History and Description of Property and Securities of The United Railways and Electric Co. of Baltimore April 21st, 1913. OFFICERS. William A. House, President. Frank A. Furst, Vice-President. Thomas A. Cross, Second Vice-President and General Manager. William Early, Secretary. John T. Staub, Acting Treasurer. N. E. Stubbs, Auditor. Joseph C. France, General Counsel. DIRECTORS. H. Crawford Black, Alexander Brown, Frank A. Furst, B. Howell Griswold, Jr., William A. House, George C. Jenkins, Seymour Mandelbaum, Henry A. Orrick, John B. Ramsay, Douglas H. Thomas, Francis E, Waters. ALEXANDER BROWN & SONS, Fiscal Agents. Copyright 1913 by Alex. Brown & Sons K X | A.V FORMED BY CONSOLIDATION. The Company was formed by Articles of Agreement of Consolidation, dated March 4th, 1 899, which resulted in a combination of all the street railway lines in Balti¬ more and vicinity into a single system. The authorized capitalization of the new Company was as follows: First Consolidated Mortgage 4 Per Cent. Gold Bonds. $38,000,000 Four Per Cent. Cumulative Preferred Stock. 14,000,000 Common Stock. 24,000,000 At the time of the consolidation, 1st Consol. 4s. $18,000,000 of the First Consolidated 4 Per Cent. Bonds were sold and the proceeds used as part payment for the Baltimore City Passenger Railway Company and the Baltimore Consoli¬ dated Railway Company; $15,366,000 were reserved to retire bonds of the constituent companies and $4,634,000 for betterments, extensions, expenses of the consolidation, etc. For bonds issued since consolidation, see post page 25. The whole of the $14,000,000 of Preferred Stock Preferred Stock was sold and proceeds and Income used as part payment for the above Bonds. companies. Shortly after the consoli¬ dation, it was deemed advisable to issue 4 Per Cent. Income Bonds and offer them in exchange for Preferred Stock. Practically all Preferred stockholders accepted the offer. Of the $24,000,000 authorized Common Stock. Common Stock, $13,000,000 was issued at the time of the consolida¬ tion and $ 1 1,000,000 was reserved. Of the $ 1 3,000,000 Common Stock so issued, $8,762,500 was, according to Page Three the Articles of Consolidation, used as part payment for the Capital Stock of the Company first formed by the consolidation of the Baltimore City Passenger Railway Company and Baltimore and Northern Electric Railway Company, and $4,237,500 as part payment for the Balti¬ more Consolidated Railway Company. After the con¬ solidation, $2,000,000 more Common Stock was issued to acquire all the then existing Electric Light Companies of Baltimore, which companies were subsequently sold for cash. For stock subsequently issued, see post page 28. The First Consolidated 4s and the Preferred and Com¬ mon stocks were the only securities issued at the time of the consolidation. For further data concerning these issues and for information concerning underlying bonds and securities issued since the consolidation, see post pages 24 to 38. Page Four HISTORY OF THE COMPANY. The Company in its early history was hampered by the Free Transfer Act, passed immediately after the consoli¬ dation, also by the great Baltimore fire of 1904. The consolidation took place in 1899. The City Charter of 1 898 provided for a five-cent car fare with a charge of three cents for transfers. About a year after the consolidation, i. e., April 5, 1900, the Legislature of Maryland passed a law, to take effect July 1, 1900, authorizing the Company to charge five cents for passen¬ gers over twelve years and three cents for children between the ages of four and twelve, provided, however, the Company should give free transfers throughout the city. It was generally understood that this was a com¬ promise measure passed in lieu of the many antagonistic bills aimed at the Company at this session. While it was deemed advisable by the Company to accept this legis¬ lation, it resulted in a universal transfer system which caused a material reduction from the estimated gross and net receipts of the Company. In the great fire of February 7th and 8th, 1904, the Company was one of the chief sufferers. The loss from property destroyed was not great and was largely covered by insurance, but the indirect loss in gross and net receipts was considerable for the year 1904. In June, 1904, the Company passed the interest on its Income Bonds and adopted a plan of rehabilitating the property, not alone where it had been affected by the fire, but with the pur¬ pose of making the system one of the best in the country. The street railway systems of the city at the time of the consolidation were in fairly good physical condition, but Page Five the years following witnessed remarkable developments and improvements in rapid transit facilities. New motor inventions made much larger cars available. The econo¬ mies of improved machinery justified the discarding of but half-worn equipment. Cars of greater capacity enabled the companies to relieve to some extent the rush-hour traffic, but these cars in turn required the laying of new and heavier rails and practically the rebuilding of old power-houses and the erection of new ones. In order to provide funds for its Financial Plan elaborate plan for the rehabilitation of of 1906. the system for improvements, exten¬ sions, etc., the Company adopted a financial plan in 1906. (For Statement of Financial Plan of 1906, see Commercial and Financial Chronicle, Vol. 83, page 156.) This plan was divided into two parts: (a) IMPROVEMENT OF EXISTING PROPERTY.— For Track Reconstruction and Repair, Improvements to Power Houses and for the General Improvement and Betterment of Property covered by the Mortgages of the United Company, the United Company was to use so much of its income as might be needed up to and includ¬ ing the year 1910. The Income Bonds Coupons from 1904 to 1910, inclusive, were funded by the issuance at par of Thirty-Year 5 Per Cent. Funding Bonds. The holders of $13,842,000 out of a total of $13,- 976,000 of Income Bonds availed themselves of this offer and deposited their bonds under the plan. The surplus income over and above interest on first mortgage and underlying bonds was thus made available (under the funding plan) for improvements, betterments, etc., dur¬ ing the period mentioned. Page Six This surplus, exclusive of Extraordinary Expenditure Account and Depreciation Charge, increased from $1,001,298.58 in 1906 to $1,703,713.14 in 1912. (b) ACQUISITION OF NEW PROPERTY.