History of Aultman & Taylor, Part VII

Reorganization leads to a lucrative trade in water-tube boilers for Aultman & Taylor

John Cahill's first boiler patent, granted in October of 1892

John Cahill's first boiler patent, granted in October of 1892.

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The seventh installment of the late Dr. Bixler's history of the Aultman & Taylor Company appears below. The Album is serializing Dr. Bixler's book, which affords rare insights into the life and times of a major American manufacturing firm. For more than 20 years, Dr. Bixler's unpublished manuscript lay virtually forgotten in the Mansfield/Richland County Public Library. Then, acting on a tip from George Richey, Dr. Rhode found the book, edited it, and prepared it for publication in the Album. In this installment, Dr. Bixler highlights Aultman & Taylor's lucrative trade in water-tube boilers.

Click here for part I of the history of Aultman & Taylor.
Click here for part II of the history of Aultman & Taylor.
Click here for part III of the history of Aultman & Taylor.
Click here for part IV of the history of Aultman & Taylor.
Click here for part V of the history of Aultman & Taylor.
Click here for part VI of the history of Aultman & Taylor.

CHAPTER 7

A New Company and Water-Tube Boilers

Immediately following his election to Congress in the fall of 1891, Michael D. Harter withdrew from an active role in the management of the Aultman & Taylor Company, a responsibility he had assumed for 21 years. Having been elected to represent the people from his section of the state of Ohio in the halls of Congress, he was desirous of devoting all of his time and energy to that new endeavor. 1 

Newspaper accounts asserted that a foremost manufacturing company of Mansfield was the Aultman & Taylor Company. Its business had been successful due primarily to its efficient management, as well as the business tact of its treasurer and superintendent, Michael D. Harter. At the time of his retirement as an active participant he owned a considerable amount of stock in the company. 2 

In accordance with Ohio law, notices were published in the local newspapers beginning on Aug. 23, 1891, announcing that a reorganization of the Aultman & Taylor Company was to be completed. These accounts asserted that the firm was to be bigger and better than ever, that the reorganization was to occur after 25 years of a most remarkable record, and that the year of 1890 had been an unprecedentedly good one. Primarily because of his retirement, Harter deemed the time opportune for the organization of a new company. Accordingly he initiated the movement that established the Aultman & Taylor Machinery Company.

While the newspaper referred to the transaction as reorganization, yet it is more accurate to state that, to all intents and purposes, a new company was established, as indicated by the change of name to the Aultman & Taylor Machinery Company.3 At the close of the 1891 season the Aultman & Taylor Company sold their plant to the Aultman & Taylor Machinery Company and ceased the manufacture of machinery. The new company was incorporated on Sept. 1, 1891, and began operations on that date.

The company earned more than $2,500,000 from 1867 to 1891 inclusive. That was an average of about $120,000 per year. These figures alone constitute positive proof that the company was prosperous from the outset. Indeed there was no loss during any of those years, a most enviable record. The season that closed on Oct. 1, 1891, the final year of the Aultman & Taylor Company, showed a profit of approximately $200,000.

When the original company was founded, it was incorporated on Nov. 9, 1867 as the Aultman & Taylor Manufacturing Company. This was its official title until Oct. 29, 1875, at which time the title of the company was changed by the omission of the word "manufacturing," and the firm became simply the Aultman & Taylor Company. Beginning with 1891 it continued to exist concurrently with the new company, even though it built no machinery after that year. The reason for this situation becomes clear as the history of the two companies unfolds 4 

So far as the stockholders were concerned, there was little change in the actual holdings of the new company as compared with the old; those who owned stock in the Aultman & Taylor Company also became stockholders in the Aultman & Taylor Machinery Company. A few persons acquired stock due to a provison that all officials of the company were required to own stock. However, the number of new persons involved in the purchase of stock was relatively insignificant.

