LO'AjttJoL/vvv KA>T^^w FOR PRIVATE DISTRIBUTION THE PRESENT FINANCIAL SITUATION OF THE AMERICAN RAILROADS CONSIDERED WITH REFERENCE TO SENATOR CUMMINS' SPEECH IN THE SENATE OF THE UNITED STATES ON APRIL 13, 1914 OCTOBER, 1914. BY W. H. WILLIAMS, THIRD VICE-PRESIDENT, THE DELAWARE AND HUDSON COMPANY Compliments of W. H. WILLIAMS Third Vice-President The Delaware and Hudson Company TS. PAGE Section " A" — Conditions irrespective of European War 1 First Conclusion : Yields on Government Securities (United States, English, French and German) 4 Yields on Railroad Securities selected by Senator Cummins 7 General comment on foregoing__ 11 Yields on representative Railroad Securities 13 Yields on securities of railroads, Eastern District. _ 18 Fallacy of use of average rate paid on Railroad Bonds ___ 22 Causes of impairment of ability to raise new capital 27 Value of railroad stocks paying five per cent 38 Second Conclusion : Questions of capitalization 42 Many recent investigations demonstrate the rail- ways not overcapitalized 43 Official statistics plainly refute charge of overcapi- talization 44 Alleged overcapitalization of Union Pacific 52 Third Conclusion : Fallacy of considering increase in net earnings as the measure of success of business enterprise — 56 Increased investment in road and equipment 1890- 1912 _ _ 58 TABLE OF CONTENTS. PAGE Section '* A" — Conditions irrespective of European War 1 First Conclusion : Yields on Government Securities (United States, English, French and German) 4 Yields on Railroad Securities selected by Senator Cummins 7 General comment on foregoing. _ 11 Yields on representative Railroad Securities 13 Yields on securities of railroads, Eastern District. _ 18 Fallacy of use of average rate paid on Railroad Bonds - 22 Causes of impairment of ability to raise new capital 27 Value of railroad stocks paying five per cent 38 Second Conclusion : Questions of capitalization 42 Many recent investigations demonstrate the rail- ways not overcapitalized 43 OflBcial statistics plainly refute charge of overcapi- talization 44 Alleged overcapitalization of Union Pacific 52 Third Conclusion : Fallacy of considering increase in net earnings as the measure of success of business enterprise — 56 Increased investment in road and equipment 1890- 1912 -.- 58 SO^f^^f? n PAGE Aggregate gross receipts, operating expenses (in- cluding taxes) and net revenues 59 Average gross receipts, operating expenses and net revenues per train mile 61 Average gross receipts, operating expenses and net revenues per mile of line 64 Relation of railway income to railway capital and capital securities 65 Additional Suggestions : Impairment of railway income by reason of dimin- ished purchasing power of money 70 Governmental pressure upon earnings 76 Increased competition for capital 82 Railroad securities now in default 89 Section " B " — Additional considerations made necessary by the European War __ 91 Diminished traffic 91 Difficulties and excessive cost of financing 100 Conclusions __ _ 107 THE PRESENT FINANCIAL SITUATION OF THE AMERICAN RAILROADS CONSID- ERED W^ITH REFERENCE TO SENATOR CUMMINS' SPEECH IN THE SENATE OF THE UNITED STATES ON APRIL 13, 1914. The discussion herein will be arranged in two sections, as follows : A. Considerations that are effective irrespective of the European War now in progress. B. Additional considerations made necessary by the European War. SECTION A. Considerations Irrespective of European War. Fortunately, sound and profitable discussion of the data and conclusions presented by Senator Cummins, and of the present economic situation of the American railway industry can rest safely upon the general principle which he proclaimed at the beginning of his address. This general principle is stated in terms which serve not only to express the strong convictions of the speaker, but as well, to affect any thoughtful mind with convincing force. It is of such profound import- ance, so valuable as a standard by which to test his con- clusions, as to warrant the repetition of his exact language. Senator Cummins said : " The happiness and prosperity of the country are dependent upon the safety, adequacy and efficiency of transportation. Everybody desires that every railroad shall be well constructed, well equipped, and well operated. Everybody knows that these things cannot be accomplished unless the compensation for the service rendered is sufficient to pay for maintenance and opera- tion, and so to reward the capital invested that those who have money to invest will look upon the enterprise as an attractive one." {Congressional Record of April U, 19U, p. 72^.) In other words, it is recognized and must be the basic principle of further discussion, that for the sake of the general welfare of the United States, disregarding the possibly selfish or personal interests of railway employes, railway creditors, railway owners and railway managers, it is necessary that the railway revenues should continuously supply sufficient funds to meet all expenses of operation, including liberal wages and adequate repairs and renewals, to pay all taxes, and to afford a fair and attractive return to investors, the latter safeguarded by a marginal surplus large enough to justify confidence that it will not fail on account of any merely temporary industrial depression. Nothing less would satisfy Senator Cummins' statement of this guiding principle. Before subjecting his practical conclusions to the test thus afforded, it will be well to note also, that Senator Cummins recognizes that during the last twenty years improvements in railway facilities have vastly augmented the value and effi- ciency of the American railway system. He said : " One thing more I ask you to bear in mind as I pro- ceed. It will, I think, be admitted by everyone that the physical condition of the railroads is better at this moment than ever before in their history. I mean that the roadbeds are safer, the rails better and heavier, the bridges sounder and stronger, the station houses and other structures more commodious and permanent, the equipment more adequate and lasting, and the locomo- tive power greater than at any other time since the first railway train started on its journey. " It follows, of course, that the railroad property de- voted to the public service is more valuable at this moment than at any other moment since railroads began. We ought to understand that we are dealing with the most complete railroad system that this world has ever seen, prepared to render more and better service than it ever rendered before, and all the declamation about the railroads passing into decay and becoming unsafe or in- sufficient is the rankest, baldest nonsense." {Congress- ional liecord of April IJ/,, IdlJf., p. 721^.9). The foregoing is not more than a fair statement of a fact which can be verified by any competent inquirer. The railways of the United States are at their highest point of efficiency and have, therefore, attained the state in which they represent the greatest investment of capital and the highest potential or intrinsic value. If their value in the eyes of investors is less, as will presently be shown, it is because the facts do not support the conclusions which Senator Cummins has announced, as to earning power under existing rates of fare and freight and with the standard money by which these rates are measured at its present level of value. It is consequently important to examine these con- clusions, and the data on which they rest, in detail. First Conclusion. Senator Cummins' first conclusion appears to be that cap- ital currently needed for railway purposes can be obtained at four per cent on bonds and five per cent on shares. He said : — " It answers my present purpose to say that railway bonds yield a little over four per cent and stock about five per cent. " These are the rates of investment in this country. Just now it may be that bonds are difficult to sell, but that is not material to the point that I am attempting to make." {Congressional liecord of April i^, IBlJf^ p. 7251). United States four per cent bonds of 790 7 and 1925. The " actual rates of interest yielded by iuvestmeuts " in these bonds from 1890 to 1909 are stated to show " the pure money rate accepted and received by investors," In parallel columns the rates of yield upon English consols, French rentes and German three per cents dui'ing the same years are shown. The fact that the rate of yield upon the American fours was lower than that on French rentes and German threes in every year but one (1896) and lower than that on English consols in fourteen out of twenty years, including the last eleven years shown in the table, should have directed attention to the exist- ence of some complicating circumstances, for no one has ever pretended that, in this comparatively new country, the "pure money rate " of interest on capital was ever as low as the contemporaneous rate in European countries. The fact is that the "pure money rate" has never since the Civil War had more than an indirect influence in fixing the price of United States bonds. These bonds are notoriously unavail- able for ordinary investment purposes on account of the pro- hibitive prices offered by banking associations wishing to gain, in addition to their low interest return, the pecuniary benefit of their use as security for bank notes. In this manner the bankers by whom they are purchased are able to secure, by such purchases, not only the interest earned by the bonds but from three to six per cent per annum, according to the state of the money market, upon approximately three-fourths of their face value. It should be noted, also, that the rate of yield upon these bonds in 1910 and 1911 was much higher than that shown by Senator Cummins for any year subsequent to 1898. The yields for 1909 (the latest year shown by Senator Cummins), 1910 and 1911 were as follows : 5 Year Yield, per cent 1909 2.52 ' 1910 2.732 1911 - - 2.692 1912 2.743 ^ Senator Cummins, Congressional Record of April 14, 1914, p. 7249. • World Almanac for 1914, p. 296. 3 Calculated. It must be apparent, from the foregoing, that the prices of United States government bonds, quoted by Senator Cum- mins, prove absolutely nothing as to what constitutes or might constitute a fair or reasonable return upon American railway capital. English Consols. Senator Cummins shows {Congressional Record of April H, 1914; p. 1249) the rate of return yielded by English consols for each year from 1890 to 1909 inclusive. The highest rate on these bonds appears to have been 2.98 per cent in 1909, and the lowest 2.45 in 1897. The later rates of yield have been considerably higher, as will be noted from the following : Average price Yield at that Year per £100 ' price, per cent • X s. d. 1909 _. 83 17 6 2.98 1910_-_ 81 1 10^ 3.08 1911 79 6 3 3.15 1912 76 3 li 3.28 1913' _._ _ 73 3 9 3.42 1 November 25, 1913. • Whitaker's Almanack for 1914, p. 533. • Calculated. From the foregoing it appears that in so far as the rate of interest, affected to a minimum degree by the element of risk and in the most highly organized and consequently the cheapest of the World's markets for capital, can be deduced from the 6 rate on English consols, there has been an increase, since the year with which Senator Cummins' table ends and to a period antedating the present European war, of about one-half of one per cent or substantially one-sixth of the former rate. In this connection it should not be forgotten that the rate of interest on English consols was reduced twice during a comparatively recent period. The first reduction, in March, 1888, was from £3 per XlOO (three per cent), to X'2 15s per £100 (2f per cent) and the second in April, 1903, from the rate fixed in 1888 to £2 10s per £100 (2^ per cent). ( Whitaker's Almanack for 1914; p. 522). French Rentes. These are the national obligations of a great and prosperous people, among whom the practice of frugality and the habit of accumulation are most generally and highly developed. Furthermore, French patriotism has long found one of its expressions in widespread distribution of these bonds among small investors. Yet a study of the yields of these securities shows increases that, like the increases already discussed, indicate a genuine rise in interest rates. During the latest year shown by Senator Cummins, 1909, these bonds sold to yield 3.09 per cent. Subsequent yields have been as follows : — Year Yield, per cent 1910 3.06 1 1911 ___ 3.14 1 1912 _ 3.24 1 1913 .__ 3.45 3 1 New York World Almanac for 1914, p. 296. * Supplied by United States Department of Commerce. German Threes. These obligations show the highest yield of any of the government securities cited by Senator Cummins. His table, ending with the year 1909, shows 3.54 per cent for its latest year. The New York World Almanac for 1914 (p. 2de) gives the rates of yield for 1910, 1911 and 7 1912 as 3.55 per cent, 3.59 per cent, and 3.74 per cent, respectively. The same authority shows that the average yield in 1912 of German three and one-half per cents was 3.90 per cent and tliat of German fours 3.96 per cent. In 1913, according to the United States Department of Com- merce, the yields were, respectively, 4.06, 4.08 and 3.95 per cent for the German fours, three and one-half per cents and threes. Chicago and Eastern Illinois General Consolidated and First Mortgage Bonds. It should be noted that although Senator Cummins' figures (p. 7250) show that these bonds produced 5.24 per cent for investors in 1890 and only 4.14 per cent in 1909, there were several intervening years daring which they produced less than the latter rate. Thus, in the years 1901, 1902, 1905 and 1906, these bonds yielded at the rates of 3.90, 3.84, 3.95 and 4.06, respectively. During the years 1911, 1912 and 1913, these bonds yielded 4.35, 4.44 and 4.95 per cent, re- spectively. For the first seven months of 1914 the yield was 5.60 per cent. The security pledged in guarantee of the payment of the principal and interest of this issue of bonds has so materially altered that there is little value in any comparisons which leave this change out of the reckoning. The increase in the value of the property covered by the mortgage is enormous and there has also been a considerable decrease in the amount secured by liens having priority over the lien of this mort- gage. The following shows the cost of the railway and equip- ment plus working capital of the Chicago and Eastern Illinois, as used in the tabulations of the Interstate Commerce Com- mission, and the amount of liens having priority over the General Consolidated and First Mortgage, on June 30, 1890, and on the same date in 1909 and 1913 : Value of road and Amount Year equipment of prior liens 1890 _ $27,541,805 $10,594,000 1909__ 77,543,708 7,727,000 1913 108.031,200 7,842,000 Missouri, Kansas arid Texas First Mortgage Bonds. These bonds appear, from Senator Cummins' table {p. 7260) to have sold to produce 5.20 per cent in 1890 and 4.01 per cent in 1909. In the meantime, they sold so as to yield 3.97 in 1905 and, since 1909, sold to yield 4.08 per cent in 1910, 4.12 in 1911, 4.22 in 1912, and 4.43 in 1913. The cost of road and equipment and the working capital, as reported to the Interstate Commerce Commission, amounted to $126,731,118. in 1890, $202,387,242. in 1909, and $233,172,- 454 in 1913. Wabash Railroad First Mortgage Bonds. Senator Cummins' table shows (p. 1250) that these bonds sold to produce 4.99 per cent in 1890 and 4.24 per cent in 1909. During intervening years they sold high enough to produce 4.07 in 1902 and 4.08 in 1901 and 1905. At the average price of 1910 they pro- duced 4.42 per cent ; at the average price of 1911 4.50 per cent ; at the average price of 1912 4.58 per cent ; and at the average price of 1913 4.78 per cent. The prior liens were about the same from 1890 to 1913, but the assets of the cor- poration increased from $133,434,841. in 1890 to $210,392,270. in 1909 and $238,063,209. in 1913. Chesapeake & Ohio First Consolidated Mortgage. The rate of yield on these securities (shown by Senator Cummins' table, p. 1S50) was 5.09 per cent in 1890, and for 1909 4.13 per cent, but the intervening years 1899, 1900, 1901, 1902, 1904, 1905 and 1906 show lower rates of yield than 1909. The rates for the four years subsequent to 1909 were 4.25 per cent, 4.26 per cent, 4.35 per cent, and 4.59 per cent, respectively. Between 1890 and 1913 the par value of liens having priority over this issue was decreased from $6,979,000. to $142,000., and the value of the assets increased from $109,402,612. in 1890 to $194,791,250. in 1909, and $276,436,183. in 1913. Chicago, St. Paul, Minneapolis c& Omaha Consolidated Mortgage . The rate of yield shown by Senator Cummins {p. 7250) for these bonds for 1890 was 4.96 per cent, and that for 1909 3.95 per cent. Intervening rates which were lower than 1909 are found in 1901, 1902 and 1905. Subsequent to 1909 these bonds have yielded higher rates of return, the rate for 1910 being 4.14 per cent, the rate for 1911 4.13 per cent, the rate for 1912 4.23 per cent, and the rate for 1913 4.50 per cent. Ahead of these bonds in 1890 were prior liens amounting to $10,359,800. which had been reduced in 1909 to $8,332,000. and in 191 3 to $7,974,000. The assets amounted to $65,397,269. in 1890, $71,855,215. in 1909, and $82,538,086. in 1913. Chicago, Burlington & Quincy, Nebraska Extension Bonds, secured hy deposit of First Mortgage Bonds of Nebraska Branch Boads. Senator Cummins shows (p. 7250) a rate of yield on these bonds of 4.53 per cent in 1890, and 3.94 per cent in 1909. Between these years the rate fell to 3.47 per cent in 1899, 3.42 in 1900, 3.40 in 1901, 3.50 in 1902, 3.69 in 1903, 3.72 in 1904, 3.61 in 1905, and 3.78 in 1906. Since 1909 the rate of yield has advanced, the rates for the four ensuing years being 4.08 per cent, 4.11 per cent, 4.18 per cent, and 4.45 per cent, respectively. The liens having priority over this issue in 1890 aggregated $52,918,502, in 1909 $27,862,200, and in 1913 $18,662,200. In 1890 the assets amounted to $236,777,826, in 1909 to $436,260,275, and in 1913 to $484,928,952. Central Hailroad Co. of Neio Jersey General Mortgage Bonds. The rate shown by Senator Cummins {-p. 7250) for these bonds was 4.55 per cent in 1890 and 3.89 per cent in 1909. Rates of yield lower than that of 1909 appear for the years 1901, 1902, 1903, 1904, and 1905. During the years 1910 to 1913, not covered by Senator Cummins' table, these bonds produced 4.02 per cent, 4.06 per cent, 4.12 per cent and 4.31 per cent. Securities having a par value of $10,047,000 which had priority over this issue in 1890 are no longer outstanding, and there is now no prior lien. The assets of the corporation amounted to $73,618,146 in 1890, to $103,966,737 in 1909, and to $119,346,178 in 1913. 10 Chicago, Mihoankee & Si. Paul General Mortgage, Series A Bonds. The rate of yield shown by Senator Cummins {p. 7250) for these bonds in 1890 was 4.39 per cent and that for 1909, 3.87 per cent. The rate for 1909 was higher than the rate for 1898, 1899, 1900, 1901, 1902, 1903, 1904, 1905, or 1906. In 1910 these bonds produced 4,03 per cent, in 1911 4.05 per cent, in 1912 4.08 per cent and in 1913 4.29 per cent. Prior liens aggregating $117,591,000 in 1890 had been reduced to $76,816,000 in 1909, and to $52,309,000 in 1913 ; while the assets aggregating $196,324,301 in 1890 increased to $443,- 499,804. in 1909 and to $595,202,515. in 1913. JVeio York, Chicago r& Si. Louis Firsi Mortgage Bonds. The rate of return on these bonds in 1890 shown by Senator Cummins' table (/). 