New-York tribune., 1873-04-17
ANALYSIS OF RAILROAD FINANCE.


sYIVANIA RAILROAD-RAPID DEPRECIATION OF
VALUES OF ALL ROADS ABSORBED BY ITO
WHAT RESULTS IT TENDS.
TO the EdttOr OF The tribune
SIR: The report of the President OF the
Pennsylvania Railroad Company TO its stocknoioers at
their late meeting the nth OF March, lS7S IS ful OF
interest II is drawn with signal ability, and reflects
great credit upon Mr. Thompson for its dction ana ar
rapgement II has the stately flow usual in Presidents
messages and its author fully conscious OF the dig
nity and importance of the subjects with which he was
dealing.
It tappears that the Pennsylvania Railroad Company
REQUIRES certain purposes some S2OO00O To induce
the stockholders TO subscribe pay for the additional
stock at par and 10 enable the Company 10 float the ad
ditiona bonds they propose to SELL necessary that
the and condition of the Company should pre-
sent promising hOuTishing outlook. This report
has accomplished this result in remarkable manner
No doubt the great mass Of the stockholders and the
public believe that the Company have really earned as
met profits $s27s52 than sufficient TO pay all the
operating expenses interest on bonds and dividends on
the stock OF the Company, and all other expenses
The report says: at will be from the preceding
statement that the surplus net profits Of the Company
I'm ls without including those from the sources alluded
TO- were sufficient to have paid dividend OF ten per
cent ON an additional capital stock of nearly $2iOOO0oo
AS the business of the Company is increasing rapidly
year after year there can be little doubt
that if this were true Of the year 1872, 1t would
be safe TO predicate a like result Of the year
1913 TO form correct opinion TO the trustwOrtn-
ness figures however ii is necessary carefully
10 examine the previous business and history OF the
Company. In doing this shall take the reports otthe
Company my guide.
By turning TO page 1S Of the report OF Mr. Thompson
OF Feb T. 1861 find this language by steadily pur
suing financial policy calculated TO attain these OBJ
jects entire debt Of the Company IN 1875 will be
rought within the amount of its gross annual incomea
condition of abundant safety to the shareholders which
may be obtained without any interruption TO your regu
lar cash dividends" BY reference to the tables ap-
pended hereto it will be how far this promise Is
likely TO be fulfilled Beyond doubt the policy of the
managers nj that time prudent and cautious Cir
cumsances over which they may not have had entire
control and others which too strong in temptation
20 be resisted, shortly afterward led them TO aban
don this condition of abundant safety"
But 10 to the figures shown by the reports
The gross receipts Of the Pennsylvania Rail
road stated, for 1872 so, ,02525 p
Total operating expenses for the time. l3G65 90
Leaving net earnings in 1872.......... sS,2l7s52 IS
The bonded debt OF the Company,
as stated i'll round figures, is. .S35,OOO,OOO
The capital stock OF the Company.
as stated in round figures, iS..... 5i,0O0OO0
annum interest s35 OOOOO bonded debt s2lOOOOO 90
To pay 10 per cent dividends on 100000 of
capital stock '.---.-....--.. 5aOOOO W
Total interest and dividends s......... $75OoOoO 90
Total net earnings, 6,2iS52 Is
Net balance. S'4i,So2 l6
This certainly would pay 10 per cent upon
s2lOOOOOO OF additional capital stock. But the
10 this may that there dividends and interest
received from the investments of the Company which
would reduce interest This may be true but II
why are they not stated The report gives the receipts
from the stock of the Pennsylvania Company" also
statement OF the receipts and expenses OF the New
Jersey roads and of the Philadelphia and Erie Why
the facts other various investments Of the Com
pany withheld The fair inference is that they are
unproductve This is in fact stated in the report ITSELF
as follows The Pennsylvania Railroad Company has
also large amount of property that is at present prac
fically unproductive, such controlling interest in
2l94 acres Of anthracite coal lands stock in the Penn
sylyania Canal and in railroads the profits OF which in
short time will add largely TO its net revenues but
which at present small and have been devoted to
their improvement" What prospect there Is OF their
adding largely its net be determined
from examination Of the results OF their management
of some OF the best of these railroads.
The Philadelphia and Erie Railroad has been under
their control ior seven or eight years. They
iority of the stock and elect their managers. Un
der their cement it has dropped along for years
Hts debt has increased enormously With a business
aarge enough paid very handsome dividend to
he stockholders the receipts have been kept down and
the expenses run up In such way TO absorb all the
earnings OF the No profits have accrued that
stock II this be not deemed fair example Will give
another The Northern Central Railroad is controlled
Rpy them IN the manner. They own majority Of
the stock and elect all the managers and officers. No
minority tockhOder has been represented in that Board
for over 10 years There be excuse for them if
There has been any msnanagement. The President Of
tbe Northern Central Railroad made report to the
stockhOders the year 1865, and stated that the bus
ness for 1864 had earned net profit the stock Of lS
er cent Since that the passenger business the
road has doubled aud the freight business quadruped
Notwithstanding tins large increase, Mr.. Thompson
states in the report under consideration that the
Northern Central Railway Company controlling inter
.t IN the stock Of which is held by this Company, in
consequence OF the Of freight charged mainly
upon ts coal traffic in 1872, did not its dividend"
The Northern Central Railway is the direct route be-
sween the anthracite coal fields OF Penn vania and the
T,ity Of Baltimore with competitor for this part Of
.be business Its local business, we'll its
xions with the Philadelphia and Erie and the Pennsy
auia Railroads render II one Of the most valuable rail
road roues in the United States. The best evidence of
.h, 20 be found in the fact that the offering
RS for ten years been pressing hard its capacity
and although its facilities have been increased by the
expenditure OF per cent upon s capital ana bonded
debt OF lSC3 they still insufficient TO meet the IN
crease in passengers aud freight transportation III,
then this road was earning Is per cent ID 1861 ana ls
business increased above stated ana yet IN 1877 IL
did not earn any dividend. what inference Is to be
drawn as 10 its management Simply that it has been
40 inefficient or wrong that profits can be expected
from IL while under the present control If tins be true
s 10 one OF the best lines Of railroad In the country
what better can be expected from the "eonrong In
terest owned by the Pennsylvania Railroad Company
An other inferior railroads will venture the assertion
hat there ia no other road in which they control
snc interest that equals the Northern Central in oca
,,on grades and business Eight IL was earn
"a per cent upon It's stock To-day 1t Is earning
.oth,no It has wilted under their management III IS
v,ng OF financial atrOphy, while the richest and most
nonrsbing food in the way of traffic is poured into It,