Evening journal., 1922-02-13

stock Of the Hercules Powder Com
pany is contemplated whereby the
S14,362,095 suplus will be converted
into common stock for the benefit OF
bondholders and stockholders is set
forth in the annual report of Pres
ident r. II. Dunham OF the COM
pany's business for the calendar year
1921, made public today Mr.. Dun
ham shows net earnings Of $500, ,e64
for the year, and the common stock
dividend OF 12 per cent. was paid
although not earned during the
year. In the course OF his report he
says:
Gross assets as compared with
last year show an increase OF s6,-
100000 representing principally
plants and Good Will acquired from
the Aetna Explosive Company. Inc.
There is practically no change in the
total current assets, as the cash pay
ment to the Eetna Company sub
stantially equalled the current assets
acquired. An item OF approximately
S240,000 appears as a contingent
asset.
There has been no change dur
ing this year in the company's au-
thorized capital stock though the
issued preferred stock has increased
s2,562,OOO. principally because of the
purchase of the assets and business
of the Aetna Explosive Company.
Inc.
"The location of the former Aetna
plants is such that their acquisition
opened to your Company fields
where explosives are used in large
quantities heretofore closed to your
company because Of the relative re-
moteness of its plants. Your COM
pany's manufacturing and distribut-
ing facilities are now so favorably
located throughout the United states
that during the year your Company
has sold high explosives and black
blasting powder in practically every
State in the United States where ex-
plosives in any substantial quantities
are consumed.
The amalgamation OF the Aetna
and Hercules organizations has per-
mitted reductions in force that could
not otherwise have been accom-
plished. The result, comprising as
It does the best talent from both
panies. is stronger than was either
company before Largely as a result
Of these economies and reductions
in salaries and wages, the quarterly
statements have shown steady i'm
provement from a net deficit before
preferred dividend in the first quar-
ter to the earning in the last quar-
ter OF slight excess over the quar-
terly common dividend paid in De
cember.
"A radical adjustments OF
values of finished product and raw
material inventories and commit
ments was made last year, but there
we're further price declines during
the year, especially in Naval Stores.
As 1t has always been your com
pany's policy to supply its customers
with its products at prices consist
ent with current material and labor
/ costs, the net income has, OF course,
been reduced even further than
would normally be expected from
the reduced volume OF business en-
ioyed. Inventories OF raw materials
are now carried at current market
prices and finished products at cur
rent cost of manufacture. The
volume OF raw materials on hand
and on commitment is consistent
with current reduced volume of bus
mess.
your company's plants manufac4
ing Naval Stores-rosin, turpentine
and pine oil--closed down early in
the year with stocks sufficient to sup
ply customers reduced requirements
for several months. During Septem-
Der the Brunswick plant was put in
operation and this branch of your
cOmpany's business is now operating
practically without loss notwith-
standing the very low prevailing
prices, which are generally conceded
to be below the cost of production
by the ordinary method OF obtaining
rosin and turpentine from the living
trees. your company still retains
at the close Of 1921 a profit and loss
surplus double its outstanding com
mon capital stock, Notwithstanding
that the common dividends for the
first three quarters were paid out Of
previously accumulated surplus. Be
cause OF the conservative dividend
policy in the period OF large earn
ings during the early war years and
the accumulation OF this large sur
plus equity belonging 70 me common
stock your directors have felt that
the common dividend should be con-
tinued while the companys financial
position permitted. even though, for
a reasonable time, the current net
earnings should fail to equal such
dividends.
1T is probable that the working
capital cannot be appreciably FUR
ther reduced so that the continua-
ton Of the present common dividend
disbursement seems TO pe dependent
upon the CONTINUATION OF business on
about the same basis as the last
quarter OF the year.
"Your directors can forsee no i'm
mediate need for additional capital,
but as the surplus is now all per-
manently invested in the business,
substantial part OF il should be con-
verted into capital stock to more
truly represent the company's ac-
tual situation. 1t is also believed
that an opportunity TO exchange