Statement showing capitalization, earnings, dividends, and sales by years, Swift & Co., 1896 to 1918.

81,049, 262.00 3,654, 316.00

11.91

2.45

2 Includes $10,000,000 for income-tax reserve.

3 Cash dividend of 331 per cent, amounting to $25,000,000, paid November, 1917, but new stock issued for same amount ($25,000,000), permission given to stockholders to convert cash dividend into new stock at par.

Includes $16,500,000 for income-tax reserve.

Capital stock increased $50,000,000, of which $25,000,000 represented stock dividend July, 1918, and $25,000.000 of stock sold at par June, 1918.

Includes $16,500.CCC for income-tax reserve. Balance of surplus account as stated also includes an addition to surplus balance of previous year for appraisal of properties, $36,746,000 and a deduction of $25,000,000 for a stock dividend given in July, 1918.

7 Average 23 years.

Mr. WELD. I have shown you from that table that the average profit of Swift & Co. for the last 20 years has been 2.45 cents on each dollar of sales, and 11.91 per cent on the net worth of the company. That profit has, of course, varied from year to year, and it became much larger than normal during the war years, especially 1916 and 1917, and more particularly 1917.

As I have also explained, that profit in 1917 was really a paper profit, a profit due to the increase in value of our inventories and a profit that we knew would be offset sooner or later in the general decline in prices.

I also wish to point out that that war profit of the packers-there was a similar increase in the profits of the other packers-was not out of line with what occurred in practically all other industries of the United States. There has been a very interesting study of the prewar and war profits of our leading industries made by Jean Paul Muller, a certified public accountant, in a book entitled "Financial Statistics of the Leading Industrial and Mining Companies in the United States," in which the prewar and war profits for a great many of our leading corporations are analyzed.

He groups all of the companies, outside of mining, which I have not touched, into two groups, and he shows that the profits of companies engaged in farm and household supplies for the years 1915, 1916, 1917, and 1918, the war years, increased 46 per cent over the profits of the four years before the war. All other companies he threw into a group called "Companies Engaged in Industrial, Material, and Equipment," and the increase there was 96 per cent.

From this same report by Mr. Muller, the increase in profit for the five large packers was from 6.2 per cent on investment for the four years before the war to 11.6 per cent for the four war years, showing an increase of 78 per cent.

Now, the average increase of the war profit over the prewar profit for all of the manufacturing and industrial corporations reported was 78 per cent, and that is exactly what it was for the five packing companies. In other words, the profits in the packing industry for the five large packers increased during the war as

compared with years before the war in practically the same proportion as the profits in other industries.

I also have here a compilation for certain selected industries taken from this study of financial statistics, just to give you an idea of how the profit increased in some other industries. Remember that the slaughtering and meat-packing industry increased 78 per cent. For woolen and worsted mills it increased 121 per cent for those four years as compared with the four years before the war. For sugar and sugar products, 113 per cent, as compared with 78 per cent in the packing industry. And of course there is shipbuilding, 209 per cent, as compared with 78 per cent for the packers. Railway equipment increased only 44 per cent. Paper and wood pulp increased 110 per cent over prewar profits, as compared with only 78 per cent in the packing industry. Iron and steel increased 105 per cent, as compared with 78 per cent in the packing industry.

I will ask that those figures be insterted in the record.

(The tabulations referred to are here printed in full, as follows:) Net earnings of certain leading industrial companies, grouped by industries, shown as a percentage of net worth.

Net earnings of 251 leading industrial and mining companies, shown as a

percentage of net worth.

Mr. ANDERSON. Those figures mean, I take it, that you people did not rob the Government as much as some of these other people? Mr. WELD. No; that is not a fair interpretation of them at all. Mr. TINCHER. What is the object of putting them in?

Mr. WELD. It is to show that the profit earned by the packers during the war increased only as the profit in other industries didpractically the average of all other industries.

Mr. CHAPLIN. It shows that the phenomenon of larger profits was countrywide, due to countrywide conditions.

Mr. TINCHER. That is, that profiteering was popular during the war?

Mr. CHAPLIN. No; not at all. I think that is a wrong conclusion. Mr. TINCHER. You do not like that word?

Mr. CHAPLIN. I will illustrate it in the farming line. I believe you own cattle yourself. If you start out with cattle at $100-and I presume that lots of them do and they go up to $150, you have apparently made $50. I do not think that is profiteering. That is what happened with us-largely paper profit, until we cash in. Mr. TINCHER. Why do you call that a paper profit?

Mr. CHAPLIN. It is a paper profit until you cash in, because the prices are liable to go down and you will lose what you thought you had made.

Mr. ANDERSON. Well, with my small financial ability-a Congressman does not have much money to spend-I do not quite understand how you got this paper profit over into the profit column.

the

Mr. CHAPLIN. I will explain to you.

Mr. ANDERSON. I wish you would.

Mr. CHAPLIN. Suppose you have a cow. At the beginning of year you say she is worth $100; at the end of the year you say she is worth $150; and you say, "Gee, I made $50 on that cow." Mr. ANDERSON. But in that case I would have that $50 in the cow and not in my profit and loss account.

Mr. CHAPLIN. Yes, sir; and then you make the statement, "Profit on cow, $50," in your surplus account. Now, that will not buy you any shoes or anything else until you sell the cow. If you hold the cow until it goes back to $100 the paper profit that you made has disappeared.

Mr. MCLAUGHLIN of Michigan. Is that the basis on which you make your inventory?

Mr. CHAPLIN. Yes, sir; we make our inventory on the market.

Mr. MCLAUGHLIN of Michigan. Did you apply that rule to all your property, or only the finished goods and the other goods on hand? Did you apply that in estimating the value of what may be called your fixed property?

Mr. CHAPLIN. No, sir; what I am talking about, this paper profit, has to do with our merchandise.

Mr. ANDERSON. Now, then, Mr. Chaplin, you give this cow illustration. You show in your statement for 1918-I am only going into this again for my own personal benefit-earnings from the slaughter of cattle, calves, sheep, and hogs, $18,786,696. Was any of that the kind of profit you refer to?

Mr. CHAPLIN. Yes, sir; most of it. We kept renewing our stocks all the time at higher and higher prices.