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By agreement dated April 19, 1939, applicants propose to accomplish the merger by causing the assets of Stages to be transferred to Interstate and by assumption by the latter of liabilities of the former. Stages would be dissolved and its stock canceled. California authorities have approved the transaction. As control of Stages by Interstate and of the latter by the railroads was acquired long prior to the effective date of the act, it is only necessary to find that the transaction proposed will be consistent with the public interest. Pacific Electric Ry. Co.-Merger, 25 M. C. C. 313.

Interstate's balance sheet as of August 31, 1939, shows assets aggregating $3,853,974, consisting of: Current assets $1,253,645, including cash $738,132 and accounts receivable $417,580; tangible property, less depreciation, $1,849,820; intangible property $561,708; investments and advances, associated companies $119,958, others $860; and deferred debits $67,983. Liabilities were: Current liabilities $558,532, principally accounts payable $217,633 and unredeemed tickets $185,936; open account with Stages not subject to current settlement $11,756; deferred credits $41,437; injuries, loss, and damage reserves $33,865; capital stock $2,638,290; and earned surplus $570,094. Income statements for 1937, 1938, and the first 8 months of 1939 show net incomes of $447,845, $485,861, and $330,089, respectively.

Balance sheet of Stages as of August 31, 1939, shows assets aggregating $31,729, consisting of: Carrier operating property, less depreciation, $7,703; intangible property $11,000; investments and advances, associated companies, $11,756; and deferred debits $1,270. Liabilities were: Current liabilities $2,956; injuries, loss, and damage reserves $3,697; capital stock $24,300; and earned surplus $776. Income statements for 1937, 1938, and the first 8 months of 1939 show deficit of $29,623 and net incomes of $17,302 and $776, respectively.

Pro forma balance sheet of Interstate, giving effect to the proposed merger as of August 31, 1939, shows assets aggregating $3,849,647, consisting of: Current assets $1,253,645, including cash $738,132 and accounts receivable $417,580; tangible property, less depreciation, $1,857,523; intangible property $572,708; investments and advances, associated companies $95,658, others $860; and deferred debits $69,253. Liabilities were: Current liabilities $561,489, principally accounts payable $217,633 and unredeemed tickets $185,936; deferred credits, $41,437; injuries, loss, and damage reserves $37,561; capital stock $2.638,290; and earned surplus $570,870.

As a result of consummation of the merger, Interstate would increase the total amount assigned to its intangible-property account by $11,000. In our opinion its accounts should not permanently reflect the proposed increase in the intangible-property account, and

our findings therefore will require amortization or write-off thereof, if the authority herein granted is exercised. Compare Mason & Dixon Lines, Inc.-Purchase-Motor Transfer Co., 25 M. C. C. 689. Applicants state that the laws of California have recently been amended so that intrastate motor-carrier operations may now be conducted in that State by foreign corporations engaged in interstate operations, and in view thereof there is no further need of continuing the corporate existence of Stages. The merger would eliminate the expense incident to the maintenance of separate corporate organizations, simplify Federal regulation, and remove doubts as to the legality of the present practice of through operations over routes of the separate companies. The unification is in line with our policy of encouraging corporate simplification in the interest of more efficient and economical operation.

We find that merger of the previously described operating rights and property of Union Pacific Stages of California into Interstate Transit Lines (Nebraska) for ownership, management, and operation, upon the terms and conditions above set forth, which terms and conditions are found to be just and reasonable, will be consistent with the public interest, and that the conditions of section 213 have been or will be fulfilled; provided, however, that, if the authority herein granted is exercised, Interstate shall amortize in equal annual amounts over a maximum period of 5 years, commencing with the date of consummation herein, the amount of increase in the "Other Intangible Property" account as result of the instant transaction, in a manner consistent with the provisions of the uniform system of accounts for class I motor carriers, or, in lieu of amortization in any year of the 5-year period applicant may write off to surplus, in accordance with said accounting provisions, one-fifth or more of the amount of such increase in the "Other Intangible Property" account, so as to remove from such account within the said 5-year period, either through amortization or write-off, the entire amount of the increase.

An appropriate order will be entered.

* Compare Gerard Motor Exp., Inc., Common Carrier Application, 2 M. C. C. 271, 276. 35 M. C. C.

No. MC-F-970

J. P. KITTRELL-CONTROL-DIXIE MOTOR COACH

CORPORATION

Submitted September 19, 1989. Decided December 21, 1939

Acquisition by J. P. Kittrell of control of Dixie Motor Coach Corporation, by purchase of capital stock, approved and authorized, subject to condition. Charles D. Turner for applicant.

REPORT OF THE COMMISSION

DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER BY DIVISION 4:

By application filed July 26, 1939, J. P. Kittrell, of Big Lake, Tex., seeks authority under section 213, Motor Carrier Act, 1935, to acquire control of Sunshine Bus Lines, Incorporated, of Terrell, Tex., hereinafter called Sunshine, and Dixie Motor Coach Corporation, of Wilmington, Del., hereinafter called Dixie, by purchase of 611 shares and 1,100 shares, respectively, of their capital stock from A. W. Riter, of Terrell, Tex., for a total consideration of $485,800. Hearing has been held, and the parties waived issuance of a report and recommended order by the examiner.

The operations of Dixie Motor Coach Corporation, a Delaware corporation, as a motor-vehicle common carrier of passengers in interstate or foreign commerce in Arkansas, Oklahoma, and Texas, are described in Airline Motor Coaches, Inc.-Lease-Dixie M. Coach Corp., 25 M. C. C. 739, and cases therein cited. The applicant in the case last cited was authorized to lease claimed rights of Dixie between Tyler and Henderson via Troup, Tex., and rights of Dixie between Dallas and Fort Worth, Tex., are under lease to Texas Motorcoaches, Inc. Dixie is controlled by A. W. Riter and family, who own 1,100 of 2,000 shares of no-par-value capital stock, outstanding. Of the remainder, applicant and members of his family own 860 shares.

