IP Ai ^B W ■-: ^H lii r'' ^H ' 1^ r ^H :^-; ^M ; fi .-A- H 1 o ;::? ^^^1 < ^*-ji li"^* ^^^1 A :j3. h.>i ^1 '■C \''1 ^M '^' r^, ^^^P ';^ \ J ^H ■ E* O ^H p.^ {/; H U5 ,..J s. ■ iu:.l;a. UNIVERSITY OF CALIFORNIA AT LOS ANGELES REPORT OF THE FEDERAL TRADE COMMISSION ON WAR-TIME COSTS AND PROFITS OF SOUTHERN PINE LUMBER COMPANIES MAY 1, 1922 WASHINGTON GOVERNMENT PRINTING OFFICE 1922 o^nvERSiTY of californt:» FEDERAL TRADE COMMISSION. Nelson B. Gaskill, Chairman. Victor Murdock. John F. Nugent. Huston Thompson. J. P. YoDEB, Secretary. ADDITIONAL COPIES OF THLS PUBLICATION MAT BE PROCURED FROM THE StrPERINTENDENT OF DOCUMENTS GOVERNMENT PRINTING OFFICE WASHINGTON, D. C. AT 15 CENTS PER COPY CONTENTS. Page. Acknowledgment vm Letter of submittal , ix Summary. Cost-accounting methods xi Rates of return on investment xir Effect of appreciation on costs, investments, and profits xiii Earnings grouped according to investment Xiv Earnings grouped accoi'ding to quantity sold xiv Investment per unit of lumber produced xiv Earnings grouped according to duration of operations xv Unit costs, sales realization, and profits sTv Unit costs 'and profits according to quantities sold xvii Prices since the beginning of the war xvii Proposed current reports xviii Chapter I. — General Survey. Sec. 1. Origin and scope of the Commission's cost worls 1 Origin of the investigation 1 Scope of the Commission's war worli 1 Source of data -♦ 1 Scope of the report 2 Sec. 2. Development of the lumber industry 2 Impoi'tance of the lumber industry 2 Migration of the lumber industry 3 Decrease in lumber consumption 4 Present and future timber suppl'es 4 Concentration of timber ownership 5 Sec. 3. Relative importance of southern pine 5 Southern pine standing timber 5 Production of southern pine lumber 6 Exports of southern pine 7 Southern pine producing and distributing agencies 7 Chapter II. — Accounting Conditions, Methods, and Problems. Sec. 1. Accounting conditions 9 Conditions of lumber accounts 9 Lacli of information regarding production 10 Sec. 2. Accounting methods and problems . 11 Unit costs 11 By-product costs 12 Interest . 13 Inventories 13 Repairs and improvements 13 Depreciation 14 Stumpage 14 Two methods of handling stumpage In cost 15 Capitalization of interest in the timber account 16 Stumpage and cut-over lands 17 Carrying charges in costs 18 Sec. 3. Importance of good accounting methods 18 Chapter III. — Investments and Earnings. Sec. 1. Scope of discussion -20 Government control, 1917-18 20 Nature of investments 20 Number of companies included 21 ni IV CONTENTS. Page. Sec-. 2. Investment and earnings on investment -2 Ut'lMtrted investment and earnings for 143 identical companies 22 Hi_'li and l()\v rates for identical companies 22 Stumi>age appreciation in investment and earnings 23 Appreciation in the accounts of 57 companies 23 Fifty-seven companies grouped according to rates of return on investment 25 Appreciation in the accounts of 143 companies 26 Analysis of revised rates of return on investment 27 Rates of return on investment hy groups 27 Companies grouped according to investment 29 Proportion of investment and earnings grouped according to volume of sales 30 Sec. 3. Investment per thousand feet of lumber produced 32 Variation of investment with timber supply 32 Earnings of companies grouped according to life of operations 35 Chapter IV. — Unit Costs, Sales Realization, and Profits. Sec. 1. Cost methods and production covered 37 The problem of lumber costs 37 Discu.ssion restricted to averages 37 Number and grouping of companies 37 Production covered 38 Volume of sales 39 Average size of companies 39 Sec. 2. Unit costs, sales realization, and profits, 205 companies 40 Cost of sales, sales realization, and earnings per thousand feet board measure 40 Average costs, sales realization, and earnings 41 Interest, income and excess-profits taxes 41 High and low costs, sales realization, and profits for individual companies 42 Costs and earnings by size of companies 43 Unit production and selling costs 44 Average costs 45 High and low costs 46 Stumi)age 46 Logging : 47 ^lanufacturing 48 General and administrative expense 48 Shipping expense 49 Selling expense 49 By-products 50 Net cost to produce and sell 51 I'roportion of total production in specified cost groups 51 Proportion or" prorluction in specified ranges of stumpage cost .52 Proportion of production in specified ranges of logging costs 53 Proportion of production in specified ranges of manufacturing costs 54 Proportion of production in specified ranges of general adminis- trative, shiiiping. and selling costs 55 Graphical presentation of proportion of production in specified ranges of cost 55 Maximum costs to produce various percentages of the output 56 Sec. 3. I'nit costs, sales realization, and profits. 143 companies 56 Averagp cost of sjiles, sales realization, and profit before and aftei- revision for appreciation 58 Costs and earnings by size of companies 59 Cost of sales, sales realization, and earnings per thousand feet 61 Average unit cost of sales, sales realization, and profit 61 Unit production and selling costs by operations 62 CONTENTS. V Chapter V. — Recent Price Movements. Page. Sec. 1. Government price regulation 64 Conditions leading up to reg\ilation 64 Prices for Government cantonment stoclv 65 Prices of Virginia and Carolina pine 66 Prices for wooden-ship schedules 66 Sec. 2. Price history 67 Prices, 1913-1916 67 Prices, 1917-1921 67 Proposed current reports 70 TABLES. 1. Pi-oportion of lumber produced in different sections of the United States, 1850-1920 3 2. Quantity of merchantable southern pine timber, by States, 1920 6 3. Quantity of lumber produced in the United States, and the quantity and proportion of southern pine lumber, 1909-1920 6 4. Total investment and earnings as reported by 143 southern pine lum- ber companies, by territorial groups, 1917 and 1918 22 5. High and low percentage rates of earnings on investment as reported bv 143 southern pine lumber companies, bv territorial groups, 1917 and 1918 23 6. Investment and earnings of 57 southern pine lumber companies as reported and after revision for appreciation in investment and costs, 1917 and 1918 24 7. Percentages of production and investment, and rates of return as reported by 57 southern pine lumber companies and as revised by the Commission, by profit groups, 1917 and 1918 25 8. Comparison of rates of earnings on entire investment as reported by the companies and as revised by the Commission, 1917 and 1918^ 26 9. Percentages of prodiiction and investment and rates of return, as re- ported and as revised for 143 southern pine lumber companies, by profit groups. 1917 and 1918 28 10. Rate of return for 143 southern pine lumber companies, as revised by the Commission, by investment groups, 1917 and 1918 29 11. Percentage decrease in production and sales footages for 1918, com- pared with 1917, for 143 southern pine lumber companies, by groups, based on 1917 investment, as revised by the Commission 30 12. Percentages of total number of companies, total sales footage, total investment, and total earnings for 143 southern pine lumber com- panies, as revised by the Commission, grouped according to quan- tity of lumber sold, 1917 and 1918 31 13. Average sales footages. average investments, and earnings per thousand feet sold, and rates of return on investment for 143 southern pine lumber companies, as revised by the Commission, grouped according to quantity sold, 1917 and 1918 32 14. Investment per thousand feet board measure of lumber produced, as revised by the Commission, for 146 southern pine lumber companies In 1917, classified according to life of operations based on timber owned and stumpage cut, by territorial groups 34 15. Investment and earnings per thousand feet and rates of return on in- vestment in 1917 for 146 southern pine lumber companies, as revised by the Commission, classified according to life of operations based on timber owned and stumpage cut, by territorial groups 36 16. Total production of southern pine lumber and quantity and percent- age of total covered in costs, by territorial groups. 1917 and 1918 .38 17. Quantities of lumber sold by 205 southern pine lumber companies, by territorial groups, 1917 and 1918 39 IS. Average production per company for 205 southern pine lumber com- panies, by States and groups of States, 1917 and 1918 40 19. Average cost of sales, sales realization, and earnings per thou.'^and feet, as reported by 205 southern pine lumber companies, by terri- torial groups, 1917 and 1918 40 VI CONTENTS. Page. 20. High and low cost of sales, sales realization, net earnings on lumber, earnings from other sources, and total earnings per thousand feet board measure, as reported by 205 southern pine lumber companies, by territorial groups, 1917 and 1918 42 21. Costs and earnings per thousand feet as reported by 205 southern pine lumber companies, according to quantity sold and by territorial groups, 1917 and 1918 43 22. Average cost i>er thousand feet of producing and selling southern pine (mill run) lumber and timbers, as reported by 20.") southern pine lumber companies, by territorial groups, 1917 and 1918 45 2.3. High and low average costs per thousand feet to jiroduce and sell southern pine lumber as reported by 205 southern pine lumber com- panies, by territorial groups, 1917 and 1918 46 24. Proportion of production falling in specified ranges of net cost to produce and sell as reported by 205 southern pine lumber com- panies, 1917 and 1918 52 25. Proportion of production falling in specified ranges of stumpage cost as reported by 205 southern pine lumber companies, 1917 and 1918_ 52 26. Proportion of production talliu!.' in sjieciiied ranges of logging costs as reported by 205 southern pine lumber companies. 1917 and 1918 . 53 27. Proportion of production falling in specified ranges of manufacturing costs as reported by 205 southern pine lumber companies, 1917 and 1918 54 28. Proportion of production falling in specified ranges of general and administrative, shipping, and selling costs combined, as reported by 205 southern pine lunil>er companies. 1917 and 1918 55 29. Revision for appreciation per thousand feet in stumpage charged to costs. 143 .'southern pine lumber companies, IH'T and 1918 57 30. Average cost of sales, .sales realization, and profits per thousand fee^ before and after revision for appreciation in stumpage charged co costs, 143 southern pine lumber companies, 1917 and 1918 58 31. Costs and earnings per thousand feet, as revi.sed by the Commission. for 143 southern pine lumber companies, by territoiial groups and quantity sold. 1917 and 1918 59 32. Proportion of production falling in specified ranges of stumpage cost, as reported by 143 soutliern pine lumber companies and as revised by the Commission. 1917 and 1918 60 33. Average cost of sales, sales realization, .ind profit per thousand feet, as reported by 143 .southern pine lumber companies and as revised by the Commission, by territorial groups, 1917 and 1918 61 34. Average cost per thousand feet of producing and selling southern pine (mill run) lumber, as reported by 143 companies and as revised by the Commission, by territorial groups, 1017 and 1918 63 35. Production, investment, earning.s, and rates of return on investment, as reported by ]4.'{ southern pine lumber companies, grouped bv States, 1917 and 1918 1 71 36. Investments, earnings, and rates of return on investments before and after revisions for appreciation in timber investment and in lumber costs of 143 southern jiine lumber companies, 1917 and 1918 73 37. Total investment and earnings as reported by southern pine lumber companies, by territorial groups. 1917 and 1918 74 38. Average cost of sales, sales realiz;ition, and earnings from lumber and other sources as reportwl by 205 southern pine lumber companies, 1917 and 1918 75 39. Costs, by operations, as reported by 205 southern pine lumber cora- panie.s, 1917 and 1918 77 40. Costs, by operations, per thousand feet, as reported by 205 southern pine lumber comiianies, arranged from low to high on net cost to produce and .sell in 1918 78 41. Costs, sales realization, and i»ronts as reported by 205 southern pine lumber companies, grouped according to footages sold, for 1917 and 1918 81 42. Cost of sales, sales realization, profit on lumber, and profit from all sources per thousand feet as reported by 205 southern pine lumber companies, arranged from low to high on basis of profit on lumber, and rates of return on investment for 150 companies for 1917 84 CONTENTS. Vn Page. 43. Cost of sales, sales realization, profit on lumber, and profit from all sources per thousand feet as reported by 205 southern pine lumber companies, arranged from low to high on basis of profit on lumber, and rates of return on investment for 144 companies for 1918 87 44. Average cost of sales, sales realization, and earnings from lumber and other sources as reported by 143 southern pine lumber companies, and as revised by the Commission, 1917 and 1918 90 45. Costs, by operations, as reported by 143 southern pine lumber com- panies, 1917 and 1918 91 46. Costs and earnings per thousand feet as reported by 143 southern pine lumber companies, by territorial groups and quantities sold, 1917 and 1918 92 47. Simple average monthly lumber prices per thousand feet, f. o. b. mill, for specified grades and sizes, January, 1917, to December, 1921 93 CHARTS. Facing page. 1. Percentage of lumber cut by groups of States 4 2. Comparison of changes in the principal elements of cost per thousand feet board measure by specified cost groups for 205 southern pine lumber companies, 1917 and 1918 52 3. Cost to produce and sell southern pine lumber, per 1,000 feet (mill run), in 1918 56 4. Average monthly lumber prices (f. o. b. mill) per 1,000 feet board measure, for specified sizes and grades from January, 1917, to De- cember, 1921, inclusive 68 EXHIBITS. Page. 1. Production, investment, earnings, and rates of return on investment for 143 southern pine lumber companies, grouped by States, 1917 and 1918 71 2. Investments", earnings, and rates of return on investment for 143 southern pine lumber companies before and after revision for ap- preciation of stumpage in investment and costs, 1917 and 1918 73 3. Total investment and earnings as reported by southern pine lumber companies, by territorial groups, 1917 and 1918 74 4. Average cost of sales, sales realization, and earnings as reported by 205 southern pine lumber companies, 1917 and 1918 74 5. Costs by operations, as reported by 205 southern pine lumber com- panies, 1917 and 1918___ 76 6. Net cost to produce and sell, by operations, as reported by 205 south- ern pine lumber companies for 1918 78 7. Costs, prices, and profits as reported by 205 southern pine lumber companies grouped according to footages sold for 1917 and 1918 81 8. Costs, sales realization, and profits as reported by individual com- panies, 1917 and 1918 83 9. Average cost of sales, sales realization, and earnings of 143 southern pine lumber companies, 1917 and 1918 89 10. Costs, by operations, as reported by 143 southern pine lumber com- panies, 1917 and 1918 91 11. Costs and earnings per thousand feet as reported by 143 southern pine lumber companies by territorial groups and quantities sold, 1917 and 1918 92 12. Wholesale prices of lumber by months, January, 1917, to December, 1921, inclusive 93 ACKNOWLEDGMENT. The Commission desires to make special acknowledgment of the valuable services rendered by Mr. John W. Adams in the prepara- tion of this report. Valuable assistance was also rendered by Messrs. Lawrence B. Anderson, Calvin C. Davis, Albert A. Hartley, and John S. Biggs. LETTER OF SUBMITTAL. Federal Trade Commission, Washington, May 1, 1922. To the Congress of the United States: The Federal Trade Commission submits herewith a report on costs, prices, and ju'ofits of the southern pine lumber industry for the years 1917 and 1918. Most of the information contained in this report was secured pursuant to the direction of the President, for the use of the War Industries Board in its regulation of lumber prices during those years. The principal facts developed from the Commission's study of the southern pine lumber industry, chiefly based upon data furnished by representative companies operating in the States of Virginia, North and South Carolina, Georgia, Florida, Alabama, Mississippi, Louis- iana, Texas, Oklahoma, and Arkansas, ma}- be stated as follows : 1. The accounting methods of southern pine manufacturers, while sometimes well devised, frequently do not enable them to determine accurately their costs of producing lumber, and in many instances result in obviously inflated costs. Keports submitted to the Com- mission show that many companies included the expenses of farm, turpentine, box, and other enterprises with the cost of their lumber operations, while other manufacturers inflated their costs by the inclusion of interest and a profit on stumpage in their cost of pro- ducing lumber. In some cases stumpage was charged into costs at such a high figure that the entire timber account was written off long before the end of the cut, while the remaining timber was charged into cost during 1917 and 1918 at the then estimated current market value. 2. The average rate of earnings on the entire business, as re- ported by 143 identical companies, was 9 ,per cent in 1917 and almost 8| per cent in 1918. There was a wide variation in the reported raf^ of earnings for individual companies. In 1917 the reported rates of earnings ranged from a loss of almost 3 per cent to a profit of a little over 52 per cent, while in 1918 the range was from a loss of 13, per cent to a gain of nearl}^ 52 joer cent. 3. The revision of the returns of these 143 companies by the elim- ination of stumpage appreciation from investments and costs in- creased their average rate of earnings on total investment from about 9 per cent to about 12 per cent in 1917 and from almost 8J per cent to about 11 per cent in 1918. 4. The total investment in the lumber business compared with the annual output varied greatly for different companies on account of differences in the supply of standing timber owned. Consequently companies owning a timber supply sufficient to last for short periods only generally received larger rates of return on their investment X COSTS AXD PROFITS OF SOUTHERN PINE COMPANIES. than those owning timber supplies sufficient to last a long time. In 1917. for example, the average revised rate of return on investment for 14G companies was a little less than 12 per cent, while the rates of return for companies grouped according to the period of timber s-upply were as follows: Five years or less, not quite 15 per cent; G to 10 years, a little over 12 per cent ; 11 to 15 years, nearly 8 per cent ; and over 15 years, 9^ per cent. In other words, the companies not burdened with a relatively large timber supply were more profitable. 5. Costs, sales realization, and earnings data which are presented for 205 identical companies producing about 54 per cent of the total output of southern pine for 1917 and almost 57 per cent in 1918 show, according to the companies' own reports, the following re- sults: The average cost of sales was $16.73 per thousand feet in 1917 and $22.44 per thousand feet in 1918, an increase of approximately 34 per cent; the aA'erage sales realization was $20.77 per thousand feet in 1917 and $26.65 in 1918, a gain of almost 28 per cent; and the profit per thousand feet was $4.04 in 1917 and $4.21 for 1918, an increase of only slightly more than 4 per cent. 6. There was a wide range in the reported costs, sales realization, and earnings per thousand feet for both years. In 1918, for example, individual costs, as reported by the 205 companies, ranged from $15.63 to $37.12 per thousand feet; the average sales realization for differ- ent companies ranged from $18.81 to $36.28 per thousand feet; while the net earnings for individual manufacturers ranged from a loss of $4.85 to a profit of $13.79 per thousand feet. 7. The southern pine lumber industry was under increasingly strict governmental control of prices from July, 1917, to the end of 1918, and throughout this period the increase in prices practically paralleled increasing costs. Following the termination of govern- mental price control the prices of southern pine lumber advanced rapidly to unprecedented levels during the latter part of 1919 and early 1920. These high prices gave rise to a "buyers' strike" and a rapid decline in prices, which began in the spring of 1920 and con- tinued threen revised by the Commission, espegially with a view to eliminating appreciation in stunipage. The reported cost of sales for the 205 companies was on the average about 34 per cent greater in 1918 than in 1917; sales realization was approximately 28 per cent higher and reported net earnings per 1,000 feet on lumber sold were slightly more than 4 per cent larger 111 1918 than in 1917. Under (TOAernment regulation prices advanced along with costs in such a manner that the reported profit per 1,000 feet of lumber sold was only slightly greater in 1918 than in 1917. The reported cost of sales varies widely for different companies, the average of $16.73 in 1917 including costs for individual com- panies ranging from $12.32 to $23.45 per 1,000 feet board measure; while in 1918 the average reported cost of $22.44 included results for individual companies ranging from $15.63 to $37.12 per 1,000 feet. The sales realization likewise showed considerable variation for different companies, the average of $20.77 per 1.000 feet in 1917 in- cluding results for individual companies ranging from $15.10 to S-J5.67. and the average for 1918 of $26.65 including figures for in- dividual companies ranging from $18.81 to $36.28 per 1,000 feet. The reported net earnings from lumber also showed similar varia- tions from company to company, the average being $4.04 per 1.000 feet in 1917. with individual company earnings ranging from a loss of $4.35 to a profit of $9.80 per 1,000 feet. The average net earnings were $4.21 for 1918 including results for individual companies rang- ing from a loss of $4.85 to a profit of $13.79 per 1.000. The lowest reported unit costs and the higliest reported unit profits were shown by the companies located in the States of Alabama, Mississipjji, Louisiana, Texas, Arkansas, and Oklahoma, called for convenience in the rei)ort the (iulf States group. The highest costs and the lowest earnings per 1,000 were reported by companies located in the States of Virginia, North Carolina, and South Carolina. In 1917 the average reported net earnings on luml^er for the 156 com- ])anies located m the (Julf States group amounted to $4.44 per 1,000 feet of lumber sold, while the unit earnings of the 24 companies com- prising the (leorgia- Florida group were $2.63 per 1.000 feet, and those of the 25 companies included in the Virginia-Carolina group were $1.38 per 1.000 feet. In 1918 the average reported net profits realized Ijy the three groups were as follows: Gulf States group, $4.62: (reorgia-Florida group, $2.74; and the Virginia-Carolina group, $0,95. SUMMARY. XVII UNIT COSTS AND PROFITS ACCORDING TO QUANTITIES SOLD. Companies producing less than 25,000,000 feet board measure in each year reported higher costs per thousand and a somewhat lower sales realization per thousand feet than their larger competitors. Consequently their reported profits per thousand feet were materi- ally less than those of the larger companies. In 1917, 33 small companies, reporting annual sales of less than 12,500,000 feet each and representing 4 per cent of the total sales, reported an average cost of sales of $17.16 per thousand feet and a net profit of $2.75 per thousand, while 8 large companies reporting annual sales of over 100,000,000 feet each, including 18 per cent of the total sales, produced at an average cost of $16.28 per thousand feet and realized a net profit of $4.59 per thousand. In 1918, 54 companies sold less than 12,500,000 feet per company. The sales of these 54 companies represented but 8 per cent of the total and were produced at an average reported cost of $24.66, and yielded a net profit of $1.32 per thousand. Six companies sold in excess of 100,- 000,000 feet each, and their combined sales represented 15 per cent of the total sales covered. These six companies produced at an average reported cost of sales of $21.73 and realized a net profit on lumber of $5.35 per thousand. PRICES SINCE THE BEGINNING OF THE WAR. From July, 1917, to the end of 1918 the southern pine lumber in- dustry was under increasingly strict Governmental regulation as to prices and distribution. In the latter part of this period prices were fixed by the War Industries Board on the basis of costs. It was not the policy of the War Industries Board to stimulate increased i^ro- duction by allowing high prices, hence prices were advanced in amount nearly parallel with increasing costs. This resulted in profits realized being nearly the same in 1918 as in 1917. Following the termination of Government price control, prices ad- vanced rapidly to unprecedented levels during the later months of 1919 and the early months of 1920. This period of highest prices was undoubtedly a period of very large profits to manufacturers of south- ern pine lumber, and production was greatly stimulated. New mills, mostly small, began operations in large numbers throughout the South. Consequently, when curtailment of buying came in the spring and summer of 1920, there was excess producing capacity in operation. Stocks accumulated rapidly and soon had to be moved at greatly re- duced prices, so that the decrease in prices from their 1920 peak was even more rapid than their advance in 1919. During the last half of 1921 prices for many items, particularly of lower grades, reached levels approximating those in effect at the be- ginning of 1917. The higher grades, for which there was a greater demand and of which there were smaller stocks accumulated during and since the war, suffered large decreases in price but did not fall to pre-war levels. Various factors have prevented the public from realizing the full benefit of decreased prices at the mill, among which 105332°— 22 2 X\^II COSTS AND PROFITS OF SOUTHERN FIXE COMPANIES. may be mentioned the tendency of retailers to maintain hio^h prices, at feast until their hifrh-cost stock is disposed of, and the high freight rates prevailing on lumber. PROPOSED CURRENT REPORTS. The foregoing statement regarding the conditions in the southern pine lumber industry since the war is necessarily confined to informa- tion obtained from trade papers and other secondary sources, because the Commission, as explained below, was prevented from obtaining adequate data from the lumber companies themselves. Realizing tlie great importance of having more definite information, during the early part of 1020 the Commi&sion decided to resume the collection of data on production, shipments, stocks, cost of production, and sales realization for several basic industries including the lumber industry. Following the temporary injunction granted in the Maynard case, in a suit by a coal company contesting the Commission's power to require such reports from the coal industry, consideration was given to the advisability of requesting lumber manufacturers to submit voluntary reports. In order to devise a plan whereby such current information as costs, production, and stocks could be secured and promptly made available to both the public and the industry, the Commission held several conferences with representatives from the southern pine and certain other important lumber-producing regions. The lumber representatives attending these conferences promised to cooperate with the Commission, and the representatives of the various asso- ciations in the southern pine region took a very active part in the preparation of schedules to be used for the collction of the neces- sars^ information. The Avay seemed open at first for continuing these basic industry reports on a voluntary basis. On account, how- ever, of the unsatisfactory results from the system of voluntary reporting in the coal and steel industries, the Commission finally decided to postpone such work in the luml^er industry until its power to require such reports was finally determined by the courts. Con- sequently the Commi>sion is unable to inchide in this report the dis- cussion of any cost or profits data more recent than that of the year 191S;. Information of this cliaracter covering 1919 to 1921. inclusive, would undoubtedly be of great interest and value both to the indus- try and the puljlic. as the lumber Inisiness. after a period of feverish activity durmg 1919 and the early months of 1920, experienced a period of depression in 1921. during which it has been claimed that much lumber was being sold by manufacturers at less than the cost of production, but no public agency has been in a position to answer the consumer's question as to whether the claim Avas well founded. The Commission believes that it would be to the benefit of the lumber industry as well as of value to the public to have such work resumed, but that apparently must await a dismissal of the present judicial injunction. WAR-TIME COSTS AND PROFITS OF SOUTHERN PINE LUMBER COMPANIES. Chapter I. GENERAL SURVEY. Section 1. Origin and scope of the Commission's cost work. Origin of the investigation. — Almost immediately after the United States entered the World War it was considered necessary to obtain accurate data regarding: the cost of prodncino; lumber, and the Commission was directed by the President to secure such infor- mation. At first the object was to determine the cost of producing cantonment stock and ship timbers, but later the cost work was extended to furnish cost data for the use of the War Industries Board in connection with price fixing. While this work was essen- tially a part of the vrar work of the Commission, a report covering the cost of production, prices, investment, and earnings for the southern pine lumber industry during 1917 and 1918 is published, because it is of general interest and value both to the industry and to the public, as reflecting conditions in the industry during the two war years, during which the production and distribution of lumber were under increasingly strict governmental regulation. Scope or the Commission's war work. — Throughout the war period the work of the Commission in connection with the lumber industry was practically limited to the determination of the cost of producing southern pine and Douglas fir lumber, and its activi- ties did not at any time include the fixing of lumber prices. The Commission transmitted to the War Industries Board cost reports which were used by the price-fixing committee as a basis for deter- mining prices. In order to supply the maximum amount of infor- mation regarding the cost of producing lumber, the Commission not only furnished the costs of various companies, together with the averages for individual States and groups of States, but also reported the maximum costs for various proportions of the output, so that the price-fixing committee might have at its disposal information upon which to establish prices adequate to yield wdiatever profit it might allow on whatever proportion of the production was considered necessary. • Source or data. — At first the information was secured directly from the records of the companies by agents of the Commission, but later, Avhen the work AYas greatly extended, it became impossible for the Commission's force to cover the field. Therefore this method of obtaining information was discontinued, and the plan was adopted of securing monthly cost statements on schedules filled out by the com- panies. These schedules were certified as correct by responsible offi- 2 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. cers of the companies and were subject to verification by agents of the Commission. Later, at the end of 1918, and just about the time the price control of the "War Industries Board was terminated, the Com- mission requested the companies previously furnishinfj monthly costs to furnish complete annual cost and ])rofit and loss statements for the business years 1917 and 1918 and balance sheets for the close of the business years 1910. 1917, and 1918. These statements, which serve as the basis of this report, were secured by schedule, subject to verifi- cation by agents of the Commission exactly as the monthly costs had previously been secured. It is, therefore, to bo noted that the results presented in this report are not actually based on the monthh^ reports summarized for the War Industries Board, but are based on annual statements covering somewhat more than the period previously covered b}^ the monthly cost reports. The verification of the annual statements by agents of the Com- mission was done under considerable stress and pressure for time; hence detailed audits to verify the data reported in the schedules were undertaken only in cases of apparent disagreement between the costs and financial data reported and the books of the companies. Conse- quenth' the costs, investments, and earnings presented in this report are practically those reported by the companies. In fact, the only important revision made by the Commission has been to eliminate appreciated stumpage values from investments and costs where shown by the reports or by subsequent audits of the Commission's agents. ►Scope or the report. — This report covers the costs of producing lumber and earnings per thousand feet board measure for 205 identi- cal companies manufacturing long-leaf and short-leaf southern pine lumber for 1917 and 1918 and the investment and earnings on invest- ment for 143 of the 205 companies in 1917 and 1918. These companies operated in the following 11 States, viz, Oklahoma, Texas, Arkansas, Louisiana, Mississippi. Alabama, (reorgia, Florida, South Carolina, North Carolina, and Virginia. The report also reviews briefly the market price movements for certain specified sizes and grades of soutiiern pine lumber by months during the period from January, 1917, to December, 1921, inclusive. The prices discussed are com- piled from market reports published in the lumber trade journals. Section 2. Development of the lumber industry. Lmpoktanti: of the lumber industry. — The manufacture of lum- ber is one of the oldest industries of this country, but until recent years only the most meager consideration has been given to its his- tory and development. Prior to the Civil War lumber manufacture was, relatively speaking, a local industry and of little importance in interstate commerce. Since that time lumber has been distributed to ])oints of consumption increasingly distant from its origin, and at the present time it is the largest single item of railway tonnage originating in the Pacific Northwest; while in the southern pine region it is excelled only by coal. The United States is the largest wood-consuming country in the world, and its annual production of lumber is several times larger than that of any other cx)unt^\^ Originally the forest area of the United States was, according to the United States Forest Service, GENEEAL SURVEY. 