The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1903-07-14
U. s. STEEL PROFITS.
Annual Net Earnings Equivalent to Five
Years Interest on Total Bond Issue

In view of the recent issue of 5000 ,000,-
600, five per cent. bonds, by the United
States Steel Corporation that company's
statement for the six months ending June
80 is Of special interest to those who are
ever on the alert to profit by the rule
that it is well to buy securities when they
are cheap. 1t shows the net earnings for
six months, after deduoting, each month,
the expenditures for ordinary repairs, re-
newals and maintenance Of plants, also in
terest on bonds and fixed charges Of sub
sdiary companies, to be the enormous
sum of SCI ,56S, 235; and untitled orders on
hand on July / amounting to ACCEPTS tons.
These figures are pregnant with the evil
dence of past and future prosperity
From the net earnings of SCI, SOS, 235 the
sum of $7,3S5, 299 is deducted, of which &c.
655,5O6 is set aside for Depreciation and
Reserve, and 29,795 for the Sinking
Fund on bonds of subsidiary companies,
thus leaving for bondholders and stock
holders the sumo of $54, tS2, 1886.
Out of this sum of $54, 49,, 1886 there was
paid to bondholders $4,000 (This is
six months interest on the issue of $780,
600. 900 of five per cent. fifty years bonds,
which are quoted on the bond market at
10 and 112). And there was set aside
for the Sinking Fund of the same bonds
81 $40, 600 In addition to this SIT ,S59 S39
was paid Subject to adjustment on ac-
count of conversion of preferred stock for
the new Ten-Sixty year five per cent.
bonds) to preferred stockholders and $10,-
166. $50 to holders of common stock. After
these payments there still remained undi-
yided profits Of a surplus of $17,037, DAT.
To the conservative investor and to
those who have been waiting for the semi
annual statement. the main point Of inter
est nes in ascertaining whether it gave
by its net earnings an assurance of its
ability to pay continuously fixed charges
on its new issue Of 5000 100000 (now quot
ed on the bond market at $50 as we'll as
on it's prior issue of 1902, 1000, 600 The an
nual interest on the total bond issues of
$500. 100000, at five per cent, amount to
sos, 200, 600. The net earnings for six
months, as shown by the statements, avail
able for the payment of interest on bonds
amounts to $54,1S2, 1886 Or in other words,
| it being borne in mind that interest on
bonds must be paid before dividends on
preferred or common stick the net earn
ings of the United States Steel Corpora
ton for six months were sufficient to pay
the fixed charges for full year on its
total bond issues twice over: or, at the
same ratio Of earnings for the second half
year, five tines over In view of this.
can any reasonable doubt prevail as to the
ability Of the Corporation now making a
netsearning in excess of 1925, 900 900 to pay
a fixed charge of $25,0O0000.
1t would be difficult to martial condi-
tons which would reduce the net earn
ings of this Corporation fully one-half, and
even then the sum available for interest
would be more than sufficient to pay the
interest on all bond issues twice over.
Strikes, competition, general business
stagnation which could bring about a
loss in earnings equal to a reduction Of
| seventy-fiye per cent, would place half
the railroads in the country in the hands
of receivers. And even then an addition
al element OF security is possessed by the
Steel Corporation in its undivided profits
| or surplus to which the semi-annual state
ment shows an addition of s17,O37, O47, a
| sum in excess of six mouths interest on
$500, 100000 Of bonds at five per cent
II it were not that railroad securities
nave Dcen iDuSeI ucdlI III vi the StGul-
ity market and are consequently better
understood by the general public seeking
investment for capital it is safe to say
that the last issue OF United States Steel
bonds would not be the bargains they are
now. While these bonds are selling
around SO and IS and will pay close on to
six per cent. on the investment, railroads
whose net earning cannot compare with
the United States Steel Corporation are
selling much above par and are yielding
less than four per cent on the investment