The Richmond Virginian. (Richmond, Va.) 1910-1920, 1918-01-29
RAILROAD CONTROL
PUZZLES FIAANCIERS
Bankers Seek 90 Analyzc Result on
Securities of the Numerous
Weaker Lines of Country.
TAKE FOUR ROADS AS TYPICAL
Earnings OF New Haven, NJ, X. Is r.,
Missouri Pacific. and the Chicago,
Rock Island and Chicago are Care
fully Studied

J SEAS VI AnH EubSI interesting HISN-
lions to the financial world arising
from the passage of the railroads Of
the United States under complete gov
/ eminent control for the duration Of
the war, Is that of the probable effect
/ or this great change in status on the
| weak sisters" OF the railroad world.
What VIII the effect be on their OPP
Grating efficiency, and what Ia the out
/ look for their stockholders. are Ques-
j items which are interesting fnanciers.
! The president, in his proclamation
and in his message to congress, pro-
posed to guarantees to all the railroads
an annual sum equal 70 their average
| net operating income" for the three
nscal years 1918, 1915 and 1917, and
! II appears probable that congress will
accept his recommendations But
there were n number Of railroads for
which these very three years were
the most disastrous in their history
Several large systems during this Pc
| ROD went into receivershlp, and others
saw their earnings 60 down and their
expenses mount up AT rate which
| indicated that the same fate for them
was not long delayed OF the roads
| OF the frst class. some had been re-
organized and had better prospects
/ for the future, when the presidents
proclamation apparently threw them
| back into their lean period others
are still In the receivers hands
| There has been much intensive
study. both OF the presidents plans
! and Of the position Of these railroads,
going on in the financial district in
/ the last two weeks. Compilations Of
I figures from every conceivable angle
| have been made I'm banking offices
with . view To throwing as much light
| AZ possible an the prospects Of the
holders Of their securities.
Four Roads Chosen for Analysts.
| In order to present a fair summary
of the results of this study. in the
form of the general opinion of lead
Ing ffnancters upon the subject, and
some OF the data upon which this
| opinion is based, four fairly typical
railroads. whose difficulties have been
| extensively aired before the public
were selected for detailed analysis
/ The problems which these four roads
| present were laid before a number Of
the ablest railroad fnanciers in New
| York, and tina figures which they and
their assistants have compiled 10 as
stst in studying the proh1 EN-, obtained.
Some Of them are given below:
| The four roads selected AZ fairly
Typical are the New York. New Ha-
ven & Hartford the Missouri. Kan
| sas a Texas, the Missouri Pacific, and
| the Chicago. Rock Island & Facifc
| Among them are representatives OF
all classes of railroads which have
bean In financial difficulties In the
| last three years The New Haven
WAS selected because IL has the larg-
est outstanding interest bearing obh-
I cations which mature In the year
:! 191s--close TO $50. 600. 0oo---and be
cause it's financial troubles have re-
Gently been increasing at a rate which
has caused talk of receivarshIp ahead .
the Missouri Pacific and Rock Island
because both underwent long re-
ownership and reorganization in the
three-year period, and the NJ, * &
T. because It went into the receivers
hands during this period, and stili
remains there.
Il Before going into = detnfIed anslv-
sis Of the position OF these roads, some
81 neral figures may he given regard
ing the capital requirements Of Amer
lean railroads in the year 1918, which
, must. under government control. be
handled by the director general OF the
railroads. A recent com pilation showe
= total If sa16,79t. a0s worth Of &c
curitfes of American railroads which
mature in 1918 These do not al
course. represent the total proha bIe
capital requirements Of the railroads
, but any estimate beyond this would
involve too elaborate an Investigation
into the state Of thu equipment and
operating efficiency Of each road, and
Il correlation OF individual esttrnate
OF their ne@'u by the operating ON
cers, which N would proba bly, be inn
possible To make
New Haven Needs s47, 745 900
OF the foHr roads ansfvzed the
New Haven needs a total of s4T.z4s
coo to meet it's outstanding and ma
turing obligations in 1919; $4,000. 49,
600 In a single issue Of notes falling
due May ! which the directors had
planned TO meet ny an tpaue az pra-
ferred stock, but for which thew had
not when taken over ny the govern .
mSnt, succeeded in arreurinE. The
remaining s2,745.0H0 reprercnts oFIi-
eat!ons Of eome Of its subsidiaries.
J The Rock Isla3d needs &R9q400o to
inset its outgtandile ebugatfons ma.
turing in 1918; the NJ. K & r. neafs
" lee COO. the Missouri Pacific HAS
no obligations maturing in the chr
rent year.
, one OF the difficulties in the wav
| of analysis OF the railroad situation
! IL the difference Of opinion az TO what
the president meant when he aiid
net operating income" The phrase
, Is well known 81 the railroad world
has
made It's OWE definition Of the terri,
p me official deHaition of the interest l.
commerce commission is income re-
naming after the deduction of chr
i rent operating expenses and taxes
But many financial men doubt If con
III eSs VIII accept definition which
r would mean, in practical application.
e%e'npting the railroads for tha period
OF the war from any future Increases
, In taxes. including any increases aftar
June SO l3l7. There ia also a great
zeal OF difference al opinion among
financial men as 10 just what dedur-
items arc properly allowable in cal
IculatinE net operating income" such
az deductions for maintenance, e0ufn-
ment and depreciation, These differ
ences are widest among the very roads
In question, because the receivers ar
these railroads which are under a re-
ownership have often pursued q verv
drastic policy in putting practically
all earnings back into the property.
ana consequently, on rigid interpreta =
fuon, making the statement of met
operating income" much poorer than
IL otherwise might have been II ia
/ hCped the government does not adopt
a policy which would virtually amount
TO penaiizing these roads for the CON