Preparedness Pays

Boilers abulge with defense traffic, all U.S. railroads are prospering. But no major road is so prosperous as the Louisville & Nashville. Last week it declared a $1.75 common stock dividend, thus boosted 1941 payments to $7, the highest paid since 1880.

L. & N. was the road that helped develop the great Alabama steel areas (and vice versa); it was the road whose passengers used to be met by grinning waiters with free Sazerac cocktails; it was the road which John W. (Bet-you-a-Million) Gates kidnapped from J. P. Morgan's corral in a spectacular Stock Exchange raid in 1902. Gates made $10,000,000 by selling the stock to J. P. Morgan, who then resold it to Atlantic Coast Line. A.C.L. still owns 51% of L. & N. common.*

Not in the dashing Morgan or Gates tradition is President James Brents Hill, 63. A penny pincher, he peppers his 26,600 employes with "president's messages" on thrift and courtesy. He once told employes to conserve pencils because L. & N. had to haul 1,887 lb. of freight a mile to buy one.

But Hill is a railroader who can see beyond his own switching towers. Two years ago he began grooming L. & N. for the defense rush. In the past year alone he has spent $15,000,000--almost equal to all profits in 1937-39--for 14 diesel switchers, eight diesel passenger engines, 14 regular engines, 500 all-steel hopper cars, large amounts of road and shop equipment. Meanwhile, L. & N. mechanics worked overtime to reduce "bad order" cars to only 1.8% of the total against 32.3% three years ago.

Thus prepared, L. & N. prospered almost automatically. Some 35-45% of its revenue has long come from coal--easy-riding. full-loading traffic on which any railroad should make money. Then came defense. Since 1939 at least 130 new industries have camped at L. & N.'s roadside. These include giants like TVA's Godwin, Tenn. phosphate plant (4,800 carloads annually), the Wolf Creek ordnance plant at Milan, Tenn. Moreover, L. & N. now hauls soldiers, food and equipment directly to twelve Army camps and nine air bases, indirectly to many more.

Because of these new-found traffic sources, L. & N. revenues in 1941's first nine months jumped 20% to $87,000,000, highest since 1929. But net operating income rose 57% to $19,129,000, the best since sainted 1926. L. & N.'s record in thus converting gross to net proves that it pays to be prepared.

* A.C.L. depends heavily upon its L. & N. investment. Last year dividends received totaled $3,580,000 against A.C.L. net profit of $1,824,000.

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