Arizona republican., 1921-01-09
Rec Statement ShoUs Nearly Ten Million
 Dollars Surplus

That the Rec financial statement is- sued the other day showing sur plus in the treasury of nearly ten mill Hon dollars-se, ,747, ,309.93, to be exact with a capitalization of only $10.000,- - 900 authorized, ol which only $6,9S7,- 250 worth of shares have been issued, has flooded General Manager Richard H. Scott with requests for an explana- ion of how 1t is done
 "The 39,00O.0O0 surplus does not rep resent one years profits, but the earn ings accumulated and remaining in the business over a period of years.
 "If you divide the total volume of business which was $43, ,3S1, ,000 by the net profits of the past year. which were $4,622, ,S00.69, you will find there is only slightly over a 10 per cent margin to the manufacturer on the Rec products Certainly that is not profiteering and 1t will come as a surprise to many ! buyers of motor cars that the margin of profit is so small.
 What our surplus and capital real ly represent is our idea of properly financing our business.
 We are not addicted to the habit
 of depicting the treasury in order to pay frequent and excessive dividends
 due primarily to that other habit of
 lingering the stock ticker tape with the right hand, while with the left hand you try to run the factory.
 we Rec folk have no interest in the
 readings of the ticker tape. "The last Rec treasury stock that
 was ever offered for sale was disposed of sixteen years ago. in 1904, when the , Rec Motor Car company was organ ized. Nothing has been done to change or to attempt to change the control "No one here covets the control; our ? ambitions are all in the one direction r We are manufacturers, not promoters 5 That policy leaves us free to per-
 form the one function for which the l company was organized. namely, the g making and selling of good motor ve- n hicles.
 Tt is surprising how much easier y it is to conduct a business when you . have a conviction that there is only k one legitimate source for profits, anC ' that, from the economical manufac' q ture and proper merchandising of the 2 product
 e ''You soon find that you best con S sider the interests of the shareholder - by first considering the interest of tn e customers.
 d "A business such as that can alwayi
 carry it's own financial load. f "A process all too prevalent fin in ! 3, ital stock immediately following brie II period of apparent success; then riflin n the till to pay dividends on that whil e again expanding the capitalization. d Carrying an excessive load of wa IS ter with the ever present necessit
 of paying dividends on that excessiv
 capitalization, the business soon find
 itself deprived of credit and of cours
 lacking funds sufficient to operat'
 whenever the going gets bad.
 No concern has a right to depen always on borrowed money-nor O iL repeated re-financing by the sale ( stock
 le of a concern cannot grow by whs it feeds upon and develop from 1; Di own earnings after having first bee 5 reasonably equipped with capital. the ~ there is something wrong with the man
 agement.
 D. "The most baneful effect of frequer
 changes of control is the change T policy and personnel that results frol u such changes. -n with the experienced manager go,
 his corps of experienced heutenan le and changes are made everywhere. e Whether or not the mistakes al au due to the changes in personnel O tn whether the changes are due to mil lu takes. of course. I cannot tell.
 we consider a man more valuab IT. the longer he has been with us ct There is a great temptation in tim lis like those we have just passed throuE ce to put on steam and try to make q he the automobiles in the world. he '7Ve found no difficulty in resistiI n- that temptation.
 I'd "In our long experience we had pass is through similar conditions and we
 able to discuss probabilities and wa
 and means for meeting them intel
 gently