—For new property, such as terminal stations, car houses, equip¬ ment, extensions, excursion resorts, etc., the United Com¬ pany entered into a contract with The Maryland Electric Railways Company whereby the latter agreed to furnish funds for the purchase and construction of such property as The United Company might require, which was leased to the United Company at a rental of 6 per cent, per annum on the cost of property. The Maryland Electric Railways Company has issued bonds which are a first lien upon this property and the United Company, by its rental agreement, pays a sum sufficient to cover the interest on The Maryland Electric Railways Company bonds and to create a sinking fund. The United Com¬ pany obligates itself to purchase the property at maturity for an amount sufficient to pay off all outstanding bonds. The Plan of 1906 worked out most Effect of the successfully. By the end of 1910 the Plan of 1906. physical condition of the property was excellent. The President’s Report for 1910 contained the following statement: “The property, as a result of these expendi¬ tures, is in excellent physical condition—prob¬ ably, on the whole, better than that of any street railway in the country.” “The financial plan of 1906 is consummated. The Company itself has a clean balance sheet and has no bills payable or accounts payable, except current monthly accounts.” Page Seven The Company resumed payment of interest on its Income Bonds in 1911 and in 1912 paid the first divi¬ dend on its common stock. The Report for that year shows earnings on Income Bonds (prior to depreciation charges) amounting to nearly three times the Income Bond interest, and after deduction of depreciation, to about twice the Income Bond interest. The Company’s Report for 1912 further says: “The Company has no floating debt. As of December 31 it had cash on hand amounting to $485,595.39. The Company also had in its treasury $450,000 notes of the Baltimore, Sparrows Point and Chesapeake Railway Com¬ pany and $100,000 Notes of the Baltimore, Halethorpe and Elkridge Railway Company, representing in part the construction cost of those properties. It also had unpledged $889,000 of its First Consolidated Mortgage 4 Per Cent. Bonds.” The Report for 1912 also says: “It will be noted that after deducting Oper¬ ating Expenses, Taxes, Interest, Rentals, Depre¬ ciation, etc., $677,082.32 was left available for dividends. This is at the rate of A/i per cent, on the $15,000,000 of Common Stock out¬ standing January 1, 1912, which amount, how¬ ever, increased during the year owing to the conversion of Notes into Common Stock. The Board of Directors did not distribute this full amount to Stockholders, but in furtherance of its conservative dividend policy declared in April, 1912, a dividend of 75 cents per share— Page Eight the first dividend ever paid on the Common Stock—and in October another dividend of 75 cents per share.” On April 9, 1913, the Company declared its third dividend on its Common Stock, amounting to $1.00 per share, or 2 per cent. This is regarded as a semi-annual dividend. It has been stated that the Company will take up later the question of quarterly dividends. THE COMPANY’S EARNINGS. GROWTH IN EARNINGS.—For Comparative a detailed comparative statement of Earnings. Annual Earnings from 1906-1912, in¬ clusive, see Appendix I. Omitting the year 1904 (the year of the fire) and the year 1 908 (the year of the industrial depression following the panic of 1907) the Company’s increase in gross receipts since the consolidation has averaged 7.16 per cent, per annum. The following figures give further indication of the growth of the Company since the consolidation. Com¬ paring the year 1900—the first full year of operation after the consolidation—with the year 1912, we note: Gross Increase, 93 Per Cent. Net Increase, £8 Per Cent. 1. That gross receipts of the Company from Railway properties increased in that period from $4,431,742.96 to $8,577,- 004.06, or over 93 per cent.; 2. That net receipts increased from $2,372,- 183.90 to $4,708,128.11, or over 98 per cent. Pace Nine 3. Interest on bonds, equipment and other rentals (including Maryland Electric Railways Company bonds and sinking fund, interest on new Funding Bonds and Three-Year Notes) increased from $1,477,490.78 to $2,206,430.10, or about 49 per cent. Park and other taxes increased from Tax Increase, $380,489.35 in 1900 to $796,075.84 109 Per Cent. in 1912, or about 109 per cent. If we include payments for public require¬ ments, such as regrading, repairing streets, payments in the nature of taxes amounted in 1912 to $992,396.67. There are certain factors in this latter item which are uncertain in character and may or may not be permanent, as they are due to Municipal Improvements now under way, such as widening, regrading and paving of streets and construction of new sewerage system. The following comparison of earnings, 1 906 and 1912, is also suggestive. It is based on earnings in 1906 (when the financial plan for the rehabilitation of the property was adopted) compared with those of 1912: 1. Gross Receipts, 1912, $8,5 77,004.06; 1906, $6,587,827.51. Increase, 30.2 per cent. 2. Net Earnings, 1912, $4,708,128.11; 1906, $3,366,885.24. Increase, 39.8 per cent. 3. Surplus over Fixed Charges, Taxes, Interest, etc. (not including income bonds) 1912, $1,703,713.14; 1906, $1,001,298.58. Increase, 70.1 per cent. From the above comparison it is evident that the policy of the Board in authorizing large expenditures to be made upon the property has justified and is now justify¬ ing itself. It is also evident that the financial plan of 1906 has worked out very successfully. Interest Increase, 49 Per Cent. Page Ten FRANCHISES. FRANCHISES.