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Show , j THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY (SYSTEM) EXECUTIVE OFFICE, TELEPHONE BUILDING, 1421 CHAMPA STREET Dsnver Colorado PVrusry 11 1913 TO THE STOCKHOLDERS TV following iltMNM. submitt4d by rse on behslf of your Hoard of Director, exhibit! th financial condition of the Com psoy December 31, I'M ' On that date we had. in our entire territory. 370 toraatsgo. I furnishing service to 1M.6M Exchange Stations, including 1W j Toll Station! In addition to fhaae 1S4.M Exchange Station! I i here are 18,390 atation( connected with our system on the line I of connecting companies msking a total of 203,068 Subscriber' I Station in e trice on December 31 lflt, aa increase of 80,386 I during the year, or a total increase of 40,128 atatlona sinee th I merger of The Colorado Telephone Company. Rocky Mountain Bell Telephone Company, and The Tri State Telephone and I Telegraph Company. " -'T Wilt gain t almoat 26 per I .ent since th merger. The total milea of exchange and toll I linca, a of December 31. 1912. wore 50.$1.93. an ineraaM of I IOo.ftU.76 milss for th yar. The ineraaae alane being more I ihMu fonr times the eireumfarence of the earth, and the total I wire mileage sufficient to go more than twenty timet around th I earth Total mile of exchange and toll wire underground on I I Winner 31. 1912. ware 180.929 09 Total milea of toll line I on the same date ware 71.516.06. I Befluee of the comparatively brief penod which ha elapaed I since the formation of The Mountain state Telephone aad Tele I graph Company, aome comment on the balance sheet, which fol I low, it probably eaaential to a thorough understanding of it I An examination of the balance sheet of the system of Tb I Mountain States Telephone and Telegraph Company, submitted I herewith, will indicate to stockholders th great ineraaae in I the magniture of the Company Since my last report of The I Mountain State Company we hare acquired all the Bell prop I erties in Arizona, so that oar operations now oovsr the seven I great Statea of Colorado. Ttab. Idaho. Montana. Wyoming. Mew I Mexico and Arizona, with toll line into all surrounding State I Stockholders of The Mountain State Company who war I holder of Colorado Telephone Company atoel prior to th rner I ger in 1911. will reeall that in my Utter of July 30. 1911. t I ( olorado Telephone Company stockholders, I referred to th I advantages to be secured through a wider distribution of onr I general investment Pursuing the policy than commenced, I The Mountain States Company baa expanded, until it is today I a corporation with outstanding capital stock practically 2.7 I times as great aa the entire issued capital stock af the Colorado I Telephone Company at the time the merger waa affected. The I benefits of tbia broadening of investment accrue alike to those nhose Mountain Statea Telephone holdings come from then I former investment in Colorado Telephone, to holders of Rocky I Monntsin Bell shares, (which they exchanged for Mountain I States stock), and also to those who have invested in onr share I since thr merger waa effected. I There was outstanding, December .11 1911. a tbown by my I last annual report. $20,964,300.00 of Mountain states stork. I Though the average of outstanding capital stock for the year I was $15,960,850.00. For payment of dividends, during 1911 thT I was available $1,867,299 72. against an actual dividend payment I or $1,022,598 45. leaving for 1911 $844.695 27 for Surplus and I Reserves I It will be noted that December 31. 1912. there was outstand I iog $26,994 200.00 in atock. representing an increase of $6,629. I 900.00 from figures in my last annual report Of thi increase I $4,2$8,700.00 was issued in December, 1912, with dividend ohliga I riona against it commencing January 1. 1919. I The average capital stock outstanding during the year 1912 I was $22,739,354.00. During that year there waa available $2. I 513,370.77 for payment of dividend obligations which roaehed I the actual amount of $1,687,334.00. leaving for 1912 a balance of I $926,036.77 to Reserves and Surplus. I In the report of Th Mountain State Company, aa of Daoem I bcr 31. 1911, our statement showed payment on account of I -apital stock subscription amounting to more than $1,850,000.00 I the sharra for which were not to be iaaued and delivered until I January, 1912. The Mountain Statea System report for 1912, I coming at a time when no auch item of cash subscriptions to I capital stoek appears on our books, oar eaah and deposits neces I sarily show a large reduction, amounting to more than $750,000.00 I Our real estate holding ahow an increase during 1912 of nearly I $500,000.00, our telephone plant, practically $4,MO,000.00, our sup- I plica furniture and tools, more than $860,000.00. and our stocka and I bonda in connecting companies, from which w derive business, al I moat $1,000,000.00. I With the growth of the Company, and plans under way to I continue the policy of diffusion to which I have above referred, onr I billa payable show an increase of something mora than $226,000.00 I Accrued liabilities not due, some $650,000.00, includes dividend I payable January 16, 1913, amounting to approximately $400,000.00. Mr There was a transfer of $176,000.00 from Surplus