The capital stock paid in originally to the Aultman & Taylor Machinery Company was $140,000, but later $100,000 was added. Before the organization was finally completed, the capital of the company was set at $50,000. This consisted of 5,000 shares at $100 each. The records of the proceedings of the incorporation show that, on Aug. 1, 1891, James E. Brown, Arnold Kalmerten, W.A. Habeson, and Michael D. Harter were subscribers to the articles of incorporation 5 

The first board of directors of the new company was comprised of Henry W. Harter, A. Kalmerten, James Reynolds, J.E. Brown, and F.L. Loomis. The board met on Oct. 1, 1891, and elected Brown president, Henry W. Harter vice-president, Kalmerten Secretary, Reynolds treasurer, and W.G. Pile superintendent.

The annual salary of the president was fixed at $4,000, the vice-president at $600, and the superintendent at $1,800. The officers with the exception of the vice-president were to devote all of their time to the business of the company. A lawyer, Harter served as counsel for the firm.

Having been elected president, Brown succeeded Michael D. Harter as the guiding spirit of the company. He presided until the firm went out of business, covering a period of 32 years.

One condition imposed by the old company was the right of its stockholders to subscribe for one half of the capital stock in the new company, for which they paid in full, as did all other stockholders.

The new company purchased the real estate, machinery, materials, and tools on hand in the plant at Mansfield. By joint agreement between the two firms, the Aultman & Taylor Machinery Company paid to the Aultman & Taylor Company $120,000 in cash for the above items. The engines and parts were sold at 40 percent of the list price, which was considered to have been a low price. The second-hand engines were sold at 30 percent of the list price with the old company paying the freight to the factory. An effort was made to sell as many of them as possible in the country instead of returning them to the factory. The new company paid $250 for each of the old engines with the exception of the Eureka engines. While the price paid for the Eureka engines is not available, it may be fair to assume that the list price was the amount paid. All of its other assets, such as notes, accounts, farms, cash on hand, bills receivable, stationery, and stamps were retained by the old company. Insofar as was possible its affairs were closed up, which left the new company with a clean sheet, as well as a reputation equal to that of any similar company

The new company was not charged for the office fixtures at home or abroad or for vaults, safes, carpets, or furniture at Mansfield. In return the old company was given free access to and use of the offices as long as they were needed. The portion of the salaries and expenses of the collection department and the bookkeeping department were adjusted at the end of each season on an equitable basis between the two companies. The records show that these were larger during the first few years than in later years. During the ensuing years money trickled into the treasury on notes and accounts that were often long past due. These accounts were eventually liquidated or became defunct. These propositions were extremely favorable to the new company, but the stockholders in the old company owned more than half of the stock in the new company.

When the organization of the Aultman & Taylor Machinery Company was accomplished on Oct. 1, 1891, it was indebted to the Aultman & Taylor Company for $648,269.27. On March 2, 1896, a note was executed by the Aultman & Taylor Machinery Company for the full amount and was payable on July 1, 1897. However, the note was extended from time to time until July 1, 1902. At that time the Aultman & Taylor Company stated that the note was long overdue. The Aultman & Taylor Company requested that the Aultman & Taylor Machinery Company pay interest on the note. In accordance with the above resolution, the Aultman & Taylor Machinery Company executed a new note that was to bear interest at the rate of four percent per annum, and this note was made payable July 1, 1905.

A special meeting of the stockholders of the Aultman & Taylor Machinery Company was called for Feb. 26, 1906, for the purpose of considering the question of increasing the capital stock of the firm from $500,000 to $1,000,000.

The increased stock was to be preferred as to capital and dividends. The holders of the preferred stock were to receive from the assets remaining after paying debts and liabilities the full payment of the par value of the preferred stock before anything was paid upon the common stock. The holders of the preferred stock were entitled to dividends at the rate of six percent per annum, payable out of the surplus in preference to all other stockholders, and those dividends were to be accumulative.

On Feb. 26, 1906, the special meeting of the stockholders was convened, and assent was given to the preferred stock. There was unanimous agreement that it was of the utmost importance to have the debt reduced or wholly discharged. It was emphasized that the indebtedness constituted a menace to the credit of the company, and its existence prejudiced the standing of the firm in the minds of conservative persons. It was also pointed out that the stockholders would find it difficult, if not impossible, to sell shares near their true value, so long as the debt prevailed. Even though the debt was held by friends of the company, it was stated that 'changes may at any time occur that might put the control of this large demand in hands less disposed to continue the favorable treatmen.' The claim could be pressed against the company disastrously if it should be controlled by adverse or indifferent interests. The argument continued that, if converted into stock, it would be a continuous investment , and payment could never be demanded. The right of redemption was reserved, which could be a valuable privilege. It was hoped that, within a few years, the condition of the company would be such that it could sell a preferred stock bearing a lower rate of dividend and with such help retire the new stock. Seventy-two of the stockholders, including proxies, were in attendance at the meeting. Sixty of the stockholders, representing 4,769 shares of capital stock, assented in writing to the increase of capital stock by issuing 5,000 shares of preferred stock.

