New-York tribune., 1921-08-14
Status of Virginia Carolina Preferred

boSss t"sn .harrs MsrsA Of y shs
chemical preferred because Tho Tribune
had for some months recommended the
purchase OF that stock as very good in
vestment The April dividend was re-
ceved. but not any since. Looking over
corporation Is now paying dividends.
tf, neither on The common or preferred
cidedly shrunken. I'm not a hnancier.
have l!ttie time to study such matters.
put want to ask your advice as TO what
should do Shall ! sell hold on?
shall appreciate the favor much II you will
Inform me Of the present condition OF the
Virginia Carolina Chemical Company and
why dividends passed | believe The
Tribune intends TO direct its readers in
correct path. but the best laid schemes
DIR. F.. A. New
Answer-We appreciate the under
standing way in which you discuss the
Virginia. Carolina Chemical matter. 1t
is true we recommended the preferred
stock for long time, and we regret
tho passing of the dividends. For
years it was a good investment. The
1921 report, just out, recorded loss
for the company for the first time in
twenty-five years. Past experience is
usually good basis for investment
Judgments, but it is not infallible
About the same thing has happened to
those of our friends who bought Gen.
trail Leather preferred, but those are
the only two that have gone bad on US
so far. We hope that will be All So
far Is your individual problem is con-
cerncd, VIC advise you to hold your
Carolina stock, rather than to take a
loss in it, because the dividend is Gu
mulatlve and accruals bear interest;
assuming, Of course, that you can af-
ford to 90 without any income retu m on
that part of your capital which is tied
up in the stock. Our advise as to hold
ing the stock is based on study of
sncce sslvc balance sheets of the COM
pany. The comparison between the
May 81, 1920, balance sheet and May 81,
1921, us most unfavorable. The opera
year A>resulted in loss Of $13,152, 600,
and this loss was funded by the sale of
$l2, 100000 twelve-year ~ per cers
sinking fund bonds. and the loss, be-
sides intereet, which amounted to ST.
48l 900, and dividends on the stock,
which amounted to $3,15o00O, were
subtracted from the surplus. Even the
sulc of the $12,50O,O00 debentures was
not sufficient 10 put working capital
into an entirely satisfactory Situation
On May 81 there was SIS, ,534 900 mate
cost or market price, whichever was
the lower. There were $14,613,000 &C
counts receivable and SCI, 1,199,0O0 bills
receivable. This compares with $24,-
214,000 accounts receivable and SILL
5o2, 900 bills receivable at the end of
the 1920 fiscal year. In other words,
during the year the company con-
verted something less than half Of the
accounts into bills receivable, but col
lectlons were not sufficient to- make any
gain on the total of rcceivaNles. At
the end Of the 1921 fiscal year there
was $7,409, 900 cash on hand, comparing
with sa,46s 900 at the beginning of the
year. Thus the sale of S12,50O,ONO de-
benturcs had barely preserved the cash
position of the company. 1t had, how
ever. prevented the current liabilities
from running up much over May "a,
1920, figures. On that date there waA
$22 ,507,00 bills payable and s5,O22, 900
accounts payable, a total of S25 529 900. !
On May 81, 1921. there was $27, 1922, 900
bills payable and S1,611 900 accounts
payable, total of S29 ,033, 900 The
apparent necessity Of giving paper to
cover accounts payable is. presumably,
sign Of pressure brought to bear by
standing this unfavorablc comparison
the 1921 balance sheet, when taken in
connection with thc past record Of the
company, does not. in our opinion. war
rant selling the stock at a large loss
ii you can afford to forcgo dividends
and take certain speculative risk. In
1918 the company was about to face
year Of severe dcpressi It's bal /
ancc sheet, as Of May 81, shows sS,3io,
600 materials and supplies on hand a
total of S1S,834 900 rccevab blcs with
SO, ,023, 900 bills payable and sl0o3, 900
accounts payable. and there was only /
s?,876,0 900 cash on hands In other
words, the relation of bills payable to
total rccevabes was not so very much
worse on May 81, 1921, than It was on
May 81, 1919, and the bookkeeping sur
plus OF the company was almost the
same IN 1918 as it was in 1921, after
the losses Of the previous year had
been written of With this compare
lively unfavorable financial position
the company was able to get through
i91415 and to build up large su>
rlus in the years that followed up II
1920. Of course, the final outcome will |
depend on how long the depression in
the fertilizer business lasts. With
fairly quick resumption Of demand for
lis products and an Improvement in
collections from its customers it would |
appear that the company has good
prospect OF getting back onto sound
basis.