« AnteriorContinuar »
Mr. KUCHEL. Mr. Chairman, will the National General Corp. have a reasonable time in which to file any additional reports or exhibits for the record ?
The CHAIRMAN. National General has the right to file any and all such evidence and exhibits, without question, Senator.
Mr. KUCHEL. Thank you. The CHAIRMAN. The Chair wishes to thank you, Mr. Klein, and Mr. Lipton, and Mr. Finell, and the Senator, for your patience. We are sorry we held you so long but it was quite essential, as we saw it.
I want the gentlemen to know, all of you, there is nothing personal in this matter at all. All we are receiving is a lot of facts. There may have been cause for irritation at times, but it is never deliberate, and I can assure you that the committee, in evaluation of all of the data will be eminently fair and objective.
Mr. KLEIN. Thank you, and I thank you for your kindness and courtesy, gentlemen.
The CHAIRMAN. We will now adjourn.
(Whereupon, at 12:55 p.m., the committee recessed, subject to call of the Chair.)
NATIONAL GENERAL CORPORATION
Documents submitted for record January 28 and 29, 1970.
STATEMENT BY EUGENE V. KLEIN, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, NATIONAL GENERAL CORP. Mr. Chairman, we at National General Corporation believe these hearings serve a commendable purpose. You yourself have observed that the emergence of innovation and new concepts of management could make a valuable contribution to our business and economic society. Indeed, they might well be the progenitors of, to use your language, "an assault against much which is outmoded, inefficient and timid."
We respectfully agree with this statement about the possible value of evolving techniques of management. In our opinion, this trend of the 1960's served our society well in helping to revitalize stagnant areas of our economy and contributing to an effective free enterprise system. In this sense an innovative company, which I consider National General to be, serves as a catalyst in the continuing derelopment of American business.
Parenthetically, I might say that I am not certain what a so-called conglomerate is. If it applies to any company that is simply engaged in more than one line of business, then we fall within its definition, as do the vast majority of large corporations in the United States; on the other hand, if it applies to those industrial giants operating multi-complex subsidiaries and units engaged in inany unrelated lines of business, then National General does not qualify. We are engaged in two lines of business, leisure time and financial services.
We are proud to have the opportunity to appear before this committee which is composed of knowledgeable men, well versed in all relevant legal and economic matters. By our appearance we hope that we can lend some assistance to the effort of this committee. Some months ago we began our contribution by submitting large quantities of information about our company. In the following statement I will outline the history of National General, its development since 1961, and briefly summarize current operations.
The history of National General as a corporation dates from 1952 when the company was organized to acquire the motion picture theatre chain then owned by 20th Century Fox Corporation which, along with other major studios, was required to divest itself of its theatres. National General, therefore, operates its theatres under a "consent decree" and indeed pursues its other activities associated with the motion picture industry under the continuing jurisdiction of the cognizant Federal Court. For example, when National General desired to enter the fields of motion picture production and distribution, it was incumbent upon us to seek and obtain the permission of such Court. I should like to point out to this honorable committee that the events leading to the consent decree took place long before this management was involved with National General, and the persons involved with such events have not been with this company for a long, long time. As initially constituted. National General (then known as National Theatres, Inc.) was a motion picture theatre company, restricting itself for several years to the operation of theatres. It then entered the television field, and in the years 1959, 1960 and 1961 it sustained very large losses totaling $22.5 million.
When the present management of National General assumed stewardship of the company in 1961, the unprofitable activities were drastically curtailed, and subsequently eliminated; so that commencing with fiscal 1963, the company entered upon an era of profit which I will refer to later.
After the comparatively short period of time required to turn the corporation around, management formulated a new concept of growth. The company would
vigorously seek out expansion opportunities under this concept, not only in the theatre business but also in the leisure time and financial services field. Management envisioned a society with increasing leisure time on its hands and the company would endeavor to anticipate and fulfill these needs. As a concomitant to this expansion into what management believed would become a dynamic and extraordinary growth field, we recognized that there would be a need for new and expanded financial services.
I believe that the facts speak for themselves in assessing the soundness of management's vision and planning.
Since 1961 there has been a tenfold expansion of revenues. Gross revenues increased from $44 million in 1961 to $458 million for the 52-week period ending in September 1969. Operating income grew from less than $1 million in 1961 to $12.7 million in 1969. In other standard measurements of corporate performance, the increases have been equally dramatic. Net worth, for example, rose from approximately $8 million in 1961 to $278 million in 1969; and assets climbed from $39.5 million to $1.073 billion. From the losses experienced in years 1959 through 1961, the company beginning in 1963 showed continuing increases in after tax dollar profit for each of the subsequent years. 1963.
2, 625 1965.
3, 110 1966..
3, 778 1967.
4, 010 1968
6, 121 1969
12, 660 How has all of this been accomplished? By National General pursuing a course of internal and external growth throughout the 1960's.
In motion picture theatres National General has since 1961 expanded internally from a chain essentially operating west of the Mississippi River to an operation encompassing areas to the eastern seaboard. in the last five years National General has obtained court approval for 108 additional theatres.
