Rosy Box Score

How has U.S. business weathered the dislocations of rearmament and the impact of higher taxes? To find out, businessmen kept their eyes cocked anxiously on 1951's first-quarter earnings reports. Last week, as report after report told of alltime record sales and profits, it was clear that business had outperformed its expectations. Out of 176 companies which have reported so far, 135 had chalked up bigger net profits than in the first quarter of 1950.

Tax Bug's Bite. Nevertheless, the excess profits tax, added to a boost in thd corporate income tax, took such huge bites that even a tremendous increase in sales brought only a small rise in net profits. In the booming chemical industry, for example, Union Carbide & Carbon boosted sales 40% but profits rose only 6%, to $29,178,685. Many another company increased its gross but profits dropped. General Electric, with a new high in sales and pre-tax profits, wound up with a 5% drop in its net (to $34,996,395). International Business Machines did the same: its net slid from $7,669,736 to $7,218,635. And industries such as television, which were hit by a sales slump, were also down. Admiral's net dropped from $4,158,449 to $2,403,344.

The larger steel companies were hit even harder by taxes. Republic's net slipped from $16,621,334 to $12,271,377, Armco's from $11,894,130 to $10,443,239. Yet the smaller steel companies, with a more favorable tax base, turned in some impressive rises. Wheeling Steel's net shot up from $2,998,696 to $5,043,744, and Barium Steel turned a $95,836 loss into a $1,875,509 profit.

Rearmament's Bulge. Rearmament's demands had also perked up many an industry, notably aluminum. Reynolds Metals net jumped from $1,454,257 to $5,696,031, a 300% rise. Big American Woolen Co., which has either a feast or a famine, watched its profits soar from a moth-eaten $230,000 to $1,095,000. And the once-sputtering airlines were purring like jets: American turned a $1,331,285 loss into a $2,914,610 profit. The building boom, nipped by restrictions on private housing, had merely shifted its base to the bigger boom of expanding defense production. As a result, Johns-Manville managed to boost its net from $3,928,551 in 1950-3 first quarter to $6,292,995 this year, a 59% gain.

Some businessmen feared that taxes, slow-moving inventories (see State of Business) and the step-up in arms production might make first-quarter profits the best in 1951. Said G.E.'s President Ralph J. Cordiner: "Our profit [for the year] may well be less than in 1950." But G.E.'s chief competitor, Westinghouse, after paying $26,688,550 for taxes v. $7,860,533 in 1950, still managed to boost its net from $11,890,377 to $16,692,898. Westinghouse President Gwilym A. Price took a cocky attitude toward the future. He said that Westinghouse would boost its sales fast enough to match, or better, 1950-5 income.

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