3 about 822,000,000 acres, or almost 44 per cent of the total land area of the country. At the present time the forest area covers about 463,000,000 acres, or about 56 per cent of the original forested area. According to the Forest Service, tlie original timber stand was about 5,200,000,000,000 feet board measure, of which about 2,215,- 000,000,000 feet board measure, or about 43 per cent, still remains. The present supply consists of about 1,755,000,000,000 feet board measure, or 79 per cent, of softwoods and 460,000,000,000 feet board measure, or 21 iper cent, of hardwood. Of the present total supply of softwoods about 15 per cent is southern pine, which, since 1909, has furnished about one-third of the total annual production of all kinds of lumber. Migration of the lumber industry. — Originally the timber areas of the United States were widely distributed throughout the country with the exception of the plains region. The history of the develop- ment of the lumber industry in the United States is the story of the migration of its largest center of production from one to another of the five great timber sections of the country. These five sections include the following areas: The northeastern section covers Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecti- cut, New York, New Jersey, Pennsylvania, Delaware, and Mary- land; the central section embraces West Virginia, Tennessee, Ken- tucky, Ohio, Indiana, Illinois, and Missouri; the southern is made up of Virginia, North and South Carolina, Georgia, Florida, Ala- bama, Mississippi, Louisiana, Arkansas, Oklahoma, and Texas; the Lake States region includes Michigan, Wisconsin, and Minnesota; while the western section comprises New Mexico, Arizona, Colorado, Utah, Wyoming, Montana, Idaho, Washington, Oregon, Nevada, and California. Although the production outside of these five tim- ber regions is insignificant, some lumber has been produced in every State in the Union. The following table, based upon statistics compiled by the United States Forest Service, shows the migration of the industry in the United States since 1850: Table 1. — Proportion of lumber produced in different sections of the United States, 1850-1920. Section. 1850 1860 1870 1880 1890 1899 1909 1918 1919 1920 Northeastern Central Per cent. 54.8 18.6 13.6 6.3 5.9 .8 Per cent. 37.0 21.1 17.8 13.6 6.5 4.0 Per cent. 37.8 20.0 9.4 24.4 4.9 3.5 Per cent. 25.8 18.4 13.8 34.7 4.5 2.8 Per cent. 19.8 13.1 20.3 34.6 9.6 2.6 Per cent. 16.3 16.1 31.7 24.9 9.9 1.1 Per cent. 11.7 12.3 44.9 12.3 18.4 .4 Per cent. 7.4 7.8 43.2 10.1 31.3 .2 Per cent. 7.5 8.7 46.6 7.8 29.2 .2 Per cent. 6.5 8.1 Southern 42.5 Lake States 7.1 Western 35.6 All other .2 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 In 1850 lumber manufacture was one of the leading industries in the northeastern section, which supplied over one-half of all of the lumber produced in the United States. Twenty years later, in 1870, the Northeastern States produced only three-eighths of the country's total output, while the production for the Lake States increased to 4 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. practically one-fourth of the total for the United States. In 1880 the Lake States were in the lead with 35 per cent of the country's total, while in 1899 the production in the bouthern States exceeded that of any other section. In recent years the proportion of the total produced by the northeastern and lake regions has dAvindled in importance to about 7 per cent each, while that for the southern region begins to show a tendency to decrease, and that of the w'estern section is showing a marked tendency to increase. Since 1880 the j>roduction of the Western States has increased from 4.5 per cent to 35.6 per cent of the total. This section w^ill be the next and last great producing area, as the dwindling southern pine and hardwood forests can not long continue to furnish as large a proportion of the total as at the present time. The relative importance of the produc- tion supi^lied by the different sections of the country are presented in graphic form in Chart 1, opposite. As the production of the South decreases with depletion of its forests, the country will be- come more and more dei^endent on the Pacific Northwest for its domestic lumber supply. Imports will also increase in importance as a source of construction lumber and exports will probably decline. Decrease in lumber consumption. — The per capita consumption of lumber in the United States has declined rapidly in recent years. In 190G, the year of maximum consumption, it was about 525 feet, while in 1919 it was only about 310 feet per capita. This decline was partly due to the substitution of other materials for lumber for many purposes for which there was formerly a large demand. Much of the diversion of the demand for lumber to other materials has either been due to the intrinsic superiority of such substitutes for the uses to which they have been devoted or because they were cheaper. The more important substitutions have been of structural iron, steel, concrete, brick, tile, and terra cotta for general structural purjjoses; metal shingles, tile, slate, and composition materials for roofing; fiber for boxes and crates; steel for railroad construction; steel, con- crete, and wire for posts and fencing; cement and stone for paving and sidewalks; and metal for cooperage, machine, and vehicle parts, interior trim, and ship construction. The United States Forest Service estimated in 1917 that for purposes for which lumber had previously been used substitutes of various sorts displaced at least 8,090.000,000 feet board measure annually, which is equivalent to nearly 22 per cent of the countrj'^'s average annual lumber production since '1909. Present and future timber supplies. — The United States Forest Service estimates that, notwithstanding the large substitutions of other materials for lumber, the present quantity of standing timber, includ- ing second gi'owtli, will last only about 60 years at the present rate of cutting. The T'nited States Forest Service also estimates that timber is now being cut in the United States about four times as fast as it grows.* Conse(|uently, unless a further marked reduction in the per capita consum|)ti()n can lie seemed through a further substitution of Other mat<»rials for uses now supplied by lumber, and unless there is more f<)mi)lete utilization of the timber cut, the present sources of lumber supply will ho greatly depleted, or entirely consumed, before - v. 8. KorPBt Service. " Timber Depletion, Lumber Prices, Lumber Exports, and Coa- centration of Timber Ownership," 1920, p. 3. I 5 0) u o 0) Q. D O Q! O > h D O LJ m D J O u o ? z y o q; y Q. c^i X ^ i*r ^ ^ ^ 3;- ^ ^ K ^•> :i^ § ^. ^ ^ ■^ H ^" ^ t^ ^ ^' kl ^ ^ V ^ V S f. ^ ^ ^ 1 ^' =51 § 1 1 1 1" ^' ^ ^ ^ Nl ki' c=i V. '* fi^' 1 cs ^ t^a 5 •^ ty ^ ^ ^ ^ ^ >C' :^'^ IvJ ^■^ 1 § 1 1 §■ 1 1 ^ N 1 ^ ^ ^ ^ § GENERAL SURVEY. 5 any policy of reforestation, however effective, can produce merchant- able timber in quantities to supply the demand. Other countries, with the exception of European and Asiatic Rus- sia, are in much the same position with respect to coniferous forests, which, because of the lightness, durability, and easy working quali- ties of such woods, furnish the main varieties of construction lumber. The United States is estimated to have, next to Russia, the largest area of standing timber of the Temperate Zone species in the world. It is therefore in a better position than most countries, provided proper steps are tal^en to conserve and reproduce its dwindling timber resources, to meet the real shortage of Temperate Zone forest products that is making itself felt throughout the world. Tropical countries have great untouched virgin forests, but they are mainly of heavy hardwoods that are difficult and expensive to log and manu- facture, and when manufactured, are far less suitable to general con- struction work than the coniferous species. Concentration of timber ownership. — In 1913 the Bureau of Corporations called attention to the growth in the concentration and control in the ownership of standing timber in the United States.^ In 1920 the United States Forest Service stated that in general the situation as to the ownership of standing timber had not changed materially from that shown in the report of the Bureau of Corpora- tions. According to the Forest Service, further increase in the con- centration of ownership of standing timber for investment or specu- lative purposes appears to have been checked by the heavy expenses for fire protection and timber taxes, and other expenses incident to carrying large timber supplies. At the present time the number of southern pine timber owners not operating sawmills is small, large sales of stumpage are few, and the available stumpage is rapidly becoming definitely related to manufacturing plants. The Forest Service estimates that the south- ern pine region contained about 139,000,000,000 feet of virgin pine in 1920, and that 5,401 sawmills were operating on this supply. This timber is being cut so rapidly that it is estimated in 20 years the remaining stand of virgin pine will be about 30,000,000,000 feet and that it will be controlled by 45 mills owned or controlled by a con- siderably smaller number of corporate interests. When the virgin timber is cut out, some of the larger mills cease operating and are replaced by smaller mills which operate on second growth and upon virgin timber that was too small to cut when the timberland was first logged, so that the number of small sawmills in the southern pine region is increasing rapidly. During 1919, under the stimulus of high prices, it is estimated that between 800 and 1,000 small sawmills began operations in the South. ^ Section 3. Relative importance of southern pine. Southern pine standing timber. — It has been estimated by the Forest Service that the original stand of southern pine, including both long and short leaf, was approximately 650,000,000,000 feet, and of this total quantity there is still remaining about 258,000,000,000 »The Lumber Industry, Part I, pp. 20-21. ' Report of the United States Forest Service on Timber Depletion, Lumber Prices, Lumber Exports, and Concentration of Timt>er Ownership, 1920, pp. 60—63. 6 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. feet, includinfr both virjrin and second ^ro^yth. or about 40 per cent of the estimated ori'jinal stand. This quantity, as already stated, inchides about 15 per cent of all the reniaininfr softwood timber in the entire country. The States of Louisiana, Mississippi. Florida, and Texas contain about 59 per cent of the present quantity of stand- in^^ timber in the southern pine area. The followino; table shows the distribution ])y States as shown by the Forest Service: * Table 2. — Quantity of merchantable southern pine timber, by States, 1920. States. Quantity (feet). Louisiana i 47,348,400,000 Mississippi ' 40,476,200,000 Florida 30,429,300,000 Texas ' 27, .524, 700, 000 Alabama 25,316,400,000 Georcia 21, 807, 600, 000 Arkansas 15, 743, 700, 000 Per cent. 18.37 15.71 14.14 10.68 9.82 8.46 6.11 States. South Carolina. North Carolina. Virginia Oklahoma Missouri Quantity (feet). 13, 889, 800, 000 15, 300, 800, 000 8, 698, 000, 000 4, 791, 400, 000 364, 700 Total 257,691,000,000 Per cent. 5.39 5.94 3.38 1.86 .14 100.00 Accordinp; to the Forest Service, 54 per cent of the present total stand is old timber and the remainder, or 46 per cent, .second growth. Of the present stand slightly more is represented by short-leaf than by long-leaf pine. The short-leaf pine occurs to a greater extent in the South Atlantic States and the long-leaf in the Gulf States. Production of .southern pine lumber. — The following table shows the total lumber production in the United States, the production of southern pine, and the proportion which it represents of the total out- put 10(19- 19-20: Table 3. — Quantity of lumber produced in the United States, and the quantity and p7-oportion of southern pine lumber, 1909-1920. Year. United States (feet;. Southern pine. Feet. Per cent. 19091 44,. 509, 761, 000 4(1, OIK, 282,000 37,003.207,000 3y, 158, 414, 000 38,387,009,000 37,346,023,000 37,011,6.56,000 39, 807. 251, (XK) 35, 831, 2:?!), 000 31,890,494,000 .34, .552, 100, 000 16,277,18.5,000 14,143,471,0(X) 12, 896, 701), 000 14, 737, 0.52, (XW 14,8.39,3r>3,000 14,472,804.000 14, 700, (XX), 000 15, 0.5.5, OM),0(X) 13,,539,4r>l,O00 10, 845, (XW, 000 13 062 .101 000 36.6 19101 35 3 1911 1 34 9 19121 37 6 19131 38 7 1914 1 38 8 19151 39 7 19161 37.8 19171 37 8 19181 34 19191 37 8 192C> 33,798,800,000 1 ll,0yi,O!0,000 32 8 A vcragc 37,442 853 000 13.804 fififi ()0n 36 9 1 U. S. I>ept. of Apriculture Bui. 845, Production of Lumber, Lath, and Shingles, 1918, p. 18. « Inited States CVnsus. » U. 8. Dept. ol Agriculture, Press Relea. to what constituted costs as well as to the proper method.s of ascertaining them. Lack ok infok.matio.v rpxjaruixg production. — In keeping rec- ords of the footages passing through the various operations there was a marked lack of uniformity. Some companies kept separate production records for each operation in bringing the logs to the ACCOUNTING CONDITIONS. 11 mill and in manufacturing them into different kinds of lumbei*. A large number, however, kept only the footages applying to major operations, such as logging and sawmilling, but kept no record of the number of feet passing through particular operations, such as yarding, dry kiln, or planing mill. There were other cases where no record of production of any kind was kept, the com- panies depending entirely upon the quantity sold, which figure was applied against the total production cost in order to arrive at the unit cost per thousand feet. Section 2. Accounting methods and problems. Unit costs. — In sawing lumber, logs of various grades are used,, and, from each grade, lumber of different sizes and grades is pro- duced. If the mill is using logs that are of uniform quality, it will be using a raw material that shows for a specific accounting period an average cost which is uniform per thousand feet. This raw matenal (stumpage) when mechanically divided into lumber will produce a certain percentage of each of several grades. Furthermore, in order to meet market demands, as well as to most efficiently utilize different parts of the log, various sizes of each grade will be produced. At any particular time the machine processes involved, and therefore the manufacturing expenses incurred, in producing a given size and finishing it in a given manner will be identical per thousand for each of the grades produced. The physical basis for computing unit manufacturing costs is the number of processes through which the material passes to produce a given size finished in a given man- ner regardless of the grade. The principal object of grading is to obtain the best market price for the finished product. Its only leltition to costs is that by grading the product at certain stages in manufacture it may be possible to prevent unnecessary processing of low-grade stock. In the Southern States timber used in the mill is generally owned by the interests operating the mill. It was bought at prices de- termined at the time of purchase by the general grade of the timber itself. When cut, the logs are not graded strictly but are charged into costs at a uniform price per thousand feet. However uniform their grade may be, when sawed, the logs produce various grades of lumber, the raw material cost of which as charged by the mills is the same for all grades. Furthermore, mill experience is that if a given size is produced, it will be produced in various grades, and, provided the same finish is given to all grades, at identically the same cost per thousand. Disregarding the question of grades it is possible, provided suffi- ciently detailed departmental production and cost records are kept, to determine the unit cost of a given size finished in a given manner by adding to the cost of stumpage the cost of each of the processes through which the material passes. Although, as stated above, various manufacturers' associations have given a great deal of atten- tion to the question of educating their members regarding the de- sirability of ascertaining such costs, few southern mills kept suffi- ciently detailed departmental costs in 1917 to even roughly approxi- mate unit costs by sizes. In fact the majority of mills made little or no attempt to keep costs and productions segregated even on the 12 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. broadest departmental lines. ^Many mills, although they were able to report data from which the average cost of sales for mill-run lumber, as shown in subsequent pages, was computed, found their recordji inadequate to yield detailed information as to costs by opera- tions in the form requested. In the discussion of costs by operations it has accordingly been necessary to confine attention in the ensuing pages to the average cost per thousand feet of mill-run lumber for stu'nipage. logging, manufacturing, administrative, shipping, and seliintr expenses. Unit logging cost is based on the board measure footage logged, manufacturing and administrative costs on the foot- age manufactured, and shipping and selling costs on the footage sold. The figures thus obtained fail to show the costs of specific items. Their principal value is that for the considerable number of mills they reflect the general movement of manufacturing costs by operations during the period covered. When added together they yield a cost to produce and sell which differs slightly from the more accurately computed average cost of sales. It was found that in some cases mills having costs segregated to a greater or less extent by operations, computed their mill-run cost of ])roduction for each operation on the basis of tlie footage passing through it, and then added together the unit costs thus secured to obtain the average cost of mill-run lumber. This would be correct if all lumber produced passed through each and every process. In actual practice, however, this is not true, hence it is incorrect to call such a figure an average cost for all lumber produced. For instance, taking the results for a particular company, the cost per thousand obtained by adding together the unit costs for sawmill, green sorter, stacker, dry kiln, dry sorter, rough shed, yard expense, planing mill, and finished shed, plus depreciation amounted to $11.61 per thousand feet. This represents the average cost of that part of the product which passed through each and every process. The correct average cost for mill-run lumber, obtained by dividing the total cost of manu- facture by the saAvmill cut, resulted in an average cost for run of mill amounting to $9.47 per thousand feet. Bt-i'uoduct costs. — No uniformity was found in the method of handling by-product costs. Some companies reduced the cost of lumber manufacture by the amount of income derived from the sale of l)y-products. Others credited the amounts received from the sale of laths, shingles, etc., to the profit and loss account as income from other sources without charging those by-product operations with their proportion of costs. The costs in these particular instances were included as a part of the cost of manufacturing lumber. The result of this method was to inflate the lumber production cost. Still other companies charged the direct conversion cost to the va- rious l)y-product operations, but made no charge for raw materials us^ and alhxated no pai't of the general overhead expense applying to these opcriitions. There were also some companies having tur- |»('ritine and rosin oi)erations, the expenses of which were combined with luriil)er costs, and tliis. of course, made it impossible to ascer- tain accurately' the cost of producing lumber, turpentine, or rosin. In its schedule for the rej)orting of lumber costs the Commission adopted the plan of deducting income from by-products sold from the total lumljer manufacturing cost. In the following pages unit ACCOUNTING CONDITIONS. 13 costs are shown both before and after deducting the average income per thousand for by-products as reported by the companies. Interest. — Good accounting practice excludes all interest from direct manufacturing costs, and treats interest actually paid as a financial item in profit and loss. Many lumber companies, however, included in their direct costs interest on short-term notes; others interest on short-term notes and bonds; and still others interest on long and short term borrowing and also hypothetical interest on " owned '' investment. The practice of including interest was encouraged by one of the largest lumber manufacturers' associations of the South, which in- structed its members in reporting costs to the association to include interest at 6 per cent on 50 per cent of the investment. By invest- ment, according to instructions given out by this association, was meant the prevailing market value of land and timber plus what it would cost to replace the entire plant. These various methods of treating interest gave rise to large variations in the amount of interest charged to costs, and, of course, very materially inflated the costs as reported by a considerable number of companies. Eiforts were made to exclude all interest from manufacturing costs compiled for the War Industries Board as well as for this report. Inventories. — At various stages in the manufacture of lumber, inventories of logs and partially finished as well as finished lumber are accumulated. Logs, for instance, may accumulate in the woods and at various points in transit from the woods to the mill as well as in the log yard or mill pond. Few mills of the South kept any strict record of the movement of logs from the woods to the mill, hence inventories necessary to explain differences in footages at different stages in manufacture were frequently lacking. Three different practices of valuing finished lumber inventories were generally used in the industry, namely, market value, cost, and arbitrary value. Market value was used by some companies, because it served as a basis in the settlement of insurance claims and pre- miums, and also because it included the unrealized profit if the mar- ket were above cost. Only a few companies took inventories at actual cost. A considerable number of companies usin^ the arbitrary value had for many years followed the custom of taking the inventory at an unvarying rate, regardless of changes in cost or market value. One company, for example, still valued its stock at $10 per thou- sand feet when its costs were about $20, and as a result it showed a loss on its books for its stock of $10 per thousand feet, notwith- standing the fact that the finished lum.ber had a market value of approximately $25 per thousand feet at the time. For the purpose of this report inventory values as reported by the companies were used. Repairs and improvements. — One of the most striking instances of incorrect accounting, and one wdiich every effort was made to correct, was the practice of charging extraordinary repairs or im- provements into costs during the month when such repairs and im- provements were made or paid for, without taking into account the fact that such expenditures frequently applied to a period covering several months or perhaps a year or more. This was especially true in the handling of spur tracks, the costs of which were charged into 10.5332°— 22 3 14 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. costs the month ■v\'hen completed instead of being prorated over the period during which the particular spurs would be used. If a bridge on a main-line railroad was built, or supplies were bought for a period of six months, the}' were often charged to the costs of the month in which the bridge was completed or the supplies were pur- chased. As a result of such practices the lumber production cost would show as much as a 100 per cent increase in a single month over the previous months. In the annual cost statements the general effect of the practices described, in so far as they were applied in charging repairs or improvements the use of which extended into subsequent years, or to supplies not consumed during the year, was the same as for the monthly statements, although the fluctuations were less evident. Depreciation. — At the beginning of the cost investigation the agents of the Commission found that in many instances no depre<:ia- tion charges were made : in other cases it was a spasmodic ana arbi- trary charge ; and in still other instances the amount was contingent upon the profits made during the year. In the last-mentioned case, if the earnings were unusually large, a liberal charge was made; but if the earnings were just ordinary, only a minor charge was made; and. if earnings were small, or if there was a loss, no depreciation charge of any kind was made. In some cases a fixed depreciation charge per thousand feet board measure was made, estimated to be adequate to extinguish the plant and equipment upon completion of the cut. Some companies made this charge in a lump sum to cover all departments. Others applied it by departments to the footages passing through the departments. Still others simply charged a percentage of the total investment, varying from 2^ to 20 per cent annually to total costs for the year. In this report depreciation has been used as reported by the com- panies. The lack of uniformity in methods of handling the charge, however, indicates that the industry can do itself a great service if better methods of determining and applying the charge can be worked out in accordance with good accounting principles and their general adoption brought about. .Stcmpage. — In examining the records of southern pine lumber companies it was found that stumpage (standing timber) appeared on the books in one of the following ways: (1) Original cost; (2) original cost plus carrying charges; (3) value as of March 1, 1913 (the date allowed by the income-tax regulations) ; (4) estimated cur- rent maiket value; or (5) arbitrary value. Of the five methods named above only the first two, except by for- tuitous combinations of circumstances, can meet the requirements of good accounting practice in the determination of either cost or profit. Owing to the use of one or the other of the last three methods, many eompanies either experienced considerable difficulty in reporting stumpage at cost as called for in the Commission's schedule, or failed to do so, and as a consequence the figures which were included in the Commi.ssion's reports to the War Industries Board were not. strictly speaking, cost figures, because some of those submitted were considerably above cost, owing to reappraisals, 'and others were below cost, due to failure to add to the original cost of stumpage legitimate carrying charges from the date on which the ACCOUNTING CONDITIONS. 15 stumpage was acquired to the date on which the cutting was begun. This condition made it necessary for the Commission, in determining the cost of producing lumber for the price-fixing committee, to set up the figures in the cost statements in two different ways, namely, the cost of producing lumber exclusive of the stumpage charge as reported by the companies and the cost of producing lumber includ- ing the reported stumpage charge which, as already explained, was not in all cases a true stumpage cost. In transmitting costs to the price-fixing committee of the War Industries Board, the Commis- sion made this situation clear. The same inaccuracies apply to a less extent to the stumpage costs shown in this report because more thorough revision has m some cases been made. Correctly handled, stumpage investment should be carried on the books and the stumpage cost charged to costs at actual cost plus carrying charges, if any. If the tract represents only such a quan- tity of timber as the mill may reasonably be expected to cut during its normal life and operations were begun immediately after its purchase, the stumpage investment should be carried on the books and the timber cut charged to cost at the original cost, or purchase price, and all carrying expenses charged directly to costs. If, how- ever, the tract was purchased and held for some time before it be- came definitely related to a manufacturing operation, thereby entail- ing the payment of taxes, insurance, and other direct expenses inci- dent to properly caring for and safeguarding the property, these charges should be added to the original cost of timber. The period covered by carrying charges thus capitalized in the timber account should be from the date of purchase to the date on which the tract became definitely related to a mill as a part of a total supply of accessible timber that the mill may reasonably be expected to cut during its normal life. The items that may legitimately be capital- ized in this manner include, as already stated, taxes, insurance, and other expenses incident to the proper supervision of the property, but they do not include interest paid on bonds or timber notes. Tmo methods of handling stumpage in cost. — There are two prin- cipal views regarding the treatment of stumpage as an element of cost. The first and correct view is that it should be charged at actual cost, while the second and incorrect view is that it should be charged at its market value at the time it is cut. The Commission's war-time task was to ascertain as accurately as possible the cost of producing lumber, hence instructions were issued to its agents, and later to mills in connection with the cost schedule, to include stumpage at original cost of timberlands owned, less the value of surface or cut-over lands, divided by the estimated yield of timber at the time the timber was purchased. To this such carrying charges as taxes and insurance on a reasonable amount of timber were to be added, but interest on timber investment was not to be included in stumpage cost. In case the original cost of timberland could not be ascertained, the book value as of December 31, 1918, was to be used. This was done merely to provide a uniform arbitrary rule for han- dling all cases in which original cost could not be ascertained. If stumpage is charged into costs at any value other than actual cost (or if applicable, actual cost plus legitimate carrying charges 16 COSTS AXD PROFITS OF SOUTHERN PINE COMPANIES. from date of purchase to date on which cuttinjj: was begrun), the cost stateiiioiit no longer represents the true cost of lumber. For instance, if market value of $6 per thousand is used for stumpage that actuallj' cost $4 per thousand, the cost statement is thereby made to show a cost of production $2 per thousand higher than actual cost, and profits shown for the year are correspondingly reduced. If, on the other hand, stumpage is charged into costs at an arlfitrary figure less than cost, say $2 per thousand, when it actually cost $4, the converse is true with respect to both costs and profits for the year. In case the first method is pursued to the end of the cut, there will l)e a considerable profit shown by the timber account remaining to be divided, while if the second practice is used to the end of the cut, there will be a deficit to be absorbed. It is frequently argued that mill owners liaving stumpage pur- chased long ago at low prices should charge it into costs at present market values in order to make their costs comparable with those of mills that have purchased their stumpage recently at high prices. Since charging stumpage into costs at other than its actual cost pro- duces fictitious cost showings, the argument can have no support from an accounting viewpoint. The real point of contact between two competitors, one of whom has low cost and the other high cost stumpage, lies not in uniformity of cost showings but in the market price at which the ]:)roducts of both will sell. Both are striving to get the best possible price for their products under the existing state of market demand. In for- mulating their sales policies and prices, both should have accurate knowledge of their respective true costs. In the case of the manu- facturer having low-cost stumpage. it may be highly desirable to know not onlv what his costs actually are but also what they would be were he obliged to pay current prices for stumpage. By knowing the latter he is able to estimate with some degree of accuracy the minimum-price competition of his less fortunately situated com- petitors, and can formulate his sales policy and selling prices so as to take the fullest possible advantage of his superior competitive position arising out of his earlier purchase of stumpage. At all times, however, the accounting systems of both should show their true costs. In times of advancing prices the market will absorb the production of both, but in times of falling jirices true costs may be no less im])ortant to the low-cost than to the high-cost mill in deter- miuing wliat jjroduction and sales policy to pursue. Capitalization of interest in the thnher account. — Interest pay- ments on bonds or timber notes must be paid whether or not there is any income realized from the particular timber tract on Avhich the money is borrowed. Tiie necessity of meeting these payments has in the past been an important factor in the development of sawmill capacity in excess of current market needs, as timber own- ers found it necessary to put their holdings on an operating basis to meet their interest payments. At the present time most of the large holdings of the southern-pine region are rapidly becoming definitely related to milling operations, but the question as to how best, from an accounting viewpoint, to treat interest payments on outstanding bonds and timber notes during the period that timber reserves are held out of use is one on which opinions differ widely. ACCOUNTING CONDITIONS. 17 It is frecjiiently arcfued that such interest payments should be capitalized m the timber account, a practice that has been followed by a considerable number of timber owners. As capitalizing in- terest rapidly increases the book value of the timber, the period dur- ing which it can be done depends on the movement of stumpage values which in turn are dependent on the market prices that can be obtained for lumber. Unless the advance in prices of stumpage and lumber from year to year are greater than the amount of interest paid, the holding must eventually be sold or exploited at a loss regardless of the manner in which interest charges have been handled. From the accounting viewpoint that no interest should find its way into costs the practice would not be approved, as any interest capi- talized would ultimately become a part of the cost of stumpage when the timber is finally cut. For income-tax purposes the Treasury Department allows the de- duction of interest paid on real estate mortgages from taxable in- come. If interest is capitalized in the timber account, it can not be deducted from taxable income for the year because, when capi- talized, it loses its identity as interest. It would therefore seem inadvisable either from a cost accounting or a tax paj-er's viewpoint to capitalize such interest payments. It would rather seem advisable to pay them out of earnings from current operations, even though to do so may place a heavy burden on present profits. Handled in this way, full advantage is taken of possible income-tax deductions, and anticipated future profits in the form of capitalized interest charges are not worked into future costs. Stumpage and cut-over lands. — From the information at hand it appears to be a rather common practice among southern pine lumber- men in determining the cost of stumpage to simply divide the total cost of the timber, including the land, by the quantity of standing timber and call this the unit cost. This method is correct if it is cer- tain that the land possesses no value, but is erroneous if the land possesses value. The value of cut-over land ranges, according to its character and location, from practically nothing to approximately the value of unimproved agricultural land of the same grade in the same general locality. In some cases, indeed, lumber operations are conducted at a loss over very sparsely wooded sections in order to make the land available for agricultural purposes. In view of these varying conditions, it is clear that the correct method of determining stumpage cost is to deduct the fair value of the land from the total cost of the timber and land and divide the remainder by the number of thousands of feet of standing timber in order to get the cost per thousand feet. If, for example, a lumber company buys 10,000 acres of timber land scaling 10,000 feet per acre at a cost of $60 per acre, making a total cost of $600,000, the total quantity of standing timber on the above basis amounts to 100,- 000,000 feet, which, divided into the total cost of the timber includ- ing the land, gives a cost of $6 per thousand feet. Let it be assumed for the sake of this illustration that the value of the land after the timber has been removed is $10 per acre according to contemporary sales of similar tracts, or a total value for the land alone of $100,000. Deducting this amount from the total cost of $600,000, the net cost of the timber is $500,000, which amounts to $5 per thousand feet as 18 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. compared with a cost of $6 when no consideration is given to the ralue of the land. Under such circumstances a hind account should be kept separately, and all charges properly belonging to land should be debited and all sales of land credited to that account. CavnjhiQ charges in costs. — As has been previously indicated, carrying charges, such as insurance, taxes, and other expenses incident to the supervision of the property, but not interest, incurred on timber tracts before they are detinitely related to a manufacturing enterprise and cutting is actually begun, may be capitalized as a part of the timber account of the mill. After cutting actually begins such charges should properly be included in operating costs. This was generall}' the practice of the mills, but there was considerable differ- ence of opinion as to Avhat constituted legitimate carrying charges. Frequently, in addition to legitimate charges, interest paid on timber notes and bonds was charged to costs. Interest is, as previously stated, a profit and loss item and not an item of cost ; consequently^ it should not be included in carrying charges at anj^ time. Wherever shown to have been included in costs it has, as previously stated, been elim- inated. As the timber on a given tract is cut. carrying charges decrease from year to year, thus reducing the amount charged to costs and the amount of carrying charges per thousand feet of lumber produced as the cut proceeds. If it is desired, the total carrying charges that must be incurred during the life of the operation may be estimated at the outset and charged to costs at a flat rate i)er thousand subject to adjustment if it is found that for any reason the original estimate was incorrect. If the rate of cut estimated at the outset is not for any reason maintained, the length of the operation will be increased, while if the rate of cut is increased the converse will be true. In either case adjustments in the estimated total amount of carrying charges to cover the increased or decreased time during which carry- ing charges are paid will be necessary. The carrying charges which are charged to current operating costs should not cover a supply of timber greater than the mill may reasonably be expected to consume during its normal life. Carr3'ing charges on stumpage that can not be reached from present mill operations should be capitalized in the accounts of the future milling projects to which the stumpage ulti- mately may become related. Section 3. Importance of good accounting methods. Adequate accounting records are among the prime essentials in the successful conduct of modern business enterjDrise. The purpose of accounting is to give a systematic and true statement of the condition of the. business. Any good accounting system applied to the lumber business would liave to conform to the economic facts of the industry. Detailed inforjnat^on on the cost of raw materials, the cost of con- verting them into finished products, and the cost of placing them on tlie market is necessary to determine the profitableness of the lumber liusincss as well as to decide whether it is more profitable to manufac- ture a few stai)le grades or many highly finished products. As ap- l^lied to mai'keting lumber, an ade(|uate cost system, where various methods of distribution are in use. should show whether it is more profitable to sell the product to the wholesaler, to the retailer, or ACCOUNTING CONDITIONS. 