7250) was 4.38 per cent, and that for 1909, 3.94 per cent. Meanwhile lower rates appear for the years 1895, 1896, 1897, 1898, 1899, 1900, 1901, 1902, 1903, 1904, 1905 and 1906. The yield produced iu 1910 was 4.04 per cent, in 1911 4.03 per cent, in 1912 4.04 per cent, and in 1913 4.25 per cent. There have been no prior liens during the period covered by these compilations, but the assets increased from $51,112,528 in 1890 to $66,463,809 in 1909, and to $68,121,282 in 1913. West Shore Firsi Mortgage, guaranteed by New York Central. The yield shown by Senator Cummins for these bonds (p. 7250) was 3.88 per cent in 1890, and 3.89 per cent in 1909, differing from the other bonds in that the 20-year period shows an actual advance in yield. The only intervening years in which the yield was as high as in 1909 were the years 1891, 1892, 1893, 1907 and 1908. In 1910 these bonds yielded 3.96 per cent, in 1911 3.97 per cent, in 1912 4.02 per cent, and in 1913 4.21 per cent. There were no prior liens in either year, but the assets of the Company have increased from $60,000,000 in 1890 to $68,415,580 in 1909, and to $71,493,345 in 1913. It should be noted that these bonds produced a materially lower yield in 1890 than any other bonds used in Senator Cum- 11 mins' table, and that in many respects the conditions surround- ing them warranted their being considered as supplying a more satisfactory indication of the real interest rate, exclusive of insurance against extraordinary risk, than any of the other bonds used. General Comment. Senator Cummins did not give the average rates of yield for all the bonds included in his table, but such averages have been computed for the years 1910 to 1913 inclusive. The average in 1910 was 4.13 per cent ; in 1911, 4.16 ; in 1912, 4.23 ; and in 1913, 4.48, thus showing a very material increase over the rates of four years ago, and over any rates except the very old- est appearing in Senator Cummins' table. In connection with the separate railways for which quota- tions have been given, there has been some analysis of the quality of security and the quantity of assets. There have been many other changes favorably affecting the value of se- curities represented by these rates ; among them the season- ing of securities through distribution to ultimate investors ac- companied by a reduction in the floating supply offered upon markets and exchanges. The additional capital employed by the companies, in most cases obtained by junior issues, has also enabled them to add to the income available for the pay- ment of interest on these selected securities, while the pay- ment of prior liens has diminished the requirements having priority. The Chicago, Burlington and Quincy furnishes a typical instance of the latter condition. The interest charges on the securities selected by Senator Cummins throughout the whole period amounted to approximately $1,000,000 per year. In 1890 the amount of income available for interest on these selected securities was $6,956,315, being the difference between a total available for interest and similar charges of $9,754,680, and 12 interest on prior liens aggregating $2,788,365. In 1913 the amount available to pay this $1,000,000 of interest was $27,864,190 or the difiference between $28,632,648 available for all interest and $768,458, which was all that was then required to pay interest on prior liens. A similar illustration is furnished by the Chesapeake and Ohio. During the period between 1890 and 1913 the interest charge on account of the issue selected by Senator Cummins increased from about $1,000,000 to nearly $1,500,000. In 1890 this company had $1,459,697 to pay interest, and there were prior liens calling for $418,470 interest ahead of the security selected. In 1913, on the other hand, the company had $10,617,662 with which to pay interest and the interest on prior liens amounted only to $8,520, leaving seven times the amount required for this selected issue. Of course, it is not to be understood that these improve- ments in the quality of the particular securities which were selected represent absolute gains to the stockholders of the companies. It is a consequence of the fact that the selected liens were themselves, in many instances at least, junior securities at the time of original issue, which was not far from the beginning of the period used by Senator Cummins, and that in the processes of time they have become preferred liens, and the assets have been increased by means of the proceeds of sales of junior liens and capital stock. The Chicago & Eastern Illinois selected securities were issued in 1887 as a result of consolidation ; the Missouri, Kansas & Texas securities in 1890, as a result of reorganiza- tion ; the Wabash in 1889 as a result of reorganization ; the Chesapeake & Ohio in 1889 as a result of reorganization ; the Central Railroad of New Jersey in 1887 as a result of reorganization ; the New York, Chicago & St. Louis in 1887 as a result of reorganization. The bonds of the West Shore Railroad are not only a first lien on the property of that IS company but are also guaranteed both as to principal and interest by the New York Central and Hudson River Railroad Company. A much larger group of bonds, selected with better appre- ciation of the conditions essential to a scientific presentation of the facts concerning the interest rate, appears in the writer's pamphlet, entitled " Railway Credit and Increased Competition for Capital." In this pamphlet the data were brought down to the end of the first six months of the year 1913, so that they have the advantage over Senator Cummins' table, which ends with the year 1909, of disclosing the ten- dencies of the last four years. The following table is from the pamphlet referred to. Na Raileo Loui New N. Y Nort The: St. L Grea Penn At. 1 Balti. Balti- Chgo Chgo Chgo Color Denv Erie : Centi Soutl Unioi Tol Av. 15 SUMMARY OF YIELDS ON SELECTED HAILROAD BONDS. Name of issuing body Typo of bond 1903 1904 Railroads Louisville & Nashville New York Central R. R... N. Y. Ont. & West. R. R.. Norlliern Pacitic The Reading Company .... St. Louis S. Western Great Northern Pennsylvania R. R At. Topeka & Santa Fe. . .. Baltimore & Ohio Baltimore & Ohio Ohgo. Burl. &Quincy Chgo. Mil. & St. Paul Ohgo. Rock Is. & Pac. Colorado & Southern Denver & Rio Grande Erie Railroad 'Central Pacilic - Southern Railway Union Pacific Unified Gold Mortgage Refunding 1st G. 4's. Prior Lien leral First Gold Collateral Trust. Guaranteed First General Prior Lien Gold Illinois Dio General General Gold First Mortgage First CoDsol. Gold Collateral Trust First Refund. Gu First Consolidated General Gold 4% ^% 4% 4?„' H% i% 3i"i 4% ^% 4% 4% 4% 4% 4.02 3.95 4.1S) 4.02 4.00 3.99 3.83 3.71 3.90 4.91 4.11 4.53 4.09 3.85 4.09 4.35 444 3.87 3.97 4.49 4.04 4.37 3.84 3.81 3.94 4.10 3.83 4.63 3.9S 4.27 3.97 4.20 3.76 4.18 4.13 3.95 3.95 4.05 4.89 4.03 4.29 3.85 4.16 3.90 4.30 403 4.34 4.43 4.83 4.18 4.13 4.30 4.13 4.05 3.95 4.14 5.01 4.39 4.16 3.91 4.18 3.95 4.16 4.53 4.47 4.16 4.10 4.44 5.36 4.24 4.34 3.96 3.97 4.05 3.99 4.18 4.18 4.84 4.13 4.50 4.40 4.46 4.03 4.03 4.35 4.06 4.13 4.03 4 13 4.33 4.34 4.81 4.18 3.98 4.30 4.01 4.10 4.07 4.13 4.05 4.14 4 33 4-53 4-63 4.18 4.64 3.94 4.10 4.40 4.50 4.58 4.33 4.66 3.97 1913 6mo8. only 4.13 4.44 4.36 4.17 4.56 4.75 4.13 4.18 4.53 4.37 4.35 4.19 4.43 4.71 4.93 4.58 4.45 4.75 4.13 Totals . 78.34 3.91 17 The foregoing shows heavy increases in yields between 1909 and 1913, the general average being 4.08 per cent in the earlier and 4.41 per cent in the later year. The solitary exception to this rule is that of the collateral trust bonds of the Erie Railroad, which sold almost on a five per cent basis in 1909, owing to the then recent financial difficulties which that property encountered late in 1907, and the security of which has very materially improved during the last four years under an highly efficient management and by reason of the self-denial of the owners of the equities represented by its different grades of shares who have permitted the reinvest- ment of income which they might have insisted upon having distributed. These heavy increases in yields between 1909 and 1913 are the equivalent of heavy declines in the market values of the securities represented and they demonstrate the fact that a table ending with the year 1909, like that presented by Senator Cummins, does not adequately present the facts of the present situation. In selecting railway securities for the foregoing table, the greatest possible cave was exercised to choose only those that would afl'ord reliable comparisons. It was recognized that a considerable number of bonds was necessary in order to ex- clude merely local incidents and purely individual character- istics, and that every security used must be as representative as practicable ; moreover, to be available for the purposes of the compilation, bonds must mature several years later than 1913, i, e., they must run the full period covered in the in- vestigation and several years beyond ; for, otherwise, they would not be trustworthy indices of the interest rates which investors obtain on long term obligations. Other principal factors determining the selection of securities were — 1. /Relative stability of values. Issues were excluded if their price fluctuations were predominantly influenced by the financial standing of the issuing company. 17 Tlie foregoing shows heavy increases in yields between 1909 and 1913, the general average being 4.08 per cent in the earlier and 4.41 per cent in the later year. The solitary exception to this rule is that of the collateral trust bonds of the Erie Railroad, which sold almost on a five per cent basis in 1909, owing to the then recent financial difficulties which that property encountered late in 1907, and the security of which has very materially improved during the last four years under an highly efficient management and by reason of the self-denial of the owners of the equities represented by its different grades of shares who have permitted the reinvest- ment of income which they might have insisted upon having distributed. These heavy increases in jdelds between 1909 and 1913 are the equivalent of heavy declines in the market values of the securities represented and they demonstrate the fact that a table ending with the year 1909, like that presented by Senator Cummins, does not adequately present the facts of the present situation. In selecting railway securities for the foregoing table, the greatest possible care was exercised to choose only those that would afford reliable comparisons. It was recognized that a considerable number of bonds was necessary in order to ex- clude merely local incidents and purely individual character- istics, and that every security used must be as representative as practicable ; moreover, to bo available for the purposes of the compilation, bonds must mature several years later than 1913, i e., they must run the full period covered in the in- vestigation and several years beyond ; for, otherwise, they would not be trustworthy indices of the interest rates which investors obtain on long term obligations. Other principal factors determining the selection of securities were — 1. Relative stability of values. Issues were excluded if their price fluctuations were predominantly influenced by the financial standing of the issuing company. 18 2. Broad and active Tnarhet. To be admitted to the tabu- lation a security must be dealt in in sufficient volume to make the quotations representative of actual market value. 3. Uniform and uninterrupted payment of interest. With- out this qualification a security would not sell at a market price conforming to any particular income yield, but on a po- tential basis of prospective increase or decrease in the net return. Hence securities not having this quality were ex- cluded. A somewhat wider basis of selection was found to be nec- essary in order to present a special study of the interest rates demanded of railways located east of Chicago and the Missis- sippi river, and north of the Ohio and Potomac rivers, but the foregoing rules were applied as rigorously as the conditions permitted. A table, also taken from the pamphlet previously named, showing more than fifty securities of railways so lo- cated, appears below. CO lo CO : o CO "^ ^ • ^ oj ?o Tt* o CO «3 t- iO Q H i-s < en Q O P CS O 00 —I -rH t^ lO CO CO *} 00 O C? iX> o COtJH ^ CO -^ « O^ 00 CO J> t- O SS 3S O 00 O T-< O CO CO ^ "^ '^ ^ 1-1 o CO CO —1 CO 1-1 {> CI CO J> S^ th CO CO CO CO -* CO TjH CO 1-1 c- c- o aa !^ oi -^ t- cs o w o CO CO -^ CO -^ GO O O -^ ^ iO o o CO "^ "^ "^ "^ CO t- O CO rH ■* OJ CO O 1-1 X) r-l (?J C5 O CO ^" -^ -* o O C5 to 00 CO 00 OJ CO o o O 00 O 50 o CO CO ■* c6-^ iO CO » 3: CO O} c: ■* OO O CO 31 O ^ co" ri' CO* CO CO C5 CO o o CO 52 O Oi 1-1 1^ o lo t- 00 OJ C5 CO O 1— _ C-; co'co -<^ CO O to 'i* 't' 1-1 GO JO -^ o o o oi T-i CQ ci O CO C- 05 CO CO 00 t- O CO Ci tH O 00 l^ ■» CJ ■* CO 00 O t-. o o ^^ '^ "^ ^T* o a; w '^ O ^ 00^ 05 O 00 o CO-*COTli 1-1 ci 00 o GO O CO Tf O O^ 1-; to ^H 1^ ^1 T^ >* CS O UO •<# to CO to S5 05 O liO 05 CS -^ t>- to j> 00 o O 05 o to to ^- lO to *> o ca rH 00 Ci GO o CO CO' CO •>i< O CO 00 05 to to GO £- ■rH O Ol Ol ■* Tj* OC5 CO to 00 00 OOi-i to O 0^1-1 ?> GO t- o e - th -^ CO CO '^l Til i> CO O O to Iff J> Ci o oo O GO to O O Iff CQ 0"J lO o Gi rH Ci O T— I CO "* CO -^ -^ 00 »o T^ o GOTi< rt< CO Iff 00 ooi-; CO CO co^ O 00 O Ci CO CO o o t- Ci 00 00 CO CO CO CO Ci t- TjH 00 c} 00 1- Iff to t- i> GO CO CO CO co' o o o o to t- lO O lO to GO O Ci Oi Ci co' T* CO CO CO CO Ci »o o ^O -H t, to GO GO Ci_ co' CO CO CO o ■* Iff 00 0» l> 00 c- Ci 00 o 00 CO CO -^ CO Iff Ci t^ t- t~ -^ to to t- 00 Ci CO CO CO CO I ^t . '•H 1 ro o ^ ^ lof^O — 22 !<:— . 2^ ~ (tt V c3 cS'-? —' 1 "< to • a 3 lei ^ be M o c I K '-' |-H __r« r^ '-'5 t^ S '""^ d."^ «-< ^ 3 ~ 'l^ . ►4 a; X o o Tf ^ 1?^ c: 3 ?: 3 « o 3 o M »H "n S2 ! t' ■^ si ! 1? ■^ 1 n 1 •^ l£ -*'■** 4.598 4.176 4.282 i cc ■^ ■^ 1 cot^ oc if s? ? o ^ -* 3.926 4.005 4.433 -*• ■>li "^ -fjl -^ Tj« •* j ■^■iji g5SS8 O COiC Ol -^Tp-fjico e> w w CO »- o ^ ^ ^ ^ -d* ■*' g|5Sggg|S§8 CO t- -* Oi o ^ ^" ^ ^" ^ oom^Sco ^ ^ M ni rli ^ o t-ococooi ODOfflCDiO CO^^ri^ 1121 i ^ s II si§§£ ■^Tji-lj^TJH CO-* i>GOt-OCSI>CIX)QOCJO rjiTj^Ti?^^ O Oi CO O t- C- ^ C£ 0» X *5 t- £S3Sg CO^rji-^-iji OCOCS-H ^ m 1 ' o o» o ic ic '^ w »*■= ^ OO |ssi -^-di-^-rf •*■* '*■*■<*'*-* OT ra CO ^ ^' Tii 1 coco •>l o -H .»*- C5 aj t- CO M CO ■* -^ ■*■ o s CO ,-( i> e- -o M O Ci CT -^ t^ csooats coeOTjirirp CO ■* M "* co' XCIQOO COMrfTli ' •* 1908 4.230 4.090 4.709 4.915 4.876 4.655 4.535 4.539 CD ■-■? -4* C- c^> '?> 0-* O CD (T? 1> g5|g II |g|gg2|gg|| ir:: 'Xt CD t- CO r: xt ^ '_- CO •0 Cii tJ5 -^ji ■*!' -^ Ills i p -* 3 goj=ci-gm^ ss .■^co -tlirt^'#Tl^ COn5 OCOCOCOtt-*OJCOOOOO mil CO CO CO -*^-* ■^li S^oP^ CT 5S35 -* ■* g .^^.^^^.^^'.^ .^^ CO "t-oq ill 1 cotjhcoco c6(.d c6cococO'*'^'^-dH'*'*- e c J J C i 6 c ■1 Id si 1 c 1 rf < i c 3 V J* ;5S ; s : ; So ;w ga jo ^Idl 3 ■gso 1 1 baSo ".§■«£ = odSii 5 ^ ri o ® -' la : i^ i : : 9 j 13.!^ U B3 1 II O § by "tSi goo gii;(i;a:B=e= Oh ? m c ."qM -J ■ ^ ^ ■ ^ E ^* : II ^ 1 " -S .°= lae^o s i 7 j ^ : ill So ■< B5 21 The results disclosed by the foregoing do not differ at all materially from those in the table first introduced. Among the fifty-eight securities for which the 1913 yields are given, there are ouly two which do not show very substantial in- creases in yields, that is decreases in market value, between 1909 and 1913. And the exceptions are issues of the Erie Railroad, the reasons for which have already been explained. It should be noted that in the single instance in which the table last above shows a security that is also included in the table presented by Senator Cummins (^. 7350),— t\mt of the Central Railroad of New Jersey, General Mortgage, — the rates of yield shown for the years that appear in both tables are substantially identical. The following summary of the facts in the tables taken from the writer's pamphlet is significant. Rate of Annual Yield to Investors. Year. First table. Second table. 1903 4.10 4.06 1904 4.05 4.03 1905 3.91 3.93 1906 4.01 4.04 1907 4.30 4.31 1908 4.30 4.42 1909 4.08 4.11 1910 . 4.21 4.26 1911 _._ 4.21 4.26 1912 4.26 4.30 1913 4.41 1 4.47 2 ^ First six montlis. ^ First eight months. The foregoing shows that the average income yielded by railway bonds purchased at current prices was lowest in 1905, that it rose heavily in response to the financial and industrial 21 The results disclosed by the foregoing do not differ at all materially from those in the table first introduced. Among the fifty-eight securities for which the 1913 yields are given, there are only two which do not show very substantial in- creases in yields, that is decreases in market value, between 1909 and 1913. And the exceptions are issues of the Erie Railroad, the reasons for which have already been explained. It should be noted that in the single instance in which the table last above shows a security that is also included in the table presented b}* Senator Cummins {p. 7550),— that of the Central Railroad of New Jersey, General Mortgage, — the rates of yield shown for the years that appear in both tables are substantially identical. The following summary of the facts in the tables taken from the writer's pamphlet is significant. B,ate of Annual Yield to Investors. Year. First table. Second table. 1903 4.10 4.06 1904 4.05 4.03 1905 3.91 3.93 1906 4.01 4.04 1907 4.30 4.31 1908 4.30 4.42 1909 4.08 4.11 1910 ._ 4.21 4.26 1911 4.21 4.26 1912 _ 4.26 4.30 1913 4.411 4.472 ^ First six months. * First eight months. The foregoing shows that the average income yielded by railway bonds purchased at current prices was lowest in 1905, that it rose heavily in response to the financial and industrial 22 depression of 1907-1908, after which it fell off somewhat in 1909 and 1910, only to rise in the subsequent years (not shown bj Senator Cummins who, strangely enough, declares — p. 7250 — " I do not look upon time as material ") to an higher level than that of the panic of 1907 or the subsequent months of de- pression. It shows that the yields of 1913 were higher than at any time during the previous ten years, which is merely another way of showing that values were lower. And, of course, the security of every one of the bonds included in the tables increased during the ten year period, as in most cases a greater or smaller volume of prior securities was liquidated, and in every case the value of the property represented was augmented by improvements and often by extensions. Bonds of United States railways. Senator Cummins shows {p. 7251) the following as the rate of interest paid on the par value of all bonds of United States railways : Year Hate of interest Year Rate of interest Year Rate of interest 1899 4.42 1904 4.18 1908 3.92 1900 4.33 1905 4.16 1909 3.90 1901 4.34 1906 4.05 1910 3.89 1902 4.34 1907 4.11 1911 3.82 1903 4.28 The foregoing figures throw no light whatever upon the rates of interest actually paid by railway companies upon the sums realized from sales of bonds, for they contain no allowances for discounts or commissions, and they throw no light upon the yield demanded by investors, for they are not adjusted to prices paid by purchasers for investment. More- over, they represent payments under contracts having widely variant terms, made at different times, through- out a period running back to the date of issue of 23 the earliest security that had not matured prior to each par- ticular year, and hence are largely influenced by rates of inter- est that do not anywhere prevail at this time. Thus, the re- port of the Statistician to the Interstate Commerce Commission for the year 1911 shows {p. 4-0) that railway bonds aggregating; $1,288,055,129, in par value, paid less than four per cent in- terest in that year. This amounted to 13.11 per cent of the total par value of railway funded debt (exclusive of equipment obligations) and the whole amount is represented in Senator Cummins' average rate for the year 1911. Of course none of these bonds is worth par in the present market, or has been worth par in any market that has existed for a long time and little, if any, of this aggregate produced anything like its par value when the bonds Avere originally disposed of in exchange for capital. This is particularly apparent with regard to secur- ities of inferior obligation. An illustration is furnished by in- come bonds of which there were outstanding on June 30, 1911, $252,183,655, in par value. Only $8,499,405 of this aggregate paid as much as six per cent in 1911 and $185,288,520 paid less than five per cent, $84,863,520 paid nothing and $11,708,- 000 while paying some interest paid less than two per cent. Later records are not available but it is probable that even the poor condition of 1911 will prove to be better than that which the records of the last two years will finally disclose. Obvi- ously the owners of this class of securities will suffer still more from any further depletion of railway income. A very moderate suggestion of the widely varying character of the securities represented by these averages may be gained from the classification for 1911 presented by the Interstate Commerce Commission {Report on Statistics of Railways for 1911, page J{.0). This classification is summarized below : 24 -t^ 1 CO O 00 U5 lO rH a flr- ILO t- I— 1 CO rH 05 .^ ^ "*,"^^ ^„'~1,'^„ >o ^ ® s t-'o" co">ooo" cT ^ 1^ ^ lO O O C5 rH I— 1 GJ O jj Ci "^ O 00 t- iH •N CO (M CO O i-H 1—1 CO O CO iX> CO CO 05 5:^ S CQ 1— 1 I— 1 CO > O ^ (m" cm" fe €^ m^ -ki -t=» © 1 O O) CO O -(M CO a P3 > a _ O Ol t- O GO 00 a> ^ y^ -^ "t: Oi CM CO O lO o^ O "^ , © a l^ S C^ CO C^ C- 00 t-" 5-< r^ a [^ 05 o a CD c 2 -a o -w 2 '^ «2 (M 00 Oi 1— 1 Oi 1—1 -1 «» 1^ ^ S ?r! Oi 00 05 00 CO iH Oi as t- I— 1 o^ ^^ t-" H ^ ^^ a r^ . O O O 1 o ! o O O 1 o ® Hog a f^ 1 p^ O O^ 1 ; t-" o"oo" j ^r? ?-i ... .^ CO o CO 00^ fH ffi ® o o o r— 1 ~»^ t- O O (M CO CO OQ CO O CD LO G^ t~ £ 00 LO Oi CO r-H t-" (D n^ CO ''tl »0 CO lO lO a "3 rHoo^ o^oq^o Oi •S P, CO (M 00 cm" lO o €©■ I— 1 ^ ^' a: 00 X) »o t^ to CM 05 Cl to CM o t^ CO 1— 1 CO 1— t -«*l p— 1 CO CD UO CO CO oT 03 r-H CO ''tl 00 CO t~ ~i^ Uti 00 CM 1—1 CM o^ O b- O^ CO CM »0 co" 1—1 00^ CO Id '^ lO C5 CM_^rH Ol CM rH h-Ti-H m^ m < 1 r^ 1 1 2 • 1 a 1 1 q ' ! 3 ' '.o ', . \ ' -^ ' • c3 «2 : to < 1 © 1 1 .-, >j ! : s 1 j2 -4iS 1 1 -^^ , o 3 1 I « _ o insr^ . «g IS 1 a 05 , ,r3 03 1 O "^ . 