stating the fact that the other parties to the contract were unwilling to modify it at that time.1

Mr. Cox. But you did modify the contract by a formal document in this year, did you not?

Mr. SAFFORD. We did.

Mr. Cox. I hand you a document entitled "Amended agreement between Hartford-Empire Co. and Lynch Corporation," dated November 12, 1938, and I ask you if that is a copy of the modification of that contract.

Mr. SAFFORD. Yes; it is.

Mr. Cox. Mr. Safford, was this contract in fact made on November 12, or is it merely dated November 12?

Mr. SAFFORD. I don't know, sir.

Mr. Cox. You are not prepared to answer that question?

Mr. GOODRICH. We are trying to get the date.

Mr. SAFFORD. I think that was the date it was signed.

Mr. Cox. You are quite sure about that?

Mr. SAFFORD. No; I am not. It can stand at that.

Mr. Cox. Very well; I offer this.

The CHAIRMAN. Is this for the record?

Mr. Cox. I prefer not to have that one printed unless the other is printed, but I would like to have both go in as exhibits.

The CHAIRMAN. It may be so received.

(The amended agreement was marked "Exhibit No. 152" and is on file with the committee.)

Senator KING. Mr. Cox, would it interfere with your program if I should ask him very briefly the difference between the first contract and the modification contract, not all the terms, but the point as to which you said there was a misconception? I am not clear as to just what that misconception was.

Mr. Cox. I am content to have the witness do that, but before he does I should like to say this: I have no doubt that the Department will not agree with his explanation of either contract. Since we are attempting under some difficulty to finish today, we are not going to go into that matter with the witness, but I would not wish the committee to think that we accept any statement he may make on that matter without qualification, merely because I do not examine him. on it. With that qualification, I have no objection to Mr. Safford's making a statement.

Senator KING. If he is to be permitted to make a statement, he ought to do so.

Mr. Cox. All I want you to understand is that by my failure to ask the witness, I am not acquiescing.

Senator KING. I am not asking you to be bound by anything he states unless you want to be. Proceed.

Mr. SAFFORD. To be perfectly frank, Senator, I don't think the amending agreement does affect the question which Mr. Cox raised the first time. The misconception which might have arisen with reference to that contract, I think I am correct in stating, was cleared up by a letter in 1936, and it is not embodied in the amending agreement, and if Mr. Cox wants to produce the letter, I am willing to identify it.

1 Subsequently entered in record as "Exhibit No. 162." See appendix, p. 801.

Mr. Cox. I am not aware what the letter is, but I am perfectly willing to have it go in the record, if you have a copy of it.

1

Mr. SAFFORD. Perhaps Mr. Kramer can find the letter.

Mr. Cox. We will find the letter. I would rather not stop now. If you can give me a copy, I can put it in the record.

Mr. SAFFORD. We understand, then, it will go in the record?

Mr. Cox. I beg your pardon.

Mr. SAFFORD. I say, we understand from you it will go in the record.

Mr. Cox. Will the reporter read to Mr. Safford the remark I made two statements before the last?

The REPORTER. "I am not aware what the letter is, but I am perfectly willing to have it go in the record, if you have a copy of it." Mr. Cox. Is that quite clear, Mr. Safford?

Mr. SAFFORD. Yes; that is fine.

Mr. Cox. I may add for the committee's benefit, though, that we propose to demonstrate by another witness later this morning how this provision actually worked.

Mr. Safford, I am going to hand you a mimeographed copy of document entitled "Hartford-Empire Co. Analysis of Financial Statements," and ask you if that is a document which you have seen before, and which you have agreed to be substantially accurate. Mr. SAFFORD. Yes; that is correct.

Mr. Cox. I should like to have this document marked.

The CHAIRMAN. How do you identify this document? What do you call it?

Mr. Cox. I read from the title at the top, "Hartford-Empire Co. Analysis of Financial Statements."

The CHAIRMAN. You asked that it may be marked and printed in the record?

Mr. Cox. Yes.

The CHAIRMAN. It may be so received.

(The document referred to was marked "Exhibit No. 153" and is included in the appendix on p. 794.)

Mr. Cox. Mr. Safford, I am going to hand you another document entitled "Hartford-Empire Co.," again "Analysis of financial statements," a one-page document, and I ask you if you have seen that and are satisfied as to its accuracy.

