The Thomas A. Edison Papers Digital Edition

Transcription

To The Directors Of The Edison Electric Illuminating Company Company of New York:- 
November 1892 
Dear Sirs:- 
As the year draws to a close it seems wise that we should consider certain questions that relate to our future policy, and, while there may be no need for immediate action, the decision which we arrive at regarding these questions may affect our action with reference to other matters which do require immediate attention. 
The past year has been a profitable one. Our earnings have shown a gratifying increase. The work of building and enlarging our plant has gone on with [illegible word] an interruption. Various problems which have arisen, and for a time, seemed perplexing, [paper torn] considered and adjusted. In fact, the [paper torn] full of successes and [illegible words] all along the [paper torn]. 
One of the first questions in point of time, which will have to be considered, will be the addition to our Reserve Fund, and the amount to be placed to its credit at the end of this year. Years ago, in 1886, when our plant was small, we felt it necessary to credit this account with $10,000 per year, and, while our property has increased from $732,000 at that time, to $6, 732,000 now, or nearly eight times in value, the amount credited has remained the same until last year, when we credited $25,000. 
It would [illegible word] wise now to put aside a much larger amount to provide for the many contingencies which may arise. In case an accident should occur to any of our Stations, our earning capacity might be affected to a considerable amount, and we ought to have an ample fund to fall back upon for the continuance of dividends, as well as to repair damages. My judgement is that we should carry $50,000 to Reserve Fund, at any rate, for the next few years. 
Another question is a matter of bookkeeping. We have not in the past been in the habit of charging up the dividend for the last quarter, which is paid on February 1st. following, against the earnings of the year, as should have been done. This gives a false balance and rather a misleading one. In order to correct this mistake, unless otherwise ordered by the Directors, the Treas- [paper torn] the dividend due February 1st, 1893, at the [paper torn], and this year a note will be made explaining [paper torn] in Income account and Balance Sheet. 
The next question we will have to consider will be the rate of our next dividend. It has been rumored on the Street, without any authority, that the Company will in February begin paying on the basis of 6%. 
A further question of policy is here involved. The earnings of the next quarter will probably show enough to pay 1 ½% upon our increased capital, and a possible increase through the year to insure its continuance at that rate. Calculation of “The Net Earnings For The Year 1892 Are, (estimated)” 
 
Net Earnings, 10 months,			$365,175,59 
Earnings, Nov. & Dec., (estimated)	  105,000,00 

             
470,175,59 
 
Interest on Bonds, paid and due,		$127,731,17 
Interest on Floating Debt, (Aprox.)	    14, 952,00 
Four dividends,				  245,000,00 
Reserve Fund,				    50,000,00	437,681,17 

     ---------------- 
Surplus for the year,......................................       32, 492, 42 
600,000,00  
Interest on $3,250,000 Bonds		$162,500,00 

For The Year 1893:- 
If we estimate an increase of earnings of, say 25% for 1893, we should have, say,       
Dividends on 65,000 shares stock, 5%,     325,000,00 
Interest on Floating Debt, (est)		    25,000,00 
50,000,00            562,500,00     

          -----------------    
[paper torn] for year,..................................................                 37,500,00 
 
1% [paper torn] on the Stock would require $65,000,00. 
When we increase our dividend we invite the conversation of many of our Bonds into Stock, and thus add a possible $97,000., to dividend charge for each 1% increase. By the time when we will have to decide upon the May dividend we will be much better able to determine whether our increased earnings will warrant an increase of dividend. I certainly do not think we would be justified in considering any increase in the February dividend. 
In order to carry on the development of the Company, as its growth demands, we must carry a large floating debt next year; pending the consideration of the question of providing new capita;, which will soon be before us again. 
I am not prepared at this time to suggest any particular policy, or to advocate any particular plan for the raising of this new capital. I merely offer the above suggestions, which may properly influence us in our immediate action. 
Spencer Trask, 
President.