1 a e4-i ' ^ 1 1 a O CO 03 1 1 •^^ ■^ "S ^"^ ; ^ 03 CO ^ Q ^1-^ .1-^ ^ rtga late: in otes ome icell 1^ c^ 03 a U.2 Tot 25 The foregoing, however, cannot convey anything approach- ing to an adequate impression of the almost infinite variety of the securities represented. Considering, for example, the item of mortgage bonds, these include bonds secured by first, second, third and even fourth mortgages ; in some of the cases of mortgages of each degree the property pledged under the mortgage is an extensive system, in others the main line or chief component portion of such a system, in others it is merely a branch or lateral line which may even be notoriously unprofitable and incapable of separate existence ; in cases of junior mortgages the prior liens may be small or great, and, in addition there are wide difl'erences in the margin of corporate income (less interest on prior liens) over the required interest — that is, in the margin of safety. Collateral trust bonds may be issued against stock or against bonds of any degree of security, they may be issued in volume sufficient to absorb all or only a fraction of the income obtained from tlie collateral they represent. Income bonds may represent the uncertain security of an income capable of being earned only under most favorable conditions, or they may be the unpaid remainder of early issues with priority even over first mortgages of later creation. Conversion privileges are also examples of condi- tions attaching to some bonds, which have at times led their purchasers to accept lower rates of interest than would other- wise have been available. These are only a few illustrations of the vast multitude of differences and potential differences which deprive the general averages under consideration of any probative force. Foreign raihoay bonds. The table just referred to also includes (p. 7251) average rates of interest reported as paid on the par values of the debentures or bonds and other evidences of indebtedness of English, Welsh, Scotch and Irish railways. Although the figures shown appear somewhat lower than those shown for American railway bonds, they are also rates applicable to nominal or par values, and have no 26 relation to iDCome yielded to investors or paid as proceeds actually realized by the issuing corporations. For these reasons, as well as on account of the widely varying condi- tions in Great Britain and the United States, these figures have no utility in the present discussion and do not in any way sustain, or tend to sustain, Senator Cummins' conclusion. The conclusion that bonds bearing four per cent interest are salable at ])ar is, however, contradicted even by Senator Cummins' own figures (p. 7250) for the year 1909. These data show that in 1909 four of the ten securities he used were salable only at prices that would yield more than four per cent, and that in 1908 this was true of eight of the ten. It has alread}^ been shown herein, that these yields were much below those now demanded and irrefutable proof has been given that four per cent bonds, even of the highest security, have not recently been marketable at their face value. For a long time the standard rate on railway securities of the highest class has approximated four and one-half per cent and it is not believed that during 1913 or subsequently any bond bearing that rate was sold so as to realize for the corporation quite as much as its face value — that is, in every case some discount or commission was necessary. Furthermore, the rate of yield used by Senator Cummins, and also those cited herein, relate to the highest grades of railway securities, while in very many instances, further financing by railway corporations must be effected by the issue of junior securities of more or less inferior grade to those made the basis of the foregoing discussion. Precisely as those who lend upon real estate security demand an adjust- ment between the amount of each loan and the value of the security which must leave a substantial equity, American in- vestors in railway bonds have insisted that issues secured by first mortgages should be definitely limited in amounts. The rapid expansion of the country's industries and of their de- mands upon the railways for the movement of trafiic, have 27 rendered the issues thus provided for insufficient to meet the present heavy capital requirements. In conr^equence, the power of most companies to issue first mortgage bonds has been, or will soon be, completely exhausted. Many railroads, unable to issue more first mortgage bonds, and not able to sell stock, have been forced to create second or other junior mortgages. Obviously, the security of these junior mortgages is inferior to that of the prior liens upon the same properties, and this difierence must be recognized in the yields allowed to their purchasers. Thus the present inability of the railroads to issue bonds secured by first or prior liens upon their properties, has forced, and will con- tinue to force, them to satisfy their capital requirements at higher rates of interest by the sale of securities having less valuable equities. This is one of the causes of the current high cost of railway capital. In other respects the ability of the railways to raise new capital has been impaired, and the cost of the capital obtained has been enhanced by the following : 1 : Decrease of net earnings due in part to decreases in rates and in part to higher operating costs. 2 : Inability to obtain any increased return after increasing total investment. 3 : Legal restrictions upon the investment of the funds of savings banks and insurance companies and of trust funds in railway securities. 4 : Discriminations agaiust railway securities in the matter of exemptions from taxation as contrasted with Federal, State and Municipal bonds. 5 : Risk attending railway enterprises. Each of the foregoing will be discussed in turn. I. Decrease of railroad net earnings. Owing to the rigidity of rates and the inability to adjust their charges to conform with changes in business or in operating conditions, railroads, in this respect, are at a peculiar disadvantage as compared 28 with manufacturing concerns. Although railroads cannot expand earning capacity as industrial comj)anies do, thoj are, nevertheless, affected by business depressions. It is otherwise with the public utility companies whose securities are now competing so strongly for investment popularity with those of the railroads. The stability of earnings of public utility com- panies offers, undoubtedly, a strong investment advantage. Unlike railroads, the earnings of public utility corpora- tions, as a rule, are not affected by business depressions. This was amply demonstrated during the year following the panic of 1907, when, notwithstanding the general business de- pression throughout the land, street railway and other public utility earnings underwent very little change, although rail- road and industrial concerns experienced a very large falling off both in gross revenue and in net earnings. A reliable com- putation shows that in 1908, the aggregate gross earnings of 164 steam railroads fell 11.89 per cent below the earnings of 1907, whereas the earnings of 203 electric railways were practically unchanged and the gross earnings of 10 gas and electric companies in large cities actually increased 6.43 per cent over the preceding year. The earuiugs of telegraph and tele- phone companies also showed an increase during this period of business depression.* II. Inability to obtain any increased return after in- creasing total investment. Evidence has been introduced be- fore the Commission showing that the property investment of the railroads is increasing at a greater ratio than net operating income. Thus the increase in the capital investment as of June 30, 1913, over June 30, 1910, of thirty-eight eastern railroads was $659,862,586. or 11.74 per cent, whereas net operating income actually decreased $16,311,321. or 4.62 per cent. If we compare the property investment of 1903 with * J. E. Voegelin, " Comparative Effects of Business Depression on earn- ings of Railways and Other Concerns," Railway Age-Gazette, Dec. 24, 1909. 29 1913 there is shown an increase of property investment of forty-six per cent and an increase of net operating income of less than thirty-four per cent. This condition is undoubtedly due in large part to the non-productive nature of much of railroad capital. Improvements such as the elimination of grade crossings, elevation of tracks, electrification of terminals and the like, entail large capital expenditures without corre- sponding net return. In recent years, notwithstanding large increases in gross receipts, increases in expenses and in taxes have been so great as more than to offset the additional receipts, so that for the new money which the investor has put into the railroads there has been little or nothing earned. The railroads of the United States as an whole have earned continuously since 1907, less than six per cent on their capitalization, as will be seen from the Table on the following page. Of the total capitali- zation of the railways on June 30, 1914, approximately twenty- two per cent was accounted for under the existing account- ing regulations of the Interstate Commerce Commission and there can be no question as to its representing money actually going into the propert3^ It is, therefore, significant that com- pared with June 30, 1907, and with an increased investment in Eoad and Equipment of approximately $273,000,000 in 1908, $668,000,000 in 1909, $1,447,000,000 in 1910, $2,243,000,000 in 1911, $2,823,000,000 in 1912, $3,627,000,000 in 1913, and $3,627,000,000 in 1914, the money available for interest and dividends was less than the year 1907 in every year but 1910 and 1913, and the income over 1907 in the former year was sufficient to pay only 3.42 per cent, and in the latter only 1.28 per cent, on the additional new cash that had gone into road and equipment. This statement does not include any portion of the cash or material on hand, or other working balance items, so that the actual return is less than stated. Were it possible to secure the figures for switching and terminal companies, the returns would be further reduced. PER CENT OF RETURN IN COST Of ROAD AND EQUIPMENT OF ROADS IN THE UNITED STATES FOR EIGHT TEARS— 1907— 1914, INCLUSrVE-ALSO NET RETURN ON INCREASED CAPITAL AND PER CENT OF INCREASED RETURN. (Yeabs Ended Jdnk 30th.) 1914 1913 1912 $15,763,599,781 1911 1910 1909 1908 1907 Cost of road and K«mPMKNT $* 16,567,662,600 «16,567,662,600 $15,183,570,926 $14,387,816,099 $13,609,183,515 $13,213,766,540 $13,940,379,330 Revenues 3,173,714,000 2,311,186,700 3.318,538,300 2,355,904,000 2,906,737,460 2,035,718,892 2,852,854,721 1,976,331,864 2,813,141,575 1,881,879,118 2,473,305,301 1,650,034,304 2,440,638,833 1,710,401,791 730,237,041 78,673,794 2,570,795,058 1,737,698,201 E.xpcDses Net operating revenue — in- cluding outside operations. Taxes 862,527,300 150,371,100 962,634,300 139,836,100 871,018,568 120,619,874 876,532.857 108,309,513 930,262,457 98.034,593 823,171,097 85,1.39,554 833,096,857 79,640,013 712,156,200 833,798,100 750,398,694 768.313,345 833.237,864 738,031,543 651,563,247 753,456,844 Hire of equipment, cr., (bal- ance) = 16,232,100 2 22,333,550 16,233,100 22,333,550 13,644,834 20,648,174 13,616,738 18,903,463 11,803,699 17,531,307 8,118,416 15,315,611 14,140,351 13,890,179 Total 38,555,650 38,555,650 34,393,008 33,530,200 29,334,006 33,334,027 28.030,530 Total income 750,711,850 871,353,750 784.691,702 800,733,545 861,561,870 761,365,570 679,593,777 753.456,844 ' 36,134,900 2 35,676,800 36,124,900 35,676,800 34,633,728 83,073,300 33,831,604 30,371,290 30,277.114 38.819,675 27,419,654 26,111,803 25,096,461 23,136,983 435,843 Total 71,801,700 7l,£01,700 67,706,928 64,192,894 59,096,789 53,531,457 48,233,444 435,843 Net opbbatinq ikoome 678,910,150 799,553i050 716,985.674 736,540,651 802,465,081 707,834,113 631,860,333 753,021,001 Percent en cost of road and equip- 4.10% 4.83"^ 4.55% 4.85% 5.58% 5.20% 4.78% lucrcased cost of road over 1907 .... 3,637,383,380 3,627,383,380 2,823,220,561 3.343,191,706 1.447,436.879 667,804.295 273,387.320 Loss 74,110,851 46,.531,049 Loss 36,035.237 Loss 10,480,350 49,444,080 Loss 45,186,888 Loss 121.660.668 Percent of increased return to in- creased cost of road and equip- Loss 2.04% 1.38% Loss 1.28%- 1 OSS 0.73% 3.43% Loss 6.76% Loss 44.50% The operating revenues, expenses and taxes for 1914 are obtained from moi thly returns filed with the Interstate Commerce Commission. These returns cover all Class I roads, i. e., roads having operating revenues of more than $1,000,000. p r annum. In 1911 Class I roads, which we have, bore the following relation to the total for all roads : Operating revenues, Operating expenses. Taxes The figures shown in the table 98.22% 96.03% 90.85% estimated on the basis of that relationship as ollows : (Jt) Class I (Actual) I $3,0.13,747,596 3,319,433.611 136,612,209 i not till data necessary to eliminate ; All others (Estimated) $119,906,404 91,754,089 13,758,891 if same could be ell $3,173,714,000 2,311,186.700 1.50,371.100 minated the result would Operating Operating expenses Taxes S These figures include a few switching and terminal roads, but we h: lend to reduce the return on property and on securities outstanding. " Inasmuch as no figures are available covering the increased investment in roa and equipment, during the year ended June 30, 1914, and to leave no qu' tion as to our figures being conservative, we have simply used the investment as It stood n June 30, 1913. Also, inasmuch, as no figures are available covering H of liquipment, and Joint Facility Rents in 1914, we have used 1913 figures. ' The figures for 1912 were compiled by representatives of the Pennsylvania R. I. and The Delaware and Hudson Company from the reports of all roads flli with the Interstate Commerce Commission tor that year. « The figures for 1913 were obtained in the following manner Road and equipment 15,183,570, 126 Operating revenues ' — '" Operating expenses ] Taxes .".'...!*!!'.! Hire of equipment, cr '...'...'. Joint facility, cr Hire of equipment, dr ,.', ...'.. ]', Joint facility, dr ','.['..'.. From the Interstate Commerce Commission's " Preliminary Abstract of Statis ics of Common Carriers.' Applying percentages in column 3 to class I roads, column 4. 1911 % Class I Total Class I roads to total 5,183,570 126 11,603,747,694 76.42 3.8.53,854 1-21 2,745,236,044 96.33 1,976,331 464 1,898,005,807 96.03 108,809 >13 98,394,788 90.85 13.616 r38 12,185,389 89.48 18,903 162 17,814,.591 94.34 33,821 ;o4 27,633,029 81.70 30,371 J90 29,152,746 95.99 1913 Class I ♦ 13,661,007,791 3,096,877,616 2,166.344,608 117.956,136 14,534,436 21,037,719 29,514,053 34,246,193 All roads JI 16.567.062.600 3.218,538,200 2,355.904,000 139,836,100 16,233,100 23,333,5.50 36,134,900 35,676,800 33 III, Legal restrictions on railroad securities as savings bank investme?its, etc. The savings bank laws of New York, Massachusetts and a number of other States provide that no bonds of any railroad corporation shall be available for legal investment by savings banks nnless the railroad issuing or guaranteeing such bonds shall have regularly paid 4 per cent per annum during a period of five or more years upon all its outstanding capital stock {see Appendix C\ pages 57-62). These laws generally provide further, that the outstanding capital stock of the railroads shall not be less than one-third of its mortgage indebtedness during the period these dividends have been paid. Moreover, the classes of railroad bonds in which savings banks are permitted to invest are usually limited to prior lien obliga- tions. It will be seen that the above provisions require the railroads, if their bonds are to have access to the market supplied by these banks, to pay regular dividends and that their outstanding bonds shall not exceed a given relation to their capital stock. The seriousness of this situation with respect to railroad financing must be recognized when consideration is given to the fact that trustees of estates, trust companies, and conservative investors are bound, either in law or for their own protection, to limit their holdings to savings bank investments. There has been already presented to the Commission evi- dence showing the decline in the ratio of capital stock to total railroad securities. According to official reports capital stock was but 44.10 per cent of total capital issues in 1910, com- pared with 48.85 per cent in 1903. With respect to the eastern railroads the decrease in ratio of stock to total securities during the same period was from 50.43 to 46.17 per cent. It sliould be noted that in 1913 the savings banks of the United States, reporting to the Comptroller of the 33 III. Legal restrictions on railroad securities as savings bank invest /ne /its, etc. The savings bank laws of New York, Massachusetts and a number of other States provide that no bouds of any railroad corporation shall be available for legal investment by savings banks unless the railroad issuing or guaranteeing such bonds shall have regularly paid 4 per cent per annum during a period of five or more years upon all its outstanding capital stock {see Appendix 0, pages 57-6^). These laws generally provide further, that the outstanding capital stock of the railroads shall not be less than one-third of its mortgage indebtedness during the period these dividends have been paid. Moreover, the classes of railroad bonds in which savings banks are permitted to invest are usually limited to prior lien obliga- tions. It will be seen that the above provisions require the railroads, if their bonds are to have access to the market supplied by these banks, to pay regular dividends and that their outstanding bonds shall not exceed a given relation to their capital stock. The seriousness of this situation with respect to railroad financing must be recognized when consideration is given to the fact that trustees of estates, trust companies, and conservative investors are bound, either in law or for their own protection, to limit their holdings to savings bank investments. There has been already presented to the Commission evi- dence showing the decline in the ratio of capital stock to total railroad securities. According to official reports capital stock was but 44.10 per cent of total capital issues in 1910, com- pared with 48.85 per cent in 1903. With respect to the eastern railroads the decrease in ratio of stock to total securities during the same period was from 50.43 to 46.17 per cent. It should be noted that in 1913 the savings banks of the United States, reporting to the Comptroller of the 34 Currency owned about $821,500,000 of the railroad bonds against about $708,000,000. held hj all other banks, trust companies, etc. These figures serve to suggest the serious effect upon these important agencies for the encouragement of thrift, and the irreparable damage to their depositors that would folloAV further depreciation of railway securities. If the margin of receipts over expenses, taxes and interest should continue to diminish so that the factor of safety, required by the savings banks laws, in bonds which these banks are per- mitted to purchase, should disappear, not only would the sav- ings banks be compelled to cease purchases of the railroad bonds affected, but they would be obliged eventually to sell those they now possess. And in this compulsory marketing of railroad securities they would, in effect, acknowledge that they were disposing of these securities because their quality had become doubtful. The prices that would be realized under such circumstances would, necessarily, be little better than panic prices and the injury to savings bank depositors would be irreparable. It is plain that the failure to earn any return on new capital, if continued, must lead speedily to this precise result, for it tends to produce a condition in which the payment of dividends would be impossible. Further, it should be noted that a number of companies whose bonds are already in the savings bank class are not able to obtain new capital by the issue of stock. They are compelled to resort to heavy bond issues, and since most other companies have no available means for new financing other than the sale of bonds, the market for securities afforded by savings institutions is threat- ened with elimination. This is another condition which is tending constantly to enhance the cost of new capital to the railroads. It is, therefore, essential that railroad earnings shall be large enough to place the companies in a financial position that will enable them to obtain necessary new capital by the issue of shares of stock and, at least, to maintain the 35 position of the existing issues of bonds that are now available for savings bank investment. The unfavorable market conditions for railroad securities have been further intensified by recent changes in insurance laws. According to the insurance law of New York, Chapter 33, of 1909, paragi-aph 100 : " No domestic life insurance company, whether incorporated by special act, or under special general law, shall invest or loan upon any shares of stock of any corporation, other than a municipal corporation, nor, excepting government, state or municipal securities, shall it invest in or loan upon any bonds or obligations which shall not have been secured by adequate col- lateral security or where more than one-third of the total value of the collateral security therefor shall con- sist of shares of stock." The law further provides that insurance companies which, on the first day of June, 1906, owned any shares of stock of railroads, or other corporations, other than public stocks of municipal corporations, should dispose of such securities not later than December 31, 1911, which period has been extended to December 31, 1916. The effect of this provision is further to restrict the market for railroad stocks and railroad col- lateral bonds secured by stocks. Most insurance companies were the owners of large blocks of standard dividend-paying railroad securities, whereas at the time this statute was en- acted the stocks of other business corporations had not reached a safe enough basis to lead the life insurance companies to acquire them. Thus, railroad stocks have been affected by the new insurance law more unfavorably than those of other cor- porations. The fact that a large number of railroads have found it necessary to reduce dividends, or are threatened by a situ- 36 ation imperiling the maintenance of dividends, is also having the effect of restricting the market for their securities. IV. Discrhninaiion in exemptions from taxation. The dis- crimination against railroad securities, as compared with State and Municipal obligations in exemptions from taxation, has for many years been an obstacle to the marketing of rail- road securities on terms relatively as favorable, other things being equal, as government obligations. This fact recently became prominent when the new Income Tax law exempted nearly all classes of government securities. The immediate effect was a rise in the price of the exempt securities — a rise much more pronounced than warranted by the ])resent rate of the tax, because of the apjDrehension that, as the Federal government is constantly demanding more revenue, the rate ma}' be increased. V. Risk attending railroad enterprises. Added to the foregoing causes of decline in railroad credit is the increasing uncertainty of the financial results of railroad operations. The railroad business suffers exceptionally from periods of de- pression owing to the requirement that its facilities shall always be sufficient for the prompt movement of the maximum traffic. Thus, during the twelve months ended with June 30, 1893, the traffic made it necessary for the railroads to equip them- selves to carry on the average not less than 83,809 passengers and 551,232 tons of freight one mile per mile of road. It was not until 1898 that the density of freight movement again equalled that of 1893. After the panic of 1907 there was a re- duction in freight business for the next two years, that of 1908 being 7.36 per cent and that of 1909 being 9.33 per cent less than for the year June 30, 1907. By reason of large increase in fixed expenses, especially those arising from the unavoidably heavy additions to capital investment, the railroad companies are becoming less able to reduce their current outlays in times of business depression. Senator Cummins also failed to take into consideration the 37 fact that there remains a very considerable volume of railway indebtedness which is covered by contracts that were made prior to the fall in interest rates that produced the relatively low level which antedated the present rise. The rates that must be paid under these contracts vary from live per cent upward and the validity of these pledges is equal to that of those made at lower rates. The amounts reported hj the Interstate Com- merce Commission (see 7'eport on Statistics of Baihvays in 1911, p. JfjO) on June 30, 1911, were as follows : — Funded debt (exclusive of equipment trust obligations) Eate of interest Amount Percent of total outstanding 5 per cent or more but less than 6 per cent. () per cent or more but less that 7 per cent. 7 per cent or more but less than 8 per cent 8 per cent or more $1,882,727,034. 