STUDIES IN SECURITIES 
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Air Reduction Co. 
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The Air Reduction Co. now making its record for the second 
decade of its corporate life seems established on an annual earning 
power basis of well over $20 a share available for dividends and 
depreciation. Record in the ten years ended 1925, of $94 a share 
aggregate net of which $41 a share was charged off for deprecia- 
tion of plants and amortization of patents, $30 paid in dividends, 
and $23 surplus kept in the property, laid a splendid foundation. 
In 1926, the first year of its second decade, Air Reduction Co. 
earned $20 a share after expenses and taxes, of which $9 was 
charged off for reserves, indicating as yet no let-down in the 
management’s obviously liberal depreciation policy. It is known 
depreciation on property is charged off at annual rates ranging 
from 2% to 25% and amortization of patents in sums computed 
to entirely provide for them by expiration. Thus as of December 
31, 1926 plants were carried net at $6,544,000 after reserves of 
$6,889,000, and patents at $588,000 after reserves of $1,988,000. 
Clearly the reported earnings for stockholders have been soundly 
arrived at after such liberal charge-offs, even admitting the tech- 
nical nature of the company’s business. An eminent chemist and 
corporate executive once said: ‘‘You must remember that a hoary 
bearded professor in his laboratory with a test tube in hand may 
wipe out a million plant investment;’’ and Air Reduction man- 
agement have apparently the same idea. The depreciation policy 
has been an outstanding feature of this company. 
With plants in over 30 cities and distributing its products from 
150 warehouses throughout the country, Air Reduction manu- 
factures and sells oxygen, acetylene, nitrogen and other gases, 
carbide, and oxy-acetylene cutting and welding equipment used 
principally by steel manufacturers, foundries, railroads, shipyards, 
automobile makers and repair shops. Additions and acquisitions 
(made largely from earnings) have resulted in a well-integrated, 
rounded-out, operating industrial. ‘With air one of its principal raw 
materials and its manufacturing process largely automatic, ratio 
of operating expenses to gross, at 63% in 1926, is relatively low. 
Gross business has expanded to $12,735,000 in 1926 from $1,173,000 
in 1916. Capitalization has been simplified by conversion in past 
years of bonds and preferred stock into one issue, now outstanding 
in amount of 211,655 shares of no par capital stock. 
As of December 31 last, current liabilities were $1,334,000 and 
current assets $7,520,000 (of which $2,803,000 was cash). Ex- 
cluding patents, Air Reduction stock has a sound asset value of 
$80 a share with fixed assets carried at ultra-conservative figures. 
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