We at the Internet Checker Taxicab Archive (ICTA) take the word “archive” very seriously. Over the years we have amassed the most significant Checker archive library in the world. Be it brochures, manuals, service bulletins, blueprints, engineering memos, production reports and engineering diagrams, no one else has a library as comprehensive as the ICTA.
We also have financial reports. Now from a automotive standpoint, financial reports are not very exciting, but they can provide great historical perspectives. In our archive, we have perhaps the most significant Checker financial report, the year end audit report for fiscal year 1923, Checkers first year of operation.
The Audit Report of 1923 was presented to Checker Cab Manufacturing on July 30th 1923. It covers the first year of CCM’s existence starting in April of 1922. That said, its clear that this was Checker’s most important year. The period covers the time period when Checker was integrating the Markin Auto body Company and Commonwealth Motors into on single enterprise. It covers the time period when Checker was moving from Joilet to Kalamazoo.
Setting up a new company and consolidating production is a challenge enough, based on review of the report, its clear that Checker Cab Manufacturing faced additional challenges. We cover this in our summary. Additionally the report sheds light on some areas of question and in some cases, the audit report generates more historical questions.
The audit and financials build up and financial statements were prepared by the firm of William Castenholtz & Co. of Chicago, San Francisco and Los Angeles. The firm performed more than just an audit, they essentially had to develop a new set of financial statements. The best way to tell the story is to pull excerpts of the report that actually explains the challenges and issues at the start of the company.
Within the “General” section of the Audit Letter, the Castenholtz firm states the following:
“To properly comprehend this report it is necessary to have a clear conception of the fact that our examination involved more than a regular audit due to several factors. For on thing, in the organization of the new corporation a deal of confusion developed as to the date of the corporate purchase, with the result that the books of the Delaware Corporation and the New Jersey corporation both misstated the facts:”
Essentially there were two sets of books and they most likely did not present meaningful numbers or tie out and balance.
The audits further document that “we therefore found it necessary to correct both sets of records. Further, due to several causes, chiefly rapid growth and unavoidable but frequent changes in personnel, the books and records were rather incomplete, a condition which it was imperative we remedy before statements could be prepared which would reflect the true situation.”
Once the audit was complete, and the financials prepared, the Castenholtz firm went on to affirm that now reconciled, “we believe the books will be brought into eminently satisfactory condition a situation in our opinion that the present bookkeeping department can maintain.”
Essentially the financials were corrected and some degree of systems and contols were now in place to insure that financial records of the future would be generated by the CCM bookkeeping department.
So bottom line, the books were a mess and the audit firm was engaged to build up a correct set of financials. One has to wonder if the books were so messed up, how could Markin actually run the shops? How did Markin and line management make investment and operation decisions if the books were so bad? Today, all this writer can come up with is, good luck.
The resulting books establish a benchmark. Based on the produced balance sheet, the total assets of Checker Cab Manufacturing was $1.4M in adjusted for inflation, that represents $22M in 2020 dollars. Total equity (net worth) was $1.2M representing $18M in 2020 dollars. Current assets were $1.2M and Current Liabilities was $240K indicating a ridiculously high working capital ratio. So high this accountant finds it unbelievable.
The audit report also served as a production report. According to the reports 1045 units were sold during the 13 month period May 22 thru May 23. The selling price was $2671.00, that converts to $41,323.00 in 2020 dollars about the same price today as a standard size American SUV. Total revenue from taxicab sales was $ 2,195,663.00 for the 13 periods and again this converts to $33.9M in 2020 dollars. See production schedule below.
There are some interesting footnotes to these financials. Apparently, Morris Markin (CCM) had a limited investment in the Checker Taxi Company in 1922, he would not gain control of the Chicago operation until the early 1930’s. That said, the Chicago taxicab operation appears as an asset on the balance sheet, a one dollar asset!
Essentially Checker Taxi Company of Chicago had a exclusive contract to purchase taxicabs from Checker Cab Manufacturing. Unfortunately there is a footnote that reports that the Chicago operations was non-compliant with the contract between the two companies, that would explain why the contract was valued in the goodwill section of the balance sheet for only one dollar. Perhaps the contact value would go up for the intangible value, if Markin would gain more control of Checker Checker Taxi. In the end the point is moot, as Markin ultimately gained complete control of Checker Taxi Company of Chicago.
Another interesting item pops up in the Audit report. For those familiar with Checker history, most have heard of the story of how Morris Markin acquired the Lomberg Auto Body company. The traditional story promotes the idea that Markin, flush with cash from producing US Army uniforms during World War I gave loans to various small Russian immigrant owned businesses in Chicago. One of those business was the Lomberg Auto Body company, owned by Abe Lomberg. Lomberg borrowed $15K so he could expand his production capabilities to produce Taxicab bodies for Commonwealth Motors. Based on previous accounts, Lomberg could not make payments on the loan and Markin took over the business in exchange for the loan and the rest was history.
Well, there is an interesting find in the report. As of May 1923, Abe Lomberg still owed Checker Cab Manufacturing $5201.94 which converts to approximately $80,500 in 2020 dollars. So what was the note held by Checker against Lomberg for? It just seems odd, the guy gave up his company in 1920 yet he was still not free from Markin?
It might be possible that Abe Lomberg stayed on with Markin Auto body in 1920 as an employee or contractor. Perhaps this not was some form of employee or contractor advance? We’ll never know, but its nice see good old Abe still involved with Checker after its creation in 1922.
One of the bigger challenges seen in the audit report findings was the fact that most employee advances and travel and expenses were undocumented. Thousands of dollars were unaccounted for indicating poor controls. This was also the case with inventory and apparently the auditors had to back into a number based on Taxicab’s standard bills of materials.
Within the Accounts Payables section there was a current invoice for the Indianapolis firm Millspaugh & Irish for $2500.00. This invoice converts to roughly $40K in 2020.
According to Mark Theobold of Coachbuilt.com Millspaugh & Irish was “Millspaugh & Irish are remembered today as the Duesenberg Model A’s “in-house” production body builder. They started in business as an aftermarket Model T body supplier, eventually supplying production bodies to Anderson, Barley, Duesenberg, Hanson, Kelsey, Lexington, Maibohm, Monroe, Moon, Premier and Stutz. They also furnished taxicab bodies to Barley, Checker Cab, Dodge, Kelsey, Pennant and Premier and supplied limited edition aftermarket bodies for 1923-1927 Dodge chassis. One of the firm’s final projects was a 12-vehicle fleet of Dodge-based Planters advertising vehicles shaped to look like a giant peanut.”
So what was Checker buying from this third party? Checker started the process of moving production from Joliet to Kalamazoo in the Spring of 1923. During this period Checker would contract with other body makers to produce wood taxicab bodies while Checker was effectively down during a move. Based on the Coachbuilt text above, it pretty clear these invoices were for taxicab bodies.
These are just a few examples of the facts that can be found in the audit report. Just some highlights from the Audit Report, it will be interesting to see if we can find additional historical nugets. Over the next couple of months this writer (a degreed accountant) will dig deeper into the supporting ledgers. A copy of the audit letter can be found in the files section of the ICTA Facebook page.
For full access to the Checker Cab Manufacturing audit letter, please join our group by clicking on the link below