Sunshine, a Texas corporation, operates pursuant to pending "grandfather" application in No. MC-59399, as a motor-vehicle common carrier of passengers in interstate or foreign commerce, in territory generally bounded by Dallas, Winnsboro, and Palestine, Tex., and Shreveport, La., connecting with Dixie at Dallas. Certain of its

claimed routes are operated by others under lease.1 A. W. Riter is president of Dixie and Sunshine, applicant is vice president, and both are directors in the companies. Of Sunshine's total outstanding capital stock, consisting of 1,500 shares, par value $100 each, applicant owns 760 shares, or 50.6 percent; A. W. Riter 600 shares; Milton G. Thomas and D. L. Crittenden, employees of Sunshine, 100 and 27 shares, respectively; Mrs. N. B. Pinson 11 shares, which she would sell to A. W. Riter for purchase by applicant; and John H. Awtry 2 shares.

By agreement dated June 19, 1939, applicant would purchase from A. W. Riter 611 shares of the capital stock of Sunshine, at $300 per share, and 1,100 shares of the capital stock of Dixie, at $275 per share, for an aggregate consideration of $485,800, of which $100,000 would be paid in cash and the balance evidenced by 6 promissory notes to be dated June 19, 1939, 1 for $45,000 payable December 19, 1939, and 5 for $68,160 each, payable December 19, 1940 to 1944, inclusive, with interest at the rate of 4 percent per annum, payable annually. The agreement further provides that the above shares, together with 500 of the shares of Dixie's stock already owned by applicant, shall be attached to the notes as collateral, subject to the release of such 500 shares after payment of the first 3 notes, and that applicant shall have the right to vote all of the stock so long as the notes are not in default. If default occurs, voting power is to vest in the seller, and the latter also shall have the power, upon 90 days' default in payment of principal or interest, to sell said stock either at public or private sale after 10 days' notice in writing to applicant. To the extent of carrying out of the latter provisions of the contract in event of default might result in a change in control requiring our approval under section 213, nothing herein contained is to be construed as approval of such provisions. Compare Rock Island M. Transit Co.-Purchase-White Line M. Frt., 5 M. C. C. 451, 458. As previously indicated, applicant already controls Sunshine through ownership of a majority of its capital stock. The proposed purchase by applicant of 611 additional shares of stock in Sunshine accordingly does not involve an acquisition of control of that carrier within the meaning of section 213, but, as such purchase is included among the terms of a single transaction whereby applicant seeks authority to acquire control of Dixie, our consideration and findings will relate to the transaction in its entirety, including purchase of such additional stock.

Applicant's personal balance sheet as of July 31, 1939, giving effect to instant transaction, shows assets aggregating $1,089,089, consisting

Between Kaufman and Honey Grove via Greenville, Tex., and between Greenville and Mineola, Tex., its rights are leased to Pete Hubbard; and those rights between Athens and Jacksonville, Tex., are leased to B. Barker and Pauline Hatzenbuehler, doing business as Ace Bus Company.

of: Current assets, $38,899, composed of cash $10,062 and notes receivable $28,837; fixed assets, less depreciation, $23,507; total investments, including stock in Dixie and Sunshine, $1,026,083; and other assets $600. Liabilities were: Current liabilities $122,225, principally notes to a bank and insurance company $75,000 and a note to A. W. Riter due December 19, 1939, $45,000; long-term liabilities $340,800, comprised entirely of five notes payable to A. W. Riter, each in amount of $68,160, due annually in turn, beginning December 19, 1940; deferred credits $400; and net worth $625,664.

Dixie's balance sheet as of July 31, 1939, shows assets aggregating $593,834, consisting of: Current assets $312,030, principally cash and accounts receivable; carrier operating property, including 50 motor vehicles, less depreciation, $198,461; nonoperating property $100; intangible property $69,833; investments, securities, and advances $3,000; and prepayments $10,410. Liabilities were: Current liabilities $96,758, principally notes payable, taxes accrued, and unredeemed tickets; deferred credits $320; capital stock $99,225; and surplus, unearned $150,775 and earned $246,756. Income statements for 1937, 1938, and the first 7 months of 1939 show net incomes of $85,016, $73,940, and $26,811, respectively. Included among Dixie's current assets of $312,030 is an amount of $264,285 said to represent advances due from stockholders. The latter have no intention of paying the amount. Hence, retention of said amount in the balance sheet reflects an artificial asset situation which should not be permitted to continue, and our findings will be conditioned accordingly.

Sunshine's balance sheet as of July 31, 1939, shows assets aggregating $391,388, consisting of: Current assets $38,022, principally cash and accounts receivable; carrier operating property, including 40 motor vehicles, less depreciation, $119,111; nonoperating property $450; intangible property $226,787; and prepayments $7,018. Liabilities were: Current liabilities $27,777, including taxes accrued $16,837; deferred credits $251; capital stock $150,000; and earned surplus $213,360. Income statements for 1937, 1938, and the first 7 months of 1939 show net incomes of $93,265, $68,299, and $30,023, respectively.

Applicant proposes to pay principal amount of $485,800 for 55 percent of the stock of Dixie, and 41 percent of Sunshine's stock, which companies have, as of July 31, 1939, an aggregate net worth of $299,211, excluding intangible property and advances due from stockholders. Combined net earnings for 1937, 1938, and the first 7 months of 1939 were $178,281, $142,239, and $56,835, respectively. If the latter figure were projected to the end of 1939 by use of average earnings per month during the 7-month period, the resulting net income would be $97,432, and there is reason to believe that such figure might be exceeded, as

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