The Indianapolis journal., 1903-07-12
U. s. STEEL PROFITS.
Annual Net Earnings Equivalent to
Five Years Interest on Total
Bond IsSue.

In view of the recent issue of 500, 900, 900
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 we'll to buy
securities when they are cheap 1t shows
the net earnings for six months, after de-
Quoting each month the expenditures for
ordinary repairs, renewals and mainte-
nance of plants. also interest on bonds and
fixed charges of subsidiary companies, to be
the enormous sum of Sol ,56S, 235; and untitled
orders on hand on July 1 amounting to A.
666,57S tons. These figures are pregnant
with the evidence OF past and future pros
perity. (
From the net earnings of s61,56S, ,2S5 the
sum OF $7,3S5, ,299 is deducted, of which &c.
655.5Oi is set aside for depreciation and re-
serve. and s729 7s5 for the sinking fund on
bonds of subsidiary companies, thus leaving
for bondholders and stockholders the sum
of Sol, lS2,936.
Out of this sum of $54.lS2.936 there was
paid TO bondholders S7600,0O0. (This is six
months interest on the issue of 304,000,0OO
OF per cent. fifty-year 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, so, 900. In ad-
dition to this .S39 was paid (subject to
adjustment on account of conversion OF pre-
ferred stock for the new ten-sixty-year 8
per cent. bonds) TO preferred stockholders;
and SIC, ,l66,OoO TO holders of common stock.
After these payments there still remained
undivided profits OF a surplus of s17,O37,0i7.
To the conservative investor and to those
who have been waiting for the semi-annual
statement. the main point of interest lies
In ascertaininS whether it gave by its net
earnings an assurance of its ability 10 pay
continuously fixed charges on its new issue
Oh S2OOOO0.vO (now quoted on the bond mar
ket at so as We'll as on its prior issue of
S3O2 600. The annual interest on the to-
tai bond issues of 500, GOO, CO., at ) per cent
amount to s25.20O00o. The net earnings for
six months, as shown by the statements
available for the payment of interest on
bonds amounts TO sd, 1S2, 1886. Or, in other
words, Ii being borne in mind that interest
bonds must be paid before dividends on pre-
OF the United States Steel corporation for
six months were sufficient to pay the fixed
charges for a full year on its total bond
issues twice over; or, at the same ratio of
earnings for the second half year five times
over. In view of this. can any reasonable
doubt prevail as to the ability of the cor
poration. now making a net earning in ex-
81. .000, ,Oo0?
1t would be difficult to marshal condi-
tions which would reduce the net earnings
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 COM
petition. general business stagnation
which could bring about a loss I'm earnings
equal TO a reduction of 20 per cent would
place half the railroads in the country in
the hands of receivers And even then an
additional element of security is possessed
by the Steel Corporation In it's undivided
profts or surplus 10 which the semi-annual
statement shows an addition Of 81, as7, 2
sum In excess Of six months interest on
<5oo.OOoOoo OF bonds at per cent.
IL IL were not that railroad securities
been
market and are consequently better under
stood by the general public seeking invest
ment for capital. IL Is safe to say that the |
would not be the bargains they are now
w lille these bonds are selling around S3 |
and 80 and will pay close or TO 6 per cent. |
on the investment, railroads whose net |
earnings cannot compare with the United |
States Steel Corporation are selling much
above par and are yielding less than per
cent. on the investment