629,025,700. 118,603,707. 763,150. 19.18 6.41 1.21 .01 Total $2,631,119,591. 26.81 The existence of these bonds must for some time in the future influence the average rate of interest paid by the rail- ways, and although there have been years during the last de- cade during which, had they matured, they might have been re- funded at lower rates than those required by the contracts, still in force, there is no longer any reason for confidence th-it the maturity of any of them, save those carrying the very highest rates, at least, will afford opportunity for any saving. There is, on the contrar}', much reason for believing that, for a long period to come, the interest rate will remain at the higher level. 38 Value of railway stocH paying Jive per ce7if. Senator Cummins insists {p. 1252) that " under noimal conditions in- vestors are glad to put their money in railway * * * stocks paying five per cent dividends." If Senator Cummins meant by the foregoing that investors have recently been ready to absorb at par new issues of railway shares on a five per cent basis, he is quite seriously in error, and if he did not mean that they would purchase such securities at par his assertion in no way supports his argument. The restricted market for such portions of old issues as have appeared for sale during the last year is well known and even these small sales have not, to any large extent, realized prices on a five per cent basis. The preferred shares of the Atchison, Topeka & Santa Fe, a five per cent security, have sold as low as $97.50 per $100.00 share since January 1, 1914 ; the common shares of the Chicago, Milwau- kee & St. Paul, also a five per cent stock, as low as $94,125 per $100.00 par value, while those of the New York Central & Hudson Kiver, paying the same rate, have varied between $83.63 and $96.63 for $100.00 par. The five per cent second preferred shares of the New York, Chicago & St. Louis have sold at 72 per cent of par ; those of the Southern Railway between 74.625 per cent and 85.25 per cent. The common stock of the Lehigh Valley, which pays ten per cent dividends and on a five per cent basis would sell at $200.00 each, has sold between $132.25 and $156.25 ; those of the Pennsylvania Railroad, worth $120.00 on a five per cent basis, at $108.25 to $115.50 ; those of the Chesapeake & Ohio, worth $80 at five per cent, at $44.38 to $68.00 ; those of the Baltimore & Ohio, (common stock) worth $120.00 at five per cent, from $78.00 to $98.38 ; those of The Delaware and Hudson Company, worth $180.00 at five per cent, at $145.50 to $159.50. In general it may safely be said that no new issue of railway stock has for a long time been marketable on a five per cent basis — even 39 sales in the market, in relatively small volume, have not been i^ossible on that basis. It is true that in a remote period there were railway stocks in considerable volume which sold regularly above par. In those days, before the fall in the purchasing power of the money by which scheduled rates are measured, before the long series of substantially compulsory increases in wages, before the great rise in the cost of fuel and other supplies, before the enactment of full-crew laws, etc., there were actual equities supporting the value of these shares and, in many instances, the railways were able to satisfy their capital re- quirements by disposing of shares of stock at prices notably above par. In this way these companies brought into their treasuries actual cash in excess of the par value of the shares issued to procure it. Such operations are now out of the question. There is now scarcely a railway anywhere which could secure needed capital by the sale of stock and those who paid premiums have, in most cases, seen their stock fall to par or below par. To a large extent railways are pro- hibited, by statutes, from disposing of new shares at less than par and the financial markets refuse to take such shares at par. Under such conditions bond issues have become the only available means for raising funds. Second Conclusion. The second conclusion stated by Senator Cummins is that a margin of $704,000,000 between gross receipts and necessary payments for wages ; maintenance of roadbed, structures and equipment ; other operating expenses and taxes, would suffice (leaving intercorporate payments such as rentals, etc., out of the amount) to permit the payment of four per cent on bonds and five per cent on stock {p. 7^52). In discussing the foregoing it should be noted, at the out- set, that it rests upon the assumption that well-managed rail- 40 way properties may pay out, in interest and dividends, the entire excess of their gross receipts over necessary expenses and taxes, that is, the whole of their corporate income. Such an assumption is unprofitable and illusory. There are many contingencies, many non-revenue producing alterations or improvements, the cost of which must be provided for out of income, and all practical business experience, not only that of railways, but that of all kinds of industrial undertakings sup- ports the assertion that any corporation that adopts and follows that profligate plan for any length of time might as well be considered as hopelessly insolvent from its commencement. There is no course consistent with solvency save the conserv- ative one of re-investing or retaining for contingencies a sub- stantial portion of gross receipts over and above that portion necessarily expended in operation and to meet taxation. Moreover, the figures shown by Senator Cummins, as aver- age yields demanded by investors, so far as they are accurate at all, and the average yields introduced herein by the writer, are the yields demanded when this sound and conservative policy is enforced ; not those speculative yields that would be required, if the securities could be sold at all, from corporations which were known continuously to violate this most essential principle of safe financial management. It may be premised, therefore, that if $704,000,000 would meet legitimate require- ments for interest and dividends, there would have to be a con- siderably greater amount than $704,000,000 over expenses and taxes or it would be impossible to pay that amount to in- vestors This essential fact was entirely overlooked or ignored by Senator Cummins. Questions of capitalization. Much of Senator Cummins' argument in support of his second conclusion rests upon his assumption that the volume of railway securities in the hands of investors has a par value in excess of the actual cost of the properties represented. This is the frequently refuted and ever-recurrent charge of " over-capitalization," It is incon- 41 sistent with other portions of Senator Cummins' speech, for it is obviously impossible that the railwaj's, as an whole, should be both " over-capitalized " and " under-capitalized." Yet, in another portion of his speech (p. 7'256), he said " I shall not take up the probable tendency of the railway companies to charge in their maintenance accounts many expenditures that might well be included in their construction or capital account." Of course, if the railways have failed to charge the capital account with expenditures properly belonging there, they are, to that extent, under-capitalized. The charge of " over-capitalization " is also inconsistent with an admission made by Senator Cummins {p. 7251) as follows : " I may pause here to say that if the principle or rule laid down by the New Jersey Utilities Commission, concerning which we had much to say recently and which Senators well understand, is applied to the rail- roads of the country, the value of this property will, in my judgment, be four, five or six billion dollars more than its present capitalization." Continuing {o7i the same page) Senator Cummins im- mediately followed the foregoing with " If the other rule is applied to the railway prop- erty, it is likely that its value will be found to be less than its present capitalization. It all depends upon the estimate which the Interstate Commerce Commission shall finally make with regard to the intangible value of the railroad property as to the conclusion which it may reach ; but if this intangible value is added, then I have no doubt whatever that the railroads will be entitled to an increase." In other words, Senator Cummins admits that the charge of " over-capitalization " rests wholly upon a difference of opinion as to the principle involved and that if the principle 42 lately adopted in New Jersey is sanctioned by the Interstate Commerce Commission the railways will be found to be very greatly "under-capitalized." The reference "concerning which we had much to say recently " is most significant and the facts are most persuasive that the United States Senate and the other public authorities have already sanctioned the principle which would operate so as to demonstrate that the railways are actually and properly worth more than their present capitalization. The Senate discussion thus referred to was that which preceded the confirmation, as a member of the Interstate Commerce Commission, of Professor Winthrop M. Daniels of New Jersey, who was at the time of his nomina- tion and appointment a member of the Public Utilities Com- mission, of his State, having been appointed by President (then Governor) Wilson. Professor Daniels was largely responsible for the adoption of the principle in question and was chosen for membership in the Interstate Commerce Com- mission by President Wilson long after his course in this re- spect had become well known and the principle thoroughly understood. After prolonged discussion of both in the Senate, he was confirmed by a very large majority. Hence it may be concluded that President Wilson and the Senate fully approve of the principle adopted in New Jersey and have purposely placed an advocate of that principle where he can do most to extend its application. Moreover, there is no evidence that any member of the Interstate Commerce Commission has an}' other view, on this question, than that held by Professor Daniels. It is submitted that the principle wisely adopted in New Jersey is correct and will prevail. Long before the nomination of Professor Daniels, and con- sequently before the controversy alluded to by Senator Cum- mins, the latter declared his belief that " the physical value of the railroads of the United States exceeds largely the capital- ization." His language was unequivocal and should be quoted. Speaking before the Traffic Club of Chicago some four years 43 ago, in an address subsequently printed in " Freight, The Ship- pers' Forum," for March, 1910, Senator Cummins said in part — " I have some friends who believe we ought to have a physical valuation of the railways of the United States. I assume, to furnish a basis for ascertaining the capital on which a reward should be permitted. Personally, I do not concur in their views, for I know just enough about the railway properties of the United States to believe that while the railway companies are cajDitalized for something like sixteen billion dollars, possibly fifteen billion dollars, a 23hysical valuation might result in about twenty billion dollars * * * I have just said that I believed the physical value of the railroads of the United States exceeds largely the capitalization * * *." In the recent Anthracite case before the Interstate Com- merce Commission {Docket No. IfBlIf., noio pending) the carriers concerned, that is, all the railways serving the anthracite region, introduced testimony showing that from their crea- tion they had, in the aggregate, sold shares having a par value of $838,003,907 for $890,394,666 in cash, thus receiving a premium (less discount) of $62,390,759 and bonds with a par value of $1,037,419,765 for $1,004,809,442 in cash, a discount of $32,610,323. Thus, these railways combined have received from the sale of shares and bonds, $19,780,436 in cash and property more than their aggregate par value. Further, in connection with the Anthracite case, the chief accounting officers of the anthracite carriers prepared an analysis of the property investment and income accounts of those companies. There were deducted from the cost of property any discounts on securities which had formerly been added thereto, and there were transferred from operating income or profit and loss the items formerly charged thereto, which properly belonged in the property account. 44 Tliis investigation disclosed the fact that the actual cash cost aggregated not less than $1,701,778,548 as compared with a book cost of $1,559,680,747 * for the Delaware, Lackawanna & Western, Central E. E. of New Jersey, Lehigh Valley, New York, Susquehanna & Western, Pennsylvauia Eailroad, New York, Ontario & Western, Delaware and Hudson, and Philadelphia & Eeadiug. A joint report of the Board of Eailroad Commissioners, the Tax Commissioners and the Bank Commissioners of Massachusetts fixed the value of the New York, New Haven & Hartford as $179,532,881, which is to be compared with $168,349,730, the book cost of the property, as reported by the Interstate Commerce Commission. An engineer's valuation of the Lehigh Valley, made under the direction of Mr. William J. Wilgus, an engineer who has had very extensive experience in the valuation of properties of similar character, fixed the cost of reproducing that prop- erty, as of June 1, 1914, as $324,478,300. Mr. Wilgus placed the reproduction cost of roadbed, structures and equipment, exclusive of all allowances for coutiugencies and " overhead " expenses as $256,072,863, of which $174,645,746 was for roadbed and structures and $74,427,117 for equipment. On substantially the same date, that is on June 30, 1914, the entire par of all Lehigh Valley bonds and shares was $150,254,- 869.18 of which $60,608,000 was stock and $89,646,869.18 repre- sents bonds of various classes, including those secured by mort- gages, collateral trust agreements, equipment trust agreements and miscellaneous. Mr. Charles Hansel, an eminent consult- ing engineer who made a similar study of the Philadelphia & Eeadiug Eailway, gave the cost of reproducing its roadbed and structures, without equipment, as of June 30, 1913, as * The comparison shown is for the year ended June 30, 1911, the latest for which the book costs, reported to the Interstate Commerce Commission by roads comprised within the railroad systems named, are available. 45 404,222, the figure including an allowance for contingencies or " overhead " expenses. One year later, on June 30, 1914, the Philadelphia & Reading Railway Company was repre- sented by securities having a total par value of $01,867,445.94, including $42,481,700 in shares and $49,385,745.94 in bonds. Mr. Hansel also valued the physical property of the Central Railroad Company of New Jersey in the single state of New Jersey, at $82,122,886. This value represents part only of the railway property of the Central Railroad of New Jersey, but it exceeds the par value of its securities on June 30, 1914, which was $73,707,800, including $27,436,800 in stock and $46,271,000 in mortgage bonds and equipment trust obligations. Official statistics already supply a plan and complete refuta- tion of the charge of " over-capitalization." The following is a consolidated balance sheet of all the railroads of the United States, made up from the reports of the Interstate Commerce Commission, and from the reports of railways to that body, for the years 1890 and 1911 : 46 < S^ r-(eo t~ • OS O O CO - f- o -TOO lO 00 : "*' « Tj* CO <» CO r-it- •CO ■^ ^^ •<* -o f^ o oao-* : ^ c- OS —.-*(» . lO CO lO o 13^ T-1 -^ ■* O .-H O 00 05 CI i> T-i o « o 1 -* CO I t- »o io 00 c; CO O Ci O Tj< 00 o ic o oj o'co'^jTo o m o o •<*< c; t-^ o o o o7 ■^»c ic <>* cT 00 O t> W 05 05 Tfl >— O c w P 0* 05 <1J ''- C u — .15 c >■ .- ^ "- 5 ^ g *i O t- fc- CI a- '3 c ^ "-I a ^ o 00 ■^ w CO i> oo 7-HC5t-05(MO |-*0 o ooc5J>t-oo loo CO «cj cj ■<*•>* CO T-H 1 ■5l< CO £> ■^ o^co I-H i C^M »o MCO CO o m^ «^ ^ 0Ot-itj< •o> lO o -<* 00J>O • o ^ o t- •^ CO o •CO lO OS l> t- cseo .o OItI co (MN 1 o CO m 1^ m Oi C- CO r-. o: 05 OJ Tfi o O OT Tjt t- CD iO CO : 73 o CO « « • -c := ■- ^ g -■ c •- ;s •- ^ o r: "^ ^ tS o ^ .S -g ^ o 5 fc/j .^ = fc P ^w '-- .-^ '^ tL >r - H^^ S ^ 2 oS^kI « aj & O 47 The following statement shows the length in miles of main and other tracks : Per Cent Tracks 1911 1890 Increase of increase Single track 223,843.29 142,016.80 81,826.49 57.62 Second track 23,146.10 8,437.65 15,008.45 177.87 Third track 2,414.16 760.88 1,653.28 217.28 Fourth track 1,747.10 561.81 1,185.29 210.98 Total all main tracks 251,450.65 151,777.14 99,673.51 65.67 Yard and sidings. 88,082.76 30,611.79 57,470.97 187.74 Total mileage operated (all tracks) 339,533.41 182,388.93 157,144.48 86.16 The Commission, in its annual reports, shows the securities issued per mile of road (first main track) but does not show the results per mile of main track (i. e., first main track, sec- ond, third, fourth and other main tracks), nor does it show the results per mile of all tracks, (i. e., main tracks, yard tracks, passing tracks and industrial tracks). From the consolidated balance sheet it will be noted that the securities per mile of road have increased 41.96 per cent, while per mile of main track they have increased only 35.06 per cent ; per mile of all tracks they have increased but 20.19 per cent. However, de- ducting the investments in stocks and bonds of other corpora- tions and showing the results only for securities issued on account of the cost of road and equipment, leaves an average per mile of road in 1911 of $66,360., an increase of 19.30 per cent ; an average per mile of all main tracks of $59,074., an increase of 13.50 per cent, and an average per mile of all tracks of $43,749., or an increase of 1.01 per cent. From 1888 to 1909, inclusive, the reports of the Interstate Commerce Commission stated the cost of road and the cost of 48 equipment separately, but since 1909 these items Lave been consolidated. Comparing these separate items for the period for which they are respectively available shows the following : Average Cost of Koad and Equipment Per Mile. Per mile of road. Per mile of main track. Per mile of all tracks. 1909 1890 1909 1890 1909 1890 Cost of road Cost of equipment...... $55,849 5,542 $51,400 2,960 $50,276 4,989 $48,109 2,770 $37,673 3,783 $40,033 2.305 Total $61,391 $54,360 $55,265 $50,879 $41,456 $42,338 The foregoiug shows that a very large proportion of the increases from 1890 to 1909 represent the higher cost of equip- ment per mile that has resulted from the expansion of traffic, from the higher cost of the labor and materials entering into equipment, and from meeting the public demand for equipment of improved quality and efficiency. The figures show that per mile of road, cost of road increased 8.66 per cent from 1890 to 1909, while cost of equipment increased 87.23 per cent. Per mile of main track the increase in cost of road was at the rate of 4.50 per cent, and in equipment at the rate of 80.11 per cent. Compared with all tracks, cost of road actu- ally decreased 5.90 per cent during the nineteen years, while cost of equipment increased 64.12 per cent. It is known that the same tendencies are in continued operation, and it is rea- sonable to conclude that if the separate costs of road and equipment were available for 1911 they would show a still greater relative increase in the cost of the latter. Moreover, the meagre increases in the volume of securities, as compared with trackage, are surprising when consideration is given to the large expenditures since 1890 for reduction of grades, revision of line, interlocking towers, automatic block 49 sif^nals, increased weight of rails, increased capacity of bridges, improved stations and terminals, elevation of tracks and the many other items classified as additions and betterments which have increased the aggregate cost of material in place. A very considerable portion of those improvements has been charged to the income account or to the profit aud loss ac- count, and is not included in the book cost of the property, and no securities have been issued on account thereof. The charges to the capital account during the past twenty years, at least, can be said to have been most conservative, and for the last six years all these charges have been controlled by the uniform accounting system prescribed by the Interstate Com- merce Commission and checked by inspectors exercising the authority of the Federal government. The following table shows the book cost of the railways in comparison with the traffic handled, and indicates the increased efficiency of railway facilities and methods and the smaller average volume of capital per unit of service. Capitalization and Efficiency. Item Cost of road and equip- ment pins working assets Number of passengers carried one mile Number of tons of freight carried one mile 1911 $17,159,801,4^2 1890 5,113,975,272 33,201,694,699! 