The remainder of the debt, which amounted to $148,269.27, was covered by a note executed by the Aultman & Taylor Machinery Company bearing interest at the rate of four percent and which was to fall due on Dec. 6, 1906. Thus the debt of the Aultman & Taylor Machinery Company was liquidated.6 

In the final analysis, the Aultman & Taylor Machinery Company absorbed the old firm although attended with financial problems. A period of 10 years was required to complete the transaction.

On the basis of the president's report it appears that the first year was very successful for the Aultman & Taylor Machinery Company. The total sales of threshers, engines, sawmills, clover hullers, and repairs amounted to $105,000 To avoid any fallacious showing of earning, it was concluded to carry $100,000 of repair credit in a sinking fund. This was done to offset any deductions from repairs by reason of discounts for repairs, etc.

At the meetings following the close of the first year, the board of directors declared a cash dividend of eight percent on capital stock and carried $180,000 into surplus and $25,627.76 into the sinking fund.

Water-Tube Boilers

During the early 1890s the Aultman & Taylor Machinery Company was approached from time to time with requests to build stationary boilers, as well as to do contract work. John Cahall, superintendent of the boiler department, and his son, William, were possessed with considerable inventive genius. John Cahall was awarded on Oct. 25, 1892, patent #485087 for a vertical water-tube boiler and on April 17, 1894, patent #518519 for a horizontal water-tube boiler.

Beginning in 1895 the company manufactured the Cahall boilers and successfully placed them on the market. During the same period they also built the Babcock and Wilcox water-tube boilers.

In the case of fire-tube boilers the hot gases pass through the tubes or flues on their way to the smokestack The large mass of water outside of the tubes is heated, and steam is produced. This was, with a few variations, the almost universal type of boiler used in manufacturing plants and mills until late in the 1850s and early 1860s. During those years there were many boiler explosions. So there arose a demand for a boiler that possessed safety features not found in fire-tube boilers.

Stephen Wilcox is generally credited with being the first in 1856 to use inclined water tubes, connecting spaces front and rear with a steam drum above. In 1866 Babcock became associated with George Herman Wilcox. During that year the Hope Iron Works in Providence, R.I., built the first Babcock and Wilcox water-tube boiler, which was sold in 1867.

The conditions peculiar to the water-tube boiler are the reverse of those in the fire-tube boiler previously described. In the water-tube boiler the water occupies the space inside the tubes, and the hot gases generated in the firebox pass on the outside of the tubes toward the smokestack. The heating of the water within the tubes produces the steam, which passes into a drum or drums at the end of the tubes. In the Cahall boilers the steam in the drums was superheated. Both types of boilers had certain advantages The watertube boiler steams more quickly than does the fire-tube boiler due to the fact that there is not a large mass of water to be heated. Moreover, boilers of this type are not subject to dangerous explosions, since, in the event an explosion does occur, only one of the tubes is likely to let go It likely will cause little or no damage. They carried from 300 to 800 pounds of pressure per square inch, which satisfied the demand for more power. They were compact and saved valuable space. But they had disadvantages; they were more expensive than fire-tube boilers and more difficult to keep in good working order. Such boilers were used in factories and on ships.7 

To launch into the building of water-tube boilers, it became necessary for the company to enlarge its facilities. A more complete treatment of plant additions will be presented later, but for now it is enough to state that a considerable outlay of funds was required for construction, as well as for the purchase of machinery and equipment designed for the manufacture of such boilers.

As already noted, the company began building watertube boilers in 1895 and in 1905 sold that business to the Stirling Company. The firm's records show that this venture proved to be a lucrative part of their business. With the exception of a few years their boiler department made a satisfactory profit.