19 directly to the consumer, or to use all three of these avenues of distribution. In addition to its general advantages in relation to business organ- ization and business policy, systematic accounting in the lumber business would be of direct benefit in connection with banking service, with income taxation, and with Government cooperation in general. Where lumber investments have been regarded unfavorably by bank- ers, the hesitation to grant credit except at high interest rates may often be traced to the inabiltiy of the lumberman to make a clear and conclusive statement of the financial condition of his company. Until lumber cost accounting systems are so improved that a systematic and true statement of the current condition of the business can be fur- nished in financial statements it is not probable that adequate credit facilities will be available to the industry. In the absence of a sys- tematic method of stumpage valuation and accounting it is not likely that the Federal income tax can be administered without discrimi- nation affecting different companies and producing sections. More- over, Government activity of whatever kind with respect to the lum- ber industry is handicapped by the lack of comparative information which only systematic and intelligent methods of accounting can adequately supply. It sometimes happens that unusually low prices develop in an in- dustry through the policy of price cutting by those who have no definite knoAvledge of their costs as compared with their selling jDrices. There are times, of course, when a company, or even an in- dustry, is compelled to dispose of its product at a temporary loss in order to meet changing conditions. Such a situation justifies sharp price reductions. This, however, is an entirely different matter from low-price competition resulting from ignorance of true costs. If manufacturers consistently make low prices because they do not ac- curately know what their costs are, the results may be serious not only to themselves but to the whole industry. The position taken by a considerable number of business men that a modern accounting system costs more than it is worth is generally based either on failure to recognize its fundamental value and im- portance in the conduct of their businesses or on unfortunate experi- ences in which they have adopted systems too complicated for their needs. The general principles of accounting apply with equal force to a large or a small business. There is, however, a wide varia- tion in the manner of their application, depending on the type and volume of business done. In a given line of business a complicated system yielding costs in great detail may be absolutely necessary to a firm transacting a large volume of business, while the same system adopted by a firm doing a smaller volume of business may be un- necessarily expensive. Care must be exercised, therefore, in adopting a system to fit it to the size and fundamental needs of the business rather than to secure perfection in showing every detail of cost. Chapter III. INVESTMENTS AND EARNINGS. Section 1. Scope of discussion. Government control, 1917-18. — During much of the period from January 1, 1917, to December 31, 1918, covered by this report, tlie southern pine himber industry Avas, as previously stated, under in- creasin^rly strict governmental roii^ulation both as to prices and distri- bution. The first price reofulation was the ao^'eement of June 13, 1917, between representatives of the southern pine mills and the lumber and forest products committee of the Council of National Defense. By this agreement the prices of Ciovernment cantonment stock were fixed at an average price of $20 per thousand for the various grades used. Somewhat later similar price agreements fixing the prices of lumber for other Government purposes were entered into, and one year later, in July. 1918, regulation of prices was extended by the War Industries Board to all civilian as well as Government purchases. On the distribution side various priority regulations affecting the trans- portation and use of lumber tended to restrict its production and to confine its distribution to those uses most vitally connected with the conduct of the war. During the period of price fixing by the War Industries Board the Federal Trade Commission was requested to compile data re- specting the costs, profits, and investments of lumber manufacturers so that the Price Fixing Committee of the War Industries Board would be in a position to determine prices with some knowledge of what they would yield the industry m rate of return on capital in- vested. In order to supply this information it was necessary for the Commission to have its field agents make balance sheet audits to ar- rive at the investments of individual firms engaged in the lumber business. During the actual war period such audits were made for about half of the southern pine operations whose costs are discussed in Chapter IV. This work was discontinued at the end of the price- fixing program and therefore included only part of the balance sheets secured by the Commission. Nature of invkstments. — Many companies have investments in- cluding not only standing timber, logging, and sawmilling equip- ment, but farms, cut-over lands, turpentine operations, lath and box shooks mills, etc. In a few cases the investment in by-product and outside operations were considerable in amount, but they represent only a .small part of the total investment of all companies combined. The reports of the companies showed earninp;s from lumber segre- gated from other earnings, but many companies did not report the detail necessary to separate their timber and sawmill investment from their by-product and other investments. Although it would be de- sirable to show earnings from lumber in relation to timber and saw- milling investment, it is imj^ossible to do so for want of more de- tailed information. Consequently, in order to present the results for 20 INVESTMENTS AND EARNINGS. 21 both years for as large and representativ^e a group of companies as possible, comparisons are confined to total earnings from all sources in relation to total investment, including by-product operations, farm lands, and outside investments. In most cases, as already stated, the by-product and outside invest- ments were small in comparison with the investments in timber and sawmills, A considerable number of comjjanies showed small losses on their by-product operations, and even for those showing profits on by-products and outside investments the earnings were not large. Consequently the rates of return on total investment shown below are only slightly different from what they would be if only timber, logging, and sawmill investment, and earnings from lumber were used, and serve as a fairl}' accurate indication of the general con- dition of the southern pine lumber industry during the two war years. The net investment was computed from the liabilities side of the balance sheet and includes capital stock, bonded indebtedness and other long-time notes, surplus and reserves which were properly a part of surplus. Outside investments, such as Liberty bonds and stocks in other companies, were excluded. The Commission also excluded appreciation of stumpage whenever shown by the com- panies, consequently the investment is presented as reported by the companies and as revised by the Commission. (See p. 24.) Net earnings are presented both as reported by the companies and as revised by the Commission. The reported earnings include the profits for the entire business (less income from Liberty bonds and from stock owned in other companies). As bonded indebted- ness and long-time notes were included in investment the rate of return on investment was computed on the total earnings before the payment of interest. AVhenever possible the Commission revised the earnings by the amount of the stumpage appreciation charged to costs. XuMBER OF COMPANIES ixcLUDED. — Of 205 Companies whose aver- age unit costs, sales realization, and profits were reported (Ch. IV), 157 returned balance sheets and profit and loss statements for the business year 1917 and 144 for 1918. For both years 143 identical companies returned complete cost and financial data, and these com- panies are identical with the group of 143 companies whose unit costs and prices are discussed in the latter part of Chapter IV. Several of the companies operated two or more mills and returned combined cost, profit and loss, and balance-sheet statements, so that the total number of individual operations included is somewhat larger than the total number of companies. In the ensuing discussion of profits in relation to investment vari- ous groupings of the companies are shown to bring out interesting features developed from the Commission's study of investment and profits on investment in the southern pine industry. Three general territorial groupings of companies are shown, the first and largest, called for convenience the Gulf States group, including interests located in the States of Alabama, Arkansas, Louisiana, Mississippi, Oklahoma, and Texas ; the second, called the Georgia-Florida group, including operations of those two States ; and the third, or Virginia- Carolina group, including companies operating in Virginia, North Carolina, and South Carolina. 9 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Section 2. Investment and earnings on investment. KkI'OHTKD IXVKSTMEXT AND EARNINGS FOR 143 IDENTICAL COM- PANIES. — Table 37 (p. 74) shows for all comi^anies furnishing ade- quate reports to the Commission, namely, for 157 companies in 1917 and for 144 companies in 1918, the reported total investment in all operations, whether in lumber production or otherwise, and the re- ported total earninofs from all sources. Table 4 shows the investment and earnings as reported by 143 identical companies in each year. The rates of profit shown are in each case substantial!)^ the same. This group is identical with the 143-company group whose costs are discussed in Chapter IV (see ])p. 56 to 63). The rates of earnings after revision by the Commission are shown later (see p. 29). Table 4. -Total investment and earnings as reported by llfS southern pine lumber companies, by territorial groups, 1917 and 1918. Group. Year. Number of com- panies. Total investment. Total earnings. Rate of return on invest- ment. Gulf SUtes 1917 1918 Georgia- Florida I 1917 1918 Virginia-Carolina. All companies. 1917 191S 1917 1918 116 116 13 13 14 14 143 143 ?274,272,598.77 285,677,072.35 12, 920, 913. 47 12,331,393.03 22,221,177.36 24, 060, 910. 16 300,414,689.60 322,069,375.54 S26, 360, 537. 30 25, .502, 997. 25 1,064,869.95 1,064,421.69 465,641.06 563, 821. 30 27,891,048.31 27,131,240.24 9.6 .8.9 8.2 8.6 2.1 2.3 9.0 8.4 For all companies the percentage rate of retura as shown by their reports decreased from 9 per cent in 1917 to a little over 8 per cent in 1918, a com])aratively small but appreciable decrease in rate. Tw'o causes contributed to tlie decreased percentage rate, the first being the increase in total capital invested from approximatelv $309,000,000 in 1917 to $322,000,000 in 1918, and the second being the decrease in earnings reported from approximately $27,981,000 in 1917 to.$27,- 131,000 in 1918. The total capital invested was about 4 per cent greater in 1918, and the total earnings from all sources were nearly 3 per cent less in 1918 than in 1917. While the earnings per thousand feet increased 9 per cent in 1918 over 1917 the total quantity sold de- creased 11 per cent, these two factors working in opposition account for the 3 per cent net decrease in earnings. The Virginia-Carolina ^i-oup showed a considerable increase in both investment and earn- ings, and a slight increase in rate of return on investment; the Georgia-Florida group showed a slight decrease in earnings, but an increased rate of earnings on investment, while the Gulf States gi'oup showed a considerable increase in investment, a less than propor- tionate increase in earnings, and consequently a decrease in rate of return. The increased investment in 1918 for some companies represents actual addition to properties by purcliase of .stumpage or by new con- struction and e(|uipment. Others apparently wrote up, or "appre- ciated" the })ook values of tlieir properties to figures approximating the then estimated current market value of stumpage and replace- ment value of plant. High and low rates for identical companies. — The ranges in in- dividual rates of reported earnings on investment included in the INVESTMENTS AND EARNINGS. 23 average rates in the jDreceding table are shown in Table 5 for all com- panies and for each group : Table 5. — High and low percentage rates of earnings otl investment as reported hy IJfS southern pine lumher companies, by territorial groups, 1911 and 1918. Group. Year. Number of com- panies. Percentage rate. High. Low. GuJf States Georgia-Florida. Virginia-Carolina All groups 1917 1918 1917 1918 1917 1918 1917 1918 116 116 13 13 14 14 143 143 52.1 51.7 IS. 1 16.3 15.3 9.9 52.1 51.7 '2.9 "13.0 3.1 1.7 U.l 17.7 12.9 '13.0 > Loss. The reported earnings of individual companies varied in 1917 from a loss of about 3 per cent to a profit of a little over 52 per cent, and in 1918 from a loss of 13 per cent to a profit of almost 52 per cent. In both years the largest percentage rate of return on investment for a single mill, as well as the OTcatest loss, occurred in the Gulf States ^roup. The Georgia-Florida group showed no losses and the extremes in rates of earnings were much more moderate, the highest rate for the two years being 18 per cent and the lowest about 2 per cent. In gen- eral the Virginia-Carolina group was the lowest profit group, its highest profit company shoAvmg earnings of 15 per cent in 1917 and 10 per cent in 1918. Several companies in this group sustained losses in each year, the heaviest percentage loss being a little over 1 per cent in 1917 and about 8 per cent in 1918. Stumpage appreciation IN INVESTMENT AND EARNINGS. — As ex- plained in Chapter II, page 14, the use of appreciated values of stumpage in computing costs makes the amounts of profit shown for both years less than they should be for some companies, while for others the use of stumpage values less than cost makes profits shown larger than they actually should be. Furthermore, the use of appre- ciated values in investment tends to show percentage rates of profit on investment less than they should be while carrying stumpage or other investments on the books at less than actual cost tends to make rates of return on investment too high. Appreciaf-ioii in the accoujits of 57 companies. — Analyses of the timber accounts of 57 of the 143 companies are available which show that the cost of stumpage was not used in their timber accounts or cost statement in one or both of the years covered. In a few cases the companies carried their timber investment on their books at less than the amount paid for it and charged stumpage into costs at less than its actual cost. These cases, however, were the exception rather than the rule, the prevailing practice among the 57 companies being to carry their timber investments on their books at appreciated val- ues and to charge stumpage into costs at inflated figures. In some cases stumpage apparently was carried in the timber accounts at cost, but charged into costs at appreciated figures. In a few cases this practice had gone on until the timber account was totally written off 24 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. before the cut was completed, and the remaining stumpage had been written back on the books, and the process begun again. Forty-two of the 57 companies required adjustments in both in- vestment and costs in both years, in most cases the change being due to carrying stumpage in investment and charging it into costs at figures higher than cost. i. e., at appreciated values. The remaining 15 companies showed miscellaneous changes, usually due to appre- ciated values either in investment or costs, or in both, in one or the other of the two years. Table G shows the investment and earnings of the 57 companies as reported, the amount of appreciation in investment and in costs as shown by analysis of timber account, and the effect of adjusting the investment and earnings figures on the rate of return on invest- ment. The same data are also shown for 4'2 of these companies. These data, as stated above, are based entirely on figures reported by the companies and subsequently verified by agents of the Commission. Table 6. — Investment and earnings of 57 southern pine lumber companies as reported and after rei^ision for appreciation in investment and costs, 1917 and 1918. Item. 1917 ot companies: Reported investment $149, 379, 772. 33 Appreciation 30,685,989.85 Revised investment $118, 693, 782. 48 Percentage decrease 20. 5 Reported earnings $14, 368, 054. 01 Appreciation in costs 4, 411, 299. 81 Revised earnings l $18, 779, 353. 82 Percentage increase I 30.7 Reported rate of earnings 9. 6 Revised rate oX earnings | 15. 8 42 companies:' Reported investment . Appreciation Revised investment Percentage decrease. Reported earnings . . . Appreciation in costs. Revised earnings Percentage incrca>e. . , Reported rate of earnings. Revised rate of earnings. . . $123, 594, Ifti. 83 27, 782, 865. 73 $95,811,240.10 22.5 $12,230,918.27 4,165,026.31 $16,395,944.58 34.1 9.9 17.1 191S $159,479,708.92 32, 801, 294. 83 $126,678,414.09 20.6 $14,067,017.26 4, 319, 236. 82 $18,386,254.08 30.7 8.8 14.5 $133, 100, 256. 67 29, 815, 912. 07 $103,284,344.60 22.4 $12, 406, 532. 96 3,997.512.30 $16, 404, 045. 26 32.2 9.3 15.9 • Included in the 57 companies. The adjustments shown in each group are the net totals for the group, i. e,, the dill'erence between the amount by which the total timber investnicnt for certain companie.s was increased, and the amount by which it was decreased for others. For instance, in the 42-company group for 1917, 4 companies carried their timber invest- ment at less than actual cost by ai:)proximately $750,000. This amount has been deducted from the total appreciation for the remain- ing 38 companies to ol)tain the net appreciation shown in the table. The following year the understatement of timber values for ?> of the 42 companies amounted to $70,000. which was likewise deducted from the api)rociation shown by the remaining 39 companies. INVESTMENTS AND EARNINGS. 25 The result of all revisions for the 57 companies was a decrease in reported investment amounting to about 21 per cent in both 1917 and 1918. The decrease in investment for the 42 companies was approximately 22 per cent in both years. The elimination of excessive depletion from costs resulted in an increase in amount of earnings of approximately 31 per cent for the 57 companies in both years. The increase in amount of earnings for the 42 companies was 34 per cent in 1917 and 32 per cent in 1918. The effect on rates of earnings of carrying appreciated values in in- vestment and charging them into costs is strikingly brought out by the table. Based on the investment and earnings as reported, the percentage rate of return for the 57 companies was about 10 per cent in 1917 and nearly 9 per cent in 1918. After revision of invest- ment and earnings the corrected rate for the 57 companies is in- creased to about 16 per cent in 1917 and a little less than 15 per cent in 1918. For the 42 identical companies the increase in per- centage rate was somewhat larger than that for the 57 companies. Fifty-seven companies grouped according to rates of return on investment. — Table 7 shows the results for the 57 companies grouped according to their respective rates of earnings on investment before and after adjustment for appreciation in investment and costs in 1917 and 1918, together with the proportion of total production and the proportion of total investment for the 57 companies covered in each group. Table 7. — Percentages of production and investment, and rates of return, as reported by 57 southern pine lumber companies and as revised by the Com- mission, by profit groups, 1917 and 1918. Reported. Revised. Profit groups. Num- ber of com- panies. Per cent of total produc- tion. Per cent of total invest- ment. Rate of return on in- vest- ment. Num- ber of com- panies. Per cent of total produc- tion. Per cent of total invest- ment. Rate of return on in- vest- ment. 1917. Loss 1 8 19 15 5 7 2 1.0 1.5.5 34.5 21.6 9.3 15.7 2.4 1.7 24.8 37.8 19.3 7.5 8.3 .6 iQ.l 3.3 7.7 12.7 16.5 23.3 45.4 Under 5 2 14 5 14 10 12 2.6 24.6 5.8 28.9 17.7 20.4 8.8 29.8 7.7 28.3 15.2 10.2 3.8 5 to 10 7.3 10 to 15 13.3 15 to 20 16.6 20to30 24.0 Over 30 38.7 Total 57 100.0 100.0 9.6 57 100.0 100.0 15.8 1918. Loss 5 8 24 7 6 6 1 6.1 7.7 46.6 12.1 14.7 11.5 1.3 6.6 12.6 52.6 11.7 10.6 5.3 .6 »1.9 2.5 7.5 11.5 18.0 24.2 30.5 3 4 10 13 12 6 9 3.9 4.6 16.6 24.5 18.1 14.4 17.9 4.6 8.9 17.2 29.8 18.8 11.4 9.3 12.3 Under 5 3.7 5 to 10 8.2 lOto 15 12.7 15 to 20 16.8 20 to 30 22.7 Over 30 35.9 Total 57 100.0 100.0 8.8 57 100.0 100.0 14.5 » Loss. Before revisions were made the majority of the 57 companies and the bulk of the total production and investment for both years fell in the four groups showing rates of return under 15 per cent. The result of revisions on the grouping of companies was to materially 26 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. decreiise the number of companies in these groups and to correspond- ingly increase the number of companies in the groups making over 15 per cent in b'^th years. After revisions for 1917 the majority of the companies and the bulk of their production and investment fell in the three groups having earnings averaging over 15 per cent on total investment. In 1918 the number of companies shifting to the higher-return groups was somewhat less than in 1917. It is to be noted that although the result of revisions made was to materially increase the average rate of earnings for the 57 companies in each year, the effect of shifting companies from lower to higher groups caused comparatively little change in average rate of return for the companies in each group except in the group making over 30 per cent on investment. For the latter group, two companies in 1917 had an average rate of about 45 per cent. After revision the number of companies was increased to 12 and their average rate of return decreased to less than 39 per cent. In 1918 one company before revision showed a rate of return of about 31 per cent on total invest- ment, while after revision 9 companies showed rates in excess of 30 per cent, their average return being almost 36 per cent. Ap2)J'€ciatioii in the accounts of l-lfS companies. — For a part of the 86 companies included in the group of 143 companies, shown in Table 4, complete analyses of investment are available, which indi- cate no appreciation in their investment as reported. For the others no analysis is available, consequently it is impossible to state whether they have appreciation in either investment or costs. In all proba- bility a number of the 86 companies had some appreciation in invest- ment or in costs, or in both. The following table summarizes the changes in rates of earnings for the 143 companies and for subgroups of the 143, consisting of 86 companies showing no appreciation and 57 companies showing ap- preciation in investments or in costs, or in both, in one or both years. Table 8. — Coinparison of rates of earnings on entire investment as reported by the companies and as revised hy the Commission, 1917 and 1918. Rates of earnings. Item. 1917 1918 As re- ported. As re- vised. As re- ported. As re- vised. ShowinR appreciation (57 companies): High 46.4 "0.1 64.2 0.9 30.5 ■2.8 45 Low ■ 3 7 Average 9.6 15.8 8.8 14 5 Showini; no appreciation (86 companies): High 52.1 >2.9 62.1 12.9 51.7 113.0 51 7 Low 1 13 Average 8.5 8.5 8.0 8 Total (143 companies): High 52.1 >2.9 64.2 12.9 51.7 113.0 51.7 Low ■ 13 Average 9.0 11.6 8.4 10 9 1 Loss. INVESTMENTS AND EARNINGS. 27 Analysis of revised rates or return on investment. — For the 143 companies the result of revising investment and earnings was to increase the rate of total earnings to total investment from 9 per cent to about 12 per cent in 1917 and from a little over 8 per cent to nearly 11 per cent in 1918. For 86 companies there were no adjustments and for the remaining 57 companies the adjustments made resulted in a marked increase in rate of return on investment in each year. On the whole, however, the effect on the percentage rate of return on investment of the practice of carrying timber in- vestment at appreciated values, and charging stumpage into costs at appreciated values is strikingly shown in the results for the 57 companies. The table also shows the high and low rates of earnings on in- vestment for the 86 companies for which no revisions for apprecia- tion were made in investment or costs in comparison with the high and low rates of return both before and after revision in investment and earnings for the 57 companies. Before revisions were made for appreciation in investment and earnings, the highest rate of earnings and the greatest percentage of loss occurred in both years among the 86 companies for which no revisions were made. In each year one company of the 86 made earnings amounting to slightly more than half of its total invest- ment. In each year, also, a number of the 86 companies showed losses, the largest loss in 1917 amounting to almost 3 per cent of the total investment and in 1918 to 13 per cent. After revision for 1917, the highest rate was shown for one of the 57 companies. In 1918, however, the highest rate of earnings was made by one of the 86 companies for which no revision was made. Among the 57 companies for which revisions were made, a few showed large earnings, the majority showed moderate earnings, and but one company showed a small loss before, and none after revision in 1917. In that year the result of the revisions made was to increase the maximum rate of return for one company from 46 per cent to 64 per cent, but to very slightly increase the minimum rate of return for the group. In 1918 the maximum rate of return for any indi- vidual company of the group, both before and after revision, was noticeably less than that of the preceding year. A few of the 57 companies reported rates considerably higher than the average, the maximum rate for the group being just over 30 per cent as com- pared with 46 per cent for the previous year. The majority of com- panies showed moderate rates and a few showed small losses, the heaviest of which amounted to less than 3 per cent of the total in- vestment. Revisions for the 57 companies for 1918 produced a marked increase in the maximum rate of earnings for the group, but caused one company's percentage loss to be somewhat greater after revision than before. This company showed appreciation in invest- ment but none in costs. It operated at a loss for the year, which was the same before and after revision. Consequently, reducing its in- vestment by the amount of appreciation shown resulted in a higher percentage rate of loss. Rates of return on investment by groups. — A few of the 143 companies reported very large earnings in each year, but the greater nun4)er reported only moderate earnings and a considerable number 28 COSTS AXD PROFITS OF SOUTHERN PINE COMPANIES. reported losses in each year. The actual distribution of the 143 com- panies in groups according to the reported and revised rates of return on investment is sliown in Table 9. Table 9. — Percentages of production and investment and rates of return, as reported and as revised for l-'/S southern pine lumbc>r companies, by profit groups. 1917 and 1918. Reported. Revised. Profit groups. Number of com- panies. Per cent of total produc- tion. Per cent of total invest- ment. Rate of return on in- vest- ment. Number of com- panies. Per cent of total produc- tion. Per cent of total invest- ment. Rate of return on in- vest- ment. 1917. Loss 6 25 44 31 17 14 6 3.7 18.1 30.2 19.3 13.8 10.9 4.0 4.7 26.5 33.9 16.9 10.4 6.1 1.5 11.2 3.1 7.1 12.7 16.3 23.3 36.8 5 19 39 21 26 17 16 3.2 12.2 25.7 12.1 22.7 11.9 12.2 4.3 19.8 30.1 11.7 19.6 as 5.7 >1.4 Under 5 .- 3.1 5to 10 6.8 10 to 15 12.9 15 to 20 16.4 20to30 23.9 Over 30 37.9 All groups 143 100.0 100.0 9.0 143 100.0 100.0 11.6 1918. Loss 17 28 49 20 13 13 3 7.0 17.1 35.6 14.0 10.9 13.9 1.5 7.9 21.2 42.4 12.0 7.3 8.6 .6 11.8 2.9 7.3 11.9 17.5 22.8 32.6 15 24 35 26 19 13 11 6.0 15.7 21.9 19.7 12.4 15.3 9.0 7.1 20.5 25.8 20.0 10.5 11.6 4.4 11.9 Under 5 3.2 5to 10 7.4 10 to 15 12.6 15 to 20 16.7 20to30 22.4 Over 30 35.8 All groups 143 100.0 100.0 8.4 143 100.0 100.0 10.9 •Loss. In 1917, 6, and in 1918, IT of the 143 companies reported small losses on their total business, but the revisions of the Commission reduced these to 5 and 15, respectively. In 1917, 75 companies, repre- senting 52 per cent of the production and about 65 per cent of the total investment, reported profits of less than 10 per cent on their total investment, while in the following A-ear 94 companies, representing nearly GO per cent of the total production and over 71 per cent of the total investment, reported less than 10 per cent. Taking the 1917 revised figures, 63 companies, representing 41 per cent of the production and 54 per cent of the investment, realized less than 10 per cent on the investment, and for 1918 there were 74 companies in this group with 43 per cent of the production and 53 per cent of the investment. In both years the companies re- porting earnings greater than 30 per cent represented only a minor part of the total production and investment covered, amounting to only 4 per cent of the production and nearly 2 per cent of the investment in 1917 and a little over 1 per cent of the production and si.x-tenths of 1 per cent of the total investment in 1918. Taking the revised figures in 1917 there were 16 companies with 12 per cent of the production and a])out 6 per cent of the investment which realized over 30 per cent on the investment, and in 1918 there were 11 companies with 9 per cent of the production and about 4 per cent of the investment which fell in this group. INVESTMENTS AND EARNINGS. 29 Companies grouped according to investment. — The total invest- ment of companies engaged in lumber manufacture varies greatly with the quantity of timber and timberland owned. Consequently two companies having practically the same production and earnings may have widely differing rates of return on their total investment. The following table shows the revised rates of return for 143 southern pine companies, grouped according to their respective total revised investments into 7 groups, as noted in the table. The results are shown for each of the three territorial groups as well as for all terri- torial groups combined. Table 10.- -Rate of return for I'fS southern pine lumhei' companies, as revised by the Commission, by investment groups, 1917 and 1918. Investment groups. 1917. Under $250,000 $250,000 to $500,000 $500,000 to $1,000,000 $1,000,000 to $2,500,000 $2,500,000 to $5,000,000. . . . $5,000,000 to $10,000,000... Over $10,000,000 Average, all groups 1918. Under $250,000 $250,000 to $500,000 $500,000 to $1,(X)0,000 $1,000,000 to $2,500,000. . . . $2,500,000 to .$,5,000,000. . . . $5,000,000 to $10,000,000. . . Over $10,000,000 Average, all groups Gulf States group. Num- ber of com- panies. Rate of return on in- vest- ment. Per ct. 22.3 17.3 16.3 16.4 12.2 10.3 5.9 12.5 Georgia-Florida group. Num- ber of com- panies. 8.0 10.6 12.8 12.7 13.3 10.6 7.7 11.7 Rate of return on in- vest- ment. Per ct. 12.8 8.5 9.4 10.2 12.0 11.3 7.4 10.9 Virginia-Caro- lina group. Num- ber of com- panies. Rate of return on in- vest- ment. Per ct. 9.5 7.5 9.0 6.7 .9 U.l All groups. Num- ber of com- panies. 3.1 7.0 5.5 4.7 1.3 2.3 Rate of return on in- vest- ment. Perct. 