execution of the agreement and the delivery of the stock, the business of Stages shall be conducted in the usual way; that the salaries of its officers, or of its stockholders now employed by it, shall cease on the first of the month following execution of the agreement; that no dividends shall be declared or paid by Stages; that expenses shall be limited to those incurred in the ordinary course of business; and that there shall be no increase in Stages' authorized or outstanding capital stock. Oakley and McKinley Sparks agree that they will not engage in operations competitive with those of Southeastern for a period of 10 years after date of consummation, except as may be expressly agreed upon in writing, and except that their continued operations under the corporate identity of Sparks Brothers Bus Company, Inc., of Paintsville, herein called Sparks Brothers,10 shall not be considered in violation of their agreement not to engage in operations competitive with those of Southeastern.

The agreement further provides that upon approval of the transaction by regulatory authorities, the present officers and directors of Stages and of the Virginia company will resign so that they may be succeeded by nominees of Southeastern. As a condition precedent to approval of the transaction, Utter requests that he be released as trustee of the 11 shares held in trust for Keenon, and of the 10 shares each held in trust for Jacqueline Huguelet Bradley and Mary Whitney Eversole.

Southeastern's balance sheet as of December 31, 1947, shows assets aggregating $15,612,243, consisting of: Current assets $5,909,469, principally cash $2,477,041, temporary cash investments $1,833,350, and accounts receivable $959,346; carrier operating property, less depreciation, $5,960,775; intangible property $2,873,354; investment securities and advances-associated companies $391,952; and other $2,864; and deferred debits $473,929. Liabilities were: Current liabilities $3,854,351, principally accounts payable $1,163,296 and taxes accrued $1,725,868; advances payable-associated companies $118,258 and other $30,000; deferred credits $100; reserves $165,730; capital stock, common $5,428,180; premium and assessments on common capital stock $640,835; and earned surplus $5,374,789. Its income statements for 1945, 1946, and 1947, show net incomes, before provision

10 On September 9, 1939, in No. MC-29428, a so-called "certificate of registration," supported by Kentucky certificates 664, 59, and 6, was issued to Sparks Brothers, describing passenger operations in interstate or foreign commerce under the partial exemption of the second proviso of section 206 (a) of the act, between Prestonburg and Wayland through Johnson and Floyd Counties, between Martin and Virgie via Hunter, McDowell, Drift, Wheelwright, and Weeksburg through Floyd and Pike Counties, and between Hazard and Allen via Hindsman, Maytown, and Martin through Perry, Knott, and Floyd Counties.

for income taxes, of $7,157,122, $5,321,114, and $3,456,254, and, after such provision, $1,888,122, $3,242,339, and $2,101,474, respectively. Stages' balance sheet as of December 31, 1947, shows assets aggregating $206,644, consisting of: Current assets $54,136, principally cash $48,650, accounts receivable $3,849, and material and supplies $682; carrier operating property, less depreciation, $114,198; intangible property $28,749; investments securities and advances-other $1,556; and deferred debits $8,005, principally prepayments $7,810. Liabilities were: Current liabilities $60,968, principally notes payable $10,000, accounts payable $15,128, and taxes accrued $23,159; deferred credits $2; capital stock, preferred $20,800 and common $5,000; and earned surplus $119,874. Its income statements for 1945, 1946, and 1947, show net incomes before provision for income taxes, of $42,903, $7,292, and $13,319, and, after such provision, $17,859, $4,799, and $9,856, respectively.

With regard to the previously described lease of interstate rights between Jenkins and Pikeville, duplicating those of Stages between those points, in Booher-Purchase-Howard, 45 M. C. C. 822, Booher represented that, in January 1934, he entered into a lease agreement with Clinch Valley for the lease of its operating rights between Bristol and Pikeville for a term of 1 year, with the right to renew the lease from year to year; and that later he subleased, or relinquished, that portion of the lease for operations between Jenkins and Pikeville to Sparks Bus Line, which is now Stages. In respect of that lease in the case last cited it was found:

As the lease of the rights of Clinch Valley Transit Company has been renewed from time to time since the operations of motor carriers have been subjected to regulation, there is grave doubt whether such operations are now lawful without our prior approval of the renewal of the lease. The parties should immediately take such steps as may be necessary to correct this situation.

In a letter of May 9, 1947, our Bureau of Motor Carriers inquired of Clinch Valley whether the matter would be presented to the Commission for determination by the filing of an application, accompanied, if desired, by a petition for dismissal upon jurisdictional grounds. No such application has been filed. In the instant proceeding Southeastern does not seek authority to acquire control of these operations through continuance of the lease by Stages. Our findings will be conditioned to require termination of the lease upon Southeastern's exercise of the authority herein granted.

The net book value of Stages' capital stock as of December 31, 1947, was $145,674, including intangibles, and $116,925, excluding intangibles, for which Southeastern would pay a consideration of

$220,000. To justify, in part, the purchase price, Southeastern presented evidence showing that the cost of Stages' carrier operating property exclusive of land and structures, amounted to $180,260, compared with a net book value as of September 30, 1947, of $100,876. It asserts that the present market value of such property is at least $25,219 greater than the net book value and that, in addition, certain land and structures carried on Stages' books at a net book value of $20,811 could be readily sold at its current market value of from $50,000 to $65,000. The real estate consists of a centrally located corner lot in Pikeville upon which Stages maintains a bus station and a garage. Southeastern contends that the purchase price was agreed upon by the contracting parties after arms-length bargaining and that it is not unreasonable considering that the market value of Stages' physical property is in excess of its net book value to the extent indicated.