Agents and Contracts

The sale and marketing of watertube boilers at times became an exasperating problem for company officials. At a meeting of the board of directors on July 24, 1894, Brown recommended that the firm enter into a contract with H. E. Collins of Pittsburg for the exclusive sale of the Cahall water-tube boilers. A second contract was executed on Sept. 29, 1896. This contract carried an addendum that included the Thayer Company of Boston, Philadelphia, and New York.

At the board of directors meeting on Nov. 24, 1896, a contract between the Aultman & Taylor Machinery Company and W. C. Temple of Pittsburg was submitted and approved Temple. was made the sales manager for the Cahall, Babcock and Wilcox, and any other water-tube boilers the company might choose to build.

Apparently Temple was not satisfied with the contract, for at a meeting of the board of directors on Jan. 19, 1899, he proposed that he be placed on a fixed salary of $6,000 per annum with an additional five percent of the gross amount of the sales of the water-tube boilers. This proposition was unacceptable to the directors, and negotiations were continued.

On Feb. 24, 1900, a new contract between the company and Temple was submitted to the directors. In lieu of the compensation provided in the 1896 contract. Temple received one-third of the net profit on all boilers and appurtenances. In addition to this, the company agreed to pay him six percent of all sales free-onboard at the factories, after deducting from the proceeds the expenses for selling those products. The new contract became effective Jan. 1, 1900.

In 1904 the directors were again confronted with executing a new contract with Temple. At their meeting on Nov. 7 Isaac Harter reported on negotiations with Temple for a revision of the latter's contract. The board requested W.W. Darley, who served as mediator between the parties, and Harter to put their propositions in writing for the next meeting.

Brown reported to the directors at their meeting on Jan. 19, 1905, that a settlement had been effected. Apparently the company was in arrears in its commission payments to Temple. Agreements were submitted to the board and approved.

An important adjunct to the watertube boilers was stoker manufacturing. Beginning in Oct. of 1897, there was an unexpected growth in demand for the Mansfield Chain Grate Stoker. During the next 15 months the firm sold 166 of them, which had a value of $186,000. One hundred of them went to the Carnegie Steel Company, which was the largest user of the company's stokers at that time

Yet another type of stoker came to the attention of the officials of the company, which they envisioned would be an important addition to their business. That was the Meldrum Koker Stoker, which was an English invention and patented in the United States.

Several members of the board looked into the merits claimed for that device and were convinced that it would be a desirable addition to their business. Negotiations were begun during the early part of 1905 with Meldrum's agent, Arthur D. Southam, for the purpose of securing sole control of that stoker in the United States. Following extended discussions a proposition by the board was offered to the Meldrum brothers and eventually accepted. The company began the manufacture of the Meldrum Koker Stoker and placed it on the market along with the Mansfield Chain Grate Stoker and the firm's water-tube boilers.

Isaac Harter on April 15, 1905, presented a proposition from Kennedy Parks, who invented a special machine for making seamless headers, which were an important part of the company's water-tube boilers. Parks claimed that his machine would not only reduce the cost of the headers but also produce a superior header. Following his presentation, the company appropriated $500 for experiments with Parks' machine. On May 3, 1905, an announcement was made that the experiments had been successful and an agreement reached with Parks. 8 

Foreign Trade

The firm expanded its business to include a number of foreign countries. The company had a good market for its water-tube boilers abroad, which continued until it disposed of that part of its business.

In 1899 a firm of brokers presented a proposition that entitled them to the exclusive sale of the Cahall boiler in Germany and Austria on a royalty basis of ten cents per square foot of heating surface. Temple was authorized to close the contract. Each year thereafter, shipments of boilers went to those two countries.

In 1901 the firm of Dank & Company, Limited, of Oldbury, near Birmingham, England, expressed a desire to build the Cahall and Babcock and Wilcox water-tube boilers. They requested that permission be granted to sell those boilers in the United Kingdom. Those requests were acted upon favorably by the board of directors. The English firm was also granted the right to manufacture and sell the Mansfield Chain Grate Stoker.

