STUDIES IN SECURITIES

Earned Increase
per Share in Reserves Total
1022.5 coun 35.60 $4.40 $10.00
BLE 220 2.00 4.30
{920%. ..-..... 6.30 unavailable 6.30

*Equivalents also of $2.10 per share in 1921 and $5 in 1920 were charged
off for inventory and security losses. Figures for 1920 are of the five
companies consolidating December 31.

In aggregate Allied Chemical in six years earned gross income
after depreciation and renewals of $134,667,000, of which $14,045,-000
 was paid in federal taxes, $4,714,000 was charged off in 1921
for inventory and security losses, $69,545,000 was paid in preferred
and common dividends, and $35,545,000 was carried to surplus.
During this period as indicated above there was a net increase in
reserves (exclusive of tax reserve) of $41,971,000. The six year
net increases in surplus and reserves total $77,515.000 or $35.50
a share on the common stock.
The capitalization of Allied Chemical consists of $39,284,900 79%
preferred stock (a substantial part of which may be among the
$80,835,000 marketable securities in the treasury) and 2,178,109
shares of common stock, no par value. The reserves of this company
 are equivalent to $53 a share on the common. Excluding
reserves entirely and $21,306,000 goodwill, the book value of the
common stock figures $69.50 a share.
Let us examine the integrity of this $69.50 a share book value.
The $144,029,000 current assets provide for the entire outside liabilities
 of $13,557,000, par for the $39,284,900 preferred stock (retirable
 price 120) and leave $91,187,000 for the common stock or
$42 a share toward the $69.50 book value above given. Assuming
the fairness of $7,211,000 ‘‘investments’’ and ‘‘deferred assets,’’
this leaves the plant account for discussion as the remaining
tangible asset.

Allied Chemical’s plant account is just as interesting as its current
 asset position. The plant item is carried at $165,130,000
among the assets; and the credit reserve against plant is $93,606,-000
 (of the total reserves of $115,661,000). The net value of the
property item is therefore $71,524,000.

We find that from 1920 the gross value of plants increased $23,-759,000.
 At the time of the merger in 1919-20 the net value of
the plants was given as $93,261,000 and it was officially stated that
‘““this amount represents original cost, less depreciation, and not
replacement values. About half consists of construction and acquisitions
 made before 1915.” We know that valuations of assets on
subsidiaries’ books were in no case increased in consolidation, and
half of the net value of the plant was based on costs in 1914 and
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