Since the advent of the order permitting National General to embark upon the production and distribution of motion pictures, starting from scratch, our production company, National General Productions, Inc., has produced 11 pictures, which have been released or are ready for release in the near future. Our distribution company, National General Pictures Corporation, has placed in distribution a total of 17 pictures produced by National General Productions, Cinema Center Films (CBS) and others, with a projected program to distribute approximately 15 pictures in 1970.
The acquisition of Grosset & Dunlap and Bantam Books Publishing companies in March 1968 represented another significant expansion of leisure time activities.
A well-known reprint and hard-cover publishing firm established in 1898, Grosset & Dunlap organized Bantam in 1945 to publish and distribute mass-market paperback books. Grosset & Dunlap currently has a total of approximately 3,800 titles of original and reprint books in print.
Bantam publishes approximately 300 new paperback titles a year, both reprints and originals, for a broad cross-section of the reading public. Bantam has pioneered as a public service and as good business the "instant publication" of important titles of current national interest, such as The Report of the Warren Commission on the Assassination of President Kennedy and The Report of the National Advisory Commission on Civil Disorders. The most recent title of this type was We Reach the Moon, the complete story of America's space program and featuring the exploits of Apollo 11 astronauts. Bantam, which has published 112 titles that have sold more than one million copies of each title, distributes books through more than 100,000 retail outlets in North America and 110 countries elsewhere in the world.
The publishing activities since joining National General have grown consistently in a highly competitive market, resulting in a marked increase in profits.
Our first venture into financial services took place in 1964 with the acquisition of Columbia Savings and Loan Association, which is based in the Los Angeles area. Columbia since joining the National General family has been a consistently profitable operation. Expanded further with the purchase of Harbor Savings and Loan in 1969, Columbia now has assets of $198 million-which ranks it in the top 2 percent nationally—and operates eight offices in Southern California.
To further expand our financial services, National General acquired Great American Holding Corporation in late 1968. In our opinion, the Great American Insurance Group offered maximum possibilities. The company was over-capitalized and in our opinion the excessive surplus capital could be much more profitably and economically utilized in other areas while still preserving the stability of the growing insurance corporation.
A sound and growing company, Great American has been doing business since 1872. It is principally a fire and casualty insurer. Great American is licensed in all states of the United States and in addition transacts business in other U.S. territories as well as various foreign countries. The Great American Group ranked 24th in premiums among the stock, mutual and reciprocal fire and casualty groups in the U.S. in 1968. It is our opinion that with the infusion of management talent and enthusiasm from National General, Great American Insurance Company will become a better company for its policyholders and as a contributor to the profits of National General.
Subsequent to the purchase of Great American, Republic Indemnity Insurance Company was acquired in March 1969. This firm specializes in workmen's compensation insurance in California. A highly efficient operation, Republic had the lowest combined expense and loss ratio in California for its field over the past five years. It achieved an approximate 17% volume increase in 1969.
As can be seen from National General's record we are not an acquisitionminded company, seeking and consummating acquisitions solely for the purpose of acquiring new companies. Since the advent of present management, approximately 9 years of stewardship, the company has only made four major acquisitions, defining a major acquisition as one costing in excess of $10 million.
We are now entering a new decade and our management is enthusiastic about the opportunities and challenges of the seventies. We hope to vigorously pursue our concept of leisure time and financial services and our policy of internal and external expansion.
We would like this Committee to know that we stand ready to cooperate with it at any time in the future when called upon.
Again, thank you for permitting me to make this statement.
(The document referred to as p. 9 follows:)
NATIONAL GENERAL CORPORATION
List of Corporations of which National General acquired or disposed of 50% or more of the voting stock during the period January 1, 1960 to January 1, 1969.
ACQUISITIONS FROM JANUARY 1, 1960 TO JANUARY 1, 1964 Designed Facilities Corporation (formerly Mobile Rentals Corporation )-ACquired 100% of stock in exchange for N G C stock-February 1963. Mission Pak, Inc.
Acquired a minority interest for cash. Subsequently acquired assets and business in exchange for NGC stock.
West Coast Hollywood Theatres—Purchased outside 50% of capital stockMay 1963.
DISPOSITIONS FROM JANUARY 1, 1960 TO JANUARY 1, 1964 National Telefilm Associates, Inc.-In August 1960 National General declared a dividend consisting of 844,875 shares of National Telefilm stock which reduced National General's ownership from approximately 87% to less than 50%.
Vermont Avenue Theatre Corporation-Entire capital stock sold March 1960.
ACQUISITIONS FROM JANUARY 1, 1964 TO JANUARY 1, 1969 Columbia Savings and Loan Association-95% of stock acquired in exchange from N G C debentures and warrants-August 1961.
Williamsport-Lycoming Corporation-Acquired 50% of stock for cash and 50% of stock in exchange for stock of Bluefield Cable Corporation (N G C subsidiary)—December 1964.
Sunset-Fox Plaza, Inc.--Acquired 100% of stock-February 1966.
Banner Productions, Inc., and affiliates—Acquired 100% of stock in exchange for Series A & Series B Preferred Stock December 1967.