Answer. The controlling interest in the Utica Gas & Electric Co. was acquired by the Mohawk Hudson Power Corporation in 1925, and in 1929-I am going out of my report the Niagara Hudson Power Corporation acquired complete control of the Mohawk Hudson Power Co. Mr. MACHOLD. Not complete control. By Mr. CHANTLAND: Question. Strike out the word "complete." Answer. Did I say "complete control?" Control, then. Strike out "complete control." It was about 73 percent of the voting stock. Question. Now, just one more thing to complete the picture. Exhibit no. 1 of your report, following the text, is apparently balance sheet for the years 1902 to the year 1931, inclusive, isn't it, Mr. Taylor? Answer. Yes. Question. And it shows that the balance sheet showed in 1902 how much assets and liabilities? Answer. Total assets $4,437,950.30. Question. Increasing, from year to year, in varying sums, until the balance at the end of 1931 stood at what figure? Answer. $38,426,804.61. Question. Now, having given that much of a descriptive, birdseye view, if you can call it that, of the company, its growth and operations, I will call your attention to the table of contents of your report. You tell me how you have dealt with the affairs of this company, how many chapters in your report? Answer. Seven. Question. Chapter 1? Answer. Shows the history, growth, and control of the company. Question. You have stated most of the facts on that in your preliminary statement, have you not? Answer. Yes, sir. Question. Chapter 2? Answer. Organization of the company. Question. And you have also taken from the chart a good deal of what is in there?" Answer. That is correct, sir. Question. Chapter 3? Answer. Balance sheet accounts. Question. Chapter 4? Answer. Fixed capital and retirement reserve. Question. Chapter 5? Answer. Investment in Kanata Realty Co., Inc. Question. That is their one subsidiary? Answer. Yes, sir. Question. Chapter 6? Answer. Capital liability. Question. You answered the one subsidiary, between the one side and the other side of the story, on the one hand the fixed capital and on the other the liabilities; is that it? Answer. Yes; that is the way it is put in. Question. Chapter 7? Answer. Income, expenses, and surplus. Question. And in regard to that chapter, state in a little more detail what you have set out. Answer. In chapter 7 Question. That is rather a long chapter and I would like to have you go a little more into detail with that. Answer. Chapter 7 covers income from electric operations-strike that from the record, please. This chapter includes a combined comparative income statement for each of the years 1925 to 1931, inclusive. Question. Why those years? Answer. Because they represent the years following the acquisition of the company by the Mohawk Hudson Power Corporation. Question. Yes; all right. Next? Answer. The second section has to do with the income from electric operations and then following that we deal with electric operating expenses. Question. Well, don't you make certain anaylses of the income? Answer. Yes, sir. Question. And you do the same with the expenses? Answer. Yes; they are analyzed in detail. Then we deal with the income from gas operations. Question. Yes. Answer. Following that with, in section 3, allocation of commercial, new business, general and misecllaneous, and retirement expenses as between electric and gas operations. In section 4, we deal with the allocation of taxes between electric and gas operations and a comparative summary of tax accruals for each of the years, 1928 to 1931, inclusive. In section 5, we deal with the subject of merchandising and jobbing, for the years 1928 to 1931, inclusive. We also deal, in section 6, with corporate incomes, as shown on the income account state ment. Then, in section 7 of chapter 7, we deal with the dividends, surplus, and return on fixed capital, etc., with details. Question. In other words, section 7 is the disposition of what is earned? Answer. It is a statement of the earnings and the disposition of them. Question. In sections 3 and 4, regarding allocations, you show, I believe, that up to 1932, or 1931, the allocations between gas and electric prorated or arbitrarily made on some basis of that sort and that recently a change has been made and now the accounts are kept separately, I believe? Answer. That is correct, sir. Mr. CHANTLAND. This is off the record. (There was a discussion off the record.) By Mr. CHANTLAND: Question. What was the ownership and control of this company between its formation in 1902 and when it came into the Niagara Hudson Power Corporation in 1925? Mr. MACHOLD. The Mohawk Hudson Power Corporation. By Mr. CHANTLAND: Question. Mohawk Hudson Power group then and what is now the Niagara Hudson Power Corporation group, and let it be understood that when I refer to the Mohawk Hudson group I refer to the Mohawk Hudson Power Corporation as the predecessor or intermediate holding company. Answer. During the entire period between May 26, 1902, and even prior thereto up to the acquisition of control of the company by the Mohawk Hudson group in 1925, the company was practically owned by two parties, Mr. William E. Lewis and Mr. Anthony N. Brady, who, with a few associates, controlled in excess of 90 percent of the stock. That was true as to Mr. Brady's interest, for the reason that subsequent to his death, in 1913, his interests were held by his estate and were so handled. Question. Let us turn now to page 10, Mr. Taylor. The company on which you now report, the Utica Gas & Electric Co., was incorporated under the laws of what State? Answer. Under the transportation corporation laws of the State of New York, on May 10, 1902. Question. Authorized capital stock of how much? Answer. $2,000,000, consisting of 20,000 shares of the par value of $100 per share. Question. The certificate of incorporation gave it the usual power to go into the gas and electric public utility business? Answer. It did, sir. Question. The charter was amended two or three times? Answer. The charter was amended numerous times between 1902 and 1931. A copy of the certificate of incorporation and the amendments thereto are attached to this report as appendix 1 within Commission's exhibit no. 5337. Question. Tell me of the method of exchange of