—The United Company now operates 403.3 miles of main line. Counsel advise that all of the Company’s franchises in the streets of the city are per¬ petual with the exceptions noted below. About fifteen miles of disconnected franchises granted since the new city Charter (1898), while not perpetual in terms, are for twenty-five years, renewable for twenty-five more at a fair valuation. The franchises granted to the Balti¬ more City Passenger Railway Company—fifty-six miles— and the Citizens Railway Company—thirteen miles— were subject to charter provisions, giving the right to the city every fifteen years to purchase these particular properties, but only upon payment of the value of all its property and franchises. These rights mature eight years apart, and it will be noted that they represent a very small portion of the whole system. Even if it were practicable for the city to purchase and operate discon¬ nected lines with separate power facilities, the security holders are amply protected, as the city can only do so upon payment of the value of the franchises, as well as the value of the property so acquired. There has been no agitation for Municipal Ownership in Baltimore, as the city has an exceptionally advantageous arrangement with the Company, receiving in addition to regular taxes, 9 per cent, of the gross receipts within city limits. This is known as the Park Tax. IMPROVEMENTS TO PROPERTY. It may be interesting to summarize Summary of the improvements to the property since Improvements. the consolidation. Page Eleven In 1899 the Company operated 353 Trackage. miles of single track; today it operates over 403 miles. Of this, 236 miles are in the city, 1 04 miles of which have been entirely reconstructed with nine- and seven-inch girder rail of the most improved pattern. About 200 miles of city lines have been either cast- or electric-welded. All of the 1 71 miles of T-rail on suburban lines are reported as in good condition. Since the consolidation, nearly all Equipment. the smaller cars in use at that time have been discarded and the Company’s equipment today is largely of the most modern J. G. Brill & Co. double-truck, semi-convertible type, equipped with air brakes and with multiple control on high-speed cars. At the time of the consolidation the Power Houses. Company’s power house capacity was 1 1,979 kw.; today it has a modern, thoroughly equipped central power house with normal generating capacity of 37,300 kw., and operates five sub¬ stations, three of which are practically new, with 32,000 kw. capacity. The following is an extract from the Power Contract. Report of the Company for 1911; "SUSQUEHANNA RIVER POWER.—On February 8, 191 1, an agreement was entered into between your Company and the Pennsylvania Water and Power Company, covering the furnishing by the latter Com¬ pany of hydro-electric energy. The agreement runs for a period of fifteen years, with the right reserved to your Company to terminate it at the end of either five or ten years. Under this contract, the Power Company began furnishing current on July 17, 1911. * * * Page Twelve “Operations at the Pratt street plant have not been entirely discontinued, but the river power is utilized in conjunction with the steam generated power at Pratt street, this latter station being always available for any emergency that may arise.” At the present time the Company’s power requirements are to a large extent supplied by power generated on the Susquehanna River, supplemented by steam power gen¬ erated at its own plants, which are maintained in a high state of efficiency in order to be prepared for immediate service in the event of a serious interruption of hydro¬ energy. The advantage derived from the utilization of river power is not only in the saving of cost of current, includ¬ ing charges for depreciation of power plants, but in the large capital outlays which would otherwise be necessary for the acquisition of new machinery. The car house capacity has been in- Car Houses. creased 66.6 per cent, since consolida¬ tion and since 1904 the Company itself has erected, or has leased from The Maryland Electric Railways Company, eight barns of the most approved concrete construction. The annual report of 1907 says of these houses: “They are models of completeness in respect to the housing of the Company’s valuable equipment, and providing of comfortable quarters for employees and waiting rooms for passengers. The fire hazard has been reduced to a minimum, all material of an inflam¬ mable character having, as far as practicable, been eliminated in their construction.” CAPITAL EXPENDITURES. It will thus be seen that the United Company’s system has been practically built over since the consolidation. Page Thirteen This has required large capital expenditures, costing from the date of consolidation to December 31, 1912, over $19,300,000, as follows: Capital Expenditures from Income and proceeds sales First Consol. 4s. $7,892,063.72 “Extraordinary Expenditure Account,” taken from Income, etc. 5,350,650.11 Maryland Electric Railways Company bond pro¬ ceeds and Special Sinking Fund. 4,186,944.81 Car Trusts. 1,906,211.70 Total.$19,335,870.34 NOTE.—In the “Extraordinary Expenditure Account,” which was an account kept for the purpose of determining the exact cost of rehabilitating the property, are some items which may properly be charged to Maintenance and Repair; the balance represents capital expenditures for new property, improvements, etc. Notwithstanding this heavy expenditure for rehabilita¬ tion the total interest charges (including rentals) had only increased by December 31, 1912, $668,939.32 over the year 1900, or at the rate of 3.4 per cent, on the above expenditures, which indicates satisfactory financing. COMPARATIVE CAPITALIZATION OF THE UNITED RAILWAYS AND ELECTRIC COMPANY OF BAL¬ TIMORE WITH RAILWAYS IN OTHER CITIES. The report of the United States Comparative Census Bureau on Street and Electric Capitalization. Railways (1902)* shows the following net capital liabilities (bonds and stock) per mile of surface lines in all cities of over 500,000 population. Page Fourteen Population, Capital Liabilities, City. 1910. Per Mile. New York. 4,766,883 $259,542 Chicago!. 2,185,283 218,864 St. Louis. 687,029 198,647 Pittsburgh. 533,905 185,170 Baltimore. 558,485 182,009 Philadelphia . 1,549,008 165,085 Boston . 670,585 97,353 *The only later report (1907) recapitulates the per mile capi¬ talization by States and geographic divisions, but not by cities. fThese figures are based upon the 1913 records for the Chicago Railways Company and the Chicago City Railway Company. It will be seen from the above table that the capital liabilities per mile of The United (Railways and Electric) Company (of Baltimore) was at the time of the Census Report lower than that of the principal surface lines in all of these cities save two. NOTE.