The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1902-01-31
CITES THE; RECORDS.
The New York Commercial on the
Northern Securities Co.
PAST OF THE N. P. AND THE 6. N.
mendous Capitalization of
$4Od,OOO,OoO.

For the benefit of. investors the New
York Commercial makes an extensive re-
view OF the Northern Securities company,
it's organization and It's. prospects. Il
points out chat one-fourth the entire
capitalization Of the company is water,
and that it's recklessly large capitaliza-
tion Is not justified by the past record
of the two roads, the Great Northern
and Northern Pacific, which 1T was organ
Commercial says:
The Northern Securities company has CAP
ital stock of $500 0OO OOO-over $780, 900 900 more
than the combined capital of the two com :
panies it is to purchase. The increase of
$500 900, O00-which is attended by no ,corre-
spending additional asset, and is, to all intents
and purposes, pure int1ation-while impos-
ing, will not add single passenger or a
single dollars worth of traffic to either Of
the roads The total available earnings of
both companies during the last fiscal year
was less than per cent upon the $400, 000, 600
OF capital Stock although during this year
the combined earnings of Great Northern and
Northern Pacific were larger than ever before
in their history In 1893 the combined capt.
Utilization of the two companies was $l75, 000,-
900, or less than the proposed capitalization
of Northern Pacific alone. In three years
1894 1895, 18S6--Northern Pacific was unable
to earn it's fixed charges by a total Of over
$14, O0O, 900. In 1894 Great Northern was I'M
able to meet its dividends by $1,0O0,0O0; yet
at that time the capital stock Of the company
was less than $25,OO0000, instead of 5000 000 OOU
and over to which figure it is now to be raised.
1t would be almost idle to take the earnings
of these two roads five years ago and cal
-culate the showing their earnings would make
in the light OF their enlarged capitalization.
During 1S94-5-6 Northern Pacific was unable
to meet it's fixed charges while the available
earnings of Great Northern in no one OF these
years amounted to as much as Go of per
cent Of it's proposed capitalization of $225, 900,
900 and less than $40 of per cent on $400,
G0O, 600. OF course these figures Of earnings
deal with past years, but they are instructive
at least In showing the confidence which is
expressed in the power OF these roads to con-
tinue to earn indefinitely fabulous sums of
money.
The capitalization Of the Northern Securi-
ties company is clearly based upon the I'M
usually large earnings OF an exceptionally
prosperous year, which Is not justified by the
past record Of either of the roads. Earning
power and optimistic hopes have been CAPT
talizea in tho most reckless fashion-far difa
ferent from those conservative policies
which have guided the arrangements Of the
railroads in the past and which has done so
much toward raising the securities of that
industry to the high place they at present
I'LL in the investment market. Inc prosperity
Of a railroad, like that OF an industrial, is
dependent upon natural laws. During years
OF general activity and business prosperity,
traffic is heavy and earnings are large, while
years Of general depression are nowhere more
quickly reflected than in declining railroad
earnings. For five years now this country
has enjoyed uninterrupted prosperity, espe-
cially In the northwest, where the lines con-
trolled by the Northern Securities company
are situated, and which has not suffered a
serious crop failure during this entire period.
For the last four years each unonth has re-
ported an uninterrupted increase in earnings.
Railroad earnings will not continue to in
crease uninterruptedly, and no one can tell
what they will amount to during 1905 or 1905.
Practical railroad men generally agree that
If the railroads can maintain their present
volume of earnings, it will be all that can be
expected. Yet, as shown above, during the
last year, when earnings exceeded those Of
any previous year, the Northern Securities
company would have failed to have earned
per cent upon its capital stock. 1t seems
incredible that even the public is so unsus-
pecting as to imagine that the capitalization
Of the Northern. Securities company repre-
sents only it's intrinsic value. based on the
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