The news-democrat. (Providence, R.I.) 1906-1909, 1908-01-08
NEW HAVEN R. R. CREDIT
STRAINED TO UT7ERMOST"
Bandeis So Declares After Completing Probe Into the Boston
Maine Merger-O ther Criticisms.

tion OF the management be sold in the
market without notice to the public from
time to time, at any price-a serious
menace to the market value Of New
Haven stock"
Under the same heading. In treating OF
bonds. he says:
1.-The outstanding funded Indebtedness
(including notes payable) OF the new
New York. New Haven and Hartford
Railroad company on June 80. 1907. IN
cluding debt OF subsidiary companies and
OF merged roads. as reported TO stock
holders. was s23l. .7s7 100. and It's only
contingent liability as reported TO stock
holders, was Joint liability with other
roads for any deficiency on foreclosure OF
bonds Of the Boston Terminal company.
AS matter OF fact. the liabilities OF the
New York. New Haven and Hartford
Railroad company on June 80, 1907 were
$S5.o3247 greater. or In all s2G6.Sl9,677
as certain liabilities were not disclosed
IN the report TO stockholders
DIVIDENDS FROM "OTHER INCOME"
In treating OF How Dividend Require
ments Arc Met" by the New York. New
Haven and Hartford Railroad company,
Mr.. Brandeis says
Prior to the year beginning July J.
1906 all dividends are reported as having
been paid substantially from not earn
ings from operation. That is. the balance
or reported net earnings OF the railroads
tsteam) remaining after paying fixed and
other charges was In each year substan
tally sufficient to pay the dividends de-
clared. In 1861 the dividends paid
amounted TO $500. .9SS, but the balance OF
reported railroad net earnings remaining
after the payment OF fixed charges was
only 81. .484. 1851 In other words, at least
$3.50, al.09 of the dividends was paid out
af other income
'ln the current year the net earnings
from operation OF steam railroads must
fall far short OF meeting all fixed
charges. In other words, all OF the divi-
dends as we'll as part OF the fixed
charges must be met from the income
other properties
The gradual shrinkage of the surplus
net earnings from operation OF the steam
railroads applicable to dividends over
fixed charges. the increase OF dividend
requirements, and the inroad OF dividends
upon ''other income" according to the
reports 10 stockholders for the past seven
years are shown In n table. which he ap-
pends
MANIPULATION.
Under the heading Profit and Loss
Manipulation, Mr.. Brandeis says OF the
New Haven:
THE proft and loss account in the re-
port TO stockholders for the year ending
June 30. 1907. shows a gain OF S.030, 326.S
as arising substantially from the item.
Premiums on issues OF stock and bonds
less discount and commission on deben-
lures SAT-, ,3sSo3.' As matter OF fact,
there was no actual gain. That Is, no
money was received from the public as
premiums on stock The Item is a mere
intercompany bookkeeping device which
prevented the profit and loss account
from showing an actual loss. But for
this item of gain from premiums. the ac-
count would have shown a loss. because
OF the charge TO this account Qnstead OF
to the years income) OF S3.00ooQ0 charged
or TO meet the depreciation and the
amount of s3.lf7.56 paid for discount.
commissions and expenses OF the Euro
pean loan negotiated in the year 1907, the
facts in regard TO which are not disclosed
in the stockholders report"