18.0 14.2 14.7 16.1 10.7 8.7 5.9 11.6 7.9 10.3 11.6 11.8 12.4 9.3 7.7 10.9 1 Loss. On account of the larger number of companies in the Gulf States the greatest significance attaches to the results for that territorial group and to the results for all territorial groups combined, as the number of companies in each size classification is in most cases sufficiently large to prevent one company with exceptionally high or exceptionally low earnings affecting unduly the averages. It is quite noticeable in both years that the companies of the Gulf States and Georgia-Florida groups realized rates of return on their total invest- ments that were on the average much larger than those of the Vir- ginia-Carolina group, and that they were highest for the Gulf States group. The most striking feature brought out by the table for each terri- torial group is that the highest rates of return on investment were made by companies having small or medium-sized investments, while the smallest rates of return were made by the large companies. Companies having a very large investment, as a rule, have a larger proportion of their total investment in land and timber than those 105332°— 22 4 30 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. havino; a smaller investment, and therefore, as stated above, tend to show Tower returns on investment. It is also quite noticeable that in 191S the rat^s of return for the companies having the smallest total investments (with the exception of the small companies of the Georgia-Florida group) generally decreased, while those of the com- panies having the largest investments generally increased. A study of the volume of production and sales for the 143 com- panies grouped according to their total investment indicates that the total sales for the smaller companies decreased in 1918 by larger per- centages than those of their larger competitors. Table 11 shows the percentage decreases in production and sales footages for the various investment groups. In this table the companies are grouped for both yeare according to their investments in 1917, in order to make the companies in each classification identical for both years. Table 11. — Percentage decrease in production and sales footages for 1918 com- pared icith 1917, for l-iS southern pine lumber companies, ty groups, based on 1911 investment, as revised by the Commission. Gulf States group. Georgia-Florida group. Virginia-Carolina group. AH groups. Investment group. Num- ber of Percentage decrease. Num- ber of com- pa- nies. Percentage decrease. Num- ber of com- pa- nies. Percentage decrease. Num- ber of com- pa- nies. Percentage decrease. 1 com- pa- nies. Pro- due- Sales, tion. Pro- duc- tion. Sales. Pro- duc- tion. Sales. Pro- duc- tion. Sales. Under $250,000 8 26.0 1 22. .T 2 4 5 112.1 13.6 17.1 16.5 113.7 15.8 4 2 4 1 2 1 28.2 33.2 32.3 40.8 12.7 37.7 2.5.0 32.1 31.7 37.6 16.8 29.5 14 17 36 46 19 8 3 22.1 16.3 18.2 17.2 11.8 13.1 13.6 19.7 $250,000 to $500,000 11 i 20.3 14.7 27 16.6 1 13.3 45 16.8 1 10.8 15 12.3 t 7.0 7 9.9 ! 2.3 3 13.6 13.3 10.9 $500,000 to $1,000,000 $1,000,000 to $2,500,000 15.4 11.3 $2, 500, 000 to $5, 000, 000 $5,000,000 to $10,000,000 Over $10.000,000 2 6.6 12.3 7.4 5.5 13.3 All groups 116 14. si 9. 9 13 7.3 2.0 14 27.8 26.3 143 153 10- T 1 1 Increase. For the 143 companies it is quite noticeable that the percentage decreases in both production and sales footages were greater for the small companies than for the large companies. For territorial groups it is quite noticeable that the Virginia-Carolina group showed a larger percentage decrease in both production and sales footage than either of the other gi'oups. This tends to explain the marked decrease in rates of return on investment show'n for the Virginia- Carolina group in Table 10. The smaller companies of the Georgia- Florida group, on the other hand, showed considerable increases in their total production and sales footages. These increases tend to exi)lain why rates of return on investment did not decrease for com- panies in this group. (See Table 10.) PifOI'OHTION OF INVESTMENT AND EARNINGS GROUPED ACCORDING TO voLoiE OF SALES. — The quantity of lumber sold by the 143 companies for which complete cost and financial data were secured ranged, for individual companies, from 5.781,472 to 276,722,248 feet board meas- ure in 1017 and from 2,448,920 to 220,121,273 feet board measure in INVESTMENTS AND EARNINGS. 31 1918. In order to show the distribution of total quantities sold, investment, earnings, and rates of return on investment among large and small companies, the 143 companies have been grouped into five groups, based on volume of sales in feet for 1917 and 1918, as shown in Tables 12 and 13. Table 12 shows the percentage of the total num- ber of companies, total investment and total earnings falling in each size group. Table 12. — Percentages of total number of companies, total sales footage, total investment, and total earnings for 143 southern pine lumber companies, as revised by the Commission, grouped according to quantity of lumber sold, 1917 and 1918. Quantity sold. Companies. Number. Per cent of total. Per cent of total sales footage. Per cent of total invest- ment. Per cent of total earnings. 1917 12,500,000 and under 12,500,000 to 25,000,000 25,000,000 to 50,000,000 50,000,000 to 100,000,000 Over 100,000,000 Total 1918 12,500,000 and under 12,500,000 to 25,000,000 25.000,000 to 50,000,000 50,000,000 to 100,000,000 Over 100,000,000 Total 12.6 32.8 35.0 14.0 5.6 3.1 16.1 33.1 25.0 22.7 2.3 12.4 34.2 25.7 25.4 1.9 10.0 39.2 25.3 23. 6 143 100.0 100.0 100.0 100.0 20.2 35.0 26.6 14.0 4.2 113 100.0 5.3 18.7 29.1 28.2 18.7 3.9 16.5 31.2 27.2 21.2 2.1 12.5 32.5 31.0 21.9 100.0 100.0 100.0 Nearly half of the 143 companies in 1917, and somewhat more than half in 1918, sold less than 25,000,000 feet of lumber each, while in both years practically four-fifths of the total number of companies included in the tabulations sold quantities not exceeding 50,000,000 feet per company per annum. In both years four-fifths of the total number of companies sold less than 50,000,000 feet per annum, and their combined sales represented approximately 50 per cent of the total footage sold. About half of the remaining 50 per cent of the footage sold was reported by 20 companies reporting between 50,- 000,000 and 100,000,000 feet board measure in both years. The remainder was covered by ei^ht large companies in 1917 and six large companies in 1918, reporting sales amounting to over 100,000,000 feet each. The percentages of companies were relatively high for the small company groups, while the percentages of total sales footage, total investment, and total earnings were greater for the large com- pany groups. Although there is a rather striking uniformity in the percentage distribution of total sales, total investment, and total earnings for each size group in both 1917 and 1918, the small com- pany groups show a relativelj'^ smaller proportion of total invest- ment and earnings than of sales footage, while the larger company groups show a somewhat greater proportion of total investment and earnings than of footage sold. 32 COSTS a:n'd profits of southern pine companies. Table 13 shows the average sales footacre, investment, and earnings per thousand feet of lumber sold and rates of return on investment for the 143 companies grouped exactly as in the preceding table. Table 13. — Arerafie sales footages, average investments, and earnings per thousand feet sold, and rates of return on investment for IJ/S southern pine lumber companies, as rerised by the Commission, grouped according to quan- tity sold, 1!)J7 and 1918. Quantity sold. Number of com- panies. Average sales per company. Invest mentsper thousand feet sold. Earnings per thousand feet sold. Rate of return on invest- ment. 1917. 12,500,000 and under 12,500,000 to 2.-),oon.ono. . . 25,000,000 to 50,000.000 . . . 60,000,000 to 100,000,000. . Over 100,000,000 Total 191S. 12,500,000 and under 12,500,000 to 25,000,000. . . 25,000,000 to 50,000,000. . . 50,000,000 to 100,000,000 . . Over 100,000,000 Total Feet. 9,102,195 IS. 274, 827 35, .369, 068 66. fv3H, SS7 151, «2, 705 $39.75 40.18 53. 86 53. 82 5S.3G 37,311,047 8,618,286 17,847.777 36,540,336 67, 090, 014 148,570,615 52.24 45.18 53.31 65.05 58.71 68.72 33,315.215 60.71 $3.70 3.78 7.15 6.13 6.29 Percent. 9.3 9.4 13.3 11.4 ^ 10.8 6.05 2.66 4.39 7.35 7.26 7.74 6.60 11.6 5.9 8.2 11.3 12.4 11.3 10.9 The average sales per company for the different groups vary from slightly more than 9,000,000 feet board measure for the smallest froup to over 151,000,000 feet for the largest group in 1917, and rom slightly more than 8,600,000 feet for the smallest group to nearly 148.600,000 feet for the largest group in 1918. In general, taking quantity of sales as the basis of comparison, the companies with the smaller volume of sales showed lower earnings per thousand feet board measure than those having large sales, especially in 1918. Of the five gi'oups shown, the middle group had the highest rate of earnings in 1017, while the next to the largest group had the highest rat« in 1918. The average rate for the 143 companies was somewhat le.ss in 1918 than in 1917. Although on the whole the companies selling the largest quantities of lumber realized greater profits per thousand feet sold than the small companies, the rates of return on investment for the large companies were not correspondingly greater on account of the larger investment. Tliese larger investment figures are in the main due to larger investments in stumpage and to a less extent to plant and equipment and other investment figures. Section 3. Investment per thousand feet of lumber produced. \ .\i!i.\riox OF iNVF.sTMKNT WITH TiMF.ER SUPPLY. — In tlic lumbcr in- dustry a large part of the investment of many firms represents stand- ing timber and timber lands. This is especially true of those firms having sui)plies of timber sufficient to last for a number of years. For a company having a timber supply sufficient for 15 years the pro- portion of total investment per unit of product represented by tim- ber and timber hinds is considerably greater than that for a company INVESTMENTS AND EARNINGS. 33 having a five-year supply. This situation is shown very well by the following; tabulation of the total investments per thousand feet of lumber produced for 146 southern pine lumber producers based on the total investment at the end of 1917 and the production for the year 1917. In 1918 the production and distribution of southern pine lumber was under increasingly strict governmental regulation and the total cut of the companies reporting to the Commission was about 12 per cent less than in 1917, hence the year 1917 has been chosen as the more nearly normal of the two years for which data are available. In compiling the figures, the three broad territorial gi'oupings pre- viously used have been retained. In many cases the reports did not segregate land and timber values or furnish plant or working capital investments in detail, hence the total investment shown in the balance sheets has been divided into land and timber, plant and equipment, and all other investments. The amount shown as " all other " investments is obtained by deduct- ing from the total investment shown in the balance sheet the amounts reported by the companies as representing the value of land and tim- ber, and plant and equipment. After this segregation was made the mills in each territorial group were arranged in four classes according to estimated length of opera- tions based on the log scale cut for the year 1917 and the timber stand in log scale owned as of December 31, 1917. The first clas- sification includes all companies owning timber sufficient to last five years or less, providing the rate of cut for the year 1917 were main- tained. The second classification includes companies having an owned supply of timber sufficient to last from 6 to 10 years; the third, companies having oAvned timber sufficient to last from 11 to 15 years; and the fourth, companies having over 15 years' supply. In the last- named group it was found that but one company had timber suffi- cient to last over 20 years. The investment per thousand feet of lumber produced is shown in Table 14. The figures shown in the table are obtained by dividing the total for each of the three items of investment named above by the total production in board measure for the year 1917. The 146 companies included in the tabulation represent all companies report- ing investments and timber stands for the year in such form as to be usable in the tabulation. The reports indicate that if the 1917 rate of cut is maintained, and disregarding growth of timber, 73 companies, or exactly half of those included in the tabulation, would cut out their timber in five years or less, or by the end of 1922; 119 companies, or over four-fifths of the total, would cut out by the end of 1927 ; 137 companies, or more than nine-tenths of the total number of companies, would complete their cut by 1932 ; and but one company of the 146 would still be in opera- tion after 1937. It will be noted also that all of the 9 companies that in 1917 had over 15 years' timber supply were in the Gulf States group. As already stated, these calculations depend on taking the stands as reported and disregarding current growth, which can not be definitely determined. From this showing, therefore, it is not to be definitely concluded that all of the companies will complete their cut and cease production by the dates given. The rate of cut may be 34 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. lessened, thereby lengthening the life of the operations, or there may be standing timber adjacent to the mills that was not owned in 1917 that may be bought or secured by lease. The fact remains, however, that southern pine, representing, according to the United States For- est Service in 1920. but 15 per cent of the softwood standing timber of the country can not long continue to supply, as it has been doing in the past few years, about 35 per cent of the total lumber produc- tion of the country. As the larger mills complete their cut they will be succeeded by smaller mills operating on isolated tracts or on sec- ond growth, so' that the southern pine area will not until long after the dates mentioned cease to be an important lumber-producing re- gion. The results shown for these 146 companies that were repre- sentative commercial producers of lumber in 1917 merely emphasizes the growing need of a definite public reforestation policy to prevent the complete exhaustion of southern pine timber. Table 14. — Investment per thousand feet board nveaaurc of lumber produced, as revised by the Commission, for l.'fG southern pine lumber compavies in 1917, classified accjording to life of operations based on timber oicned and stumpage cut, by territorial groups. Num- ber of com- panies. Investment per thousand feet sawmill cut. Timber supply and terri- torial group. Total invest- ment. Land and timber. Plant and equip- ment. AU other. Amount. Per cent of total. Amount. Per cent of total. -\mount. Percent of total. 5 vears and under: Gulf States 59 8 6 $37.66 32.90 27.46 $16. 89 10.52 12.06 44.9 31.9 43.9 $9.67 9.86 7.44 25.7 30.0 27.1 $11. 10 12.52 7.% 29.4 38.1 29.0 Total 73 36.94 16.30 44.1 9.59 26.0 11.05 29.9 6 to 10 vears: Gulf States 38 3 5 53.31 57.63 76.58 27.98 35.90 42.17 52.5 62.3 55.1 10.27 10.42 12.41 19.3 18.1 16.2 11.06 11.31 22.00 28.2 Georgia-Florida 19.6 28.7 Total 48 56.38 30.06 53.3 10.54 18.7 15.78 28.0 n to 15 vears: Gulf States 16 1 1 80.21 94.03 56.30 50.57 58.65 39.80 63.0 62.4 70.7 14.97 20.00 5.65 18.7 21.3 10.0 14.67 15.38 10.85 18.3 16.3 Virginia-Carolina 19.3 Total 18 79.87 50.14 62.8 15.08 18.9 14.65 18.4 Over 15 vears: Gulf State.s 9 73.93 53.18 71.9 12.10 16.4 8.65 11.7 Total 9 73.93 e3.18 71.9 12.10 16.4 8.65 11.7 All companies: Gulf States 122 12 12 53.14 48.46 62.72 29.14 24.02 34.03 54.9 49.6 54.2 11.02 11.79 10.84 20.7 24.3 17.3 12.98 12.65 17.85 24.4 Georgia- Florida 28.1 VlrglnlarCarolina 28.5 Total 146 53.53 29.21 54.6 11.04 20.6 13.28 24.8 INVESTMENTS AND EARNINGS. 35 In general the table shows marked increase in investment in land and timber as the estimated life of the operations increases, ranging from $16.30 for the group owning timber sufficient for 5 years or less to $53.18 for companies having over 15 years' supply. For all groups the average land and timber investment amounted to $29.21 per thousand feet of lumber produced in 1917. It will be noticed that the largest proportional investment in land and timber changes from one territorial group to another as the life of operations length- ens. In the five years and under the Gulf States group shows the largest proportional investment in land and timber, in the 6 to 10 year group the Georgia-Florida, and in the 11 to 15 year life the Virginia- Carolina group shows the largest. For all groups the largest propor- tional investment in land and timber shifts back to the Gulf States group. For investment in plant and equipment there is a closer uni- formity in each group. In terms of percentages of total investment, land and timber repre- sents a progressively increasing proportion varying from about 44 per cent for the companies having a timber supply to last 5 years or less to approximately 72 per cent for the companies having in excess of 15 years' supply. The proportion represented by plant and equipment varies considerably from group to group, repre- senting on the average from about 26 per cent for the companies having the smallest timber supply to a little over 16 per cent for those having the largest supply. All figures discussed above are based on the revised investment and the production for the year 1917. Later years doubtless would show somewhat different results. Some of the companies included above would have completed their cut, others doubtless would show larger investments due to timber purchases or to writing up their timber accounts, while others that have neither added to their timber sup- ply by purchase, nor written up the value of their timber would show smaller total investments as their supply is cut out. Finally, any change in the quantity of lumber sawecl from year to year would result in correspondingly increased or decreased investment per thousand feet produced in subsequent years. Consequently, the fig- ures shown above are not to be assumed to represent a constant figure for investment per thousand feet that may be applied to any year but the year for which they were computed. Earnings of companies grouped according to life of opera- tions. — Table 14 showed that the total investment per thousand feet of lumber produced increases with the amount of timber lands owned. Consequently, it may happen that two companies producing under otherwise similar conditions as to volume, cost, etc., and sell- ing at the same profit per thousand feet of lumber sold may show widely differing rates of return on investment because one has a relatively larger timber investment than the other. Table 15 shows for 1917 the average unit investments, unit profits, and rates of return for the 146 companies grouped according to their estimated length of operations based on stumpage owned and stumpage cut. 36 COSTS AXD PROFITS OF SOUTHERN PINE COMPANIES. Table in. — Investment and earnings per thousand feet and rates of return on iniestment in I'JH for /-}6 southern pine lumber companies, as revised hy the Commission, classified according to life of operations based on timber otoned and atumpage cut, by territorial groups. Timber supply and territorial group. Number of com- panies. Invest- ment per thousand. Earnings per thou.sand. Rate Of return (per cent). 5 years and under: Gulf States 59 8 6 $37.66 32.90 27.46 Jo. 77 2.74 1.11 15.3 8.3 4.1 Total 73 36.94 5.39 14.6 6 to 10 vears: Gulf States.. 38 3 5 53.31 57.63 76.58 7.82 7.98 1.02 14.7 13.8 1.3 Total 46 56.38 7.00 1Z4 11 to 15 vears: G ul/ States 16 1 1 80.21 94.03 56.30 6.19 4.84 7.86 7.7 Georgia- Florida 5.1 14.0 Total 18 79.87 6.15 7.7 Over 15 years: Gulf States 9 73.93 7.01 9.5 Total 9 73.93 7.01 9.5 All groups: Gulf States 122 12 12 53.14 48.46 62.72 6.62 4.68 1.29 12.5 Georgia- Florida 9.7 2.0 Total 146 53.53 6.18 11.6 The 73 companies in the group having timber supplies to last five years or less showed the smallest average earnings per thousand feet of lumber produced but the highest average rate of return on total investment. The most trustworthy comparisons^ how- ever, appear to be those drawn from the Gulf States group, for ■which this same relationship is found as to the companies with the smallest timber supply. Chapter IV. UNIT COSTS, SALES REALIZATION, AND PROFITS. Section 1. Cost methods and production covered. The problem or lumber costs. — The sawmill takes a log and di- vides it into a number of marketable sizes and grades of lumber and has left a quantity of low grades and short lengths that are rework- able in the production of lath, shingles, box shocks, firewood, kin- dling, etc. In the cost accounts of southern pine mills the logs manu- factured are charged to manufacturing at a uniform cost per thou- sand feet, so that the initial cost of different parts of a given log finding their way into different grades of lumber is the same for both high and low grades and by-products. Furthermore, each manu- facturing process produces various grades of each size at identical cost per thousand feet for both high and low grades. Average stumpage, logging, and manufacturing costs are easily obtainable. The average cost of producing a given size finished in a given man- ner may be ascertained if sufficiently detailed mill records are kept. For the various grades produced of any given size, however, there are no differences either in cost of stumpage as handled by manu- facturers of southern pine, or in subsequent mill processes that dif- ferentiate the costs of high grades from those of low grades of any size finished in a given manner. Consequently, detailed cost com- parisons by sizes and grades can not be made from the data reported by manufacturers. Discussion restricted to averages. — In the absence of costs by sizes and grades it is necessary to confine the ensuing discussion to average costs, average selling prices, and average profits per thou- sand feet of lumber sold, regardless of size or grade. In a number of cases, owing to lack of complete information, it has been necessary to use different footages without corresponding inventory adjust- ments in the computation of costs. From a study of the costs of cer- tain companies, which could be computed both with and without inventory adjustments, it appears that the error in costs as reported due to lack of inventories is small, probably not more than 1 or 2 per cent for southern pine mills as a group. The statistics shown reflect the general condition of the southern pine industry as a whole during the period covered. Number and grouping or companies. — A total of 205 producing companies returned usable reports showing average costs of mill-run lumber. The preceding chapter discusses the investments and profits of 143 of these 20.5 companies that returned usable financial data for both years. In this chapter the average costs of the 205 compa- nies are discussed as reported by the companies, and in addition the costs for the 143 companies whose investments and profits are dis- cussed in Chapter III are shown both before and after revision for appreciation in stumpage. 37 J,553,57 38 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. The unit costs, prices, and profits of the 205 producing companies are discussed first. These reports were not revised to eliminate ex- cess depletion on account of appreciation of stumpage, because the data for such revision were too incomplete for man^' of the com- panies. These 205 companies returned a total of 218 reports covering the costs, sales, realization, and profits from lumber and other sources for 236 individual mills. In some cases the companies owning two or more mills returned consolidated reports for all of their mills. In othere, companies owning two or more mills returned a separate report for each mill. In the computation of unit costs, prices, and profits it might be desirable to use the individual mill as the pro- ducing unit. Since, however, it was impossible from data at hand to segregate the costs of individual mills in the consolidated cost reports, while it was possible to combine the mills owned by a single company to form a consolidated company report, the latter course has been pursued, and the unit costs, prices, and profits of the 205 companies are made the basis for discussion. The discussion of the unit costs, sales realization, and profits, for the 143 companies as re- ported and as revised by the Conunission is taken up in the last part of this chapter. Production covered. — The following table shows the production of southern pine and number of mills operated by the 205 companies covered in this report in comparison with the total production of southern pine lumber and number of mills operating as reported by the United States Forest Service for the years 1917 and 1918. Table 16. — Total production of southern pine lumber and quantity and per- centage of total covered in costs, by territorial groups, 1917 and 1918. Total southern pine.' Covered by Federal Trade Commission. Group. Number of mills. Production Number of mills. Production. Percentage of total. Number of mills. Produc- tion. 1917. Gulf States 2,221 801 2,506 Feet. 8, 756, 449, 000 1, 493, 966, 000 2, 085, 459, 000 182 24 30 Feet. 5,551,767,449 445, 729, 641 608,311,984 8.2 3.0 1.2 63.4 Georgia- Florida 29.8 Virginia-Carolina 29.2 Total 5,528 12,335,874,000 236 6,605,809,074 4.3 53.5 1918. Gulf States ],S92 7, 03.5, 283, 000 1,118,594,000 1, 652, 578, 000 182 24 30 4, 708, 162, ,562 391,603,393 443, 142, 267 9.6 3.7 1.4 66.9 649 2,177 35.0 Virginia-Carolina 26.8 Total 4,718 9,806,455,000 236 5,542,908,222 5.0 56.5 » U. S. Department of Agriculture, Forest Service, "Production of Lumber, Lath and Shingles," 1917, p. 10, and 1918, p. 19. It will be noticed that while the proportion of production covered by this report in 1917 was about 54 per cent, the number of mills was only about 4 per cent. F'or different territorial groups the propor- tion covered varied from 29 to 63 per cent in 1917, and the propor- tion of mills varied from about 1 to 8 per cent of the Forest Service UNIT COSTS, SALES REALIZATION, AND PROFITS. 39 totals. In 1918 the proportion of production covered was about 57 per cent and varied from 27 to 67 per cent for the different groups, while the number of mills operated by companies reporting to the Commission varied from a little over 1 to almost 10 per cent of the Forest Service totals. This shows that the production not covered by the Commission represented that of a great number of small mills, many of which had very inadequate accounting records and were therefore unable to furnish the data requested in the Commission's schedules. Volu:me of SALES. — Table 17 shows the total sales of the 205 com- panies for 1917 and 1918 grouped exactly as in the preceding table. Table 17. — Quantities of lumber sold by 205 southern pine lumber companies, by terriiorial groups, 1917 and 1918. Group. Number of com- panies. Quantity. Per cent 1917 1918 in 1918. Gulf States 156 24 25 5,702,619,348 431, 915, 963 626,750,634 Feet. 5,100,593,056 391, 996, 592 468,534,043 10.6 9.2 25.2 Total 205 6,761,285,945 5, 961, 123, 691 11.8 The quantity of lumber sold, like the quantity produced, showed a marked decrease in volume in 1918 as compared with 1917, varying from 9 per cent to 25 per cent for the different groups and amount- ing to nearly 12 per cent for the 205 companies. In both years the sales reported were greater than the production, as will be noted by comparing Tables 16 and 17. The total sales realization, however, increased about 13 per cent for all groups, the percentage increases for different groups ranging from about 7 per cent for the Virginia- Carolina group to about 16 per cent for the Georgia-Florida group. (See Table 41, p. 81.) Average size of companies. — Much of the virgin stand of southern pine, particularly in the South Atlantic States, has already been or is rapidly being cut out. As the best timber is exhausted, large mills are dismantled and are replaced or superseded by smaller ones work- ing on small isolated areas of virgin timber and second growth. Consequently there is considerable variation in the size of mills operating in different parts of the southern pine belt, the larger being in the Gulf States and the smaller ones in the Atlantic Coast States. Table 18 shows the average production by States for the 205 companies covered in this report. The companies located in Oklahoma, Louisiana, and Texas re- ported the largest, and those of North Carolina the smallest aver- age production per mill in each year. In general the average pro- duction per company in the western end of the southern pine area is from one and a half to two times as large as that of companies in the Atlantic Coast States. 40 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Tabu: 18. — Average production pei- company for 205 southei-n pine lumber companies, by States and groups of States, 1917 and 1918. Nnmher of com- panies. 1917 1918 State and group. Total produc- tion. Production per company. Total produc- tion.* Production per company. 23 18 48 38 2 27 Feet. 461,168,310 569, 102, 058 2,348,604,768 1, 0S3, 003, 464 137,670,210 952,218,639 Feet. 20,050,796 31,616,781 48. 929, 266 28, 500, 091 68, 835. 105 35, 267, 357 Feet 350,561,762 470, 927, 498 2,048,718,566 922,699,714 100,344,651 814,910,371 Feet. 15, 241, 816 26,162,639 T/onisiana ... 42,681,637 ■Mississippi 24.281,571 Oklfthnrnn .50, 172 325 T^»Tft.<< 30, 181, 866 Total Gulf States 156 5,551,767,449 35, 588, 253 4,708,162,562 30,180,529 Florida 17 7 343,361,429 102, 368, 212 20, 197, 731 14, 624, 030 304, 215, 891 87,387,502 17,895,052 12, 483, 929 Total Georgia- Florida 24 445, 729, 641 18,572,068 391,603,393 16, 316, 808 North Carolina South Carolina Virginia 7 10 8 73, 465, 809 208,876,528 325, 969, 647 10,495.115 20,887,653 40, 746, 206 55, 933. S54 145, ^i, 743 241,373,670 7,990,551 14,583,474 30, 171, 709 Total Virginia-Carolina 25 608 311,984 24, 332, 479 443,142,267 17,725,690 Total 205 6,605,809,074 32, 223, 459 5,542,908,222 27,038,577 Section 2. Unit costs, sales realization, and profits, 205 companies. Cost of sales, sales realization, and earnings per thousand feet BOARD measure. — Table 19 shows the average cost of sales, sales realization, and earnings per thousand feet board measure as re- ported by the 205 companies whose production is discussed above. Three territorial ^oupings are shown, which are identical with the subgroups shown in the preceding tables. The unit figures are based on the quantities and total costs shown in Exhibit 4, page 74. Tabi.e 19. — .iveragc cost of sale^s, sales realization, and earnings per thousand feet, as reported by 205 southern pine lumber companies, by territorial groups, 1917 and 1918. Group 1917. Gulf States 1 Georgia-'"lorida ' Virginia-Carolina ' All groups 1918. Gulf SUtC5 Georgia- 'lorida Vlrglnla-Tarolina All groups Number of com- panies. 1.56 24 25 205 156 24 25 205 Cost of sales. S16.44 17.45 18.91 16.73 21.87 22.99 28.18 22.44 Sales realiza- tion. S20.88 20.08 20.29 20.77 26.49 25.73 29.13 6.05 Net earnings on lutnber. S4. 44 2.63 1.38 4.04 4.62 2.74 .95 4.21 Farnings from other sources. SO. 92 .58 .44 1.03 .57 .45 .95 Farnings on rntire business. J5.36 3.21 1.82 4.89 5.65 3.31 1.40 5.16 i Includes Alabama, Arkansas, Louisiana, Mississippi, Oldahoma.and Texas. 'Includes T'loridaand 'ieorgia. •Includes North Carolina, .South Carolina, and Virginia The cost of sales shown above includes the total reported cost of stumpage. logging, manufacturing, general and administrative ex- penses, selling and shipping expenses, less net income from by-products, UNIT COSTS, SALES REALIZATION, AND PROFITS. 41 the production of which is not treated as a separate operation, and the material or other costs of which are included in logging, sawmill, or other lumber-manufacturing operations. The sales realizations shown are the net sales reported after de- ducting discounts, returns, allowances, and freight paid. Net earnings on lumber shown in the table represent the difference between the realization per thousand feet and the cost of sales per thousand. It is to be noted that for those companies that failed to keep by-products costs separately from lumber costs the effect of de- ducting income from by-products from lumber costs is to cause any profit realized from by-products to be included in profit from lumber. This applies to the results for approximately 40 per cent of the com- panies. In general, the income per thousand feet from by-products was small when spread over the total production of all companies, amounting to but 11 cents per thousand feet of lumber produced m 1917 and 12 cents per thousand in 1918. (See Table 22, p. 45.) These small amounts represent net income from by-products which may be more than or less than the cost of by-products sold. Consequently the error in average net earnings on lumber for all companies intro- duced by their handling by-products in this way for 40 per cent of the companies covered is very small, if not negligible. Earnings from other sources represent income derived from such sources as commissaries, farms, cut-over lands, light and power plants, tenements, stocks and bonds owned, common carrier earnings of owned logging railroads, profits on the sale of capital assets and for some companies income from by-products (laths, shingles, and shooks, turpentine, and rosin) the production costs of which were not reported as part of costs of lumber. Average costs ^ sales realization^ and earnings. — Average cost of sales and average sales realization for all companies and for the different groups of companies showed marked increases in 1918 over 1917. The highest cost of sales in both years is shown for the Vir- ginia-Carolina group. The largest percentage increases in both cost of sales and sales realization is likewise shown for the same group. The average net earnings per thousand on lumber for all companies and for the Gulf States and Georgia-Florida groups showed a slight increase, but the earnings of the Virginia-Carolina group (in both years the lowest of the three groups) decreased from $1.38 per thou- sand in 1917 to $0.95 per thousand in 1918, a decrease of 31 per cent. Average earnings per thousand from other sources showed an in- crease for all groups in 1918. Average total earnings, including earnings from lumber and other sources, also increased, being on the average for all companies over 5 per cent higher in 1918 than in 1917, notwithstanding the fact that the Virginia-Carolina group showed a decrease of 23 per cent in their total earnings. Interest, income and excess profits taxes. — In the schedules all interest and income and excess profits taxes were excluded from costs. This method of reporting interest eliminates factitious cost showings and puts all companies on the same basis by eliminating the question as to whether a company oAvns or borrows its capital and makes the main consideration a fair return on capital employed re- gardless of the method of capitalization. Income and excess profits taxes, as their names imply, are levied on and payable from income and were therefore excluded from cost in the schedules. These items 42 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. are payable out of earnings before the final distribution of profits in the form of dividends or profits carried to surplus. The amount of these items for the year 1917 ranged from $0.86 to $1 per thousand feet board measure for the different groups and averaged $0.97 for all three groups. For 1918 the amounts increased for every group, ranging from $1.23 to $1.41 for different groups and averaging $1.38 for all groups. After the payment of interest, and income and excess profits taxes, the profit remaining decreased sliditly for all groups from an average of $3.92 per thousand for the vear 1917 to $3.78 per thousand for 1918. (Table 38, p. 75.) Hjgh and low costs, sales realization, and profits for indi- vidual COMPANIES. — The preceding discussion of unit costs, sales realization, and profits was based entirely on average figures, no men- tion being made of the ranges in items included in the averages. Table 20 sliows the high and low for each of the items shown in Table 19 for the 205 companies. Each of the figures shown is the highest or the lowest figure, as the case may be, for an individual company for each of the items. Table 20. — High and lotv cost of sales, sales realization, net earnings on lumber, earnings from other sources, and total earnings per thousand feet board measure, as reported by 205 southern pine lumber companies, by territorial gwups, 1911 and 1918. ^ Group. Num- ber of com- pa- nies. Cost of sales. Sales realization. Net earnings on lumber. Earnings from other sources. Total earnings. High. Low. High. Low. High. Low. High. Low. High. Low. 1917. Gulf States 156 24 25 $23.45 $12.32 $25. 33 24.60 25.67 $15.31 15.10 16.93 $9.80 1 $2. 72 2 $14.02 i$1.34 12.12 1.96 2 $16..57 8.69 7.12 i$1.21 Georgia-Florida Virginia-Carolina 23. 03 13. 20 22.40^ 13.01 7. 03 1 . 94] 1. 