JAS. H. OLIPHANT & CO. 
_— Te 
A policy of intensive rather than extensive improvement pursued 
in recent years definitely benefits the earning power of the 
Corporation on a given volume of business. Since the wartime ex- 
pansion ending 1918, when $302,776,000 plant expenditures of 
which $103,301,000 were charged to earnings as inflated cost had 
left capacity at 22,340,000 tons, there has been $518,156,000 added 
to property account and $414,702,000 to reserves against it with 
increase in capacity only 840,000 tons. These outlays provided 
both mills for finished products, adding breadth to the business, 
and modern facilities for economical operation, replacing hands 
with machines. Consequently a tendency of prices to fall and 
wages to rise has been successfully met: 
Jperations 
(per cent. 
capacity) 
1926. ..... 
1925..... 
1024... .] 
1923... 
1922.... 
1921....9 
1920... 
1939... 
(D 
Prices 
‘change 
er ton) 
" lower 
AIT 
2h’ 
the 
Wages 
Tails) 
Earnings 
(per share 
new) 
$12.80 
9.20 
8.40 
11.70 
a1 2.03 
0.73 1.60 
7.00 11.90 
6.17 7.95 
Record peacetime earnings were turned out in 1926 with rate of 
operations the same as in 1923 and 1920 although prices were less 
than in 1923 and daily wages more despite abandonment beginning 
1924 of the twelve hour day. From the by-products at one time 
wasted the Corporation by 1925 had developed earnings equal to 
$3 a share on the new amount of common stock. Budget for re- 
search work is now being enlarged substantially. 
Before the net available for dividends, and besides the allow- 
ance of $120,000,000 yearly for maintenance and repairs, United 
States Steel sets aside an increasing amount annually to make good 
any depletion and depreciation of assets. These reserves if re- 
lated to the gross plant value were 2.3% in 1924, 2.59% in 1925, 
and 2.8% in 1926 and if figured on the present common stock were 
$6.85, $7.90 and $9.00 a share respectively. Liberal reserves of 
course are necessary to care for the discard of facilities when bet- 
ter are found and for the doubling of dollar cost when a new 
plant replaces an old one. Whether this burden on earnings may 
not be lightened is conjectural. A regularly increasing part of 
the depreciation allowance goes to sinking fund for bond retire- 
ment. From a peak of $643,099,000 in 1912 funded debt was re- 
duced to $492,689,000 in 1926, and interest from $33,301,000 in 
1913 to $25,515,000, a saving equal to $1.10 on the new common 
shares. The bonds in sinking fund, $214,204,000 in 1926, continue 
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