co, the banking house which
financed the NJ. Rumely company, yes
terday issued statement regarding
the recent reorganization of the COM
pany and the circumstances surround
ing the election of a new board of
directors and an entire new manage
ment of the properties.
The statement is as follows:
1--WE have deferred making any state
ment regarding the company until the
completion of a REIMBURSEMENT of its
management and affairs, which has
been in progress for several weeks. We
feel that investors In the securities of
the company are now entitled to a
full statement of the measures which
have been taken for the re-organiza-
ton of the management of the COM
pany and of the grounds for our be-
lief that the enterprise Is essentially
sound.
"The temporary difficulties in which
the company recently found itself were
the direct result of a too rapid ex-
pansion of it's business with an I'M
usually large amount of capital re-
quired in the agricultural implement
trade, in which credits averaging eigh-
teen months or more are habitually
given.
THE combined sales for 1911 of the
constituent companies (other than the
Northwest Thresher company, acquir-
ed late in 1922 were reported to be
about $4,000, 900; in 1912 about ST.
100000. AS a result of this rapid in
crease the company carried over into
1918 greatly increased current assets,
but also large floating debt.
AT various times during 1912 esti-
mates and reports had been made by
the company as to- the earnings for
the year, and we had ourselves en-
ployed independent certified public ac-
countants to check the company's es-
Inmates and generally examine the
condition of it's affairs. The reports
made to us in October, 1912, indicated
that earnings of at least $2,200,000 for
the year might confidently be relied
upon. AS late as December, 1912, the
company furnished a profit and loss
statement and tentative balance sheet
as of September 80, 1912, showing up
wards of So, 100000 earned for the first
nine months of the year. Feeling that
we had every reason to believe that
the business, while expanding rapidly,
was actually showing liberal profits,
we purchased in February last $10,000,-
900 of the company's two-year 6 per
cent notes, convertible into common
stock at par. We were then assured
that with the proceeds of these notes,
and moderate seasonal borrowings
from the banks, the company would
have sufficient funds to handle the vol
ume of business then contemplated.
subsequently, during the annual
audit, we were the first time led to
believe that neither We nor our &C
countants had received full or reliable
information from the officers of the
company regarding it's true manufac-
turing and financial position. We &C
cordingly arranged to have elected as
vice president in charge of finances,
John H. Gray, in whose integrity and
capacity we have implicit confidence
Mr.. Guy took office about eight weeks
ago. He found that the officers had
planned to increase the volume of the
current year to about $4,000, 900, and
that contracts for the purchase of ma
terials and other arrangements had
been made with that in view. 1t was
apparent that so great an expansion
would result in the employment of a
much larger amount of capital than
had been estimated. A reduction in
this volume to $22,000,00o was, there.
fore made.
Upon the publication on April 2 OF
the annual report, which showed the
earnings for 1912 had fallen far short
of the company's estimates, the com
pany's banks, most of whose loans had
been paid out of the proceeds. of the
sale of the S10,000.000 of two-yearnotes
became distrustful of the management
and hesitated to extend to the com
pany the usual seasonal credits, upor
which it relied to enable it to carry OF
it's business until the autumn, wher
most of it's collections are made.
I'm order that we might be in Pc
sition to deal with this emergency, We
caused a further examination to be
made with the aid of Mr.. Guy and ex
perts in the agricultural implement
business. and reached the conclusion
that, while the management had beer
improvident in its policy of rapid ex
pansion, and while the bookkeeping
prior to the administration of the pres
comptroller Cwho was appointed only
a few months ago. had been imperfect
and while much of the information
which had been furnished to us and tt
our accountants regarding the finan
cial position of the company and its
requirements was most inaccurate ant
misleading, the enterprise was essen
TALLY a sound one. We believe tina