Question. And the next figure is $312,809.35? Answer. Yes, sir. Question. Made up of what? Answer. That represents the surplus brought forward from companies merged subsequent to May 26, 1902. Question. To wit? Answer. Herkimer County Light & Power Co., $87,994.18; College Hill Electric Co., $25,163.85; Progressive Electric Co., $562.87; Newport Electric Light & Power Co., $82,873.09; Central New York Power Co., $116,215.36; or a total, as previously stated, of $312, 809.32. Question. Now, then, the next item here is $16,537,576.68, and that is what? Answer. That item represents the net income for the period May 26, 1902, to December 31, 1931. Question. And is the earned operating income? Answer. The earned operating income, yes. Question. The next item? Answer. The next item represents discounts on bonds acquired for the sinking fund, $3,996.50. Question. And the next item? Answer. Unamortized premium on bonds retired in the amount of $8,018.82. Question. And the next item? Answer. The next item represents profit on sale of Adirondack Power & Light Co. stock owned, $15,000, that being the sale of the Adirondack Power & Light Co. stock owned by the company. Question. Making the total credits to surplus for this company for this period of its existence up to December 31, 1931, of what? Answer. $16,997,832.51. Question. What have they done with that? Answer. There has been paid out in dividends during the period $12,801,739.54, of which $8,202,608.70 was paid on common stock and $4,599,130.84 was paid on the preferred stock. Question. I believe in the summary which is at the front end of this report you have stated that all preferred-stock dividends have been paid during the term of existence of this company? Answer. Yes. Question. And in addition to that this amount of dividends, scattered over the period of the company's existence? Answer. Yes, sir. Question. All right; the next item? Answer. The next item represents miscellaneous contributions to charitable and other institutions, $24,754.30. Question. Then, to get to this surplus total here, it is, of course, all true that the amounts charged to funded debt have been taken care of? Answer. Absolutely, sir. I think I stated that. Question. I wanted the record to show that. These are over and above fixed charges? Answer. Over and above fixed charges. Question. So that they are items commonly credited into the surplus account? Answer. Yes, sir. Question. Go ahead. Answer. The next item is a net figure and represents inventory and other miscellaneous adjustments which have taken place during the period from May 26, 1902, to December 31, 1931, in the amount of $116,015.87. The next item represents loss on sale of Liberty bonds owned by the company, and sold, in the amount of $20,495.71. The next item represents premium on bonds purchased for sinking fund, $25,621.87. The next item is the premium on bonds retired, which has been previously referred to, in the amount of $90,000. Question. Yes; we have already discussed that. Answer. The next is additional Federal income tax not previously provided for. Question. What does that mean, that a certain amount had been set aside and it was found that it was not enough to take care of the taxes and they had to take that out of the surplus? Answer. That is correct, in the amount of $75,960.55. The next item is debt discount and expense items charged off, in the amount of $34,851.50. That would be back prior to 1909, discount on bonds sold and charged directly to surplus instead of through unamortized debt discount and expense account. Question. So that took this much out of the surplus account? Question. Go ahead. Answer. The next item is a net figure and represents miscellaneous adjustments which were ordered by the Public Service Commission of the State of New York during the period from the date of the beginning of the Public Service Commission of the State of New York to December 31, 1931, in the amount of $308,698.20. Question. When you say it is a net figure resulting from the adjustment, that means that in this series of adjustments resulting from P.S.C. adjustments, there were some in and some out, and this is the net out? Answer. Yes; this is the net debit. Question. The net debit? Answer. Yes. Question. All right. Answer. The next item is loss on sale of securities owned, in the amount of $32,325.21, which represents losses sustained on securities which the company had acquired. Question. So that that came out of the surplus? Answer. Yes, sir. Question. All right. Answer. The next item is the same, only it is specifically on the Newport Electric Light & Power Co. stock, $76,000. Mr. MACHOLD. May the record show that that $76,000 item in the charges to the surplus is the same transaction as referred to in the credits as an $82,873 credit? That is correct, isn't it? The WITNESs. That is correct; yes, sir. By Mr. CHANTLAND: Question. So that in effect, then, it is not $76,000 against income, but that would be a net figure? Answer. That would be a net figure. Question. It would be a net credit? Answer. Yes, sir. Question. All right. Answer. The next item represents notes receivable against the Central New York Power Co., written off, in the amount of $267,390.55. Question. Is there $116,000 against that? Answer. Of which there is an offsetting credit item of $116,215.36. Question. So that actually the difference between those is the amount that came out of surplus? Answer. That is correct, sir. Question. All right. Answer. The next item is the loss on the sale of Upper Hudson Co.'s., what is known as the Upper Hudson Co.'s., and is a net figure in the amount of $10,258.29. This item represents a certain transaction which took place in what is known as the sale of the Upper Hudson Co.'s to the Adirondack Power & Light Co. The next item represents deficit in the operation of the Kanata Realty Co., written off, charged to surplus of the Utica Gas & Electric Co., in the amount of $48,689.72. Question. Of course, if that represents the surplus, we are not much concerned with the loss of the Kanata Realty Co., when they take that loss out of the surplus? Answer. The next item is engineering survey expenses on projects not developed, in the amount of $104,659.76. This item represents engineering and surveying and other expenses incident to the prosspecting for the purchase of lands and sites which it was later decided not to develop, and the expense of that was charged off on profit and loss, instead of being carried into fixed capital account of the company. Question. And