The Fortunes of War

U.S. investors got a classic example last week of the hazards in estimating wartime corporation profits. Out with their annual reports were Cessna Aircraft Co. and Beech Aircraft Corp.--both reporting for the fiscal year ended Sept. 30. Both companies are small, smart and fast-growing; both specialize in plywood, twin-engined training planes; both have recently gone into gliders; both have factories in Wichita, Kans. Yet their earnings were as different as down & up:

Down was Cessna which tripled sales to a record $37,589,000 while profits flopped 60% to $738,000. Big reason for the slump: last year Cessna feasted on fat foreign orders (at 10-20% profit margins); this year it rationed along on U.S. Government contracts (2% margins). Besides this Cessna set aside $5,302,000 for Federal taxes, $4,800,000 for price refunds to the Government, and $1,254,000 for "policy adjustments and conversion from war to peace," when Cessna hopes to build "the family car of the air."

Up was Beech which boomed sales sevenfold to a smacking $59,593,000, jacked profits 410% to a record $2,418,000. Beech also set aside huge sums for Federal taxes ($6,429,000) and price refunds ($7,200,000). But Beech worried less about war's end, set up no special cash fund for peacetime conversion (although it has paid off the RFC, bought its plants outright). Result : more profits available to stockholders now, perhaps less preparation for things to come.

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