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The following section will show that notwithstanding its technical disqualification to get the advantage of the growth formula, Sylvania is truly a growth company as envisaged by the law.

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SYLVANIA ELECTRIC PRODUCTS, INC.

EFFECTIVE TAX RATES FOR SYLVANIA ELECTRIC PRODUCTS, INC., THE ELECTRICAL MACHINERY INDUSTRY, AND THE DURABLE AND NON-DURABLE GOODS MANUFACTURING INDUSTRIES

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Source:

1951

Derived from:
Company Data; United States Department of Commerce.

Prepared By
BONI, WATKINS, MOUNTEER & CO.
Incorporated
New York, New York

Consulting Economists

SYLVANIA IS ONE OF THE FASTEST GROWING TELEVISION COMPANIES

Sylvania's character as a television company comes from its manufacture and sale of television tubes and parts. Sylvania's separate experience shows that it has had tremendous growth, particularly in the television field, which is not reflected in its present excess profits tax credit. Sylvania itself did not engage in the manufacture of television sets prior to the 1950 liquidations. One of its subsidiaries (Colonial Radio Corp.) was engaged in such set business only to a limited extent and its experience was not typical of the industry. The other subsidiary (Wabash Corp.) was not engaged in any phase of the television business. Hence Sylvania's own growth was obscured in the process of consolidation of its experience with that of its subsidiaries, as required by section 462 (c) of the code. Through much of the base period, as at present, Sylvania has been one of the leaders in the television industry and, therefore, the type of company for which section 435 (e) (1) (B) of the Internal Revenue Code, dealing with eligibility for the growth formula by reason of sale of new products, was designed to give relief. Sylvania is now, and for some time has been, 1 of the 2 largest television tube manufacturers. It markets approximately 20 percent of the television picture tubes sold in the United States and is a leader in the radio and electronics fields. Sylvania is also a leader in the manufacture of lighting.

EVIDENCE OF SYLVANIA'S GROWTH

Under the various measures of the company's growth, Sylvania experienced a more rapid growth in the 13 years ending in 1950 than manufacturing industry in general, and even than the rapidly growing television industry.

1. Growth in sales volume

On chart 3 are plotted indices (1938=100) of (a) Sylvania's annual sales (excluding the Wabash and Colonial Corps. and divisions) during this period, (b) those of the 21 television companies (out of the group of 25) publishing such data,' (c) those of manufacturers in the electrical machinery group of companies, and (d) those of all manufacturing companies. Significantly, Sylvania's sales rose twice as rapidly between 1938 (a cyclical trough of business activity) and 1950 as did those of the group of 21 television manufacturing companies, and likewise twice as fast as did those of all manufacturers classified in the electrical machinery group of industries.

2. Growth in physical output

But even this contrast does not tell the full story. Congress had in mind pri marily safeguarding from undue excessive taxation the normal profits resulting from expansion of the sales of new products. The most novel, as well as the most important, single component of a television set is the picture tube. Gaged by production of picture tubes, Sylvania's growth was more spectacular, even than that of the industry as a whole. Between 1946 and 1950 Sylvania's unit sales of picture tubes skyrocketed, the number sold in the latter year being close to 4,000 times greater than unit sales 4 years earlier. In contrast, the industry's total sales of picture tubes increased an estimated 930 times, and production of sets less than 1,200 times, or only a third as fast as the rise in Sylvania's tube sales. (See chart 4.)

1 Four companies of the sample of 25 listed in appendix 1 do not publish sales data for the full period. These companies are Emerson Radio & Phonograph Corp., Motorola, Inc., Packard-Bell Co., and the Magnavox Co.

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SYLVANIA ELECTRIC PRODUCTS, INC.

INDICES OF SALES OF SYLVANIA ELECTRIC PRODUCTS, INC., ALL MANUFACTURING COMPANIES, ELECTRICAL MACHINERY COMPANIES, AND 21 TELEVISION COMPANIES

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700

Sylvania

400

100

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Company Data; United States Department of Commerce; Moody's Investment Service and Standard and Poor's Corporation.

1938

1939 1940

Source:

1950

SYLVANIA ELECTRIC PRODUCTS, INC.

PERCENTAGE INCREASE FROM 1946 TO 1950 IN SALES OF PICTURE TUBES FOR SYLVANIA ELECTRIC PRODUCTS, INC. AND THE PICTURE TUBE INDUSTRY AND PRODUCTION OF TELEVISION SETS FOR THE TELEVISION INDUSTRY

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New York, New York

100,000

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Source: Derived from:

Company Data; Radio-Television Manufacturera Association; United States Department of Commerce.

3. Growth in employment

Another measure of Sylvania's growth is its employment record. As the following table (and chart 5) shows, the rise in average employment (number of employees) at Sylvania's plants was 10 percent greater than that in the electronic tubes branch of the industry, where the rise surpassed that in any other field of manufacture.

SYLVANIA ELECTRIC PRODUCTS, INC.

PERCENTAGE INCREASE FROM 1939 TO 1950 IN EMPLOYMENT

FOR SYLVANIA ELECTRIC PRODUCTS, INC. AND SELECTED INDUSTRIES

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1 Sylvania's employment reflects total wage and salary workers excluding employees of Colonial and Wabash. The other industry data reflect employment of production workers only, since total employment figures are not available for 1939. Therefore, this measure of Sylvania's growth is minimal because (a) it is practically certain that Sylvania's production staff increased faster than its clerical and executive forces, and (b) the data includes that of Sylvania's entire operations and not tubes alone.

Source: Derived from company data, census of manufacturers, 1950.

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