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Show The Mountain States Telephone and Telegraph Gompany (SYSTEM) Denver, Colorado. February 11 1913. EXECUTIVE OFFICE. TELEPHONE BUILDING, 1421 CHAMPA STREET. TO THE STOCKHOLDERS: The following statement, submitted by me on behalf of your Board of Directors, exhibits the financial condition of the Company December 81 L9I3 On that date we had, ,n our entire territory 870 (Exchangee furnishing service to 184,868 Exchange stations including 1,293 Toll Stations, in addition ad-dition io these 184,hfiS Exchange Stations, there are 18,390 stations connected with our system on the lines of connecting companies, making a total of 203. 058 Subscribers" Stations m service on December 31, 1912, and Increase of 80,-255 80,-255 during the Near or a total increase of 40,123 stations since 'hp merger of The Colorado Telephone Company, Rocky Mountain Bell Telephone Company Com-pany and The Tn-State Telephone and Teleiraph Companv. on July 81, CHI a gain of almost 26 per cent, since the merger The total mile-, of exchange and toll lines, as of December -1.1912. were 506.G18.93, and increase of 105 -831.76 miles for the ear. The increase alone, being more than four times the circumference of the earth, and the total wire mileage sufficient to go more than twenty times around the earth Total miles of exchanges and toll wire underground on December 81 . 1912. were 180.929.09. Total miles of toll lines on the same date were 71,616.06 Because of the comparativ ely brief period which hag elapsed since the formation of The Mountain States Telephone and Telegraph Company, some comment on the balance sheet, which follows, is probably essential to a thorough understandinc of it. An examination of the ba'ance sheet of the system of The Mountain States Telephone and Telegraph Company, submitted herewith, will indicate to stockholders the great increase In the magnitude of the Coro-,-an Since my last report of The Mountain States Company We have acquired al! the Hell properties in Arizona, so that oir operations now cover the seen sreat States of Colorado, Utah, Idaho, Montana, W yming, New Mexico, and Arizona, with TjoII lines into all surrounding State? Stockholders of Colorado Telephone Companv stock prior to the merger mer-ger In 1911, will recall that in my letter of July 20, 1911, to Colorado Telephone Tele-phone Company stockholders, 1 referred to the ad vantages to be secured through a wider distribution of our genetal inestment Pursuing the policy then commenced The Mountain States Company has expanded, until it is today a corporation with outstanding capital stock practically 2.7 times as great as the entire issued stock of the Colorado Telephone Company at the time the merger was effected The benefits of this broadening of investment accrue alike to those whose Mountain States Telephone holdings come from their) former investment in Colorado Telephone, to holders of Rocky Morntain Bell shares, (which they exchanged for Mountain States stock i. and also to those who have invested In our shares since the merger was effected. There was outstanding. December 31, 1911. as shown by my last annual report, $20,364 300 00 of Mountain Stales stock. Though the average of outstanding out-standing capital stock for the vear was $l,960.RSO.oo. For payment of dlv-JdendB: dlv-JdendB: during 1911 there was available 81,867,293.72 against an actual dividend divi-dend payment of $1,022.598 45, leaving for 1911 $814. 690. 27 for Surplus and Reserves It will be noted that December 31. 1912. there was outstandinging $26.-994,200 $26.-994,200 00 in stock, representing an increase of $6,629,900 00 from figures in my last annual report or this Increase. $4,298,700.00 was issued in Decern-ber Decern-ber 1912. with dividend obligations against it commencing .Tauuary 1. 1913 The aorage capital stock oi:t6iandine during the year 1912 was $22,739,-' S64 00. During that vear there was available $2,513,370.77 for pavment of dividend obligations which reached the actual amount of $1,687,834.00, leav-lag leav-lag for 1912 a balance of $926, 036 77 to Reserves and Surplus. In the report of The Mountain States Company, as o! December 81, 1911, our statement showed pav ments on account of capital stock subscriptions; amounting to more than $1,350,000.00, the shares foi which were not to be Issued and delivered until January, 1912. The Mountain States System report re-port for 1912. coming at a time when no such item of cash subscriptions to1 capital stock appears on our books our cash and deposits necessarily show a largo reduction, amounting to more than $760,000.00 I Our real estate holdings show an increase during 1912 nearly $500,000(111 our telephone plant, practically $4,J50,000 00, our supplies, furniture and tools, more than $350,000.00, and our stocks, and bonds in connecting companies, j from w hich we derh e business, almost $1,000,000.00 With the growth of the Company, and plans under way to continue the' policy of diffusion to which I have above referred, our bills payable show an I increase of something more than $225,000.00 Accrued liabilities not due. 6ome $650,000 00, includes diidends payable January 15, 1913, amounting to j 1 I approximately $400,000.00 There wa6 a transfer of $175,000.00 from Surplus, to the Emploves Benefit Fund It has never been my thought to insist upon a large