fwwF$$$ I EVENING EUBLIO LEDGERr-IfilLADEttelA, MONDAY, APRIL' 18, 1021 15 The United Gas Improvement Company ' - - ' !- 39th Annual Report FOR FISCAL YEAR ENDED DECEMBER 31ST, 1920. to the Stockholders of The United Gas Improvement Compnny: rnnVlT AND MJ ai;uuunt iuk USUAL yisau enuev lAbVillIJEIl Ol, 1MV EARNINGS IFrom Leased Works and from Investments In Stocks ana oonau $ u,uuo,oo.i x Sale of Securities. Engineering: and Supervision Interest Rental of Broad and Tasker Streets Office Rental of Offices in Building:, Broad and Arch Streets, to Companies in which this Company is a shareholder 740,474.66 6,209.00 380,687.88 1,660.00 76,181.17 LIABILITIES Capital Stock: Common $61,020,800.00 Preferred 4,654,800.00 $65,584,600.00 Six per cent. Unsecured Gold Notes. ...... 7,600,000.00 Bills Payable (Liberty Bonds) 488,750.00 Taxes (Accrued but not due) 208,020.00 Sundry Accounts 734,303.08 Philadelphia Sinking: Fund Reserve 10,628,200.00 Philadelphia Accrued Rental 1,505,050.02 Philadelphia Sundry Creditors 490,216.14 Philadelphia Uninvested Accretions on Sinking: Fund 236.00 Undivided Profits, Decem ber 31, 1010 $34,765,017.20 Net Profits for Year 1020. . . 2,303,876.12 $37,058,893.41 LessDividends paid in Year 1920 Preferred Soptembcr 16 $34,072.80 December 15 79,714.05 Total Earnings $7,128,773.22 EXPENSES laboratory $32,370.10 Department of Tests 10,200.00 Registration of Stock 1,600.00 Expenses of Restaurant, Broad and Arch Streets, over Receipts 10,385.12 Rental of Saf o Deposit Box 2,000.00 T.itteatlon, Retainers, Lawyers' rcc3, etc... 18,006.40 Operating' Telophono Service 4,946.18 Dues to Trade organizations 1,005.00 Special Advertising (Annual Report, etc.) . . 0,271.35 Office Furniture 7,026.34 Cost of Operating Building,. Broad and Arch Streets, including Taxes 117,131.22 Varies and Traveling Expense 629,443.80 Office Supplies v 17,016.43 General Expenses 70,742.65 Taxei, Stato and Federal 315,077.60 Insurance, Taxes and Maintenance- of Broad and Tasker Streets Office- 421.42 Construction Contracts 7,834.06 interest on Bills Payable- 30,728.03 Discount and Interest on Unsecured Gold Notes 610,626.00 Bonus Tax, Increase Capital Stock 11,387.01 Commission on Issue of Preferred Stock... 30S.150.00 $113,787.75 Less Interest Adjustment on Preferred Capital Stock Subscriptions 27,523.01 $86,263.84 Common January 16 $1,220,506.00 April 15 1,220,596.00 July 16 1,220,590.00 October 15 1,220,506.00 4,882,384.00 Total Dividends.. 4,968,647.84 Undivided Profits, December 31, 1920, in vested as above 32,090,245.57 Total Expenses $2,210,325.66 Profits for Year 1020 before Deduction of Loss from Operations of Philadelphia Gas Works $4,009,447.56 Loss from Operations of Philadelphia Gas Works 2,605,671.44 (Jet Profits for Year 1020 j $2,803,876.12 COMPARATIVE STATEMENT OF PROFIT AND LOSS FOR FISCAL YEARS ENDED DECEMBER 81st EARNINGS 1919. From Regular Sources $6,420,068.32 From Special Sources: Profit from Sale of Se curities 1920. $6,382,298.66 $47,659.60 746,474.60 746,474.56 Total Earnings ,.$0,429,058.32 $7,128,773.22 $698,814.90 EXPENSES Xtxes, Salaries and Expenses $1,353,597.06 $1,303,550.66 Commission on Preferred Stock 305.160.00 War Chest Contribution ... . 25,000.00 Discount and Interest on Cold Notes 533.750.00 610.fl2fi.00 , - ., v.. $60,040.40 305,160.00 26,000.00 1-76,875.00 ' Total Expenses $1,012,347.06 $2,219,325.66 $306,978.60 Profits for Year before De duction of Loss from Op erations of Philadelphia Gas Works $4,517,611.26 Lois from ODcratlons of Philadelphia Gas Works.. 732,271.13 $4,900,447.56 2,005,571.44 $391,836.30 tl,873,300.31 Net Profits for Year. $3,785,840.13 $2,303,876.12 $1,48104.01 27,523.01, Dividends: Preferred $113,787.75 Less Interest Adjustment on Preferred Capital Stock I inscriptions v f'On. int Earnlnrr - - ommon from Current Earnings... From Undivided Profits of rrevlous Y"nrs $86,263.84 $86,263.84 $3,785,340.13 1,097,043.87 $2,217,612.28 2,664,771.72 Total Common Dividends. $4,882,884.00 $4,882,884.00 ToUI Dividends $4,882,884.00 Decrease. 