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and deduct the expenses of miscellaneous operations therefrom in an amount of $33,008,368, leaving a net revenue from miscellaneous operations of $5,519,232. The taxes on miscellaneous operating property is next deducted from that last figure, these taxes amounting to $2,079,265, leaving a balance from these miscellaneous operations known as "Miscellaneous operating income," $3,439,967, to be added to the railway operating income, and, putting those two together, the total operating income becomes, according to this abstract, $1,048,042,557.

Next, taking up the nonoperating income, consisting of various accounts: The first is hire of freight cars-credit balance, $16,724,136; then rent from locomotives, $6,621,239; rent from passenger-train cars, $10,633,029; rent from floating equipment, $205,347; rent from work equipment, $1,776,509; joint facility rent income, $25,831,102; income from lease of road, $5,738,079; miscellaneous rent income, $8,460,761; miscellaneous nonoperating physical property, $2,899,118; separately operated properties-profit, $3,403,651; dividend income, $95,320,640; income from funded securities, $44,601,475; income from unfunded securities and accounts, $25,323,829; income from sinking and other reserve funds, $2,737,243; release of premiums on funded debt, $397,885; contributions from other companies, $864,568; and the item known as miscellaneous income, $2,270,331.

These accounts that I have read under the heading of "Nonoperating income," giving a total nonoperating income of $253,808,942, which, added to the total operating income, gives a gross income of $1.301.851,499.

Then follow "Deductions from gross income." The first is hire of freight cars-debit balance, $41,240,971; rent for locomotives, $6,357,073: rent for passenger-train cars, $11,603,074; rent for floating equipment, $2,181,076; rent for work equipment, $505,148; joint facility rents, $41,571,819; rent for leased roads, $139,786,572; miscellaneous rents, $5,439,990; miscellaneous tax accruals, $2,442,491; separately operated properties-loss, $2,555,084; interest on funded debt, $415,036,887; interest on unfunded debt, $17,892,708; amortization of discount on funded debt, $3,225,542; maintenance of investment organization, $365,732; income transferred to other companies, $3,925,685; miscellaneous income charges, $3,707,752; making total deductions from gross income $697,837,604.

That item deducted from the "Gross income" leaves the "Net income," about which we have been speaking, and that "Net income " for the year ended June 30, 1916, was $604,013,895. Then follows the disposition made of that net income.

Senator CUMMINS. I will inquire about that a little later, but in reaching the net income, which you have just stated, there has been deducted the interest upon the entire funded debt, or bonded debt, of all the railways.

Commissioner HALL. On the unfunded also.

Senator CUMMINS. Yes, both funded and unfunded. So that for the year 1916, ending June 30, all the railways in Class I had something over $600,000,000 that could have been applied if they had been so minded, to the payment of dividends on stock?

Commissioner HALL. That was what was left after the payment of these debts; yes. But there were sinking and other reserve funds which had to be taken care of out of this item "Net income."

Senator CUMMINS. Precisely; the railroads could have put any amount they saw fit into the sinking fund or into the surplus fund, but they had that money after paying all their expenses and all their interest for the year 1916.

Commissioner HALL. Yes; after paying their current debts.

Senator CUMMINS. And just from a mere recollection of the par value of all the capital stock outstanding at that time, that would have paid a substantial 10 per cent dividend upon all the capital stock at par, would it not?

Commissioner HALL. The capital stock outstanding in the hands of the public, eliminating duplication, issued by Classes I, II, and III roads, and nonoperating subsidiaries for the year ended June 30, 1916, appears in answer to question 8 of the Questionnaire as $6,314,570,354. The account "Net income" for that year, as appearing in the abstract in evidence, is $604,013,895 for Classes I, II, and III, which would be something less than 10 per cent on the capitalization outstanding in the hands of the public.

Senator CUMMINS. Ten per cent would be about $630,000,000? Commissioner HALL. Yes.

Senator CUMMINS. Whereas the actual net income that could have been applied to dividends was $604,000,000.

