Twelve years after taking charge of the plant, Colonel Hickman had earned by the old Graniteville mill sufficient surplus to build the Vaucluse Mill at a cost of $361,513.24 without calling for a.s.sessments upon stockholders, and five years later had acc.u.mulated a cash surplus of $220,831.86. He had doubled the production of the original Graniteville Mill. The statement of the affairs of the two plants in 1804 showed:

_Gross Profits:_

Graniteville $82,724.69 Vaucluse 37,131.31 ----------- Total profits $120,856.00 Net profits 80,701.71

This net profit amount represented 13.5 per cent. profit on $600,000 capital.[372]

Coming down, now, a decade later in the period. There is shown a degree of success pretty much uniform for the various mills.

The first plant of the Gaffney Manufacturing Company which was paid for when operation commenced, in three years earned enough to build an additional plant of two stories.[373] This mill indicates very well a fact brought out in the preceding chapter, that many additions to plant, which were being made after the mills had been a few years in operation, were accomplished from earnings. The Salisbury Mill is a case in point. Its inception and that of the Gaffney Mill the two being projected at about the same time had many things in common (as did the towns in which they were built). Increases in plant of the Salisbury Mill have been greater proportionally than the increases in capitalization.[374]

From manufacturers, from investors, and from persons acquainted with the public economy, have been had statements, each reflecting an individual bias, but each showing unmistakably that there was a general and marked decline in profits in the second decade of the development. A retired mill president, whose decision to leave the field was perhaps affected by the condition she described, regretted that the companies are still laboring under decreased profits as a result of the fact that mills were built more rapidly than the market for goods expanded to meet the development.[375] Another mill president thought that no more mills are likely to be built in his section too many years. "They went it too rank, you know," he declared with some feeling. "Once in a while you hear of a new mill starting up, but its not as common as it was ten or fifteen years ago." He put the date of the fall-off in profits at about 1900.[376] The son of Colonel Hammett, several times mentioned, who is a successful manufacturer, deplored the building of too many mills in a short period, and said that profits fell away abruptly.[377]

A bank president whose inst.i.tution has played a leading part in the textile prominence of Columbia, South Carolina, said that "1890 to 1900 was the heaviest borrowing period, as this was the greatest period of development. Profits were poor, especially from 1895 to 1903."[378]

Though he does not believe selling agents have taken much stock in North Carolina mills, Mr. Thompson attributes many failures of mills to "slavery to commission houses through which they sell their product." He implies that it was the grip which the agents got on the mill by the loan of running capital that brought the ill effects. At any rate, the commission houses became more deeply interested in the mills as the plants increased in numbers, and profits were hurt by this fact, he believes.[379] This influence continues, thinks a former president of the great Graniteville Mill, who said: "The commission merchants take the very heart out of the mills. The commission houses of New York, Philadelphia and Boston get more out of the mills than the stockholders in the South."[380]

While it is true that "most of the mills of the South have succeeded,"[381] there have been, besides some concerns which have stood still, neither making nor losing, a few notable failures. It is the common opinion that failures have been due almost entirely to lack of capital and bad management. Probably these faults and a good many others contributed to the ill success of the old Charleston Manufacturing Company, which began life with such high hopes at the outset of the cotton mill era. If any enterprise was an expression of the motive forces in the South in 1880, this one was. It supplied a potent example to communities all over the South contemplating cotton factories. The property of the Charleston Manufacturing Company was sold under the hammer to the Vesta Cotton Mill Company, which was not more successful with the plant. After standing a year idle, the attempt was made to operate the mill with colored help, and a reorganization of the Vesta Company was had for this purpose. A large proportion of the subscribers to the original company remained in the two reorganizations that followed.[382] In the experiment of negro operatives the old factory was again opening up a vista to the South, for, as it was vainly pointed out to the negro population of Charleston, if the trial of colored operatives in the Vesta Mill had succeeded, plants all over the section would offer employment to negroes.[383] When this third effort to use the plant for a cotton mill came to nought, the machinery was moved to Gainesville, Georgia, and though the top of the new mill was carried away by a cyclone almost as soon as completed, the company is now doing well in its new location.[384] The great, gloomy pile that thrice held so much of the confidence of the South and the best hopes of Charleston still flanks the railway tracks and rears itself above the depot, and seems all very silent in spite of the fact that it is now occupied by tobacco manufacturers.

The grandfather mill, as it might be called, of the Southern textile industry, is that of Graniteville, established by William Gregg in 1846.

The factory nearly failed in 1867, but was saved by the genius of H. H.