11,847,785,617 253,783,701,8391 76,207,047,298 Increase per cent 111.48 180.24 233.02 That the railways, with an increase of 111 per cent in capital have been able to handle 180 per cent more passenger 50 tiaffic"and 233 per cent more freight traflBc clearly indicates notable eflScieucj. This result has been obtained, principally, by three means : First : A reduction in the grades and improvement of structures, the cost of this improvement necessarily adding to the average cost per mile of track. Second : Increased investment in equipment as shown below. Equipment. Item 1911 1890 Increase Number Per cent Number of locomotives Number of passenger cars Number of revenue freight cars 61,327 49,818 2,195,511 30,140 26,820 918,491 31,187 22,998 1,277,020 103.47 85.75 139.03 As the miles of main track increased only 65.67 per cent it will be seen that, necessarily, the investment per mile of track on account of locomotives, passenger cars and freight cars has very materially increased. The roadbed has been strengthened by use of heavier rails, and by the substitution of iron and steel for wooden bridges, etc., and terminal facilities have been enlarged and improved. Third : The aggregate capacity of all equipment has in- creased much more than the number of locomotives and cars. The reports only show this information for the years 1902 to 1911, both inclusive. The average tractive power of locomo- tives in 1911 was 27,949 pounds, as compared with 20,485 pounds in 1902, being an increase of 7,464 pounds, or 36.44 per 51 cent per locomotive. The average capacity of freight cars iu 1911 was thirtj-seven tons as compared with twenty-eight tons in 1902, an increase of nine tons, or 32,14 per cent. Undoubt- edly, the average capacity of freight cars iu 1908 was not less than sixty-five per cent above the average capacity of 1890. The only data for the period prior to 1902 appear to be that included iu a report by Mr. L. F. Loree, as Reporter (for United States) to the International Bail way Congress held in Paris in 1900, who communicated with all roads in the United States then operating five hundred miles of line, or over, rela- tive to the capacity of cars actually in service. The results are shown in the following statement : 52 cs o a *; rt o o H u ^ v:> (Ne« ow |Ti oTcd" tn 35 CO CO iO c^ inrH ino oo oo ino oin £-00 £-00 SS OOOO CJOJ'OOOD ooco QC CO coooiocco I- :o COcO £-t- COCO T-iOi 2 C-. in in COco TT ■* CC CO t° '-o l-t- I <1 t- I-l 0»C- Ort 002 ri-r <3W j=2 ^ j3 o o K^ <, 12; p^ •a . J JO E-iQfe: _, 5oos|z;PHt> cS •• t-l o o I ■So Ji>-^S.^i=i ^« SacaKMSSo "a c3 . . . t» *-* u & .^ T3 a> 0^ o L> .2 p •• — fao S woo O O ,^J o u . (-1 m l-l r-l ^ lO O 3 OG5 0« »00 I> CO br C5 T- -^ W -« TH T— T-l H tor lins' res 9^ lO lO ^^ 00 fcO 5? a o' c~ O .~ D ISO <^ n 3 ^. ^5 ,^ a CO *- 9 03 S o »o «> to O r^ 0-* Qi rt<^ lO iO i-H CO OJ CO~ tc — o » l> O Ci) C5_ o'o co'cT ^ ^ „ TJI Oi>00£- l~- ■* 1-1 C} O 1-1 O iO CJ .-I IC 1-1 « t- c.> co^ O GO -H Co" CO O^ 07 o CD t- 00 J> fc 70 -^ m »0 »0 iO I^J CO CO IC Tt< CO o> co"io" o< CI ir; t- CC 00 TT 05 ic"— "— "si" Oi 00 ■* CO 00 1> o ^ CO 1-1 O Tj< rH lO ccoj ;d co" O t> O? CO i-_^Cl -"t CO •^cTco co~ JO 00 w c CO C-. o ^^ GO — T^ lO CO O c- ODO — > OS l> oTc: OO 00 Tit 'C CO o ooo i^ CO'l- l,0 3s" ca C5 40 00 "* -.' i-T o t> :o CO X CO CO t> co' vj o oT C5 r- lo 00 00 '9< {.~ t- OO OJ O »-l O O — rt OS OS OS OS ^ 5 r-5 00 3 >. s 5 .2 ^- .22 £ s >. a c3 O •;= a 5^.2 o S 2 a -^ O 2i 3 t^ =" 8^ ^^ W ,^ S 2 £ « >. g a -" -51 -^ « ^ S o 2 a; -P a ^ > " « a 03 >> .2^ 73 o 2 a; 03 P< ■ s s i ^ 8 ^ " t- :i: s S S -. S a; S "g « tc « 03 2 a i 63 Average gross receipts, operating expenses (not including iaxef^) and net revenues per train mile. The data on these points used bj Senator Ciimmins appear on pages 7253- 7254. It must be obvious that averages resting upon such di- vergent units as passenger train miles and freight train miles, and coveriug a period during which there have been chauges in the relative volume of passenger and freight traffic and in the methods of moving both, cannot furnish a reliable basis for valuable conclusions. At the beginning of the period used by Senator Cummins, that is in 1890, the ratio of passenger movement (number of passengers carried one mile) to freight movement (number of tons of freight carried one mile) was as 100 to 643 ; while in 1911, the latest year for which the data are available in the reports of the Interstate Commerce Com- mission, this ratio had fallen to 100 in 764. It would be as- sumed that the expense of running a freight train one mile must be materially greater than the expense of moving a pas- senger train the same distance, and the report on Statistics of Baihvays in 1890, published by the Interstate Commerce Com- mission, shows that during that year the average cost per freight train mile was $1.06 and that of running a passenger train one mile was $0.81, while the average for all trains was $0.96. The computations indicated by the following table show that if there had been no change whatever save that in the relative proportions of passenger and freight movement, this average cost would have increased to $1.03. Item Traffic move- ment in 1911 Average oper- ating expenses per train mile in 1890 Column 2 multiplied by column 3 Passenger miles Ton miles 33,201,694,699 253,783,701.839 $0.81 1.06 $26,893,372,706.19 209,010,723,949.34 All traffic 286,985,396,538 $295,904,096,655.53 $295,904,096,655.53 ^- 286,985,396,538 — $1.08. 64 A further comparison may be based upon the ofBcial data for 1890 and 1911. The following figures are from the Report on Statistics of Railways for 1890: Item Gross receipts per mile carried Operating ex- penses per mile carried Net receipts per mile carried Passenfijer (cents) 2.167 .941 (cents) 1.917 .604 (cents) 0.2oO Freight — tons .337 In 1911, the railways of the United States, according to the interstate Commerce Commission, carried 33,201,694,699 pas- sengers and 253,783,701,839 tons of freight one mile. Simple computations show that if they had obtained an average net revenue of 0.250 cent per passenger mile from 33,201,694,699 passengers, the total net revenue from that service would have amounted to $83,004,236.75, and that average net revenue per ton of freight per mile, on the basis of 253,783,701,839 ton miles, would have produced a total net from freight of $855,251,075.20. Hence, if the margin of net revenue that prevailed in 1890, on both classes of traffic, had been maintained in 1911, the aggregate net receipts from tbese sources would have amounted to $938,255,311.95. Senator Cummins' figure for that year is $874,707,664. and would be somewhat reduced if the proper corrections were applied. Furthermore, when it is stated that the average net receipts per train mile in 1890 amounted to 48.225 cents and in 1911 to 70.486 cents {p. 7^5Jf) there is no mention of the fact that the train mile of 1911 was a very difi'erent, a very much more costly and a very much more efficient unit than the train mile of 1890. Using Senator Cummins' figures, the following comparisons are ofi'ered. 65 Year Gross receipts per train mile Operating ex- penses per train mile Net receipts per train mile Percentage of gross receipts in excess of operating ex- penses 1890 1911 $1.44281 2.24824 $0.96006 1.54338 $0.48225 0.70486 83.44 31.35 The best measure of the freight train mile, as a transporta- tion unit, is the averarije train load. This has increased vastly since 1890, as shown below : — Year 1890 1891 1892 1893 1894 1895 1896 1 Average train Year load in tons 175.12 1897 181.67 1898 181.79 1899 183.97 1900 179.80 1901 189.69 1902 198.81 1903 Average train load in tons 204.62 226.45 243.52 270.86 281.26 296.47 310.54 Year 1904 1905 1906 1907 1908 1909 1910 1911 Average train load in tons 307.76 322.26 344.;59 357.35 351.80 362.57 380.38 383.10 Averages derived from the foregoing, showing increases as compared with the year 1890, can now be placed in juxtaposi- tion with those used by Senator Cummins witli relation to in- creases in net revenues per train mile. Percentage increase over 1890 Period Net revenues per train mile siiown by Senator Cummins (p. 7B54) Average load of freight trains 1890-1894 3.22 1 1.72 » 28.91 42.81 57.10 46.16 3.13 1895-1899 1900-1904 1905-1909 21.89 70.22 101.30 1910 117.21 1911 118.76 Decrease. 66 It certainly could not be expected that the railways would be able to haul 118.76 per cent more freight in each average or typical train without entailing considerably higher capital expenses, and the increase of 46.16 per cent made so promi- nent by Senator Cummins seems really insignificant when illuminated by the facts concerning the growth of the train- load and when it is remembered that out of this 46.16 per cent of increase in net revenues (that is, balance left after meeting the expenses of operation) provision must be made for taxes, unproductive alterations or improvements, interest on current and funded indebtedness, and return to the owners of the property (dividends). These increases in trainload have not been obtained without great additions to the cost of the properties. It is not only that the size and tractive power of locomotives had to be greatly increased and the size, capacity and strength of freight train cars largely augmented and all trains supplied with air brakes and im- proved safety appliances — all these things required enormous expenditures of capital, but, in addition it was necessary, in order to move the larger and heavier rolling stock and the longer and heavier trains, to enlarge tunnels, strengthen all bridges, replace light rails with heavy rails, reduce grades and lengthen the radii of curves. These additions to the value of the property involve not only added charges for maintenance, but as they were possible only by means of heavy expenditures of capital, they have necessarily involved proportionate increases in the payments for use of capital — that is in interest and dividends. Average grosfi I'eceipfs, operating expenses {not ii^clnding ia.res) and nei reveyiiies per mile of line. On pages 7254-7255, Senator Cummins introduces data showing the foregoing averages on the basis of miles of line, that is distances between terminals. Such averages make allow'ance neither for the much greater 67 proportion of additional trackage (that is, extra main tracks, sidings and yard tracks), to mere length of line, to the im- proved quality of the road bed and structures, nor to the largel}^ increased cost aud intrinsic value represented. Tables attached hereto as appendices A, B and C show the fignres used by Senator Cummins modified by the corrections made necessary by the changes in the Commission's classification of accounts. Relation of Railway Income to Bailway Capital ajid Capital i Secvrities : As an incident to his third conclusion, Senator Cummins appears to have been seriously misled as to the relation of railway income, that is the balance of gross re- ceipts over necessary expenses, taxes and interest indebtedness, to the par of railway securities, aud also, to real railway capita], that is to the amount represented by property used for railway purposes. He said : " This means that the railway companies as a whole earned enough in 1913 to pay seven per cent, upon all their capital stock, whereas we have seen that five per cent actually paid makes such stock attractive to the investing public, aud is sufficient to invite complete confidence " (p. 7252). The erroneous character of the assumption underlying the foregoing, that a railway can pay out in dividends the last dollar of its annual balance of income over expenses, taxes and interest, has already been explained and it has also been made clear that five per cent dividends do not suffice to attract purchases at par of new shares. It is also to be remarked that comparisons of this character include no allowance for return upon sums earned but not withdrawn, in dividends, by the owners and not made the basis of additional security issues. If the owners of a railway property are justly entitled to not less than six per cent dividends but go without any dividends, or with dividends at lower rates, in order to im- 68 prove or extend the property, they are entitled to a return upon their funds which they have permitted to remain in the public service. And whatever the property may have earned at reasonable rates belongs to the owners, and if not withdrawn, should bring them a fair return. In other words, if the par values of securities are to be used at all in calculating rates of return, there should at least be added to such values the full amount of surplus accumulated and on hand, for, having deferred their demand for what earnings justly belong to them, the owners are entitled to income upon the added capital which they thus loan to the company. Senator Cummins' figures make no allowance for this return. Furthermore, the validity of Senator Cummins' final aver- ages depends upon the accuracy of the deductions from operating income which he has made on account of interest, etc. The amounts he has deducted for these purposes are those reported by the Interstate Commerce Commission. They do not include all interest obligations, but only those which have been covered by charges in the railway accounts. Thus, if interest, cumulative or otherwise, on income bonds has not been provided for, or if charges in the books have not been made on account of interest that has not been earned, the data reported by the Commission are, to that extent, too low. In many recent instances no interest upon income bonds has been provided for and as to railways in the hands of re- ceivers, no charge has been made for interest on securities in default. If corrections for these omitted deductions could be made, the final averages would be materially reduced. Nor do Senator Cummins' figures contain anything for discount on securities sold nor for losses sustained on account of property retired and not replaced. But, disregarding these objections, the official statistics do not support Senator Cummins' belief that the railways earned seven per cent on their stock in the year 1913. Actually, they earned very much less than that, as will appear from the following : 05 O r^ C? lO -H Tt< « CJ J, a; t^M r "S"^ £^«fc r, £ X5^ 53 Ji S ^^ « o ^ •S,.ts ^ t! o 05 sre com] filed w come " tionship ommon CO OS o g or. — '-; —^ co- co 2'ia-*s CI 2 2 2|| »- — 1 ■- , *^ O -- CO b!} m vi c3 a c-^ .S<«.S'>,5 3 O o'S,'^ ^2^i-s ^^ ="-, -^^ t facili he rep other ads, an Abstra( below • a -^ ' P '^ro' oooooooo ttO O O O O lO o o 'O cf 00 ■* «o oi co' •^'' o" 03 CO CO O CO :0 (T! C>"> C- CtO».OC3GOWCOi-(0_ Kt^QOiocToci^Jo" CO T- iO O i-H CI CO CO ^ lO CJ CJ^tH •*! CO eo'cf ■—iCOQOtS^OSCOCO Cii-iOClC0>-ii005 t-oco'-i'tt-O'-' aa o s CO ( ^ 5 O a ^ ^ 03 . O O o c> tc O t~ T-i ■" '5 TiJ o ,_r r^ W CO ^ o S ^ CO Cl 'O a; .2 ^ O :;5 ~ tc C 52oOeocoiooo"<* O 05 Cl 00 05 CO C5 CO o •S .2 o3 a"*- =^=^j p^ O o3 >.= o.-< ^TtQOc35T-l050 'CC5-COiOOi> 9 t-'c 1 ■* c „ i> N O CO -1-1 00 CO T-1^ „ cf »o 00 CO cf t-'r^'os' g«5C-00 o o a s ;^ .r: 03 03 *^ n a; -- S oj _, o;:' ^ aw .3 °^ o > o , - .2 "^ o P .- '-' _tn .^ a a ■-, a 5 5 -3 S a ^ - ^ — « c o O (U 3 ^ _ to .^ O J- o o3< OJ fl-S S'O 3 3" g"''° a &s ■^ OJ o3 aj I— t o " 3;^£ s«^ «g"2 .51 c335_^aogco a gW5T. «^'~' * fcfi^i >- o ^ £ 3 O J- ^ en 03 a rt '•-' "^ C! fc> >- S fl O^ tl 3 rli"fl' COr-lTtlCJCOO'stHO CJCiCOi-lcOCOOCS OTt-00»Oi>rlHCOCl r^ O •^dTr-^'crCOCO'-^'-l" OSt-lOJOO.— OCJt- ■g "^^OO CO CiO^CO 01 co__co P^ CO cf so 00 co'od co'o '^ODiot-OT-Hi-icoeo r-<^30 OS^T-H 10 cTth' S >^fl fl s-T? C5 ,•:: SS c — „ fcH OJ CO to P-i oi 3 - O O - f- o a =3^ 3H ,3 OJ -fl (B "^'-' 2 ■^ O bo CO 3 a WF '-^ o *- « O CO 'co ^ O CO O 3 K a CO to ^ X oJ 03 'H^ bc 03 E«.2 «^ ^ CO ^■^ ; — \ 3 IS O "U P. ° S: a. i o a;p«.2.9 bcbti 3 3 « -^ !» . 3 r- ~jcO •* 00 3 O t3 03 o iO fl, •:3 o 3 o «> J> ^ 0; ^j to '-' ' 03 m ,I-H 03 tJ^COt-h >- 03 S (>■*->--; §0 O CO CS CO S 'O i-; CO co'cQ o 0) ■ 3 1-5 t^ Cd QJ ^S a 3 |o CO rHC5 err Q 'fl fl 05 ^O'O bo 0^ Ci Jj CO 0; cr' « as ffi tn CO 3 en a. 2 y *-; C3 2.g S2 S.2 3 '*- a^ o >< „ .=" oJ O bflho :S O bO 'c 3.2 ;* 2 3 S .53 bCl' O 2ir3 c -' « 3 a ■fl 2 « bcca .■^i (U 03 CO j2 CO 3 ; 05 OS bfi*- .3 a « QJ - CO S' 2 ^ S3 p £:^ '" ..fl OJ 3 fe .a ^ o ^ 3 a a c3"^ ^ 03 bn .3 a ■»; — 3 " ^ r- ^ r* "S h-J" 0.^0.^ 2 2 a" fl.tS fl.ti crrr: cr:fl OJ tJ 11 o <-. .03'*-' i? •^ £ g izi £ O O S OO H O 2; g» if i° isiS"""^ 6 £ 3 =3^?i !f?f: O WOODS 5" J (n m ^ ro = ^ a»-s- ^HgS ■2 .a B ^ 5 I Sli -g £ to # 9 I * = a o : ;§ tMam g = 2 I log S a S oc H g " ^ 2 -^ "m 5 s fe Sp-g S Bos-5^ B-sr. u^zz o":;: i; . S.2 OOE- M- fS'g a to . 71 It should be remembered that the foregoing figures do uot include any securities outstanding against switching or terminal companies, and that the interest charges stated are exclusive of the charges on bonds or other indebtedness of such com- panies. Moreover the deductions from income, although in- cluding discounts on securities sold, when such discounts were charged agaiust income, do not include similar charges against profit and loss. It is significant that, in 1913, charges to profit and loss on this account, for railways having gross operating receipts of $1,000,000, or more, aggregated $26,879,417. In the same year these larger roads were obliged to charge profit and loss with retired road and equipment to the amount of $10,936,937. The interest on Income and other bonds which accrued and which the roads were unable to pay in 1913 aggregated $11,606,533, the delayed income debits charged to Profit and Loss during that year amounted to $1,763,868. It is apparent, therefore, that it would have been perfectly correct to have deducted a further item of $51,186,755 from the income of 1913 before stating the " balance available for dividends," etc. If this deduction had been made the balance shown would have amounted to only 5.73 per cent of the outstanding stock. But with no allowance for these and similar charges to profit and loss the table shows only 4.60 per cent on stock in 1914, 6.56 in 1913, 5.74 in 1912 and 6.41 in 1911. Obviously, too, only part of this balance could safely be distributed in any year. Much more useful comparisons are, however, those which place the whole balance left from income, after deduction of necessary expenses and taxes, in juxtaposition with the real capital, that is cost of the property (See page 31, herein). Such figures show that on all the property devoted to the public service the railways earned but 4.10 per cent in 1914, 4.83 per cent in 1913, 4.55 per cent in 1912 and 4.85 per cent in 1911. 71 It should be remembered that the foregoing figures do not include any securities outstanding against switching or terminal companies, and that the interest charges stated are exclusive of the charges on bonds or other indebtedness of such com- panies. Moreover the deductions from income, although in- cluding discounts on securities sold, when such discounts were charged against income, do not include similar charges against profit and loss. It is significant that, in 1913, charges to profit and loss on this account, for railways having gross operating receipts of $1,000,000, or more, aggregated $26,879,417. In the same year these larger roads were obliged to charge profit and loss with retired road and equipment to the amount of $10,936,937. The interest on Income and other bonds which accrued and which the roads were unable to pay in 1913 aggregated $11,606,533, the delayed income debits charged to Profit and Loss during that year amounted to $1,763,868. It is apparent, therefore, that it would have been perfectly correct to have deducted a further item of $51,186,755 from the income of 1913 before stating the " balance available for dividends," etc. If this deduction had been made the balance shown would have amounted to only 5.73 per cent of the outstanding stock. But with no allowance for these and similar charges to profit and loss the table shows only 1.60 per cent on stock in 1914, 6.56 in 1913, 5.74 in 1912 and 6.41 in 1911. Obviously, too, only part of this balance could safely be distributed in any year. Much more useful comparisons are, however, those which place the whole balance left from income, after deduction of necessary expenses and taxes, in juxtaposition with the real capital, that is cost of the property (See page 31, herein). Such figures show that on all the property devoted to the public service the railways earned but 4.10 per cent in 1914, 4.83 per cent in 1913, 4.55 per cent in 1912 and 4.85 per cent in 1911. 72 ADDITIONAL SUGGESTIONS. Impairment of Eailway Income by Eeason op Diminished Purchasing Power of Money. That money, the measure of values, the medium of exchange and the ordinaiy standard of deferred pay- ments, is not perfectly adapted to those uses, is a commonplace of economic science. No device capable of meeting the requirements of intrinsic lvalue and at the same time immune to variations in its value as a commodity has ever been discovered and it is extremely probable that the qualities suggested are so inconsistent that their coexistence in one object is impossible. Therefore, money varies in value from period to period and at times its purchasing power is rela- tively high, at others relatively low. Now it has long been recog- nized that these inevitable fluctuations in the value of money must work hardship. Debtors on long-time contracts are prejudiced by a rise in the value of money, such a change being the equivalent of a fall in the price of commodities and labor (although different commodities and different forms of labor will always be affected differently) and implying that greater effort is necessary to procure a particular sum. On the other hand, creditors on long-time contracts and all per- sons having fixed money incomes, or who supply commodities or services, the prices or rates for which are fixed by law or custom, necessarily suffer when money falls in value, as the prices they have to pay are enhanced without any corre- sponding adjustment in their receipts. Professor Irving Fisher, of Yale University, an authority upon monetary problems, recently said : " During the last fifteen years, although the gold dollar has remained the same in size, its purchasing power has fallen to two-thirds of the dollar of fifteen years ago. This shrinkage in the monetary yard-stick has injured all those who had expected to receive a fixed number of dollars — salaried men, wage-earners, bond- 73 holders, sayings' bank depositors and many others." " Instahility of Gold" lecture hy Professor Irving Fisher for the A lexander Hamilton Institute, p. 6. Other assertions of the same principle by competent authorities follow : " Variations in the exchange value of an article are indicated by changes in prices, aud changes in prices are themselves the index of changes in the exchange value of money. Limiting the discussion to this definition of value, it would be futile to argue, for instance, that gold has not ' appreciated ' in regard to given articles when their prices had fallen, and equally futile to argue that it had not ' depreciated ' when prices had risen " Charles A. Conant : The Principles of Money and Bank- ing, Vol. I, p. 153. " A fall in the value of money and a rise in prices are not two occurrences, certainly not two occurrences standing to each other in the relation of cause and effect ; they constitute a single occurrence described in two different ways." — Dr. Pierson, late Minister of Finance of The Netherlands. Applying these principles to American railway charges, in testimony before the Interstate Commerce Commission in the recent Advanced Rate case, Mr. Charles A. Conant, said, in part : — " It is pertinent to this enquiry to set side by side with these changes in the purchasing power of money the changes which have taken place in the rate of com- pensation received by the railways for passengers and freight. Fortunately, the system of statistics estab- lished by the Interstate Commerce Commission permits an ascertainment of the average receipts per unit of service by the railways of the United States. Taking the receipts for freight alone per ton-mile and expressing them in mills, or tenths of a cent, it appears that this average of ton-mile receipts varied only within narrow limits during the Avhole of the sixteen years from 189C to 1912, In 181)0, the average receipts per ton-mile, 74 were 8.06 mills ; in 1912, they were 7.43 mills. This represented a decline of 63 hundredths of a mill, or about seven per cent. This decline in freight receipts, however, was onlj the decline expressed in terms of money. " Quite different and striking results are obtained if one compares the purchasing power of this money in 1896 with its purchasing power in 1912. Such a com- parison is easy and simple under the system of index numbers. In order to determine this ratio of purchas- ing power, it is only necessary to divide the rate per ton mile by the index number for prices. The result gives the relationship of the ton-mile revenue in pur- chasing power on different dates, expressed in mills, upon the basis of the average of prices from 1890 to 1899. If the receipts per ton -mile in 1896 were 8.06 mills, and wholesale prices bore a ratio to the standard of 90.4 points, the purchasing power of the receipts per ton-mile was 8.92 mills. As the index number of prices advanced, however, even if receipts remained the same in terms of money, the purchasing power of the receipts inevitably fell in a striking ratio. " After the revival of business activity in 1897, re- ceipts per ton mile declined only slightly, but the index number of wholesale prices increased rapidly. The re- sult was that the purchasing power of the money received for freight fell from a ratio of 8.06 in 1898 down to 6.61 in 1905. Then began another decline, interrupted only by the depression of 1908, which finally carried the ratio of purchasing power of freight receipts in 1912 down to 5.56. When' this purchasing power of the re- ceipts per ton-mile is compared with the corresponding figure of 1896, we find a decline of 3.36 mills, or 37.6 per cent. I conclude, therefore, simply as a question of mathematics, and without undertaking to enter into the intricacies of railway accounting or the special demands which have been made upon the railways, that the pur- chasing power of the moneys which are now paid for freight is approximately 37 per cent, less in the market for commodities than it was in 1896." " From 1903 to 1912 there was a decrease of 17.1 per cent in the purchasing power of ton-mile earnings, 75 and even from 1908 to 1912 a decline of 9.4 per cent or nearly twice the proportion in which it is now asked that permission be given to advance nominal rates ex- pressed in terms of money. " The calculations for the entire railway system follow : Purchasing Po-wer of Receipts Per Ton-Mile Average re- Index number of Corrected pur- ceipts per wholesale prices, chasing ratio of ton mile, on basis of receipts per ton Year. in mills 1890-1899. mile, in mills 1880 12.32 147.5 8.35 1885 10.11 115.8 8.73 1890 9.41 112.9 8.33 1895 8.39 93.6 8.96 1896 8.06 90.4 8.92 1897 7.98 89.7 8.90 1898 7.53 93.4 8.06 1899 7.24 101.7 7.12 1900 7.29 110.5 6.60 1901 7.50 108.5 6.91 1902 7.57 112.9 6.71 1903 7.63 113.6 6.72 1904 7.80 113.0 6.90 1905 7.66 115.9 6.61 1906 7.48 122.5 6.11 1907 7.59 129.5 5.86 1908 7.54 122.8 6.14 1909 7.63 126.5 6.03 1910 7.53 131.6 5.72 1911 7.57 129.2 5.85 1912 7.43 133.6 5.56 " Results substantially similar are obtained for the railways in eastern territory, with their generally lower average of tou-mile receipts. For the ten-year period 1903-1912, the decline in the purchasing power of freight earnings works out at 18.8 per cent. The follow- ing table gives the calculations for railways in eastern territory : 76 Purchasing Power of Receipts Per Ton-Mile Eastern Territory. Index number Corrected Average of wholesale purchasing Year receipts per prices, on ratio of receip ton mile, in basis of 1890- per ton mile, mills 1899 in mills 1903 6.76 113.6 5.94 1904 6.94 113.0 6.14 1905 6.73 115.9 5.80 1906 6.54 122.5 5.33 1907 6.59 129.5 5.08 1908 6.58 122.8 5.35 1909 6.54 126.5 5.17 1910. ._ 6.46 131.6 4.90 1911 6.49 129.2 5.02 1912 6.44 133.6 4.82 1913 6.37 Percentage of decline in purchasing ratio, 1903-1912 __ _ „. 18.8 per cent" On the same occasion Mr. Conant also said : " It is this fact which faces the railways as well as other producers and investors, and with which they have had to deal in recent years. Those producers who have been able to operate in a market where they wtre free to use their own judgment and economic power in fixing prices or wages, have been able to adapt them- selves more or less rapidly to the depreciation in the purchasing power of the dollar. If they were workers for wages, they have been able to demand increases in their wages to enable them to meet the increased cost of living, as expressed in dollars. If they were dealers in articles of retail trade, they have been able to advance the prices of those articles from time to time to cover the increased cost of obtaining them at wholesale or directly from the producer. By 77 this means, they have succeeded in effecting the eco- nomic adjustment of their position to the diminished purchasing power of the dollar. The process has been gradual, although the figures which I shall soon pre- sent will show that it has been rapid. The fact that it has been gradual, and that wage-earners and mer- chants have been able to adapt themselves gradually to the change, has, to a certain extent, concealed its real economic significance. " A warm political campaign was waged in this coun- try seventeen years ago, in which it was declared on one side that the purpose of the other side was to cut the valne of the dollar in two by substituting for the gold dollar, which was the standard, a dollar of another metal having only half the value of the old. Rightly or wrongly, it was declared that there was likely to ensue a rise of prices, expressed in the cheaper dollars, which would be so sudden and rapid that it would not be pos- sible for the wage-earner to keep pace with the change, and that he would suffer at first a diminution of one- half in the purchasing power of his wages before he could obtain even a partial adjustment of the number of dollars paid him to their diminished value in ex- change for other things. " Something like the process of this predicted change has been going on from quite other causes during the past seventeen years, but the fact that it has occurred without any change in the statutes fixing the amount of metal or the kind of metal in the dollar has veiled its real significance to the average man, and has prevented taking measures of protection against its effects except through efforts to increase wages and prices. " What would have been said if it had been proposed by law in 1896 to require the railways to reduce their rates from 35 to 50 per cent within fifteen years ? What would have been the protests and what would have been the unsettlement of the value of railway securities in the market if an order had been made by this Commission to any such effect ? But the silent and irresistible processes of economic forces have re- duced the money value of these rates something like 78 this proportion within the past sixteen or seventeei years, while the railways have suffered a steadj^ impair- ment of their earnings, and for a number of years past have been restricted by statute law from adapting themselves, like other industries, to the new monetary conditions," Governmental Pressure Upon Earnings. For many years the tendencies of American governments, Federal, State and Municipal, have been to depress the corporate income of the railways and to weaken the confidences of in- vestors in the stability of railway securities. By no means the greatest of the many elements of this pressure has been the rapidly increasing burden of taxation, which the railways have been forced to bear. This is shown by the following table : Taxes. Per cent of taxes to Balance of gross balance of gross operating receipts operating receipts Year. over operating ex- Amount of taxes. over operating ex- penses and inter- penses and inter- est on indebted- est on indebted- ness. ness. 1902 ___ $342,118,570 $54,465,437 15.92 1903 365,416,846 57,849,569 15.83 1904 340,214,391 61,692,354 18,13 1905 385,624,970 63,474,679 16.46 1906 471,897,066 74,785,615 15.85 1907. ._ 492,691,574 79,640,013 16.16 1908 335,180,133 78,673,794 23,47 1909 404,700,513 85,139,554 21,04 1910 513,887,110 98,034,593 19.07 1911 438,240,959 108,309,512 24.71 1912 417,365,048 120,619,874 28.90 1913__ _ 493,088,450 129,836,100 26,33 1914 392,981,550 150,371,100 38.26 79 The foregoing figures have been adjusted so far as neces- sary in order to allow for changes in the accounting system prescribed by the Interstate Commerce Commission. They show heavy increases both in the total amount of the taxes exacted and in the ratio of these amounts to the funds out of which they must be paid. Thus in 1914 the railways paid $2.39 in taxes for every $1.00 which they were required to pay in 1902 and out of each $1.00 available for such pay- ments in 1914 they paid thirty-eight cents which is to be com- pared with sixteen cents in 1902. In addition to increased taxation, Federal and State legis- lation, in the form of hours of service laws for employees, full crew laws, requirements concerning the preparation, filing and posting of rate schedules and annual and periodical reports, locomotive regulations, such as those in regard to washing, testing and inspection, etc., employers' liability acts, elimin- ation of grade crossings and other items of this character, has added very large sums to the annual cost of railway operation. As the extent of these expenditures on the part of The Dela- ware and Hudson Company is typical of those throughout the whole American railway system, the following table showing how much these provisions of law have cost that property is pertinent : 1909 1908 1907 1 [^ Expenses Capital Expenses Capital Expenses Total 1 $24,819.43 K n ir> fin $21,477.00 (5) 4,950.00 (5) 1,638.99 $4,138.75 (1)$172,310.36 / 40,310.00 1 \ 2 172 13 10,564.04 " J 2,275.00 ^ 99.924.95 40.832.88 86,628.80 170,042.00 r ** •• •* , 12,600.00 25,000.00 10,740.00 23,017.00 $61,822.99 10,320.00 23,025.00 ^570,531. 56 $86,483.75 $622,888.03 $'26,129.00 6.855.00 47,712.71 $12,624.00 $5,757.00 $116,320.00 48,025.10 20,546.46 10,300.57 177,667.74 $80,696.71 $33,170.46 $16,057.57 $342,012.84 $4,568.57 $36,549.77 365.84 $1,153.20 $45,495.14 $248,751.16 250.00 19,126.12 8,491.75 • 615.84 $1,158.20 $45,495.14 $271,369.03 $6,280.00 $180,111.82 $26,095.00 5.200.00 2,500.00 1,000.00 $26,095.00 5,200.00 $8,698.00 1,064.00 $175,572.60 33.439.00 13,500.00 7,930.00 $34,795.00 $31,295.00 9,762.00 $229,441.60 $12,718.43 ,615.84 $196,871.84 $1,153.20 $126,288.45 $45,495.14 $62,303.32 $1,695,091.52 1 t' 81 1913 1913 1911 1910 1909 1908 1907 Capital Ex,: Capital Expenses Capital Expenses Capital Expenses Capital Expenses Capital Expenses Capital Expenses Total RELATIONS WITH EMPLOYEES Hours of Service Laws : t 44 J'.OI) >',.w )4.4i) . .'5 S« $37,631.03 6,852.00 1,533.74 $29,657.13 6,853.00 1,576.40 $38,503.58 6.624.00 1,858.39 $24,819.43 5.940.00 2,172.13 $21477.00 (6) 4,950.00 (3) 1,638.99 $4,138.75 (1)$172,310.36 10,564.04 (1) Full Crew Laws : 43,358.94 (3) 17,371.52 (3) 40,832 88 '?6.o6 13,749.40 35,000.00 12,749.40 25,000.00 13,600.00 35,000.00 13,600.00 35,000.00 10,740.00 33,017.00 10,320.00 33,025.00 86,638 80 Loss of Interest Account Necessary Increased Work— Fund _^_^.^.^ 170 043 00 •*r ■1 on $116,134.11 $93,306.45 $74,585.97 .«70,531.56 $61,822.99 $36,483.75 $623 888 03 " OFFICE AND LEGAL *■ 10.00 lil.50 : is.w $17,400.00 9.483.60 18,967.95 $17,400.00 10,613.00 28,863.36 $17,400.00 11,675.00 23,303.70 $36,139.00 0,85.5.00 47,713.71 $12,634.00 $5,757.00 48.02.5.10 20,546.46 10,300.5" 177.607.74 *i ^3.49 $45,851.55 $56,871.36 $53,378.70 $80,696.71 $33,170.46 $16,057.57 $343,013.84 REVENUE $45,153.54 10,025.11 (4 -■ 3(1. 35 $9,137.77 $9,136.96 $9,137.12 $4,368.57 $36,549.77 ROADWAYS AND STRUCTURES ElimiDation of Grade Crossings— New York \ 1 $39,160.39 1,178.53 $55,322.50 705.00 .$201.55 6,967.48 5,094.43 $57,365.84 250.00 $1,153.20 $45,495.14 $343,751.16 19,136.13 $3,397.33 8,491.75 $55,177.65 '1 Total $40,338.93 $55,937.50 $13,363.45 $3,397.33 $57,615.84 $1,153.20 $45,495.14 $271,369.03 OPERATION 1 $60,527.61 $30,833.00 $31,837.00 $6,380.00 $180,111.83 1 f; |94.5<; 50.0(1 OO.OU ,/ 50.00 EQUIPMENT AND REGULATIONS Locomotives ; $29,945.12 5,650.00 3,500.00 1,000.00 $38,049.93 5,675.00 2,500.00 1,000.00 $26,095.00 5,200.00 2.500.00 1,000.00 $26,095.00 5,200.00 3,500.00 1,000.00 $26,095.00 5,300.00 $8,698.0C 1,064.00 $175,572.00 83.439.00 13,500.00 Ash Pans and Front Ends $1,507.50 $1,372.50 7,930.00 Total $1,507.50 *l,,f,M.56 $1,372.50 $39,095.12 $37,224.92 $34,795.00 $34,795.00 $31,395.00 9,763.00 $239,441.60 Reinforcing Combination Cars $13,718.43 t $12,718.43 Grand Total $69,403.58 «»:j i{!)6.81 $41,711.42 $370,736.16 $55,937.50 $227,264.69 $12,363.45 $306,131.12 $57,615.84 $196,871.84 $1,153.20 $126,388.45 $45,495.14 $63,303.32 $1,695,091.63 SAFETY Maintenance — Labor J 00 7') '.8 76 OOOO $33,887.00 29,177.00 105,686.00 4,000.00 $33,002.00 32,809.00 103,734.48 $30,798.00 41.449.00 97,571.70 $33,333.00 41,449.00 98,338.53 $23,218.00 36,780.00 94,414.90 $7,449.00 59.487.00 51,930.83 $185,193.70 Maintenance— Material 393,551.75 Operation 668,620,25 8,000.00 Total $J, 7i36 $172,750.00 $159,545.48 $159,818.70 $162,999.53 $154,413.90 $118,866.83 $1,155,365.70 Safely Appliances : Equipment 1 30 86 1)0.00 $84,634.96 1,200.00 $48,671.13 1,300.00 $1,540.08 1,200.00 $1,413.44 1,200.00 $1,534.73 1.300.00 $56,062.62 $891.89 $273,978.10 Inspection Total., mM $85,834.96 $49,871.13 $2,740.08 $3,612.44 $2,734.73 $56,063.63 $891.89 $380,178.10 CroBsing Flagmen and Gatemen 1^ $113,716.49 $109,346.41 $104,811.44 $98,513.20 $100,518.71 (6) $647,158.55 Total Charges to Capital $69,403.58 I $41,711.43 $55,927.50 $12,363.45 $57,615.84 $1,153.30 $101,557.76 $339,633.75 Total Cliarges to Expenses *7( 80.57 $643,037.61 $546,027.70 $471,501.34 $460,997.07 $383,954.79 $183,063.04 $3,777,793.87 JSOTES ; (1)— 3 Months only. (2)-6i Months. (31—4 Months. (4)— 6 Months. (5)— 10 Months. (6)— Figures not Available. ' 83 The foregoing is not offered in any spirit of criticism. Some of the expenditures indicated, including most of those in- curred to provide better or additional signals and safety appli- ances were unquestionably desirable, while others, of which the so-called "full-crew " laws are an example, merely imposed upon the railways utterly useless and burdensome obligations and expenses. In this paper it is intended only to call atten- tion to the fact that an heavy aggregate increase in operating expenses has resulted from this general class of legislation. Closely allied to the increases due to explicit legislation, are those that have resulted from arbitrations of differences with employees concerning wages and hours and conditions of labor. These arbitrations have been conducted under the Erd- man law, and the Newlands law by which the former was superseded, Acts of Congress which while ostensibly providing means for arbitrations voluntarily agreed upon in actual prac- tice, operate upon railway employees with substantially com- pulsory effect. The Delaware and Hudson Company has been a party to several arbitrations of this character, the results of which have similarly affected all railways in eastern territory. The following summary of the effect of the awards in these arbitrations upon the annual expenses of The Delaware and Hudson Company is taken from the annual report of President L. F. Loree for the year that ended with December 31, 1913. *' The award of the arbitrators in the case of the engineers, in effect during eight months of 1912, gave an advance of 4.34 per cent, and during 1913 cost this company $33,030.92. The arbitrators to whom the de- mands of the firemen were referred, reported on April 23, 1913, their award taking effect on May 1, 1913. The increase awarded was 8.16 per cent and the cost to this Company, to December 31, 1913, was $27,308.53, or at the rate of $40,902.80 per year. The demands of the conductors and trainmen, under discussion by the General Managers' Association of New York at the close of last year, were submitted to arbitration on 83 The foregoing is not offered in any spirit of criticism. Some of the expenditures indicated, including most of those in- curred to provide better or additional signals and safety appli- ances were unquestionably desirable, while others, of which the so-called "full-crew " laws are an example, merely imposed upon the railways utterly useless and burdensome obligations and expenses. In this paper it is intended only to call atten- tion to the fact that an heavy aggregate increase in operating expenses has resulted from this general class of legislation. Closely allied to the increases due to explicit legislation, are those that have resulted from arbitrations of differences with employees concerning wages and hours and conditions of labor. These arbitrations have been conducted under the Erd- man law, and the Newlands law by which the former was superseded, Acts of Congress which while ostensibly providing means for arbitrations voluntarily agreed upon in actual prac- tice, operate upon railway employees with substantially com- pulsory effect. The Delaware and Hudson Company has been a party to several arbitrations of this character, the results of which have similarly affected all railways in eastern territory. The following summary of the effect of the awards in these arbitrations upon the annual expenses of The Delaware and Hudson Company is taken from the annual report of President L. F. Loree for the year that ended with December 31, 1913. " The award of the arbitrators in the case of the engineers, in effect during eight months of 1912, gave an advance of 4.34 per cent, and during 1913 cost this company $33,030.92. The arbitrators to whom the de- mands of the firemen were referred, reported on April 23, 1913, their award taking effect on May 1, 1913. The increase awarded was 8.16 per cent and the cost to this Company, to December 31, 1913, was $27,308.53, or at the rate of $40,902.80 per year. The demands of the conductors and trainmen, under discussion by the General Managers' Association of New York at the close of last year, were submitted to arbitration on 84 July 26, 1913 ; the Board of Arbitrators reported on November 10, 1913, and the award took effect on October 1, 1913. The increase in wages awarded amounted to seven i)er cent and the increased expense to this Company, from October 1 to December 31, 1913, to $26,168.02, or at the rate of $104,672.08 per year. An Act of the Legislature of New York, which took effect on September 1, 1913, required the railways of the State to place an addi- tional and unnecessary employe ou the majority of their trains. These employees in no degree increase the safety of operation or serve any useful purpose, but from September 1 to December 31, 1913, the added cost to this Company was $40,832.88, or at the rate of $122,498.64 per year. A similar Act of the Legislature of Pennsylvania, in effect since July, 1911, caused this company an unnecessary additional expense, in 1913, of $40,194.49. Together these items represent an in- crease in annual operating expenses of $341,358.93, which will, of course, become greater if the volume of traffic increases. " During the year which ended with June 30, 1913, the railroad department of this company paid to its employees the sum of $8,508,673 which was $1,122,780, or 15.20 per cent in excess of the sum that would have been paid for the same services at the rates of com- pensation that were in force on June 30, 1910. And this comparison takes no account of increases in wages that took effect after June 30, 1913." Increased Competition for Capital. During the period covered by Sentor Cummins' speech the railroads have had to meet progressively increased competi- tion in the investment field. Municipal and industrial securi- ties, in particular, now obtain shares of the investment fund which formerly flowed mainly into the railroad field. The competitive position of the railroads, in the struggle to obtain capital out of the general investment fund, has been impaired 85 by (1) increases in the public and private demand for capital, (2) increases in the rates of interest offered for loans to muni- cipalities, (3) decline of the credit of railroad companies, and (4) enhanced credit of securities resting upon manufactur- ing enterprises. For the purposes of the following statement, investment securities are grouped as :-- 1. Government (State and Municipal). 