No. MC-F-893 CONSOLIDATED BUS LINES, INCORPORATED— MERGER-ANGLE STAR LINES, INCORPORATED Submitted January 30, 1940. Decided May 2, 1940 Merger in Consolidated Bus Lines, Incorporated, of operating rights of Angle REPORT OF THE COMMISSION DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER BY DIVISION 4: By application filed May 2, 1939, authority is sought under section 213, Motor Carrier Act, to merge the operating rights of Angle Star Lines, Incorporated, of Bluefield, W. Va.,2 into Consolidated Bus Lines, Incorporated, of Beckley, both Virginia corporations, hereinafter called Angle and Consolidated, respectively, for ownership, management, and operation. Hearing has been held. The joint board has made no recommendation and has indicated it is agreeable to having the matter disposed of without its filing its report and recommended order. There was no opposition. Consolidated, organized August 16, 1937, as part of a consolidation plan approved and authorized in Consolidated Bus Lines, Inc.-Consolidation, 5 M. C. C. 309, decided December 28, 1937, is controlled by J. E. Craft through ownership of 67 percent of its outstanding capital stock, consisting of 1,578 shares of common stock, without par value. On July 27, 1939, in No. MC-61947, embracing Nos. MC 4949 and MC-61818, issuance of a certificate to Consolidated under the "grandfather" clause was authorized, covering operations in interstate or foreign commerce as a motor-vehicle common carrier of passengers and their baggage and of express, mail, and newspapers in the same vehicle with passengers, over regular routes, serving principally the coal-mining district of West Virginia, extending between Layland, on the north, and Filbert and Bluefield, on the south, and between Roanoke, Va., on the east, and Logan and Holden, on the west, serving 1As filed, the application sought authority to purchase, but it will be treated herein as a request for authority to merge as the facts plainly indicate that to be the result desired. All points mentioned are in West Virginia, unless otherwise indicated. intermediate points, with certain exceptions, and designated off-route points. Angle has outstanding 100 shares of common capital stock, par value $100 each, of which 75, 15, and 10 shares are owned, respectively, by Thomas H. Scott, G. H. Foresman, and Craft. In Angle Star Lines Common Carrier Application, 16 M. C. C. 189, decided March 13, 1939, Angle was found entitled to a certificate under the "grandfather" clause, covering operations similar to those of Consolidated over a specified route between Bluefield, W. Va., and War, via Bluefield and Pocahontas, Va., and Squire. Negative action respecting all other operating rights claimed by Angle was taken on October 9, 1939, in Murphy Bus Co. Common Carrier Application, 19 M. C. C. 447, wherein, effective November 25, 1939, No. MC-79011 (Sub-No. 1), Angle Star Lines, Inc., Common Carrier Application, was denied, and No. MC-79011 (Sub-No. 2), Angle Star Lines, Inc., Change of Route Application, was dismissed. In Consolidated Bus Lines, Inc.-Consolidation, supra, division 5 authorized, as an incident to the consolidation plan above referred to, lease by Consolidated of the operating rights of Angle for a 2-year period which expired December 29, 1939, at $480 per year, and in a supplemental report in that case, 35 M. C. C. 59, decided on the date last mentioned, the division approved extension of said lease for not exceeding 1 year on the same terms to permit continued operations by Consolidated under Angle's confirmed operating rights pending disposition of the instant application. Corresponding intrastate rights, including other such rights between Big Rock, Va., and Bluefield, of Angle are also leased by Consolidated, which has subleased the latter rights to C. C. Selfe for $100 per month, with option to purchase for $17,500, if this application is approved. Under agreement of April 29, 1939, Consolidated proposed to acquire the assets, subject to liabilities aggregating $8,299, as of November 30, 1939, of Angle, in exchange for issuance and delivery to the latter of 100 shares of the former's stock. Owing to the restricted interstate rights granted Angle, this agreement was modified by supplemental agreement dated January 2, 1940, to reduce from 100 to 57 the number of such shares to be issued to Angle. If instant transaction is approved, Angle would be dissolved and its stock canceled. The present 1,578 shares of outstanding stock of Consolidated are carried on its books at stated value of $32,875, or $20.83 per share. For the purpose of exchange under the merger a value "We are without jurisdiction to authorize the transfer of strictly intrastate rights." Santa Fe Trail Transp. Co.-Purchase-Schaeffer, 5 M. C. C. 115, 117. Evidence shows Angle's only assets to consist of interstate and intrastate operating rights. per share of $175 is to be used, determined by dividing $278,000, representing estimated total capital stock and surplus of Consolidated as of December 31, 1939, by 1,578 shares. The 57 additional shares to be issued in this transaction were computed by dividing $10,000, the approximate purchase price paid by the present stockholders of Angle for the latter's stock acquired in 1937, by $175.5 Upon dissolution of Angle, its stock in Consolidated would be distributed to the stockholders of the former in proportion to their present holdings, except that Scott's interest would be assigned to Craft, who has agreed to purchase the former's shares at the same price as was paid for his stock in Angle, viz, $7,725. Balance sheet of Consolidated as of November 30, 1939, shows total assets of $332,367, consisting of: Current assets $38,581, representing cash $5,414, accounts receivable $20,696, and material and supplies $12,471; carrier operating property, including 27 motor vehicles, less depreciation, $78,939; intangible property $145,186; advances to Angle $1,390; prepayments $6,886; and notes receivable, noncurrent, $61,385. Liabilities were: Current liabilities $50,506, principally notes payable $10,000, accounts payable $15,763, and taxes accrued $23,872; equipment obligations $8,584; reserve for unredeemed tickets $5,464; capital stock $32,875; and surplus, unearned $31,635 and earned $203,303. Income statements for 1937, 1938, and the first 11 months of 1939, including operations under leased rights of Angle since December 29, 1937, show net incomes of $49,722, $17,036, and $32,161, respectively. No separate financial data covering operations under the leased rights were submitted, but it was testified that combined interstate and intrastate operations over the considered route returned an average net income of approximately $1,800 annually, in addition to $1,200 yearly rental received from the sublease of other intrastate rights. Angle's balance sheet as of November 30, 1939, prepared from best information available, shows no assets. Liabilities were: Matured obligations, notes payable $1,317, accounts payable, prior to July 1, 1937, $6,616, and accounts payable, current, $366; capital stock $10,000; and earned surplus (debit balance) $18,299. Pro forma balance sheet of Consolidated as of November 30, 1939, giving effect to the proposed merger, shows assets aggregating $349,276, consisting of: Current assets $38,581, representing cash $5,414, accounts receivable $20,696, and material and supplies $12,471; carrier operating property, including 27 motor vehicles, less deprecia The method of determining the book value per share in the instant case is not to be construed as being approved, but, by reason of the condition hereinafter imposed with respect to the disposition of the amount which would otherwise properly be includible in the "Other Intangible Property" account, the propriety of the method need not be further considered. tion, $78,939; intangible property $163,485; prepayments $6,886, and notes receivable, noncurrent, $61,385. Liabilities were: Current liabilities $57,415, principally notes payable $11,317, accounts payable $21,354, and taxes accrued $23,872; equipment obligations $8,584; reserve for unredeemed tickets $5,464; capital stock $42,875; and surplus, unearned $31,635 and earned $203,303. The proposed merger results from the view expressed in the first report in Consolidated Bus Lines, Inc.-Consolidation, supra, namely: "If operations under the lease prove successful, eventual acquisition of the leased rights by the new company [Consolidated] is contemplated." The testimony is that revenues derived from handling interstate passengers alone over the route considered have increased approximately 50 percent since Consolidated assumed operation under the lease and that such route can now be considered as a valuable and profitable adjunct to the latter's transportation system. While economies which normally may be expected from unification have been realized to a certain extent under the present method of operation, added savings in matters of accounting, annual reports, etc., from the merger should further improve net revenues, and the transaction in general is in line with our policy of furthering corporate simplification in the public interest. As a result of consummation of the merger, Consolidated proposes to increase the total amount assigned to its intangible-property account by $18,299, on the basis of balance sheet as of November 30, 1939. At the hearing, the secretary and treasurer of Consolidated advised that such amount would be amortized in equal annual amounts over a 10-year period. Considering the balances in Consolidated's surplus accounts, we are of the opinion that the amount of the increase which would properly be assignable to the "Other Intangible Property" account should immediately be charged to unearned surplus. Our findings will be conditioned accordingly. We find that merger of operating rights of Angle Star Lines, Incorporated, into Consolidated Bus Lines, Incorporated, for ownership, management, and operation, including the right to a certificate covering rights confirmed in Angle Star Lines Common Carrier Application, supra, herein authorized to be unified with rights otherwise confirmed in Consolidated, 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 condi- tions of section 213 have been or will be fulfilled; provided, however, that, if the authority herein granted is exercised, Consolidated shall immediately charge to unearned surplus the amount that would otherwise properly be included in its "Other Intangible Property" account. An appropriate order will be entered. No. MC-F-1070 DOHRN TRANSFER COMPANY-PURCHASE-FRED W. BOHL Submitted April 10, 1940. Decided May 2, 1940 Purchase by Dohrn Transfer Company of operating rights and property of Fred W. Bohl, doing business as the Corn-Belt Warehouse, approved and authorized, subject to condition. David Axelrod for applicant. Russell B. James for protestants. REPORT OF THE COMMISSION DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER BY DIVISION 4: Dohrn Transfer Company, an Illinois corporation, of Rock Island, Ill., by application filed November 28, 1939, seeks authority under section 213, Motor Carrier Act, 1935, to purchase, for $4,900, operating rights and property of Fred W. Bohl, of Galesburg, Ill., doing business as The Corn-Belt Warehouse. Hearing has been held, at which a motor carrier and a rail carrier opposed the application but introduced no evidence. The joint board has made no recommendation and has indicated that it is agreeable to having the matter disposed of without its filing its report and recommended order. Pursuant to authority granted in Dohrn Transfer Co. Common Carrier Application, 4 M. C. C. 111, on January 20, 1938, in No. MC-33087, (embracing No. MC-78162 1), a certificate was issued to applicant under the "grandfather" clause, covering operations in interstate or foreign commerce as a motor-vehicle common carrier of general commodities, over numerous regular routes, principally in Illinois, but including service to a few points in Iowa and Missouri, in territory generally bounded on the east by Chicago, Oswego, La Salle, East Peoria, Macomb, Jacksonville, and Alton, Ill., on the south by St. Louis, Mo., on the west by Quincy, Ill., and Keokuk, Burlington, and Clinton, Iowa, and on the north by Lena, Freeport, Rockford, and Elgin, Ill., serving all intermediate points on such routes, and certain off-route points. 1 Rights covered by this application were acquired pursuant to authority granted in Dohrn Transfer Co.-Purchase-Carr, 5 M. C. C. 282. |