—Considerable changes have taken place in the past ten years in all of the properties, but as the (Baltimore) United Company has been carefully financed during this period, it is probably safe to assume that the relative proportions are fairly accurate. In estimating the “bonded debt” per mile of The United (Railways and Electric) Company, the $14,000,000 of Income Bonds are generally included as a “debt.” This, however, creates an erroneous impression. These bonds should be regarded as they were originally intended and designed to be regarded, in the nature of preferred stock, for which they were actually exchanged. The interest on these bonds is payable not as a debt, but only if and when earned. The principal does not mature unless there is a default upon underlying bonds. If this be Page Fifteen taken into consideration, a more accurate idea of the situation is obtained. Deducting $14,000,000 of Income Bonds reduces the “bonded debt” of the United Com¬ pany, as frequently given in publications, by about $38,000 per mile. THE IMPROVEMENT IN THE ACTUAL SECURITY OF THE BONDS AND STOCK OF THE UNITED RAILWAYS AND ELECTRIC COMPANY OF BAL¬ TIMORE SINCE THEIR ORIGINAL ISSUE. FIRST CONSOLIDATED MORT- 1st Consol. 4s. GAGE 4s.—The First Consolidated 4s are now an absolute first lien on 182 1st Mortgage miles of track. In November, 1911, on 182 Miles the United Company retired $2,000,000 of Track. Baltimore City Passenger Railway Com¬ pany First Mortgage 3s and $500,000 Baltimore City Passenger Railway Company 4 J/2 P er Cent. Certificates of Indebtedness. In 1912 the Company retired $250,000 Central Railway Company First Mort¬ gage 6s. The mortgages and indentures securing the above bonds and certificates have been canceled and the properties released. In addition to the above track¬ age the bonds are also a lien upon all of the property of the Company now owned or hereafter to be acquired subject to $9,050,000 underlying bonds. But the most noteworthy evidence Earnings of their improvement in substantial Applicable. security and value is the fact that the gross and net receipts of the United Company, since the consolidation, have nearly doubled. The bonds were issued in 1 899. In 1 900 the Company’s Page Sixteen net earnings available for taxes and fixed charges, were $2,372,183.90 and in 1912 they were $4,708,1 28.1 1 — an increase of $2,335,944.21. On the other hand, the interest charges and sinking fund of the Company only increased $728,939.32 during this period. The surplus for many years went Improvement back into the property and increased of Security the security of the first mortgage bonds from Income. without placing any additional lien ahead of them. Thus, for six years— 1904 to 1910, inclusive—substantially the total income of the United Company, over and above the fixed charges, was applied to improvement of the property. Even the income bond interest during this period was funded and the cash spent upon the property. THE MARKET VALUE OF THE Market Value. FIRST CONSOLIDATED FOUR PER CENT. BONDS.—While investors who receive a regular return on their investments do not, as a rule, concern themselves as to market quotations, we have been asked by a number of those who have traded in the bonds why it is that their market price is considerably lower than at the date of their issuance, in view of the very material improvement in the substantial value of the bonds. The security has been strengthened each year; the surplus applicable to interest and taxes has nearly doubled; the property was never in better condition and yet the market value of the bonds is lower. Overlooking the purely local influence, such as the tax burden which reflects sympathetically upon all the United Company’s securities, it is also true that high-grade bonds everywhere are selling at lower figures than those pre¬ vailing at the time of the issuance of these bonds. Page Seventeen It was very generally thought by economists in 1899, the date of the issuance of these bonds, that this country would go permanently on a 3(4 per cent, interest basis for high-grade investments. Since that date, however, largely due to the discoveries of gold, the interest return upon these securities has been materially increased by the decline in market prices. INCOME BONDS. The Income Bonds have been bene- Income Bonds. fited in security to the same extent as the First Consolidated 4s, as they are a lien upon all the property covered by the First Consoli¬ dated 4s. The interest on these bonds was funded from 1904 to 1910. Payment of interest was resumed in 1911. The interest on these bonds and dividends on a small amount of preferred stock amounts to $560,000 annually. After payment of operating expenses, taxes and fixed charges, the Company earned in 1911, $1,427,618.85. This was distributed as follows: $450,944.11 to Extraordinary Expenditure Account; $560,000 to holders of Income Bonds and Preferred Stock and $416,674.74 to Profit and Loss. In 1912 the United Company earned $1,703,713.14 after payment of operating expenses, fixed charges and taxes, or more than three times the interest on the bonds. After allowing for depreciation, the United Company was still able to show about twice the interest on the Income Bonds. NOTE.—Any comparison in detail of Annual Statements of The United Company prior to 1910 must be made with care, as the Company during those years was passing through a period of Page Eighteen extraordinary expenditures, requiring new financing and the use of all available income. There is, therefore, no accurate standard of comparison, and in examining the results of any that may be made it should be borne in mind that while the extraordinary expenditure account (opened by the Company at the time of the adoption of its funding plan, in order to determine accurately the cost of rehabilitating the property), includes items representing large capital expenditures, such as principal payments due on Car Trusts, it also includes items that in the absence of such an account might ordinarily be charged to “Maintenance and Repair." COMMON STOCK. It is evident that all the extensive Common Stock, improvements to the property were made at the expense of the common stockholder, no dividends having been paid until 1912. For many years the whole of the Company’s surplus was turned back into the property. The common stockholder naturally looks to the results of these expenditures for his return. The Company declared dividends