FINANCE
W A L L STREET OF C H E M I S T R Y Pfizer planning convertible preferred issue for plant expansion, will split common 3 for 1, may be working on new antibiotic for tuberculosis A RED herring prospectus preliminary •**- document for professional use outlining new financing of Chas. Pfizer & Co. has been issued. The new financing will consist of an offering of 150,000 shares of a cumulative second preferred stock which is convertible into common stock, and 444,015 shares of new common stock. Prior to the offering, the stockholders will vote on a three for one split of the outstanding common stock. Pfizer expects to realize about $27 million in proceeds of the sales of equity securities, of -which some $7 million will be used to defray the cost of the 1951 plant expansion program. In this connection, Pfizer has obtained a certificate of necessity amounting to about $12.4 million for expanded facilities, including antibiotics and citric acid as well as related electric generating capacity. Fermentation capacity, which can easily be switched among several antibiotics, will be increased at the Brooklyn, Groton, and Terre Haute plants, while citric acid capacity at Groton will be enlarged. This latter location is also the scene of a $2 million vitamin A plant announced early this year. The balance of the proceeds of the offering will be added to working capital and may be used for further expansion of production facilities. Pfizer's business seems to require a relatively large working capital position, somewhat in excess of $25 million, and sales have increased to such an extent that additional funds are needed to finance the larger volume of business. Notwithstanding the heavier working capital requirements, Pfizer admits that the board of directors has under consideration a wide variety of plant expansion projects which appear to offer advantageous opportunities. None of these projects has been approved as yet. However, it is said that Pfizer is not satisfied with its streptomycin as a curative for tuberculosis, and may well be working toward the development of a more specific antibiotic for this purpose. In addition, die company has been researching one of its newer organics derived from the fermentation of molasses, itaconic acid. Certain substituted itaconic acids have shown some promise as piasticizers for vinyl resins, while recent patent literature disclosed the use of itaconic acid as a comonomer with acrylonitrile to produce a synthetic fiber. In general, Pfizer research has produced very profitable products of fermentation processes, and an outlay of close to $3 million, as a guess, for chemical and biochemical research will doubtless be productive of still other discoveries of a V O L U M E
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profitable nature. The prospectus shows that Pfizer earned 95 cents a common share in the month of April alone, while four months earnings through April 29 amounted to $4,873,395, about equivalent to half of earnings for the full year of 1950. Taxes paid for the first four months of the current year almost equal those paid for ail of 1950. As a result of the heavier tax burden, the margin of profit on sales has dropped slightly from the 1950 rate of 16.3% to a current 14.9%. Nevertheless, a good earnings improvement is in prospect for 1951 barring a retroactive income tax increase. Pfizer thinks highly of the convertible preferred form of financing. Not only is such an issue a suitable method of financing for a fast growing company, but it retains a high degree of flexibility in the capital structure. If, in the future, the equity markets are not susceptible to new financing and Pfizer requires additional funds for expansion, the borrowing is still open. In that event, Pfizer would consider some form of indebtedness and could make a good case on the basis of its growth record and solid equity capitalization. A m e r i c a n - M a r i e t t a Expands, Sees Increasing Sales At a meeting of the board of directors of American-Marietta Co. regular quarterly dividends of 50 cents per share on the common stock and $1.25 per share on the preferred were declared payable Aug. 1 to shareholders of record July 20. President H. J. Hemingway told the directors that American-Marietta's sales for the six months ended May 3 1 , 1951, together with those of its subsidiaries for the same period, will total in excess of $30 million, an increase of more than 76°$ above the sales figure of $17,028,227 reported for the first six months last year. The increase has been brought about largely by the company's planned program of expansion and the fact that demand for many of its products continues to exceed expectations. American-Marietta intends to spend approximately $1 million this year on plant and laboratory expansion. Construction of additional production and research facilities is well under way at the company's Seattle plant which supplies resins and adhesives to the plywood, hardboard, and paper industries. Contracts will soon be awarded for an addition to the Cleveland plant of the Master Builders Co. which will double that subsidiary's production of Pozzolith, JULY
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a cement dispersing agent. The Los Angeles plant will also be enlarged to handle increased production of resins and specialized finishes. Further expansion into allied fields is also contemplated. According to Hemingway, the company's backlog of orders is at an all-time high with the amount of government business on hand greatly exceeding the small decline in orders caused by civilian curtailment. Hemingway further stated, "We are optimistic about our prospects for the balance of the year. We will set a new record for sales this year and it is possible that we may set a new record in earnings despite the higher taxes which will apply." Davison Stock A c q u i r e d W. R. Grace & Co., an operating and holding company, has acquired a block of 106,000 shares of the common stock of Davison Chemical Corp., representing 16.5% of the total outstanding stock. Both concerns have scotched rumors that Grace intends to obtain control of Davison. Grace has extensive interests in shipping, banking, and export-import fields, and in addition controls the Naco Fertilizer Co. which produces sulfuric acid, superphosphate, and mixed fertilizers. Fertilizer plants of Naco and Davison do not conflict with each other geographically. Grace originally became intereste * in the fertilizer business through its ade in guano and Chilian nitrate. There is some speculation that Grace looks at Davison as an investment in a chemical growth stock. Petroleum catalyst and silica gel operations of the latter have tended to balance the fertilizer side of the business, and heavier consumption of phosphates can be predicted for the future. N e t Earnings A d v a n c e For Reliance Electric The Reliance Electric & Engineering Co. reported net earnings, subject to final audit, of $904,363, or $2.16 per common share, for its fiscal half year ended April 30 on net sales of $15,413,918. This compares with net earnings for the first six months of the previous fiscal year of $494,731, on net sales of $7,413,911, or $1.11 per share, adjusted for the 418,422 shares now outstanding. The $23.5 million backlog with which Reliance entered its third quarter is the largest in the company's history, according to J. W. Corey, president. Billings of $3,065,495 for April, latest month reported, established another all-time record for the concern, he said. Closing M a r k e t Prices At the close of business on June 25, the stocks mentioned above were quoted as follows: Chas. Pfizer W. R. Grace (bid) Davison Chemical American-Marietta ( bid) Reliance Electric & Engineering. . . (bid)
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