Stages' net incomes for 1945, 1946, and 1947, after provision for income taxes, were $17,859, $4,799, and $9,856, or an average annual net income, after such provision, during the past 3 years of $10,838. This would represent a return of about 5 percent on the investment of $220,000. Southeastern estimates that, under its management, Stages' net income in 1947, after provision for income taxes, would have amounted to $28,000. While it may not be assumed that Stages' net income will increase to the extent estimated by Southeastern, it appears, that, under the new management Stages would be able to conduct more profitable operations. It would effect savings through elimination of the salaries paid officers, and certain stockholders, of Stages. Economies would also be effected on other administrative expenses and in large-scale procurement of equipment, material, and supplies for both companies. The 20 motorbusses at present operated by Stages are in good condition for over-the-road service. The purchase price would be paid by Southeastern from its current funds. As of December 31, 1947, the purchase price proposed to be paid for Stages' stock exceeded its net book value, exclusive of intangibles, by $103,075. Considering the balance in Southeastern's surplus account, our findings will be conditioned to require that Southeastern immediately write off the amount by which the purchase price to be paid for the stock exceeds its net book value, exclusive of intangibles, as of the date of consummation.

Stages' operations are over highways in the mountainous coal mining area of eastern Kentucky. Formerly the highways were so poor that it was difficult to operate over them, but now they have been rebuilt and are suitable for economic and expeditious service. Opera

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tions have been severely handicapped by strikes and a lack of competent management. When Utter acquired control of Stages pursuant to authority granted in No. MC-F-2884, supra, he made efforts to improve its service, but was unable to reach a satisfactory understanding with Oakley Sparks, who had always held the office of president, relative to the management of its operations. Because of this difficulty Utter sold his stock interest and that of his wife to Dorton, a friend of Oakley and McKinley Sparks. As a result of the continued illness of the Sparks brothers, shortly after the sale by the Utters of their stock to Dorton, Keenon assumed management of Stages' business affairs. He asserts that he is not qualified to manage the over-theroad service of a motorbus carrier of passengers and that he has been unable to find a person capable of managing the operations of Stages efficiently. Confronted with this situation, the stockholders decided that it would be in the best interests of all to dispose of their stock in the manner proposed.

The principal route of Stages is between Ashland and Jenkins via Paintsville and Pikeville over U. S. Highway 23. The routes of Southeastern extend on the east to Paintsville and Jenkins, points served by Stages, and across the latter's route, immediately south of Ashland, to Huntington. Passengers moving between points served by Southeastern and those served by Stages are interchanged at the connecting points. The interchange connections have not been entirely satisfactory, and, because of strikes and inadequate management, Stages has not been able to coordinate its schedules with those of Southeastern in an efficient manner. Following consummation of the instant transaction, Southeastern would coordinate the schedules of Stages with its own at the connecting points so to eliminate interchange delays. Stages has never had in effect a sound maintenance program for the repair of its equipment, and its garage facilities are wholly inadequate for that purpose. Upon approval Southeastern would repair the equipment of Stages in its modern garage in Lexington where it has ample facilities. Smaller equipment now used by Stages would be replaced with larger and more comfortable busses. Additional schedules would be added for the convenience of its patrons. Under Southeastern's experienced management, Stages would be able to provide its passengers with a service superior to and more efficient than that which it has been able to offer in the past. There is a sufficient volume of passenger traffic moving over the routes of Stages to support the improved service. No displacement of employees would result from the transaction.

As seen, in order to effect consummation of the transaction, Utter seeks authority to be released as trustee of the capital stock of Stages which he now holds in trust. Obviously, upon transfer of the stock to Southeastern, the three separate trusts would no longer perform the purpose for which they were created. Therefore, our authority granted herein contemplates concurrently with consummation of the transaction, the termination of the three trusts, so that all of the capital stock of Stages will be transferred to Southeastern free of the trusts. It is anticipated that, when certain obstacles can be overcome, steps will be taken to unify Stages' properties with those of Southeastern, subject to our approval.

We find that acquisition by Southeastern Greyhound Lines of control of Kentucky-Virginia Stages through purchase of its capital stock, upon the terms and conditions above set forth, which terms and conditions are found to be just and reasonable, is a transaction within the scope of section 5 (2) (a) and will be consistent with the public interest; provided, however, that, if the authority herein granted is exercised, Southeastern Greyhound Lines shall immediately write off that part of the amount assigned to its "Investment and Advances— Associated Companies" account by which the total purchase price paid by it for the stock of Kentucky-Virginia Stages exceeds its net book value, exclusive of intangibles, as of the date of consummation, such write-off to be accomplished in the manner to be determined upon submission of the journal entries proposed to record the transaction, as required by our order herein; and provided further, that, upon exercise of the authority herein granted, the lease between Clyde Booher, doing business as Bristol-Norton Bus Line, and KentuckyVirginia Stages shall be canceled concurrently therewith.

An appropriate order will be entered.

50 M. C. C.