The United States Railroads

In class I are railways with operating revenues in excess of $1,000,000 annually. In class II are railways earning from $100,000 to $1,000,000. Railways earning less than $1oo,000 are in class III.

While the table shows 144 class i operating companies, many of the separately organized railways are operated as parts of systems under unified managements. The number of unified operating systems and smaller independent railways in class I is about 6o.

Because the data for class I railways are much more complete than those pertaining to classes II and III, and because classes II and III are so relatively unimportant, the facts and figures in the following text will, unless otherwise stated, apply to class I railways only.

The road mileage shown in the table does not include multiple running tracks or tracks in yards and sidings. The total miles of trackage of class I railways in 1934 was 402,431, of which 238,555 was first main track, 36,313 second main track, 5,685 other multiple main tracks, and 121,878 yards, sidings and indus trial tracks. For every road mile in 1934, therefore, there were 1.68 miles of track, including yards and sidings. The ratio of track miles to road miles has been increasing slightly.

The total railway route miles in recent years has been declining inasmuch as the miles abandoned have exceeded the miles of new railway constructed. The abandoned mileage consisted mainly of unprofitable branch lines, on which the volume of traffic, adversely affected by depletion of natural resources or by com petition of motor vehicles, had been so seriously diminished as to yield operating revenues less than the cost of operation. From 1921 to inclusive, the total road miles constructed were 7,075 and the miles abandoned were 13,866.

Number of Locomotives and Cars.

The numbers of loco motives and cars have recently declined. The increases in the tractive capacity and the efficiency of locomotives, and the in creases in capacity of freight cars and their mileage per car day, have enabled the railways to handle a given volume of traffic with a smaller number of units. The decline in number had set in about 1923 and was accelerated during the depression by losses in traffic and earnings, and inability financially to keep up the former pro gramme of replacement of obsolete units.

In addition to the steam locomotives shown in the table for 1935 there were 98o electric and internal combustion locomotives. The comparable figures for 193o and 192o were 707 and 364. In

addition to the railway-owned freight cars the railways use over 300,00o private freight cars owned by packers, oil companies, coal companies and other large shippers, and the railways own 76,955 company service cars. To the railroad-owned passenger train cars should be added about 8,000 Pullman sleepers and parlor cars owned by the Pullman Company and operated by the railways under contracts.

Investment in Road and

combined bal ance sheet of all railways on December 31, 1935, shows an invest ment of $25,500,335,062 in road and equipment. This is the so called "book value," the integrity of which has frequently been challenged because of a widely held belief that it had been inflated by questionable financial practices in earlier years. The principal purpose of the Valuation Act of 1913 was to determine the valid ity of the investment account. The figures now available indicate that the book value exceeds the estimated cost of reproduction, less accrued depreciation. The inflation of years ago, when the books did not accurately reflect the facts, had been offset by the many reorganizations of the weak lines and by earnings plowed into the property by the strong lines.

Against this investment there was, on December 31, 1934, an outstanding net capitalization of $18,652,491,252, of which $11, 613,527,983 was in bonds or other funded debt, and $7,038,963,269 was in capital stock. The capitalization above noted is that out standing in the hands of the public and excludes securities held by or for the issuing companies.

While it is true that the actual investment in railway properties is slightly in excess of the book value entered as an asset on the balance sheet, and that the capital obligations outstanding in the hands of the public are substantially less than the book value, it does not necessarily follow that the railroads collectively are not overcapitalized, if earning power rather than physical value is taken as the criterion. The book value includes the cost of many facilities not now used, or used in but small degree, and the cost of many locomotives and cars which are so highly obsolescent as to be worth no more than their scrap value. Sooner or later the railways will be forced to recognize that obsolescence, restate their investment account and adjust their capital structure accord ingly. No one can now state with authority what that obsolescence amounts to in definite figures.