Capitalization and Dividends of the Railways of Texas Year Ending June 30, 1909 WASHINGTON, D. C. AUGUST, 1911 Digitized by the Internet Archive in 2016 https://ar9hive.0rg/detaij s/capitalizationdiOlasso 9 Vo, I ^ / X- >x. o CAPITALIZATION AND DIVIDENDS OF THE RAILWAYS OF TEXAS. In this study, prepared by request, it has been the purpose to ascertain the capitalization of the railways of Texas, their dividends, and the proportion of non-dividend-paying stock, and to make a comparison in these respects with the railways of the United States as a whole, and with those of other sec- tions of the United States. The study is for the fiscal year ending June 30, 1909, the latest year for which requisite statistics are available. The data has been obtained from the annual report of the Railroad Commission of Texas and the statistical report of the Inter- state Commerce Commission. From the table which is printed hereafter with explanatory comment, it will be perceived that the capitalization of the Texas roads per mile is $32,070, or less than half the average for the whole United States, which is $73,829. It is of interest to compare this further with Interstate Commerce Commission Group V, which has the lowest capitalization per mile,* $46,364, and with Group II, which has the highest capitalization per mile, $147,300. It should be noted that these amounts repre- sent the gross capitalization per mile, in which are included duplications due to intercorporate ownership. The net capi- talization of the railways of the United States as a whole, that is, the gross capitalization less deductions due to the ownership of the securities of one railway by another, and less deduction of securities covering property other than railway property, is $59,259 per mile. The net capitalization of the railways in each group or in each state is not ascertainable. It has therefore been necessary in this comparison to use the figure *In the comparisons of Texas with the various groups, Group IX is omitted from consideration, because the State ot Texas comprises the major part of Group IX and largely determines its character. P 8 1 5 0 8 4 of' gross capitalization. While it is likely that the net capitali- zation of the railways of Texas, if it were ascertainable, would not show the same relative reduction from the gross as that of the United States as a whole, it is significant that the gross capitalization per mile of the Texas lines is 45 per cent less than the net capitalization per mile of the railways of the country as a whole. On the same basis of comparison of gross figures, the table shows that the amount of stock per mile is $9,839 in Texas, $32,450 for the United States as a whole, $15,495 in the lowest group (Group V), and $65,456 in the highest group (Group II). The amount of bonds per mile is $22,231 for Texas, $41,380 for the United States, $30,869 for Group V, and $81,844 for Group II. The average rate of dividend on railway stock is lower in Texas than elsewhere. The average dividend paid in 1909 on the aggregate of dividend-paying and non-dividend-paying stock was less than three-tenths of one per cent. On the simi- lar aggregate of stock for the entire United States, the divi- dend rate averaged 4.2 percent. In the lowest group (Group IV) this dividend rate averaged 1.6 percent, and in the highest group (Group VII) 6.8 percent. That is, the average dividend rate on the total railway stock of the United States was more than seventeen times as high as that of Texas ; in Group IV it was over six times as high, and in Group VII twenty-eight times as high. The low dividend rate on Texas stock would lead one to expect that the proportion of railway stock paying no divi- dends would be higher in Texas than in the country as a whole. This proves to be the fact to an extraordinary degree. The ratio that the stock of non-dividend-paying railways bore to the stock of all railways was 95.8 percent in Texas, in the United States as a whole, 29 percent, in the group with the highest ratio (Group IV) 58.7 percent, and in the group with the lowest ratio (Group I) 6.7 percent. It should be noted that for reasons given later in the discussion of the table, this com- parison of the proportion of stock not paying dividends is 5 based on the total stock of dividend paying roads compared with the total stock of non-dividend-paying roads, and not on the issues of stock paying dividends compared with the issues of stock that paid no dividends. Certain discrepancies exist between the data published by the Texas Railroad Commission and that published by the Interstate Commerce Commission. If the higher figures given by the Interstate Commerce Commission had been used as the basis for the foregoing comparison, instead of the lower fig- ures of the Texas Commission, the amounts entering into the comparison would have been but little changed, and the rela- tion between the status in Texas and that in other parts of the country, not at all. Therefore it has not seemed necessary to present these discrepancies in the summary. P61508 6 Capitalization and Dividend Returns of the Railways of Tex , Year endin . (United States and Group figures from Statistical Re Texas figures from 1909 report of It' GROUP. Mileage Owned. Stock. Bonds. Amount. Per Mile. Amount. Per Mile. Texas 13,079.41 $128,686,677 $9,839 $290,768,6265 $22,231 United States.. 236,868.53 7,686,278,545 32,450 9,801,590,390 41,380 Group I 7,950.14 324,754,673 40,849 445,333,910 56,016 < < II 23,236.94 1,520,991,520 65,456 1,901,806,200 81,844 III... 24,880.48 997,639,248 40,097 1,310,905,552 52,688 4 < IV.. 14,880.97 396,395,222 26,638 553,027,315 37,163 i ( V 28,377.26 439,709,547 15,495 875,969,066 30,869 4 i VI ... 