The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1871-05-30
SPECIAL NOTICES.

prosperous times resulted in large dividends yet the
basis considered by the directors as dangerous
and unsafe, and the larger part Of the funds re-
been raised by the sale, at par OF new stock to the
stockholders. On the 1st OF January the stock held
by individual stockholders In the United Companies
and the Philadelphia and Trenton Railroad Company
was, In round numbers, nineteen and a half mil
lion dollars, while the debt was somewhat over df-
Taking the rate of earnings on this total invest
ment to be eight per cent the same as above, then
the result would be as fOlOws:-
Eight per cent earnings on ss4 500, 900 so, 100000
Deduct interest on sl5 at per cent 100000
Leaving applicable for dividend ..... 81 $50 900
or about nine and a half per cent. only.
IT will thus be seen that with the same rate OF
earnings on total investment, from the changed pro-
portion OF stock to debt formerly thirteen and a
while with the same rate OF earnings now on the
total investment, only nine and a half per cent.
would be earned. and that the large dividends de-
clared in fsrmer years were DUE in great degree,
to small proportion OF stock to the total investment.
The rate of eight per cent has been TAKEN 1t being
believed to be about the amount earned on the total
investment for any number of consecutive years
Some years it may have exceeded that rate, but in
others 1t has fallen below that point
For the last year, however the earnings on the
total investment dropped to about six and twothrds
Many causes have tended to produce this dminu-
ton OF earnings, some Of which, being exceptional,
may be expected to cease; Others, however, must
continue 20 operate for some time. Among the
former may be mentioned the partial failure OF the
peach crop IN certain years, paralysis OF the coal
But it may be remarked that while these special
causes Of loss may not exist in the future yet expe
rence teaches us that other new exceptional cases
will probably occur which cannot now be antic-
pated
Among the causes tending to reduce the net earn
Dgs below those OF former days. the increase In the
price Of labor and materials is prominent The net
earnings on most railroads would formerly average
about fifty per cent. of the gross receipts, now sell
dom more than thirty.
Again, large increase OF expenditure is made
necessary without any corresponding Increase OF
earnings. Ihe public demand more costly StruC-
lures. Real estate has to be purchased in advance
Of nttlT the immediate requirements which while a5so-
not bringing with it an immediate increase Of
1t ia true that on the ether hand the business and
consequently the earnings, must be expected TO in
crease but 1t must be remembered that with in
creased earnings increased expenditures become
necessary to provide facilities to do the business,
and with that more additions to the debt or stock.
In other words, while more money is earned, the
capital expenditure has to be increased in about
the same proportion. The capital expenditures for
this year are estimated to exceed one million OF dol
lars
Many Of our Directors have thought that it would
be expedient TO merge our several companies into
one, and by reducing the number OF directors and
officers that greater degree OF simplicity in the
management could be obtained.
While this would probably be the result to small
extent, yet it s extremely doubtful whether changes
could be made radical in their nature to intro
duce that absolute concentration of management so
essential and necessary to the prosperity OF any
company. The very constitution Of the Companies
will prevent an absolute unity OF sentiment and
Ii would therefore appear that leaving out OF con-
sideration the loss OF business consequent on the
building OF rival road yet that the actual secured
interest OF ten per cent is equal to II not greater
than could have been earned in the more prosperous
days OF the companies had the same proportion of
stock and debt existed, and very much greater than
1t has been lately; and that 1t would be unwise to
estimate that with the sources OF business
untouched, the amount of earnings on the total in
vestment in the future will exceed those OF the
past; it may indeed be well doubted whether they
would ever be again equalled. The construction of
the rival road referred to above Should however, be
taken into consideration In fact, the question
solves itself into question OF lease or rival road ;
the last resulting In a divided business and at re.
duced rates, must insure small dividends, an the
conversion OF the roads OF the companies from
main thoroughfares to simply local roads.
The proposed lease now submitted for ratification
has been drawn with the utmost care, Provisions
have been inserted to guard the interests of the in
dividua stockholders In every possible contingency.
1t insures the stockholders a fixed, sure income,
instead of fuctuating one greater ar in amount @
doubt that the stock becoming in fact, bonds of the
Pennsylvania Railroad Comnany, secured by the pre-
sent works Of the United Companies together with
the additions that will necessarily have to be made
will take a high rank in the market as trSt-ClaSs
investment, and will be valued accordingly.
The lease received the utmost care aud scrutiny
from your board, and Is recommended for your ac
ceptance by vote of sixteen members OF the Board
| IN favor to nine against
SAMUEL WELSH,
A. L. DENNIS,
| r. Il. STOCKTON.
JOHN G.. STEVENS,
| CAMBRIDGE LIVINGSTON,
|