JAS. H. OLIPHANT & CO.
to progressive improvement in earnings and co-operative financing
of a critical maturity ‘New Haven’’ was successful in avoiding the
path which after a similar start in 1921 ‘“St. Paul’’ was forced to
follow. New Haven in 1921 following the loss sustained had work-
ing capital of $1,287,000, and a $27,582,000 maturity four months
away ; in 1926 had earnings equal to $5.20 a share, working capital
of $19,950,000, and no sizeable maturity until 1940, barring $87,-
130,000 6% Government loans. Sale of $50,000,000 7% preferred
stock at 100 in 1927 is a step in working off the Government
borrowings and it proves both a better credit standing and stock-
holder good will.
This recovery was made with practically no contribution from the
ill-fated outside investments which were responsible for the com-
pany’s fall from eminence beginning 1913. Rehabilitation of earn-
ing power has been due to a tightening grip on expenses, operating
ratio declining from 102.3% in 1920 to 73.7% in 1926 (pre-war
ratio closer to 70%).
No net return is being received from $146,000,000 face value of
bonds, notes and stocks of subsidiary railroads, trolley lines and
steamship companies, whereas the capital obligations outstanding
as a result of their acquisition is a fixed charge. A gross income
in dividends from this total was received of $160,060 in 1926 (from
Central New England Ry.) but $973,700 was paid out in guar-
antees on New York, Westchester: & Boston Ry. bonds and Boston
R. R. Holding Co. preferred shares. It is in the ultimate increase
of earning power of this bulk of unproductive commitments that
final rehabilitation of New Haven rests.
The biggest item in these outside ventures is the ownership of
219,189 shares of Boston & Maine R. R. common stock (plus
10,694 shares of preferred stocks and 45,317 shares of prior prefer-
ence stock, latter to be taken up at various dates under the 1926
readjustment plan) carried on the New Haven books at $27,247,000
as of December 31 last (through its medium the Boston R. R.
Holding Co.) which was acquired at high prices in the latter part
of New Haven’s extravagant expansion period 1903-14. Boston &
Maine has had a remarkable recovery of earning power from a
deficit of $7,348,000 in 1921 to a surplus in 1925 of $6.90 a share,
and in 1926 of $9.40. From the low prices there has been a $12. -
000,000 appreciation in the Boston & Maine investment. This is
substantial though still leaving book value over twice market value.
Some of the street railway ventures look hopeless, other invest-
ments such as Connecticut Co. ($45,569,000 book value) and New
York, Westchester & Boston ($14,430,000 book value) while now
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