Evening star., 1935-04-07
HOLDING COMPANY
MEASURE SCORED
BY UTILITY LEADER
Fogarty Makes Plea for
North American Based on
Past Record.
DECLARES RATES FAIR
AS CHARGED BY UNITS
Peoples Drug March Report
Shows "A Per Cent Sales Gain
Over Year Ago.
BY EDWARD C. STONE.

Stockholders of the North Ameri-
can Co. have received a detailed re-
port Of the vigorous plea made by
President J. F. Fogarty against the
abolition of holding companies as
proposed in the bill now before the
House Committee on Interstate and
Foreign Commerce.
The statement is of special interest
to the Capital as the company has
a controlling interest in the Wash
ington Railway & Electric Co. and
the Potomac Electric Power Co. The
utility official declares that criticisms
made against holding companies in
general are not justified against the
North American Co., in the light of
its past record.
The North American Co. Is As
years old and entered the Washington
utility field in 1925. The company
does not conduct a management, engi-
neering or construction company, the
president says, but its officers and
staff take an active part in the affairs
Of the operating companies to i'm
prove the service, lower costs, study
rates and push merchandising sales.
The parent company also conducts
oil bond financing, the subsidiaries
getting the full proceeds Of the sales.
In his plea for the future of the
company, he states that in the last
five, years residential electric rates
have been reduced until users now
are saving about s4,500.00O a year
In 1894 the subsidiaries had to pro-
vide for taxes chargeable to electric
operations an amount equivalent to
IS per cent of the revenues of that
department. Without these taxes,
substantially lower rates might have
been charged.
~. r. g. E. Status Explained.
speaking of intermediate holding
companies, President Fogarty says the
Washington Railway -Ss Electric Co.,
a direct subsidiary of the North
American Co., was at the time of its
acquisition in 1925 an operating as
well as a holding company, but since
December, 1888, it has been only a
holding company. and for legal as
we'll as practical financial reasons
cannot be dissolved at this time"
In connection with State regulation,
q point which has been often referred
to during the hearings, it is stated that
Washington has had such regulation
for the last % years Speaking of ac-
counting practices, Mr.. Fogarty says
the firm meets all the New York Stock
Exchange requirements, also mails
quarterly earnings statements to all
stockholders.
When the P. w. A. began urging
application for Government money for
building municipal plants, stockholders
began to express concern. When the
r. v. A. started activities there was
good deal Of selling of North American
holdings, % per cent of these sellers
laying their action to the Government
activities.
Turning tc rates, Mr.. Fogarty told
the House Committee that for the year
1884 the average residential rate of
North American Subsidiaries was 385
cents per kilowatt hour. compared
with All cents for Baltimore, 4.36
cents for Hartford and 5.66 cents for
Boston, service in these three cities
being furnished by independent COM
panies.
Shows Size OF Investments.
In backing up his claims of destruc-
tive effects which he said the bill
would have on investors. the official
said total holding company invest
lnents in the North American situa-
ton on the basis of their asset values
are about 1912 1000, 900, against which
there are outstanding IN the hands of
the public senior holding company
securities of about $155, 100000, leav-
ing a net asset value of North Ameri-
can common stock of more than S2l6,-
100000 or over S25 per share. Before
distribution can be made to North
American common stockholders, these
senior securities must be retired This
would require about S160,000000 of
cash and would involve, first, the sale
of a very large part of the holding
company investments in a market
which is now badly disorganized with
respect to public utility stocks and,
second, the redemption of these senior
securities at premium of about So
100000 in excess of their par or face
amount.
In this connection, I might add
that in the interest of conservatism in
these computations I have assumed
that holding company preferred stock
would be paid off at par in dissolution,
even though 1t is unlikely that the
preferred stockholders would vote for
dissolution if by not doing so they
would obtain premium on the re-
demption of their holdings. Based on
the total asset value of $372, 100000, it
would appear that the sale of about 43
per cent of such assets would be
SUFFICIENT to retire all senior securities,
but this would be utterly impossible
at the present time, and CssIe situation
would be worse If this bill were passed
and all holding companies were COM
PEELED to dispose Of their investments
and dissolve" Mr.. Fogarty concluded.
Peoples Drug Sales Higher.
Sales of Peoples Drug Stores, Inc. in
March totaled s1,558.299. against
Sl.45O,9 ,922 in March. 1884, an increase
of Sl07.370, or IA per cent, according
to the monthly report out yesterday.
First-quarter figures were also report
ed. sales totaling $4.453,338, as COM
pared with s4,023,175 in the same
period in the previous year. This is a
gain of s430.163, or 10 per cent. Sales
for February revealed an increase OF
14.2 per cent over the like month last
year.
Three closed Washington banks are
to pay further dividends soon, Re-
ceiver Norman r. Hamilton announces.
The Northeast Savings Bank will pay
10 per cent and the Washington Saw
ings Bank the same percentage, be-
ginning next Wednesday, while the
Potomac Savings Bank will pay 1872
Dar cent some time in May.