Commissioner HALL. I think it ought to be stated here that the credit table from which you have been reading these items include both Class I and Class II roads, whereas the table furnished by us included only Class I roads, and possibly that will acount for the discrepancy in the figures.

Senator CUMMINS. The abstract from which I take the item of net income for the year ending June 30, 1916, includes Class I, Class II, and Class III roads. The response to item 8 of the Questionnaire is confined to Class I and Class II roads, and nonoperating subsidiaries. Commissioner HALL. Yes.

Senator CUMMINS. There is a little confusion there still. You refer to question 8. Item 1 in the Questionnaire, as answered in the table to which I have referred more than once, is confined to Class I roads.

Commissioner HALL. It is.

Senator CUMMINS. And that fact will account in all probability for the discrepancy or difference in the figures that appear in the printed table as compared with the figures in the answer to the Questionnaire.

Commissioner HALL. That may be, but Dr. Lorenz can indicate that definitely.

Senator KELLOGG. Right there, that total amount that you gave of net income after paying interest, did you say the whole amount of that was available for dividends?

Commissioner HALL. That was the question. I indicated in my answer that out of that would come whatever was applied to sinking and other reserve funds, whatever was appropriated for investment in physical property, stock discount extinguished through income, and miscellaneous appropriations of income.

Senator POINDEXTER. Let me ask you whether or not investment in physical property includes all operating expenses in the figures which you gave?

Commissioner HALL. Not as investment; no.

Senator CUMMINS. I want the commissioner to clearly understand my former question. I have not suggested, of course, that all this money was divided among the stockholders; the company was at liberty, of course, to use part of it for surplus and part for sinking fund, and part of it for investment, as they saw fit, but it was free money after paying all the expenses of the railroads, and after the maintenance of their property, and after proper charges for depreciation were made.

Senator TOWNSEND. Is that correct?

Commissioner HALL. It was free money except as engagements might have been entered into with regard to sinking and other reserve funds.

Senator CUMMINS. I now refer to the year ending June 30, 1915, as noted in the answer to the question; I read what is there statedremember all the time that these are figures for Class I roads alone; "Railway operating revenues, $2,871,563,047; railway operating income, $716,476,186."

I would like the very same application of the report of the commission and the same separation made with regard to the two items I have just read as you have already made with regard to the year 1916, and I may say that I would like the same explanation and the same figures for each of the years mentioned in answer to the question. Commissioner HALL. Well, Senator, I have the corresponding column of the abstract for the year ending June 30, 1915.

Senator CUMMINS. To avoid the necessity of reading all these items, will you please identify the pages and hand them to the reporter, so that they may become a part of the record, and will you state from those reports which you have identified the final result for each of those years as you have stated that result for the year 1916? Commissioner HALL. For the year 1916 I have stated the item “Net income," but I have not stated what disposition was made of that net income. That appears also in the abstract from which I have been reading.

Senator CUMMINS. I think in order to be clear and to be less confusing I would rather have those other years follow as I have suggested, and then we will take up the inquiry as to what was done with the money..

Commissioner HALL. The corresponding information for the year ending June 30, 1915, appears in the press abstract of Statistics of Steam Railways in the United States for the year ending June 30, 1915, published by the Interstate Commerce Commission, under the head Operating roads," and a subcolumn "Total operating roads under income account," on pages 8 and 9 of that abstract.

(The data referred to are here printed in full, as follows:)

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The tables following present for the year ended June 30, 1915, the condensed income account and the profit and loss account of the operating roads and of their subsidiary nonoperating roads. The figures given include such intercorporate payments as may be involved in the items stated. Returns for a few small roads have been omitted because of incompleteness. The accounts of the operating roads include both operating and financial transactions, while the accounts of the nonoperating roads are confined for the most part to receipts and payments under leases, contracts, and agreements. For a number of items, such as dividends, taxes, etc., figures for all roads must be taken into consideration in order to learn the aggregates of such items for the classes of railway companies represented.

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$2,956, 193, 202

54, 420, 217

13, 102, 125

2,088, 682, 956

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