Brown reported that he had been conducting correspondence with William McLean & Company of Melbourne, Australia, concerning the marketing of the company's boilers in that country. This firm, through its representative, O. H. Remmington, had applied for the exclusive agency for the sale of water-tube boilers and Mansfield Chain Grate Stokers in Australia and New Zealand. A contract was executed between McLean & Co. and the Aultman & Taylor Machinery Company, and many of the firm's water-tube boilers went to Australia and New Zealand.

There were other companies authorized to market the water-tube boilers. They included E.P. Martz, Henshaw, Bulkley & Company, Hendrie & Bothhoff Manufacturing & Supply Company, and Alexander Lewis.

Another outlet for the sale of the firm's water-tube boilers was the United States Navy. W.C. Turner, vice-president of the Thayer Company, was authorized to sign on behalf of the Aultman & Taylor Machinery Company documents essential in the transaction of business with the Navy Department. On the basis of this action and the records of the company, it appears that the United States Navy used those boilers on a number of their vessels

Promotion of Sales

The company utilized a variety of methods of bringing their watertube boilers to the attention of prospective customers. The usual media of newspapers and magazines carried pictures along with descriptions.

Fairs and exhibitions provided another avenue for bringing the firm's boilers to the attention of the public. The company exhibited its water-tube boilers at the Louisiana Purchase Exposition held in St. Louis during 1904. Isaac Harter, Jr., later called attention to a supply of booklets left over from that Exposition. It was his suggestion that the company print a card calling attention to the fact that the water-tube boiler had been awarded first prize. In compliance, a card was printed that had a picture of the medal that the company had won. These cards along with the booklets were mailed to users of boilers.

Financial Aspects of the Boiler Trade

On April 5, 1905, Isaac Harter, Jr., recommended the adoption of a new price list on the company's boilers and repairs. The new price list became effective on May 15. Apparently the new list did not decrease sales. Only the Thayer Company objected to the new price list.

Shortly thereafter the Thayer Company brought suit against the Aultman & Taylor Machinery Company to recover damages. Company records mention this lawsuit but give no information as to its outcome. In order to avoid the recurrence of such difficulty, succeeding price lists carried a statement to the effect that the company reserved the right to change prices at any time.

On Oct. 1, 1897, the firm's total boiler sales amounted to $10,958.70; on Jan. 1, 1898, they amounted to $119,926.52; on Jan. 1, 1899, they amounted to $122,574.50; on Jan. 18, 1900, they amounted to $2,620,871.69; on Jan. 1, 1901, they amounted to $1,757,489.74; and as of Jan. 1903, they amounted to $2,300,000. On Jan. 1, 1899, commissions due the agents amounted to $14,808.69; on Jan. 18, 1900, commissions due Temple amounted to $100,930.15 and to the Thayer Company $33,739.10.

During 1901 there was a marked increase in the volume of the company's boiler business. The first five months of 1903 were distinguished by the receipt of a very large number of orders, the aggregate of which was much larger than any other similar period in the history of their boiler business, but the last six months of that year were decidedly the worst period. During that year there was a large increase in the demand for their horizontal, and a decrease in the demand for their vertical boilers.

During the first part of 1905 the boiler department showed a gain of 15 percent in shipments over the same period in 1904. There was about a 100 percent increase in the sales of boilers.

The company arrived at a crucial milestone and made a decision that had far-reaching consequences, most of which were unforeseen by those who were responsible for guiding the destiny of the firm. At the meeting of the board of directors on Sept. 7, 1905, Brown reported that negotiations had been in progress for the sale of the water-tube boiler business. He announced that a contract had been drawn up with the Stirling Company of Barberton, Ohio. That company, while its plant was located in Barberton, was organized and existed under the laws of the state of New Jersey.

For a number of years it was common practice of many companies to be incorporated in New Jersey, even though their plants may have been located elsewhere. This practice prevailed because the incorporation laws of New Jersey were more favorable to the corporations than was true in most of the other states. Mrs. Harter offered a motion to execute the contract with the Stirling Company. That motion passed.

