The statement by the treasurer in the general account shows all of the transactions of the company outside of its operating details.

Mr. WINDOM. Does not the company receive dividends or profits from this property bought with this money-$46,000,000-except that for repairs and fuel, &c. ?

Mr. LEWIS Yes, sir.

The CHAIRMAN. Do they not pay a dividend also on the $46,000,000 of stock, or the additional stock, and interest on the additional bonds making up the $46,000,000?

Mr. LEWIS. Yes, sir; they pay dividends on all the stock they issue. The CHAIRMAN. So that, really, there is a double profit to the company growing out of that increase to the capital stock and bonds. They receive a profit from the property, and they also make a dividend on the increase of stock, and pay interest on the increase of bonds with which this property was bought.

Mr. LEWIS. I do not know that I exactly understand you. Of course, if they invested this money they obtained from stock and bonds profitably, they would derive an income from it which would go toward paying the interest on their own bonds or stock.

The CHAIRMAN. That goes to make up your receipts ?

Mr. LEWIS. Yes, sir; it goes to make up the general income of the company by reducing interest account.

Mr. SHERMAN. I suppose the bonds of railroad corporations included in your assets are bonds of railroads that you have aided in constructing their works, &c. ?

Mr. LEWIS. Yes, sir.

Mr. SHERMAN. Do you know whether, generally, the bonds and stock which you have purchased of this kind have been very profitable, or whether you have gained your profit by the improved business given to your road ?

Mr. LEWIS. Some of these bonds are remunerative, and others are not at present. They all are getting into being remunerative. As a rule, after taking a road, it takes a considerable while to get the business up so that it will pay a profit over working expenses.

Mr. SHERMAN. Have these bonds been purchased from the earnings of the company from time to time?

Mr. LEWIS. They have been paid for out of money in the treasury, but it would be difficult to say what portion of the money was derived from earnings and what from the proceeds of stock and bonds sold.

Mr. SHERMAN. Is any portion of it made by accumulated earnings not divided?

Mr. LEWIS. That I could not answer definitely. It might or might not be. Any profits over and above the dividends would be more likely to go into the general improvement of the road. It is a very difficult matter in railroad business to decide absolutely many charges, whether they would be repairs or construction, or what amount of a charge should be charged to repairs and what to construction. Different railroads have different methods. Some railroads charge all they can to construction, while others charge as little as they well can and be on the safe side.

Mr. SHERMAN. Do not these $42,000,000 include the whole of your construction account; is not that the whole cost of your road ?

Mr. LEWIS. Yes, sir; construction and equipment account, as upon our treasurer's books; but over and above that large expenditures have been made upon the road, and equipments paid out of earnings.

Mr. SHERMAN. And the other assets are investments which you have made as a corporation in other railroad companies?

Mr. LEWIS. Yes, sir, including the working capital for leased lines, for cross-ties, iron, and other materials.

The CHAIRMAN. You spoke of an issue of stock and bonds since this report was made, did you not?

Mr. LEWIS. No, sir.

The CHAIRMAN. Has not the legislature of Pennsylvania authorized an additional issue of stock, and if so, how much, on your road?

Mr. LEWIS. They authorized us to increase the capital stock. Mr. Kneass, I think, can give you figures better than I can on that.

Mr. KNEASS. The company was authorized, in February, 1873, to increase its capital stock from time to time $75,000,000.

The CHAIRMAN. Has any part of that stock been issued?

Mr. KNEASS. No, sir, no part of the last authorized increase has been issued, but out of stock authorized in 1872 there have been issues made since last annual report.

The CHAIRMAN. How much?

Mr. KNEASS. I think about $13,000,000.

The CHAIRMAN. Has that been disposed of?

Mr. KNEASS. Yes, sir; it was issued, giving the stockholders the privi lege of subscribing at par. That stock was taken mainly to be expended on the road in terminal facilities, to enable it to accommodate its increased and increasing business.

The CHAIRMAN. Taken at par?

Mr. KNEASS. Yes, sir.

Mr. DAVIS. That has been since the 1st of January; since this report was printed?

Mr. KNEASS. Yes, sir; it takes a great deal of money to provide for the increase of the business.

Mr. SHERMAN. Do you regulate tolls on canals?

Mr. KNEASS. No, sir.

Mr. SHERMAN. Do you know them?

Mr. KNEASS. I have very little knowledge of them.

Mr. SHERMAN. Who would know the tolls paid on the canals?

Mr. KNEASS. The president of the canal company, General Wistar. Mr. SHERMAN. Is he in town?

Mr. KNEASS. No, sir, he is not here.

Mr. SHERMAN. You say the canals do not do any through business? Mr. KNEASS. No, sir, excepting between here and Baltimore.

Mr. SHERMAN. But I speak of the interior canals of Pennsylvania. Mr. CASSATT. They do none at all.

Mr. SHERMAN. My object in inquiring was to learn how far they affect you in enabling you to carry grain in competition with other lines.

Mr. CASSATT. None at all, sir.

The CHAIRMAN. What is the arrangement between your company and the sleeping-car company or companies?

Mr. CASSATT. They furnish the cars and we run them, not making them any charge for doing so, and they collect whatever charges they may for berths or seats.

The CHAIRMAN. They receive all the proceeds of the berths, and the benefit you derive is the use of the car?

Mr. CASSATT. Yes, sir, and the accommodation it affords the passen gers, of course. They hire the porter and conductor of the car.

The CHAIRMAN. Do you regard that arrangement as beneficial to the company?

Mr. CASSATT. Well, yes, we think it is a fair one. We are owners in the sleeping-car stock; the Pennsylvania Railroad Company, I mean, is, as a company.

The CHAIRMAN. Not individual members?

Mr. CASSATT. No, sir; as a company. It owns stock representing about half of the value of the equipment on its lines; so that the Pennsylvania Railroad Company participates to the extent of one-half in all the profits earned on its own line by the running of these sleeping-cars. This we think is a better arrangement for the company than if it ran its own cars, as, with such an extended system of sleeping-car lines, running on many roads in different interests, the service can be better managed and more efficiently performed by a separate organization. The Pullman Palace-Car Company, too, own all, or nearly all, the patents on sleeping-cars; and it is also doubtful whether a railroad company could legally collect pay for the sleeping-car accommodations, when, as would frequently be the case, this charge, added to the passage fare, would exceed the limits fixed by law.

The CHAIRMAN (addressing the committee.) I find on pages 108 and 109 of this report a detailed statement of the expenses of the Pennsylvania Railroad and branches for the year ending December 31, as follows: