Sidebilder
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thing else.
which represent about 3% percent of total system customers.

Corporate structure is simplicity itself.
No minority interests in operating companies.
All operating companies controlled direct, except three smallest companies
No intermediate companies for construction, purchasing or servicing, or any-

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THIS IS OUR CORPORATE CHART-BASED ON CHART IN DR. SPLAWN'S REPORT

CORPORATE

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All securities in the hands of the public are securities issued by American Gas & Electric Co. itself or by an operating company controlled directly by the American Gas & Electric Co.

Every operating company is subject to State commission control.

American Gas & Electric Co. itself has staff of technicians, accountants, lawyers, statisticians, corporate officers, and related clerical force.

This staff performs, on a cooperative basis (that is, each company bearing only its share of the total cost), managerial, legal, purchasing, insurance, accounting and auditing, commercial, statistical, appraisal, and engineering services, besides the service of corporate officers.

There is no duplication of work done by the operating companies themselves. This staff is in effect part of the organization of the operating companies. Although the entire staff would be available to any one of the operating companies in case of necessity, the part thereof whose cost is borne by a given operating company as related to total employees of that company is shown by this chart to be insignificant. Personnel-Officers and employees on the property and in American Gas & Electric Co. staff, a typical

company (Indiana & Michigan Electric Co.)

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Observe strength of parent company and its ability to lend financial support to its subsidiaries.

Cash and current assets are $20,000,00) in excess of current liabilities.
Only three security issues-debentures, preferred, common. No bank loans.

Company owns mortgage bonds of subsidiaries more than equal to its own debenture debt; owns preferred stocks of subsidiaries almost equal to its own preferred stock.

Observe strength of entire goup.

Cash and current assets equal to about three and one-half times current liabilities.

Reserves equal to more than 10 percent of investment.

American Gas & Electric Co.'s own balance sheet as of Dec. 31, 1934

ASSETS

$56, 491, 760 29, 447, 509 54, 342, 353 2, 968, 941

The company owns,

Bonds of its subsidiary companies---
Preferred stock of subsidiary companies..
Common stock of subsidiary companies.
Accounts due from subsidiary companies...-

Total
Miscellaneous investments.
Cash and other current assets -
There is discount and expense in connection with the outstanding
debentures, now being written off, the balance..

Total assets.

143, 250, 563

1, 946, 372 21, 526, 000

5, 861, 492

172, 584, 425

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LIABILITIES
The company owes
Debentures

$50,000,000 Current liabilities..

875, 575 The company has reserves for taxes, etc.

2,686, 306 The preferred stockholders have invested..

33, 715, 837 The common stockholders have invested and reinvested: Stock...

$44, 827, 377 Surplus.

40, 479, 330

85, 306, 707 Total...

172, 584, 425 American Gas & Electric Co. and subsidiaries, Dec. 31, 1934

ASSETS

The subsidiaries own plants, lines, buildings, real estate, machinery, equipment, representing

$394, 932, 541 The group ownSecurities of other companies.

3, 079, 354 Amounts due from jointly owned companies..

2, 230, 073 Special deposits..

319, 711 Cash and other current assets.

50, 505, 220 The group has

Prepaid expenses, cash tied up in banks and materials
salvaged from facilities removed.

1, 513, 623 Miscellaneous suspended items..

110, 562 Discount and expense on debt outstanding, which is being written off, the balance of which is now..

13, 314, 275 Total...

466, 005, 359

LIABILITIES

$194, 246, 400 14, 565, 306

206, 809

The group owes

The public for money borrowed.
Current liabilties.-

Contractual liabilities.
The group has accumulated reserves for depreciation, for taxes,

for bad debts, etc.----
There are miscellaneous uspended credits of.
The preferred stockholders of the group invested..
The common stockholders have invested or reinvested:
Stock-

$44, 827, 377 Surpluses.

66, 609, 598 The parent company holds securities of its subsidiary companies

at a lower figure than the book figures for those securities, such difference amounting to...

45, 954, 606

475, 230 82, 414, 016

111, 436, 975

16, 706, 017

Total.

466, 005, 359

Parent company advances money to meet construction needs of subsidiaries. At peak of such advances, subsidiaries had borrowed more than $40,000,000.

Gross capital expenditures of subsidiaries in last 10 years has been in excess of $200,000,000. In same 10-year period parent company has put more than $96,000,000 of its money into then owned subsidiaries through purchase of their bonds, preferred and common stock (bonds, $56,000,000; preferred, $20,000,000; common, $22,000,000).

Actually in last 7 years the public investment (as distinguished from American Gas & Electric stockholders) in the group has increased practically not at all; the entire net increase in investment has been American Gas & Electric stockholders money;

*Write-ups” aggregating $42,500,000 by our subsidiaires have been alleged. The balance sheets' above will show that even if that amount be taken out of fixed capital the American Gas & Electric common-stock holders have an investment of $85,000,000.

Write-up” in our system is the result of operating companies stating on their books the values of property as of date of acquisition rather than stating socalled “historical cost” on books of former owners. “Write-ups" can be unfair and harmful to investors or customers only if they represent more than true value of the property; and then only if: A. Securities be sold to the public supported by such "write-ups". B. Such “written-up" values be asserted in determination of baxis for rates.

A. This graph shows positively that there are no securities in the hands of the public, either of the holding company or of the operating companies, representing any part of these "write-ups". Even if the entire “write-up" be deducted from the assets, there still remains $38,000,000 more assets than all securities in the hands of the public.

B. For the year 1934 combined earnings of all subsidiary operating companies were equal to 5.85 percent on fixed capital as shown on their books; and would be equal to only 6.52

percent on fixed capital if every dollar of alleged "write-up" were deducted. Rate reductions in several companies were made in 1934 and not fully reflected in above earnings; and further reductions have been made in 1935 by practically all our subsidiaries.

ENGINEERS Public SERVICE Co., Inc.,

Nero York, April 28, 1935. S. 1725 Hon. BURTON K. WHEELER, Os. Chairman Committee on Interstate Commerce,

United States Senate, Washington, D. C. SIR: The relatively short time available for presentation before your committee of objections to the bill above mentioned necessitates the filing in writing with you of information regarding my company, the Engineers Public Service Co. (Delaware). This company's voting stock of 1,910,000 shares is owned 91 percent by Stone & Webster, Inc., also a Delaware corporation. As this interest was referred to by proponents of the bill before your committee, it seems to me desirable that this letter, giving the facts about my company, be made a part of the record of the hearings.

I have left with the clerk of your committee a copy for each member of a brief respecting the Engineers Public Service Co., which I had prepared for use in presenting the matter to the corresponding committee of the House of Representatives, and to which reference is made for details too voluminous to include in this letter. In general, 90 percent of the properties controlled by my company are comprised in four well-integrated groups and a fifth, partly integrated, accounts for half the balance; the three remaining are isolated and cannot properly, be tied in with other systems.' (See map as frontispiece of brief.) The properties of the Engineers system manufacture about 2,000,000,000 kilowatthours per year, or about 24 percent of the Nation's output.

With regard to title I of the bill, I am in complete accord with most of its provisions for Federal regulation of utility holding companies, but object most strenuously to the provision to abolish the holding companies; especially as it is based on the premise (set forth on p. 5, \ines 19 and 20) that the holding company is inherently injurious to investors, consumers, and the general public.'

That 'abuses as set forth in the 1'2 points in the bill have been incidental to holding-company operation by some companies is freely admitted, but since many companies have not practiced them, they cannot accurately be described as in

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