The machinery and equipment used in the manufacture of water-tube boilers was moved to Barberton during 1905. The contract between the Aultman & Taylor Machinery Company and the Stirling Company was completed on Sept. 15, 1905. That sale included all of the fixtures and machinery used in the manufacture of water-tube boilers. Among the articles listed were rivet machines, punches, shears, stokers, cranes, planers, hoists, boring mills, locomotive cranes, headers, patterns on hand, and many others, comprising more than a hundred items.

The final contract that was executed between the company and Temple provided that he receive $1,000 per month plus a commission of three-fourths of one cent per square foot of heating surface. That contract was to have continued until Oct. 15, 1911. The contract with the Stirling Company provided that, if possible, it was to reach an agreement with Temple. In the event that they failed to do so, the Aultman & Taylor Machinery Company would fulfill its obligation to Temple. In case the latter situation prevailed, the Stirling Company was obligated to reimburse the Aultman & Taylor Machinery Company to the extent of $1,000 per month plus three-fourths of one cent per square foot of heating surface.

Contracts in force with other companies were to continue until the date of their expiration.

Another adjustment involved the Cahall patents. At that time William H. Cahall owned the interest of Helen E. Cahall and John Cahall in certain patents. The Aultman & Taylor Machinery Company obligated itself to secure their interests from William H. Cahall. The firm was to secure the consent of William H. Cahall to the sale by the Stirling Company of the Cahall vertical and horizontal boilers. The Aultman & Taylor Machinery Company also agreed that it would not engage in the manufacture or sale of water-tube boilers for a period of 10 years from the date of the contract. The agreement was ratified by the board of directors at their meeting on Sept. 15, 1905, and signed by J.E. Brown, president of the Aultman & Taylor Machinery Company, and by Edward R. Stettinius, first vice-president of the Stirling Company.

The Stirling Company paid the sum of $275,000 for the water-tube boiler business. To cover this sum, 11 promissory notes were written. In addition to this sum they paid $45,000 for all contracts and orders for water-tube boilers on hand. When consideration is given to all of the financial facts incident to the sale, it is probably fair to assume that the Stirling Company paid between $350,000 and $400,000 for the water-tube boiler business.

In view of the fact that the Aultman & Taylor Machinery Company's water-tube boiler business was lucrative, why did they sell it? Did the officials consider the building of threshing machinery more profitable?

If the price received for the business is compared to the profits realized during the 10 years of building and selling water-tube boilers, it appears that the price that the firm received for the business is much less than should have been realized. In view of the expansion of the water-tube boiler business of the Stirling Company and later the Babcock & Wilcox Company, one cannot escape the conclusion that, had Aultman & Taylor continued their water-tube boiler business, they might have continued in business for more years.

That there was a ready sale for Aultman & Taylor's boilers is evidenced by the fact that, for a number of years in spite of operating their plant to full capacity, they were unable to manufacture a sufficient number of boilers to satisfy the demand. Under such conditions it is difficult to understand the need to continue the outlay of huge sums of money in commissions.

In spite of the fact that the Stirling Company was anxious to acquire the water-tube boiler business, Aultman & Taylor employed an agent to conduct the sale who was paid a huge sum of money for his services. There are those who are of the opinion that the entire transaction had the earmarks of mediocre management and a lack of good judgment.

Whether the officers of the company were at all times prudent and wise in their judgments and actions will probably always be a matter of conjecture and opinion. Nevertheless, it can scarcely be disputed that the sale of the water-tube boiler business and the relinquishing of the patent rights to the Cahall boiler were little less than a colossal blunder. 9 

Notes

1. "Biography of Michael D. Harter." 74-85. The Sunday Shield, Aug. 23, 1891.
2. Record Book, minutes of the meetings of the stockholders and directors of the Aultman & Taylor Machinery Company. Brown, J.E. "The History of This Company and Its Predecessors." The Rooster, 1920. Brown, Ted, secretary of the state of Ohio, Court of Common Pleas, Richland County, Ohio.
3. Ibid.
4. Since there were three distinct companies, reference to them is made by their legal names.
5. Record Book.
6. Ibid.
7. A technical presentation has been avoided. For those who desire a more complete discussion, it is suggested that they consult treatises on water-tube boilers.
8. Record Book, minutes of the meetings of the Sstockholders and directors of the Aultman & Taylor Machinery Company.
9. Ibid.