1 1ncrease. $4,968,047.84 $86,263.84 For the IlectrW.v k flfua' yCar ended Dcccmbcr M. 1920, tho sales of gat and irlVon i,u I)ropertics in whlch yu interested show, in com- .. ...vti j,ijii; City of Philadelphia inR. i Gerties outside of Philadelphia: NatS r 30-71 per ccnt- incrca3e- Natural Gas 9.47 per ccnt. decrease. STATEMENT OF ASSETS AND LIABILITIES December 31, 1920 ACUtffO f 'J. Electric, Welsbach and other proper H COSt Qli OHO OOP r?f "vestment in Phi.adelph.a Lease eVcIusiv; '"m cZvuu:;::-:-':'- "?!!! ? ,iberf n , 'iimia udb worKS. 4,774,650.41 S E.Sndmn.I'd Vlctry Not0S 016,250.00 "tote, Plilladelphia and elsewhere. . . 1,051,759.23 unts and Bills' 'iJXu E ' - 2 OUnon. ,, n ..": . " I'.-.V ' ,Wi,00.or criii T uranieea Dividends (Ac- 123.75 04,252.49 200.00 ued but nnt .....v """,UD v""" toreronm I ' "uc' 780, ... ...niui-mi Mladelphi Total a Sinking Fund Securities 10,628,! $110,280,621,41 Total $110,280,621.41 Messrs. Lybrand, Ross Brothers and Montgomery have audited these statements and report as follows: "LYBRAND, ROSS BROS. & MONTGOMERY, Accountants and Auditors, Morris Building, Philadelphia. Philadelphia, 11th April, 1921 Wc have examined the Assets and Liabilities of The United Gas Im provement Co. as of 31st December, 1920, and tho Income and Operating Accounts for tho year ended that date and found them correctly stated on tho books of tho Company. Wo certify that tho foregoing statements of Assets and Liabilities as of 31st December, 1020, and Profit and Loss Account for tho year 1020 arc in accordance with the books. LYBRAND, ROSS BROS. & MONTGOMERY, Accountants and Auditors." A Committoo of tho Board of Directors has examined and verified the Company's securities and report as follows: "Philadelphia, March 2, 1021. Mr. Samutl T. Dodinc, President, The United Gas Improvement Company, Broad and Arch Strcctg, Philadelphia. Dear Sir: Pursuant to resolution adopted by tho Board of Directors on Febru ary 9, 1921, wo have counted all the stocks and bonds owned by The United Gas Improvement Company and found tho same to agree with the amounts stated in tho books of the Company. We have attested in writing detailed list of said stocks and bonds and have filed tho same with the Treasurer. Very truly yours, WILLIAM WOOD, MORRIS L. CLOTHIER, THOMAS J. DOLAN." The $6,103,000 of 7 per cent. Preferred Stock, tho issue and disposal of which were authorized at tho last Annual Moetlmr. wn nffomH tn h. stockholders for subscription at par in proportion to their holdings of Common Stock. Only $962,750.00 boing so disposed of, the balance was taken and paid for by tho Underwriting Banking Syndicate. Tho $7,600,000 of 0 per'cent. Gold Notes maturing February 1, 1021, were paid from the proceeds of an issue of two year 8 per cent. Gold Notes of like amount. .. i .OBt marxea icature ot izo was the greaV increase in the cost oi on ana coai, and tne difficulty of securing adequate supplies at any ft SVI.I '"" .! were lauen to secure the adontinn nt nnu, n. cf ards and increased rates for gas and electric current" to offset increased costs oi manuiacturc. These efforts have! been successful in every case except in the City of Philad ""Ma. y " u Din, , ufCam BPpar0' ' " defldt for 1920 Jn operating under TTV,.? n "V .