The Bridgeport evening farmer., 1911-09-18
PROBLEMS OF NEW HAVEN ROAD
Discussion of Company's Divi- dend Record From New
 York Source
AS TO ITS NEW FLOWS"
Questions Which Now Confront Mag. nificent New England Railroad
 Property.

financial writer in the New York Evening Post gives this expert opin- ion of the New Haven railroads con- dition and discusses the problem ahead of it:
 The New Haven has been dropping to new low records since 1902. Up to that time it had been a problem for
 the management to find some way of hiding surplus earnings over the per cent. dividend the whole road hav- ing been rebuilt and re-equipped by overcharging operating expenses. But. in 1903. a change occurred in the man agement, and after that no trouble was experienced in disposing of sur plus earnings. First, competitive railroad lines were purchased; next. competitive steamboat lines were ac- qulred, and, finally, the company se- cured control of 1,4O0 miles of com petitive electric railways.
 In protesting against the purchase of the Boston & Maine, one of the last railroad properties. acquired, counsel representing the State of Mas sachusetts accused the New Haven management of reckless acquisition of other properties at e1orbitant cost acquisitions made partly with view to mere aggrandizement" That was
  Investigation of the facts, however, shows that in some cases the New Haven exchanged it's own stock pay ing per cent. dividends for the stocks of other companies paying much less; in other instances, New Haven sold its own stock or bonds to buy stocks of railroad, steamboat, and trolley lines paying no dividends Thus the problem resolves itself into simple matter of arithmetic. For the inter- est and. dividends being paid on money invested in other properties, is the New Haven getting satisfactory re- turn in increased earnings and income from investments? That question is answered by the following figures comparing net income for 1911 with that for 1901, fixed charges for 1911 being partly estimated:
 Inc. 1911. 1901. PC. Net income, $ 2S, ,266, ,699 s12, ,646, 391 1+ 124 Fixed chgs, 22,911, 1883 7.sSS, f05+1S7 Cap. stock, 77,o5O,oo 54.es5 5,4oo+224 Bonds, 215, ,791, 900 g, 536, ,O00+ 563 Notes, 3S, 00O, GOO
 Bds & notes, 253, 791, 900 32,536, ,000+6S0 Net income in the foregoing table represents the amount remaining taf- ter operating expenses have been paid, and after all income from investments has been included. That item shows an increase of PA per cent. compared with 1901; but fixed charges and diyi- dends have both increased over 1S0 per cent. because of the tremendous increases which have been made in stock and bonds to acquire other prop critics. Within ten years New Haven's net income has increased 124 per cent, but the bonds and notes issued have increased 680 per cent.
 When a company's fixed charges and dividend requirements are in- creasing faster than its net income, one of three things must happen: Gross earnings must be increased; op- erating expenses must be reduced, or else the dividend must be cut. Only recently President Mellen issued or ders to reduce operating expenses wherever possible, and stop all inn provements where the cost of carrying half-completed plans would be less than the cost of finishing. the work. Doubtless operating expenses can be greatly reduced by the carrying out of those orders; but the facts remain that last year the dividend was not earned by $800,O00; during the past ported
 In some respects the difficulties which confront the New Haven today are like those which overlook the Pennsylvania after the panic of 1907. But there is this difference: the Penn- sylvania raised practically all of the money spent before and after 1908 for improvements without increasing fix ed charges, and all of the money was spent to increase facilities of lines already owned, while most of New Ravens money has been used to ac- quire control of outside properties It may be that when earnings begin to show an upward turn, New Haven will recover it's lost ground as rapidly as the Pennsylvania did after the panic of 1907, but dividends were re- duced by the Pennsylvania before the turning point was reached. Unlike New Haven, Pennsylvania never paid an unearned dividend