2. Railroad. 3. Public utility. 4. Industrial. The issuing or debtor concerns, in each of the foregoing groups comprise a distinct type of business or financial organi- zation. Moreover, the financial or business operations of each group are influenced by dift'ering conditions affecting in- vestment values. Broad, general results of careful inquiries concerning the yields, respectively, obtained upon investments in bonds of the different classes, at the average prices of each calendar year from 1903 to the end of the first half of 1913 are shown in the following table : Rate of Yield, Pek Cent. Year. Govern- ment. Public utility. Industrial. Railroad. Eastern railroads.* 1903 3.25 3.30 3.29 3.43 3.70 3.70 3.61 3.77 3.80 3.85 3.91 4.63 4.60 4.43 4.56 4.91 5.11 4.71 4.79 4.77 4.80 4.90 5.69 5.81 5.19 5.18 5.76 5.90 5.16 5.25 5.17 5.18 5.35 4.10 4.05 3.91 4.01 4.30 4.30 4.08 4.21 4.21 4.26 4.41 4.06 iy04 4 03 1905 3.93 1906 1907 4.04 4 31 1908 1909 1910 4.42 4.11 4.26 1911 1912 1913 (six months) 4.26 4.30 4.47 Co) * Exclusive of convertible issues. (a) Covers first eight months. 86 Examination of the foregoing shows that the net income yields of all groups, except the industrial group, were in the first half of 1913 higher than the year 1903. During the panic years 1907-1908, the income yields considerably rose, but in the case of railroad and government securities the average yields for those two years w^ere lower than at present. This is important. The depression in securities caused by the panic of 1907 lasted but a short period. The fall in prices began in the autumn of 1907 and recovery was under way several months before the end of 1908. Thus the rise in yield during the period was due to temporary conditions and cannot be taken as a gauge of the trend of investment values. Moreover, business depression leads investors to diminish their purchases of speculative securities and to increase their purchases of " gilt-edged " investment bonds. Since 1909, however, the depreciation has been confined mainly to those classes of securities which are generally termed " high grade," and cannot be said to be due to mere general business de- pression. Tlie extent of the depreciation in the value of the different groups represented in the table can be seen most clearly by comparing the average yields, based on market prices, of the year 1909 and six months of 1913 : Yield Per cent 1909 1913 Government bonds 3.61 3.91 Public utility bonds 4.71 4.90 Industrial bonds _ 5.16 5.35 Kailroad bonds 4.08 4.41 Eastern railroad bonds 4.11 4.47 In other words the railroads are now compelled to pay more for their capital than at any time within eleven years. Eailroad preferred stocks, likewise, have offered higher yield than since the year 1908, and the depreciation in this group of securities has been almost continuous since that time. 87 It must be concluded, therefore, that 1. — the general interest rate has risen, and, 2. — that securities offering the highest return {{. e., the so- called " low grade " securities) have come more into popular favor. The recent increase in the net income rate on State and Municipal bonds can be readily explained, A general rise in interest rates has caused the securities giving the smallest re- turn to be exchanged for those affording a higher return, and thus large amounts of these securities have changed hands. As the number of buyers willing to purchase them at their former low income yield has decreased, they have necessarily been offered at lower prices. Another potent cause of the decline is the immense increase in the amount of these securities that has been put out within the last decade, the volume of these issues being greater than the market would take at the former low rates. All this is clearly shown by the following which shows the annual aggregates of new State and Municipal bond issues, with the comparative interest rates thereon, from 1902- 1912, inclusive, exclusive of bonds taken for the sinking fund of New York City, and their distribution among different in- terest rates : Percentages o : total put out at different rates of interest. Amount issued Year. 3^"^; or 40/ 4i%and 5% and Unknown less. H%- higher. unusual. 1902... $143,590,868 58.58 23.99 3.01 8.70 5.73 1903... 152.281,050 47.38 31.18 5.88 11.97 3.59 1904... 238,929,204 51.87 31.30 5.05 9.92 1.86 1905.. 183,080,023 47.24 30.23 7.61 13.24 1.68 1906... 201 743,304 17.92 59.55 7.24 12.18 3.11 1907... 227,643,208 7.44 43.16 30.36 15.06 3.98 1908... 313,797,549 5.91 39.51 33 22 17.73 3.63 1909... 329,358.486 8.85 49.08 14.86 24.31 2.90 1910... 307,013,386 6.26 30.98 34.97 25.00 2.79 1911... 395,069,205 1.69 32.12 40.25 23.90 2.04 1912 .. 383,150,828 1.25 26.41 43.63 25.98 2.73 88 The remarkable features of the foregoing table are : (1) The almost uninterrupted increase in new issues in both good and bad business years, and (2) The constant tendency to put out bonds at higher in- terest rates. Thus, in 1911, the new municipal bonds amounted to almost three times the amount put out in 1902, Only a very small part of municipal issues is due to refunding. The great bulk of them is due to rapid development and public improve- ments, and to the desire to " boom " the cities through large outlays. As a result, " assessment values," which are at the basis of municipal credit, have been greatly enhanced. A.ccording to a United States Census Report on the Financial Statistics of Cities for 1911, the indebtedness of 184 cities having a population of 30,000 or more at the close of the fiscal year 1911, amounted to $2,618,107,501, representing an increase of 8% over the previous year. In the words of the Report : " The figures show that, taken as a whole, the cities are increasing their costs of government (including out- lays) faster than their revenues, and as a result are in- creasing their indebtedness even faster." In order to find a market for the avalanche of new muni- cipal obligations it has been necessary to offer higher returns. An indication of the growing popularity of public utility and industrial bonds is found in the following table of invest- ment bond holdings by all classes of banks as reported by the Comptroller of the Currency. 89 Ph g CJOC« CO iO O lO O O i-^ o IZi !» -^ CO CQ C5 ^ 00 CJ »o c^ o ^ ■<*oo-* CO rl o «OCQO ,-H ci o Ti cs O 05 CO O 00 2 »o 05 1-; o CO o (?i •^ t- oo -— t- (M CO O iO ■«i< £- i^-- i : :8 io .^2 :E ":''- a a - ;cc • « -) ors ■ : o S •° ft^o :5 ted State e, Munic Iroad boi er Publ onds c. Bonds OS -; •prf-sa-^^^s ' P^«o s 90 It can be seen that in the five years covered by the above table the amount of railroad bonds actually decreased, and the percentage held to total investments declined from 33.8 per cent to 28.3 per cent. On the other hand, other public service bonds increased from 10.1 per cent to 13.4 per cent which represents an increase from $466,500,000 to $721,300,000, a gain of about 54 per cent. Quoting from a statement given to the press recently (New York Times, Dec. 15, 1913) by the New York State Superin- tendent of Banks : " A change in income basis has resulted in the heavy depreciation in valuation of investment secur- ities. Short-term bonds, notes, and equipment obliga- tions are preferred to long-term bonds because of the income return and the small prospect of depreciation. The development of public utility, power, and electri- cal enterprises has brought another class of investments into prominence, which are made atttractive through favorable rates of interest offered." The general conclusion from the foregoing is that railroad securities have lost a great deal of their former position as the most popular class of investment securities, occupying a place between government obligations (selling at a very low income yield), and public utility or industrial securities (offering a high income yield, but considered less desirable for conserva- tive investment). This has contributed to (a) the pronounced fall in the prices of outstanding standard railroad securities and (6) greater difficulty in procuring new railroad capital. Thus it is to be observed that American governments have not only increased the amounts exacted from the railways by taxation, laid severe and costly operating burdens upon railway managements, and limited the charges permitted for the ser- vices rendered, but, in addition, have made heavy demands upon the available investment fund and bid against the rail- ways for capital which is indispensable to the latter if they are 91 satisfactorily to perform their public functions. Most of these governmental borrowings are for unproductive purposes and become in themselves the cause of augmented taxation. It is submitted that this progressive impairment of the opportunities for successful railway financing cannot continue without grave public detriment. Railroad Securities No"w in Default. A pressing feature of the immediate situation is, that already a large volume of railway bonds is in default on account of failure of the companies represented to earn enough to pay the interest agreed upon. These securities are not now drawing interest for their owners, and in many in- stances such interest will never be paid — in some even the principal will be reduced. An incomplete list of these secur- ities with the date on which the default began and the amount of each issue follows : Railway. First 5s. Alabama Terminal Atlanta, Birmingliara & Atlantic , Chicago & Eastern Illi- nois Chicago & Eastern Illi- nois Chicago & Indiana Coal Chicago & West Michi- gan Chicago, Peoria & St. Louis Chicago, Rock Island & Pacific Cincinnati, Hamilton & Dayton Cincinnati, Indianapo- lis & Western Colorado Midland Denver, Rio Grande & Western Evansville & Indianap- olis Evansville & Indianap- olis First 6s Issue. First 5s First 5s Stock Trust Certifl cates 4s , Refunding & Im- provement 4s . . 5s Prior Lien 4^s Collateral 4s ... First and Refund- ing 4s First and Refund- ing 4s First 4s First Consolidated 4s First Consolidated 6s Amount. Default began. $2,445,000 14,443,000 23,876,900 18,019,000 4,626,000 5,758,000 2,000,000 71,353,500 1,677,000 4,722,000 1909 1909 1913 1914 1914 1914 1914 1914 1914 1914 January 1 January 1 July 1 July 1 July 1 June 1 Sept. 1 May 1 July 1 July 1 9,532,000il913 January 1 5,379,000 1,853,000 647.000 1914 1914 1914 April 1 Julyl July 1 92 Railway. Flint & Pere Marquette Georgia Terminal . ... Indianapolis, Decatur & Western International & Great Northern Kansas City & Mem phis Kansas, Oklahoma & Western Missouri, Oklahoma & Gulf Missouri, Oklahoma & Gulf Missouri, Oklahoma & Gulf Missouri, Oklahoma & Gulf New Orleans, Mobile & Chicago New Orleans, Texas & Mexico Oklahoma Central. ... Pere Marquette , Pittsburg, Shawmut & Northern Pittsburg, Shawmut & Northern. Port Huron St. Louis & San Fran- cisco St. Louis & San Fran- cisco St. Louis & San Fran Cisco St. Louis & San Fran- cisco San Antonio, Uvalde & Gulf Toledo, St. Louis & Western Wabash Issue. First 4s and 6s.. Consolidated 5s. First 5s Amount. First 5s Notes, 5%. First 5s First 6s. First Railroad 5s... First Railway 58 .. Second 5s Terminal 5s First and refund- ing 5s First 5s First 5s Refunding 4s Consolidated 4s — Improvement and Refunding 5s.... Debenture 6s Refunding 4s First 5s First 5s Miscellaneous... General Lieu 5s Refunding 4s.... Notes 6% " 5"-^ Wabash- Pittsburgh Terminal Wabash- Pittsburgh Terminal Wheeling & Lake Erie . Total First 5s Consolidated 4s A and B First Refunding and Extension 4s Notes 5% First 4s. Second 4s. Notes 5%., Default began. 5,000,000 1914 April 1 2,850,000 3,000,000 $3,163,000 11,000,000 496,000 800,000 10,655,200 7,007,000 1,467,000 550,000 11,819,000 28,593.300 3,000.000 10,106,000 8,382,000 16,000,000 5,000,000 14.491,600 169,000 3,325,000 3,491,000 69,534,216 68,562,000 2,600,000 2,250,000 2,863,000 11,537,000 41,931,240 5,000,000 1914 May 1 1909 January 1 1914 July 1 1914 May 1 1914 July 1 1913 November 1 1913 November 1 1913 November 1 1913 November 1 1913 July 1 1913 September 1 1908 June 1 1912 January 1 1914 January 1 1914 March 1 1912 January 1 1905 August 1 1905 August 1 1914 April 1 1914 May 1 1914 July 1 1913 September 1 1913 June 1 1914 August 1 1914 August 1 1912 January 1 1913 May 1 30,236,000 1908 June 1 20,000,000 1910 June 1 8.000,000 $578,677,956 1908 August I 93 SECTION B. Additional Considerations Made Necessary by the European War. So far, this paper has proceeded without reference to the World-wide significance of the catastrophic combat in which nearly the whole of Europe became involved during the clos- ing days of July and the early days of August. Whether this Titanic conflict proves of long duration, as many now expect, or peace is soon restored, as all who are able to view the situa- tion with impartiality must earnestly desire, there can be no doubt that for at least a decade to come the influences set in motion by this war will profoundly affect the financing of all large enterprises. Indeed, the effect upon American railways, which has already commenced, will have two marked and dis- tinct but related and interacting phases. One of these phases is the diminution of traffic by reason of the diminished pur- chasing power both at home and abroad ; the other the in- creased cost of obtaining capital or of contracting for the con- tinued use of capital when the contracts under which it has been used expire, which will result partly from the diminished earning power due to the reduced volume of trafiic but, in a greater degree, from the enhanced pressure upon the World's depleted supply of capital. These phases should receive separate discussion. Diminished Traffic. The diminution of traffic has already begun, as shown by the reports for August which are now coming in. These, however, will show the commencement only of a process which will, for many months, continue to increase in intensity. In the recent Advanced Rate case, decided on July 29, 1914, the Interstate Commerce Commission declared that, con- sidered altogether, the corporate income of the railways in Official Classification territory (that is to say, east of Chicago and the Mississippi river and north of the Ohio and Potomac 94 rivers) is lower than the general public welfare permits. The Commission, speaking by its Chairman, said : — " In view of a tendency towards a diminishing net operating income as shown by the facts described we are of the opinion that the net operating income of the railroads in Official Classification territory, taken as a whole, is smaller than is demanded in the interest of both the general public and the railroads ; and it is our duty and our purpose to aid, so far as we legally may, in the solution of the problem as to the course that the carriers may pursue to meet the situation." (p. 31, I. a C. Rep. 351, 381J The foregoing declaration applies, of course, to the situa- tion of the railways when they enjoyed a traffic movement undiminished by the reaction of the European war upon American industry. Now that the war has come it is not to be doubted that one of its earliest reactions in this country will be a diminution of not less than twenty per cent in the volume of the business done by the railways. Tliis diminu- tion has already begun and it will be progressive until the maxi- mum effect upon the interchange of commodities of depleted foreign commerce, and the inability to finance new business un- dertakings or the enlargement of enterprises already in exist- ence, is accomplished.* When that point is attained an upward * It certainly cannot be thought that the consequences, in this respect, of the great war now in progress will be less than those of the panic of 1893. The year following that panic total freight movement, measured in ton-miles, decreased 14.16 per cent and, although the World's Columbian Exposition at Chicago served to keep the aggregate passenger movement about at the level of the previous year (this was not accomplished without a great sacri- fice in rates, the influence of the low excursion rates being shown by a reduc- tion in the average gross receipts per passenger per mile from 2.108 cents in the fiscal year 1893 to 1.986 cents in 1894), the gross receipts from operation fell off 12.07 per cent. In the fiscal year 1895 the freight movement was 8.93 per cent lower than in 1893 and the passenger movement 14.34 per cent lower. It was not until the fiscal year 1896 that the freight movement equalled that of 1893 (and then only at an average per ton per mile of 8.06 mills or nine per cent less than the average of 8.78 mills that prevailed in 1893) ; the passenger movement of 1893 was not equalled (except as noted in 1894) until the fiscal year 1899, and the gross receipts of 1893 were not equalled until 1898. 95 movement may be expected to begin but, in its first stages, that movement is sure to be sluggish and faltering. The railways are notoriously unable to curtail their ex- penses in correspondence with reductions in the volume of trafiic. The capital which they employ is fixed capital, in the sense that it is in such form that its diversion to other uses is not possible. Hence that portion of the cost of doing business which consists of fixed charges, that is to say, of interest on the capital employed, does not diminish at all with reductions in the amount of business done. Furthermore, a railway plant that has been developed to a capacity required to meet a cer- tain maximum of traflSc movement must be maintained in its full capacity during any diminution of traffic, and it is only in so far as maintenance expenses are directly caused by the movement of cars and locomotives and proportioned to the number and extent of such movements that maintenance ex- penses are diminished in consequence of decreased traffic movement. Even train movements do not decrease in propor- tion to decreased traffic for experience has shown that a dimi- nution in the volume of services rendered, both in passenger and freight traffic, is invariably accompanied by a reduction in the average train loads.* Prof. William Z. Ripley of Harvard University, has made an exhaustive study of railway expenses in an eff'ort to dis- cover how far they are subject to variations corresponding with such variations in traffic movement as the reduction now in sight, and has concluded that less than one-third (32.5 per cent) are so variable. The results of his inquiries are pre- sented in the following extracts from his book entitled " Railroads : Rates and Regulation " {pp. 45-65). " The primary distinction in railroad expenses is between those which are constant and independent of * In the fiscal year 1894, with the fallin,3< 3,7 610, i.''l,5; 643,i<)8,0 636,^77.6 594,692,4' 691,a80,2 788,987,8 840,589,7 734,397,0 827.814,9 % of lacrease Over 1690 Operatli^ Revenues . ♦1,051,877,632. 1,096,761,395. 1,171,407,345. 1,220,751,674. 1.073.361.797 $1.122.832.006. 1,075,371,462. 1,150,169,376. 1,122,089,773. 1,247,325,621. 1.313.610.116. HET RBygHUT! 17?JiD BY V f,, f^^f^n RBYTg™ ""0 T>B CCMPARATIYK. ] Out. Oper.l f °^ % of Otperating Expenses. #692,093,971. 731,887,893. 780,997,996. 827,921,299, 731.414._322, Oper. Jt. Fdc. H. of E. & Ulsc .Rents Dr. ♦ 752.663.096. 1.181.71S.270. 776,713,9. ; 1.152.272.639. 1,487,044,814. 1,588,526,037. 1,726,380.267. 1,900,846.907. 1.975.174,091, 1,735,5 94,425. 1.458. 655. 64g7 2,082,482,406. 2,325,765,167. 2,589,105,578. 2,421,542.005. 2.443.312,232. 2.372.441.478. 2.054.017.950. 725,720,415. 772,989,044. 752,524,764. 817,973,276 856.966.999 765.235.500. 769.049.198. 961,428,511 1,030,397.270. 1,116,248,747. 1,257,538,852. 1.336.696.255. Het Bevenue From Operations. Increase Over 1890 1359,783,661. 364,873,502. 390,409,347. 392,830,575. 541.947.475. $369.968.911 349,651,047. 377,180,332. 369.566,009. 429,352,345. 456.641.119. 396.477.970. 363.223.441. 1,140,901,927. 96g.066.6l3: 1,390,602,152 1,536,877,271. 1,748,515,814. 1,687,144,976. 1.615.497,234. 1.595.727.489. 2,766,679,616. 2,818,780,398. 1.366.314.708. 1,846,702,780. 1,935,511,581. 9,859,960. 22.722,357. 6.526.463. 3.263.232. 21,552,954. 24,196,781. 525,616,303. 558,128,767. 610,131,520. 643,308,055 636.277,836 Increase Over First 5 or 10 Years Per Mile Single Track. 2.83 10.20 594,692,497. 495.585,2537 691,880,254. 788,887,896. 840,589,764. 724,537,069. 805,042,641. 770.187.526. 682.440.010. 918,423,862. 839,072,036, 65.29 40.52 155.27 136.72 106.18 $2,300. 2,262. 2,404. 2,313. 1.946, *2.240. 1,967 2,072. 2,016. 2,325. 2.435 2.166. 2,201. 2,729. 2,854. 