-ooaDiy exceed $2,600,000 and practic ally cut In half the Company's earnings from other sources, and that it was impossible to sell securities of gas and electric properties in which your undivided profits arc invested, tho President was authorized by the Board of Directors to send to all shareholders a letter of which the fol lowing is a copy: "September 8, 1020. To the Stockholders of The United Gas Improvement Company: 1.M i? i,e1?P?VaI th Board of Dircctors I bK to advise you that while the dividend payable on Ootobor 15, 1020, will be at the rate of eight per cent, per annum, us heretofore, in view of the great losses which your Company is now suffering in operating the Philadelphia Gas Works, and of which I deem it proper that you should bo advised, it is Impossible to continue tho payment of dividends at tho rate of eight per cent per annum upon the common stock in the immediate future. Such dividends as may bo doc ared after October 15, 1020, must certainly be materially less than heretofore, by reason of facts which are fully set out in the enclosed statement; and the restoration of an eight per cent, per annum dividend rate in rfnnpnrtpnf. unnn mn. - i , .. . ,. .. " r :.;: r " "" wn"y neing odjo to secure an amelioration of the conditions mentioned. A portion of your dividend paid during the years 1010 and 1020, as l?J??Z' Zeag yUr occuted undivided profits of past years; bu the objec of these accumulations is to enlarge your onZ'n? 'S ft l h ,nV01We"t8 cWe this fund, in carrying on the operations of the companies In various parts of the country in which you are interested It is manifest that the present financial con" The statement referred to follows: as enclosed In the above letter was as 'THE UNITED GAS IMPROVEMENT COMPANY Office of the President Philadelphia, August 31st, 1020. Hon. J. Hampton Moore, Mayor of the City of Philadelphia. My Dear Sir: ... . In a letter to you dated May 19, 1020, and at subsequent meetings of City Council's Committoo on Transportation and Public Utilities, I have endeavored to make clear that the greatly increased demand for oil, ns a motive force for naval and merchant vessols, automobiles, trucks and farm tractors, has resulted in a marked falling oft In the. supply available for gas manufacture. In order to reduce tho consumption of oil and guard against a short age of gas next winter, City Council, on July 13, 1020, authorized tho Commission detailed statements of our operations under the leoso from 1898 to date, which their accountants arc verifying from our vouchcra and books of account. Early in April, In response to a request from tho Commission, your Oftlcers and Engineers submitted nn exhaustive study, with suggestions concerning the future requirements and operation of the Philadelphia Gas Works. At the request of the Commission your President prepared the following summary of the results sought to bo obtained, for publica tion with the letter accompanying the study: RESULTS 80UGHT TO HE ACCOMPLISHED 1. Tho City's right to terminate the present or any arrangement at nny time on predefined conditions. 2. The continuance of the City'3 cash revenue and free gas and service. 3. In lieu of opportunity for profit, provision for a suitable and defined compensation to the Operating and Financing Tenant. 4. A financial plan capable of providing for any necessary refunding"! and of supplying as required money for construction and working capital tomporary substitution, until January 1, 1021, of a 530 British Thermal through tho issue from year to year, probably in series, of securities Unit Standard for tho 22 Candle Power Standard provided for in tho lease. The capacity of the two manufacturing plants is not more than suf ficient to meet tho estimated demand on days of maximum consumption which might be called Equipment Certificates, each series to bear the Interest rate prevailing at its date of issue, all to have amortization period long enough to discharge the principal at the lowest annual cost so as to add only the least practicable item for that purpose to the cost during the coming winter. This demand should largely incrcaso each year of gas, and to be secured by such a segregation of receipts from gas as may bo necessary to create a marketable security. 