the only way, then, that that expense would ever come back to them would be if these projects were ever subsequently taken up and became available as utility properties? Answer. They would very likely work back and pick it up. Before I finish with that I wish to state that pages 160, 161, 162, and 163 are the detailed records of surplus account just previously analyzed. Question. In other words, you have stated here the results of the working sheets following? Answer. Yes, sir. Question. All right. Turning now to page 164, what does the last column on that page show? Answer. It represents the percentage of dividends to total average book value on the number of shares of common stock outstanding. Question. All right. Read it by years. Answer. The percentage of dividends to the total average book value on the common stock of the company for the year 1925 was 8.75 per cent; 1926, 9.69 percent; 1927, 9.80 percent; 1928, 3.08 percent; 1929, 4.05 percent; 1930, 7.16 percent; 1931, 6.97 percent. The figure given for the year was on 40,000 shares of $100 par value stock outstanding in 1925. All of these shares in this table are shown on the basis of no par value stock, 10 shares of which were issued for each share of the $100 par value stock, in 1926. Question. Yes; but the percentages here are percentages? Answer. Yes. Question. And the price per share is shown in the preceding column? Answer. Yes. 102777-34-pt. 53- -21 Question. Now, turn to page 165 and beginning there, what do you set out there? Answer. The statement next attached is a comparative statement of the rate of return on fixed capital for each of the years 1925 to 1931, inclusive. Question. With the electric and the gas separated? Answer. Yes, sir, and then in the total. Question. In the total? Answer. Yes. Question. All right; you set this out in three different forms? Question. Meaning what? Answer. Meaning that this is the percent of return before the operating income deductions have been made from the revenues of the company. Question. To wit? Answer. Retirement expenses, uncollectible bills, general taxes and Federal income tax. Question. The next column? Answer. This is off the record. (There was a discussion off the record.) Answer. The second column is the return on the electric fixed capital after operating income deductions, excluding the Federal income tax, and the next one including the Federal income tax. Question. In other words, the second column is the first column. less all but the Federal income tax? Answer. Yes, sir. Question. And the third column is the first line with the deductions that you have stated? Answer. Yes, sir. Question. I will now ask you to read what the return on the electric fixed capital was for the years 1925 to 1931, inclusive, without deductions for Federal income tax and after operating income deductions. Answer. For the year 1925, 7.87 percent; 1926, 7.49 percent; 1927, 7.41 percent; 1928, 7.15 percent; 1929, 7.85 percent; 1930, 6.75 percent; 1931, 6.51 percent. Question. And the rate on this return after you also took out the Federal income tax? Answer. For the year 1925, 7.37 percent; 1926, 7.01 percent; 1927, 6.95 percent; 1928, 6.85 percent; 1929, 6.71 percent; 1930, 6.42 percent; 1931, 6.27 percent. Question. The next table showing the same figures for the gas fixed capital? Answer. Yes, sir. Question. And the table at the bottom of the page shows it in detail? Answer. Yes, sir. Question. I will ask you to read from the bottom of the page, from the bottom table, the return on the combined, the total fixed capital after income tax deduction, except deduction for Federal income tax. Answer. For 1925, 7.52 percent; 1926, 7.19 percent; 1927, 6.88 percent; 1928, 6.59 percent; 1929, 7.01 percent; 1930, 6.71 percent; 1931, 6.41 percent. Question. Turning to page 167, what have you there at the top of the page? Answer. This is the return on the average fixed capital plus allowance for working capital. Question. On what basis do you set up the working capital? Answer. The working capital is set up on the basis of one sixth of the total operating expense of each year exclusive of depreciation and Federal income tax, plus the average of material and supplies and gas manufacturing materials for each year. Question. And that is the source of this formula that you use in making this estimate for working capital? Answer. It was the formula which I am informed was agreed to as a result of a conference held in this office. Mr. MACHOLD. This is off the record. (There was a discussion off the record.) By Mr. CHANTLAND: Question. The basis for this being the decision in what is known as the proceedings affecting the charges or rates of the Utica Gas & Electric Co. before the Public Service Commission of the State of New York? Answer. Yes; that is correct. Question. Now, then, I ask you to read the rate of return on this basis, after including something for working capital on the basis that you have stated above, deducting for Federal income tax and after making the other operating income deductions that you have enumerated. Answer. For the year 1925 the return was 7.23 percent; 1926, 6.94 percent; 1927, 6.62 percent; 1928, 6.34 percent; 1929, 6.76 percent; 1930, 5.49 percent; 1931, 6.22 percent. Question. You next have some text and a table under the heading "Return on average fixed capital excluding Washington Street steam electric plant." Why do you bring that discussion in at this time? Answer. This discussion was brought in in this form by the examiner in charge of this work as being pertinent to this situation, inasmuch as the Washington Street plant had been a nonoperating plant for a number of years before. Question. All of which we have discussed a number of times in the course of this examination? Answer. Yes, sir. Question. And the figures that appear in the tables are with that change made? Answer. Yes, sir. Question. The effect of excluding the Washington Street plant in these calculations results in the rates of return carried throughout here, which raises them slightly? Answer. It does, sir, slightly. Mr. MACHOLD. We would just as soon have the record show that it is giving effect to retirements made in the year 1932, while the report only goes to December 31, 1931, and what the percentage of the increases in the return are, giving effect to these retirements. Mr. CHANTLAND. Do you want some of these things read in? Mr. MACHOLD. No; just to make the statement on the record that the increase in the percentage of the return is slight, which it is. |