Dividend on New England Power Association, common, 1927. Total 22, 727.25 106.64 608, 148.96 Income from investments in miscellaneous securities.-The dividend income from miscellaneous securities amounted to $64,000, or 0.7 percent of the total income for the period July 1, 1924, to December 31, 1931, as follows: 1928 St. Regis Paper Co. common stock_--1930-Taggart Corporation common stock‒‒‒‒‒‒ Total_____. $11,500.00 52, 500.00 64, 000, 00 Interest on advances to subsidiary companies.-The interest on advances to subsidiary companies was at the rate of 6 percent and amounted to only $10,740.12, and was all received from Malone Light & Power Co. for advances in 1929 and 1930 to that company and the companies merged therewith, the Fort Covington Light, Heat & Power Co. and Milling & Lighting Co., Inc. [72] Interest on advances to affiliated companies.—The interest on advances to affiliated companies was at the rate of 6 percent and amounted to $49,518.12, or 0.6 percent of the total income for the period July 1, 1924, to December 31, 1931. This interest was received from two companies, as follows: Interest on advances to other utility companies.-The interest on advances to other utility companies was all received from Old Forge Electric Corporation for advances made to that company on its notes bearing 6 percent interest. No interest was received until 1930, when $48,598 was received covering interest for the period October 1, 1928, to December 31, 1930. 1931, $40,519.21 was received, making a total of $89,117.21, or 1.1 percent of the total income for the period July 1, 1924, to December 31, 1931. In Interest on advances to nonutility companies.-The interest on advances to nonutility companies was at the rate of 6 percent and amounted to only $3,328.59 for the period. Interest on bank balances, etc.-The interest on bank balances, etc., amounted to $8,042.80 for the period. This amount was all on bank balances, except $154.58 received in 1930, as interest on a refund of 1926 Federal income tax. [73] Profit on securities sold. The profit on securities sold amounted to $2,843,449.91, or 33.3 percent of the total income for the period July 1, 1924, to December 31, 1931. This profit resulted from dealings in the stocks of six companies, as follows: [75] It will be noted from the above table that comparatively uniform profits were made from the sale of securities in the years 1926 to 1931, inclusive. In 1929 Mohawk Hudson Power Corporation common stock was exchanged for Niagara-Hudson Power Corporation common stock, so the profit shown was from the sale of the stock of the two companies and is largely a profit derived from the same class of stock or its equivalent. Introduction.-The expenses of the Power & Electric Securities Corporation for the period July 1, 1924 to December 31, 1931, before Federal income taxes, amounted to $509,978.13, as follows: General administrative expenses.-The general administrative expenses amounted to only $12,330.63, or 2.4 percent of the total expenses for the period July 1, 1924, to December 1, 1931. The most important items were as follows: Salaries. Auditing Directors' fees--. $6, 517. 34 2, 311. 57 Corporation Trust Co. services___ Total 1, 460. 00 750.00 1, 291. 72 12, 330. 63. Taxes (except Federal income tax).—The tax (except Federal income tax) amounted to only $19,344.63, or 3.8 percent of the total expenses for the period July 1, 1924 to December 31, 1931, and were as follows: Federal capital-stock tax-- Delaware State franchise tax--- Total. $15, 410. 86 2, 968. 69 965. 08 19, 344. 63 [77] Interest on unfunded debt.-The interest on unfunded debt amounted to $478,302.87, or 93.8 percent of the total expenses for the period July 1, 1924 to December 31, 1931. The interest paid, by years and by companies, is presented in the following statement: [79] The above table shows that all the interest payments were at the rate of 6 percent, except payments to the Equitable Trust Co. at 42 percent and 44 percent. Practically all the other interest paid was paid to subsidiary or affiliated companies. Federal income tax.-The Federal income tax charged to expense for the period July 1, 1924-December 31, 1931, amounted to $597,035.41, as follows: Credited to reserve for Federal income tax----. Adjustments in 1930_... $595, 455. 04 1, 580. 37 597, 035. 41 The credits to reserve for Federal income tax and the disposition thereof by years were as follows: No income-tax reserve was set up in 1930 as the company showed a large loss from disposal of Taggart Corporation stock. Introduction.-On December 31, 1931, the earned surplus of the Power & Electric Securities Corporation amounted to $681,642.30. There is no capital surplus. A detailed analysis of the earned surplus is presented as exhibit no. 3 of this report. It shows the additions to surplus from income, and all other additions to and deductions from surplus, from the organization of the company to December 31, 1931, by years. Growth of surplus.-During the period under review, the Power & Electric Securities Corporation accumulated a surplus of $681,642.30, as shown in the following statement: Dividends paid.-Dividends have been paid on the common stock of Power & Electric Securities Corporation since its organization. In fact, the total income of $48,750 in 1924, was disbursed as a dividend on the common stock, which was all owned by the Power Corporation of New York during the whole period. Dividends at the rate of 7 percent per annum have been paid regularly on the preferred stock since its issue in 1925. The dividends paid during the period, 1924-31, were as follows: Other surplus items.—In addition to the net income of $7,444,082.22 credited to surplus, during the period 1924–31, there were also credits to surplus amounting to $3,301,887.11, as follows: 1928-Excess of reserve over Federal income tax paid_. 1930-Dividend paid in 1929, returned__. Total_____ $8, 273. 78 260,000.00 268, 273. 78 Besides the dividends of $6,984,272.49 deducted from surplus, there were also other deductions from surplus amounting to $3,080,054.54, as follows: 1927-Deficiency of reserve to meet Federal income tax.. 1929 Accrued dividend on preferred stock---- Total $5, 607.88 40,833.33 46, 441. 21 This resulted in a net addition to surplus of $221,832.57, increasing the surplus for the period to $681,642.30, as follows: Net credits to surplus---- Net income, after dividends__. Surplus, Dec. 31, 1931---- [82] SECTION 5. RATES OF RETURN $459, 809. 73 221, 832. 57 681, 642. 30 Introduction.-Rates of return on the investment of the Power & Electric Securities Corporation in its subsidiary companies have been shown in sections 2 and 3 of this chapter, but they are shown again in this section for comparative purposes. Rates of return on capital employed, on common-stock equity, and on common stock on the corporate basis, are also presented in this section. Rate of return on investments in subsidiary companies.-The rate of return on the investment of the Power & Electric Securities Corporation in its two subsidiary companies, Northern New York Utilities Inc. and Malone Light & Power Co., by years, 1926-31, are shown the following statement: Rate of return on capital employed.-The rate of return on capital employed by the Power & Electric Securities Corporation is presented for the years 1926 to 1931. The investment used as the basis is the average of the preferred and common stock and surplus, including undistributed surplus of subsidiaries since acquisition, and the average of the advances from affiliated companies. The company has no funded debt. The income is the corporate income before the payment of interest [83] on advances received from affiliated companies, to which has been added the undistributed earnings of subsidiaries. The rates of return ranged from 5.3 percent in 1927, to 8.2 percent in 1928, after deduction of Federal income taxes. The capital employed, income, and rates of return are presented in the following statement: |