5. Such supervision and regulation of rates, services, facilities, accounts and capital issues by Public Authorities as may bo necessary to stabilize and to assure tho results intended to be accomplished. "Mr. XVillard F. Hint, Secretary Gas Commission, City Hall, Philadelphia. Dear Sir: In your letter of February 3, 1921, Question 4 reads as follows: "On tho basis of the heating value standard which you recom mend, outline in as detailed a manner as possible the changes which should be made in the plant to secure maximum economic production, taking into account interest charges and ultimate objective." The plan submitted herewith represents carefully considered effort to answer your question. Tho outstanding facts which, in our judgment, give rise to the necessity of adopting such a plan, in the interests of tha City and of gas consumers are: 1. Tho gas plant i3 now taxed to tho limit of its capacity, and additions must bo provided for immediately in order to meet the constantly growing domand. 2. The present efficient plant of the Philadelphia Gas Works has been developed according to the best practice to meet tho requirements of the terms of the lease, which specify 22 candle power as the standard, and can be readily adjusted to tho change of standard now apparently economically unavoidable, because of tho scarcity and high price of gas oil, by adding for this necessary new generating capacity, those types of apparatus and methods of production which will produce a resultant mixed gas of 530 B. T. U. at a minimum cost. 3. Such additional construction for production and distribution pur poses as should be undertaken immediately or as soon as may bo in 1921 involve on the lines set out above tho expenditure of approximately worth approximately $14,000,000. It is now conservatively valued at ti ononon , inerca"cr ,n varying amounts, averaging about $40,000,000.00. conservatively valued at j $000 000 a year making a grand total, with in ,.-..,...., 4 ouuuiuiim tuiiairucuon prior to ajecemoer 31, 1027. 4. AftCr the deduction nf t.llli rnntnlo nniA nJ J - iL nt. -m - ....... cu.u aim uiLiucu iu me Vjity oi with the growth of the City and tho increasing preference of its citizens for gasoous fuel. Upon whether a British Thermal Unit Standard shall be made per manent, and, if so, upon how many British Thermal Units pcr cubic foot of gas shall constitute said standard, depends decision as to the future development ot the gas business. An erroneous decision on tho question of standards, or failuro to act promptly, may seriously impair tho effi ciency and greatly lessen -the value of the City's most Important asset. At our last conference I stated to you that in tho operation of the Philadelphia Gas Works radical changes in economic conditions brought about by tho war havo so increased tho cost of manufacturing and distrib uting gas as to render it financially impossible for The United Gas Im provement Company to contlnuo to operate under the terms of the lease; and urged that, in tho interest of the City, its taxpayers and gas consum ers, and in fairness to The United Gas Improvement Company, an exhaus tive study of the situation bo made, with a view to establishing conditions under which it will be possiblo for the Gas Works to bo successfully operated in the future. I bcllevo that tho people of Philadelphia, constituting in their corporate capacity the Landlord, will with practical unanimity admit that The United Gas Improvement Company has been a good Tenant. I doubt whether more than a very limited number realize how good a tenant the Company has been. In 1807 tho Gsb Works had a daily manufacturing capacity of 10,440, 000 cubic feet. In the Fall of 1020, when changes in apparatus now