Barre evening telegram. (Barre, Vt.) 1898-19??, 1902-04-28
STEEL TRUSTS PLANS.
Management Issues Circular Explain
ing the $25O,OOO,O00 New Bonds.
ECONOMY IN MANUFACTURE
Declaration That Proposed Expendi-
lures For Improvements Will Eff
feet q Saving to the Combine
of S1O,OOO,OOO Annually.

New York, April 26-The nnance
committee of the United States Steel
corporation has issued it's long expect
ed explanation and defense of the plan
to borrow $5O,OOO,OOO fresh capital on
per cent bonds and convert $2O0,OOO,-
600 of its preferred stock into an equal
sum of bonds. The circular is in the
form of request for proxies to be
used at the special meeting Of share
holders called for May 10 to vote OH
the propositions. 1t is signed by
Charles M. Schwab, president, and FL
bert H. Gary, chairman Of the execu-
tive committee. OF the new finance,
plan the circular speaks as follows:
Economies in manufacture still greater
than those which already have been ac-
complished may be effected If plans of
improvement now proposed be carried
out. 1t Is estimated by the executive
committee that the expenditure OF about
&25. 000, 600 for such improvements Will eff
feet saving in manufacture Of, say, $lO,-
000, 900 annually and also under normal
conditions would substantially increase
the output, thus adding from $1,000, 600 to
$15, DOC, 900 to the yearly profits. That these
expenditures could be met gradually from
surplus earnings the management does
not doubt, but this would necessitate ex-
tending them over a period of years
and correspondingly would postpone the
realization of the profits which, by the
tanned promptly.
In February, 1901, various subsidiary
companies had under contemplation, and
In many cases actually had begun, the
construction of additions to their plants
which in some instances would have du-
plicated the facilities Of other subsidiary
companies. The aggregate of these con-
templated expenditures was something
like $50 900, 900. AS stated In the prelimi-
nary report of Feb. II, 1902, much that at
the time of organization 1t was hoped
might be accomplished in the way of
avoiding wasteful expenditures for I'M
necessary enlargement Of plants has been
accomplished by cooperation among the
several companies, enabling one to utilize
the facilities Of the other. However, ow-
ing largely to advance commitments, 1t
was Impossible to stop all construction at
the time your corporation was organized,
and tn order to finish work then already
under way cash payments have been
made during the year to the amount of
SIS, 900. 900.
1t was not possible then to determine
how much of this contemplated expendi-
ture of about $50, 000, 600 would have to be
made, nor in advance of sufficient ex-
perience would it have been wise to capt.
talize any part of the SIS, 900 that has
been actually expended.
Payments Falling Due.
Within the next few months will fall
due payments aggregating about $lU,OO0,-
900 for properties purchased almost i'm
mediately after your corporation was or
%1o otv,or
stockholders these payments were describ-
ed as purchase money obligations
The executive committee unanimously Is
of the opinion that it is desirable immedi-
ately to carry out the plans of the man
agement to effect the completely rounded
system above referred to- The finance
committee is unanimous in its support of
the executive committees recommends
lions and believes that, as desired by the
executive committee $25 900 900 should be
made available for improvements. The
finance committee also recommends capt.
talizing both the >$l5, 0000 900 expended dur
ing the year for commitments made prior
to your corporations organization and the
$40 00O, 900 yet to be paid for properties as
above stated. These three purposes in
the aggregate call for $50 ,0OO
The problem confronting the finance
committee has been to make provision for
| this $50, OOO 900 without issuing preferred
stock, which stock cannot be sold at less
than par and which if sold at par would
| be entitled to dividends at the rate of
per cent and would increase by 81, 500, 0OC
| the present annual dividend requirements
of the corporation.
The suggestion was made that preferred
stockholders might be willing to exchange
| q portion of their stock for bonds OF the
| corporation bearing alower rate of interest,
| their concession Of income on the portion
| of their stock thus exchanged being COM
| pensated, first, by the consideration that
| such bonds as should be given in exchange
| for preferred stock would generally be
| regarded as higher order of security
| and second because the prompt employ
| ment of the new capital so to be obtained
| would additionally guarantee the perma-
| nence of the present dividend rate on the
| remainder of their preferred stock.
To Rearrange capitalization.
After discussion with some of the prin-
| cipal stockholders 1t appeared practicable
| to rearrange your corporations capitaliza-
| ton (Which, in round numbers now con.
| sists of $780, 0OO 900 of bonds $780, 600 OF
| preferred stock and $500 900, 900 of common
| stock) by substituting for 5000, 900 900 OF
| the preferred stock 5000, 900 of sinking
| fund sixty year per cent mortgage gold
| bonds.
To offset the exhaustion of ore beds
! rious sinking funds are now being main
tanned. The further provision of this ad-
| ditional sinking fund to retire the propos-
| ed new bonds is, in effect, equivalent to
| retiring 40 per cent of the preferred stock
| In sixty years without increasing the ag-
gregate of the present interest and divi-
| dend charges-in fact, decreasing them by
! a net saving of about $500,OO0 a year. TIC
| do this and also to obtain the substantial
benefit of $40, 600, 900 or SIS, 000 900 annually
| from economies in manufacture and addi-
tional output by reason of improvements
| Is the aim of the present plan.
The plan thus outlined can be put in
| operation only after two-thirds In amount
| Of both the preferred and common stock
| present or represented at the stockhold-
ers' special meeting, called for May 10,
shall have voted to issue $3.50, 600 OF
new per cent sixty year sinking fund
gold bonds, to be paid for by the preferred
stockholders exchanging 5000 100000 of
their stock for like amount of the new
bonds, the additional $5OOOO,0 900 of bonds
! TO he sold for cash. To further the sue
cess of the plan there has been formed a
~