The Curtis Publishing Co. is far from unique in offering so favorable an account of its financial situation. For the benefit of this committee, I would like to insert at this point a statement of excerpts taken from the 1959 annual stockholders report of our major publishing corporations. STATEMENTS OF FINANCIAL POSITION BY LEADING PUBLISHERS (Excerpts from 1959 annual reports to stockholders) Conde Nast Publications, Inc. "The addition of the Street & Smith magazines to our publishing division, the beneficial effects of Charm's incorporation into Glamour, the indicated high level of activity in our manufacturing units, the expected further improvement in the operations of the pattern division, and the satisfactory outlook abroad, all point to a good year. But the most significant favorable factor is the continuation of the upward trend in advertising volume. It is now apparent that the number of advertising pages carried by our publications will be up substantially, at least for the first half of the year" (p. 5). Curtis Publishing Co. "In 1959, circulation growth continued to demonstrate the editorial vitality of Curtis magazines and the effectiveness of Curtis Circulation Co.'s sales organization. The Saturday Evening Post reached an all-time high at 6,115,877—a gain of 370,732 copies per issue. Ladies' Home Journal also reached an alltime high at 5,871,022, a gain of 177,487 copies per issue; as did Holiday at 930,701, a gain of 39,911 copies per issue. Jack and Jill showed renewed vigor, reaching 671,798, a gain of 28,383 copies per issue. The American Home reached an alltime high at 3,558,335-a gain of 320,867 copies per issue. All five magazines are currently well above these averages, the Post having exceeded 6,300,000 and the Journal going well over 6,200,000" (p. 8). "The improvement in earnings in 1959 was gratifying, but further gains are essential to provide facilities for growth in keeping with our market opportunities. The outlook is encouraging" (p. 11). MacFadden Publications, Inc. "While the profits increased, in the face of higher costs, the net results would have been considerably better had it not been for the steel strike. Unfortunately, the effect of the steel strike is carrying over to the first quarter of 1960. But at this time our survey indicates that we are beginning to move into higher levels of sales, on both advertising and circulation. "We are confident and optimistic as to the future of your company. rent cash position is the strongest it has been in many years" (p. 2). McCall Corp. Our cur "In the history of every corporation there are significant years in which the rate of progress and achievement becomes especially accelerated and in which plans for expansion and new development materialize with unusual momentum. For the McCall Corp., 1959 was such a year." "The forward march of events in each division as outlined in this annual report will continue through the 1960's. Our successes encourage management to continue every intelligent investment in personnel, plant, presses, and equipment, and to accelerate the rate of investment. Plans formulated and already in operation call for the strengthening of our organization in every area in order better to serve our customers and to meet our needs. Consequently, I am confident that the decade we are entering will witness unparalleled and solidly based growth for the company" (p. 3). "The continued success and future progress of McCall's magazine are related directly to the ability of the editors to produce a magazine that effectively serves the needs and stimulates the tastes of American women. With management's dedication to producing the best magazine that imagination, hard work, and the substantial resources at our command are capable of creating, the future of McCall's magazine is indeed bright" (p. 6). Typical of other comments regarding specific operations of the company is the following: "Forecasts for 1960 look forward to another record year in sales and a further increase in profits" (p. 12). McGraw-Hill Publishing Co. "McGraw-Hill experienced its best year in 1959." "As we start the year 1960, indications are that it probably will be a better year than 1959" (from statement by Donald C. McGraw, president, p. 1). "At the end of the year the net paid circulation of McGraw-Hill publications reached an alltime high of over 1.400.000 subscribers and a total of over $6 million was collected in subscription income. This gain in circulation was accompanied by the highest renewal average for subscriptions ever achieved by McGraw-Hill publications as a group" (p. 5). Meredith Publishing Co. "On an overall basis, the fiscal year 1958-59 has also been a good year in terms of operating results. Earnings totaled $4,256,000, or $3.28 per share, an increase of 10.5 percent over last year. The regular quarterly dividend of 45 cents per share was continued and dividends paid amounted to $1.80 per share. "As a result of our publishing plant expansion and equipment modernization program and the further diversification of our activities, the long-range outlook for our company is encouraging" (p. 5, letter to the stockholders). Time, Inc. "The year's results, and in particular the reduced operating income margin, reflected substantial costs in the first year of a 3-year program to broaden the base of the company's magazine publishing operations. "In view of the expected expansion in the Nation's economy, educational levels, and population, we foresee higher circulation levels for all our magazines. Life, for example, announced that it expected its circulation would be averaging 7 million copies per week in the early 1960's. In order to provide for high quality magazine production at the expected levels, it has been essential that the company and some of its suppliers make sizable investments in new and improved facilities" (p. 5). "Circulation gains by all Time, Inc., magazines, domestic and international, evidenced the continuing high level of reader interest and acceptance during 1959" (p. 10). In the course of this hearing, a number of magazine witnesses presented a dismal account of their finances reflecting net return on sales. This basis for analysis was questioned by Congressman Broyhill and Congressman Porter, and rightly so. Let me cite the "Accountants' Handbook" (Ronald Press) on the validity of using a net income to sales ratio as a measure of profits. The "Accountants' Handbook" states: "To many, a high rate of return on net sales is necessary for succesful operations. This view is not entirely sound. To evaluate properly the significance of the ratio, consideration should be given to such factors as (1) the volume of sales, (2) the total capital employed, and (3) the turnover of inventories and receivables. A low rate of return combined with rapid turnover and large sales volume, for example, may result in satisfactory earnings." A more valid measurement, on the other hand, is the net income to net worth comparison. This ratio, the "Accountants' Handbook" states, is “a measure of the earning power of the business from the proprietary of stockholders' point of view." Congressman Broyhill and Congressman Porter recognized the validity of this comparison, but in response to their request for data from the Magazine Publishers' Association, one witness for that organization stated, "We have not been able to determine that." The second witness for this same organization stated, "That kind of information is very limited and quite scanty in our industry. ** I am not permitted to have detailed or competitive figures of my many members." For the benefit of the Magazine Publishers' Association and the members of this committee, we have summarized the income-net worth position of several major magazine publishers. This data was taken direcly from the annual reports to stockholders of these companies. Their profit ratios to stockholders' equity range between 8 and 19 percent after taxes. These and other related data appear in the tables following: Sources: Standard & Poors, Moodys Manual, Magazine Circulation & Rate Trends, 1946-58, Standard Rate & Data Service, May 27, 1960. NOTES Publications.-Time, Time International, Life, Life International, Life en Espanol, Fortune, Sports Illustrated; Architectural Forum, House and Home. Other operations.-50 percent ownership in St. Francisville Paper Co.; 45 percent ownership in RockTime Corp. (new Time and Life Building); East Texas Pulp & Paper Co.; radio and television stations at Denver, Grand Rapids, Indianapolis, Minneapolis, and Salt Lake City (sold in December 1959). Stock range.-1951-59: High, 80% (1956); low, 271⁄2 (1951); 1969 to date, 674 to 6034 (May 30, 1960). History of stock.-1931, split 20 shares for each share class A or B; 1933, split 1 share $6.50 convertible preferred and 10 common for 10 common; 1941, split 4 shares for 1 share; 1949, split 2 shares for 1. • Redeemed in 1936 at $105 plus dividends. |