Hickman, a merchant of Augusta, who became its president at the critical juncture. He died in 1898, and his son came in as president. At his retirement and the reorganization of the mill, a business man of Augusta has been elected the new president, but it will require, it is said, from seven to ten years for him to build up the organization again.[385]

The Royal Mills, the only cotton factory now operating in Charleston, was built eighteen or twenty years ago, in the period of stress just noticed.

George Wagener, the original manager, left the mill at his death with a surplus of $90,000. It went into slovenly hands, and failed. It has been remodelled, however, and is now making money.[386]

The small mills' success inspired the belief that large plants would succeed. The Olympia, until recently the largest mill in the world, was built at Columbia, and the Loray Mill, with more than half as many spindles, was founded at Gastonia. It is the general opinion, whether colored too largely by the unsatisfactory history of these two conspicuous factories or not it cannot be told, that there have been more failures among the large than among the small mills.[387] It has been said of the North Carolina manufacturers as opposed to those of South Carolina that they "are not so ambitious for big places, (at the head of large companies) and a lot of those little fellows are getting rich." The North Carolina mind seems to run on smaller things. I am not sure but what the North Carolina mills have been more successful than the South Carolina mills.

A committee representing New England manufacturers has stated in spite of an advantage over the Eastern mills of 25 per cent. in labor, and 50 per cent. in respect to taxes, the Southern mills have made less profits than their older compet.i.tors because of poor financing. However this may be, the total losses on $100,000,000 invested in cotton manufacturing in the South in thirty years does not represent more than 20 per cent., is the belief of Mr. Thackston, of Greenville.[388]

To go to a lyceum lecture on a sultry summer night and be whisked away by picture and description to the snowy peaks and green glaciers of the Canadian Rockies is not a more complete or refreshing transition than that experienced by the traveler who lumbers along the Southern Railway for weary, slow miles of sodden country and ill-kept settlement, all at once to alight at the neat station and view the trim town of Gastonia, North Carolina. It is not attempted here to account for the New England psychology that animates this nonetheless Southern place, but it is deserving of better praise than its harsh name gives it. Neither is it proper in this place to seek to account for the success of its score and a half of cotton mills. The recital of the profits they have made since the European War is astounding, but there is every cause to believe in the accuracy of the information given.

In the first place, while the big Loray Mill, as has been seen, has not reflected much credit upon the community of factories at Gastonia, and is spoken of not very warmly there, no mill in Gastonia has ever had a receivership.[389]

The mills at Belmont right near Gastonia are making on the average 25 per cent profits. The Treanton Mill at Gastonia, paid 100% in cash during the first five years of its operation. The Majestic Mill, at Belmont, was expected to make in 1916-1917, 100 per cent., or the price of the plant in a single year.[390]

In cataloguing the notes from a summer trip to the mill towns, the writer feared he had made some mistake in setting down the results of an interview with the vice-president and cashier of the First National Bank, Gastonia, which is most largely interested in the mills of the place, as to the earnings. He therefore wrote for a restatement on doubtful points, and found himself confirmed. To quote the case of one mill from Mr.

Robinson's reply. "We have a mill here that had $150,000 capital paid in, and after a short time issued a stock dividend of 20 per cent. which gave them (it) a capital of $180,000, and this mill made $155,000 net profits for the year 1915. I am satisfied that this same mill will make 125 per cent. profit this year (1916) on their (its) $180,000 capital, or around $225,000 net profit."[391]

From the interview, there is the instance of a 12,000 spindle mill; not one of the most successful in Gastonia, which made $2,500 the week previous.

While the mill expected to make 125 per cent. net profits for 1916 is said to be exceptional, a number of mills were, as near the end of the old year as November 28th, expected to show from 75 to 100 per cent. net profits for 1916, the writer was told that it would be a pretty poorly managed plant that did not clear the lower percentages.[392]

A burly, forceful man in middle life, who has risen from foot pedlar to mill president, said with frankness: "I am making more money than I know what to do with. I am ashamed to take it!" He showed me the statements of the orders for product with which his four mills would be kept busy for the next four or five months. He expected to clear $60,000 on the output of each plant for this period.[393] Mr. Robinson, previously quoted, recognizes that the cotton mills at Gastonia are more prosperous than those of any other section of which he knows.[394] Not even early in the period, when mills were first building, did they make such profits as now, is the opinion of an old manufacturer at Gastonia.[395]

The foregoing citation of the earnings of various mills at various points of time in the period since their establishment has served to exhibit the general movement of profits. At the outset, most conditions were favorable to large gains--there was little compet.i.tion, labor was most plentiful and cheap, the lack of advantageous marketing facilities was to some degree offset by purely local demand for the product, and the deficiencies of management tended to be neutralized by the presence of physical advantages which disappeared when a more advanced development increased the size of plants, widened the area from which raw cotton was drawn, and extended the market for product. It is said repeatedly that in those days any fool could make money in cotton manufacture in the South.[396]

With the closing years of the second decade of the mill growth, most of these advantaging circ.u.mstances were fading before the increase of compet.i.tion. Their very success was proving fatal to the mills. They had ceased to be local affairs. When outside influences came in--commission and machinery men--new and difficult problems had to be faced. The factories were a.s.suming the physical proportions which they were bound to a.s.sume, and which it was right they should a.s.sume, but they ran ahead of the development in the textile industry, and in the South of expertness of management, business resourcefulness and economic outlook. The spirit could not keep up with the flesh, and the mind lagged behind the body.