3,046. 3,133. 2.998. 2,956. 2.586. 3,189. 3,548. 3,696. 3,143. 3.419. 76.06 (148.24 132.30) 124.17) 3.399. 3.390. 3,764. 3,429. Per Mile Main Trade $2,165.23 2,125.02 2,140.29 2,166,40 1.620.28 12.079-54 1,839,35 1,940,00 1,864.76 2,171.25 2.272.76 2.024.38 2,050.63 2,543.74 2,652.23 2,625.02 2,894.38 2.759.46 2,738.28 2.399.»6 2,921.11 3,242,15 3,359.32 2,850.84 3.096,62 3.094.19 2.928.32 3.406.47 3,105.75 ^er Kile All Track $1,800.03 1,758.89 1,649.83 1,770.59 1.448.05 Avg.Ho.of Tons of Freight Pep Train Mile $1.728.77 1,498,87 1,577,24 1,527.04 1,750.07 1.825.52 1.638.47 1 . 660.85 2,031,10 2,103.35 2,225.17 2,266.59 2.141.82 2,155.89 1.914.10 2,255.17 2,487.95 2,662.97 2,171.67 2.361.51 2.365.66 2.269.44 2,576.96 2,312.48 Red ^xgara Indicate Per Cent of Increase over average first b yfta Green Figures indicate pep cent of increase over average first 10 y. s. TEAB. 1890 1891 1893 1898 1894 Five Te»r Average.. 1«95 1896 1897 1896 1899 riiw Tear Average' Ten Year A^.eiag*. 1900 1901 1902 1903 J904. Five Tear Average. Ten 7ear Average. 1905 1906 1907 1908 1909 Flw Tsar Average. Ten Tear Average. 1910 1911.. 1912.. NOTES t (•1 Do not K» Do not 3. Do not C. Do not D. Kot a # In 1B9^ Bod Fl Crew. 1 Cost 0? nOkJ) t EQmmSKT AWD llftTERJAL t SLTfLrE Q P I r II 5{of Increase Over 1890 21.21 96.74 92.99 108.75 111.44 » T I of lua Over Tlrst 6 or 10 Tears i 63,785,950. 64,661,495 7&.016,897. 75,755,170. 6^ ,713,719 t 68,S84,646. I £0,123,916. 68,744,042. 63,605,455. 67,431.264. 72,446,051. 61.8! (70.3S 84. 2T (66. (fi R0A3 A~"EO»ifinwT AattnurERiATT Material and 9u][i|>lles 4 ^,519,173,331. 8,262,184,660. 8,639,411.727, 9,013.300,930, 9.136,184.251 66.470.145. 67.427.396. I 106,875, 103.145,9 52. 116,286.050 148,178,206, 158^6^06a irZ6.44"3.332. f i 9 6.456, 239.f #149,571,001 185,228,347 226,704.556 •226,250,462 •206, 8« ,619 198,880,797 ^0T6]'tl62.661.565 244,931,724 Amount 8,514.050.979, I 9.263,614,636. 9.569,071.775. 9,772,974,683, 9,628.012.686, 10,034, 286,856. 9.693.6S4.107. 9,103.817,543. 386. tlD 1,870,188,785. 10,808,241,037. 10.7tS,607,426. 11, 121. 683, 109. ll.grO.265.199. flO. 688 .79 6. 71 1, HO. 291, 190. 409. 112.100,719,950. 12,605.516.286. 13. 267. 048. 884. 13.440.017,002. 13.716,033,134. 13,023,867.051. tll.956. 33175^1: 15,807,785,886. % or Inorease Over 1890 ma£S_ of Ine Over rirtt 6 or 10 Yt&rd 73.21 59.01 15.86 "51.33 (86.67 ^kMt accordingly. 7E&B E.a p I F R 1890 1891 1892 1898 1694 Five Tear Average. 1895 1896 1897 1896 1899 riye Tear Average. Tea Year A^^iage. 1900 1901 1902 1903 1504. Five Tear Average- ten Tear Average. 1905 1906 1907 1906 1909 Flw Tear Average- Ten Tear Average, 1910.. 1911.. 1912.. NOTES I (•) Do not A« Do not 3. Do not C. Do not D. Vot a # In 1B9^ Red Ti Creen 1 Cost 0? ROU) t EQmFHSHT AHD HATEBTAL t SCPPLrE5~ 55 of Increaee Over 1890 78.02 E6.U 4 92.99 108.75 )lJ 111.44 V T of ina Over Tlrst 6 or 10 Tears i 63,785.950. 64,661,495 7&.016,897. 75,755,170. 62.713,719. t 68,384,646. -I % 60,123,916. 68,744,042. 63,605,455. 67,431,264. 72,446,051. 61. ei 30.6] ': (70.35 (Sf.az 84,27 /86.65 ROAD k ECmPWWT iSO MATERIAL &"^ fLI££ Material and Supplies 4 7,619.173,331. 8,262,184,660. 8,639,411,727. 9,013,300,930. 9.136,184.351. 66.470.145. 67,427.396. I 106,675, 103,145,9 52. 116,286.050 148,178,206 1 58,726,068 IT26.44"3.332. y t 96.456. 259T f $149,371,001 185,228,347 226.704,556 •226,250,462 '206.8^,619 '1198,880,797 'fo.62,661, 365^ 244.931,724 Inorease Over Anount 1890 8,514,060,979, I 9,263,614,635. 9.569,071,775. 9,772,934,683. 9,628,012,686, 10,034, 266,856 9. 693. 564. 107. 9.103.817,543. 38&|U> ,570,188,785, 10,608,241,037. 10,7r5,607,426. 11,121,»83,109, ll.grO.265,199. JIO. 888.796.71 1. tlO. 291, 190. 409, $12,100, 12,605 13,267 13,440. 13.716, 719,950. 516,286. 048,864. 017,008. 033,134. >, 023, 867 ,051. tll.956,S3i;i5r 16,807,788,386. 73.21 B9.01 of Inc Over First 6 or 10 VcArS B2.3'7 "51.33 (86.67 175. « ^that accord Ingrly. < PROPCRTT DrTESTHEBT 1 s 1 »c i Hlleage » I IP « or Increase Over ACS i of IOC.' 5 or 10 OS *fl I lUlaase C It 1 ,« TPAC .22E.60 •2H,U3,22 •US .974. 61 306,796.74 »17,0«3.15 927,976.26 •342."35li24 • 628.405, E76. 714,102,281, 760,277,389. 640,761,200. 716,016,415. ♦1I.961.348.M9. 12.420,217,938, 13.090.344.328. •1S.213.7«»,640. •13.609,1»3,516, ♦149.371.001. 185.228.347. H2,lOO,719,990. U, 605, 516.986. 2,925.766,167. 2.699,105,678. 1.611,662.986. 1,829,928,169. Flw Tear Avenge.. Tea Tear Aveia^.. IS 10 A 2,497,899,069. J 1.781,922,663. •206.849.619. 13.716,033,134. •4S.J0 ■325.570.46 •62.ee •62.19 «2,892 ,266,015. *1,700!949!443. »1,912,672. 110.67 106.3. ta.»ti'M(.25t. 74.02 61. i! Il98,890.7«7.|tl3.023:867.(t51. 7S.21 B4.97 >11.74S,6»0,!l6. ffl.19 SO.K '♦l62.6Sl,565*l.«S6.S3l.SJl. SS.Ol Jl.SJ 243.034.66 59. 5a lie. 35 42.4SI •266.1S4.66 273,960.64 U.91 (42.44 •361,766.09 967.791.99 •76.99 94.01 64.29 B i 9)3.602.507. TW.963,646. 147.61 128,26 114;. 63 IU6.10 125.66 n>.<.4 •♦14.997.816,079, 15,763,6«9.781 (86. as' (86.67 A l.»«9,10».»71. t 2.199.975.426, 1912. *!•{ Tkft _^ ^^ : Include Swltohlac anA TemliMl BodOs. : InclDle Mlseellantow R«ats - CreUt - fctr 9wltc)illi« abA Tvk1i»1 CoifABles. ; Include Hire of Bqalpa«at, Jolot Taollltlea uid Vlseella mons Bcots - Credit ; Include Klr« of Bqalpwnt, Jislnt TtelUtles ud WtacellAmoQ* lUiits - Cradlt t Cn» maa* Ccmnlsslon »limlDatedl5tlM)0UDeo.fTvii Ccst of Bud : ) tBvc rvdOQva that •ceiardlafly. ■ averee* flttt lO yetfs. Year ..« K.v»„« Total K,q)eiue (InclndlriB taa>l Het Revenue iacreaae over year 1990 1991 ♦1,051,977,632. 1.096.761,395. 11171.407.943. 11220.761,971. 1,075,961,797. 766,167,998. 916,0IS1,491. 864,496,999. T69.699.B96. » 329.676,152 991,693,407 956,355.652 366.316,996 303.922.201 1W4. ATe>«e. 1995 1996 1997 1999 1999 AY..««. 1»00 1901 1902. 1909 1904 Averase 1905. 1906 1907 1909 «0». Av»«W« »10 IJll. 1912 1913 1,122,962,009. 2.06 l,U2 .089,773. 1,147,325,621. 1,913,610,119. 912.959,955. 796,662,609, 661,801,600. 909.906,631. SdilswiAW 337,209,541 926.427,165 396,624,121 410,303,497 363,856,586 7.69 1,BM.626,037. 1.726.800.267. 1,900.946,907. 1,976,174,091. 1.091.941.642. 1,170,714,194. 1,916,988,421, 1,400,092,607. ossieeeioas 686,468.496 l!l95!tiW!628. 640!034;e96 2.326,765:167. 1.464,076.851. l!929!e29!l9oi 1,764,109.022. 1,689,972,424. 628 1405. 576 711,102,291 639i702,'9e9 1.667,728.670. 694.239.666 2.789.761.669. 9;om,'l69;769. 1.926.426,184. 2,029,90,817. 2,091,»r9,977. 9.142,941 .921. 766i398il52 ei4iz2li942. 199.26 114.48 UT.go O 64 D M a? ■ O O O N toS O *0 O A o o o o ^ o o o o JrH r> 00 o ^00 o oio ^ n ao>-*A 9 (»0>(Q0}OC49> t-IO^IO V» x^ Vrff \^ \Hf \^ ^-^ V ^^ ^^ ^* ' OOOOOOOOOOQi • •••••••••• oooooooo r-l'<^r-IOU>(OfHCOf-ir-0>0 W •-• rH CV) t^ lO Ifl to lO Ol CM iH O O O o o o o o o o o o o o o M O lO lO to lO Ai CV| •-< o o o o oooooooo oooooooo 0100000<00 iHODr-im<-lt>-0>0 §000000000010 ooooooooooio • ••••••••••* OOOOOOOOOOOiH — — o O p o 8 o o o w >-> o o lo lo o la o lo o> ^■ oooooooo ooooo~~~ o o o o o o»Oc*oocra>o»^S«>ot^ 00 2 14 t> IQ Of-I ■ <# lO cj 0> 9 fH '« Si It M O met « n o D •O o o olc* 8e o V o a C0 • • • • •Mr- to to •p c o «k-i fr- a> o Sn 9 n t- .0000 cj o o o o CD O <0 O ,f-l t~ 00 O ^ CO O VO lO oO <« n -* 80 >o i<3nNrH^I0M0«O<0t<> Ot Ok 10 <0 O CM 0> OOOOOOOOOQ • ••••••••• OOOOOOOOQOP 8 OOOOOOOOOQ ooooiooooo'O »H'^r-io«ooo»-ta)tHr-o»o e.o«>eMW"~ " " ■* CM r-l rH CV| t> 10 If] to 10 <^l M •-• 000 000 000 o o o o o o OOOQOOOO oooooooo 00000000 oooooooo o«ooooo«oo ^^a>^^CD^^^.CT>0 uTuTn^lO CM M cH r-t to CM O o o o O O O I 80 O O O O ' o 5 o o o I 000 000 o la o O fl o la 10 0> 0>OCMO>000>00>C< lOCMO^r*^ IOr-l( ^ ^ n r- CO r- to I 00000 I 10 CM O O O O O O r-l §0 O O O O lO A O u> o >r> ov O 0> <7> <0 <0 O t^ O-r-l 00 10 >0 0> r-l •H < 10 •-• CM o9' oooooilSoooooo OQOQOOOOQOQ SooooQ«oooe oooiowiaoi0om iliilltflii' 2^S»gS8SSS8: 5N>-incnoQoou> O * O O ^^^ O O W O O^ ( Iilllilt«^ili 888S8 ,oS8 ^8 oooog 'sue S ooooS g^g g oToOU)* to © N ID r4 t~ Soooo ooo o # llllllllsli 888888888888 8_8o§8_S8_88 8S_8 !8§S8§! OOOOOOOOOOOW 3S5Ssa; § i lg AFFBIDK D (See Pa^ 7255) STATEMENT OF EQUIHJENT, NBT RBVIMTJE USED BY 3H«AT0R CnMJIHS, NET RETOmjE USED BT SEKATOR COMOHS REVXSED TO INCLUEE OUTSIDE 0IGRATI0H3, JOINT FACILITIES AND KI SGELLANEOUB BEffTS; ALSO SHOVHIKJ SAME ITEMS PER MILE OF TRACK AND AVERAGE NnUBSR OF TCNS OF iDEIOHT PER TRAIN MILE FROK 1890 TO 1913 FOR AH ROADS IN TEB DHIIED STATES. MAINTEIUNCE OF ECUIPMJMT PER MLE NET REVSNUS USED BT HR. CaUMUIS. NET HEVKHOE USD BY ip. OmnOHS REVISED TO BE C01JPA2AT rJK . AvgJlb.of Tons of Frt. Per Trtdn Mile YEAH Maintenance of Equipment Increaae Over 1890 jEof Increase Over First 5 or 10 Years Per Mile Single Track A Per Mile Uain Track A Per Mile All Tracks A . Bet Revenue St of Increase Over 1890 % of Increase Over First 6 or 10 Yeacs Per Kile Single Track A Per Mile Hals Track A Per Mile All Tracks A Bet Revenue j£of Inoreaae Over 1890 > Of Inoreaae Over First 6 OP 10 Years Per Vile Single Track A Par Mile Main Track A Per Mile All Tracks A #114,038,756. 117,047,095. 128.712,016. 136,875.909. 112.894.526. $ 729.13 72S.77 792.57 806.20 642.57 $ 686.30 681.69 705.62 754.50 595.64 $ 570.55 564.23 609.86 616.94 491.28 $328,576,192. 331,593,407. 356,356,862. 356,315,886. 303,822,201. $2,101.00 2,056.00 2,194.00 2,099.00 1,729.00 $1,977.42 1,931.19 1,953.60 1,964.11 1,617.33 $1,643.90 1,598.46 1,688.48 1,606.01 1,322.14 $328,676,192. 331,593,407. 356,355.852. 356,315,886. 303,822,201. $2,101.00 2,056.00 2,194.00 2,099.00 1,729.00 $1,977.42 1,931.19 1,953.60 1,964.11 1.617.33 $1,643.90 1,598.46 1,688.48 1,606.01 1.322.14 175.12 181.67 181.79 183.97 179.80 1891 1893 1694 Five Year Average $121,913,820. 6.90 $ 738.38 1 685.26 $ 569.67 $335,332,708. 2.06 $2,152.00 $1,884.86 $1,559.64 $335,332,708. 2.06 $2,162.00 $1,884.86 $1,659.64 180.61 189S 1896 1697 $113,788,709. 133,381,998. 122,762,356. 142,624,862. 150,919.249. $ 640.18 732.94 669.79 772.41 804.75 $ 598.59 686.04 626.08 721.26 751.15 $ 487.79 657.76 507.25 581.35 603.33 $309,818,614. 337,209,541. 326,427,165. 385,524,121. 410,303,487. $1,743,00 1,853.00 1,726.00 2,088.00 2,188.00 $1,629.81 1,734.42 1,664.77 1,949.60 2,042.13 $1,328.12 1,410.09 1,348.80 1,571.42 1,640.27 $309,818,614. 337,209,541. 326,427,165. 385,524,121. 410,303,487. $1,743.00 1,853.00 1,726.00 2,088.00 2,188.00 $1,629.81 1,734.42 1,664.77 1,949.60 2,042.13 $1,328.12 1,410.09 1,348.80 1,571.42 1,640.27 189.69 198.81 204.62 226.45 243.52 1899 Five Year Average 132,695,435. 16.36 8.84 $ 728.23 $ 677.53 t 548.37 4353,856,586. 7.69 5.52 $1,933.00 $1,806.77 41,462.33 $353,856,586. 7.69 6.52 $1,933.00 $1,806.77 $1,462.33 213.46 Ten Year Averag; $127,304,627. 11.63 $ 731.32 $ 681.21 1 558.37 $344,594,647. 4.87 $1,980.00 $1,843.93 $1,511.43 $344,594,647. 4.87 $1,960.00 $1,843.93 $1,511.43 197.32 1900 $181,173,880. 190,299,560. 213,380,644. 240,429,742. 267,184,739. $ 940.89 793.09 1,066.08 1,171.04 1,258.86 $ 876.80 904.30 988.02 1,081.74 1,168.76 $ 700.10 717.16 778.21 847.12 899.39 $477,284,050. 507,184,395. 555,666,083. 585,458,486. 574,581,484. $2,479.00 2,593.00 2,776.00 2,852.00 2,707.00 $2,309.83 2,410.15 2,572.84 2,634.10 2,491.88 $1,844.33 1,911.36 2,026.53 2,062.77 1,934.14 $477,284,030. 607,184,396. 555,666,083. 585,458,486. 674.581.484. $2,479.00 2,593.00 2,776.00 2,862.00 2^707.00 $2,309.83 2,410.15 2,672.84 2,634.10 2,491.88 $1,844.33 1,911.36 2,026.53 2,062.77 1,934.14 274.63 281.26 296.47 310.54 307.54 1902 1903 1904 Five Year Average i2ie,49S,713. 91.59 79.24 $1,086.14 $1,006.06 $ 792.09 $430,034,896. 64.36 61.04 $2,685.00 $2,486.61 $1,950.67 $540,034,896. 64.36 61.04 $2,685.00 $2,486.61 $1,960.67 289.09 Tai Year Average $176,594,574. 63.98 $ 914.06 $ 850.28 $ 678.20 $44 6,945,741. 36.02 $2,327.00 $2,164.26 $1,726.24 $446,945,741. 36.02 $2,327.00 $2,164.26 $1,726.24 468.17 1905 1906 1907 1908 1909 Five Year Average Ten Year Average $288,441,273. 328,564,656. S68,0a,728. 373.463,046. 367,089,678. $1,329.39 1,477.71 1,618.18 1,620.27 1 , 559 .42 $1,217.80 1,333.85 1,470.92 l,469.a 1,412.02 $ 940.17 1,036.17 1,122.22 1,119.34 1,072.26 $628,405,576. 714,102,281. 760,277,389. 660,621,160. 738,788,772. $2,896.00 3,212.00 3,342.00 2,823.00 3.138.00 $2,653.12 2,943.80 3,038.36 2,569.66 2.841.77 $2,048.28 2,052.08 2,318.09 1,960.03 2.167.99 $628,405,575. 714,102,281. 760,277,369. 640,761,200. 716.016.415. $2,896.00 3,212.00 3,342.00 2,780.00 3.042.00 $2,653.12 2,934.80 3,038.36 2,620.77 2.754.17 $2,048.28 2.062.08 2,318.09 1,920.48 2.091.47 322.26 344.39 367.36 361.60 (A) 362.57 (Al 1346.122,076. 202.64 183.08 ».,S23.50 $1,386.51 $1,060.06 f698,439,036. 112.56 108.28 i3.038.00 $2,806.06 $2,145.28 $691,912,672. 110.67 106.34 $3,052.00 $2,779.73 $2,125.23 352.52 1281,607,894. 147.12 ia.37 91,317.79 il, 209.24 $ 937.46 $619,236,965. 88.46 79.70 $2,896.00 $2,657.14 $2,057.27 $615,973,734. 87.47 78.76 $2,880.00 $2,643.14 p, 048 .41 342.58 1910 1911 19 12 $417,419,775. 431,892,653. 266.03 278.72 f 242. 39 'f|j.^6> 2a9.26l $1,793.25 1,741.26 $1,568.16 1,577.11 $1,186.64 1,174.28 $835,155,461. 774,160,327. 737,584,4'>5. 814,221,842 164.17 136.61 184.48 U7.80 '149.05 {142.36 130.86) 124.66) (119.96 (114.04 142.81) ia&.^a> $3,468.00 3,121.00 $3,137.50 2,836.94 $2,374.17 2,104.89 $813,602,507. 749,965,546. 147.61 128.25 14^.63 136.10 123.65) 117.64) $3,378.00 3,023.00 |3,0 56.53 2,738.68 $2,312.90 2,039.10 380.38(A) 383.10(A) 1913 . BOTB - (A) Miles of Switchlrg anl lennlnal Companies not vsed in ooii;mtii« the flaares In 1908, 1909, 1910 and 1911. RAl'F?W?eflKT"t;?^^^r"8*i?t'ST^,^r?i?e'(^e'5i'a^A^*ffrl^l^afl'.*''« '^■* ^'^^^ ^^ 7253,.aiil repreeeits Net Revenue leas Taxes. Srwn Figures indicate Pep Cent, of increase over average first 10 years. MAME or £QAD CMc««o k £asterT\ Illinois R. R... Missouri, Kan&^ i Texas By ibbAsb R. R ChesApeaket Ohio ^..... T/blcagD, St.PBUl. Minn. & Onah« I^ Chicago, SUTllnffton t ^Incy R.B.. Ceotnl B.R. of H. J Chicago, Milwaukee i St.faul .New York, Chicago & Sciouls IKLECIEC BOKDS First Ifcrtjage Qlldated Mortgage Mel^rasks £j(tenslon BonAs secured by deposit of lal Mt£ Bonds of tjebraslci fich Rd£ General MorVg««e 19'JO t 3, 679, boo, 40,000,000 2^,581,000 22,021,000 rjta YALits omsumiiiio 24,6«0,000 34,690,000 6,102,000. 19,764,000 EO, 000, 000 1909 tl9,e5S.000, 40,000,000. 33.900,000. 27,066,000, 20,142,000. 23,430,000. 46,091,000, (21,343.000 39,999,600 53,900,000 29,666,000 20,573,000 22,236,000. 46,091,000 48.641,000 PREggRRED I.ISH5 MR TAUa Oni3T ^»ll™l'- 9 10,594.000. I 7,727.000 6.979,000, 10,359,800 52,916,602 10,047,000 117,691,000 207,000, 2,142,000 6,332,000 27.862,200 14,204,000 142,000 7,974,000, 16,662,200 CAPITAL S' EUR VALUS OUTSIAimillO 29,1*0.700 ,426,413, HLB VAUJS OUTSIAUIIIIO 156,313,600. 6.380,000, 16,197,000, 10,000,000. 1913 t 40,867.000.' 100,770,491. 61,216,149. 169,960,176.1 9,000,000. 196,404,754. 10,000,000. 1890 111,663,000. 60,000,000. 52,000,000. 71.000,000. 34.060,126. 76,394,506. 18,629,200. 61,708.661. 30,000,000. 10.000,000. 76,300,500. 92,282,906. 79.491.400. 34,050,126. 110.839,100. 27,436,600. 232.623,100. 3O,00O,X0, 10,000.000. 92.400,' 62.796,1 sMtaaiT aiomo the reiatioi or cmTAn 3Q£cs3> bows usn> n sbutoi CUMMIES* ADOREfiS. TO THE PRIOR, ADD JUBIOB U133, THE COST 0? BOAD ABDEWmeNT, TOm. XSSEia, etc., as op 1690, 1909 A»D 1913, FOR 1HS PQLLOimia nousi COBPORATB SURPLUS TOTAL SECiraiTlJS t SUBPOJS " 384,021. 6,631,164. 17,700,013. 2,600,442. ^,419.514. 224,122. X 3,045.119. 1,873,856. 3,876.663. 54,860,096. 10.939,486. 47.960,996. 1,772, as, 8,415,580. t 949,999. 6,223, U7. X 7.216,499. 2,514,6X. 4,592,020. 91,039 ,1£6. U,13T,gE6. 43,417,093. 2,021,339. 11,493,345.' 1890 } 26,999,381. 124,311,220. 130,781,423. 107,138,979. 64,104,964. 200,809,720. 66,665,055. 189,921,STB. 50,006,122. 60.000,000. 199,5«3,939. 189 ,738 ,255. 66,402,769. 376.305,196. 89,947,296. 414,177.495. 60,927,626. 66,415,560. TACTOR O? BA TBII FOB SRT. BCIEB a i!CllBlTlE3. Chloa«o A Eastfiirn Illinois R.R Missouri, X^ansas A tens Qy. Oo. ......... «hbuh R.B. Od Chesap««jEe 4 Ohio ^.v....... Cni&aeo, St Paul, lUnneApolls 4 (kiaha By. Ohloago, Airllnefeon & ^Ijwy ^. ......... Central B.R. of Mev Jers^ ........a...... Ohloaeo, Mllwsalcee 4 St Paul ^. Co. ..... Hew York, OhlOACo S St Louis 1^ I*e.st Shore B.R. IRCCIiIB AVAILABLE PQB INTEREST, ElO. 1690 t 1,009,433. 2,4S6,346. 3,039,712. 1,469,'697. 2,417,736. 21,305,545. 5,305,619. 9,452,636. 1,111,919. 1909 $ 2,887,342. 6,156,517. 6,387,273. 11,693,373. 3,665,013. 20,669,472. 7,372,422. 18,967,918. 2,993,652. 1913 t 4,621,820 8,602,347 4,991,696. 13,756.742 4,106,197 28,632,646. 9,641,150. 29,578,866, 1,982,442, ANBUAL CHABSfS PREFERBED UEBS ABUUAL CBARSES SELECTED SECURITIES 760,026, 419,040. 628,636 2,788,368. 638,560. 7,009,363 8,420. 126,520 496,430 1,222,358, 1890 1909 1913 1890 1909 1913 1690 1909 1913 848,240. 6,520 474,940 766,4581 It, I 696,513. 2,435,340. 2,259,667. 1,(M0,6ET. 1,789,099. ,517,180. ,666,969. ,443,272. ,111,919. $ 2,469^982. 6,156,517. 5,378, 663. 11,664,853. 3.366,593. 19,667,114. 7,372,422. 14,786,793. 2,993,652. i 4,398,980. 8,802,347. 4,143,366. U,746,2S. 3,630,267. 27,664,190. 9,941,150. 26,886,766. 1,962,442. t 163,950, 1,600,000. 1,U9,060. 1,101,050. 784,060. 985,600. 1,746,000. 324,060. 791,360. 2,000,000. t 992.750. 1,600,000. 1,696,000, 1,392,400. 1,206,520. 937,200. 2,254,550. ,023,200. 766,200; 2,000,000. 11,067,160. 1,599,960. 1,696,000. 1,392,400. 1,234,360. eoa.sEo. 2,264,560. 1,969,640. 755,200. 2,000,000. (*) Not Available z Deficit of Consolidation with New Yojic Contral. 224.29 52.11 100.14 X 6.49 129.10 1,179.78 167.00 653.91 40.51 146.60 284.79 217.34 790.56 176.74 1.998.60 227.00 690.86 290.74 312.22 460.16 144.46 887.37 194.10 3,010.01 336.50 1,276.24 162.51 SMTBiaiT 3<0llIO THE REOATIOI OF OmUn SOfiCKD BOIDS USH) IB SBttTOB OIWMnB" ADDIIE63. 10 HIE PIUOB, AM) JtlSlOB LUIS, THE COST 0? ROID ASDEailBem, TOIU. ASSEIS, etc., as of 1S90, 1909 Ajro 1913, FOB THE ?ca,U)Viirs nousi 1 771 1 r A 1. SI C K c a p BATE 3 U n p I s TOTiJ. SEcuniTira t SURPUIS nVESlHBHT IN BOAS t EQIniVEllF PERCa'T OP UiVBSrMENT IK TOTAl A33BT3 KBCOII OP I07AI A6S273 tUSS WXrBSSZD Loxai in BISZSS 01 wiB.YAnip or mimwH) boiid! YAIDK OOTStiUai HO 1913 1890 1309 1913 1890 1909 ma 1890 1909 1913 1890 1909 1918 1890 1909 1913 1890 1909 1913 $11,663,000. $ 22.616.100. t 25.617.800. $1,063,391. t ao*.9OT. 1 949.899. t 26,999,381. t 72,281,104. i 96,899 .69, } 28,477,936. i 88,140,040. t 79,977,646. 70.99 60.62 70.41 t 4,263,870. t 19,408,668. 126,063,554, » 27,641,805. » 77,843,708. tl08.O81,20O. 76.29 71.56 76.70 60.000,000. 76,300,500. 76.300,300. 638,220. 1.073,989. 5,22S,U7. 124.311,220. 169,620,289. 22t,2»,4a6. 124,654,876. 192,8U,072. 231,669,389. 67.91 79.25 61.96 2,074,243. 9.576,170. 21,603,065. 126,731,118. 202,387,242. 233,172,484. 68.44 00.24 82.96 62,000.000. 92,262,906. 92,400,426 TS1,«23. X 3,04S.119. X 7.216,4»9. 130,781,423. 199,583,939. zi*,so*jm. 1X9,970,000. 172,766,046. 186,168,220. 90,95 80.38 80.29 3,464,841. 37,627,224, 51,894,989. 133,434,841. ao ,392,270. 238,063,209. m.» 80.67 84.86 71.000.000. 70.491.400. 62.796.600 X 384,021. 1,873,866. 2,514,680. 107,120,979. 189,733,253. 266,2 60,656. 106,713,929. 156,664,192. 201,761,977. 77.92 81.64 66.19 2,688,683. 39,227,098, 74,674,206. 109,402,612. 194,791,250. 276,436,183, 78.0 86. M 89.19 M.0S0.U6. 34,050.126. 34,050.126. 6,631,ia«. 3,879,663. 4,592,020. 64,ie4,96«. 66,402,789, 76,189,146. 58,132,485. 63,446,785. 72,085,443. 72.66 63.48 67.91 7,268,814. 8,406,430, 10,452,643. 66,397,269. 71,885.216. 82,538,086. 76.26 66,29 72.40 76.39*. 506. U0.e39,100. 110,839.100. 17,700,013. S4,8«0,a6C 91,0S9,U6. 200.803,720. 375,305,186, 4U .013.266. 184,176,431, 360,248,060. 392,937,059. BUS 92.98 94.06 82,601,398. 76,015,216. 91,991,893, 236,777.826. 436,260,276. 484,928,962. 06.51 94.26 96.23 16.629,200. 27.436.600. 27.436,800. 2,600,442. 10,939,486. M,137,a6S. M,665,0EC. 89,847,286. se,tG6.65e. 48,608,008. 69,680,058, 78,864,522. 10.04 :6.c 40.66 26,010,138. 34,516,679. 48,481,656. 73,618,146. 103,966,737. 119,346,178. 45.43 56.63 62.22 61,708.661. 232.623.100. 232.623,100. ?,419,S14. 47,960 ,S9D. 43.417,093. 189.821.3TB. 4»4,I77.*»B. 576,894.947. 165.6S1.3D1. 274,468,163. 518,808,398, 66.09 74,41 69.32 10,693,000. 169,031.641. 76,394,122. 196,324,301, <43,«9,804. 695,202,616. 89.71 66.21 90.62 30,000,000. 30.000,000. 30.000.000. 224.122. 1,772,36. 2.021,339, 50,008,122, 60,927,626. 60,901.334. 49,840.198. 84,809,796. 58,595,306. 60.31 64.66 67.76 1,272,330. U,954,013. 9,626,976. 51,112,528, 66,463,809. 68.121,282. 61.29 71.16 72.26 10,000,000. 10.000.000. lO.OOO.OOO. 8.415,580. 11,493,345. 60.000,000. 68,415,580. 71,493,348. 60,000,000. 69,416,680. 71,493,346. 16.67 26.92 30.06 60,000,000. 68,415,580. 71,493,345. 16.67 26.92 30.06 lEI 3EC UBII1E3. AHOniT AVAUABIE FOB OJlARffiS FOR anBClEI) SECOTIIIES AjnnJAL CHASOES SELECTEB SEOUEIIIES J HABOM 0? 3AMEf TOR SELECTED SE0UB1T1S3. 1C90 1909 1913 1690 1909 1913 1890 1909 1913 696,613. i 2,469,982. } 4,398,980, t 183,950. t 992,760. 11,067,160. 224,28 M8,ea 812.22 2,436,348, 6,156.617. 8,802,347. 1,600,000. 1,600,000. 1,699,980. 52.21 284.78 460.16 2,269,667. 5,379,663. 4,143.886. 1,129,060 1,696,000-, 1,698,000. 100.14 217.34 144.46 1,040,687. 11,864.663, 1»,746,2CE. 1,101,060 1,392,400. 1,392,400. X 8.49 730.86 887.37 1,789,09^. 3,366,693. 3,630,267. 784,060 1,206,520. 1,234,380. 128.18 178.74 194,10 18,617,160. 19,667,1U. 27,864,190. 965,600 937,200, 869,820. 1,178.76 1,996.80 3,010,01 4,666.969. 7,372,422. 9,841,160. 1,748,000 2,264.660. 2,264,680, 167.00 227.00 336.50 2,443,272. 14,766,793. 26,686,766. 324,080 2,023,200, 1,963.640, 663,91 680.86 1,276.24 1,111,919. 2,993,852. 1,982,442. 791,360 2.000,000 766,200J . 2,000,000, 758,200. 2,000,000. 40.61 290.74 162.61 UNIVERSITY OF CALIFORNIA LIBRARY BERKELEY THIS BOOK IS DUF^ THE LAST DATE STAMPED BELOW to $1.00 per volume affer the six?h T^"''^"^' 'pc^easing demand may be renewpH if I ^■ .^^^^ ^ooks not in expiration of loan perTod. ^PP'^^^*'"" ^^ made before OCT 5 192'? 50to-7,'16 he: UNIVERSITY OF CALIFORNIA LIBRARY