under way are completed, tho daily manufacturing capacity will bo 74,000,000 cubic feet. In 1807 tho number of consumers was 123,026; at this date tho num ber of consumers is 418,863. Tho sales of gas in 1808, tho first year of the lease, amounted to 3,633,306,805 cubic feet. In 1920 (tho last six months estimated), 15,156,455,000 cubic feet. Tho plant when leased to The United Gas Improvement Company was Tho prlco of gas in Philadelphia has been $1.00 ner thousand euMr feet slnco January 1, 1894. During tho first four (4) years of this period the property was operated under municipal management, at a loss of $981,643.94, or an average loss of $245,410.08 per annum. From December 1, 1897, to December 31, 1920, under the manage ment of The United Gas Improvement Company (the last six months of 1920 being estimated), tho City's profit is as follows: Cash paid into City Treasury $30,679,370.00 Betterment and Extension of Plant 25 718 847.81 Free Gas for and Care of Street Lamps 14,889,081.05 Freo Gas for City Buildings 2,454,808.10 $73,742,106.96 City s average profit $3,206,182.47 per annum. During tho same period The United Gas Improvement Company's profit averages 634,676.33 per annum. When tho war began, the Philadelphia Gas Works was tho only gas works in the country equipped to produce toluol, the demand for which was largely in excess of the supply. This made it possible during 1915 1016 and 1017 to offset to some extent the steadily Increasing cost of gas manufacture from the increased profits of the residual business which wc nuvo ount up at tno rniladelphia Gas Works. In 1018 the situation changed. The City's share of tho $1.00 paid by consumers was increased to 25 cents pcr thousand cubic feet, and simultan eously with a reduced revenue pcr thousand cubic feet tho Company was faced by further greatly increased costs, so that for 1918, 1019 and 1020 the results aro as follows: In 1018 " 1919 " 1920 1918 1919 1020 6 mos. actual 6 mos. estimated Total 3 years Profit of City. $4,581,171.56 4,414,700.40 5,274,766.58 $14,270,638.54 Loss of The U. G. I. Co. $854,111.04 732,271.13 2,654,080.38 $4,240,472.45 $3,157,654.76 in 1018; $3,207,747.46 in 1919, and $3,837,512.78 in 1920 tho operating company's deficits were: ' $864,111.04 732,271.13 2.605.571 44 without earning or paying in nny of these years interest on improve- e u"1"3 ,othc,r tha" thosc rcP"sentcd by the securities of The Equitable Illuminating Gas Light Company of Philadelphia. Tho above deficit in 1920 was incurred under the following average prices for material: B rnnn0?1 W '8-052 "Ct t0" Generator Fuel 7 79 .. , "."''"'.,",". 6.37c pcr gallon mo low price of oil being due to contracts made in 1019. There is no assurance that comparative losses will not occur in SnfonfPtrenworinddCr ,CaS ,B th " " C - The above construction requirements amounting, with interest to approx.mately $16,000,000, create a financial problem of such maKn tudo ecur InTt u lmP0Ssible' u"der existing conditions, to seU Ee"terat.C'ldC """ "" "Ml a"d - portage? to?henStv!17 t0 Ur,?e,Tn th Commi38in the manifest im fn he"" ls nduSrv anTrmdatinKuthe P'ant t0 th cha"ed conditi" satisfy the iuhll, I T Aincrcas'" th opacity from time to tlmo to imnaiLPntPnn A"y ther Plicy wou,d resu,t ultimately In its T T v uVCVenU0 Producing asset to the City, and would tend to cripple the building and industrial development of the City. The plan proposed provides alike for the improvements unrentlv r quired at once, and for the future development of thTl'STX?' w,n msure its permanent value and efficiency; and while i recoV the necessity of looking to earnings as tho onlv ,. J- .1 iuS!" nizes ings as the only source available ai n Hnalo rt ll.,.....: .i To cite but one illustration nf t, i . .. testimony shows thnt i,;. " . "Ci"'" " n"wn l0 tne Commission, tho . . 