Note:—Of the above figures the Adams, American, Southern and Wells-Fargo Companies accounted for 89% of the mileage and for 94% of the total operating revenues.
One feature of the above figures stands out pre-eminent. With a capital stock of $59,000,000 and a funded debt of $21,000,000, the express companies performed express operations bringing in an annual revenue of $223,000,000. (Of this latter sum, one-half went to the railroad, steamship and stage lines for transporting the packages entrusted to their care by the express companies.) On January 1, 1918, the cost of the land and buildings owned by the express companies was slightly more than $20,000,000 and of the equipment slightly more than $23,000,000. It is therefore immediately evident that the most valuable asset of the express companies is to be found, not in their tangible property, but in their contracts with the various railroad companies giving them the exclusive right to have their packages transported by the railroads on passenger trains—in a sense, their charters.
PROFITS OF EXPRESS COMPANIES
Previously to the regulation of express rates by the Interstate Commerce Commission and to the beginning of the parcel-post in this country, the profits of the express companies were undeniably swollen. By just how much they were unreasonably large, it is practically impossible to determine; although the Interstate Commerce Commission did on several occasions officially assert unduly large profits in the case of the Wells-Fargo Company.
As described above, three of the five leading companies had issued no stock at a fixed par value, but had distributed a certain number of shares of ownership. They had started in business with a limited equipment (Franklin K. Lane declares that it had not exceeded $1,000,000 in value) and had purchased new equipment mostly from current profits. Some companies have capitalized their profits. Others have carried them along from year to year in a profit and loss account. By their contracts with the railroad companies, they have become practically a part of the railroad system, and hence whatever equipment and property they themselves possess have served up to the present time as little basis for determining their just profits. For instance, as the decision of the Interstate Commerce Commission's report of 1912 pointed out, some one company may invest money in certain equipment which another company hires. They both may make the same percentage of profit on the same amount of business, but in the first case the profit would loom small in comparison with the property of the company, whereas in the second case, it would loom unnaturally large. In other words, a charge on capital in the first case would be classified as an item of operating expense in the second.
And yet, despite all these considerations, the fact that from 1909 to 1912 the net profits of the companies were from 17% to 65% of the value of their properties, coupled with the common sense knowledge that in those years there was no inward or outward compulsion upon the directors of the companies to charge one cent less than the traffic would bear, makes it certain enough for practical purposes that the express companies' profits were unethically swollen.
Whatever the profits before 1913, however, they have sadly dwindled since, as the following figures of the Interstate Commerce Commission will indicate:
Note:—In studying the above figures, it must be remembered that approximately one-half of the operating revenues are paid to the railroads for transportation, so that for practical purposes the ratio of the total operating revenue to the net operating revenue with respect to the direct business of the express companies—the collection of packages for the railroads and the delivery from the railroads—would be approximately twice the percentages in the above table.