to the Employee' Benefit Fund It has never bean my thought to insiit upon a large surplus, which might readily have been accumulated had my invariable policy not been to keep the Company' ratea at the lowest possible level commensurate with good servioe. but an analysis of the an mial reports of The Colorado Telephone Company and The Mountain Moun-tain Stataa Company (ainee it inception) will show that the policy of carrying to reserves an adequate nun for the ample protection of stockholders haa been eminently satisfsntory. and ha worked out extremely advantageous! Any variationa in the surplus account ac-count from year to year will be found to he represented in our replacement reserve Onr Surplus and Reaervn hare now reached $3 996343.08. A comparison of our financial operation between the years I'M'.' and 1911 is manifestly difficult, if not almoat impossible without entering into great detail. The statement for the year 1911 was made up by combining the individual earnings of the three merged nompanies prior to their consolidation, snd adding to thi total the actual gross earnings of The Mountain States Company for the period pe-riod of its existence in 1911. With the rapid growth of the entire system, daring 1912, and the accompanying necenaary increase in the amount of capital stock outstanding through issue on account of enlargements, it is difficult to strive at a statement showing gross earnings for twelve months, in eoropsrison with total capital atock issued, unless arbitrarily the amount of stock outstanding December De-cember 31, 1911. is taken in connection with earnings for 1911. and over against these are put figures showing outstanding capital stock December 31. 1912, and gross earnings for 1912. On this basis of comparison it i shown, however, thst with the increase in its capital capi-tal stock outstanding, your Company is at the same time gaming in the relation of Its gross earnings to capital stock In other words, on this basis of comparison, 1912 show s gain of 1.4 pe cent over 1911 in the relation of gross esminga to outstanding stock, indicating that with increase of capital liability there i a more than corresponding advance in groa return. There was likewise in 1912 sn increase of 9.6 per cent aver 1911 in the amount carried to Reserves and Surplus after payment of all operating expenses and dividends. THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY ffMKl DECEMBER 11, 1912. ajMrt- ! Betels 5S.tw.isj.jr Telephone Plt 04.422.9JS.01 jppllee. Furniture and Toeft I.W4.S00.8! ' sat snd Depoeits M7.470.S': Witt aad Areount ReetiTSbl .. . 767,879 4" storks aad Bend 1.790.9S4.SO t!.S4.44 : LIABILITIES ' pitl Stock Common Meek S4 994.jl00.00' Preferred Btocka Vone tended Debt Bonded Debt None Real Ratal Mortgage None Billa Parahl 49J.OOO.OO f norti Parable i.vi.sss.s: s .-rrued Uahllltlee Not Doe rt.io.349.2 ! Employe Benefit Fund . I 7.1,0000m Replacement Reeerrea J.477.15J.84 " rpbi 519.S19.S4 132,444 .49 9 For Year 112. roa earning M.M4 374 tS EXPENSES Operation, Taiea. tc 3,J92,04t.3l Waist l,039,lSS.li' 'fetal Expn 44.331.S03.iR Vet Esnisg 4S..113.370 77 Deduet tMridend . I.3RT.3M.00 irr and Surploa !" nr. : : 'An ieoreea or Report Dc. 81. 19)1. ot 4c "An mctse orat Report Dec. 31, 1911. of 44 24V91 " M,S4,2M,7O0 Iaaued in December. 1912. ' iarr f 89irS5 for tne year I desire to call particular attention to the tact tbat the ugur previously quoted, for 1912. refer to our system as a whole. so tha' no misconception may esiat aa to that portion of our investment lying in any of the larger citiea in our territory These figures eonelnsively prove that our Company is m a wholesome and pros parous condition. With the rapid growth of the past few yettrs ii is. or should be. generally known that we have maintained th 1 high standard 6f financing, which ao long characterised The Coin rado Telephone Company. lAkf thst Company, the amount we have invested in sctnal physical property, is grester thon our capital liabilities by a considerable sum. Thi is of douhle advantage to onr stockholders: first, in that the vslue of their stock is at once apparent, when the need or desirability arises, for selling or mort gaging their holdings when emergency funds are required. It in euros the ready market that. Ill stable and safe investments should command. In the aecond place, it i our great safeguard in the face of unjust attacks which must constantly he expected h pulilie service corporations. It is our insurance in any flnsl trial of strength between our Company and those who would seek to tin dermine ita credit at large. We havo been subjected from time to time, ami must expect in the future to be similarly subjected, to attacks auch ss I have 1 indicated But in the fact that there is no water in onr stock, that we have no fixed charges in the matter for bond interest, no pre-i pre-i erred stock, no abnormal charges of any kind, lies onr safety and our strength. Our books snd oar system of accounting art open at all time, so that ''he who runs may read." No charge that we make an excessive profit can possibly bs maintained in the fac of the facts shown by the figures herewith submitted, which prove conclusively that our rates are reasonable, because they are sufficient suffi-cient only to return a fair percentage upon