Mr. SAFFORD. That is correct.

Senator KING. Mr. Cox, that first offer embraced all these pages, did it not?

Mr. Cox. Yes. I should like to offer this one page. We don't have to mark that, Mr. Chairman, because it is included in the document which I have already offered.2

I call the committee's attention to the fact that the last page of the document which Mr. Safford identified contains two compilations with respect to the rate of return received by the Hartford-Empire Co. The fourth column from the left contains a percentage figure which is entitled "Return on total investment." The figure in the last column toward the right is a percentage figure entitled "Return on investment employed in operations."

1 Subsequently entered as "Exhibit No. 162." See appendix, p. 801. 2 See "Exhibit No. 153," appendix, p. 794 at p. 798.

The CHAIRMAN. By whom was this analysis prepared?

Mr. Cox. This was prepared in the first instance by the Department of Justice, and it has been substantially accepted, so far as its arithmetical accuracy is concerned, by the Hartford-Empire Co., is that correct?

Mr. SAFFORD. Yes; we accept in principle the method used in determining these figures.

Mr. Cox. I point out that the two rates of return are figured on a different base. The first one, "Return on total investment," is figured on the basis of the second column from the left which is entitled "Total capital and surplus." The last figure on the right, "Return on investment employed in operations," is figured on a base which is shown in the fifth column from the left, headed "Net capital employed in operations." There are several differences between the composition of the figure entitled, "Total capital and surplus" and the figure entitled, "Net capital employed in operations," but I think there will be no disagreement if I state that the most substantial difference, and the thing that accounts for the greatest difference in the two figures, is the fact that total capital and surplus includes the amount of certain marketable securities held by the Hartford-Empire Co. as of recent years, 1937, and amounts to upward of $2,000,000, whereas the figure "Net capital employed in operations" does not include the amount of those marketable securities. That would be an accurate statement?

Mr. SAFFORD. That is correct.

Mr. Cox. I also call the committee's attention to the fact that in making this analysis, the Department has not attempted as is done in utility rate proceedings to make any evaluation of the assets of this company. We have accepted the valuation which has been given

to us.

The rate of return for the period from 1912 to 1937 figured on the basis of the net operating income or loss amounts to 9.99 percent. I point out for the committee what we regard as a significant fact that beginning in 1932, which was the date which the Hazel-Atlas Co. gave up the struggle and took a license and at the same time that the contract was made with the Lynch Corporation, put in evidence this morning, the next year 1933, in the same year 1933, the Ball Bros. took a license and there has been testimony in the record that after the Hazel-Atlas case a large number of small manufacturers took licenses, and beginning with that period of time the rate of return on the investment employed in operation rose from 16 percent in 1933 to 67.77 percent in 1937.

Representative SUMNERS. Mr. Cox, have you any explanation as to how it came about that in 1931-I believe I have the correct column-the net income was 4.25, and the next year 10.37?

Mr. Cox. In 1932?

Representative SUMNERS. What happened between 1931 and 1932? Mr. Cox. We have had testimony here that Hazel-Atlas, which was the second largest manufacturer in the field, took a license in 1932 and a large number of other manufacturers also took a license.

Mr. OLIPHANT. Have you available figures on the trend of corporate profits generally from 1931 to 1932? Is that up or down?

1 See infra, p. 610.

Senator KING. Do you mean with respect to this corporation? Mr. OLIPHANT. No; corporations generally.

Mr. Cox. I am afraid we have nothing of the sort.

Mr. OLIPHANT. The trend of corporate profits in general.

Mr. Cox. I am afraid we have nothing of that sort available this morning.

I am about to abandon the subject of these financial statements, so perhaps if the committee have any questions they would like to ask they may do it now.

Senator KING. Following the inquiry of Congressman Sumners, and perhaps this is a duplication of his inquiry, may I inquire again, because I didn't understand your answer, how it is that in 1932, with a total capital and surplus of $5,243,000 plus, the return on investment employed in operations was 10.37, whereas in 1937, with capital and surplus substantially the same, the return on investment employed in operation as reported by this document is 67.77 percent?