68 5.91| »4.35| 2.35 1.64 14.35 All groups 205 23.45 12.32 25.67 15.10 9.80| 14.35 2 14.02 12.12 2 16.57 14.35 1918. Gulf States 156 24 25 29.91 31.30 37.12 15.63 16.85 23.23 34.64 36.08 36.28 19.61 18.81 21.83 13.791 1 4. 85, « 14. 36 8.581 13.55; 2.00 5.74| 14.36 4.09 13.50 1.94 1.77 2 18. 16 1 4. 85 Georgia-Florida Virgmia-CarolLna 9.35 13.00 5. 83 1 4. 36 All groups 205 37.12 15.63 36.28 18.81 13.79 14.85,2 14.36 1 1 1 3. 50! 2 18. 16 14.85 » Loss. * One compajiy operating four mills reported costs and income in detail for one mill only, but included n-it earnings from the other three mills as " earnings from other Bources." There is a wide spread between the highest and the lowest average cost of sales and sales realization shown by individual companies due to different grades of timber, different operating conditions, dif- ferent sizes and grades of lumber produced, etc. Since lumber is produced at widely differing costs and sold at different prices ac- cording to grade and finish considerable range in profit per thousand feet naturally follows. Some companies in each group in each year sold their lumber at a loss, at least as compared with average cost of production, while others made large earnings per thousand feet. Similarly for earnings from other sources, some companies show profit and otliers los.ses in every group. It sometimes happens that a siiiull ])rofit on lumber is more than balanced by a loss from other sources, or a loss on lumber is turned into gain in total earnings. Nevertheless, some companies in every group carried on their total UNIT COSTS, SALES REALIZATION, AND PROFITS. 43 operations, including lumber and other operations, at a loss, while other companies show profits of varying amounts. In both 1917 and 1918 the Virginia-Carolina group showed the smallest maximum earnings as well as the largest loss per thousand, while the largest earnings and the smallest loss was for companies in the Gulf States group. Costs and earnings by size of companies. — A study of cost of sales and earnings per thousand for the 205 companies arranged according to volume of sales indicates that the smallest companies realized the smallest earnings per thousand feet. For this study the companies of each of the three territorial groups have been ranked according to their respective sales footages into five groups, as shown in Table 21^ and Exhibit 7, page 81. Table 21. — Costs and earnings per thousand feet as reported by 205 southern pine lumber companies, according to quantity sold and by territorial groups, 1917 and 1918. Quantity sold. Per cent of total sales footage. Cost of sales. Earnings on lumber. 1918 Per cent of total sales footage. Cost of sales. Earnings on lumber. Gulf States: Under 12,500,000 12, 500, 000 to 25, 000, 000. 25,000,000 to 50,000,000. . . 50,000,000 to 100,000,000. . OverlOO,000,000 2.3 13.8 31.3 19.0 17.9 J17.31 17.28 16.36 15.97 16.28 $3.57 2.80 4.64 5.29 4.59 4.3 17.7 26.2 22.4 15.0 $23. 78 22.72 21.52 21.35 21.73 $0.8S 3.13 5.01 5.55 5.35 Total. 84.3 16.44 4.44 85.6 21.87 4.62 Georgia-Florida: Under 12,500,000 12,500,000 to 25,000,000. . 25,000,000 to .50,000,000. . 60,000,000 to 100,000,000. Over 100,000,000 1.2 2.9 2.3 16.90 18.00 17.07 1.57 1.52 4.52 1.9 1.8 2.1 23.46 22.86 24.15 19.30 2.61 1.03 1.95 8.58 Total . 6.4 17.45 2.63 22.99 Virginia-Carolina: Underl2,500,000 12,500,000 to 2.5,000,000. . 25,000,000 to 50,000,000. . 50,000,000 to 100,000,000. Over 100,000,000 .7 2.4 1.8 4.4 17.08 19.25 17.07 19.73 1.95 1.90 2.59 .52 1.7 1.9 1.2 3.0 28.28 29.08 29.00 27.25 .97 .20 3.51 .35 Total. 18.91 1.38 7.8 28.18 .95 All groups: Undfer 12,.500,000 12,500,000 to 25,000,000. . 25,000,000 to 50,000,000.. 60,000,000 to 100,000,000. Over 100,000,000 4.2 19.1 35.4 23.4 17.9 17.16 17.64 16.45 16.68 16.28 2.75 2.49 4.53 4.39 4.59 7.9 21.4 29.5 26.2 15.0 24.66 23.29 22.02 21.98 21.73 1.32 2.70 4.73 5.04 5.35 Total. 100.0 16.73 4.04 100.0 22.44 4.21 Note. — More and complete data regarding this table will be found in Exhibit 7, p. 81. Of the 205 companies, 156, or over three-fourths of the total num- ber, were located in the States of Alabama, Arkansas, Louisiana, Mississippi, Oklahoma, and Texas, comprising the Gulf States group. These 156 companies reported approximately seven-eighths* of the total quantity of lumber sold in each year. The remaining com- panies were about equally divided between the Georgia-Florida and Virginia-Carolina groups. The 24 companies of Georgia and Florida, representing approximately one-eighth of the total number 44 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. of companies, reported about one-fifteenth of the total quantity sold in both years, -while the 25 companies of the Virginia-Carolina out one-eleventh of the total quantity sold in 1917 and about one-thirteenth in 1918. All of the companies selling over 100,000,000 feet board measure and all but four of the conipanies selling between 50,000,000 and 100,000,000 feet ^vere in the Gulf States group. Less than one-fifth of the total number of companies in the Gulf States group sold less than 12,500.000 feet in either year, while for each of the other groups al)out one-third of the companies in 1917 and one-half in 1918 sold less than that quantity. The net profits realized on lumber by the small companies of the Gulf States group were ver^'^ much larger than those of the small companies of the Georgia-Florida and Vir- ginia-Carolina groups in 1917, but were smaller in 1918. Owing to the larger earnings of its large companies in both years the average profit per thousand of the Gulf States group, amounting to $4.44 in 1917 and $4.62 in 1918, were nearly 70 per cent greater than those of the Georgia-Florida group in both years, and about tAvo and one- half times greater in 1917 and nearly five times greater in 1918 than those of the Virginia-Carolina group. The larger earnings of the Gulf States grou]) in 1917 were due to somewhat lower average cost of sales and slightly larger average sales realization. In 1918 the average cost of sales for the Gulf States group was less than that of either of the other two groups, but the average sales realization of the Virginia-Carolina group was materially greater than that of either of the other groups. The last-named group, however, had such a high average cost of sales that its average earnings per thousand on lumber were the smallest shown for any group in either year. In the Georgia-Florida and Virginia-Carolina groups the num- ber of companies in each of the different size classifications was so ^mall that exceptionally high or low figures for a single company materially affect the results for each of the various size-groups. For the (iulf States group the highest cost of sales and the lowest earnings per thousand feet in each year were shown by the smaller groups of companies. In both years over 50 per cent of the total sales reported by the 205 conipanies comprising the three territorial groups were reported by companies selling between 12,500,000 and 50,000,000 board feet annually. Comparatively few companies selling over 50,000,000 feet board measure annually reported a relatively large proportion of tlie total lumber sales. These large companies generally produced lumber at a somewhat loAver cost per thousand feet than their smaller coni[)etitors and sold their product at somewhat higher prices in both years, thereby realizing higher earnings per thousand. In gen- eral also the larger companies showed larger earnings from other sources, and conseciuently a wider range in earnings per thousand from their entire business than the smaller companies. As already shown, however (see p. 29), the smaller companies generally showed a higiier rate of return on investment. Unit I'RoDUCTioN and selling costs. — The subject of unit lumber production costs may be approached either from the point of view of production costs by operations such as logging, mill cost, gen- eral and adminLstrative. shipping and selling expense, or it may be UNIT COSTS, SALES REALIZATION, AND PROFITS. 45 approached from the point of view of analyzing and assembling the various elements of cost, such as labor, materials and supplies, and overhead expense, which constitute the total cost of sales. The cost schedules used by the Commission in its war-time cost work called for departmental costs and production in considerable detail. Most companies were able to report their departmental ex- penditures at least in total, but many were unable to report analyses of these totals according to the schedules. In general, the amount columns of the schedules were filled in detail much more completely than the columns provided for departmental production quantities and inventory footages and amounts. Failure to report production and inventories by departments was due to the fact that the records of many of the companies were not kept in such a way as to yield the figures requested. Ave7'af/e costs. — Since detailed analyses of cost figures by depart- ments were lacking in many schedules, it is possible to present costs for the 205 companies discussed above subdivided to show only stumpage, logging, manufacturing, general and administrative, shipping, and selling. In the computation of these reported costs, lack of departmental production quantities and departmental inventory footages and amounts makes it necessary to use different quantities as divisors in computing costs of different items as de- scribed in Exhibit 5, page 76. Consequently, the average figures for total cost to produce and sell, obtained by adding together the aver- age departmental costs shown in Table 22, are only approximately correct. At best the departmental costs shown represent only the cost of producing a certain number of feet board measure of logs and of sawing and marketing a certain quantity of lumber during the year. The quantity logged may be greater or less than the quantity of lumber sawed, and the quantity of lumber sold may likewise differ from the qviantity of lumber sawed. A study of cer- tain companies for which costs could be accurately computed by de- partments indicates that the error in total cost, as shown in the table, due to omitting inventory adjustments, is probably not more than 2 per cent. Table 22. — Average cost per thousand feet of producing and selling southern pine (mill-run) lumber and timbers, as reported by 205 southern pine lumber companies, by territorial groups, 1911 and 1918. Year and group. Num- ber of com- panies. Stump- age. Log- ging. Mai fact inj lU- ir- General and admin- Ship- ping. SeUing. Total. Less by- prod- uct. Net cost to producei and sell. istra- tive. 1917. Gulf States.... Georgia- Florida Virginia-Carolina.... 156 24 25 $4.66 4.19 3.29 $4.44 5.53 6.67 $4. 5. 6. 48 15 23 $2.31 2.04 2.65 $0.48 .34 .32 $0.55 .49 .63 $16. 92 17.74 19.79 $0.10 .30 .16 $16. 82 17.44 19.63 All companies. 205 4.50 4.72 4.69 2.32 .46 .55 17.24 .11 17.13 1918. Gulf States 156 24 25 5.06 4.34 3.66 6.55 8.05 10.68 6.78 7.28 9.58 3.07 2.64 4.25 .68 .54 .51 .69 .53 .78 22.83 23.38 29.46 .09 .38 .27 22.74 23.00 29.19 Georgia- Florida Virginia-Carolina . . . All companies. 205 4.90 6. 98 1 7. 04 1 3. 13 .66 .68 23.39 .12 23.27 105332"— 22- 46 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. The aveiatre reported cost of every item shoAvn in Table 22 in- creased in 1918 as compared with the previous year. Total cost to produce and sell for all companies was nearly 36 per cent greater in 1918 than in the previous year. This increase in average cost includes increases in diUerent items, as follows: Stumpage, 9 per cent: log- ging. 48 per cent; manufacturing expense, 50 per cent; general and administrative expense. 35 per cent; shipping expense, 44 per cent; and selling expense. 24 per cent. As explained below, the increase in stumpage which is given unrevised was due in part to apprecia- tion of stumpage investment. The deduction for by-products is necessary, because about 40 per cent of the companies do not segregate the cost' of by-products, such as laths, shingles, shooks, etc., from their lumber costs, hence the total cost of mill-run lumber has been reduced by the amount of net income from by-products realized by the companies including by-products costs in their lumber costs. Al- though this item was considerable for certain of the 40 per cent of com- panies reporting it. Avhen averaged over the total production of the 205 companies, the deduction amounted to but 11 cents per thousand feet board measure in 1917 and 12 cents in 1918. Considerable variation appears in the percentage increases of cer- tain items for the different territorial groupings of companies, the largest increases both in amounts and percentages generally being shown for the Virginia-Carolina group. High and low costs. — The previous table and discussion does not show the wide ranges in individual company costs included in the averages. The following table shows the highest and lowe.st costs for the 205 companies. The groupings shown are the same as those in Table 22. Table 23. — High and loiv average costs per thousand feet to produce and sell sovtliern pine lumber, as reported by 205 southern pine lumber companies, by territorial groups, 1917 and 1918. Item. Gulf States. Georgia- Florida. Virginia- Carolina. All groups. 1917 1918 1917 1918 1917 1918 1917 1918 Stumpage: $9.07 1.60 11.15 1.83 9.96 2.44 6.87 .69 14. .56 .09 1.79 .01 25.24 12.53 $9.45 .79 15.32 3.09 13.55 3.79 7.85 .71 14.51 .06 2.21 .01 35. 92 16.30 $10.00 1.54 10.63 3.03 10.11 3.24 3.68 .39 1.10 .32 1.96 .02 25.27 13.21 $8.36 2.18 13.37 4.69 13.16 3.76 6.59 1.20 1.55 .39 1.75 .03 36.54 16.86 $6.00 2.29 10.98 3.41 9.75 3.95 7.03 1.25 1.67 .33 1.63 .01 24.15 15.20 $6.99 2.50 17.42 6.67 13.66 5.93 9.30 2.36 2.69 .32 2. OS .03 38. IS 24.03 $10.00 1.54 11. 15 1.83 10.11 2.44 7.03 .39 M.56 .09 1.96 .01 25. 27 12.53 $9.45 .79 Loggiiip 17.42 3.09 Manufacturing: High 13.66 3.76 General and administrative: High 9.30 .71 '^'& >4. 51 .06 Sellint;: High 2.21 .01 Net cost to produce and .sell: High 38.18 Low • 16.30 Probably includes other expense than shipping. Sfvmpar/e. — The various methods by which stumpage values are carried on their books by different companies and charged into UNIT COSTS, SALES REALIZATION, AND PROFITS. 47 costs were desci'ibed in some detail in Chapter IT (pp. 14- to IG). Variations in methods of handlintr stumpa<^e and variations in quality of stiimpage both tend to produce wide differences in charoes made for this item to costs. The average figures for different groups shown in Table 22 included charges to costs varying from $1.54 to $10 per thousand feet board measure in 1917 and from $0.79 to $9.45 in 1918. In some cases the stumpage cost reported was less and in others greater than the actual cost of the stumpage cut. As only a few companies charged stumpage at less than cost, while a con- siderable number charged stumpage at more than cost, the over- charges more than counterbalanced the undercharges. The maxinuim charge of $10 per thousand feet in 1917 was an arbitrary figure made by a company that had no accurate record of original cost, and claimed further that in drawing near the end of its cut it foujid the quantity of its standing timber had been grossly overestimated in the past and therefore depleted at too low a figure to wipe out the timber account as carried on its books. The maximum figure of $9.45 for 1918 was the price paid by one company for standing tim- ber. The low costs shown apparently were due to low-grade timber, inaccessibility, light stand, or to charging stumpage at the actual price paid for it, in some cases many years ago. In some cases com- panies reported a lower stumpage figure in 1918 than in 1917, due to cutting lower grade timber. This was particularly true of com- panies included in the Virginia-Carolina group, in which the timber holdings in many instances consist to a considerable extent of isolated tracts left when the larger and better areas were cut out, or of second growth on cut-over lands. Another factor tending to make stumpage values lower in the eastern part of the territory is the scattered character of the timber, resulting in higher logging costs than in denser timbered and more accessible areas. Although some companies reported lower stumpage costs in 1918 than in 1917, the average stumpage cost for the 205 companies was almost 9 per cent higher in 1918 than in 1917. Two factors may be mentioned as explaining this increase, li'irst, the market prices for stumpage, which are in the long run dependent upon the prices that can be obtained for finished lumber, tended to advance with advanc- ing lumber prices. Consequently companies purchasing additional areas, either for immediate or future operations, were obliged to pay higher prices for their stumpage, and the higher prices paid were reflected in their stumpage cost. Sales of stumpage, however, were not large, as the greater part of existing southern pine timber is already in the hands of strong companies and generally definitely related to existing sawmill operations. Consequently the greater part of the 9 per cent increase in average stumpage cost shown in Table 22 for the year 1918 was due to the second factor, Avhich was the practice by a considerable number of mills of charging stumpage to costs at estimated market value or some other figure higher than actual cost. Logging. — The term " logging " as used here embraces all opera- tions from cutting the trees to delivery of the logs at the mill pond or log yard. These operations are treated as a unit, although they naturally divide themselves into what is commonly known as " woods 48 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. cost "' and " transportation cost."' Woods cost includes felling the trees and assembling the logs by hauling or skidding in preparation for transportation to the mill. Transportation is generally by steam railway or " logging road " equipped Tvith temporary spur tracks to reach areas being cut. The distances over which logs are transported varies widely. As the timber of some companies is much more acces- sible than that of others, total logging costs naturally vary greatly both as to woods expense and transportation. The average logging cost reported was the total logging expense of the year divided by the board measure footage of logs delivered at the mill during the year, this being the most reliable figure available for many mills that did not show all the quantities and inventories necessarj^ for the more accurate computation of logging cost. The average logging cost computed in this way shows marked increase in 1918 over that of 1917. (Table 22.) The logging cost was highest for the Virginia-Carolina group and lowest for the Gulf States group in both years. The spread in costs among the 205 companies was very large, ranging from $1.83 to $11.15 in 1917, and from $3.09 to $17.42 in 1918. (Table 23.) A peculiarity of this item is that the Gulf States group, which had the lowest average logging cost, also shows the highest and lowest cost for all three groups in both years. Mo.raifacturing. — Under this heading are included all expenses of converting logs into finished lumber from the time they enter the mill pond or log yard to. but not including, the loading of the fin- ished lumber for shipment. In arriving at the unit costs shown in Tables 22 and 23 the total amount of money expended in the various manufacturing operations was divided b}' the total sawmill cut to obtain the cost per thousand of producing average mill-run lumber, and therefore the result does not apply strictly to the production of any one particular size or grade. The mill cost of producing timbers and undressed lumber is less than the average shown, while the cost of producing dressed lumber is slightly greater, and the cost of special grades and sizes, such as edge-grain flooring and interior finish, is considerably greater. The wide range in cost between companies shown in Table 23 is due to a number of factors, such as the kind, size, and grade of logs used, the character of the mill equipment, the percentage of output as related to mill capacity, the accounting methods used in treating extraordinary or unusual expenses incurred. The manufacturing costs varied for all companies from $2.44 to $10.11 per thousand feet in 1917, and from $3.76 to $13.66 in 1918. In both years the widest spread within the lesser territorial groups occurred in the Gulf States group, amounting to $7.52 in 1917 and $9.76 in 1918. General and adininisitrative expense. — This item, as shown in the tables, includes all salaries of officers and office force, office expense, such as rent, light, heat, water, telephone, telegraph, stationery and supplies, taxes (other than income and excess-profits taxes), insurance agamst fire and tornado, etc.. on plant, equipment, inventories, and timber, employers liability, depreciation on office buildings and equipment, and any other (\\penses that are not directly chargeable to any particular operation. UNIT COSTS, SALES REALIZATION, AND PROFITS. 49 The average general and administrative expense based on total general and administrative expense divided by the footage of lumber manufactured by all companies was $2.32 per thousand feet in 1917 and $3.13 per thousand in 1918. These averages included high and low figures for different companies varying from $0.39 to $7.03 in 1917 and from $0.71 to $9.30 in 1918. The Virginia-Carolina group showed the highest figures for an individual company in both years. The wide variations shown are explained in individual cases by lack of uniformity in handling depreciation, taxes, and insurance, and in some cases by inclusion of excessive officers' salaries in costs. Some companies showed abnormally high depreciation charges, while others showed very low charges or none at all. Some included only taxes on logging and manufacturing equipment, while others appar- ently included taxes on large timber holdings, cut-over lands, farms, and town property. Taxes on stumpage, if not included as a part of stumpage cost, should be added to general and administrative ex- pense, provided the timber area from which the taxes arise represents only a reasonable supply for existing operations. When taxes on an abnormally large timber supply are added to general expense, the result is an abnormally high figure per thousand. The same is true of insurance on standing timber. Abnormally high officers' salaries, amounting in some instances to scA^eral dollars per thousand feet, caused high general and administrative expenses in some cases. Likewise the inclusion of extraordinary expenses incurred during the period, but which should more properly have been spread over suc- ceeding years, had the same effect. Abnormally low general and administrative exj^enses were due in some cases to the inclusion of such expense items under other head- ings or to failure on the part of the management to charge general and administrative expenses actually incurred to costs. tihi'p'ping expense, — Under this heading are included labor, power, and materials necessary to transfer the lumber from the piles, load, and make it secure on or in the car. The principal item under this heading is the direct labor required to handle the lumber, the other two items being so small for some companies as to be of very minor importance. In the computation of shipping cost, the total number of feet shipped is used as the divisor in arriving at the unit cost per thousand feet. The average shipping expense for all companies amounted to $0.46 per thousand feet shipped in 1917 and $0.66 in 1918. These averages include results for individual companies ranging from $0.09 to $4.56 in 1917 and from $0.06 to $4.51 in 1918. In both years the highest and the lowest costs were shown by companies of the Gulf States group. The wide range was probably occasioned by certain companies purchasing special equipment and charging the entire original cost to shipping expense in the year the equipment was bought, or in a very few cases, to the inclusion of outgoing freight or other items of expense under shipping. Selling expense. — Lumber is sold to the retailer in three general ways: Through the selling agencies of individual companies, through selling agencies handling the produce of a number of companies but 50 COSTS AND PROFITS OF SOUTHERN PINE COMPANIKS. ownotl or coopeiatively controlled by the producers, and through middlemen or wholesalers. It is estimated that 60 per cent of the southern pine product is sold by the first method, which has the ad- vantage of giving the individual company direct supervision and control over the distribution of its product. Sale of the product through the company's own selling organization necessitates work- ing capital sufficient to finance both production and sale of the prod- uct, and in case tlie production is small may entail prohibitive ex- penses. The second method, that of several mills, generally more or less closely affiliated in ownership and control, organizing a single selling agency, possesses the advantage of increasing volume of sales handled by the sales force, with the additional advantage that an order that can not be filled by a single mill may be allocated to several mills. In other respects it possesses to a certain degree the advantages and disadvantages of the first method. The third method, selling through wholesalers, is that predomi- nantly used by small producers. The wholesaler handling a part or all of the product of a number of companies is in a position to oft'er customers a wider range of sizes and grades than a single com- j)any. In addition to providing selling facilities, the wholesaler frequently renders financial assistance, especially to companies un- able to obtain such assistance from other sources. The selling expenses shown in Tables 2:2 and 23 are based on the quantity sold divided into total selling expense reported by com- panies distril)uting their lumber in all three of the ways described above. Naturally the expense shown varies widely with the method of selling used. On the average the selling expense amounted to $0..55 per thousand of lumber sold in 1917 and $0.68 per thousand in 1918. The ranges for individual companies included in these aver- ages were from $0.01 to $1.96 in 1917, and from $0.01 to $2.21 in 1918. The average selling expense for many companies was materially lessened in both 1917 and 1918 by the fact that the Government took a large part of their production, and therefore the time and effort required to sell that ]>art of their product was greatly reduced. The quantity sold decreased in 1918. hence the higher costs shown for all companies were principally due to maintaining large selling organi- zations in comparison with jjroduction and sales, or to high commis- sions paid to brokers, or to the erroneous inclusion of items .such as shipping expense, demurrage charges, etc.. that are not properly a part of selling expense. I!y-products. — The question of handling the costs and income from by-products in relation to the costs of the primary products is a difficult one in any industry. When the Commission began its cost investigation during the war it discovered many cases where no charge was made for the raw materials consumed and no part of the overhead expense was allocated to the production of these by- products. It also discovered instances where the direct manufactur- ing co^ts of by-products were so closely interwoven with the lumber manufacturing costs that not all of these appeared as charged against by-product operations, and as a consequence a very large by- product ])rofit was shown. It Avas. in part, this situation that led to the practice adoptfd M H-$l.50 21.2 32.0 U.Mtr, «5-i.';..w f.^. .'^O- $6 55.2 77.0 87.4 Vv-$c..«) $e.ia-$7 92.2 96.4 Over $7 100.0 T B.M.I BY3l7ANDigi8:\ n" 29 - 28 - 2? 26 - 25 - 24- 23 ■3.2. 21 -20 19, 16 :)i ■ '^ h 1 4 1*1 '3 ^ 12 ^ ' 1 1 - lO 9 26 - 2-7 - 26 - 25 - 24 - 23 - 22 - 2 1 - ; J M , ; ^ alNEa ' i^ :; ^ < ^ ^ s ^ ^ $ ^ ^ 19 S 16 g 15 |v 14 Ul 13 SI 12 1 1 ^ ^ § ^ ^ ^ ^ ^ ^ 1^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^- ^ ^ l [_ ^ ^ ^ l B 9 ^ $ ^ t H ^ ^ ^ ^ Hi _■ 6 ^ 1 ;- ^ ^ ■ 1 7 6 - 5 ■ 4- • 3 2 1 ^ ^ ^ ^ ^ ■ Ij ■ ^ $ i-»l v; H I 1 4 3 2 1 ^ ^ ^ ■^- ^ *' ■ 1 ^ s _ii 1 1 1 :^ s^ ^ i- ^ H TO i B 1 1 1 ^ ^ ^ 1 [^ ^ 1 t< 1 fc 1 1 In 1 1 1 ^ ^, \ 31 J, J 1 N 1 .1 1 ^\ 1 ,1 NUMBER OF CDMPANIE5 I6| 44 B3]7 52J2 3l7'a5!iQh g|?2 7|l5 2121 1 |lS p 2|3 5|ig |l3 |3 NUMBEF? OF COMPANIES CD5T RANDEbIN DDULAR5 I4.DD AND UNDER 4.ai 6.00 6.DI ie.D B.DD 2aa 2D,DI 2?|r D 22m ?4JD 7DI 7 5D 7SI 8DD 9DI asQ 851 901 g,5D iDoa iOD I2DC 12 Dl ISOO 15 01 &N0 QvEB COST RANGES IN DOLLARS 1317 ^SS3 1318 — 1 29 - 28 - 2'7 - 26 -25 - 24 -23 -22 - 2,1 1 1 fVE 1 9 - 1 8 "u - 1 7 m 14 h .3 ^ 12^ ■ 1 1 • 9 ■ 8 - 7 ■ 5 ■ 5 4 - 3 2 i fijT ^1 3|lD NUMBER DF COMPANIES "?.DI 7.51 AND OVER COST RANEES IN ODLLAR5 1317 1318 l()r)S32° — 22. (Face p. .52.) CDMPARI5DN DF CHANGES IN PRINCIPAL ELEMENTS DF CD5T PER M.FEETB M. BY SPECIFIED COST BRDUP5 FDR ZD5 5DUTHERN PINE LUMBER COMPANIES 1917 AND 1918. ;: : :: :^"' ;j :|rj :fj QINB 26 1 — 1 II -i llllll^^ ■■ :;'?i";:?is™"iBoi5::.:^ _ 1 1 1 1 1 1 1 ' 1 1 1 It GENERAL AND ADMINISTRATIVE - ;? k g § I — ' II 1 i . [. ■■ ■ ■■ . 1 1 II - 1 k 1 . 1 1 -4 — Ml 1 1 "cwa^H'-i \t£T-. _ . ,.,..-, u ■. > ,.1 /u 1 .U, 1 ,[i, ,.: . li.i ,., tii-^.?i,''i •J-ffk .."■S-UdoksOiS QD.S 50& 00,5 SDi? DOl? bols OoJBSDh DotgSollQ DOjdl'cH J.^2QD|2Sa|3DO;3SO|.iD0|J^D|SDdbiD;BDQ'6 5DrDQP^QlaTc2 ^S-h' m UNIT COSTS, SALES REALIZATION, AND PROFITS. 53 In 1917, 70 companies, producing about 27 per cent, and in 1918, 60 companies, producing 21 per cent of the total quantity, reported stumpage costs not in excess of $4 per thousand. In 1917, 154 com- panies, producing 72 per cent, and in 1918, 127 companies, pro- ducing 55 per cent of the total quantity, reported stvmipage costs not exceeding $5 per thousand. In 1917, 192 companies, producing nearly 95 per cent of the total, and in 1918, 173 companies, producing 87 per cent of the total quantity, reported stumpage costs not in ex- cess of $6 per thousand. Although there was considerable shifting of companies from lower to higher cost groups between tlie two years, over half of the total production (62 per cent in 1917 and nearly 56 per cent in 1918), Avas covered by companies reporting stumpage costs ranging from $4 to $5.50 per thousand feet in each year. The results for 143 companies as revised by the commission are shown in Table 32, page 60. * Proportion of production in specified ranges of loggincj costs. — Logging includes all expenses of cutting and transporting logs from the woods to the mill pond and log yard. Table 26 shows the per- centages of total production covered falling in specified ranges of cost of logging as reported by the 205 companies for 1917 and 1918 : Table 26. — Proportion of production falling in specified ranges of logging costs as reported by 205 southern pine lumber companies, 1917 and 1918. 1917 1918 Cost per thousand leet. Number of com- panies. Per cent of total production. Number of com- panies. Per cent of total production For each group. Cumu- lative. For each group. Cumu- lative. 15 6 10 16 25 26 26 26 17 12 9 7 2 1 11.1 6.1 8.8 7.4 11.0 14.1 12.0 10.3 6.1 3.8 3.1 2.6 1.3 11.1 17.2 26.0 33.4 44.4 58.5 70.5 80.8 86.9 90.7 93.8 96.4 96.6 97.9 $2 50-$3 $3-S.3.50 .. 8 5 9 13 7 8 10 20 22 15 21 15 8 9 19 13 3 6.8 6.8 $3.50-$4 3.0 9.8 $4-S4.50 8.7 S.4 3.1 7.6 5.0 10.6 9.0 4.8 0.6 10. I 2.9 2.8 6.0 3.9 IS. 5 $4.50-$5 26.9 $5-$5.50 .30.0 $5.50-$6 37.6 $6-$6 50 42.6 $6.50-$7 53.2 $7-87.50 62.2 $7.50-$8 67.0 $8-88.50 73.6 $8.50-S9 S3. 7 $9-S9 50 86.6 $9.50 $10 . 2 5 .7 1.4 98.6 100.0 89.4 $10-$12 95.4 $12 $15 - ... 99.3 100.0 i Logging costs showed a wide spread in each year and was materially higher in 1918 than in 1917. Consequently there was a great deal of shifting of companies from lower to higher cost groups throughout the ranges of cost shown. In 1918. also, the range from lowest to highest cost was somewhat greater than in the preceding year. In 1917 about 59 per cent of the total production footage covered was produced by 98 companies reporting logging costs not exceeding $5 per thousand, while in 1918 only 27 per cent, representing the pro- duction of but 35 companies, fell within this range. In 1918 the 54 t'OSTS AND PROFITS OF SOUTHERX PINE COMPANIES. production of 80 companies reportinfr logging costs ranging up to 5*^7 per thousand was required to cover 53 per cent of the total pro- duction, and that of 102 companies reporting logging costs not in excess of ST.no was required to cover 62 per cent of the total. In 1017, 179 companies reporting logging costs not exceeding $7 per thousand produced nearly 91 per cent of the total footage. In 191.S this maximum logging cost ($7) covered, as stated above, but 53 per cent of the total. To cover 89 per cent of the total footage for 1918 required a maximum logging cost of $10 per thousand. In 1917 the largest percentages of the total footage falling in specified 50-cent ranges were in the ranges between $4 and $6 per thousand. These ranges in 1917 covered nearly half of the total production. In 1918 tliere was a much more general distribution of the total produc- tion to the various ranges, the two largest percentages falling in single groups being almost 11 per cent in the group from $6.50 to $7, and slightly more than 10 per cent in the group from $8.50 to $9. Proportion of production in specified ranges of manufactuHng costs. — Table 27 shows the percentages of total production falling in specified ranges of manufacturing cost, as reported by the 205 companies : Table 27. — Proportion of production falling in specified ranges of manufacturing costs reported by 205 southern pine lumber companies, 1917 and 1918. 1917 1918 Cost per thousand feet. Number of com- panies. Per cent of total production. Number of com- panies. Per cent of total production. For each group. Cumu- lative. For each group. Cumu- lative. tS-iO and under 15 47 37 29 25 17 13 10 3 3 1 1 9.1 2.5.8 18.0 11.7 16.2 6.1 5.8 4.1 .6 .4 .3 .4 9.1 34.9 52.9 64.6 80.8 86.9 92.7 96.8 97.4 97.8 98.1 98.5 $3..tO-H 2 2 7 19 31 27 16 16 20 20 10 8 8 19 0.6 .6 5.7 7.8 IS. 4 15.3 8.2 7.6 10.7 8.3 3.0 5.8 3.1 4.9 0.6 U-U ..tO H . .S0-$.5 i.a 6.9 »5-».5..50 15.50- $6 14.7 33.1 J6-S6..50 48.4 Je.50-$7 56.6 r-«7..so J7.50-$« 64.2 74.9 $S-$8_50 83.2 >S.50-$9 86.2 J9-$9..tO 92.0 $9.50-110 3' 1 1.3 .2 99.8 100.0 95.1 Over $10 100. e For manufacturing costs, as for logging, there was a considerable increase in cost between the two years, which resulted in the shifting of companies from lower to higher groups. In 1917, 26 per cent of the total quantity was produced by companies reporting costs rang- ing from $3.50 to $4 per thousand, while in 1918 only slightly more than one-half of 1 per cent was in this range. In 1917, 53 per cent of the total footage was jH-oduced at a manufacturing cost not ex- reeding $4.50. and nearly 65 per cent of the total production fell under $5 per thousand. In 1918, to cover about 57 per cent of the footage, required the production of companies reporting manufactur- ing costs u)) to $7, while 64 per cent of the total required a maximum UlsriT COSTS, SALES REALIZATION, AND PROFITS. 55 ran«Te up to $7.50 per thousand. In 1917 nearly 93 per cent of the total footage was produced at a cost not exceeding $0.50 and nearly 97 per cent at not exceeding $7 per thousand, whereas in 1918 to cover 92 per cent required the production of companies reporting up to $9.50, and to cover 95 per cent of the total required costs ranging up to $10 per thousand. Proportion of 'production in specified ranges of general adminis- trative^ shipping^ and seTling costs. — In the preparation of the data shown in Table 28 general administrative, shipping, and selling ex- penses have been combined, and the companies ranked on the basis of the total for all three items. The table shows the percentages of total production falling in specified ranges of cost for the three items combined. Table 28. — Proportion of production falling in specified ranges of general and administrative, shipping, and selling costs combined, as reported hy 205 south- ern pine lumber companies, 1911 and 1918. Cost per thousand feet. $1.50 and under. $1.50-$2 $2-$2.50 $2.50-$3 $3-?3.50 «3.50-$4 $4-$4.50 $4.50-$,i $5-$5.50 1... $5.50-$6 '.... J6-S6.50 $6.50-$7 $7-«7.50 Over $7.50 Number of com- panies. Per cent of total production. For each group. 