Atlanta Georgian. [volume] (Atlanta, Ga.) 1912-1939, 1913-06-22
MANY MILLIONS
FROM EARNINGS
BACK IN STEEL
Equity for Common Shareholders
Increased 1868, OOO,OOOSince
Organization.

NEW YORK. June 21.- Since 1901.
the Steel Corporation has put back
into its various properties from earn
ings approximately $315,OOO,0OO. This
addition to its assets is net.
| In addition, it has liquidated $780,
10000 par value of its own bonds
through sinking funds This, with
sundry sinking fund balances on
hand. brings total appropriated from
earnings in such a way as to increase
equity for shareholders TO 1865, 0OO,-
GOO If this could be applied wholly
to common stock. it would represent
$3.50 per share.
If it be considered that in the orig
inal organization of the corporation,
the preferred stock was fully covered
/ by tangible assets, then all of this
could be treated as an equity built
up for common stockholders. But
there is good reason to doubt that the
preferred stock was thus originally
covered by assets Bureau of Corpo-
approximately $4,000, 900 of the pre-
ferred had no tangible assets back of
it in 1901. On this basis equity built
up from common stock, from earn
ings, is reduced to about $l56,OOO,-
600, or, say S32 a share.
Heavy Depreciation Charge.
IN. U,,ro,,, 90 f,,-r,yrot;o,c - ite
report of 1911, however, computed
that on its estimate of investment,
the Steel Corporation had set aside
S3S,25O,O0 600 more for depreciation than
was actually needed.
If the corporations balance sheet
valuations are used, no addition to the
equity for the stock should be made
on this account as fun depreciation
would be needed. But assuming that
| the common stock had no assets back
Of it in 1901 no depreciation would
be called for. and the S3S, 100000 thus
set aside for depreciation may be re-
garded as creating an equity for the
stock in place Of water. This would
| amount to, roughly, $3.50 per share
additional
| Naluing ore properties at the start
| at only Sl00,000,000 (the Bureau Of
| Corporations estimate) and allowing
nothing for business organization,
good will, trade marks or other in
tangible assets, the Steel Corporation
! has, therefore, from earnings, made
good the original deficiency in the
! assets, compared with capitalization,
to the extent of S4O0,OOO,0O0.
Water Made Good.
On this conservative basis. which
takes no account Of the admitted ap-
| probation in value of certain prop
| critics like city land and ore. or of
| the expanded organization, any water
| in the preferred stock has been made
good, and in addition an equity of
| $40 per share been built up for the
common stock
Against present increased value of
! ore lands. however. must be COnsid-
| cred possible effect of competition of
| the Hill ores, which will come on the
market next year.
This net addition to the equity
should not be confused with expen-
| ditures for new construction, which
| up to the close of 1912 amounted to
over $4240O0,00O. This outlay for
construction, however, was not a net
addition to assets,
United States Steel common stock
| finds itself to-day preceded by SIPS
! 100000 more bonds than in 1901. In
United States Steel bonds the in
crease has been $15O,1SO, 900, in sub
sidiary company bonds, $12S1S2,772.
| Against this is reduction of $3.50
| 600 600 in preferred stock, brought
about, Of course, by an exchange of
| this into bonds.
Good Financing Done.
| So far as the position Of the com
mon stock from the viewpoint of as
! sets is concerned the exchange of
S15O,0O0,000 preferred stock into a
| like amount Of bonds is of no special
significance. This operation, severe
! ly condemned at the time cost the
corporation S6.S00 600 in cash com
missions. In nine years since the ex-
change was effected, however. there
| has been saved approximately $19,-
| 600 600 in dividends The plan has
| therefore, provided a means of get
| ting additional cash into the treasury
without increasing fixed charges. 1t
! also undoubtedly tended to help the
! position of the preferred stock, which
at that time was wet blanket on the
| entire security market
This means that the increase in the
! equity for the stock is indicated by
| amount provided from earnings, as
! above set forth. Whether that equity
| be reCkOned as $50 or $40 or $50 per
! share, or at some other figure de-
| ponds largely upon the individual
! opinion as to what extent original
assets failed to cover the bonds and
preferred stock. But that the equity
| is substantial, is clear.
| The more important question from
! the stockholders standpoint is wheth-
| er, in event of tariff revision trade
| recession or disintegration this equity
| can be conserved.