The prosperity which the mills are now enjoying they very well understand to be hectic, the result of the European War. They were having a hard time enough until the war came and put them all on velvet, as someone expressed it; 25% of the Southern Mills were in bad shape, defaulting an interest, etc.[397]

There are in the industrial community of Gastonia, however, and in certain individual mills and managers, particularly in North Carolina, signs, that point to a catching up of internal capacities with external maturity.

There is being developed--not yet clearly seen by any means, and in not a few points apparently contradicted[398]--a manufacturing spirit in the South, an industrial faculty that is able to cope with difficult conditions, the results of economic progress. This promises that the South is learning after forty years what Edward Atkinson said it did not know, the difference between a penny and a nickel. It indicates that the South will be meeting narrow margins of profit with close figuring of the costs of production.

It is natural to turn from the subject of profits to that of dividends.

There is in the history of the mills a general parallel between the two, with, however, certain variations arising from the fact that the industry has been and is now in constant process of growth. With the exception of perhaps a few years, earnings could always be profitably invested in the business,[399] particularly in expansions of plant.[400] As will be seen in more detail later, the peculiar conditions under which the mills took their rise involved indebtedness for plant and for running capital, and earnings had to go to pay interest and princ.i.p.al of this.

The Augusta Factory was founded in 1847,[401] and, with Graniteville nearby, though in South Carolina, resembled in its earlier years, and to a diminished extent still does, the English and Continental textile manufactories.[402] They have both fallen upon evil days more recently.

The Augusta Factory made 5 per cent. quarterly dividends for eight years and nine months from its founding.[403] In 1858, eleven years after establishment, the plant was sold to a company with Wm. H. Jackson at its head, for the sum of $140,000. Though the stockholders in the Jackson Company paid $60,000 for repairs to the property, the purchase price, payable in instalments for ten years, was made up from profits. The mill at the close of the war was the wealthiest in the South. It was said in 1884 that it had had an uninterrupted course of prosperity since the war.

From 1865 to 1880 the company paid average annual dividends of 14 21/32 per cent.[404]

In 1880 the stock of the mills at Augusta, Georgia, paid about 8 per cent.

interest per annum, in semi-annual and quarterly dividends.[405]

Under Col. H. H. Hickman's management of Graniteville there were regular dividends of 10 per cent.[406] The son of this former president, and until recently himself president of the mill as his father's successor, said: "Graniteville was so successful it had a large influence. It never ceased operation, and to my certain knowledge it had a fifty-year record of dividends."[407]

Perhaps some indication of the widespread popularity of cotton mills as an investment from a purely dividend-seeking point of view is contained in a newspaper notice of 1881 setting forth that a large mill at Nashville, Tennessee, had declared a dividend of 14 per cent. and another was built.

In 1881 the Enterprise Factory, in Georgia, declared a 10 per cent.

dividend, and decided to increase its capacity by 125 per cent. or more--from 13,890 spindles to over 33,000, and from 264 looms to more than 600.[408] Mills as Pulaski, in the same State, were anxious to double their capacity; $50,000 was subscribed for a mill at Jackson, West Tennessee; Dallas, Texas, was starting a $200,000 spindle plant, and the town of Sherman wanted a $75,000 factory.[409] The following year, the same paper printed an item showing further that dividends were being paid to stockholders in factories all over the South: "The cotton mills in Mississippi have proved bonanzas for the owners. The one at Wesson (it has been seen that this company made 30 per cent. profit from the plant) pays 26 per cent. dividends...."[410] The mill established by Mayor Courtenay, of Charleston, at Newry, South Carolina, paid no dividends for the first seven years of its life; this distinction from the earlier mills in regard to dividends, bears out what was said of profits in the period in which this plant was built (1892-3). Over the whole twenty-four years of its history, however, the company has paid an average of 6 per cent. to its shareholders.[411]