4'wonjii, wnur I rpu- -...1a j- - . I ' Manu ;tuX;v:v-:r' " r !" pcr alIo.n for oil at bo product COke wm Bas, the rate-nu h ,;; e te. " -w: is h- ,r,t n T rtusubt isi, nna alter mat dato on 13Vs s on for 528 B T U M, 4 ti .in j U, c ocrvice umnis. Cents ner C-nllnn nt nna efr,!-.. i r - .. . . i . ua ' u- gOS Is SI. 40. nnH .tin C f.r -a - i, . . . ." w"v "" uiiu o cents per Kaiion (under a IM" m. wh(v . tu .. '.. " " ,k' " ""nun ucrives no-return latlA?Lan??r f "f P" gallon for the entire Here h.' C tvVS 3" ?" bevomf PrfT 1 1 inoi , ?" at 13 ccnts pcr aIlon to contract the plan, was for 1020 sfsM Vio" i . , Um 8tlU conti under b???nd FfbrUary 1' 1021 for the Int Breeze Work,, and our 5 cent Growth of ZZl 1' 37)51 2-8. and will constantly increase with tho contract for the Twontv.fifth .., -nr-t :n ....' , . .. (im. j . . . """ "" wm expire uDout the same time, and cannot bo renewed at less than 13 cents per gallon. ilnn i IM l ' 10,21' 0iI C08ts us no moro tha" 13'' nts pcr gallon at both works, our loss for 1021 and thereafter will, under the terms of the lease, greatly exceed the loss of 1920. The following figures illustrate the effect of the war upon the cost of manufacturing gas in Philadelphia: 1016 Gas Oil per gallon 3 ccnts Gas Coal per not ton $3,13 Boiler Fuel per net ton $3,10 Generator Fuel per net ton... Si v Materials for Construction, Repairs, etc Increase of WaKCS 10 to 125 per cent. Increase of 100 to 150 per cent. 1020 5 cents to 13 H- cents. $3 90 to $13.75 S4.G2 to $13.42 $7.15 to $8.45 the lllltilTlACs n n.l.J: j. 1 the public lighting is free of coJt consldcrab Pt of The plan amply safeguards the interests of tho Otv nnj by prov d ng that the Citv m.,. ... . . ity and the public, from the operating companv uoon J, 'T tak Phfihio" f the plan the indebtedness undTblStir then ary V'0" bcint? made '" subject to regulation from imp B' ratM are mal conditions. tlme t0 Umc ,n "ordanco th prevailing by thT;ts:nts7.eor;:;0Th:rnh"c,oTr,t of tho works h- is founded, and 0 "Jlcfc anV 0 5hcr ian" 'T""" " wh,ch tho show that rates for gas must of t " !?t " ' PUrPSe mu,t be ". assume that no new operaX II y ,b1Yncr,'Med' a fair to develop the plant as mS0?' n" anJ pany, because of ,t, twenty-two L 1 l 'US In,Provement Com- -""" j unra 01 e courtk thnn that the way of udequute and effort. No nrincinlo hn k.nn . But for this great increase In . n.i . .1. -, , . . i contracts shmilrl .- I". ".! la?ly rccoB"'"d by th SStft Se"! S5Lir5 i7ra S'-fei-SSS? t0 ,n thousand cubic feet the high qu Z XZZ SSi Z 3 &? "" .5 Prm,t """" n"' Xnm: yeMa' nnd to ",a,nta, tht cit-' p--1 p-"t , cconTrsec:nus? aml de--iop-s:r,;icth?;rc,hti8 - WedethPrnftinK Cndlti0nB Jt Wil1 b impossiblc fr us to do so. ' b0pe that they'maTb; helpfuni'soluu J Ur mltM ,n th" Mjldctir'5: "T81 thBt nt th0 -rliest PO-lbl- date the I C""o"." f the problt"" tho V, ;r'u ",c acrvces 01 capable and impartial cx- r.no - 4..J.. .1 . . .. . --.vwo Ui i- -.u.""ay. l"rougniy tho situation and to recommend m x'"J oniLG:; ffijsis thorouKh Tsidcra- Milo R. Maltble, Mr. Wlllard F hi ?, f l?' coniP08eJ f Dr. Thomas F. Arm trong and Mr ChnT' u' "0WBnI R' ShePPard Mr. advise tho Major ad CoL l Jf T" th ity t0 be made In the lease expiring December 31 X, ' n,f "" ShU,d policy and plan for the City to Zro. In J!fV V ? permanet operation of the Phlladelphfa Crks? ?, & J Ma' y W and of tho holder have perform ed th." duties wSf T my ,S " "ha"- UBually strenuou, comm.o.,r.d 8e 'In ToLT'" W' tho appreciation of the Board of Directors and pfC8ldenf roco,c,,,t,OB o By order of tho Board of Directors. ' SAMUEL T. BODINE, "I Presiding - ' ' 1 if l.-faa 'K tt hLmH"9 i ' '' " T . ' -"- " "'" '" St - i t In .t- . r,-v- n. fv,nv, .j j y t? u ., &... ; tjj9SttV., thMib.) srta f.
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