stocks for the merger described there. Answer. This company was formed under an agreement between the Utica Electric Light & Power Co. and the Equitable Gas & Electric Co. of Utica. Question. As we have seen on the chart? Answer. That is correct. Question. All right. Answer. Every effort was made to secure a copy of the agreement of April 5, 1902, but without success. The officials and officers of the Utica Gas & Electric Co. and the personnel did everything possible that they could to locate a copy of this agreement, but they were not successful. I have the minutes of the initial meetings of the Utica Gas & Electric Co., disclosing the general terms of that agreement, in that the Utica Gas & Electric Co. was to acquire the outstanding stocks of the Utica Electric Light & Power Co. and the Equitable Gas & Electric Co. of Utica on the basis of 1 share of the Utica Gas & Electric Co. stock for each share of the Utica Electric Light & Power Co. stock and 2% shares of Utica Gas & Electric Co. for each share of the Equitable Gas & Electric Co. stock. Question. So that the story, then, in shares, was what? Answer. That the Utica Gas & Electric Co. exchanged 20,000 shares of its stock for 14,000 shares of the stock of the consolidating companies, which resulted in an increase in the capital stock of the Utica Gas & Electric Co., as compared with the capital stocks of the predecessor companies, of $600,000. Question. Yes; but is that in truth and in fact, an inflation or writeup of that amount, or is it offset? Answer. This increase in capital stock was offset in part- Answer. By an increase in the fixed capital of the consolidated company and a decrease in the surplus of the consolidating companies, in the following amounts: Fixed capital was increased to the extent of $372,138.81 and the surplus of the predecessor companies was decreased by $227,861.19, which accounted for the increased capitalization of $600,000. Question. So that the real increase is? Answer. $372,138.81. Question. And not $600,000? Answer. That is correct. Question. The story of this transaction which you have just given in dollars appears in the tabulated statement on page 13? Answer. Yes; it does. Question. Now, Mr. Taylor, just a question at this point: Who had the controlling interest in the Utica Electric Light & Power Co. and in the Equitable at this time? Answer. William E. Lewis and a few associates controlled the Utica Electric Light & Power Co., and Anthony N. Brady and associates controlled the Equitable Gas & Electric Co. of Utica. Question. Let us turn to chapter 3, beginning on page 14. Chapter 3 deals with balance-sheet accounts, and you have already found that on page 171, as exhibit 1, there is comparative statement or summary of items of balance sheets, showing a growth from $4,400,000 to $38,400,000; is that correct? Answer. That is correct. Question. Now, on page 15, you state-you set out a more itemized balance sheet for the year ending December 31, 1931, do you? Answer. Yes; as a consolidated, condensed balance sheet. Question. Following page 15, you give a brief textual discussion of some of the items in this balance sheet? Answer. Yes. Question. The principal statement, in a number of instances, is that they are discussed more in detail in other chapters of the report; is that right? Answer. That is correct; yes, sir. Question. All right, we will take them up when we come to them. On page 18, referring to debits, you take up the item of unamortized debt discount and expenses, $605,574? Answer. Yes. Question. How has that been handled? Is part of it still in existence? Answer. Why, yes; the unamortized portion of the discount on bonds during the period between 1902 and 1926. Question. Yes. Answer. The detail of the balances are shown as follows: Balance remaining unamortized of the bonds of Equitable Gas & Electric Co., $2,057. Bonds of Utica Gas & Electric Co., of their refunding and extension series, $337,463. Of their series C bonds, $94,982. Series D bonds, $171,072, or a total unamortized as at December 31, 1931, $605,574. Question. That is, still unamortized at the date of your report? Question. It had been bigger? Answer. Oh, yes. Question. Where is the account stated, under what heading-in chapter 6, at page 86 and following? Answer. Yes. Question. All right, we will come to it at that time. Retirement suspense account, $92,725; that represents what? Answer. Represents the cost of retiring various minor projects, the allocation of which had not been determined at the end of the year. Question. There was a small miscellaneous suspense item? Answer. $8,903, which were miscellaneous items; cost of remodeling building at Herkimer, N.Y., $1,755; transportation expense, $10,658. Question. On the liability side of this balance on December 31, 1925, you show how much? Answer. $29,910,597. Answer. Funded debts, $15,910,000; preferred stock, $10,000,597; and common stock, $4,000,000; or a total of $29,910,597. In addition thereto there was a premium on the 7 percent preferred stock of $95,605. Question. Is that a capital liability? Answer. A capital liability. Question. But how much money had come in? Do I get that here? Answer. That I have when we get farther on. Question. There had been commissions paid, so that not quite the face had come in; is that right? Answer. Yes. That will be dealt with later on in the report. Question. The funded debt, then, is 53.19 percent of the total capital liabilities? Answer. Yes; of the total capital liabilities. Question. And what percent of the total liabilities? Answer. That is the total capital liabilities, and 41.40 percent of the total liabilities, and the preferred stock represented 43.43 percent of the capital liabilities and 26.02 percent of the total liabilities. The common stock represented 13.37 percent of the total capital liabilities and 10.1 percent of the total liabilities. Question. In your balance sheet as at December 31, 1931, given on page 15, is an item of advances from affiliated companies of 21⁄2 million dollars? Answer. Yes. Question. That will be dealt with later? Answer. Yes. That is advances from affiliated companies. Question. Due affiliated companies, I should say. However, I may state-what companies advanced this sum of 21⁄2 million dollars? |