T CHAPTER XVIII HE PRAIRIE CATTLE CO. may be called the mother of the British Cattle Companies. It had a varied career, as this chapter will disclose. As I had nothing to do with it personally in its inception, Mr. J. M. Rusk, who was for many years its able Secretary at the home office in Edinburgh, Scotland, has sent me the following statement: "The original proposition for embarking upon the enterprise connected with the Western Cattle Range business was first introduced in Edinburgh by Messrs. Underwood, Clark & Company in the year 1880. At that time the knowledge of the Western Range business of America was only known to Scotsmen by way of romance. It was represented to the people in Scotland as an industry whereby all they had to do was to put their money into cattle which could be grazed upon the Western prairie grass free of any cost, and sent to the market fat. The proposition submitted by Messrs. Underwood, Clark & Company to a few financial men in Edinburgh expressed the purchase of a ranch in Colorado and in New Mexico, and afterwards there was added a ranch in Texas. A Company was constituted in January, 1881, with a Board of Directors of which the Earl of Airlie was appointed Chairman. The original issued capital of the Company was £100,000, but this was increased during the two or three years following for the purpose of adding additional land and purchasing additional herds of cattle. The theory submitted to the financial circle, and afterwards to the shareholders, was that by purchasing patches of land up and down the water courses in Colorado, the owners of this land, having access to the water, would be able to control the whole range of the district. The intention of this theory was that by investing a comparatively small amount in land the share holders would have the benefit of unlimited grazing rights behind the land. "The original prospectus of the company bore that the range cattle industry in the Western States of America had yielded very large profits. These profits had been not less than from 25 to 40 per cent per annum, and under more favorable conditions have exceeded 50 per cent. Such profits are not surprising when it is kept in view that to raise a three-year-old steer worth from $25 to $30 costs only from $6 to $10.' "After two or three years' experience of the operations of the Company under the management of Messrs. Underwood, Clark & Company in America, and subsequently under R. G. Head, the shareholders awakened to the delusion that the representations that had been made to them could not be verified. The capital which was sent out every year for the first two or three years for the purchase of additional herds. came back too soon by way of remittances from the proceeds of the cattle which had been purchased shortly before out of the capital. These return payments were supposed to be revenue derived from the legitimate income of the herd. The result was that by the year 1886-87, the managers found they could not produce sufficient cattle on the market to send the usual remittances. These shortages began to be apparent with the result that the shareholders got suspicious and from that point inquiries took place which brought out the fact that either through want of provision for losses on the range, or through mismanagement, the company found itself short of the numbers of the herds which it had in its books by many thousands of cattle. "The following figures are taken from a printed statement issued by the shareholders for the year 1883: Price realized per head... .$25.00 .$13.88 Valuation of Stock per head in Balance Sheet.. American Expenses per head... Debenture or Preferred Capital... Ordinary Capital paid up... .... Dividend per cent on Ordinary Capital. The Reserve or balance forward 4s Iod £223,240 £250,000 ....20/2 .£10,413 £5 "In view of subsequent experience, it would not be safe to take many of these figures as accurate, especially with regard to the number of cattle, the area of land, the number of calves, or the valuation per head of the cattle. The 20 1-2 per cent which was paid in Dividend was no doubt largely accounted for by the realizing of cattle, which formed the Capital of the Company and not out of the annual increment of the herds." My first introduction to the Prairie was in 1882. It had already, either by a dividend or otherwise, made a great impression in Scotland. The financial officers of that conservative old city had found a new mine to exploit. The drawing rooms buzzed with the stories of this last of bonanzas, staid old gentlemen who scarcely knew the difference betwixt a steer and a heifer discussed it over their port and nuts. Mr. Underwood, a banker in Kansas City, the promoter, was a little tin god and Mr. J. Duncan Smith was his prophet. Mr. Smith was a fine type of an Edinburgh lawyer, successful in an investment