3.9 6.4 12.9 18.5 17.2 17.1 12.3 2.3 1.9 5.9 .7 .1 Cumu- lative. 3.9 10.3 23.2 41.7 58.9 76.0 88.3 90.6 92.5 98.4 99.1 99.2 100.0 1918 Number of com- panies. Per cent of total production. For each group. 0.5 .8 4.0 9.7 14.8 10.6 13.4 8.3 12.5 10.5 5.7 5.2 1.0 3.0 Cumu- lative. 0.5 1.3 5.3 15.0 29.8 40.4 53.8 62.1 74.6 85.1 90.8 96.0 97.0 100.0 Expenses incidental to general administration, shipping, and sell- ing increased in 1918 over those for 1917. In 1917 practically 59 per cent of the total footage was covered by companies showing unit costs for these three items combined, ranging up to $3.50, and 91 per cent at unit costs up to $5 per thousand. In 1918, however, costs ranging up to $4.50 per thousand were required to cover slightly less than 5i per cent of the total, and costs up to $6.50 per thousand to cover ap- proximately 91 per cent of the footage. These increases are similar to those for logging and manufacturing shown in Tables 26 and 27. Graphical presentation of proportion of production in specified ranges of cost. — Chart 2, facing page 52, as already stated, presents graphically the data shown in Tables 24 to 28, inclusive. The chart brings out even more strikingly than the tables or the preceding dis- cussion the shifting of production from lower cost groups in 1917 to higher cost groups in 1918. Of the various items comprising net cost to produce and sell, it is quite noticeable that, although there was a marked tendency for stumpage costs reported to increase in 1918, as compared with 1917, the shifts in distribution of total production 56 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. to the various ranges of cost -were less irreofular than for the other items of cost. The shifting: of production from lower to higher cost ranges of logging was not only very pronounced but was also very ir- regular. The shifting of production from lower to higher ranges of <'Ost for manufacturing and for general administrative, shipping, and selling combined was also noticeable, but was less irregular than for logging. Maa'imum costs to prodibce various percentages of the ontjnit. — During the war it was frequently the practice to show the maximum cost of producing various proportions of the total output of southern pine lumber, as of many other commodities, in order that the price-fixing committee of the War Industries Board might have at its disposal data which would enable it to determine a price which would insure the produ.ction of the requisite supply. Chart 3, oppo- site, shows the cost by operations and the total net cost to produce and sell various percentages of the total output of southern pine cov- ered in tliis discussion. The chart also shows the net cost to produce and sell for each of the 205 companies for the year 1918. In prepar- ing the chart the companies Avere ranked in order from lowest to liighest net cost. The maximum net cost to produce and sell is indi- cated at intervals of 10 per cent of the total production from the lowest to the highest cost. The figures for individual companies on wliich this chart is based will be found in Exhibit 6, page 78. The chart shows in a graphical manner the increase in costs from lowest to highest for the year. It will be noted that the percentage groups showing the greatest si)read in costs were the to 10 per cent group and the 90 to 100 j^er cent group. It is also to be noted that certain of the 10 per cent groups were made up of fewer companies than others. This is especially true of the first 10 per cent groii]) and the 50 to 60 per cent group. It is likewise noticeable that the 90 to 100 per cent group consists of a comparatively large number of small companies having widely vary- ing costs. The increase in costs is fairly constant through 90 per cent of the production, but mounts rapidly for the companies consti- tuting the last 10 per cent. For different cost items there is wide variation shown for different companies. The maximum and minimum costs shown for stumpage. logging, and manufacturing are the same as those shown in Table 23. General expense, as shown in the chart, includes three items, namely, general expense, shipping, and selling, that are shown separately in Table 23. It is interesting to note that the average net cost to produce and sell for the 205 companies shown in Table 22, amounting to $23.27, represents approximately the net cost to produce and sell of a com- pany located in the group just below the 50 per cent point. Section 3. Unit costs, sales realization, and profits, 143 companies. For the 143 companies which have been considered in Chapter III in the discussion of the rate of return on investment, it is practicable to i>resent unit costs and profits after revision to exclude exces- sive depiction on account of a])preciation of stumpage values. Of tlie 143 companies 57 returned reports indicating either appre- ciation or depreciation of stumpage values in investment or in costs, .RUN IN mi8, jv to hi^h with the maximum ee feet B M. 105332'— 22 (Face p. 50.) CDST TD PRDOUCE AND SELL 5DUTHERN PINE LUMBER. PER M. FEET MILL RUN IN 1918; Showrn^ Sfi/mpags Logging. Manufacfurm^. General Expense (including Shipping and Seflingfandthe Total Cost arranged from lov\' to high wilh the max costs of various percentages of the output, as reported bv eos Companies having a total production of 5,5«e,9os. see feet BM r UNIT COSTS, SALES REALIZATION, AND PROFITS. 57 or in botlu in one or both years. In most cases in which adjustments were made the charge for stumpage "was higher than the prices actu- ally paid for it and in some cases higher than the figures at which standing timber was carried on the books. The reports of the re- maining 86 companies showed no appreciation in costs, stumpage be- ing charged at cost as shown by the books, although it is probable that if complete analyses of the timber accounts of some of these companies were available it would be found that the timber is carried on the books at considerably appreciated values. The following table shows a summary of the revisions made in stumpage for the 143 companies. These companies are divided into two groups consisting of 86 companies for which no revisions were made and 57 companies for which revisions were made. The 57 com- panies are again subdivided into tw^o groups to show the revisions made for 42 companies having appreciation in both investment and cost in both years and 15 companies for which miscellaneous revi- sions in stumpage costs were made. Among the 15 companies are included those showing appreciation in both investment and costs in only one year and others showing appreciation only in investment or only in costs in one or both years. The groupings are identical with those appearing in Table 30 (p. 58), but the adjustments shown differ slightly, because in the computation of unit cost of sales the total cost of sales has been divided by the footage sold ; while in the computation of appreciation in stumpage cost, as shown in Table 29, the total appreciation for stumpage cut during the year has been divided by the stumpage footage. Table 29. — Revision for appreciation per tJiousand feet in stumpage charged to costs, I'fS southern pine lumber companies, 1917 and 1918. Companies — Number of com- panies. Stumpage. Reported by com- panies. Appre- ciation adjust- ment. Revised cost. Per cent of de- crease. 1917. Showing no appreciation Showing appreciation (a) Appreciation both years (6) Miscellaneous All companies 1918. Showing no appreciation Showing appreciation (o) Appreciation both years (6) Miscellaneous All companies $4.50 4.49 4.71 3.58 $1.85 2.17 .53 $4.50 2.64 2.54 3.06 41.2 46.1 14.5 4.50 3.65 18.9 4.98 4.83 5.02 4.03 2.13 2.45 .81 4.98 2.70 2.57 3.22 44.1 48.8 20.1 143 4.91 3.94 19.7 Considering first the percentage increases in stumpage cost in 1918 over 1917. both before and after revision, it will be noted that before revision the 15 miscellaneous companies showed the largest percentage increase in stumpage cost, but after revisions were made the percentage increase for the 15 companies was much lessened. The 86 companies reporting no appreciation, and for which, there- fore, no revision was made, showed much the largest increase in stumpage costs. 58 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. For the 57 companies for which revisions were made, the average value of stumpage was decreased $1.85 per thousand feet board meas- ure, or 41 per cent in 1917. and $2.13, or 44 per cent, in 1918. For the 42 companies for Avhich revisions were made in both costs and investment in both years, the reduction in stumpajie cost amounted to $2.17, or 46 per c'ent. in 1917, and $2.45, or nearly 49 per cent, in 1918. For the 15 companies for which miscellaneous revisions were made the cost of stumpage as reported and amounts of the revisions made were materially less than for the 42 companies. When aver- aged over the total production of the 143 companies, for 86 of which no revisions Avere made, the reduction made in stumpage cost per thousand feet board measure, as reported, amounted to $0.85, or almost 19 per cent, in 1917, and $0.97, or nearly 20 per cent, in 1918. Average cost or sales, sales realization, and profit before and AFTER revision FOR APPRECIATION. — Table 30 shows the cost of sales, sales realization, and net earnings from lumber before and after revision of costs for appreciation in stumpage. The 143 companies are divided into two main groups, viz, 86 companies whose reports did not disclose any appreciation and 57 companies whose reports showed appreciation. The amounts of revision obtained by sub- traction differ slightly from those shown in Table 29. because in the computation of cost of sales full consideration has been given to all available inventories while the results shown in Table 29 include no inventory adjustments whatever. Table 30. — Average cost of sales, sales realization , and profits per thousand feet before and after revision for appreciation in stumpage charged to costs, IJfS southern pine lumber companies, 1917 and 191S. Number of com- panies. Cost of sales. Sales realiza- tion. Net profit on lumber. Companies— Reported. Revised. Reported. Revised. 1917. Showing no appreciation 86 57 $17.09 16.09 $17.09 14.27 $20.79 21.11 $3.70 5.02 $3.70 6.84 143 16.63 15.81 20.93 1 4.30 5.12 1918. 86 57 22.91 21.48 22.91 19.52 27.00 26.82 4.09 6.34 4.09 7.30 All companies 143 22.25 21.34 26.92 4.67 5.58 The greatest significance attaches to the figures for the 57 com- panies whose reports showed a definite amount of appreciation in the figures at which stumpage was charged into costs. The average amount of appreciation deducted from cost of sales for the 57 com- panies amounted to $1.82 per thousand feet board measure in 1917 and $1.96 in 1918. Reducing co.st of sales by these amounts resulted in correspondingly increased profits for the 57 companies. The reports of the remaining 86 companies showed no apprecia- tion and are tabulated as including no appreciation in costs, al- though it is, as previously explained, not at all improbable that UNIT COSTS, SALES REALIZATION, AND PROFITS. 59 some at least of the 8G would show appreciation if complete analyses of their timber accounts were available. Costs and earnings by size of companies. — In the discussion of the 205 companies a comparison was made of the costs and earnings for different size groups based on quantity of board feet sold. In the following table similar data are presented for the 143 companies whose costs and investments were revised with regard to apprecia- tion of stumpage. The data are shown as revised by the Commis- sion, but the reported costs are also shown in the Appendix. (See Table 46, p. 92.) Table 31. — Costs and earnings per thousand feet, as revised by the Commdssion; for l-'fS southern pine lumber companies, by territorial groups and quantity sold, 1911 and 1918. 1917 1918 Number of board feet. Number of com- panies. Per cent of sales footage. Cost of sales. Earn- ings on lumber. Number of com- panies. Per cent of sales footage. Cost of sales. Earn- ings on lumber. Gulf States eroup- 12,500,000 and under 12,500,000 to 25,000,000.... 25,000,000 to 50,000,000 50,000,000 to 100,000,000. . . Over 100,000,000 10 36 45 17 8 1.9 12.6 29.8 21.0 22.7 $16. 63 16.97 15.29 14.89 15.42 $.3.89 3.48 6.09 6.34 5.45 17 42 34 17 6 3.2 16.1 26.2 24.6 18.7 $23.38 22.27 20.32 20.07 20.92 $1.28 4.11 6.60 6.83 6.16 Total 116 88.0 15.50 5.56 116 88.8 20.84 5 93 Georgia- Florida group: 12,500,000 and under 12,500,000 to 25,000,000 25,000,000 to .50,000,000. . . . 50,000,000 to 100,000,000. . . 4 6 3 .6 1.9 2.3 17.56 10. 65 15.93 1.95 2.30 5.47 5 4 3 1 .9 1.3 2.0 1.1 22.21 22.13 24.07 17.77 3.00 2.80 1.90 10.10 Over ioo,ooa.o;)o Total 13 4.8 16.43 3.76 13 5.3 22.01 3.94 Virginia-Carolina group: 12,500,000 and under 12,500,000 to 25,000,000 25,000,000 to 50,000,000. . . . 60,000,000 to 100,000,000.. . Over 100,000,000 4 5 2 3 .5 1.6 1.1 4.0 17.63 19.40 14.06 20.67 1.74 1.48 3.50 15.15 6 5 1 2 .8 1.6 .9 2.6 27.64 29.82 30.59 26.04 1.71 .78 3.70 1.57 Total 14 7.2 19.21 .68 14 5.9 27.99 1.71 All groups: 12,500,000 and under 12,500,000 to 25,000,000. . . . 25,000,000 to 50,000,000. . . '. 60,000,000 to 100,000,000... OverlOO.OOO.OOO 18 47 50 20 8 3.0 16.1 33.2 25.0 22.7 16.99 17.17 15.30 15.82 15.42 3.14 3.14 5.96 5.24 5.45 28 51 38 20 6 5.0 19.0 29.1 28.2 18.7 23.89 22.89 20.90 20.53 20.92 1.67 3.74 6.18 6.47 6.16 Total 143 100.0 15.81 5.13 143 100.0 21.33 5.57 ' Loss. The reported costs for the 143 companies, which, as stated above, are shown in the appendix, were not generally dissimilar, either in amount or in the relations of the different groups, to the reported costs of the 205 companies, and therefore do not require any special comment. The same may be said with regard to earnings, (lenerally speaking, the revision decreased costs and increased earnings per thousand in a more or less similar degree, the outstanding exception being the Virginia-Carolina group, which reported no appreciation. Consequently the general conclusion draAvn from a comparison of the revised figures for these 143 companies is substantially the same as that drawn from the comparison already made for the unrevised costs 60 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. of the 205 companies. (See Table 21, p. 43.) The companies with medium size or large sales had lower costs and higher profits per unit of product than the companies which sold comparatively small quantities of lumber. The minimum cost and maximum profit, how- ever, did not fall in any case to the largest size group. Thus for costs the next to the largest size group had the lowest average for the Gulf group in both 1917 and 1918, while the middle group was second and the largest size group third. The same ranking occurred with respect to earnings per thousand. For the other two groups the smaller number of companies and the absence of very large companies give somewhat varying but not contradictory results, while for all groups combined the situation was substantially the same as for the Gulf group. Table 32. — Proportion of production falling in specified ranges of stumpage cost, as reported by U/S sauthern-pine lumber companies and as revised by the Commission, 1917 and 1918. Reported. Revised. Cost per thousand feet. Number of com- panies. Per cent of total production. Number of com- panies. Per cent of total production. For each group. Cumu- lative. For each group. Cimiu- lative. 1917. $2..50 and under 8 9 12 18 27 35 19 7 3 2 3 4.4 3.9 8.5 8.5 18.8 28.2 19.2 5.0 1.5 .7 1.3 4.4 8.3 16.8 25.3 44.1 72.3 91.5 96.5 98.0 98.7 100.0 35 15 13 17 21 22 9 2 3 27.3 8.8 9.1 10.4 14.5 13.5 10.9 2.4 1.1 .7 1.3 27.3 $2 ..tO 1 $3 .00 $3.00 to$3..50 . 36.1 45.2 $3..50 to J4.00 55.6 $4 .00 to $4.50 70.1 $4.50 to $5.00 83.6 $.5.00 to $.5.50 94.5 $.5..50 to $6.00 %.9 $6.00 to $6 .50 98.0 $6.50 to $7.00 98.7 Over $7.00 100.0 Total 143 100.0 143 100.0 191s. $2. .50 and under 5 12 7 17 13 33 25 12 5 7 7 2.1 5.7 4.2 8.3 9.7 24.6 24.5 10.9 2.7 4.0 3.3 2.1 7.8 12.0 20.3 30.0 54.6 79.1 90.0 92.7 96.7 100.0 33 18 7 18 13 20 12 8 4 2 8 24.5 12.0 5.2 11.1 9.2 10.6 13.0 7.2 2.2 1.2 3.8 24.5 $2..50 to 13.00 36.5 to.OO to $;i.50 41.7 $3..50 1 $4.00 52.8 $4.00 to $4. .50 62.0 $4.50 to $5.00 72.6 $5.00 to $5..50 $5.50 to $6.00 85.6 92.8 $6.00 to $6. .50 95 $6.50 to $7.00 96.2 Over $7.00 100.0 Total 143 100.0 143 100.0 For comparison with Table 25 (see p. 52), which gives for 205 companies the proportion of production falling in specified ranges of reported stumpage cost, a similar table is given below for the 143 companies on the basis of revised costs. For other items of cost this form of cla.ssification is not repeated as the revision in question did not affect them. The revision by generally reducing the cost of stumpage tended, of course, to put a larger proportion of the pro- duction in the lower part of the scale of stumpage cost. Thus in 1918 UNIT COSTS, SALES REALIZATION, AND PROFITS. 61 the reported stumpage costs for 50 per cent of the output ran as high as the $4.50 to $5 stumpage cost group, while for the revised costs 50 per cent of the production fell in the group of $3.50 to $4 stumpage cost or lower. Or to put it another way, in 1918, taking stumpage costs up to and including $5 there would be included on the basis of reported costs only 54.6 per cent of the production, while on the basis of revised costs there would be 72.6 per cent. Cost of sales, sales realization, and earnings per thousand FEET. — In order to show the unit costs of the 143 companies whose investment and earnings on investment are discussed in Chapter III the following tabulations are presented. The groupings used are the same as those used in discussing investments and earnings in Chapter III. The first grouping shows the costs, sales realization, and profits as reported for the 143 companies as a single group and subdivided according to territorial location into the following three subgroups : Gulf States group, 116 companies in the States of Arkansas, Ala- bama, Louisiana, Mississippi, Oklahoma, and Texas ; Georgia-Florida group, 13 companies in the two States named; and the Virginia- arolina group, 14 companies in the States of Virginia, North Caro- lina, and South Carolina. In Table 30 the 143 companies are grouped to show the results for 86 companies whose reports did not disclose appreciation in stumpage values and 57 companies whose reports showed appreciation in timber investment and stumpage charged to costs in one or both years. Average unit cost of sales, sales realization, and profit. — The aver- age unit cost of sales, sales realization, and profit per thousand feet board measure, shown in Table 33, are computed in the same manner as those shown for the 205 companies previously discussed. (See pp. 40 to 44.) The results shown are those reported by the companies, full consideration being given to all available inventories in deter- mining the cost of sales and profits. In this tabulation the results are shown both before and after adjustments for appreciated values in stumpage. Table 33. — Average cost of sales, sales realization, and profit per thousand feet, a reported by 143 southern pine lumber companies and as revised by the Commission, by territorial groups, 1917 and 1918. Group. Num- ber of com- panies. Cost of sales. Sales reali- zation. Net earnings on lumber. Net earn- ings from other sources. Total net earnings. Re- ported. Re- vised. Re- ported. Re- vised. Re- ported. Re- vised 1917. Gulf States 116 13 14 $16.41 16.92 19.21 $15.50 16.43 19.21 $21. 06 20.19 19.89 S4.65 3.27 .68 $5.66 3.76 .68 $0.97 .85 .53 $5.62 4.12 1.21 $6.53 4.61 1.21 Georgia-Florida Virginia-Carolina All groups 143 16.63 15.81 20.93 4.30 5.12 .93 5.23 6.05 IMS. Gulf States 116 13 14 21.86 22.44 27.99 20.86 22.01 27.99 26.79 25.95 29.70 4.93 3.51 1.71 5.93 3.94 1.71 1.10 .69 .29 6.03 4.20 2.00 7.03 4.63 2.00 Georgia-Florida Virginia-Carolina AU groups 143 22.25 21.34 26.92 4.67 5.58 1.03 5.70 6.61 105332°— 22 6 62 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Although considerable differences occur in the amounts of items shown in Table 33 for the 143 companies, as compared with those shown in Table 19 for the larger group of 205 companies, practically the same general trend in costs, sales realization, and profits are shown for both groups. For the 143 companies unit costs and sales realization, showed marked increases in 1918 over the preceding year. In terms of percentages, the average cost of sales, excepting for the Virginia- Carolina group, increased somewhat more rapidly than the selling prices. In both years the Gulf States group realized the largest and the Virginia-Carolina group the smallest net earnings per thou- sand feet on lumber. For all three groups the amount of revised earnings on lumber was 46 cents greater in 1918 than in 1917. This increase of about 9 per cent included increases in profits from lum- ber amounting to 37 cents per thousand for the Gulf States group, 18 cents per thousand for the Georgia-Florida group, and $1.03 per thousand for the Virginia-Carolina group. In 1917 the profits of the last-named group were small compared with those of either of the other groups. Even in 1918, when their profits per thousand were two and one-half times as great as in 1917. their earnings were still small compared with those of the other two groups. Xet profits from other sources include income from outside invest- ments, earnings of owned common carriers, etc., and for those com- panies keeping accounts for their by-product operations separate from those for their lumber operations, earnings from by-products. Profits from other sources increased in 1918 for the Gulf States group, but decreased for both of the other groups. Total earnings increased in 1918; the average increase in revised earnings for all groups was 56 cents per thousand, representing a 9 per cent increase over the amount per thousand earned in 1917. Here again the Virginia-Carolina group showed the largest increase in earnings per thousand, but even after the increase their profit per thousand was less than half that of either of the other groups. Unit production and selling costs hy operations. — Table 34 shows the unit costs by operations of producing and selling for 143 manu- facturers of southern pine lumber. The companies are grouped, as in the preceding table, into three territorial groups. In com- puting the figures shown in the table it has been found necessary on account of lack of complete information for a considerable num- ber of companies to use the costs reported for production in the various departments as described in Exhibit 5 (p. 76). Consequently, the net cost to produce and sell obtained bv adding together the unit costs for the different departments differs from the true net cost of sales because of lack of inventory adjustments. The costs are shown as reported and as revised, but the only item of cost affected by the revision is stumpage. UNIT COSTS, SAKES EEALIZATION, AND PROFITS. 63 Table M.—4^verage cost per thousand feet of producing and selling southern pine {mill-run) lumber, as reported by IJ/S companies and as revised by the Commissioti, by territorial groups, 1917 and 1918. Num- ber of com- panies. Stumpage. Gen- eral and admin- istra- tive. Ship- ping. Selling prod- uct deduc- tions. Net cost to pro- duce and jell. Group. Re- ported Re- vised. Log- ging- factur- ing. Re- ported Re- vised. 1917. Gulf States 116 13 14 $4.66 3.45 3.24 $3.72 2.98 3.24 $4.35 5.62 6.58 $4. 45 5.31 6.52 82. 31 1.71 2.77 $0.49 .30 .22 $0.59 .57 .61 $0.09 .34 .15 $16. 76 16.62 19.79 $15.82 16.15 19.79 Georgia-Florida Virginia-Carolina All groups 143 4.50 3.65 4.58 4.64 2.32 .47 1 .59 .11 16.99 16.14 1918. Gulf States 116 13 14 5.08 3.79 3.53 4.00 3.36 3.53 6. 43 6. 75 8.01 , 7.42 10.16 9.80 3.12 2.45 4.34 .71 .51 .34 .74 .62 .74 .08 .44 .27 22.75 22.36 28.64 21 67 Georgia-Florida Virginia-Carolina 21.93 28.64 All groups 143 4.91 3.94 6.74 6.97 3.16 .67 .73 .11 23.07 22,10 Comparison of the figures as reported by the 143 companies with those reported by the 205 companies in Table 22 (p. 45) shows some variation in every item. These differences, except in a few cases, are not large. In general, every item of cost showed marked increase in 1918 over 1917. Stumpage, as reported by the companies, increased on the average for all companies about 9 per cent, logging 47 per cent, man- ufacturing 50 per cent, general and administrative 36 per cent, ship- ping almost 43 per cent, selling nearly 24 per cent. These costs in- clude by-product costs. After deducting income from by-products the average reported net cost to produce and sell for all companies was approximately 36 per cent greater in 1918 than in 1917. The revised stumpage increased about 8 per cent, and the revised net cost to produce and sell about 37 per cent. There is considerable spread between the different groupings of companies for each item shown. The Virginia-Carolina group gen- erally showed higher costs than either of the other two groups and showed a net cost to produce and sell several dollars higher in both years than either of the other groups. For the item of stumi^age the Gulf States group showed the highest figure in both years, while for most other items this group showed lower costs than the other two groups. Chapter V. RECENT PRICE MOVEMENTS. Section 1. Government price regulation. CoxDiTioxs LEADING UP TO REGULATION. — The Outbreak of the World War had a very depressing effect on the lumber industry. This "was due in the first place to the cutting off of exports to Euro- pean countries, thereb}" increasing the quantity to be absorbed in the domestic markets, and in the second instance, to the general derange- ment of economic conditions everywhere, which brought about a feeling of uncertainty and a consequent curtailment of domestic building and other operations requiring the use of lumber. In 1915 the situation began to improve as the country adjusted itself to the new economic conditions occasioned by the war. In 1916 there was considerable building activity and also liberal purchases by the railroads which brought about a very marked improvement over 1914 and 1915. In 1917, when this country became a participant in the World War. there was a good demand for lumber from normal sources, which, coupled with the military requirements of the Gov- ernment for cantonment stock and ship timbers, resulted in a sharp advance in prices. Before the large purchases necessary for the Government's imme- diate and anticipated war needs could be made, it was necessary to determine what was wanted, and when and where the stock should be delivered, as well as to devise ways and means by which the lumber industry could supply the lumber. One of the first steps taken to solve the problem was the organiza- tion in May. 1917, of a committee on lumber and other forest prod- ucts under the raw materials division of the Council of National Defense. The function of this committee was to ascertain the needs of the Government for lumber and forest products and to devise plans by which such requirements could be furnished promptly and at fair prices. This committee continued to function under the Council of National Defense until September, 1917, when its work was transferred to the lumber section of the newly created War Industries Roai'd. From that time on until the termination of the Avar it continued to function as a part of that body. At first the duties of the committee were mainly advisory in char- acter, but later its powers were broadened and extended until at the conclusion of the war it was the principal agency between the A'ari- ous (iovernment departments and the industry. It kept in touch Avith the general situation in the lumber industry, enforced the rul- ings of the price-fixing comniittee. and allocated the Government requirements to the various lumber-producing regions of the coun- try, thereby preventing confusion in the placing and filling of Gov- ernment orders.^ ' War Industries Board Bulletin 43. Prices of Lumber, pp. 22-24. e4 RECEISTT PRICE MOVEMENTS. 65 Through the efforts of the committee a conference was arranged in the spring of 1917 with representatives of the lumber industry for the purpose of providing machinery Avhereby Government orders might be placed with individual mills that could promj>tly and efficiently fill the orders. At the conference it was decided that since the Government did not possess adequate information relative to the character of timber and operating facilities of the mills, the most advisable method of accomplishing this purpose would be the organization of emergency bureaus in the various producing regions to act as distributors of orders given out by the Govern- ment. This arrangement provided that all mills in a given region could participate in Government orders handled by the bureau upon payment of a small fee for the upkeep of the organization and by furnishing the bureau with a statement as to stocks on hand and operating capacity. These bureaus allocated to the various mills those particular specifications which they were in a position to produce, and apparently delays in delivery were reduced and the Government's building program expedited. Prices for Govern mext cantoxment stock. — Next in importance after the ascertainment of the Government's lumber needs and the provision of means by which these needs were to be supplied was the question of prices at which the orders were to be filled. It was evident from the location of the majority of the training camps that the greater part of the Government's orders for cantonment stock would fall upon the southern pine lumber industry, because it was the nearest source of supply and its product was that pre- dominantly used in such construction. As the result of efforts of the lumber committee a price agree- ment with representatives of the southern pine industry respecting cantonment stock was reached on June 13, 1917. This agreement provided for an itemized price on all cantonment stock which would yield for all grades used an average of $20 per thousand feet. These prices were effective only on Government orders, the prices of lumber for civilian purposes being left unregvdated until June 15, 1918. For a considerable part of this time the fact that prices for cantonment stock had been fixed, together with slack civilian demand, tended to regulate civilian prices as well as those on Gov- ernment orders. In the spring of 1918, however, civilian prices advanced until they were several dollars per thousand higher than those in effect on Government orders. The development of this situation made it seem necessary to regulate the prices on civilian as well as on Government orders, as it was felt by the War Industries Board that the production of lumber for civilian purposes ought not to be stimulated by high prices. The prices for cantonment stock agreed to on June 13, 1917, re- mained in effect until September 11, 1917, when there was a volun- tary reduction of $1 per thousand on 1-inch boards and 50 cents per thousand feet on 2-inch dimensions. On October 10 there was an- other reduction of 50 cents per thousand feet, and on November 11 a still further reduction of 40 cents per thousand feet. These revised S rices remained in effect until June 15, 1918, when the War In- ustries Board established an average mill-run price of $28 per thousand feet, applying on both Government orders and civilian purchases. Three months later, in September, 1918, the prices es- 66 COSTS AXD PROFITS OF SOUTHERN PINE COMPANIES. tablished on June 15 were, according to agreement, subject to re- vision. On September 23 slight revisions in certain item prices were made, the average remaining at $28, and the schedule was made ap- plicable to all Government purchases, including the Emergency Fleet Corporation and other Government bodies that had previously been purchasing at less than regular schedule prices for the sizes and grades used under an early agreement between manufacturers and the Emergency Fleet Corporation. This schedule remained in effect until December 23, when it lapsed, and Government control over that section of southern pine prices covered by the agreement auto- matically ceased. Prices of Virginia and Carolina pine. — In the price agreements of June, 1918. long and short leaf Virginia and Carolina pine were treated separately from other southern pine. The prices agreed upon for lumber from this section went into effect at midnight June 28, 1918, subject to revision three months later. These prices differed slightly from those on the remainder of southern pine described above.'though the average was approximately $28 for run of the mill. On October 1, 1918, minor changes in the prices of certain items were made and the ao:reement continued to December 23, 1918. when it, too. lapsed and Government price control of the entire southern pine industry ceased. Prices for wooden-ship schedules. — With the inception of the Government's ship-building program it became necessary to purchase material for wooden ships. On May 28, 1917. an agreement was reached between the Shipping Board and the manufacturers of southern pine whereby the latter agreed to furnish the Government with lumber suitable for ship schedules at an average price of $35 per thousand feet. This average price went into effect for 100 schedules, each requiring about one and one-half million feet of lumber. On October 30. 1917. the average price was increased by agreement to $40 per thousand feet. This new price agreement pro- vided that each item be given a certain price. These item prices ranged from $22 per thousand feet for the low-grade stock to $100 for the larger and more costly sizes. Later, owing to changes in the established schedules requiring heart specifications (known as sched- ule 23) . it became necessary to increase the price-s on these items from $5 to $20 per thousand feet, depending upon their relative difficulty in manufacturing. When these prices went into effect the average price for the entire schedule was increased from $40 to $44.72 per thousand feet. No other price changes were made on wooden ship schedules until October 11, 1918, when the average price became $46.23, which was based upon item prices established by the War Industries Board, which became effective September 23, and con- tinued until December 23, 1918.^ From the above brief summary of the Government's activities re- specting prices of lumber it is evident that during about three- fourths of the period covered by this report the prices of southern pine lumber were \mder increasingly strict governmental control, be- ginning with the agreement of May 28, 1917. with the Shipping Board, by which the prices for wooden-ship schedules were estab- *War Industries Board Balletln No. 43 (1919), "Prices of Lumber." pp. 23-28, and Report of tlic War Industries Board, "American Industry in the War' (1921), pp. 211-227. RECENT PRICE MOVEMENTS. 67 lislied. and extending by subsequent agreements with the Shipping Board and the War Industries Board to cover cantonment stock and other Government purchases, and finally in 1918 to civilian purchases also. Not only were prices regulated but production and use were restricted to an increasing extent through conservation orders, pri- ority" regulations, and transportation embargoes, by which it was provided that the Government and industries vitally connected with the conduct of the war were to be supplied before less essential civilian needs. Section 2. Price history. Prices, 1913-1916.— Prior to the outbreak of the war in 1914 the general t-endenc}' of southern pine lumber prices had been downward during the year 1913. From the latter part of 1913 to August, 1914, there had been very little fluctuation or change in the level of prices. The outbreak of the war was immediately followed by a sharp reduc- tion in lumber prices. Exports, of which southern pine furnished nearly one-half, were greatly reduced and the industry entered upon a period of low prices that was not directly relieved, as was done in manj'- other industries, by the placing of orders by European bellig- erents. Consequently throughout the later months of 1914 and the first half of 1915 southern pine lumber prices were low, though show- ing a slight tendency to increase. During the later months of 1915 and the first two or three months of 1916 the price level rose until it was about the same as in the early months of 1913, but the increase was followed by a downward reaction during the middle of the year, though not to the level of the two years preceding the rise. Again, during the latter part of 1916 prices advanced somewhat, so that dur- ing the last quarter of the year the general price level was slightly higher than that prevailing in the middle of the year 1913.