Omaha daily bee., 1909-05-16
Earnings and

The majority of the stock of the Omaha & Council Bluffs
Street Railway Company is owned by citizens of Omaha and
Council Bluffs, and control of the property, therefore, is vested
at home. There are now about 500 stockholders in the cor
poraton. OF late years many local investors have bought the
company's stocks and bonds, a practice which the Company is
glad to encourage.
In this article is presented a condensed statement of the
earnings and expenditures of the Company for the year 1908,
and also a condensed balance sheet at the close of business
December 81, 1908, showing the assets and liabilities.
From the first it will be seen that the net profits of the
Company for the year we're $422, $50, of which $500, 900 was
paid in dividends, and $22, $50 carried to surplus.
The second statement shows that the outstanding capital
izaton of the Company amounts to $9,433,O 900 in bonds, and
$9,OOO,OOO in stock, or a total of $18, 433, 900.
That the entire physical property of the Company could
be reproduced today for less than Sis, 433,O 600, all conditions
being equal, is undoubtedly true. In this connection several
important factors must be considered. Millions of dollars
have been spent for construction and equipment of which no
trace remains today. Large amounts we're forced into the capt.
talization through the principle of competition fostered by the
people in the sos. The capital account was further sweHed by
reason of the absence of a depreciation fund prior to the re-
organization OF 1902.
A considerable part Of the capitalization of the Company
represents values which never went into the property because
it was necessary to sell securities for much less than par in
order to obtain capital for construction, reconstruction, re-
newas, rehabiitations, Identification and the purchase of COM
pedng lines. The principal reason why the Company
was forced to part with it's stocks and bonds at SaCri-
fees was because the corporation never succeeded in
paying a dividend until 1899
For illustration: An investor buys stock which has borne
no dividends on the theory that some day it will pay dividends.
The difference between the par value of the security and the
price he pays for it is the way he measures his belief in the
chances OF dividends being paid. He offers 500, say, for a
$500 stock Qace vafue); 500 goes to the Company and is spent
on the property. But when the days of proft-making comes
the Company has to pay dividends on 500, not on $50.
AS a general rule the more prosperous a company is the
less of this kind of water gets into the capitalization. A very
prosperous corporation can sell its securities at a premium. and
the premium as we'll as the par-value proceeds may be spent on
the physical property Fortunately this Company has now
established the value of its securities so that in future little.
in the sale of its securities.
Before presenting the condensed statements permit us to
call attention to the fact that the Omaha & Council Bluffs
Street Railways paid no dividends for thirty out of forty years,
and that in 1908, if the capitalization outstanding was cut in
two, the total earnings on bonds and stocks were less than 10
per cent. for that year.
Following is the statemento of the receipts and expenses of
the Company for the year 19O8:-