The building of the Salisbury Mill was completed December 1, 1888. The first cloth was turned out February 9, 1889. The first dividend of 5 per cent. was declared January 11, 1890. The mill has missed only one dividend payment, a quarterly one, since this time.[412] It is true that for the first three or four years of its life, the concern was in an uncertain way, the panic of 1893 proving embarra.s.sing to it, though not as seriously so as in the case of the Newry Mill, just cited. For a long time the investment paid 8 per cent. dividends, then for several years of late 10 per cent. On July 10, 1916, the directors declared an extra dividend of 5 per cent., paid August 1. A part of the profits has for years and years gone back into the business, enabling it now to earn good sums.[413]

In the first ten years of its operation, the Laurens Mills were very profitable. Borrowing money to bring its spindleage up to thirty thousand, it expanded to 43,000 spindles on earnings. At the end of the ten-year period there was the plant worth about $800,000; the company owed no money, and the only liability against it was $350,000 of common stock.

There was a cash surplus, probably small. For six years it had been paying 12 per cent. annual dividends. The mill was incorporated in 1895.[414] It is not certain that dividend payments were made by this company while it was carrying its debt, but the Anderson Mill, Anderson, South Carolina, paid interest on its indebtedness and 8 per cent. dividends as well.[415]

Reference has been made to Mr. Thompson's statement that large profits have frequently enabled mill companies to discharge all obligations before the last subscription-payment was due. He cites the case of an enterprise of $100,000 capitalization, with shares payable in weekly instalments of 50 cents, which after 70 weeks, with only $35 on the share paid up, declared a dividend of 4 per cent. on the capitalization. This plant, which he says is by no means universal, has, besides building large additions from profits always paid 4 or 5 per cent. in dividends each half-year. This is probably the Cabarrus, one of the Cannon mills, at Concord.[416]

From Mr. August Kohn was had a valuable estimate of the whole matter of Southern cotton manufactories as investments, a.s.suming, that is, that the mills of his State have been typical in this respect of those of the rest of the section. He said: "If the people of South Carolina had put their money into farm loans at 7 per cent.--the same people and the same money--they would have been better off personally than they are after having invested in cotton mills. There are no failures in real estate mortgages at 7 per cent., but in cotton mill investments, princ.i.p.al and interest has frequently been lost."[417]

If this opinion is to be believed, had Mr. Goldsmith taken all the factories of the State, and not "the fifty more important cotton mills of South Carolina," he would have found an annual average dividend for 1905, 1906 and 1907, not of 7.56 per cent., but something below 7 per cent.[418]

It is well to conclude this random review of the dividends paid by the textile enterprises of the South with a thoughtful caution from Mr.

Thackston, of Greenville, who has been of chief a.s.sistance to the writer in the financial aspects of the problem: "When it is said that the mills (have) made such and such dividends, it is to be remembered that in many cases the plant had cost more than the capitalization would show. Twelve or 10 per cent. on a $50,000 investment is very different from 12 or 10 per cent. on $30,000 paid up. The mills made so much money that they could pay off their indebtedness frequently in a few years, but the returns on capital paid up were not so great as might appear in some statements.

"Piedmont is capitalized at $800,000. The plant probably cost $1,500,000.

When they pay 10 per cent. on the investment, it is because they are neglecting to reduce the debt on the plant. They are really paying about 6 per cent. on the investment, considering the total liabilities of the stockholders."

Tompkins has placed a useful modification upon the nominal showing of dividends which finds place here, and has application to what was earlier said of profits as well: "The tables ... showing range of profits, are made up from exhibits as usually made in annual reports. This is exclusive of depreciation, or wear and tear. Even in cases where an item of depreciation is carried in the accounts, it is often simply a matter of bookkeeping, and not a sum set aside for replacing of machinery.... Where large profits are reported, and large dividends paid, it is always a question whether the vitality of the mill is not suffering. There is a number of cases where mills have paid several large dividends at the start, but, on account of making no provision for depreciation, have finally collapsed."[419]

Some mills to continue Mr. Thackston's statement, cost in plant, he said four times their total capital. A man would build a 10,000-spindle mill and add to it greatly, not increasing the capital at all; he trusted to earnings to care for the debt, and delayed payments on common stock.

A remark of Mr. Goldsmith, though he unfortunately does not give the source of his information, confirms this calculation. He says: "The average South Carolina weaving mill costs about $20 to $21 per spindle; it is capitalized at about $12 per spindle, and earns from $2 to $4 per annum per spindle."[420]

A statement covering five years for average well-managed mill properties in and around Greenville, South Carolina, shows, he said:

Average earnings on plant cost 13.47 per cent.

" " per spindle $ 2.94 " cost " " 21.08 Capitalized at " " 12.72

His conclusion was that "In general, the dividends on the actual cost of the plants have not been over 12 per cent."[421]