The last two months of the year showed the effects of the business depression, earnings of the last quarter, net for dividends, being only $18,614,416, compared to $28,758,142 the three months preceding. But it was not until 1908 that the full force of the storm was to be seen. In the first quarter of this year net profits applicable to dividends dwindled to $8,854,297.37, compared with $27,031,008.20 a year previous, and second-quarter profits were $9,042,027.55 against $30,843,512.61 in the same period in 1907. A striking comparison of the difference in trade conditions that occurred in the twelvemonth is afforded by the following statistics. 1908 1907 Gross sales $482,307,840.34 $757,014,767.68 Steel ingot production 7,838,713 tons 13,342,992 tons Finished steel production 6,206,932 tons 10,564,537 tons Number of employees (avg.) 165,211 210,180 Net earnings $91,847,710.57 $160,964,673.72 Net for dividends $45,728,713.70 $104,565,563.76 No special appropriations were made out of 1908 profits and a surplus of $10,342,986.70 was thus shown for the year after the dividend payments. However, such an appropriation appeared to be unnecessary as the Corporation already had a large reserve fund for the most important work underway, the building of the city and plant at Gary. On January 1, 1908, the balance on hand for this purpose was $26,051,242.62, and there was spent on the work $18,848,472.19 during the year, so that at the start of 1909 there was a balance of sufficient size to continue the work for several months. During the year 1908 the bonded debt of the Corporation, which had been increased from $564,670,876 at the end of 1906 to $602,320,511 a twelvemonth later, chiefly on account of the issuance of securities for exchange for Tennessee Coal & Iron stock, was reduced to $594,865,534. Among the important items of expenditure for 1908 is found a sum of $3,460,993 which was employed in modernizing the plants of the Tennessee company acquired the previous year. This was the beginning of a series of large expenditures extending over many years, and all for this purpose. Up to the end of 1914 approximately $20,180,092 had been spent on this work, most of it coming from the general funds of the Corporation and not from the earnings of the southern subsidiary itself. To what extent the acquisition of the Tennessee company affected the Steel Corporation’s capacity is shown in a table submitted in the report to stockholders for 1908, the figures given being as of the end of the year: BLAST FURNACE STEEL FINISHED PRODUCTS INGOTS STEEL _Tons_ _Tons_ _Tons_