Mr. SAFFORD. I think the explanation, Senator, which Mr. Cox gave is substantially correct, with perhaps this one additional statement, that the amount of glassware produced in this country has been steadily increasing over the last 10 years, and particularly after the repeal of prohibition. It jumped to the extent of, I should say, some 16,000,000 gross at the present time, due to liquors and beers.

Senator KING. Would that make that increase, that difference between 10.37 and 67.77 percent, with substantially the same surplus? Mr. Cox. Mr. Safford, just for my own information, did the upswing in production because of the change in the prohibition lawMr. OLIPHANT (interposing). May I interrupt to suggest that the Senator's question has not been answered?

As I understand it, the percentages in the last column are percentages of the figures shown in the third column from the end, and that the apparent discrepancy to which the Senator points is accounted for by the decrease in the amount of net capital employed in operation.

The CHAIRMAN. I think possibly the Senator would like to have the witness answer the question.

Senator KING. My able confederate on my right has projected himself very properly into the witness box.

Mr. OLIPHANT. I wanted the Senator's question answered.

Senator KING. Do you agree with the answer to the statement just made by Mr. Oliphant?

Mr. ŠAFFORD. The total capital and surplus stayed the same, approximately, in the period of 1932-37. In other words, the company issued no additional stock and the surplus remained substantially the same, as I remember, but the net capital employed in operations in the period between 1931 and 1937 shows a decrease. I should say the difference was due to our investments. In other words, more of the surplus was placed in investments, so that in 1937, while the total capital and surplus remained $5,400,000, the net capital employed in operations, upon which the percentage is based, was $2,500,000.

Senator KING. May I inquire whether or not any part of that 67.77 return on investment employed in operations was distributed to any of the associates of the Hartford, to those companies that had taken licenses? Did they get any part of that 67 percent?

Mr. SAFFORD. No, sir; they did not. This is the net figure, sir.

Senator KING. That was received and enjoyed exclusively by Hartford?

Mr. SAFFORD. That's right, sir.

Senator KING. That is all.

The CHAIRMAN. The only division was with the other two corporations, was it not, the Owens-Illinois and the Hazel-Atlas?

Mr. SAFFORD. Yes; there was a division of the gross returns, and of course Owens was out by that time.

The CHAIRMAN. The Senator was asking whether or not there was any division of profits with your licensees. There was no such division?

Mr. SAFFORD. None.

Senator KING. That is all, Mr. Cox.

Mr. Cox. In response to the question which Mr. Oliphant asked a moment ago, I might state that we have here a copy of the financial letter of National City Bank of New York for April 1938, which contains a computation showing the rate of return for the years between 1926 and 1935, for all active corporations in the United States, compiled from annual statistics of income received by the Treasury Department, and that shows that the average return for all active corporations for that period of time was 1.50 percent. That is the closest we have to the figure you asked for, and does not cover the entire period involved here.

Senator KING. Does that paper show the losses, the deficits of the more than two hundred and thirty or forty thousand corporations? Mr. Cox. It does show certain losses; yes, Senator. It shows nothing about the trend from year to year.

Senator KING. Of the corporate period from 1931 to 1933?

Mr. Cox. Yes. It shows here that in 1931-well, beginning 1930, for example, where the rate of return was 0.86, it dropped to a deficit or red figure of minus 1.95. In 1932 it was minus 3.75; 1933 it was minus 1.68. The figure minus 3.75 I should have read for 1932. In 1934 it rose to 0.13; in 1935, 1.18 percent.

Mr. Cox. I think I should like to put on another witness at this point, and I think I shall probably want to have Mr. Pease and Mr. Safford back for a short time afterward, but there is one witness here it would be convenient if we could go through with now.

The CHAIRMAN. Very well.

Mr. Cox. Mr. Coleman.

The CHAIRMAN. Do you solemnly swear the testimony you are about to give during this proceeding shall be the truth and nothing but the truth, so help you God?

Mr. COLEMAN. I do.

The CHAIRMAN. You may be seated.

TESTIMONY OF S. A. COLEMAN, JR., PORT ISABEL, TEX.

Mr. Cox. Mr. Coleman, you were at one time connected with the Knape-Coleman Glass Co., were you not?

Mr. COLEMAN. Yes, sir; I was president of the Knape-Coleman Glass Co.

The CHAIRMAN. Will you spell that?

Mr. COLEMAN. K-n-a-p-e.