^ Prices, 1917-1921. — Chart 4 (facing p. 68) shows the actual price movements for five typical sizes and grades of southern pine lumber, by months, from January, 1917, to December, 1921, inclusive. All prices plotted in the graph are monthly averages of mill prices quoted in the lumber trade journals, preference being given to Hattiesburg, Miss., quotations when obtainable. When Hattiesbui-g quotations were lacking quotations for Alexandria, La., Kansas City, Mo., or Birmingham, Ala., have been used, preference being given to quo- tations for the last three markets in the order named. During the first two months of 1917 prices were fairly stable, but from March to July, 1917, there was a sharp tendency to advance. With the beginning of Government price control in July, 1917, the rapid advance was checked. During the period of increasing Gov- ernment price control, from July, 1917, to December, 1918, the tend- ency of prices was gradually upward for all grades, including those shown in the chart. Some grades, for instance ship timbers, showed greater increases, but on the whole the price movement of the sizes and grades shown is typical. The termination of Government control in December, 1918, oc- curred when the southern pine lumber industry was facing a period of uncertainty. Many Government contracts were still running, but it was evident that Government requirements would soon be greatly » War Industries Board Bulletin 43, Prices of Lumber, p. 57. 68 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES, reduced. AVith the termination of hostilities the public expected early and marked reductions in jn-ices, but in this expectation failed to correctly forecast the future. Prices advanced sharply throughout the last half of 1019 and the early months of 1920 and attained levels very much higher than those of the war period. Referring to the chart, it will be seen that 1 inch bj' 3 inch edge grain flooring of A grade, which had during the war been quoted at from $47.63 to $51.0(5, advanced to $1-45.20 per thousand m Ma3\ 1920, an increase of nearh' 200 per cent. Xo. 1 boards, that during the war averaged approximately $28, advanced to $89.05 per thousand in March, 1920, an advance of over 200 per cent. No. 2 fencing, which during the war sold at prices ranging from $17.75 to $25.94. advanced to $44.34 per thousand in February, 1920, an advance of approximately 100 per cent. The price advances for the remaining items in the graph showed increases similar to that for Xo. 2 fencing. The prices attained in the earlv months of 1920 were so high that the market refused to absorb the production. When the so-called buyers' strike made itself felt, prices fell rapidly from the spring and early summer of 1920 to February. 1921. except for a short period of stiffening prices in the late summer of 1920. In the spring of 1921 boards, fencing, timbers, and dimensions were but little if any higher than in January, 1917. High-grade flooring, which had ex- perienced the highest prices, failed to show a like decrease, as it halted in its downAvard course at $71.67 in March, 1921. a price nearly double that prevailing in January, 1917. The fall in prices occurring in 1920 started earlier on the lower grades, on which the price increase was less pronounced than on the higher grades-, for which there was a greater demand. Reference to the chart shows that Xo. 2 fencing reached its peak in price in February, 1920, Xo. 1 boards in March, and "A" grade edge grain flooring in May. The explanation for the slump in prices beginning earlier in the cheaper grades is that during the latter part of the war period the Government demand was mainly for high grades and large sizes for shipbuilding and other purposes. Consequently there was a considerable accumulation of low grades at the end of the war, par- ticularly of boards, fencing, and small dimensions, all along the line from the mill to the consumer. For this reason boards, fencing, and small dimensions were more responsive to the beginning of curtailed demand as prices advanced. In the spring and summer months of 1921 prices fluctuated some- what, but generally showed a downward tendency through August, following which there was a stiffening of demand, with a corre- sponding tendency of prices of all grades to advance somewhat. During the period covered by the price peak beginning about the middle of 1919 and ending with the first quarter of 1920 demand exceeded supply and the condition spoken of as a "seller's market" prevailed. Prices were high and rapidly advancing. Costs un- doubtedly increased somewhat, but of course not in proportion to the increase in prices. Consequently, earnings were undoubtedly higher than during the period of Government control, but to what extent it is impossible to state. The effect of this period of high prices was to stimulate increased production. Not only did established mills produce to capacity but it is estimated by the United States Forest Service that during 1919 AVERABE MONTHLY LUMBE FDR SPECIFIED SIZES /qNDI ^3 compa/ec/hy -/he Cam/ ^meK/c3n Lumhe. % t3i7 1318 /^^JFMflMJjflSDNDJFMflMJJflSDN 1 1 \ LEGEND \ Boards [i'^-Z^ //^ i" " renan^ \^e-7ii-3 i 1 ' T. ■ ' ^^ 1 1 ^^^^ ^^.^o—o''' '^•^'^'^ i ^'':>f TTrj ' ^ ^-^ "" JFMflMJJflSQNDJFlMflMJJflSOjg laiv laiB Charf - 4- flVERflGE MONTHLY LUMBER PRICE5(F. D. B. MILDPER M. FEET B.M. FDR SPECIFIED SIZES AND BRflDES FROM JflN,l3l7, TO DECigZI.INCL 35 ca-'^pufed hy ihe iTofTim/ssian ^hyrr uveek/y- prices reaorfBti by fhs /Imer i-j/7 Lumberman 7&/- Wjs Ha^^isahu^y Disfr-ic^ la 1317 1918 1 11 3 laZQ I9S i ij.i i II i i J ii il-U- ill 1 L ■ Xi \\V\\ m :i ! Ili\j , i 1 T 1 _ . ' 1 1 jil!lV\ i 1 1 j — ^ fyoofpff 1 - - Boai'ds 111 1 l\ 1 1 ^! III l._ ,.. — 1 ■ Dtmensto — j ■ ■ T/mde'S \.i.r^5,3 ^ -- III! \l \\\ ;M^IE 1 M \ mi 11 -J-- --- / .__x|_ 1 _ . . /_ ..Jill ill ] iiJi ti s. t" "%i:r:\"r 1 J iti \ r / sa ,^4u.._ I " '"J 11/ 1 1 'I'l so ±::^jj2 t^ "]T"'jZ 7"^ii v ]'f\ ^ I - t \\\ I 'fflrbiVi t 1 TM X - - 1 -'- ^? i^ i\ J\f n TTT' - .->-i^O 1 \if H'^ T _[_[ ^ '- %(! Xfe:2"^i?sa^ i ^^ /. /. ''■■■^ j* ^^il j i->..ViV ^i§: « : ■■J - . ^ 5. . --' lai 1 la !l lazo rae RECENT PRICE MOVEMENTS. 69 between 800 and 1,000 small mills began operations in the southern pine region alone. When demand decreased in 1921 through the so-called buyers' strike it was immediately found that there was excess producing capacity in operation. Mill stocks accumulated for a time, but soon had to be moved at greatly reduced prices. Freight rates are an important factor affecting the delivered price of lumber, thereby limiting the area within which southern pine can enter into price competition with lumber produced in other sections of the country, as well as the area within which lumber from other sections can compete on the basis of price with southern pine. Hence, the high freight rates prevailing after the drop in prices in 1921 were, in addition to the decreasing demand and excess pro- ducing capacity, a material factor tending to limit the prices that could be obtained at the mills, as they prevented any great expansion of the southern pine market except at very much lower prices. In order to put southern pine on a price level with lumber from other regions producers w^ere obliged, it is said, to absorb a part or all of the freight. Other regions, too, were seeking outlets for excess pro- duction and were experiencing the same difficulties. Consequently prices fell until they were, as reported in the trade press during the summer of 1921, but little, if any, higher on many sizes and grades than they were in January, 1917. As prices fell production w^as curtailed. This, taken by itself, would tend to increase unit costs. This tendency was perhaps more than counterbalanced by decreases in cost of supplies and labor in the latter part of 1921, but, according to the statements of those engaged in the industry, the net decrease in cost was much less than the decrease in prices, so that during the period of curtailed demand and production, reduced prices, and continued high costs, many mills, it is claimed, incurred losses that tended to absorb at least a part of their large earnings during the high-price period. To what ex- tent losses incurred offset previous high earnings has not been ascer- tained. In discussing the situation under date of September 5, 1921, The National Lumber Bulletin, official organ of the National Lumber Manufacturers' Association, pointed out that the cost of stumpage has increased in recent years, but quoted the average realization of southern pine mills at that time as being between $18 and $20 per thousand for mill-run lumber, an average price at least $1 less than that realized by the 205 companies in 1917 and something like $8 or $9 per thousand less than the average price under Government regu- lation in 1918.* It is further claimed that this price is no higher than that realized 14 or 16 years ago for lumber of the same grade and the same or similai- species. A number of factors have prevented the public realizing the full extent of the 1921 decrease m mill prices, among which may be mentioned the increased cost of retailing and tlie high freight rates that must be paid to transport lumber from the comparatively re- mote producing areas to points of consumption, and the tendency of retailers who stocked their yards at high prices to hold up their prices until they had disposed of their high-priced stock. The first two factors mentioned tended to make necessary a wider spread or * See Table 19, p. 40 ; also p. 75. 70 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. margfin between the mill price and the retail price of lumber. The last-named factor tended to lengthen the period of decreased demand because, apparently, the public withheld buying so far as possible at the high retail prices asked, while retailers refused to buy until they disposed of their slow-moving, high-priced stock. The manufacturers criticized the retail trade sharply for not reducing prices, while the retail trade responded with the statement that retail prices had been i-eiluced so far as consistent with increased freights and retail ex- penses. 1'roposed current REPORTS. — During the earl}^ part of 1920 the Commission decided to resume the collection of data on lumber produc- tion, shipments, stocks, cost of production, and sales realization. Fol- lowing the temporary injunction granted in the Maynard case, respect- ing the Commission's power to require such reports from the coal industry, consideration was given to the advisability of requesting lumber manufacturers to submit voluntary reports. In order to devise a plan whereby current information on costs, production, stocks, etc., could be secured and promptly made available to both the public and the industry, the Commission held several conferences with representa- tives from the more important lumber-producing regions. The rep- resentatives attending these conferences promised to cooperate with the Commission, and the representatives of the various associations in the southern pine region took a very active part in the preparation of satisfactory schedules to be used for the collection of the neces- sary information. On account of the unsatisfactory results from the system of voluntary reporting in other industries, the Commission finally decided to postpone such work in the lumber industry until its power to require such reports is finally determined by the courts. Consequently the Commission is unable to include in this report the discussion of any data more recent than that of the year 1918. In- formation covering 1919 to 1921. inclusive, would undoubtedly be of great interest and value both to the industry and the public, as the lumber business, after a period of feverish activity during 1919 and the early months of 1920, experienced a period of depression in 1921, during which it has been claimed that much lumber was being sold at less than cost to manufacture, but no public agency has been in a position to answer the consumer's question as to whether the claim was well founded. APPENDIX. EXHIBITS. Exhibit 1. PRODUCTION, INVESTMENT, EARNINGS, AND RATES OF RETURN ON INVESTMENT FOR 143 SOUTHERN PINE LUMBER COM- PANIES, GROUPED BY STATES, 1917 AND 1918. Table 35 shows the total production, total iuvestmeut, total earnings from all sources, and percentage rates of total earnings from all sources on total invest- ment for 143 southern pine companies, grouped by States, for 1917 and 1918. The 143 companies are those whose investments, earnings, and rates of earn- ings on investment are discussed in Chapter III. All figures shown are those reported by the companies. It will be noted that the greater number of the companies and the greater part of the total investment and earnings discussed were shown by companies located in the six States of the Gulf States group. It will also be noted that the highest rates of earnings were shov.n by companies in the above-named group. and the lowest rates by those in the three States of the Virginia-Carolina group. Table 35. — Production, investment, earnings, and rates of return on investment, as reported by IJfS southern pine lumber companies, grouped by States, 1017 and 1918. Companies. Product on. Investment. Group and State. Num- ber. Per cent. Feet board measure. Per cent of total. Amount. Per cent of total. 1917. Gulf States group: Alabama 14 18 45 22 2 15 9.8 12.6 31.4 15.4 1.4 10.5 356, 480, 299 569, 102, 058 2,179,364,745 640, 109, 795 137, 670, 210 704, 550, 392 6.8 10.9 41.7 12.3 2.6 13.5 $19, 152, 889. 77 35, 733, 648. 55 139, 753, 654. 91 33, 229, 075. 95 7, 474, 584. 74 38, 928, 744. 85 6.2 11.5 Louisiana 45 2 Mississippi 10.7 OVlqhnmfi . , , . 2.4 Texas 12.6 Total 116 81.1 6.3 2.8 4, 587, 277, 499 87.8 274,272,598.77 88.6 Georgia- Florida group: 9 4 209,056,117 59, 123, 799 4.0 1.1 11,376,244.00 1, 544, 669. 47 3.7 Georgia .5 Total 13 9.1 268,179,915 5.1 12,920,913.47 4.2 Virginia-Carolina group: North Carolina 2 7 5 1.4 4.9 3.5 18,582,629 103, 288, 702 248, 479, 640 .4 2.0 4.7 463,782.85 4,597,988.44 17, 159, 406. 07 .2 South Carolina 1.5 Virginia 5.5 Total 14 9.8 370, 350, 971 7.1 22,221,177.36 7.2 Total all groups 143 100.0 5,225,808,386 100.0 309,414,689.60 100.0 1918. Gulf States group: Alabama 14 18 45 22 2 15 9.8 12.6 31.4 15.4 1.4 10.5 272, 464, 558 470, 927, 498 1,895,681,963 575,630,289 100, 344, 651 593, 227, 395 6.2 10.6 42.8 13.0 2.3 13.4 19,815,671.37 36, 48R, 007. 65 147. .593, 406. 98 33,243,371.65 7, 185, 633. 63 41,350,981.07 6.2 11.3 Louisiana 45.8 Mississippi 10.3 2.2 Texas 12.9 Total 116 81.1 3,908,276,354 88.3 285,677,072.35 88.7 : 71 72 COSTS AXD PROFITS OF SOUTHERN PINE COMPANIES. Table 35. — Production, investment, earnings, and rates of return, etc. — Contd. Companies. 1 Production. | Investment. t Group and State. Num- ber. Per cent. Feet 1-oard measure. ^l^^ Amouat. Per cent of total. 1918— Continued. Georgia- Florida group: Florida 9 4 6.3 2.8 192.3»7,064 56, J02, 455 4.4 $10,995,799.28 1.3 1,335,593.75 3.4 .4 Total 13 9.1 218, 749, 519 5.7 12,331,39.3.03 3.8 Virnnia-Carolina group: North Carolina 2 7 5 1.4 4.9 3.5 13, 613, 282 71,017,450 182, 925, 700 .3 542,943.70 1.6 6,458,50.5.33 4.1 17,059,461.13 .2 South rarnlina 2.0 Virginia 5.3 Total 14 9.8 267. 556. 432 6. 24, 060, 910. 16 7.5 Total all groups 143 100.0 4,421,582,305 100. 322, 069, 375. .54 100.0 Companies. Earnings. Rate of Group and State. Num- ber. Per cent. Amount. Per cent of total. invest- ment. 19J7. Gulf States group: Alabama 14 18 45 22 2 15 9.8 12.6 31.4 15.4 1.4 10.5 ,$1,461,391.63 3,3S9,6l9. 11 14,062,841.48 3, 189, 788. 51 917, 533. 31 3,339,313.26 5.2 12' 2 .50.4 11.4 .3.3 12.0 7.6 Arkansas 9.5 10.1 Mississippi 9.6 Oklahoma 12.3 Texas 8.6 Total 116 1 81.1 26, 360, 537. 30 94.5 9.6 Georgia- Florida group: Floriia 9 6.3 4 2.8 971,130.54 93, 739. 41 3.5 .3 8.5 Georgia 6.1 Total 13 9.1 1,061,869.95 3.8 8.2 V'irrinia-Carolina group: 2 7 5 1.4 4.9 3.5 36,636.73 348,571.28 80, 433. 07 .1 1.3 .3 7.9 South Carolina 7.6 Virginia .5 Total 14 9.8 465,641.06 1.7 2.1 Total all groups 143 100.0 27,891,018.31 100.0 9.0 1918. Gulf States group: Alabama 14 18 45 22 2 15 9.8 12.6 31.4 15.4 1.4 10.5 1, 133, 980. 09 3, 082, 236. 77 14, 517, 448. 38 3,323,916.31 737, 778. 95 2,707,63.5.75 4.2 11.4 53.5 12.2 2.7 10.0 5.7 Arkansas 8.4 Louisiana 9.8 Mississippi . . 10.0 Oklahoma 10.3 Texas 6.5 Total 116 81.1 25,502,997.25 94.0 8.9 Georgia-Florida group: Florida 9 ■4 6.3 2.8 995, 975. 62 68,446.07 3.7 .2 9.1 Georgia 5.1 Total 13 9.1 1,061,421.69 3.9 8.6 Vironia-Carolina group: North Carolina 2 7 5 1.4 4.9 3.5 44,799.24 119, 123. 00 399, 899. 06 .2 .4 1.4 &3 South Carolina 1.8 Virginia 2.3 Total 14 1 9.8 563,821.30 2.0 2.3 Toial all groups 143 iflO ft 27, 131, 240. 24 100.0 8.4 appendix. Exhibit 2. 73 INVESTMENTS, EARNINGS, AND RATES OF RETURN ON INVEST- MENT FOR 143 SOUTHERN PINE LUMBER COMPANIES BEFORE AND AFTER REVISION FOR APPRECIATION OF STUMPAGE IN INVESTMENT AND COSTS, 1917 AND 1918. Table 36 shows the total investment and earnings of 143 identical southern pine lumber companies discussed in Chapter III. The 143 companies are sub- divided to show the investment and earnings of 86 companies whose reports showed no appreciation in either timber investment or costs and 57 companies showing appreciation in either or both investment and costs in one or both years. The 57-company group is again subdivided to show the results for 42 identical companies whose reports showed appreciation in both investment and costs in both years and for 15 companies for which miscellaneous revisions for appreciation were made. The miscellaneous group includes companies for which revisions were made in both investment and costs in one year only or for which revisions were made in investment only or in costs only. The data shown represent the total investments reported in" the balance sheets of the companies covering land and timber, plant and equipment, undivided sur- plus, and outside investments; the appreciated value (if any) in timber invest- ment : the total earnings from lumber and outside investments ; the amount of appreciation {if any) in stumpage charged to costs, and finally the net invest- ment after deducting appreciation from land and timber investment, and the net earning."? after adding back to earnings the amount of appreciation in stump- age charged to costs during the year. Percentage rates of earnings on invest- ment are shown before and after adjustment for appreciation for each group. Table 36. — Investments, earnings, and rates of return on investments before and after revisiovs for appreciation in timber investment and in lumber costs of IJfS southern pine lumber companies, 1917 and 1918. Classification and item. 1917 Investment. Earnings. Rates of re- turn on invest- ment. All companies (143): Investment and earnings as reported Appreciation Investment and earnings after revision 86 companies showing no appreciation either in invest- ment or in costs ^ 57 companies showing appreciation: Investment and earnings as reported Appreciation Investment and earnings after revision A. 42 companies showing appreciation in both investment and costs in both years: Investment and eamuigs Appreciation Investment and earnings after revision B. IS companies showing miscellaneous revision: Investment and earnings Appreciation Total investment and earnings after revision $309, 414, 689. 60 30, 685, 989. 85 278, 728, 699. 75 160, 034, 917. 27 149, 379, 772. 33 30, 685, 989. 85 118,693,782.48 123, 594, 105. 83 27, 782, 865. 73 95,811,240.10 25, 78.5, 666. 50 2, 903, 124. 12 22, 882, 542. 38 ?27,891,048.31 4,411,299.81 32,302,348.12 13, 522, 994. 30 14,3!i8,054.01 4,411,299.81 18,779,353.82 12, 230, 918. 27 4,165,020.31 16,395,944.58 2, 137, 135. 74 246,273.50 2,383,409.24 9.0 ii.'e 8.5 9.6 'is.'s 9.9 "n.'i 8.3 10.4 74 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Table 36. — Investments, earnings, a/nd rates of return, efc— Continued. Classification and item. All companie.s n43): Inve.stment and earnings as reported Apprpt-iatlon Invpst ment and earnings after revision 86 companies showing no appreciation either in invest- ment or in costs 57 eompanies showing appreciation: Investment and earnings as reported Appreciation Investment and earnings after revision A 42 companies snowing appreciation in both investment and costs in both years: Investment and earnmgs Appreciation Investment and earnings after revision B. 15 companies showmg miscellaneous revision: Investment and earnings Appreciation Total investment and earnings after revision Investment. J322, 069, 375. ,54 32,801,294.83 2S9, 268, 080. 71 102, 589, cm. f.2 1,59, 479, 708. 92 32, 801, 294. 83 126, 678, 414. 09 133, 100, 256. 67 29,815,912.07 103,284,344.60 26,-379,452.25 2, 9S.5, 382. 76 23,394,069.49 Earnings. Rates of re- turn on invest- ment. $27, 131, 240. 24 4,319,236.82 31,450,477.06 13,064,222.98 14,067,017.26 4, 319, 236. 82 18, 380, 2i4. 08 12, 406, 532. 9(i 3, 997, 512. 30 16, 404, 045. 26 1, 660, 484. 30 321, 724. .52 1,982,208.82 8.4 "io.'g 8.0 8.8 ii's 9.3 15.9 6.3 8.5 Exhibit 3. Table 37. — Total investment and earnings as reported hy southern pine lumber companies, iy territorial groups, 1917 and 1918. Group. Year. Num- ber of com- panies. Total investment Total earnings. Rates ot return on invest- ment. Gulf States 1917 1918 Georgia-Florida 1917 1918 Virginia-Carolina 1917 1918 All groups 1917 [ 1918 128 117 15 13 14 14 157 144 $291,307,-590.71 286,. 353, 025. 55 13,644,6.32.10 12.331,393.03 22,221,177.36 24,060,910.16 327,173.400.17 322, 745, 32S. 74 $27,883,536.87 25,713,647.16 1,117,064.88 1,064,421.69 465,641.06 563, 821. 30 29,466,242.81 27,341,890-15 9.6 9.0 8.2 8.6 2.1 2.3 9.0 8.5 Exhibit 4. AVERAGE COST OF SALES, SALES REALIZATION, AND EARNINGS AS REPORTED BY 205 SOUTHERN PINE LUMBER COiMPANIES, 1917 AND 1918. The averages ijfr thousand feet board measure for cost of sales, sales realization, and earnings on lumber and from other sources for 205 companies discussed In Chapter IV are based on the footages and amounts shown in this exhibit. Four groupings of companies identical witli those dlscusserl in ('hapter IV are shown, namely, average of all groups (205 companies) ; Gulf States group (150 companies) ; Georgia-Florida group (24 companies), and Virginia- Carolina group (25 companies). The unit per thousand feet shown in the table for each item is obtained by dividing the total amount for ihe item by the total sales. Average sales realization is based on total sales, less returns, allowances, etc. Co.st of sales includes total cost of stumpage, logging, manufacturing, general and adminis- tration, shipping, and selling expenses. Earnings from other sources include APPENDIX. 75 earnings from by-products where by-product costs were separable from luinher costs ; interest and dividends from securities of other companies, Government bonds, etc. ; income from commissaries, rent of houses, farms, outside invest- ments, and any other items of income, less expenses, depreciation, and losses not directly chargeable to lumber costs and therefore not included elsewhere in the reports. Total earnings represent the total income from all sources, including lumber operations and outside investments of all sorts. Deductions from earnings include interest on funded debt, interest on other loans, and income and excess profits taxes. These deductions subtracted from the total earnings from all sources yield the net income after deductions. Table 38. — Average cost of sales, sales realization, and earnings from lumber and other sources as reported by 205 southern pine lumber companies, 1917 and 1918. 1917 1918 Group and item. Quantity and value. PerM feelB.M. Quantity and value. PerM feetB.M. Gulf States group (l.'je companies): Quantity sold (feet b(iard measure) 5. 702, 619, .348 $119,06.5,855.55 93,722,845.31 5,100,593,056 $135,115,661.48 111, 569, 809. 88 $20.88 16.44 $26.49 25,343,010.24 5,235,540.78 4.44 .92 23, 545, 851. 60 5,250,16.3.98 1.03 30, 578, 551. 02 5,604,233.97 5.36 .98 28, 796, 015. 58 7, 162, 559. 87 5 65 Deductions from earnings 1 41 Net earnings after deductions 24,974,317.05 4.38 21,633,455.71 4 24 Georgia- Florida group (24 companies): Quantity sold (feet board measure) 431,915,963 $8,673,649.10 7,538,699.60 391,996,592 $10, 084, 488. .52 9,009,944.20 $20. 08 17.45 $25 73 Cost of sales 22 99 Earnings from lumber 1,134,949.50 249, 120. 46 2.63 .58 1,074,544.32 223,142.97 2 74 Earnings from other sources 57 Total earnings 1,384,069.96 428, 315. 79 3.21 1.00 1,297,687.29 508, 406. 33 3 31 Deductions from earnings 1 30 Net earnings after deductions 955, 754. 17 2.21 789,280.96 2.01 Virginia-Carolina group (25 companies): Quantity sold (feet board measure) 626,750,634 $12,713,589.04 11,851,511.02 468,534,043 $13,649,377.59 13, 204, 527. 72 Realization $20. 29 18.91 $29. n Cost of sales 28.18 Earnings from lumber 862, 078. 02 277, 235. 27 1.38 .44 444, 849. 87 210, 570. 86 .95 Earnings from other sources ". .45 Total earnings 1,139,31.3.29 540,052.51 1.82 .86 655,420.73 578, 117. SO 1.40 Deductions from earnings 1.23 Net earnings after deductions 599, 260. 78 .96 77,303.43 . 17 All groups (205 companies): 6,761,285.945 $140, 453, 093. 69 ' 113,113,055.93 5,961,123,691 $158,849,527.59 133,784,281.80 Realization $20.77 16.73 " $26.65 22.44 Earnings from lumber 27,340,037.76 5,761,896.51 4.04 .85 25,065,245.79 5,683,877.81 4.21 .95 Total earnings 33,101,934.27 6,572,602.27 4.89 .97 30, 749, 123. 60 8,249,08.3.50 5.16 Deductions from earnings 1.38 26, 529, 332. 00 3.92 22,500,040.10 3.78 76 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Exhibit 5. COSTS BY OPERATIONS, AS REPORTED BY 205 SOUTHERN PINE LUMBER COMPANIES, 1917 AND 1918. Table 39 shows the consolidated figures on which the unit cost for stumpage. logging, manufacturing, general and administrative expense, etc., for 205 companies discussed in Chapter IV are based. Sttimpage. — The figures sliown for stumpage represent the total footages and values reported in response to the Commission's instructions during the war to compute the cost of stumpage in the following manner: " The amount of depletion cost (" stumpage " » is a fixed rate per M feet vsrhich if possible should be ascertained by dividing the original cost of the timber land owned, less the value of surface or cut-over lands by the estimated yield of timber at the time the timlier was i»nrchast'd (assumins the quantity is reason- able). To this such carrying costs as taxes on a reasonable amount of timber may be added, but not interest. (Interest will be allowed as a return on in- vestment.) If depletion cost can not be ascertained, the book figure for stump- age as of December 31, 1916. may be given and entered on line 10 in red. Any timber land purchased since December 31, 1916, should be entered at the actual uet purchase price. No depletion is to be figured on timber from leased lands or lands held under option (but expense charged on the basis of the amount paid for the option)." A considerable number of companies reported different footages for stumpage and logging. In some cases this difference appears to be due to logs pur- chased, while in others it is totally unexplained. The figures therefore are shown as reported without definite attempt to explain the difference for all companies of approximately 140,000,000 feet shown between the two items. This difference is, however, small, amounting to only about 2 per cent of the footage loggetl and manufactured. Logging. — The logging cost shown includes all expenses reported as incurred in clearing and swamping, felling, cutting, scaling, hauling, skidding and load- ing, depreciation on logging equipment, transportation, depreciation on trans- portation equipment, camp expense (net), and miscellaneous logging expense. Many reports showed considerable unexplained differences between footages against different items of logging expense, indicating either inventories or differ- ences in scaling at different points, regarding which no explanations were made. Some reports showed only the footage of logs delivered to the pond or log yard. Consequently it was necessary in computing logging costs for such mills for botJi years to use this footage in computing the average logging cost. Manufacturing. — Many companies failed to report inventories of logs in pond or log yard at the beginning or end of the year. Wherever inventories were reported they have been given full consideration in arriving at the footage cut and the total manufacturing cost. In all cases in which inventories were not reported the total cost has been divided by the reported sawmill cut to obtain the average manufacturing cost. The total sawmill cost includes the expenses of the iwnd or log yard, saw- mill, green sorter, stackers, trucking to dry kiln, dry kiln expense, dry sorter, rough shed, yard, planing mill, finished shed, sizer, timber dock, depreciation of sawmilling equipment, and miscellaneous sawmill expense. (Jcnernl and admin iHtratlve expense. — This item includes salaries, ofiice ex- penses, taxes (except income, and excess-profits taxes), insurance, deprecia- tion on ofiice buildings and equipment, office repairs and other general expenses. The average figure shown in the table is obtained by dividing the total general and administrative expense reported by the sawmill cut. Sliipjiing and .selling c.cpcn.'^es. — Shipping expense includes all expenses inci- dent to handling lumber from piles to cars. Selling expense includes sales- men's salaries and expenses, commissions, advertising, salaries of order and invoice clerks, and other items of expense incident to marketing the product. In computing the average for l»otli of these items, the total expense has been divided by the footage of hnnlier shipped. It was found- necessary to use lumber shipped rather than lumber sold in computing selling expenses because lumber shipped was more consistently reported than lumber sold. Net coxt to produce and .lell. — The total cost to produce and sell is obtained by adding together the various unit costs obtained as described above. About 40 fx-r coiit of the companies carried on by-product operations, the costs of APPENDIX. 77 which were not segregated from lumber costs. In the aggregate the average income from by-products for such companies (obtained by dividing the total income from by-products of companies not segregating by-product costs from lumber costs by the total lumber jiroducticm of all companies) was small in botli years. The net cost to produce and sell is obtained by deducting the small item for income from by-products from the average total cost secured by adding together the various unit costs. The net cost obtained in this way may differ slightl.y from the true cost to produce and sell because of unrecon- ciled inventory differences. In many cases the errors for different companies tend to offset each other. From a study of a number of companies whose departmental costs could be coniimted both with and without inventory adjust- ments, it is estimated that the percentage error by which the costs as shown for different groups may vary above or below the true cost to produce and sell will probably not exceed 2 per cent. Table 39. — Costs, by operations, as reported by 205 southern pine lumber companies, 1917 and 1918. Group and item. Footage B. M. T( tal cost. Cost per M. 1918 Footage B. M. Total cost. Cost per M. Gulf States group (156 com- panies): Stumpage l^ogging Manufacturing General and administra- tive Shipping SeUmg Bj'-products . 5,498,311,156 5, 524, 535, 2H2 5, 551, 767, 449 5, 551, 767, 449 5, 702, 619, 348 5, 702, 619, 348 5, 551, 767, 449 825, 596, 587. 51 24, 547, 662. 09 24, 894, 734. 29 12, 811, .329. 55 2,7.34,230.18 3, 123, 168. 28 1530,658.7/ 14.66 4.44 4.48 2.31 .48 .55 1.10 4,710,018,754 4,714,966,159 4, 708, 162, 562 4, 708, 162, 562 5, 100, 593, 056 5,100,593,056 4, 708, 162, 562 Net cost to produce and sell 93,177,053.13 $23, 851, 813. 26 30, 866, 811. 06 31, 899, 317. 73 14, 460, 726. 19 3, 488, 260. 28 3,504,515.04 $5.06 6. 55 6.78 3.07 .68 .C9 419, 495. 41 107,651,948.15 22.74 Georgia-Florida group (24 companies): Stumpage Logging Manufacturing General and administra- tive Shipping Selling By-products Net c st to produce and sell Virginia-Caroli la group (25 companies): Stumpage Logging Manufacturing Generaland administra- tive Shipping Selling By-products Net cost to produce and seU Ml groups (205 companies): Stumpage Logging Manufacturing General and administra- tive Shipping SelUng By-products Net cost to produce and seU 4.52, 602, 404 453, 012, 933 445, 729, 641 445, 729, 641 431,915,963 431,91.5,963 445, 729, 641 1, 895, 6.58. 49 2, 506, 783. 92 2, 296, 234. 58 908, 374. 24 148,648.06 210, 484. 93 1 133, 535. 25 7,832,649.97 4.19 5.53 5.15 2.04 .34 .49 1.30 609,514,266 607, 851, 148 608,311,984 608,311,984 626, 750, 634 626, 750, 634 608,311,984 2, 002, 431. 27 4,0.54,382.42 3, 792, 557. 45 1,614,691.74 201, 386. 75 ■ 395, 203. 48 1 94, 324. 76 11,966,328.35 6, 560, 427, 826 6, 585, 399, 363 6, 605, 809, 074 6, 605, 809, 074 6, 761, 285, 945 6, 761, 285, 945 6,605,809,074 29, 494, 677. 27 31, 108, 82S. 43 30, 983, 526. 32 1.5, .3.34, .39.5. .53 3, 084, 264. 99 3, 728, 8.56 69 758, 518. 78 112,976,031.45 3.29 6.67 6.23 2.65 .32 .63 1.16 19.63 4.50 4.72 4.69 2.32 .46 . 55 1.11 393, 140, .366 393,617,259 391, 603, .393 391, 60.3, .393 391, 996, .592 391,996,592 391,603,393 1, 706, 449. 49 3,167,11.5.33 2, 850, 036. 67 1, 032, 067. 10 210, 506. 45 206, 846. 32 1 147, 223. 93 4.34 8.05 7. 28 2.64 .54 .53 1.38 9,025,797.43 443, 798, 874 442,805,970 443, 142, 267 443,142,267 468,534,043 4S8, .534, 043 443,142,267 1, 625, 747. 26 4, 728, 238. 50 4, 245, 759. 94 1, 882, 256. 76 237, 267. 04 366, 163. 52 1118,535.01 12,966,898.01 3.66 10.68 9.58 4.25 .51 .78 1.27 29.19 5, .546, 957, 994 5, 551, 389, 3S8 5, 542, 90':i, 222 5, .542, 908, 222 5,961,12.3,691 5, 961, 12.3, 691 5,542,908,222 27,184,010.01 38, 762, 164. 89 38,995,114.34 17, 375, 050. 05 3, 936, 033. 77 4,077,524.88 1 685, 254. 35 4.90 6.98 7.04 3.13 .66 .68 1.12 129,644,643.59 23.27 1 Deduct. 105332°— 22- COSTS AXD PROFITS OF SOUTHERN PIXE COMPANIES. Exhibit G. NET COST TO PRODUCE AND SELL, BY OPERATIONS, AS RE- PORTED BY 205 SOUTHERN PINE LUMBER COMPANIES FOR 1918. Table 40 shows the net cost to produce and sell, subdivided to show .stumpage, logging, manufacturing, and general and administrative expenses (including shipping and selling), for 205 individual companies for the year 1918, as shown graphically in Chart 3, facing page 56. These costs are computed as explained under Exhibit 5. Table 40. — Costs, bij operations, per thousand feet, as reported by 205 southern pine lumber companies, arranged from low to high on net cost to produce and acll in WIS} Company No. Stump- age. Logging. Manufac- tunng. General and admin- istrative expense, including shipping and selling. Net cost to pro- duce and seU. 1 to 10 per cent of production: 1 $5.05 4.15 3.75 6.28 4.42 4.19 4.00 6.52 4.00 5.30 4.17 1..50 5.26 6.10 4.06 4.70 4.12 5.00 5.52 5.42 4.63 5.73 4.20 2.80 5.25 5.28 3.16 4.24 5.00 4.46 5.00 5.02 3.00 5.49 6.00 3.38 4.04 4.00 5.00 4.46 1.92 3.00 5.00 5.00 5.31 5.00 4.46 4.00 4.39 4.60 3.46 5.64 3.86 .79 3.69 5.45 5.42 $3. 24 5.52 4.69 3.88 3.09 4.36 6.19 4.72 3.69 4.42 3.71 4.00 4.17 3.55 7.87 3.60 3.37 3.22 3.14 3.17 4.90 5.42 6.75 8.56 5.00 4.87 a 37 4.54 4.16 4.20 6.90 5.11 6.69 4.97 5.37 8.09 8.66 7.50 7.16 4.08 9.41 8.12 6.44 4.31 8. .52 8.25 7.06 8.84 5.71 7,15 7.00 7.51 7. .56 11.77 7.74 6.76 3.21 $5.83 4.89 3.76 4.73 6.50 6.52 5.87 3.66 6.09 4.58 5.59 11.81 6.47 5.80 4.16 5.51 8.06 6.36 4.76 4.95 6.56 5.78 5.12 5.66 5.76 5.85 5.30 6.27 5.44 8.32 5.27 6.78 10.12 5.37 5.39 5.33 5.44 6.12 5.73 7.74 6.23 7.03 4.57 5.65 4.95 5.52 7.52 5.47 5.59 6.29 6.37 4.71 4.68 7.61 6.98 6.21 7.11 $2.18 1.99 4.66 2.53 3.58 2.56 1.61 3.19 4.45 4.19 5.11 1.32 2.76 3.24 2.60 4.89 3.37 4.43 5.66 5.54 3.09 2.27 3.14 2.43 3.54 3.84 3.02 4.81 5.29 2.95 3.11 3.42 .60 4.62 3.74 3.70 2.47 3.01 2.76 4.45 3.17 2.71 4.89 5.99 2.21 2.25 2.11 2.90 5.60 3.29 4.50 3.50 5.26 1.27 3.06 3.12 5.87 $16. 