March 9, 1946
 

I'o THE Stockholders of the

HUDSON & MANHATfAN RAILROAD COMPANY:

For your Information there is transmitted herewith a condensed statement of your
Company's fiscal operations for the year ended December 31, 1945, as audited by Messrs.
Haskins & Sells, Certified Public Accountants.

Due to the curtailment of activities incident to the War In the territory served by
your Railroad and the loss of traffic to competing trans-Hudson facilities foUowing
the lifting of restrictions upon the use of motor vehicles, Hudson & Manhattan's traffic,
which reached a wartime peak In 1943, progressively declined during the last six
months of 1945. For the full year passengers carried declined by 5,154,072, or 6.6%
below 1944. However, because of the Increase In local interstate fares, authorized by
the Interstate Commerce Commission at the Instance of your Company's manage¬
ment and eiTectlve June 26, 1944, the gross passenger revenue for 1945, as compared
with that for 1944, was only $166,184.58, or 2.5%, less.

Railroad operating expenses, exclusive of charges for amortization and depre¬
ciation, declined $42,881.99, the major changes being wage Increases aggregating
$96,499.58 and decreased general expenses of $113,222.49, the latter arising largely from
the termination of wartime provision for Insurance and Casualty Reserves. Provision
for amortization and depreciation of structures Increased by $330,098.57, as authorized
by the Bureau of Accounts of the Interstate Commerce Commission, resulting In an
aggregate net increase In operating expenses of $287,216.58. The funds allocated to
cover charges for such amortization and depreciation have been added to the Company's
Property Amortization Fund, which Is Included In Balance Sheet account, Insurance
and other funds, and, to the extent not needed for maintaining the Company's physical
properties, are available for debt retirement and other proper corporate purposes.

In contrast to the reduction In passenger re\"enues, the net revenue of Hudson
Terminal Buildings Increased $63,980.63, which amount, added to a reduction in taxes
of $56,890.18, shows an aggregate net gain, as compared with 1944, of $120,870.81, or
28.4%.

The deficit, or amount by which full bond Interest was not earned, for the year 1945,
resulting from all your Company's operations, after giving effect to the Increased
amortization and depreciation charges of $330,098.57 heretofore mentioned, was
$500,576.96, an Increase of $211,506.90, as compared with 1944.

Full Interest was earned and paid upon the First Mortgage 4^/^% and First Lien
and Refunding Mortgage 5% Bonds in the hands of the public.

Lpon the Adjustment Income Bonds, which bear cumulative Interest of 5% per
annum, payments have been made and authorized as follows: for the first six months
of 1945, 13^%, or $17.50 per thousand dollar bond, was paid October 1, 1945; for the last
six months of the year, a disbursement of 1/^%, or $12.50 per thousand dollar bond,
has been authorized and will be payable April  1,  1946.    'Fhe total paid upon the