surplus, which 1 might readily have been accumulated had my Invariable policy not been to ! keep the Company s rates at the lowest possible level commonnate with good service, hut an anahsis of the annual rports of The Colorado Telephone Companv and The Mountain States Company (since its inception! will show-that show-that the policy of carrying to renerves an adequate sum for the ample pro- tection of stockholders has been eminently satisfactory, and has worked out m extremelv advantageously. Any variations in the surplus account from year fj; to vear will be found to be represented in our replacement eserves. Our Surplus and Reservep have r,uv reached $3,996,943 08 A comparison of our financial operations between the s oar? 1912 and 1111 is manifestly difficult, if not almost impossible, without entering into J great detail The statement for the year 11 1 was made up by combining the individual eamincs o? the three merged companies prior to their consolidation, consolida-tion, and addip to this total the actual gross earnings of The Mountain 8tates Company for the period of its existence jn 1911. With the rapid growth of the entire system, during 1912. and the accompanying necessary - increase in the amount of capital stock outstanding through Issue on account M of enlargements. It Is difficult to arrive at a statement showing gross earn-rf earn-rf ings for twelve months, in comparison with total capital stock Tseued, unless arbitrarily the am -lint of stock outstanding December 31, 1911, is taken in I connection with earnings for 1911, and over against theee are put. figures showing outstanding capital stock December 31. 1912, and gross earning for 1912. On this basis of comparison it is shown, however, that with the increase in-crease In its capital stock outstanding, your Company is at the same time (V gaining in the relation of Ita gross earnings to capital stock. In other words, thf on this basis of comparison. 1912 shows a pain of 1 4 per cent over 1911 in Jf the relation of gross earnings to outstanding stock, indicating that with ln-i ln-i cresae of capital liability there is a more than corresponding advance in ff gross return. There was likewise In 1912 an increase of 9 6 per cent over 1911 in the I amount carried to Reserves and Surplus, after parent 0f au operatlug ex-Jf ex-Jf pensee and dividends. DECEMBER 31, 1912. I' ASSETS Beal Estate $ 2,256,162.621 !M Telephone Plant 26.422.936 01 I Supplies, Furniture and Tools 1.054,805 61 Cash and Deposit 567,470 82 !J Bill and Accounts Receivable 767,579.40 it Stocks and Bonds 1,796,934.60 $32,864,888.96 LIABILITIES D Capital Stock-Common Stock-Common Stocks $26,994,200 OOt Preferred Stocks 4 None Funded Debt-Bonded Debt-Bonded Debt None wj Real Estate Mortgages None Bills Payable 495, OCX) on Aeoounts Payable 553,396 67 00 Accrued Liabilities Not Due 660,249.21 Employes Benefit Fund .. 175.000 00 m Replacement Reserves 3,477,262.34 KJ Snrplna 519.6S9 84 $32,864,888 96 tjfj For Year 1912. 4 EXPENSES - sg Gross Earnings $6,844,576.25 J Operation, Taxes, etc $8,292,042.38 . Maintenance 1,039,163.10 vt j Total Expenses . $4,331,205 48 Net Earnings $2,613,870.77 Deduct Dividends 1,587,334.00 iii Reserves and Surplus 926.036 77 VZ SAn increase over Report Dec 31. 1911, of $490 663.78 An increase oer Report Dec. 81, 1911. of $4,245,961 60 -$4,298,700 Issued in December. 1912. It JAn increase of $329. .573. 95 for the year J A I desire to call particular attention to the fact that the figures previously it Quoted, for 1912, refer to 01 r system as a whole so that no misconception may Y':' ' xist as to that portion of our Investment lying In any of tho larger cities in our t.enritorv These figures conclusively prove that our Company is In a i wholesome and prosperous condition. With the rapid srowth of the past few ' years It is. or should be. generally knowu that we hae maintained the high standard of financing, which so lone characterised The ("oloraflo Telephone Companv Like that Company, the amount we have invested in actual phvs-leal phvs-leal p roper tv, is creator than our capital liabilities by ?. considerable sum This is of double advantage to our stockholders. firt. in that, the valuo of I their stock Is at once apparent, when the need or desirability arises, for fell - ing or mortgapInK their holdings when emergency funds are required It 0 Insures th. rea.L market that all stable and safe Investment should eom- mand In the second place. It is our great safeguard in the face of unjust at- trw ks which must constantly be expected bj public service corporations It jy I Is our Insurance In nny final trial of strength between our Company and ,itf those who would seeV to undermine Its credit at large. We have been subjected from time to time, and must expect In the full fu-ll ti.re to he similarly subjected, to nttaeks such as I have Indicated. But in tho fact that there Is no water in our stork, that we have no fixed cbarge3 I in the matter for bond interest, no preferred BtOCk, no nbnormai charges of I any kind, lies our Bftfety and our strength. Our books and our system of a -counting are open at all (lines so that "he who runs may read No charge ithat we make an oxressivo profit can possiblv m maintained In the face of! the facta sbown by the figures herewith submltteU. which prove conclusively that our rates aro reasonable, because they are sufficient