30 2 3 16 86 4 17 42 5 . . 17 59 6 17 63 7 ... 17 67 8 18 09 9 18 23 10 18 49 11 18.58 12 18 63 13 18.66 10 to 20 per cent of production: 18 69 15 18.69 16 18 70 17 18.92 18 . . .. 19 01 19 19.08 20 19 08 21 19. 18 22 19 20 23 19.21 24 . .. 19 45 25 19 55 26 19 84 27 19.85 28 19 86 29 19.89 30 19.93 20 to 30 per cent of production: 31 20.28 32 20.33 33 20.41 34 20.45 35 20. .50 36 20.50 37 20.61 38 20.63 39 20.65 20.73 41 20.73 42 20.86 43 20 90 44 20.95 45 20.99 48 21.02 47 21.15 48 21.21 49 21.29 50 21.33 30 to 40 per cent of production: 21.33 52 21.36 53 21. .36 54 21.44 55 21.47 56 21.54 21.61 I 40 per cent of by-products earnings were deducted from general and administrative and 60 per cent from manufacturing on each company reporting by-products sales. APPENDIX. 79 FiGTJBE 40. — Costs, by operations, per tho isand feet, etc- -Continued. Company No. stump- age. Logging. Manufac- turing. General and admin- istrative expen.se, including shipping and selling. Net cost to pro- duce and sell. 30 to 40 per cent of production— Continued. 58 $4.86 5.42 2.53 5.12 4.48 5.33 5. 58 4.80 3.15 5.59 7.00 7.00 4.88 3.37 7.42 7.00 6.24 5.89 6.81 4.00 4.45 6.96 5.42 2.33 5.00 6.11 3.55 4.10 7.72 5.66 4.96 4.47 5.43 4.12 4.92 7.54 4.97 4.00 4.00 4.76 5.00 6.31 5.27 5.91 7.00 4.38 4.87 3.60 5.00 5.33 5.42 5.00 4.55 3.50 2.60 5.00 3.73 5.00 6.28 7.80 2.00 6.44 4.78 5.00 5.38 5.76 7.23 6.16 2.73 2.34 3.37 6.42 $6.59 4.31 9. 33 3.23 7.33 7.68 5.97 7.96 7.30 5.53 4.93 6.78 5.63 7.93 6.38 4.71 6.05 5.58 4.94 7.65 6.61 7.22 6.56 7.40 6.80 10.55 9.40 8.17 5.49 5.82 7.34 8.91 4.82 6.30 9.68 6.13 7.10 7.42 8.33 4.78 6.84 6.80 8.04 6.91 6.68 8.31 6.98 9.64 7.54 8.62 6.15 8.11 6.68 8.38 8.13 8.02 6.83 9.59 6.30 5.20 7.33 7.50 7.21 8.11 7.06 9.00 5.02 5.72 10.29 11.75 10.55 6.33 $6.28 5.82 7.45 5.50 6.84 6.08 5.36 6.73 7.82 4.68 5.40 5.91 7.14 6.08 6.06 6.16 6.61 8.19 5.54 7.86 6.19 6.00 5.71 5.05 7.20 4.85 5.29 6.16 6.02 6.04 7.02 6.92 6.58 7.11 5.31 5.14 7.22 8.37 5.80 7.68 7.23 7.35 8.37 6.57 5.18 7.14 6.49 7.80 8.41 6.40 5.94 5.80 9.63 9.35 6.77 7.78 12.58 6.74 6.90 5.74 9.15 8.18 9.13 7.15 7.53 6.55 7.56 5.55 8.08 8.24 6.38 7.11 J3.90 6.09 2.36 7.85 3.09 2.83 4.99 2.45 3.71 6.20 4.72 2.49 4.54 4.86 3.74 5.76 4.83 3.07 5.49 3.31 6.59 2.66 6.19 8.14 3.96 1.58 4.88 4.76 3.95 6.67 3.93 2.97 6.54 5.86 3.54 4.64 4.22 3.77 5.46 6.53 4.70 3.36 2.18 5.47 5.04 4.10 6.64 2.99 3.19 3.81 6.66 5.27 3.35 3.02 6.79 3.49 1.18 3.15 6.02 6.81 6.19 2.66 3.58 4.61 4.81 4.66 5.07 7.46 3.81 2.65 4.72 6.16 $21. 63 69 60 .. .. 21 67 61 62 21 74 63 64 65 21.91 21.98 22 00 66 67 40 to 50 per cent of production: 68 22 05 69 22 18 70 71 22.29 72 73 22.63 22.73 22.73 22.78 74 75 76 77 78 oo 84 79 80 22 88 81 82 22.96 23.09 23 12 83 84 23.18 23 18 86 50 to 60 per cent of production: 23.19 23 25 88 89 23 27 90 23 37 91 23 39 92 23 45 93 .. 23 45 94 23 51 95 23 56 96 23 69 97 23 75 98 23 77 99 23 82 23 86 60 to 70 per cent of production: 101 23 86 102 23 90 23 93 104 23 98 105 .. . 24 03 106 24.14 107 24.16 108 24.17 109... 24.18 110 24.21 Ill ? 24.25 112 .... 24.29 113 24.29 114 24.. 32 115 24.48 116 i4.50 117 24.55 118 . . . 24.67 119 24.68 120 24.70 121 24.77 70 to 80 per cent of production: 122 : 24.78 123 24.87 124 24.88 125 24.89 126 24.91 127 24.98 128 25.02 129 25.02 105332°— 22 7 80 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Figure 40. — Costs, hy operations, per thousand feet, etc. — Continued. Company No. Stump- age. Logging. Manufac- turing. General and admin- istrative expense, including shipping and selling. Net cost to pro- duce and sell. 70 to 80 per cent of production— Continued. 130 $6.56 5.68 2.83 5.00 5.00 5.05 5.00 2. .50 9.45 4.72 3.66 4.86 2.00 2.48 3.92 4.88 2.18 4.52 4.00 2.82 5.00 5.00 7.60 4.80 6.00 4.00 5.00 6.00 4.99 2.93 6.07 8.36 5.12 5.00 6.16 5.19 1.09 7.00 4.58 5.56 2.96 4.25 5.43 1.95 3.12 3.13 6.44 4.56 4.00 5.00 5.53 4.47 8.17 5.12 7.87 2.52 6.00 3.50 4.00 5.49 7.00 3.63 3.93 2.73 3. SO 2.75 4.26 2.05 2.60 3.22 5.01 6.99 5.70 4.00 6.00 4.69 $9.12 8.35 13.37 6.48 7.03 8.86 8.31 11.84 4.83 8.22 7.92 8.51 7.25 13.43 8.37 7.63 10.09 7.74 9.83 11.20 7.62 10.91 6.78 9.88 9.45 10.14 8.39 8.72 7.81 12.25 10.70 6.91 9.58 7.40 7.32 8.80 10.04 9.68 9.31 14.14 9.32 7.15 8.94 13.83 13.06 6.26 10.42 7.49 8.93 9.82 8.08 10.87 10.11 8.82 8.98 11.33 9.15 8.46 7.62 7.39 10.60 14.30 11.90 15.12 8.29 15.32 9.75 10. .51 14.31 13.90 14.07 6.67 13.31 13.38 12.28 17.42 $7.37 7.56 7.07 5.88 6.28 7.78 7.27 7.14 5.51 8.39 9.81 7.95 8.53 6.33 8.40 8.53 8.60 10.03 9.92 7.41 9.52 7.59 8.72 8.63 6.59 6.11 9.05 9.85 8. .33 9.50 5.93 8.31 8.99 9.60 9.46 7.28 6.19 8.62 7.43 5.54 8.51 7.58 9.35 6.35 6.42 13. 55 7.75 9.65 8.02 6.23 8.54 7.56 6.39 8. SO 7.57 9.13 7.48 10.43 10.44 12.57 8.18 7.99 10. 62 7.05 6.52 9.60 8.28 13. 55 10.25 9.06 10.02 12.03 10.83 12.94 10.17 10.76 $2.06 3.57 1.92 7.83 6.98 3.67 4.81 3.99 5.69 4.22 4.22 4.34 7.90 3.44 5.11 4.83 5.16 3.78 2.36 4.71 4.09 2.85 3.50 3.20 4.49 6.31 4.12 3.39 5.93 2.39 4.40 3.55 3.46 5.16 4.32 6.04 6.07 2.13 6.13 2.23 6.97 8.88 4.14 5.78 5.31 5.10 3.57 6.50 7.34 7.24 6.16 5.47 3.78 5.96 4.30 5.78 6.30 6.67 7.09 3.73 3.74 4.01 3.70 5.30 12.63 3.84 9.54 ^.99 5.03 6.41 4.68 8.49 6.08 5.70 8.09 5.31 $Z5. 11 131 2.5.16 132 2,5 19 133 25 19 134 2,5.29 135 25.36 136 2.5.39 137 25 47 138 25.48 139 25 .55 140 25.61 141 25 66 142 25.68 143 25 68 144 25.80 145 25 87 80 to 90 per cent of production: 146 26 03 147 26 07 26 11 149 26 14 150 : 26.23 151 26 35 152 26 50 153 26 51 26 53 155 26 56 26 56 157 26 96 158 27 06 159 27 07 27 10 161 27 13 162 27 15 163...- 27 16 27 26 165 27 31 166 27.39 167 27 43 168 27 45 169 27 47 170 27 76 171 27 86 172 27 86 173 27 91 90 to 100 per cent of production: 174 27 91 28 04 176 28 18 177 28 20 178 28 29 179 28 29 180 28 31 181 28 37 182 28 45 183 28 70 184 28 72 185 28 76 186 28 93 187 29 06 188 29 15 2*1 18 190 29 52 191 29 43 192 30 15 30 20 194 31 24 195 31 51 196 31 83 197 32 00 198 32 19 199 32 59 200 33 78 201 34 18 202 35 92 2aj 36 02 204 36 54 205 38 18 APPENDIX. 81 CC ^ C^ CO fO CD 00 CD -"t* ^ t>- 00 CO in (N ^ coco CO CO Oi w5 1-1 CC t^ CO Tt* U50-* • o rte4>rf ! CO C^Nfirt* -^' cocoio to»o •* o t3 SS8S2 C-) OOIOCO • CO lO-lM-H Oi 00 iC »c t^ w t* 03 o coooi>; O) COOOOl cs C^ Oi t^r-l 1-H -0 (M CC CO o § «CK-H CO >0 ■o lo t^ CO r- lO Oi lO'TOf-T-Trf' oo" cD'orTcT -^ 00(NU7~CO- oT ^ a CD — ' 00 « 00 l^ 0 lO —ICO 00 CO CO CO CO £ MoToco- s' „- _■■ co'co'oo'^o co fr. '" CO r- o ^ o^ Oi »/^ OC CO fio -* t^MM CO ICOOJCM 00 lO 05C0 Oi o> s ."ts ■i5 pi rt'-;c4 ■ ^ C^C^ -^ -^ '«1* ^ p c« a 3 Sl^S^g ■* ss^ o "SCO 00 CO cq 28SSS CO M lO tD03-^ o d I^IOC) «*• fe §8§??5^!o CO 1 o 05 10 •«- Oi d "S CO ira-ireco" ■^ SSS'sf im' oc"coco~o''d d" p a 0)0J— . CO OO-H (N-OCD -«< t.4 r-CSt^ eocort oc t~M0C<3iiO CO P^ < ** ff oTtfTio c^ '^" cod'co'io s" ooooco t- 00 t^c-ici 00 S2§S 05 1-1 CO 00 1^ h* J^ i oooo C^lOO 00 ■^•■o >o o c< Oi f-H Oi O 00 r~ c .2 C C — ■ -H p d OOO-H d ffi-^^d d o d d -h" d d p 00 >o r^i^cD 00 CO t< 00 CO ^ 1^ CC V CD (N lO — 'dcd ^ acO CO — J JSJOJt^Oi oi oir^»o cc c; CO CD -n- CO —^ CO IC S§8 Tf CO J§S?3Sg CO ^ »C ^ CO » -1 coo^ lO 5 a> Ocp CS ^ (N COO OT M 00 OCCO-H CO CO •«• r* »c lO -* ^ oc: s a < 8 t^ 00— 1 t^ COQC'CS CO 00 ■»*" CO o o r^coio OO "S CO t^ CO CO M ■^ r>. -^ CO (^Os^ COC4 CO SSlTffS CT rt" oo" co'irfco' ^' iO lo'cTco'io <=■ COCO C^iCCOd ■"** ^ '^ — « CO t~ 00 ■* oot^ >o oo>or~co ^ "TJ-^r to 00 oo ,-1 :0 rfCD CI CO ^ CO (NCOOIM ■^ o>oo 1< OMOt* C3 1* a I^KcO irf CC ci: CDOOt^ r-- t-^oi t>:o5 a hC t^Oc 00 do "t t>^ ^co ^ g^^2S lO G g oo r^ i-o CO 00 •- to TPOOl^COCO o o o co'^co'^l^^^ c^ c CO (NO! CO Tf t»-«<00-0< CO e^-H ■<»'■* oi o e^ CO —■ oi f- s -;c41 05 lO lO <-H ^H COOiOO ^ CO Oi o Qc~.-rcrc£r<> a CC IC C^l »0 00 CD OS CO »-0 C3i lO (N "3 n 03 •«• O CO 1^ CD COiOM Ol^—-* o; CO CD (M CD OJ -c o « ^ 3 o ooo 5 iOt^->tOrt r^ lo'-^oo'ccT CO sgss?s ■^ ^ O CO oc CO CO r-t X' f-< c 00 C35 ^ « iM CO T^cn-HC^CM t-- to (NM CO IOCS t* C-) r- « »o t- CO 53 c3 OC O: coC<) Ci OiCC o ■*05 050 c — 1 cDCJCq (?■ o w ocjjgoico CD coioeJ CO "*' rt IN Cs CO »o co^co d < 82 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. CC OC C? iC M« •S X O -* Oi •^* CO CC CC to ci cc o "6 CD uS oc^i X ^ cc — Tf 00 10 QC ^ ci w CC ® ^ C 00 C2C1CO.-H ^""oToo'co'' 00 O lO^i^ CO CC QiOSQC 00 CO i-H iC U5 «c5 00 cq« CO ^S t^ 82 01 ■^ g 11 s IN O M^iO «■ C^ ■* ui U3 t~^ X 00 ci T)< tc to c t-rs e-iooor~o> «5 »CC0O 00 5C5C «o oc »c 010 >-- £ i^ tc ec i^ '^ cc CO ro •* o M o to o re 05 PC CO — re «ct~ O "v CO or^ OOmiOIMOO 10 ic «5 r^ f^; C4 06 M* 10 oi Oi -^ ^H O O ■^oTco'ec'cr o tac u5c^ -^ cc N ■'I* o; f-" c«o o C0 05 (N CC t^ CO o'er co" lOIN ^ -*Nt^C: -- (P r5 -^ — > CC »0C5t~ o :/:. o 1^ (^ O r^ o 1-^ r— Oi o ^ ^ COCOf-^ ^ CO ^ -^C4 OON C^ »ft CO t^ h» lO CO r^ CO ci — <-H ^ cs ooc^ WC^C^(N O Ci 0» QC CO "^ CO C^l ^<-H cs ceo ic ic (D ^ M — t^oc cs ^ o O OS O »-0 CO ccTcoco'otror 1-f M< «3 t^O CO eioi ^ «c -^ CO '^ CO 1-t MOO 30 OiNO -^ O C^ -1* -^ — 'T' O X X C^^Oi ofco'w"'^ uO O ■* O OS 00 t^ 01 o 10 S* (N 10 CO 10 ^ X xeo X X CS» « ^ foirTio'i^rtC »0 CO o o o 10 O !•* ^ CO 1-t O* CO CO »-i O o eot^c^M«o ■^ 1^ O" (N 10 .-IrJi-^eo OS-'S'iOCSO t^ i-i ci o »o C4 COCO O W CC^^ -^ CO COI^iO •- IN o o t^ — ■* ic lO o re Ci C^ O iC CO X 00 cor- 10 00 cv) X <<«« -^a* 00 o M* "-< r^o cT o'ocTo'co^ uO C^ CO o c5 2S t<3-s<0"5 COCO 1-1 'H o >n ■» 1-; e^ ficoMf-i 2 ..||jig £ s ^ 'J 7 § fecf s s s =■ p. 'sS - pi I'll * ? 2.8 6.1 27 2.3 4.3 29 4.1 31 4.4 33. 17.51 ! 1.03 19.43 , 1.06 20. 13 1. 16 1..55 6.6 35 2.34 1.57 2.98 1.66 1.73 2.17 1.32 5.10 2.49 ' .04 1. .54 2.21 4.40 1.49 1.92 1.44 1.74 2.27 2.01 2.28 1.17 3.08 .84 1.8.5 2. .55 1.93 1.89 2.07 2.21 2.21 1.9>( 2.02 2.94 3. .55 2.10 3.17 9.0 37 16.11 21.79 17. 62 18.26 20.98 1.21 1.21 1.27 1.30 1..32 18.6 9.5 39 5.8 41. 16.60 [ 1.36 24.51 1 1.48 4.4 43 7.1 19. 70 20. 55 21.60 19. 15 19.50 19. .57 17.70 20.60 18.62 21.36 20.34 20.83 21.41 21.47 16.00 18.43 18.46 20.68 19. .30 20.42 19. 75 18.24 19.14 18.32 20.98 17.81 20.13 1.48 1..50 1..56 1.65 1.66 1.73 1.73 1.74 1.75 1.76 1.76 1.76 1.79 1.80 1.85 1.85 1.86 1.89 1.91 1.92 1.94 1.98 2.02 2.03 2.04 2.10 2.15 43. 7.0 47 10.8 3.5 49 9.1 3.3 51 11.2 .53 15.2 5.9 .55 1.2 56 5.7 57 58 .... 59 4.8 60 10.6 61 9.9 62 12.5 63 64 22.6 6."> 66 67 4.9 6K .5.3 69 13.0 70 5.3 ' One company oneraling four mills reported costs and income In detail for one mill only, but included net oarnlncs from the other three nulls as "earnings from other sources." » The letters Indicate roughly the quantity sold during the veara.s follows: "A," 12,.500,000 or less; "B," yi,mt,m) to25,000,000; "C," 25'000,000 to SO.OOO.OOO; " D," 50,000,000 to 100,000,000, and " E," over 100,000,000 feel B. .M. ' Lass. APPENDIX. 85 Table 42. — Cost of sales, sales realization, profits on lumber, etc. — Continued. Company number. Size group of com- pany. Cost of sales. Sales realiza- tion. Profit on lumber. Total profit from all sources. Rates of return on total in- vestment. 71 B B C A B C B A A C D A B C A E B A B A C B C B A A C D B B B C A E B C D B C C B A D B C C C C C C c A E C A A C B C C B C D C B B C E C A C B B B B B C C $16. 71 18.46 19.70 20.57 18.31 16.35 18.48 15.31 17.35 22.11 19.16 16.36 17.75 16.84 16.36 15.84 17.07 13.20 17.91 21. 57 16.27 21.22 15.38 19.64 15.34 16.98 17.08 17.35 18.21 13.75 14.38 18.36 15.79 18.10 15.73 19.09 18.97 17.58 18.62 14.96 14.10 17.61 18.18 19.27 17.39 15.46 13.01 16.69 17. .59 15.58 16.11 17.15 17.57 15.31 18. 64 ' 16.50 15.45 17.32 20.02 17.68 15.12 19.08 16.75 14.10 15.84 13.64 17.13 16.08 17.20 14.94 18.18 15.20 15.60 16.15 15.91 16.63 18. 48 15.66 $18. 87 20.68 21.92 22.81 20.63 18.72 20.87 17.77 19.83 24.60 21.65 18.90 20.30 19.39 18.96 18.53 19.86 16.01 20.73 24.43 19.22 24.18 18. 35 22.63 18.37 20.02 20.14 20.48 21.37 16.92 17.57 21.55 19.06 21.41 19.17 22.54 22.44 21.19 22.24 18.60 17.82 21.34 21.91 23.07 21.19 19.27 16.93 20.62 21.54 19.54 20.08 21.16 21.60 , 19. 38 ' 22. 85 20.78 19.73 21.64 24. 35 22.04 19.49 23. 46 21.14 18.51 20.29 18.09 21.58 20.53 21.66 19.49 22.78 19. 84 20. 27 20.86 20. 70 21.50 2.3.40 20.61 $2.16 2.22 2.22 2.24 2.32 2.37 2.39 2.46 2.48 2.49 2.49 2.54 2.55 2.55 2.60 2.69 2.79 2.81 2.82 2.86 2.95 2.96 2.97 2.99 3.03 3.04 3.06 3.13 3.16 3.17 3.19 3.19 3.27 3.31 3.44 3.45 3.47 3.61 3.62 3.64 3.72 3.73 3.73 3.80 3.80 3.81 3.92 3.93 3.95 3.96 3.97 4.01 4.03 4.07 4.21 4.28 4.28 4.32 4.33 4.36 4.37 4.38 4.39 4.41 4.45 4.45 4.45 4.45 4.46 4.55 4.60 4.64 4.67 4.71 4.79 4.87 4.92 4.95 $2. 32 2.93 1.87 2.82 3.46 2.98 4.47 2.46 2.25 2.49 3.05 2.54 3.35 16.57 2. .37 3.53 3.94 2.81 3.09 4.05 3.34 3.42 3.18 2.65 4.41 4.06 3.06 4.09 4.32 3.34 6.05 2.70 3.27 3.15 3.44 3.75 4.89 3.61 4.09 4.10 3.72 3.73 6.13 4.35 5.68 4.91 4.66 4.81 4.08 4.77 4.83 3.70 4.77 4.18 4.21 4.28 7.26 4.01 4.26 7.83 4.27 5.39 5.43 4.86 4.23 5.47 4.76 5.46 5.10 4.71 4.89 5.22 4.67 6.67 6.51 4. 63 5. 77 4.95 7.5 10.7 3.4 72 73 74 75 6.5 8.7 76 77 78 14.4 7.2 9.4 6.5 79 80 81 82 83 4 8 84 7 6 85 15 3 86 21 5 87 16 1 88 89 7 3 90 28 6 91.. 7 1 92 93 10.5 94 95 96 7 97 98 99 17.0 100 14.1 101 102 3.5 103 104 3.2 105 106 7.0 107 6.1 108 6.1 109 110 28.8 Ill 10.6 112 2.0 113 8.1 114 17.2 115 12.2 116 5.1 117 6.7 118 10.9 119 8.5 120 19.5 121 122 123 4.8 124 13.3 125 ... 126 7.6 127 128 4.3 129 4.3 130 14.2 131 13.0 132 6.7 133 13.1 134 135. 41.8 136 18.1 137 12.8 138 18.1 139. 19.8 10.6 141 142 14.9 143 144 9.7 145 10.2 146 17.4 147 16.3 86 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Table 42. — Cost of sales, sales reaUzatwn, profits on lumber, etc. — Continued. Size Sales realiza- tion. Total Rates of Company number. group of com- Cost of sales. Profit on lumber. profit return on from all total in- pany. sources. vestment. 149 C D C B C C C B E D B $16. 20 15.27 16.91 13.55 15.02 17.52 15.67 16.50 14.12 15.43 20.19 $21. 20 20.30 21.95 18.71 20.24 22.79 21.01 21.85 19.53 20.85 25.67 $5.00 5.03 5.04 5.16 5.22 5.27 5.34 5.35 5.41 5.42 5.48 $5.68 5.13 5.19 5.88 5.30 5.33 6.25 6.72 6.05 5.94 7.12 39.3 150 11.3 151 152 153 8.0 154 11.7 155 16.5 156 ^ 13.2 157 * 24.3 1.58 20.9 159 14.0 160 C 16.65 22.13 5.48 9.94 16.4 161 C 15.49 21.07 5.58 5.97 7.3 162 A D 14.24 15.66 19.83 21.28 5.59 5.62 5.89 8.04 163 13.9 l&l D 15.67 21.29 5.62 7.92 27.1 165 B 19.68 25.33 5.65 4.31 6.5 166 C 17.01 22.67 5.66 8.12 9.8 B D 17.84 16.27 23.75 22.21 5.91 5.94 5.91 168 9.25 17.6 D 15.79 21.75 5.96 6.19 6.4 170 C 15.73 21.79 6.06 7.52 5.0 C 16.01 22.07 6.06 6.13 14.4 172 C B 16.02 15.81 22.24 22.08 6.22 6.27 6.37 6.90 9.7 14.9 174 C 14.93 21.20 6.27 7.29 2.6 B C 13.00 16.07 19.29 22.40 6.29 6.33 6.29 9.33 176 31.8 C 16.17 22.60 6.43 7.69 20.1 178 C 15.30 21.75 6.45 6.83 20.8 D C 14.57 15.60 21.03 22.09 6.46 6.49 6.88 6.73 180 17.2 E 14.72 21. 28 6.56 8.06 15.0 182 D 13.11 19.75 6.64 7.39 11.0 183 A 15.44 22.09 6.65 8.58 52.1 184 C 14.40 21. OS 6.68 7.34 8.4 D 14.41 21.10 6.69 7.58 15.3 1S6 E 14.93 21.70 6.77 8.77 15.5 187 C 16.00 23.00 7.00 9.38 14.2 188 C 14.22 21.25 7.03 S.69 11.2 c 14.87 21.96 7.09 9.11 i 17.8 190 D 14.02 21.28 7.26 7.32' 8.9 191 C 13.07 20.45 7. 38 7.73 1 46.4 192 B 17.13 24.57 7.44 7.46 ; 27.8 193 I> 15.48 23.04 7.56 9.65 21.5 194 B 13.72 21.30 7.58 7.78 23.8 195 A 15.85 23.68 7.83 7.83 27.9 196 B 13.18 21.14 7.96 7.94 24.7 C 12.56 20.58 8.02 8.99 9.1 198 C 12.32 20.41 8.09 8.24 9.0 199 E 13.34 21.72 8.38 8.86 14.8 200 C 13.16 21.65 8.49 8.14 22.4 201 D 13.42 22.03 8.bl 9.59 25.6 202 C 13.20 22.14 8.94 9.40 21.8 203 .• . C 12.76 21.91 9.15 9.59 13.7 204 D 12.81 22.23 9.42 10.19 33.4 205 C 13.95 23.75 9.80 9.64 12.8 APPENDIX. 87 Table 43. — Cost of sales, sales realization, profit on luinher, and profit from nil ■sources per thousand feet us reported by 205 southern pine lumber companies, arranged from low to hi(jh on basis of profit on lumber, and rates of return on investment for lJi4 companies for 1918. Company number.i Size group of com- pany.2 Cost of sales. Sales realiza- tion. Profit on lumber. Total profit from all sources. Rates of return on total in- vestment. 1 A B A A B A A i A A B D B D A A A A B B A B B B B A A B B C B A B A C D A B A A A B B C B B B A A C A A C B A B A B A B C C B B B E C «26. 97 31.23 27.89 25. 82 29.91 27.37 28.00 27.06 29.03 28.49 28.46 21.81 2 -.60 26.73 29.72 27.02 24.74 25.85 23.89 27.31 21.66 35.10 29.24 31.42 21.95 24.44 37.12 26.64 23. 05 21.25 27.29 24.92 25.92 25. 11 24.67 22.97 26.33 26.14 25.34 22.96 26.78 24.61 20.94 24. 51 23.62 26.00 29.84 2.5.04 20.72 26.56 23.67 23.76 2i. 61 25. 81 25.44 21. 32 26.20 27.50 18.51 26.35 31.14 24.93 25.40 24.03 25.14 24.49 25.16 20.67 19.12 $22. 12 26.87 23.65 21.83 2n. 96 23.52 24.30 23. 48 25.48 25.10 25.32 18.81 23. 10 24.47 27.59 24.90 22.85 24.01 22.07 25. .8 19.96 33.42 27.56 29.84 20.42 23.07 35.94 25. 78 22.19 20. 39 26.48 24.43 25.46 34.78 21.4-1 22.74 26.16 26.04 25.33 23.02 26.87 24.81 21.18 24.80 23.96 26.46 30.39 25.63 21.34 27.18 24.30 24.44 26.30 26. .==8 26.36 25.32 27.20 28.59 19.61 27.50 32.33 26.13 26.67 25.37 26.48 25.87 26.56 22.17 20.72 8 $4. 85 5 4. 36 3 4. 24 3 3. 99 8 3.95 8 3.85 8 3.70 3 3.58 8 3.55 3 3.39 3 3.14 3 3. 00 3 2..-0 3 2.26 3 2. 13 8 2.12 8 1.89 8 1. 84 3 1.82 3 1.73 3 1.70 3 1.68 3 1.68 3 1. .58 3 1.53 3 1.37 3 1.18 8.86 3.86 3.86 3.81 3.49 3.46 3.33 3.23 3.23 3.17 3.10 8.01 .06 .09 .20 .24 .29 .34 .46 .55 .59 .62 .62 .63 .68 .69 .77 .92 1.00 1.00 1.09 1.10 1.15 1.19 1.20 1.27 1.34 1.34 1.38 1.40 1.50 1.60 814.85 3 4. .36 3 2. .54 3 3.85 3 2. .57 3 3.85 .39 3.81 3 2. 56 3 3.39 3 3.14 3 3.00 3 1.92 3 1.25 3.80 .74 3.52 3 1. S4 .44 3.6S 3.71 3 4. IS 3.07 3.88 3 1.39 3 1.18 3.73 3.59 3.72 3.74 .75 .13 .16 .40 3.08 3.39 2.36 2 4 5 337 6 ■■ 11.9 1 7 8 9 10 11 3 13 12 13.. 3 2 8 14 . . 3 3 5 15 10 6 17 3 18 18 19 20 .9 21 . . 32 22 23 3 7. S 24 3.1 25 26 3 1.3 27 28 37.7 29 3 1.6 30 31 3 1.0 32 33 1.7 34 . . .6 35 36 37 3.3 38 5.4 39 3.1 40 .87 .09 .60 2.70 3.65 .43 .98 1.22 1.97 1.27 2.25 1.21 5.20 1.35 .77 .92 1.46 2 25 tie 2.32 1. .55 .42 1.20 2.91 2.71 .36 2.76 2.42 5. 88 1.45 2.9 41 42 2.6 43 5.5 44 3 1.2 45 3.9 47 4.5 48 2.1 49 .5.5 1.1 51 14.4 10.5 53 5.6 54 2.5 55 57 1.5 PS... 59 60 61 .7 63 6.9 65 .8 66 7.9 67 3.3 68 5.5 69 1 One company operating four mills reported costs and income in detail for one mill only, but included net earnings from the other three mills as " earnings from other sources." ^ ^ 2 The letters indicate roughly the quantity sold during the year as follows: "A," 12,500,000 or less; ' B, 12,500,000 to 25,000,000; "C," 25,000,000 to 50,000,000; "D," 50,000,000 to 100,000,000, and " E " over 100,000,000 ' feet b. m. 3 Loss 88 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Table 43. — Cost of sales, sales realization, profits on lumber, etc. — Continued. Company number. Size group of com- pany. Cost of sales. Sales realiza- tion. Profit on lumber. Total profit from all sources. Rates of return on total in- vestment. 70 ^ 71 72 I A B A A B B C C A B C A A C A A A C B B B B C B B 8 B B D C B B B B B B C B A B C c i 1 D C C A D C C E C D B B C D C C A A A B C c A D A B $27.46 20.95 21.45 23.18 22.29 24.98 18.63 25.98 24.57 24.44 21.49 21.69 24.54 24.26 25.08 21.99 22.68 22.76 25.47 20.43 22.63 25.13 24.72 20.56 31.82 25.87 23.51 25.75 24.24 20.69 23.90 26.69 26.11 20.92 25.75 23.30 19.86 23.69 19.35 21.75 23.22 20.98 23.26 26.04 32.58 21.81 30.59 22.89 19.77 20.68 22.32 19.74 23.61 23.50 19.13 20.63 23.06 22.50 20.95 23.54 25.71 23.27 23.42 23.87 21.19 22.44 23.62 22.04 20.37 22.25 20.26 22.06 21.85 21.89 25.39 21.88 31.30 22.22 $29.10 22.65 23.24 2,1.01 24.14 26.84 20.54 27.99 26.60 26.59 23.64 23.85 26.75 26.47 27.31 24.25 24.96 25.12 27.87 22.85 25.38 27.93 27.57 23.43 34.70 28.76 26.53 28.83 27.38 23.88 27.09 29.92 29.36 24.21 29.04 26.60 23.18 27.05 22.80 25.21 28.75 24.51 28.83 29.73 36.28 25.51 34.29 26.63 23.52 24.46 26.12 23.63 27.55 27.48 23.15 24.67 27.17 26.62 25.07 27.78 30.00 27.57 27.76 28.23 25.56 26.81 28.05 26.51 24.95 26.86 24.91 26.75 26.54 26.58 30.14 26.64 30.08 27.11 $1.64 1.70 1.79 1.83 1.85 1.86 1.91 2.01 2.03 2.15 2.15 2.16 2.21 2.21 2.23 2.26 2.28 2.36 2.40 2.42 2.75 2.80 2.85 2.87 2.88 2.89 3.02 3.08 3.14 3.19 3.19 3.23 3.25 3.29 3.29 3.30 3.32 3.36 3.45 3.46 3.53 3.53 3.57 3.69 3.70 3.70 3.70 3.74 3.75 3.78 3.80 3.89 3.94 3.98 4.02 4.04 4.11 4.12 4.12 4.24 4.29 4.30 4.34 4.36 4.37 4.37 4.43 4.47 4.58 4.61 4.65 4.69 4.09 4.69 4.75 4.76 4.78 4.89 $1.94 2.21 2.02 2.81 .71 2.40 1.91 4.05 2.02 2.51 3.08 1.83 4.02 3.62 2.80 2.93 3.33 2.36 2.39 3.02 1.81 3.82 2.85 3.03 3.38 2.92 3.53 6.43 3.32 3.19 3.54 3.23 3.25 4.02 3.19 4.53 3.41 3.86 4.03 3.81 5.S5 4.08 4.77 4.04 5.80 3.^6 3.73 3.86 4.20 3.90 18.16 4.00 5.79 2.87 4.26 6.04 6.14 4.38 5.07 7.43 5.88 6.02 4.79 7.S2 5.76 7.44 6.72 4.63 4.58 5.73 3.18 5.88 4.90 6.45 6.32 6.11 6.49 9.65 2.8 16.1 73. 74 1.2 75. . 7.1 76 77. 3.2 78 79. . 3.7 80 81 S2 S3 84 6.6 3.9 8.0 10.5 85.. 86 87 88 89... 9.5 13.9 6.4 91. . 8.9 93. 6.7 95.. 8.5 97 5.9 4.4 99 100 101 . ... 3.4 103 104 105 6.6 7.8 4.0 5.1 107 108 109 16.3 11.5 111 4.1 112 6.8 113.... . 4.0 9.9 115 9.7 116 5.9 117 18.0 119 7.4 120 7.9 121 8.4 123 17.7 125 10.9 126 127 13.2 7.9 12S 7.1 129 7.1 6.5 131 1.32 1.33 27.6 24.8 8.1 2.2 135 136 1.37 11.5 6.4 8.4 1.39 140 12.2 26.9 141 12.1 142 15.3 143 11.6 144 145 7.8 147 8.1 APPENDIX. 89 -Cost of sales, sales realization, profits on lutnier, etc. — Continued. Company number. Size group of com- pany. Cost of sales. Sales realiza- tion. Profit on lumber. Total profit from all sources. $19.99 $25. 08 $5.09 $4. 65 21.79 26.92 5.13 5.06 19.50 24.63 5.13 6.22 29.45 34.64 5.19 6.49 23.22 28.50 5.27 5.67 17.82 23.10 6.28 6.22 21.27 26.61 5.34 5.84 21.71 27.06 5.35 3.64 22.92 28.28 5.36 9.21 21.02 16.85 26.39 22.26 5.37 5.41 5.31 5.41 20.52 25.95 5.43 6.97 19.86 18.68 23.23 18.08 22.97 25.30 24.32 28.97 23.83 28.73 5.44 5.64 5.74 5.75 5.76 5.44 6.03 5.74 5.75 7.35 17.94 23.72 5.78 6.09 20.41 26.20 5.79 7.89 23.56 29.38 5.82 2.32 19.28 25. 17 5.89 5.09 19.97 25.88 5.91 7.06 19,98 25.93 5.95 4.42 22.62 28. 63 6.01 3.06 23.28 29.30 6.02 3.78 21.69 27.90 6.21 7.12 20.14 26.48 6.34 6.36 20.27 19.44 26.83 26.09 6.56 6.65 6.. 56 7.71 21.25 27.93 6.68 7.88 20.32 27.11 6.79 5.96 19.25 26.04 6.79 7.49 20.35 27.23 6.88 8.67 22.27 29 47 7.20 8. .52 17.31 24.67 7.36 7.41 21.00 28.50 7.50 9.19 22.49 30 04 7.. 55 7.55 19.50 27.14 7.64 7.63 18.21 25.99 7.78 8.24 20.41 28. 26 7.85 8.45 20. 69 28.63 7.04 8.16 18.28 26. ,59 8.31 9.05 18.79 27.22 8.42 13.00 18.29 26. 76 8 47 9.21 19.30 27.88 8. .18 9.35 18.83 27. 68 8.85 10.91 18.71 27.73 9.02 9.40 18. .50 27.59 9 09 9.55 21.40 30.71 9 31 8.82 15.81 25.27 9.46 10.07 16.49 25.99 9.. 50 9.98 17.50 27.01 1.51 11.12 18.61 28.14 9.53 9.68 18.00 27.84 9.84 10.47 19.22 29.64 10.42 13.78 17.13 28.15 11.02 11.88 16.63 27.75 11.12 11.51 15.63 29.42 13.79 13.93 Rates of return on total in- vestment. Exhibit 9. AVERAGE COST OF SALES, SALES REALIZATION, AND EARNINGS OF 143 SOUTHERN PINE LUMBER COMPANIES, 1917 AND 1918. The average cost of sales, sales realization, and profits of the 143 companies whose unit costs and profits are shown in Chapter IV, and whose investments and earnings are discussed in Chapter III, are shown in Table 44. Tlie reporred figures shown are computed as described for those of the 205 companies which are shown in Exhibit 5, Table 39, while the revised figures take account of the adjustments to eliminate appreciation of stumpage. 90 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Table 44. — Average cofit of »ales, sales realization, and earnings from lumber and other sources a^ reported by 1^3 southein pine lumber companies, and as revised' by the Commissioti, 1911 and 1918. Group and item. 1917 Reported. Amount. PerM feet B. M. Revised. Amount. Gulf States Rroup (116 companies selling 4,693.893,012 feet B. M. ): Sales realization Cost of sales Earnings from lumber Earnings from other sources Total earnings Deductions from earnings Net earnings after deductions Georgia-Florida group (13 compames selling 258,577,845 feet B. M.): Sales realization Cost of sales Earnings from lumber Earnings from other sources Total earnings Deductions from earnings Net earnings after deductions Virginia-Carolina group (14 companies seUing 383,008,800 feet B. M.): Sales realization Cost of sales Earnings from lumber Earnings from other sources Total earnings Deductions from earnings Net earnings after deductions All groups (143 companies selling 5,.335,479,657 feet B. M.): Sales realization Cost of sales Earnings from lumber Earnings from other sources Total earnings Deductions from earnings Net earnings after deductions , $98, 859, 274. 18 77,028,893.38 21,830,380.80 4, 530, 156. .50 26,360,537.30 4, 867, 199. 48 21,493,337.82 5, 221, 442. 70 4, 375, 883. 24 845, 559. 46 219,310.49 1,064,869.95 270,308.68 794,561.27 7, 616, 707. 26 7,3.'56,098.48 260, 608. 78 205, 032. 28 465,641.06 158, 121. 22 307, 519. S4 111,697,424.14 88, 760, 875. 10 22, 936, ,549. 04 4, 954, 499. 27 27,891,048.31 5, 295, 629. 38 22, 595, 418 93 121.06 16.41 4.65 .97 5.62 1.04 4. 58 20.19 16.92 3.27 .85 4.12 1.05 3.07 19.89 19.21 .68 .53 1.21 .41 .80 20.93 16.63 4.30 .93 5.23 .99 4.24 $98, 859, 274. 18 72, 744, 964. 97 26,114,309.21 4,530,1.56.50 30,644,465.71 4,867,199.48 25,777,266.23 5,221,442.70 4,248,511.84 972, 930. 86 219, 310. 49 1,192,241.35 270,308.68 921,932.67 7, 616, 707. 26 7, 356, 098. 48 260, 60S. 78 205, 032. 28 465,641.06 158,121.22 307, 519. 84 111,697,424.14 84, 349, 575. 29 27, 347, 848. 85 4,954,499.27 32,302,348.12 5, 295, 629. 38 27,006,718.74 Group and item. 1918 Reported. Amount. PerM feet B. M. Revised. Gulf States group (116 companies selling 4,228,5,5.5,477 feet B. .M.): Sales realization Cost of sales Earnings from lumlK-r Earnings from other sources Total earnings Deductions from earnings Net earnings after deductions Georgia-Florida group (13 companies selling 253,334,700 feet B. M.): Sales realization Cost of sales Earnings from lumber Earnings from other sources 'I'otul earnings Deductions from earnmgs Net earnings after deductions $113,188,877.70 92,337,031.61 20,851,846.09 4,651,151.16 25, 502, 997. 25 6, 3.53, 840. 80 19, 149, 156. 45 6, .574, 963. 74 5, 685, 729. 52 HS9, 234. 22 175,187.47 1,064,421.69 355, 053. 69 709.368.00 $26. 79 21.86 4.93 1.10 6.03 1.50 4.53 25.95 22.44 3.51 .69 4.20 1.40 2.80 $113,188,877.70 88,126,621.88 25,062,252.82 4,6.51,151.16 29,713,403.98 6, 353, 840. 80 23,359,563.18 6,574,963.74 5, 576, 899. 43 998, 064. 31 175, 187. 47 1,173,251.78 355, 0.53. 69 818,198.09 APPENDIX. 91 Table 44. — Average cost of sales, sales realization, and earnings, etc. — Contd. Group and item. Virginia-Carolina group (14 companies selling 282,187,138 feet b: M.): Sales realization Cost of sales Earnings from lumber Earnmgs from other sourres Total earnings Deductions from' earnings , Net earnings after deductions All groups (143 companies selling 4,764,077,315 feet 15. M.): Sales realization Cost of sales Earnings from lumber , Earmngs from other sources Total earmngs Deductions from earnings Net earnings after deductions Reported. Amount. $8,381,139.03 7,898,393.12 482, 745. 91 81,075.39 563,821.30 248, 237. 68 315, 583. 62 128, 144, 980. 47 105,921,154.25 22,223,826.22 4,907,414.02 27,131,240.24 6,957,132.17 20, 174, 108. 07 Per M feet B. M. J29. 70 27.99 1.71 .29 2.00 .88 1.12 26.92 22.25 4.67 1.03 5.70 1.46 4.24 Revised. Amount. 88,381,139.03 7, 898, 393. 12 482, 745. 91 81, 075. .39 563,821.30 248, 237. 68 315,583.62 128,144,980.47 101,601,917.43 26,543,063.04 4,907,414.02 31,450,477.06 6,9.57,132.17 24, 493, 344. 89 Per M. feet B. M. $29. 70 27.99 1.71 .29 2.00 .88 1.12 26.92 21.34 5. 58 l.CiJ 6.61 1.46 5.15 Exhibit 10. COSTS, BY OPERATIONS, AS REPORTED BY 143 SOUTHERN PINE LUMBER COMPANIES, 1917 AND 1918. Table 45 shows the total and unit costs to produce and sell as reported by 143 southern pine lumber companies. The costs shown in this table are com- puted as described in Exhibit 5. As the 143 companies are included in the 20.5 for which costs are shown in Exhibit 5, the differences occurring between the two tables are due merely to the use of a smaller number of companies in each of the territorial groups. Table 45. -Costs, by operations, as reported iy IJ/S southern pine lumber companies, 1917 and 1918. 1917 1918 Item. Footage B.M. Total cost. Cost perM. Footage B.M. Total cost. Cost perM Gulf States group (116 companies): Stumpage Logging 4, .562, 541, 842 4,563,095,758 4,587,277,499 4,587,277,499 4,693,893,012 4, 693, 893, 012 4,587,277,499 $21,269,891.02 19,879,299.98 20,396,427.51 10,616,509.38 2,317,919.85 2,778,788.20 1431,103.90 $4.66 4.35 4.45 2.31 .49 .59 1.09 3,909,785,173 .3,914,194,859 3,908,276,384 3,908,276,384 4,228,555,477 4,228,55.5,477 3,908,276,384 $19,853,389.45 25, 154, 570. 80 26,373,724.88 12,196,669.80 2,979,887.48 3,105,909.31 1 326, 194. 99 $5. OS 6.43 Manufacturing General and admin- istrative 6.75 3.12 Shipping .71 Selling .74 By-products 1.08 Net cost to produce and sell 76,827,732.04 16.76 89,337,956.73 22.75 Georgia- Florida group (13 companies): Stumpage 275,052,679 275,078,200 268,179,916 268,179,916 258, 577, 845 258,577,845 268,179,916 948, 264. 02 1,545,095.09 1,424,180.35 459,342.90 79, 565. 30 148,034.49 191,545.06 3.45 5.62 5.31 1.71 .30 .57 1.34 251,304,492 250,763,385 248,749,519 248,749,519 253, 334, 700 253,334,700 248,749,519 953,581.50 2,009,838.41 1,846,632.20 609,665.67 128,047.34 157,238.01 1109,816.36 3.79 Logging.. . 8.01 Manufacturing General and admin- istrative 7.42 2.45 Shipping .51 SeUing .62 By-products 1.44 Net cost to produce and sell 4,512,937.09 16.62 5,595,186.80 22. 36 1 Deduct. 92 COSTS AND PROFITS OF SOUTHERN PINE COMPANIES. Table 45.- -Cost, by operations, as required by IJfS southern pine lumber com- panies, 1911 and 1918 — ContiuutHl. 1917 1918 Item. Footage B.M. Total cost. Cost perM. Footage B. M. Total cost. Cost perM. Virginia-Carolina group (14 companies): Stumoage 37.3,014,089 370,350,971 370,350,971 370,350,971 383,008,800 383,008,800 370,350,971 $1,209,443.72 2,435,995.39 2,415,774.34 1,024,421.50 83,054.19 233, 121. 99 154.968.98 $3.24 6..SS 6.52 2.77 .22 .61 1.15 268,549,336 267,556,432 267,556,432 267,556,432 282,187,138 282, 187, 138 267,556,432 $948,830.01 2,718,755.75 2,623,238.68 1,160,932.05 96, 188. 30 207,801.91 171,0-19.34 $3.53 10.16 Manufacturing General and admin- 9.80 4.34 Shipping .34 .74 By-products 1.27 Net cost to produce 7,346,842.15 19.79 7,684,757.36 28.64 All groups (143 companies): Stumpage 5, 210, 60S, 610 23, 427, 598. 76 5,208,524,929 23,860,390.16 5,225,808,386 i 24,236,382.20 5,225,808,386 12,100,273.78 5,335,479,657 2,480,539.34 5,335,479,657 3,159,944.68 5,225,808,386 1577,617.94 4.50 4.58 4.64 2.32 .47 .59 1.11 4,429,639,001 4,432,514,676 4, 424, 5S2, 335 4,424,582,335 4,7&1,077,315 4,761,077,315 4,424,582,335 21,755,800.% 29,883,164.96 30,843,595.76 13,967,267.52 3,201,123.12 3,471,009.26 1507,060.69 4.91 6.74 Manufacturing General and admin- istrative 6.97 3.16 .67 Selling .73 1.11 Net cost to produce and sell 88,687,511.28 16.99 102,617,900.89 23.07 1 Deduct. Exhibit 11. COSTS AND EARNINGS PER THOUSAND FEET AS REPORTED BY 143 SOUTHERN PINE LUMBER COMPANIES, BY TERRITORIAL GROUPS AND QUANTITY SOLD, 1917 AND 1918. Table 4G shows the costs as reported by the 143 companies grouped accord- ing to territorial location of the companies and the quantities sold. These costs as reported may be compared with tlie costs for the same companies as revised by the Commission and sh(>wn in Table 31, p. 59, the only difference between the costs shown in the two tables l)eing the revision made for appreciation in the stumpage costs as reported by 57 companies as shown in Table 29, p. 57. Table 46. — Costs and earnings per thousand feet as reported by IJ/S southern pine lumber eompanies, by territorial yroiips and quantity sold, 1911 and 1918. 1917 1918 Number of board feet. Number of com- panies. Per cent of sales footage. Cost of sales. Earnings on lumber. Number of com- panies. Per cent of sales footage. Cost of sales. Earnings on lumber. Gulf States group: ]2..'i00,()0n and under I jjm.om to 25,000.000. . . . 2.".,0f)0,000 to .50,000,000 .50,000,CKX) to 10(),fXt(J,000. . . Over 100,000,000 10 36 45 17 8 1.9 12.6 29.8 21.0 22.7 $16.86 17.54 16.34 1.5. 93 16.28 $3.66 2.91 5.04 5.30 4. .59 17 42 34 17 6 3.2 16.1 26.2 24.6 18.7 $23.57 23.24 21.43 21.22 21.73 $1.09 3.14 5.49 .5.68 5.35 Total 116 88.0 1 16.41 4.65 116 88.8 21.84 4.93 APPENDIX. 93 Table 46. — Costs and earnings per thousand feet as reported hy US southern pine lumber companies, etc. — Continued. 1917 1918 Number of board feet. Number of com- panies. Percent of sales footage. Cost of sales. Earnings on lumber. Number of com- panies. Percent of sales footage. Cost of sales. Earnings on lumber. Georgia- Florida group: 12,500,000 and under 12,500,000 to 25,000,000. . . . 25,000,000 to 50,000,000. . . . 50,000,000 to 100,000,000. . . 4 6 3 .6 1.9 2.3 $1S.00 16.91 16.63 Jl. .51 2.04 4.77 5 4 3 1 .9 1.3 2.0 l.l $22.51 22.43 24.07 19.29 $2.70 2.50 1.90 8.58 Over 100,000,000 Total 13 4.8 16.92 3.27 13 5.3 22.44 3 51 Virginia-Carolina group: 12,500,000 and under .' 12,500,000 to 2.5,000,000.... 25,000,000 to .50,000,000. . . . 50,000,000 to 100,000,000. . . Over 100,000,000 4 5 2 3 .5 1.6 1.1 4.0 17.63 19.40 14.06 20.67 1.74 1.48 3.50 '5.15 6 5 1 2 .8 1.6 .9 2.6 27.67 29.82 30.59 26.04 1.71 .78 3.70 1.57 Total 14 7.2 19.21 .68 14 5.9 27.99 1.71 All groups: 12,500,000 and under 12,500,000 to 25,000,000. . . . 25,000,000 to 50,000,000. . . . 50,000,000 to 100,000,000. . . Over 100,000,000 18 47 50 20 S 3.0 16.1 33.2 25.0 22.7 17.22 17.65 16.29 16.69 16. ?8 2.91 2.66 4.97 4.37 4. .59 28 51 38 20 6 5.0 19.0 29.1 28.2 18.7 24.07 23.73 21.90 21.59 21.73 1.49 2.90 5.18 5.41 5.35 Total 143 100.0 16.64 4.30 143 100.0 22.24 4.66 iLots. Exhibit 12. WHOLESALE PRICES OF LUMBER BY MONTHS, JANUARY, 1917, TO DECEMBER, 1921, INCLUSIVE. This exliibit sliows thie wholesale prices for southern pine lumber per thou- sand feet board measure, by months, from January, 1917, to December, 1921, inclusive. All prices shown are simple averages of weekly price quotations pub- lished in the American Lumberman. The prices shown are generally based on quotations for the Hattiesburg, Miss., lumber exchange, but when Hattiesburg quotations were unobtainable, Alexandria, La., Kansas City, Mo., or Birming- ham, Ala., quotations have been use March . .". April May June July .\upust September October November December 1919. January February March .\pril May June July A ugust September OctolxT November December 1920. Jarus'v February March April May June July August September October November l>rcrmbei 1921. January February March .\pril May June July August September October November December . Boards SlSorS2S, No. 1, 1 X 8". 14' and 16'. Fencing, SIS No. 2, 1x4", aU lengths. Dimension, SISIE, No. l,2x 4", 10'. $49.75 49.67 49.31 49.75 51.05 51.06 50.25 48.50 48.00 49.00 49.13 48.00 50.56 50.00 49.75 50.90 52.44 .53.00 66.10 81.31 89.88 95.50 97.19 99.88 110.00 127.17 143. 39 143.81 145.20 128.13 119.98 125.44 126.51 119.00 109.25 104.50 85.63 75.00 71.67 72.00 70.42 70.76 70.69 69.75 72.22 73.98 75.34 77.71 $26. 35 29.33 28.75 29.90 29.15 31.50 31.13 30.94 29.13 29.81 30.13 30.41 30.87 33.00 32.25 32.00 33.42 36.17 40.75 46.17 48.00 55.75 51.31 64.75 62.00 85.16 89.05 73.68 63.92 54.93 50.93 52-88 47 90 44.62 37.45 32.66 29.38 26.93 25.05 25.40 23.33 22.47 25.15 21.56 22.54 24.84 28.63 25.68 $20.09 21.67 22.50 23.25 25.03 25.94 24.88 24.00 23.75 24.56 24.50 24.17 23.83 25.08 26.12 25.65 25.31 26.88 30.50 33.25 34.50 35.56 33.06 35.33 38.85 44.34 42.68 4'. 79 30. .53 33.73 W.27 3Z02 30.31 24.61 20.88 18.70 16.50 15.44 14.56 13.55 13.75 15.19 14.81 14.81 13.24 14.97 16.54 15.16 $22.00 22.07 23.13 24.50 24.90 26.44 26.15 24.19 25.75 26.00 25.13 25.69 25.80 26.50 26.88 27.05 26.94 27.75 33.46 37.58 40.30 38.63 39.32 38.81 42.90 45.94 50.85 46.55 43.69 40.15 34.67 34.83 35.88 30.85 23.88 22.30 20.50 20.00 20.75 19.90 20.81 22.79 21.20 19.94 20.48 20.93 23.18 21.82 o This book is DUE on the last date stamped below APR 1 4 1332 A FEBIKSrop^ BZimi I'. .nil L-9-35m-8,'28 jc:}cH 9757 IT , . ^^e derail 1922 mission . - T^rofits of southo: uin u l uii i"L i | ' Ji^ UCLA-Young Research Library HD9757 .U58r 1922 L 009 611 726 2 wti I'n UJNIVEKSITY of CALIFORNLI AT LOS ANGELES T.IRRARY