in 1912 equal tc 3 per cent, on its capital stock and in April, 1913, $1.00 per share was declared, which is at the rate of 4 per cent, per annum. The Directors stated in this con¬ nection that they had under consideration the advisa¬ bility of establishing quarterly rather than semi-annual dividends. The Company’s growth has been consistent and steady. The amount of its common stock, comparatively speak¬ ing, is not great, so that gradual increases in dividends do not require very heavy distributions of cash. With the history of the Company and its comparative earnings before him one stockholder may figure as well as another the prospect of increasing dividends. It should not be forgotten on the one hand that the gross Page Nineteen earnings of street railway companies progress with regu¬ larity, and on the other that there are many incidents to interfere with precise estimates as to net receipts. In this connection it should also be remembered that the city of Baltimore is especially interested in maintain¬ ing and increasing the gross receipts of the Company. In addition to other taxes, the city receives 9 per cent, of the Company’s gross within the city limits. This tax, known as the Park Tax, amounted in 1912 to $550,- 677.01 and was equivalent to over eighteen cents on the city’s tax rate. The United Company paid by way of taxes and indirect charges in 1912, $992,396.67, which, for all practical purposes, so far as the Company is concerned, may be considered as a pro-rata reduction of the fare received. The above amount is said to represent the total net earnings (after paying cost of operation only) of about one car in every five. It is believed that the very fact that these charges are now so heavy, constitutes an equitable and legal protection against further increases of taxes on the one hand or any reduction of fares on the other. PUBLIC SERVICE COMMISSION. The Company since 1910 has been under the super¬ vision of the Public Service Commission of Maryland. This Commission was created by the Legislature with extensive powers of control over rates, security issues, service, etc. The Commissioners have always shown a disposition to act with entire fairness in questions arising between the public and the companies under their con¬ trol. The Company has won most of its cases before the Commission, because the Company’s officials state Page Twenty that they are unwilling to go before the Commissioners with a case in which they have not full confidence. In a number of instances where the appeals to the Commission have, in the judgment of the Company, been just ones, the requests of the complainants have been granted with¬ out resorting to a hearing. On the other hand, the de¬ cisions of the Commission against the Company, while at times they have seemed somewhat serious, have as a rule worked out very fairly to both the Company and the public. The Company has never as yet taken an appeal from a decision of the Commission. FOR FURTHER DESCRIPTION, PRICES, ETC., UNITED RAILWAYS AND ELECTRIC COMPANY SECURITIES, including Underlying Bonds, First Consoli¬ dated 4s, Income Bonds, Three-Year Convertible Notes, Funding Bonds, Preferred and Common Stock, Maryland Electric Railways Company Bonds, Baltimore, Sparrows Point and Chesapeake Guaranteed Bonds and Car Trusts, see Appendix II. Page Twenty-One APPENDIX EARNINGS.—A comparative statement of the earn the date of the adoption of the Financial Plan for the 1912. 1906. 1907. 1908. Gross . Operating Ex- $6,587,827.51 $7,024,586.95 $6,838,042.27 penses . 3,220,942.27 3,470,087.37 3,293,337.71 Net Earnings. . . $3,366,885.24 $3,554,499.58 $3,544,704.56 Taxes . 546,507.31 564,509.86 600,931.05 Balance available for Interest, Dividends, etc.$2,820,3 77.93 $2,989,989.72 $2,943,773.51 Interest (which includes In- terest on Bonded Debt, Rentals, I n- terest on Car Trusts, Inter¬ est and Dis¬ counts) .... 1,819,079.35 1,923,432.42 2,036,251 .31 $1,001,298.58 $1,066,557.30 $907,522.20 Interest on Income Bonds—Funded, 1904 to 1910, inclusive *$450,944.1 1 charged to Extraordinary Expenditures and balance credited to Profit and Loss. Page Twenty-Two I, ings of the United Company from the year 1906— rehabilitation of the property—to and including the year 1909. $7,212,473.76 1910. $7,690,384.73 1911. $8,028,398.01 1912. $8,577,004.06 3,361,871 .55 3,601,895.83 3,681,093.50 3,868,875.95 $3,850,602.21 650,546.50 $4,088,488.90 705,291 .81 $4,347,304.51 7 25,558.60 $4,708,128.1 1 796,075.84 $3,200,055.71 $3,383,197.09 $3,621,745.91 $3,912,052.27 2,083,641 .44 2,156,343.55 2,194,127.06 2,208,339.13 $1,116,414.27 $1,226,853.54 $1,427,618.85 $1,703,713.14 $560,000.00 $560,000.00 *$867,618.85 f$l,143,713.14 f$428,574.47 charged to Depreciation; $38,056.35 Discount and Securities written off; $677,082.32 carried to Profit and Loss, out of which $463,050 was paid in dividends. Page Twenty-Three APPENDIX II. Description of The United Railways and Electric Com¬ pany Securities, Quotations (as of April 21st, 1913), Etc. FIRST CONSOLIDATED MORTGAGE FIFTY-YEAR 4 PER CENT. GOLD BONDS. Due March 1, 1949, Coupons Pay- lst Consol. 4s. able September 1 and March 1 at the banking house of Alexander Brown & Sons. Continental Trust Company of Baltimore, Trustee. Total authorized issue, $38,000,000. Outstanding in hands of public, $28,277,000 (April 21st, 1913). FIRST LIEN ON OVER 45 PER 1st Lien, 45 Per CENT. OF TRACK.—We are advised Cent, of Track. that since the issuance of these bonds, they have become an absolute first mortgage, by the retirement of underlying bonds and by new extensions, upon 1 82 miles of track out of a total of 403, or over 45 per cent, of total mileage. This includes 56J/2 miles of track formerly covered by the Baltimore City Passenger Railway Company First Mortgage Bonds, so that the First Consolidated 4s are now an absolute lien on the very heart of the United Company’s system. It also includes such new city trackage as the Light Street line, German Street line, the Lombard and Seventh Street connections, the Federal Street, Fairmount Avenue, Fre¬ mont Street, Wilkens Avenue, Dolphin Street lines, the double tracking of the Ellicott City line via Saratoga and Monroe streets and Edmondson avenue to Ellicott City, and many miles of valuable suburban lines. Page Twenty-Four The First Consolidated Mortgage is Car Shops, Etc. also a first lien upon the extensive