50,190.75 1,398,398,631 27,862 1,594,510,949 31,769 i 4 VII .. 13,638.76 407,959,786 29,912 426,517,621 31,272 4 4 VIII. 32,450.48 883,554,572 27,228 1,297,095,370 39,971 4 4 IX.. 18,162.90 318,121,840 17,515 448,028,456 24,667 4 4 X 23,099.85 998,753,506 43,236 948,395,951 41,056 a The figures exclude switching and terminal companies. b Includes equipment trust obligations amounting to $7,956,426. c Includes $25,666,134 held in treasury, pledged as collateral secu : as follows : Group I $29,749 Group I"' ! “ II 8,327,444 “ V “ III 9,152,575 “ V ; u i of the United States as a whole, and of the several groups: Hj'UNE 30, 1909. Sa »rt of the Interstate Commerce Commission for 1909 ; tl Texas Railroad Commission). a >tal Railway Capital- ization. ' Dividends Declared in 1909. Total Stock of Railways which Paid No Dividends in 1909 ij Amount. Per Mile. Amount. Average Rate Based on Total Railway Stock of Group. Amount. Percent of Total Stock of All Rail- ways of Group. 1 419,455,3035 $32,070 $307,850 0.24 $123,337,265 95.8 . .487,868,935 73,829 321,071,626 4.2 2,227,650,417c 29.0 « 770,088,583 96,865 19,575,320 6.0 21,739,094 6.7 4 ,422,797,720 147,300 71,484,423 4.7 420,996,237 27.7 J 308,544,800 92,785 35,153,385 3.5 368,252,631 36.9 ! 949,422,537 63,801 6,471,801 1.6 232,639,792 58.7 9 315,678,613 46,364 9,251,150 2.1 253,874,556 57.7 9 992,909,580 59,631 67,187,584 4.8 241,928,577 17.3 t: 834,477,407 61,184 27,793,005 6.8 28,166,800 6.9 li 180,649,942 67,199 25,029,670 2.8 232,382,171 26.3 1 766,150,296 42,182 4,681,471 1.5 211,028,138 66.3 6, 947,149,457 84,293 54,443,817 5.5 216,642,421 21.7 art, held in sinking and other funds, etc. Amounts assigned to groups are IT 1,948,900 744,720 603,285 Group VII $1,500 “ VIII 2,486,386 “ IX 155,675 “ X 2,215,900 8 The amount given in the table as representing the stock of all American railways on which no dividend was declared in 1909 is $2,227,650,417, or 29 percent of the total stock outstand- ing. This amount is ascertained by adding together the total out- standing stocks of all railways that declared no dividends in 1909. The corresponding item in the Interstate Commerce Com- mission ’s statistical report for 1909, page 57, is $2,766,104,427, and the corresponding percentage 35.-99 percent. The discrep- ancy between these two sets of figures is due to the fact that the Interstate Commerce Commission added together all issues of stock on which no dividends were paid, instead of the total stocks of all railways declaring no dividends. Thus the Inter- state Commerce Commission’s total includes a considerable amount of common stock of railways that paid a dividend on their preferred, but not on their common issues. It has proved impossible to secure from the Interstate Commerce Commis- sion or from its reports a statement of non-dividend-paying stocks in each group corresponding to the amount reported by the Commission for the United States, which has made it neces- sary to make up the item in the way described. For com- parative purposes this data is as valuable as that of the Inter- state Commerce Commission, for it gives information of the capitalization of railways paying no dividends whatever on their capital stock. Switching and terminal companies have not been included in the statistical reports of the Interstate Commerce Commis- sion since 1907. In order to make the statistics comparable, these companies have been omitted from the Texas figures. Certain differences exist between the returns of the Inter- state Commerce Commission when computed for the state of Texas and those of the Texas Railroad Commission. These differences fall into three main groups — differences due to variations in classification, differences arising out of the failure of roads to file reports, and differences in methods used in apportioning capital to those portions of interstate railways that lie within the state of Texas. Among the differences due to varying classification may be mentioned the inclusion of 9 notes, debentures, pledged bonds, and miscellaneous obligations with funded debt, and the inclusion of branches and spurs with miles of line. For all the roads failing to file operating state- ments with the Interstate Commerce Commission, mileage figures are reported by that Commission, but nothing more. Differences due to methods of capital assignment are as fol- lows. Where a railway lies in more than one group, the Interstate Commerce Commission usually apportions the cap- italization of such road among the several groups in the pro- portion of the mileage lying within the respective groups. The Texas Railroad Commission, however, apportions the capitali- zation of each railway entering or passing through the state on its own merits ; that is, on the basis of what it considers to be the proper valuation of that part of the railway lying in Texas. As the tendency of the Texas Commission is always toward a low valuation, it is not strange that it assigns a lower capitali- zation to the Texas portion of the interstate railways than does the Interstate Commerce Commission. This study, the method of which was determined in the request for its preparation, was based, as already shown, upon the Texas Railroad Commission’s figures. Yet the discrepan- cies between the Texas Commission figures and the Interstate Commerce Commission figures, the reasons for which have already been explained, are not sufficient to vitiate in any respect the conclusions of this study. It does not therefore seem worth while to present in detailed tables the statistical variations in the two reports. Date Due I upBI '3 Form 335— 35M— 9-34— C. P. Co. 385 B952B no. 18 P61508 Bunsnu. of Pistil wny Economics Q apl ~t alfciz all op. ntid Dividends of tlio liail^ays. . B952B no. 18 PS1508