The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1907-07-14
FUTURE OUTLOOK
Of SOUTHERN ROAD
STORY Of the Financing Of the
Great System Twelve
Years Ago
MORGAN CAME AS A PATRIOT.
His Patriotism. Has Paid Him
Handsomely, and Will Con
tinue in Profits.

The Wall Street Journal published
en- extended review OF conditions on
the Southern Railway from nigh
financial standpoint. 1t says:
1t Will be remembered by many per-
sons that the opportunity to reorgan-
lie the properties which formed the
Lasis OF the Southern Railway system
WAS not particularly alluring from
Bankers point of view. II was haWkeu
up and down Wall street and was
turned away at every door until the
Morgan -Drexel interests here and at
Philadelphia undertook the task. "as
matter Of patriotism" as Was after
ward explained. If tho Southern Rail-
way Company had been formed two
years later when capital was more
readily forthcoming for such things,
larger financial plan would doubtless
have been evolved. T&a year 1884
was not favorable to the financing OF
bankrupt properties; men were not
then as optimistic as they were few
years later, and. besides, 1t Is doubt
fu II any group of meL could have
lad tho imagination TO anticipate
such abnormal growth as was In store
for the Southern Railway.
For purposes of reorganization, to
retire underlying bonds, to acquire se-
curities of leased lines and to provide
for the future necessities OF a system
which consisted then of li!tle over
1000 miles. the Southern Railway Com
Tany In 1884 created first CONSOLE
dated five per cent. mortgage Of 5l20.-
100000, of which sl0o,000.00o was re-
served for specific purposes and 500
100000 for future requirements. This
reserve of s2o.000.000 for growth, 10
be issued t, rate not exceeding 81
100000 a year, was grossly inadequate
Tor a system which would nearly dou-
bic its mileage In the next ten years.
Thus handicapped, the Southern Rail-
way Con any, as It grew. resorted to
many financial expedients. all of
which We're more or less expensive
and 1t was NOT until 1906 that a com
prehensive financial scheme was de,
vised in the form of the s200.0oO.00t
development and general motrga &c
The issue OF this mortgage was a fou,
per cent. bond. but 1t has not beer
feasible since that time to. sell a-four
per cent. bond, and last January tho
company, like other railroad corpo.
rations. Issued notes. This in itselt
would be 10 reflection upon the South,
ern Railways credit. but at the SAND
Il time the company was not earning tn,
dividend on It's preferred stock nor /,
1t earning the dividend now. notwith,
standing further highly satisfactor,
gains in gross earnings this year owe
ii last. Operating expenses ana fixet
charges have been eating UP the mar
gin OF profit from operations.
Conclusions Drawn.
The concluaions to be drawn fror
our Observation-Disclosures examination &
1 the operations Of the company 70
eleven years are fairly obvious. The
are:
l.. That the company's growth an
general development have been ex
pensively financed, mostly in man
ner to increase fixed charges.
2. That according to American rail
road practice too little has been sper
upon the property out of income
3. That dividends on the preferre
stock have helped to keep the com
pany poor.
A. That for various and intricat
reasons the property has not bee
economically operated or, to put
another way. has failed to show sue
results IN the line OF economies a
could be expected from the capits
tsxpended.
8. That the theory Of capital charge
has been too risidly construed
In view OF the showing that la
been made it is difficult to see how til
disbursement OF over s2l000,o00 /
the form OF preferred stock dividend
can be juetihed. The cumulative Der
rfits OF the expenditure OF, say, ha
that sum out of income on the pror
erty would probably have been such {
Ito leave Southern Railway In muc