Carroll Park car and machine shops, upon the Pratt Street Boiler House and Equipment, upon the Dugan’s Wharf, Nunnery Lane, Eastern Avenue and Harford Road sub-stations and the new Light Street car house. It is a lien upon all the remaining property of the Com¬ pany of every description now owned and after acquired, subject only to underlying liens amounting to $9,050,000, First Consolidated 4 Per Cent. Bonds to this amount are held by the Trustee to retire these underlying bonds at maturity. CLOSED MORTGAGE—The First Con- Closed solidated Mortgage is closed, except for Mortgage. refunding purposes. The United Company, however, has $2,368,000 bonds in its treasury available for corporate purposes, all of which, with the exception of $541,000, were certified against the retirement of an equal amount of underlying bonds. $673,000 of bonds are held as collateral by the Trustees of the Three-Year Convertible Notes. The remaining First Consolidated 4 Per Cent. Bonds can only be issued in the future upon certificates to the Trustee that an equal amount of underlying bonds have been retired. These First Consolidated 4 Per Cent. Quotations. Bonds have sold as low as 79 and as high as 102J/2* Last sale 84J/4* INCOME 4 PER CENT. GOLD BONDS. Interest Payable, if earned, June 1 Income Bonds. and December 1 at the banking house of Alexander Brown & Sons. Bonds dated March 30, 1899. Payable at option of Corn- Page Twenty-Five pany after March 1, 1949. Maryland Trust Company of Baltimore, Trustee. Total authorized issue, $14,- 000,000. Outstanding, $13,976,000. MORTGAGE LIEN.—Of the $ 14,- Mortgage Lien. 000,000 of Preferred Stock (originally issued) all but $24,000 has been ex¬ changed for Income Mortgage 4 Per Cent. Gold Bonds. These bonds are secured by a mortgage covering all the property of the United Company subject to its First Con¬ solidated Mortgage and Underlying Bonds. (See Post, Title “Funding Bonds.”) The interest on these bonds is payable, if earned, pari passu with the dividends on out¬ standing Preferred Stock in equal semi-annual instalments on the first days of June and December out of “net earn¬ ings of the Company realized and remaining in any one year after the payment of all taxes, operating expenses, necessary repairs and maintenance and interest upon its bonded indebtedness.” The interest Cumulative. is cumulative. The principal of the bonds is payable at the option of the Company after March 1, 1949. The principal may be declared due and payable upon a default in principal or interest of the First Consolidated 4s or underlying bonds, whereby the principal of said consoli¬ dated mortgage bonds shall become due and payable. PROPERTIES.—For a description of the properties on which these bonds are a lien, see Memoranda of the lien of the First Mortgage 4s (ante). CLOSED MORTGAGE.—This mort¬ gage is a closed mortgage, the total authorized issue being now outstanding with the exception of $24,000 held to exchange for preferred stock. Maturity. Property Covered. Closed Mortgage. Page Twenty-Six PAYMENT OF COUPONS—The Coupons—How income interest on these bonds, pay- and When Paid, able if earned, was paid in cash from the time of consolidation until June 1, 1904, when, following the great fire of that year, the Company passed the income coupons of that date. This policy was continued until the adoption of the Company's financial plan in October, 1906, whereby the interest w as funded from 1904 to 1910, inclusive. The whole surplus income of the Company was devoted during this period to a rehabilitation of the system. While this policy resulted in a temporary hard¬ ship upon the holders of these bonds it added greatly to their security and the earning capacity of the Company. In 1911 the Company resumed payment of interest on these bonds and in 1912 the Company, after all expenses and charges, including depreciation, earned about twice the interest on these bonds. The Income Bonds have sold as low Quotations. as 41% and as high as 86. Last sale 64%. PREFERRED STOCK. The Company originally authorized Preferred Stock. $14,000,000 4 per cent. Preferred Stock, but shortly after its issue author¬ ized $14,000,000 of Income Bonds with which to retire the Preferred Stock. All but $24,000 of the stock has been retired. The stock is therefore seldom quoted; when it is, it is on a basis of prevailing market rates for Income Bonds. Page Twenty-Seven COMMON STOCK. There is now $19,568,800 outstand- Common Stock, ing (April 21st, 1913.) The United Company began paying dividends on its common stock in 1912, the amount paid that year being 3 per cent. To stockholders of record April 11, 1913, a dividend of $1.00 a share was declared. This is at the rate of 4 per cent, per annum. The Common Stock has sold as low as 8 and as high as 27%. Last sale 26. THREE-YEAR 5 PER CENT. COLLATERAL TRUST CONVERTIBLE NOTES. Due July 15, 1914. Coupons payable January 15 and July 1 5 at the banking house of Alex. Brown & Sons. Safe Deposit and Trust Company of Baltimore, Trustee. Redeemable at par and accrued interest upon sixty days’ notice. Total authorized issue, $3,125,000, of which all but $840,600 have been converted into common stock. (April 21st, 1913.) These Notes, which were issued with the approval of the Public Service Commission of Maryland, are the direct and unconditional obligation of the United Rail¬ ways and Electric Company and are secured by Trust Agreement, dated July 15, 1911. They were also secured by deposit of $2,500,000 First Consolidated Mortgage 4 Per Cent. Bonds, which, under the indenture securing the Notes, the Company reserved the right to withdraw proportionately as the Notes were paid or converted into common stock. Page Twenty-Eight The Notes were further secured by a deposit of $6,250,000 par value of common stock of the United Company with the Trustee as collateral for the Notes and for purposes of conversion. The Notes are convertible at any time up to and including January 2, 1914 (unless called for redemption) into shares of the common stock of the Company at $25 per share (par $50.) Five days’ notice of the intention to convert must be given to the Company in writing, but the Company has heretofore waived this notice. By April 21st, 1913, the holders of $2,284,000 of these notes had availed themselves of the right of conversion. The Notes were issued for the purpose of retiring $2,000,000 Baltimore City Passenger Railway Company 5 Per Cent. Bonds and $500,000 Baltimore City Passenger Railway Company 4J/2 Per Cent. Certificates of Indebted¬ ness, both maturing November 2, 1911, and the redemp¬ tion on October 1, 1 9 1 1, of the then unmatured $535,000 Car Trust Certificates, Series B and C. Any number of the above Notes may be called for redemption at any time or times upoil the giving of at least sixty days’ notice, in which case the principal of the Notes so called, will be payable, with the interest accrued, on the date named in said notice, unless the holder shall elect to convert the principal into common stock, but the right to convert the principal of the Notes called, into the common stock of the Company will cease five (5) days prior to the date named in said notice for the payment thereof. In the event that it is determined at any time by the Company to call for redemption a part only of said Notes, the Notes so to be called will be determined by lot. Page Twenty-Nine Quotations. These Notes have sold as high as 110J/4 and as low as 985/2- Last sale 105. FIVE PER CENT. THIRTY-YEAR FUNDING BONDS. Due June 1, 1936. Coupons pay- Funding Bonds, able June 1 and December 1. Mary¬ land Trust Company, Trustee. Inter¬ est payable at the banking house of Alexander Brown & Sons. Redeemable at any interest date at par and accrued interest. Total authorized issue, $3,920,000. Outstanding, $3,920,000. These bonds are not secured by Fixed Charge. mortgage, but are the unconditional obligation of the United Company to pay principal and interest semi-annually on the above dates, and are secured by agreement, dated July 25, 1906. They were created and issued for the purpose of paying the interest warrants or coupons upon income bonds from 1904 to 1910, inclusive. (See Ante, p. 27.) They are in denominations of $1,000, $500 and $100. The priority of interest on these bonds Priority to to interest on the income bonds is Incomes. ensured by the fact that all income bonds deposited under the funding plan, amounting to $13,842,000 out of a total outstand¬ ing issue of $13,976,000 have consented to such priority and a memorandum of agreement to that effect has been stamped upon the bonds and all coupons. These bonds have sold as low as Quotations. 6 7 J /4 and as high as 91. Last sale 8 7 Yl . Page Thirty THE MARYLAND ELECTRIC RAILWAYS COM- PANY FIRST MORTGAGE FIVE PER CENT. TWENTY-FIVE-YEARGOLD SINK¬ ING FUND BONDS. Dated September 15th, 1906. Maryland Electric Mercantile Trust and Deposit Corn- Railways Com- pany of Baltimore, Trustee. Interest pany First 5s. payable at the banking house of Alexander Brown & Sons April 1 and October 1. Total authorized issue, $8,000,000; outstanding, $4,000,000. Redeemable at 1 10 and ac¬ crued interest. The Maryland Electric Railways Company. Company was formed by the consoli¬ dation August 6, 1906, of the Mary¬ land Electric Railway Company and the Baltimore and Annapolis Short Line, which latter owned and operated a line, since electrified, between Baltimore and Annapolis, Md.—twenty-two miles. The Maryland Electric Railways Security. Company First 5 Per Cent. Bonds were issued after the above consolidation and are a first mortgage upon real estate, car houses, power sub-stations, excursion parks, extensions and equipment acquired with the proceeds of said bonds and leased to the United Company under a rental agreement whereby the latter Company obligates itself to pay an annual net rental of 6 per cent, on the cost, which is more than sufficient to pay interest on the bonds, and since March 30th, 1910, 1 Yl P er cent, per Sinking Fund. annum additional as a sinking fund. The United Company also pays to the Special Sinking Fund 7J/2 per cent, of the cost each year Page Thirty-One of equipment purchased with the bond proceeds and Special Sinking Fund until the equivalent of the full pur¬ chase price of the equipment is paid. The United Company pays all the cost of maintenance, operation, taxes, insurance, etc., and agrees to purchase the property at maturity of or upon any default on the bonds at a sum sufficient to retire them. The Maryland Electric Railways Company First Mort¬ gage Bonds are therefore secured: (a) By a first mortgage upon the property described. (b) By the leasing agreement of The United Company and its obligation to purchase the property at maturity of the bonds or upon any default thereon. (c) By the Sinking Funds referred to. (d) By the obligation of The Maryland Electric Railways Com¬ pany owning the Annapolis Short Line property. These bonds, in our opinion, should Character of be regarded as high grade equipment, Security. rather than as ordinary mortgage rail¬ way bonds. They are a first mortgage upon very valuable property including real estate, and their principal security lies in the fact that they represent the ownership of property, which, in the judgment of operating officials, is necessary for the economical and efficient operation of the United Company’s system. Proportioned to the value of the whole property of the United Company, or even the amounts spent upon it in the past few years, the present issue of these bonds is very small ($4,000,000) and the rental charges are not heavy. We are sometimes asked to compare the First Consoli¬ dated 4s of the United Company with the First Mortgage Bonds of the Maryland Electric Railways Company, but Page Thirty-Two the two issues are so essentially different in character of security that this cannot fairly be done. It would be just as fair to compare the security of the First Consoli¬ dated Mortgage Bonds of a railroad with its equipment bonds. These Maryland Electric Railways Quotations. Company bonds have sold as low as 94% and interest, and as high as 99% and interest. Last sale 98%. THE BALTIMORE, SPARROWS POINT AND CHESA¬ PEAKE RAILWAY COMPANY FIRST MORTGAGE FIFTY-YEAR 4% PER CENT. GOLD BONDS. Due February 1, 1953. Coupons B. S. P. & C. payable at the banking house of Alex. First 4V2S. Brown & Sons February 1 and August 1. Fidelity Trust Company of Balti¬ more, Trustee. Guaranteed Principal and interest by The United Railways and Electric Company of Balti¬ more. Total authorized issue, $2,000,000. Outstand¬ ing, $2,000,000. The mortgage is a first lien upon the Security. lines of the above Company, extending from the eastern city limits to the inter¬ section of