Profits: The First Quarter

As annual meetings came to order last week, news of pinched profits during the first quarter of 1967 did little to dampen the spirit of this capitalistic rite of spring. Company directors grinned and bore the usual questions about executive wages, profit sharing, charitable contributions, and cumulative stock voting. A.T. & T.'s new chairman, Haakon I. Romnes, greeted his 4,801 guests at Baltimore's Civic Center and handled the meeting with aplomb. In Detroit, Chrysler shareholders barely flinched when Chairman Lynn A. Townsend told them that first-quarter earnings had plummeted 71 % from a year earlier.

Indeed, it seemed that stockholders were well educated as to the causes of the downtrend and ready to accept the worst. It therefore came as old hat that such past record setters as Du Pont, Caterpillar, Union Carbide, and Safeway Stores reported earnings slides. After six years of record-high dividend checks, stockholders appeared fat, friendly and eager to be entertained by the corporate hierarchy.

In New York, CBS did just that by holding the meeting at Studio 41 in its Television City and showing a color-slide spectacular praising its achievements. Chairman William Paley remained unmoved when several stockholders complained about the quality of the CBS television schedule. After announcing that first-quarter earnings would drop about $1,000,000, although sales would rise to about $215 million, or 12% above the first quarter of last year, he formally announced two acquisitions—Creative Playthings and Holt, Rinehart & Winston. Two days earlier, RCA said its first-quarter sales and earnings were a record—$683 million and $34.4 million respectively.

Meanwhile on the West Coast, about 1,200 Douglas Aircraft stockholders gathered at the Beverly Hilton Hotel for the company's final annual meeting. Seventy-two percent of the shareholders voted for merger with McDonnell Aircraft, which is expected to take place at month's end. Even after Donald W. Douglas Sr. described the "sharp and ultimately disastrous reversal of our fortunes," which meant a loss of $27.5 million in 1966, the shareholders gave him a standing ovation. Perhaps symbolic of Douglas' lackluster recent days was a movie shown to the gathering about its DC-8 jets. It ground to a halt after a few seconds; while workmen found the reason and fixed it, a film about McDonnell ran without a hitch.

A few hours earlier in St. Louis, 81% of McDonnell's stockholders had approved the merger plan, but at least one question asked at the Midwest meeting was echoed in Los Angeles: Why is Donald Douglas Jr., the man widely criticized for running the company into the red, to be paid $100,000 annually (he received $150,000 at Douglas) as a member of the merged board of directors? With characteristic firmness Chairman James S. McDonnell answered: "No retribution of any nature is called for."

By week's end a relatively consistent pattern of first-quarter results could be charted. While such industries as aerospace, electronics, office equipment and banking were holding their own, automakers—plus the aligned producers of rubber and steel—were reporting weakened earnings. Overall, White House economists are using a $46 billion annual rate as the best guess for first-quarter profits—a $2,000,000,000 drop from the last quarter of 1966.