company that has stood the test of time. But like the rest of us, he swallowed the cattle financial camel, not even worrying at the tail. The years 1882, 1883 and 1884 were remarkably successful ones in the western cattle business. The climatic conditions were excellent, prices were good and every condition. was favorable for a company to make a good showing. Messrs. Underwood, Clark & Co. had complete control of the company so far as its range management was concerned. But they had gone further and in a contract made with the Scotch financiers they acquired a contingent interest in the profits of the business. The 1883 dividend of twenty and a half per cent made a great sensation and carried a lot of people off their feet. The average shareholder was not able to count the cost, although some of the insiders cut and ran, reaping large profits. It took the sale of 21,448 cattle to attain this end, while the calf brand was turned in at 28,207. The promoters and managers saw what was coming, and before the bubble burst they began forcing a settlement of their deferred interest. No doubt this was hurried along by an investigation made in the spring of 1883. Under date of the 20th of June of that year, Mr. Duncan Smith addresses a letter to the shareholders informing them that as he had been unable to visit the ranches himself, he had employed two experts to go over the range, report upon it, estimate the numbers and check up the statements of Mr. W. R. Green who was then the active manager under Underwood, Clark & Co. The two gentlemen were Mr. T. T. D. Andrews of Fort Worth, Texas, and Mr. Thomas Binnie, an inspector for the Scottish American Mortgage Co. of which Mr. J. Duncan Smith was managing director. Andrews, after a varied career, is still alive, while Mr. Binnie who rose by merit and fine business ability to be manager of the above company was called to his last resting place in the fall of 1916. The report to a great extent white-washed the management of the above parties. This difference, however—W. R. Green disappears and R. G. Head reigns in his stead. Head was known as the 20,000 dollar beauty in the cowman's parlance. This was supposed to be the amount of his salary, likely very much overestimated. He was a small, compact man who had been cowpuncher, drover and cattle dealer. He was honest and competent, but exceedingly vain and his promotion to this position gave him a very bad attack of swelled head. His aspiration was to be the Napoleon of the western cattle business. Naturally he was rather unassuming, a more than average business man, but his friends pushed him forward and it was rather pathetic to see him preside at the International Range Association's meetings in Denver, Colorado, in later years. Dick on the cattle Rialtos was out of place. His natural element was the range and there he should have remained. In reading over the Andrews and Binnie report, they estimated the winter loss from one to two per cent. Later we shall see how far they were correct. The report of the company for the year 1884 is interesting reading. It bears date of 28th January, 1885. The splendid statement of Underwood, Clark & Co. when promoting the company, the rosy hue of the dawn, pales and blackens when the sun rises and sends its rays over the scene. The great ranges with their water fronts and springs are suddenly reported as overstocked and the deferred interest may be seriously damaged except 45,000 cattle are shipped in 1884. I can see the Board composed of able men, most of whom I knew personally and one of whom is yet alive, scanning the document that turned upside down all the calculations of the past three years or less. It meant a settlement with Underwood, Clark & Co. or a law suit far from home and very few friends. There the Board sat with a pistol at their head and they settled for $400,000.00. One hundred thousand dollars was taken in shares, the balance in cash, and with this swag in their pockets the promoters partially disappeared from the history of the Prairie Company. A more sordid settlement was never made. As a matter of fact, the deferred interest was not worth the paper it was written on. Another deputation, this time from Scotland, comes to check up the numbers in the herd and also to size up the situation of an overstocked range. The three members of the above were Mr. John Wilson of Chapel Hill, a member of the Board, Mr. David Hume, Barrelwell, Brechin, and a Mr. Prentice, a chartered accountant of Edinburgh, Scotland. The two former I knew intimately. They were able men, as good farmers as you could meet in a day's march, but up to their arrival they had never seen a cattle ranch. They were ignorant of conditions, of climate, of the ways of the West. They ran up against a hard proposition when they tackled Underwood, Clark & Co. on their native heath. |