Eastern Avenue (extended) and Middle River; and from the intersection of Eastern Avenue and the Old Trappe Road to the terminus at North Point, passing Sparrows Point, a thriving town and home of the Mary¬ land Steel Company. Since the date of the mortgage the Company has built a double track extension to Bay Shore Park, on which extension the mortgage has become a first lien. P««e Thirty-Three The mortgage is also a lien upon Guaranteed by all other property and franchises of United Railways, the Company acquired or to be ac¬ quired. The whole of the property is leased to the United Company, which operates it and guarantees the bonds. The lease is part security for the mortgage. The mileage at present is thirty-five of single track. These bonds have sold as low as 85 Quotations. and as high as 99J/2- Last sale 95 J4* UNDERLYING BONDS. CENTRAL RAILWAY COMPANY Consolidated 5s. CONSOLIDATED MORTGAGE 5 PER CENT. GOLD BONDS. Due May 1, 1932. Coupons payable May 1 and November 1 at Merchants-Mechanics National Bank. Mercantile Trust and Deposit Company of Baltimore, Trustee. Total authorized issue, $700,000. Outstanding, Decem¬ ber 31, 1912, $700,000. They are a first mortgage on the old Security. Central Railway Company property, covering principally the Preston Street line, the City Hall, Canton and Belair Road divisions about 36J/2 miles of single track. These bonds were issued to retire underlying bonds (since retired) and for purposes of electrifying the road. Quotation. Last sale, 104J/2. Page Thirty-Four IBID. “EXTENSION AND IM- Extension and PROVEMENT” 5 PER CENT. GOLD Improvement 5s. BONDS. Due March 1, 1 932. Cou¬ pons payable March 1 and September 1 at Merchants-Mechanics National Bank. Baltimore Trust Company, Trustee. Total authorized issue, $600,000. Outstanding, $600,000. These bonds cover all property of Security. the Company except the line from Druid Hill Park to foot of Broadway viz: Belair Road, Wolfe Street and Canton lines. Quotation. Last sale, 106. CITY AND SUBURBAN RAIL- City and Suburban WAY COMPANY FIRST MORT- First 5s. GAGE 5 PER CENT. GOLD BONDS. Due June 1, 1922. Cou¬ pons payable June 1 and December 1 at the banking house of Alexander Brown & Sons. Safe Deposit and Trust Company of Baltimore, Trustee. Total authorized issue, $3,000,000. Outstanding, $3,000,000. These bonds are a first mortgage on Security. the old City and Suburban Railway Company’s property covering princi¬ pally the following lines: Maryland Avenue, Roland Park and Highlandtown, John Street and Columbia Avenue, Pratt Street, Lombard Street, York Road, North Avenue—about forty-four miles of single track. Quotation. Last sale, 103. BALTIMORE TRACTION COM- Baltimore Traction PANY FIRST MORTGAGE 5 PER First 5s. CENT. BONDS. Due November 1, 1929. Coupons payable May 1 and Page Thirty-Five November 1 at Merchants-Mechanics National Bank. Mercantile Trust and Deposit Company of Baltimore, Trustee. Total authorized issue, $1,500,000. Out¬ standing, $1,500,000. These bonds are a first mortgage Security. upon the old Baltimore Traction Com¬ pany system, covering principally the following lines: Druid Hill Avenue, Gilmor Street, Carey Street, Pikesville, Gwynn Oak, Westport, Curtis Bay, West Arlington—about thirty-two miles of single track. Quotation. Last sale, 1041/2. IBID. “NORTH BALTIMORE North Baltimore DIVISION” FIRST MORTGAGE 5 Division 5s. PER CENT. GOLD BONDS. Due June 1, 1942. Coupons payable December 1 and June 1 at Merchants-Mechanics National Bank. Mercantile Trust and Deposit Company of Balti¬ more, Trustee. Total authorized issue, $ 1,750,000. Out¬ standing, $1,750,000. These bonds are a first mortgage on Security. the old North Baltimore Passenger Railway Company lines and those of the Baltimore and Powhatan Railway Company, covering about twenty-one miles of single track on Linden Avenue, Fremont Street, Edmondson Avenue and Monument Street, Waverly line from Charles and Twenty-fifth Streets to York Road and Thirty-first Street, and on Twenty-fifth Street, from St. Paul Street to York Road. Quotation. Last sale, ]06%. Page Thirty-Si* LAKE ROLAND ELEVATED Lake Roland First RAILWAY COMPANY FIRST Consolidated 5s. CONSOLIDATED MORTGAGE 5 PER CENT. GOLD BONDS. Due September 1, 1942. Coupons payable March 1 and September 1 at the banking house of Alexander Brown & Sons. Baltimore Trust Company, Trustee. Total authorized issue, $1,000,000. Outstanding, $1,000,000. These bonds are a lien upon all the Security. property of the old North Avenue Railway Company and the Baltimore, Hampden and Lake Roland Railroad Company, covering eighteen miles of single track on North Avenue, from Walbrook to Division Street; McCulloh Street to Madison Avenue; John Street to McMechen Street on North Avenue; North Avenue to Lexington Street on Guilford Avenue; North to Charles Street on Lexington Street. Quotation. Last sale, 105%. BALTIMORE, CATONSVILLE AND B. C. & E. M. ELLICOTT’S MILLS RAILWAY COM- First 5s. PANY FIRST MORTGAGE 5 PER CENT. BONDS. Due July 1, 1916. Coupons payable January 1 and July 1 at Merchants- Mechanics National Bank. Safe Deposit and Trust Company of Baltimore, Trustee. Total authorized issue, $500,000. Outstanding, $500,000. These bonds are a first lien upon all Security. the property of the above old Company, covering principally eleven miles of track, running from Frederick Avenue near Mount Street and continuing over Frederick Road to Catonsville. Quotation. Last sale, 101%. Page Thirty-Seven 4 V CAR TRUSTS. THE UNITED RAILWAYS AND Car Trusts ELECTRIC COMPANY CAR TRUST, Series A. SERIES “A,” 5 PER CENT. BONDS. Dated October 1, 1904. Due in ten annual instalments of $35,000 each, beginning October 1, 1905. Interest payable April 1 and October 1. Fidelity Trust Company of Maryland, Trustee. Total issue, $350,000. Secured by 150 closed cars, 2 sprinklers and equipment, costing $411,510. Outstanding December 31, 1912, $70,000. The above Certificates are selling on Quotation. about a 5 per cent, basis. NOTE.—Car Trusts, Series B and C were redeemed on October 1, 1911, $535,000 at 102J/2 and interest. We have obtained the within information from various publications and from the statements of the Company and its officers. While we believe the information to be entirely reliable, it is compiled by us as a convenient reference and we assume no responsibility in connection therewith. Page Thirty-Eight j