Did PC ever make a dime?

Discussion relating to the Penn Central, up until its 1976 inclusion in Conrail. Visit the Penn Central Railroad Historical Society for more information.

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CPSK
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Did PC ever make a dime?

Post by CPSK » Sun Jun 13, 2010 3:38 pm

Hi;
I have read and heard that Penn Central never made a penny (let alone a dime) during their existence. Is this actually true? If so, how much money did they lose? Who paid their operating costs?
I grew up along the New York Central West Shore line, which later became the Penn Central River Line, and as a teenager, I would enjoy talking with train crews who were stopped for many hours on a passing track in Teaneck, NJ.

Thanks

FW

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charlie6017
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Re: Did PC ever make a dime?

Post by charlie6017 » Sun Jun 13, 2010 5:40 pm

If they ever did at all, it probably would have been in 1968. I'm thinking taking on the NH in '69 may have added onto their woes. Noel could certainly weigh in more on that.

Here is a link that has info, including a 1968 Annual Financial Report.

http://www.multimodalways.org/archives/ ... /PCTC.html

Charlie
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mst145
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Re: Did PC ever make a dime?

Post by mst145 » Sun Jun 13, 2010 9:31 pm

CPSK wrote:Hi;
I have read and heard that Penn Central never made a penny (let alone a dime) during their existence. Is this actually true?


According to their annual reports, they did turn a profit in 1968 and 1986 (a decade after they left the railroad business).

Who paid their operating costs?


Normally in a complex corporate structure like Penn Central, when you have operating losses the difference comes out of retained earnings, reducing stockholder's equity. If you don't have enough retained earnings to cover the operating loss, then the corporation goes into bankruptcy protection, which it can 1. liquidate the assets to pay off debt (Ch. 7) or 2. reorganize and wipe out the shares of stock.(Ch. 11).

M.T.

56-57
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Re: Did PC ever make a dime?

Post by 56-57 » Tue Jun 22, 2010 10:40 am

That 1968 profit and was simply grandstanding by the PRR side of the house to keep their unbroken string of dividends running.. The dividend and the profit were actually paid for out of loans provided to the railroad. 'Wreck of the Penn Central' explains this all fairly well.

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Otto Vondrak
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Re: Did PC ever make a dime?

Post by Otto Vondrak » Mon Sep 20, 2010 11:25 am

56-57 wrote:That 1968 profit and was simply grandstanding by the PRR side of the house to keep their unbroken string of dividends running.


It was the profits from the Lehigh Valley that kept the PRR and PC propped up for so many years on the balance sheets.
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56-57
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Re: Did PC ever make a dime?

Post by 56-57 » Wed Sep 22, 2010 6:42 pm

The LV was in the red from '58 on according to their own annual reports.. Was that the PRR gouging them or am I politely poking holes in your statement? I'm honestly curious to know more, I've heard the LV was 'raped' by the Pennsy (still a strong sentiment around here all these years later)..
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Noel Weaver
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Re: Did PC ever make a dime?

Post by Noel Weaver » Wed Sep 22, 2010 7:08 pm

The Lehigh Valley was already in the hole by merger time. The PRR made money on their investment in the Norfolk and
Western but they had to sell that stock as part of the agreement in order to effect the merger.
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Re: Did PC ever make a dime?

Post by 56-57 » Wed Sep 22, 2010 7:24 pm

Completely forgot about the N&W stock.. It's incredible, 1949 was the PRR's last year in the black, yet they never stopped paying dividends until 1969.. Keeping up appearances.. A lot of good it did!
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Tadman
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Re: Did PC ever make a dime?

Post by Tadman » Sun Oct 17, 2010 9:23 am

Guys, if this topic interests you, "Wreck of the Penn Central" by Binzen and Daughen is required reading. I noticed it cited in an above post - it's the best way to answer questions like this. Quite frankly, PRR and successor PC had an unbelievable corporate structure, with subsidiaries, investments, and shell companies everywhere. Brief answer: Some of the subsidiaries made money, many didn't, and David Bevan cooked the books liked nobody imagined possible. It was a bankruptcy of Enron proportions and a bankruptcy of Enron scandalousness. Of course the railroad operation was bleeding cash and had been for a while.

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Re: Did PC ever make a dime?

Post by carajul » Mon May 23, 2011 4:31 pm

You have to understand the corporate structure. It was like this...

PENN CENTRAL COMPANY (the holding company that owned everything)

Under the holding company were two other companies

1. Penn Central Transportation Company (the railroad)
2. The Pennsylvania Company aka PennCo (owned all the little subsidiaries such as trucking, pipelines, amuzement parks, smaller railroads)

When most peple heard "Penn Central" the only thing that popped into their mind was the railroad operation. The RR never made money (never made money as in taking in more money for rr shipping than expenses for running the rr). On paper they made money cuz David Beaven was xfering income and debt around all the smaller subsidiaries into the RR and they were living on credit (totally cooking the books). Selling coprorate paper, getting lines of credit, mortgaing everything they owned, etc. Eventually their credit got tapped out. The RR was losing $800,000 cash per day. In the second quarter of '70 they simply ran out of cash and credit and filed bk. That kind of cash loss is simply not sustainable. Although they did have $5 billion or so in physical assets they did not even have cash in the bank to pay their power bill.

The Penn Central Transportation Company (the railroad) is what filed bk. The parent company and PennCo continued. They took the $ the fed gov't paid them for their RR assets when CR was created, re-invested it and when their stock was dirt cheap the dude that runs American Preimeir Underwriters took control of the company.

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Re: Did PC ever make a dime?

Post by lvrr325 » Mon May 23, 2011 8:00 pm

Otto Vondrak wrote:
56-57 wrote:That 1968 profit and was simply grandstanding by the PRR side of the house to keep their unbroken string of dividends running.


It was the profits from the Lehigh Valley that kept the PRR and PC propped up for so many years on the balance sheets.


I hope there's sarcasm there I'm not seeing, because on the face of it that the little LV could keep the much bigger PRR afloat for more than a day on a good day is kind of silly. IIRC, at it's max the PRR was around 21,000 miles, while I don't believe the LV was ever more than a tenth of that, give or take a few hundred miles.

The recent Classic Trains covering just prior to Amtrak has some details on the PC merger, apparently the Pennsy's president was so desperate to bring on this merger he let the Johnson administration foist all kinds of expenses on - union benefits, hiring people back, taking in the New Haven - so I suppose you could blame Johnson in part for the failure - but either way there's no way the railroad made a legitimate profit having to spend all this additional money on top of all the expenses associated with the merger, when they were already in cost-cutting mode trying to make any money as it was. The recounts of how NYC passenger service went down the toilet after the merger tend to support this.

IIRC from LV Annual Reports I have '57 was the first money losing year. Some accounts have the LV as making a profit for the first quarter of 1975, but it depends what accounting rules are used.

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