only to return nj fair percentage upon our actual investment, ami (bis investment can be sub- t stantiated by a careful Inventor ot out property, either by Interested or. disinterested dis-interested i n v estigaiors. It is noteworthy that iqos with politi-ai i j J r I " K O' who seek self -aggrandizement, are careful to avoid an analysis- of these figures, fig-ures, or our challenge to refute them No corporation in the United States makes i fuller oi more complete statement to Its MockhoIJers, and to the spneial public, than thi I ompan does, both annually and from time to time between annual erlods. A number of our stockholders are i eople of -mall means, whose little all In the matter of savings, is Invested with us. It Is only natural that such investors should feel timid and alarmed when alta I. are made upon the depoltarv ol their funds. H is largelv to leassure the small stockholders thai these few paragraphs are written. Because of our association with The American Telephone and Ti legrapO Company, there exists in the miuJs of some an idea that we are more or less a foreign corporation and that because of this, our receipts leave this Western country that we serve; that the money paid for telephone service largely toes out of our territory. This is wholly a mistaken idea Three Million, Seven Hundred and Forty-Five Thousand Nine Hundred, and Sixty Dollars and Thirty -Four Cents ($3,745,960.34) was paid bach directly In salaries and wages to employes residing In our own territory The per- i centae of gross receipts applied to salaries and wages, is not equalled by any public service Company in the country Other Item9. operating and inaintpnance expense?, rent. ieht, heat traveling trav-eling expense taxes etc.. are largely disbursevl locally. The large numbei and proportionate holdings of local stockholders In this company Is so well known Ithat It will be readilv understood that a goodly portion 61 the amount aval able for dividends was likewise locally disbursed. It will be " Idenl from .the foregoing that the Mountain States Company is In every way truly local in j character and management and Is no Bmall factor in the Industrial health oi the Rocky Mountain region. One of the most salient features of our past year's experience has Keen I ;tho rounding out of otr territory b the acquisition of practi II .ill o tb. telephone properties in Arizona I tblnli it Is generally known that thii Stat isiDce its admission to the Union is rapidly forping to the fmnt in all of those attributes which characterize Western development The reent establishment estab-lishment of lartre irrigation projects hs done much to enhance Its agricultural ! production, in addition to its well known prominence in mining and stock i raising Since the telephone properties of tbr.l State were not so wholly Identified iwith tie Beli system and Bell progress as might be deemed beM for all. It. was decided to round out our territory by their addition to the Mountain States group. Our experience, in lakh)", over these properties, was somewhat new and. at the same time, educational Arizona is the ouly Styte In tho Mountain state region having n Corporation Commission with brono jurlsdl -itlon over telephone properties, and we. nat tal appioached the negotiations for the merjer with some trepid?.t ion However, a most satisfactory result has I been obtained, with the Intelligent co-operation of the Commission, which has evidenced ,i ki en J-ire to work with i ;i tbei tbnn for oi against, our i ompan' in the effort to provide general and comjirehensive telephone service for that , State " ... . , I To secure that result it has been found sufficient to explain With frankness frank-ness and confidence, to the Commission, our aims and intentions, and the i methods proposed. It is only just to state that, somewhat to our surprise, even j in the short time since the negotiations were opened, we have succeeded in t eliminating B number of features or our business us' ally designated as irregu-tar irregu-tar and discriminatory, probably to a greater proportionate extent in ArizomC than elsewhere in our (territory. This result can only he attributed to the I tact that the Corporation Commission law of thm Statp is administered in 8 fair, capable and intelligent manner If a llko administration will resuli from public ntilitv acts in those States in our territory whose loglslators now have Public Utility Commission 'nws tinder consideration our stockholders need have no hesitation in commanding this form of legislation In closing this brlel BUmmary of the more Important features of our business during the past year. I wish ; commend the loyalty and the efforts Of our army of employes Largely to them is due the successful results of the past vear To reciprocate. In some measure, ihls loyalty and devotion, a plan for an Employes Benefit Fund has been adopted, which will include pensions, life and accident insurance, and sickness and disability benefit'. Much space has been given to this plan in the public prese. so that it is unnecessary here1 ut Ln no it-, details I oniv wish to emphasize that it, like msny ol our si longest business resources, is made possible only by our association with Tin- American Telephone and Telegraph Company as one of the units of the meat Bell system Respectfully submitted io, the Directors. E. B. FIELD President |