The Washington herald., 1910-04-05
GAS HEARING BEGUN

that. Is not that % 10 per cent upon the
investment?
Mr. Humphreys-No, sir.
The Chairman-That is What I would
like TO have your explanation upon.
Mr.. Humphreys-But before 1 start In
want to draw attention to a. fact that
might be lost sight Of Last year these
profits were not made on the basis Of 90
cents, for it only got 90 cents for a part
of the year. That is just to remind you
OF that fact, however.
Now, in answer to your question, that
would not be a return of 80 1-3 per cent
upon the investment. but 80 per cent Of
the selling price. This very report which
have before me, the companys report,
also shows that the value Of the plant.
exclusive Of working capital and fran
chise. is 81, $685.; that is exclusive OF
the working capital and the working
capital alone should be at least % or 30
cents per thousand feet sold per year.
The statement made by my firm showed
that on December /, 1907, the company
had almost exactly 100000 in physical
assets-that is. plant. real estate, and so
forth. That was without working capital.
Up TO June 30. 1903. there were additional
extensions made, going up to $1,000 so
That on June go 1909, the actual appraise-
ment, without any franchise rights, was
$s'Z33'sol Therefore 1 say that the Sc
curities do not represent even the invest
ment And if We are going TO talk about
returns we must talk about returns on
the investment, and not on the securities.
The securities might not reach 100000.
but that would not affect the rate OF
return on the investment For instance.
take the case of one of the Massachusetts
manufacturing companies. shoes and the
like, the book value of the plant has been
reduced by excessive credits to plant ac-
count; that If the rate of interest paid
were calculated on the book value OF
the plant 1t would be a tremendous per-
centage. Here, If the earnings are caIeu-
lated on the securities. of course. the
rate of return seems high. because the
amount of the securities does not repre-
sent, in par value. anywhere near the
actual investment in the plant
Tha Chairman-What. as you make the
figures. is the return which the Wash
ington Gaslight Company is getting on
its investment?
Mr.. Humphreys Will make that CAL
culation in a moment. Taking the COM
pany's statement and making no addi-
tional allowance which / think should
be made, for increase accruing cost Of
depreeiat ion-taIing the actual value OF
81, 3 EN- -a-
which is a little above what was on
June 90, 1909. that would make 61k per
cent. If. however. you took the valua-
ton, which 1 consider a moderate one.
which we put upon the plant as a whsle
In the middle of last year, the value Of
the whole plant. the property, as a going
concern. at 100000, that would show
in earnings last year 3 per cent. with half
Of the year running al 80 cents and half
of the year at 81, or averaging about %
cents.
Mr.. orough-Ninety-si cents.
Mr. Humphreys-Between 81 and Sc
cents for the year Now. upon that
they made, on my valuation, ) per cent
on their property value, and on value
of physical assets they only made about
81 per cent
Mr. Goldsborough-Pardon me. Doe-
tor. but the difference between your
calculation OF the rate per 1000 and
that of the company is simply this.
that the company in stating its profits
overcharged itself. or failed TO credit
itself. with the depreciation account.
Mr. Humphreys-That is right, sir. as
I have tried to explain. This fails 10 de-
duct from its receipts the fun cost, as
see g.
Mr.. Goldsborough-All the actual state
ments and figures from which these de-
auctions were drawn were correctly re-
ported by the company. and this side as
sue In regard 20 cost per loo cubic feet
was made by the secretary under the ap-
prehension that it was not proper to
credit the company with the depreciation
account
Mr. Humphreys-That is what 7 have
endeavored 10 explain.
Mr.. Goldsborough-And that is the diff
ference?
Mr.. Humphreys made my statement
upon that, and I supplemented it by say
ing that d larger allowance should be
made for depreciation
The remainder of the days testimony
viii appear later.