our actual investment, and this inyestment can he substantiated by a careful inventory of our property, either by interested, or disinterested investigator It s noteworthy that those with political purpose, or who seek self aggrandizement, are careful to svoid sn snalysis of these figures, or our chsllenge to refute them. No corporstion in the United States makes a foliar or more complete statement to ita stockholders, and to tile general public than this Company does, both annually and from time to time between be-tween annual periods. A large number of our stockholders ar people of small means, whose little all in the matter of savings ia inveatcd with us. It is only natural that such investors should feel timid and alarmed when attacks are made upon the depositar? f their funds. It is largely to reassure the smsll stockholders that these few paragraphs are written. $, Brcausf of our association with The American Telephone and Telegraph Company, there exists in the minds of some an idea that we are more or leas a foreign corporation, and that because of this, our receipt leave this Western country that ws serve; that th money paid for telephone service largely goes out of our territory. Thi is wholly s mistaken idea. Thras Million Seven Hundred and Forty-Five Thousand Xins Hundred and Sixty Dollars and Thirty-Four Cent ( $3,746 .90.34 was paid back directly in salaries and wages to employees residing in onr own territory. The percentage of gross receipts applied 'o salaries snd wages, ia not equaled by any public service Company in the country. Other items, operating and maintenance expenses, rent, light, heat, traveling expense, taxes, etc. are largely disbursed locally The large number and proportionate holdings of local stockholders in this company is so well known that it will be readily understood that s goodly portion of the amount available for dividends waa likewise locally diabursed. It will be verv evident from the fore- & going that The Mountain States Company is in every way truly local in character and management and is no small factor in tbs industrial hcsltb of the Rocky Mountain region. One of the most salient features of our past year's experience has been the rounding out of our territory by the acquisition of practically all of the telephone properties in Arisona. T think it is generally known that this State, since its admission to the Union, is rapidly forging to the front in all of those attributes which char- acterise Western development The recent establishment of larg ' irrigation projects has done much to enhance ita agricultural pro duct ion, in addition to its well known prominenee in mining snd stock raising. Since the telephone properties of that State were not so wholly 4 identified with the Bell system and Boll progress as might be ileemcd liest for all, it was decided to round out our territory by their addition to the Mountain States group. Our experience, in taking over these properties, waa somewhat new and, at the same i line, cducationsl. Arizona is the only State In the Mountain 8tates region having a Corporation Commission with brosd jurisdiction over telephone properties, and we naturally approaohed the nago nations for the merger with some trepidation. However, a most satisfactory result has been obtained, with the intelligent co-op- , ' ration of the Commission, which has evidenced a keen desire to work with, rather than for or against, our Company in the effort to provide general and comprehensive telephone service for thsl State. To secure that result it has been found sufficient to explain "ith frankness and confidence, to the Commission, our aims and intentions, and the method proposed. It is only just to State that, somewhat to our surprise, even in the short time since the nego liations were opened, we have succeeded in eliminating a number of features of our business usually designated aa irregular and discriminatory, probably to a greater proportionate extent in Ari-zona Ari-zona than elsewhere in our territory. This result can only bs attributed at-tributed 1o the fad that the Corporation Commission law of that State K administered in a fair, capable and intelligent manner. If ii like administration will result from public utility acta in those State in our territory whose legislators now have Public Utility .1 Commission laws under consideration, our stockholders need have no hesitation in commending this form of legislation. In closing this brief summary of the more important tearures "I our business during the past year. I wiah to commend the loyalty loy-alty and the efforts of our army of employeea. Largely to them is due the successful results of the past vesr To reciprocate, In some measure, this loyalty snd devotion, a plan for an Employees Benefit Fund has hern adopted, which will include pensions, life and accident insurance, and sickness aad disability benefits Much apace has been given to this plan in the public press, so that it is unnecessary here to go into its details. I only wish to emphasize empha-size that it, like many of our strongest business resource. is made possible only by our association with The American Telephone snd Telegraph Company aa one of the units of the great Boll system Respect fnlly submitted for th Directors, K B. FTJBLD, Presides t . .4) |