New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1906-01-07
The Financial World.

per cent OF a week ago, call loan rates close Yor
the week at merely nominal figures. with funds
| in vast volume offered for a year under the per
cent legal rate.
Yet, over and over in this review has BEEN
urged there is In the security market need t1-
prudence caution careful weighing of values
discrimination. But this has In it not one tinzs
of beariShneSS. not one doubt of the quality az
| the Good Times warrant for current security
market strength; for illustrations abound-tal.
ing Union Pacific (as cited here week ago) fsr
example, strong, expanding, Justify prosperoua
an index of the coUntry's towering prosperity
railway progress. railway affluenee. but the echo
huence-the railroads only keeping IN stepH
And Union Pacific has advanced this week fv.
points.
Union Pacifcs net transportation earnings az
officially given out, for the first five months OF
the current year are S14572 69749. an increase
OF 81 213 913.1T the corresponding period o,
the previous year or over 10 per cent. Similar
ratio of increase for the remainder OF the fiscal
year NOW more than half gomez would approx
irnately show net earnings of S33, 100000 10
which must be added income from other sources
amounting last year to nearly S6,JO0,O 900.
Fixed charges and taxes last year in round
numbers were 81 100000, and ought to be re-
duced this year more than q million dollars by
conversion of As into common stock; but merely
assuming that fixed charges not increased
and other income not decreased. there should re-
lnain after they are provided Tor SZ9SOOOOO 70
be disposed of in what is officially called tina
appropriation Of Income Account"-which
might as comprehensively be called the What
Shall We Do With the Money! account.
Surprising al; the convertibIes converted. the
S2GO.0on000 of common stock on only Per
cent. basis would get S1O000OOO and the $780,
O000BJ preferred stock would get 100000
total dividend disbursement Of S14O000O0
And there thus remains S15,S00OO0 as bal
ance' to be partly appropriated as heretofore TO
sundTy -betteTments. additions and reserves'-
but mainly to be added to the already stupen-
dOus surplus % virtually $330O0OOO.
The $4,000 40 which might be required for
dividend on the second 800. 100000 Of preferred
authorized. but not yet issued need hardly be
considered here for it may be safely enough as
stunned that the investment of the proceeds Of It's
sale will pay its board
That Union Pacific common stock can conser-
vativeiy be put upon b per cent. basis Is too
apparent to need urging-and, indeed, there is
no reason why It should not now be on a par
with its aristocratic INSTRUMENTATION Pacific
and Great Northern-on a per cent basis. But
compare the market prices
It is not extravagant to say that Union Pacific
will soon have sufficient assured income from its
investments in the securities of other compa-
MES to meet it's fixed charges to provide
through the sale of such securities for the can
collation. of it's mortgage obligations How many
other corporations can make that showing?
On June 80. 1905. there was an accumulated
surplus of $34 943 1914 42-this surplus Cor credit
balance in profit and loss account) being merely
the profits incident to the ordinary railroad
business of the corporation since REORGANIZATION
in 1897, including perhaps profits on some prop
critics bought and sold-but not including the
enormous profits now existing in securities
quired and still in the treasury. classed as free
assets or 'unpledged assets Notable among
these Northern Pacific stock of market
value of S44 100000; Great Northern with
ket value Of $4S.00o,0 00 the unissued Oregon
Short Line As of a par value Of S57, ,000 q
real asset secured by the Southern Pacific stock
and other valuable collateral which would other
wise be in free assets; Chicago and Alton pre-
ferred of market value of about $4,000. 900 and
Northern Securities stock of par value OF
s12,S5O,000
Making still more clear this phenomenal Union
Pacific situation-and phenomenal it is con-
sidered from the most ultra conservative in
vestment viewpoints a further analysis land
for this I am indebted to one Of the most COM
pretending minds of the railway WORLD wherein
the effective facts of the Union Pacific situation
are in this wise cryStallized:
of the Union Pacific railroad with dividends
upon it's outstanding preferred stock at per
cent, and it's common stock at per cent, when
all the convertible bonds are converted INTO
common stock, will amount yearly to about S27'-
The income of the Union Pacific from its IN
Vestments by it's report for the year ending
June 80, 1906, amounted to S6.496759 3d. In the
current year net transportation earnings to No
vember go 1906 amounted to S14 572. 697 49, The
annual income from securities owned and these
net earnings for five months amount TO s21.G6s,-
ass 04. On the same basis for the next seven
months of the fiscal year the amount Of net In
come from all sources would be about S41,-
100000. Subtract from this the fixed charges
(S11,2O0,OOO), 4 per cent dividend On the pre-
ferred stock ga 900 0OO), and per cent dividend
Gf you please) on S2OO.OnOO Oe of common stock
(S12 900 000), amounting S27 200 600, and there
is left a surplus of over S14,500.000.
TO this add the surplus carried forward Juns
80, 1905, amounting to S7,219,2S1 81. and you
have a surplus in the treasury of the Union
Pacific from two years operations amounting to
nearly s22O00.OOO. Add this TO the surplus
which existed before June 80, 1906, and note the
Tesut-$57. 000,0 900.
This comments the analyst, will give a
fair idea to the relative value Of Union Pa
ciflo common stock to-day"
And-beside the fair idea'-now pitiably
petty appear the earnings of spectators who
affect to find in Union Pacific values only mar
ket manipulation
Union Pacific is typical of a long list Of Sc
curities-industrial well as railway shares.
What in Union Pacific has developed-extraOr-
binary prosperity succeeding embarrassnentS
and Observation-Disclosures I'm a host Of other
diScernible examples. Reading, 500 SmelterS-
such illustrate accomplishments already record
ed, while there are crOwding instances Of shares
similarly situated, similarly ready for the round
ing out OF new prosperity and market value
recognition. There is nowhere warrant for
progression. Retirement on every side expands.
If ever there were time for confidence such time
is the present time.
Of developments close at hand one that is
sure has to do with the future of the Wander
bllt railways UnificatfOn plans are complete.
NeW-4ork Central and Big Four CThree Cs)
are to be worth. respectively 200 and $50 in S13
per cent collateral bonds-bOndS of the Lake
Shore character.
incidentally Big Four's line into Chicago
goes into operation this week Increased earn
ingS must be large Immediately. The Grand
Trunk railroad Vanderbilt competitor) has en-
tered into contract to take 100000 tons OF coal
per year for five years from Big Four's Southern
Illinois coal felds-an of the Vanderbilt rail-
roads 10 draw their coal supplies henceforth from
the same corresponding new, incaIculabe
Big Four tonnage.
1t seems to be the judgment of authorities that
the market is likely TO develop early favor for
the lower priced railways and industrials-those
that have already established dividend bases or
whose improved prosperity and earnings con-