Wateree, St. Matthews, Orangeburg, Norway, Springfield, and Wagner, and in Nos. MC-17820 (Sub-No. 22), MC-17820 (Sub-No. 23), MC-17820 (Sub-No. 24), and MC-17820 (Sub-No. 25), to extend his operations over routes in the vicinities of Greenville, Anderson, Abbeyville, Ninety Six, Saluda, Johnston, and Batesburg, S. C. He also has an application pending under section 5 for authority to transfer his business to a newly formed corporation in which he would have a controlling interest. He owns 50 busses and operates approximately 850 route-miles.

The old company was organized October 20, 1930. It has outstanding 100 shares of common capital stock, par value $100 each, of which 99 shares are owned by its president, Frank L. Wilkinson, and 1 share by its secretary, B. G. Kitchens. It conducts operations similar to those of the partnership and Hamish Turner over routes entirely in Georgia (1) between Augusta and Columbus via Thomson, Sparta, Milledgeville, Gray, Macon, Roberta, Talbotton, and Geneva; (2) between Augusta and Milledgeville via Louisville and Sandersville (also via Tennile); (3) between Roberta and Geneva via Reynolds and Butler; (4) between Macon and Americus via Echeconnee, Fort Valley, and Montezuma; and (5) between Gray, on the one hand, and, on the other, (a) Athens via Eatonton and Madison, and (b) Gainesville via Monticello, Monroe, Winder, and Hoschton. It has generally corresponding Georgia intrastate operating rights. Pursuant to authority granted on January 27, 1940, in No. MC-FC-40060, it acquired operations conducted by its predecessor under the partial exemption of the second proviso of section 206 (a), herein called the proviso, supported by Georgia intrastate certificate of public convenience and necessity 1204, over an additional 25-mile route not covered by its certificate between Monticello and Madison via Shady Dale. No. MC-2186 (Sub-No. 4) was assigned to cover these operations. It also has on file a "registration" application in No. MC-29425 (Sub-No. 1), supported by Georgia intrastate certificates of public convenience and necessity 1278 and 1305, describing operations in interstate or foreign commerce under the proviso, since covered by its certificate, between Gray and Gainesville via Monticello, and between Roberta and Geneva via Butler. It operates approximately 30 motor vehicles, and utilizes certain office, garage, and terminal facilities of Wilkinson in Macon and Milledgeville, under leasing arrangements requiring an aggregate rental payment of $825 per month.

The proposed transaction is described in four agreements between Hamish Turner and Wilkinson, one dated November 9, 1945, two

In No. MC-F-3243, Hamish Turner-Control; Carolina Stages, Inc.-Purchase Hamish Turner.

Pursuant to certificate issued in No. MC-2186, May 14, 1942.

dated February 2, 1946, and one dated August 1, 1946. Pursuant to these agreements, the new company has been organized with directors designated by Wilkinson to manage it pending approval and consummation of the purchase by it of Wilkinson's 99 shares of the old company's stock for $720,000. The purchase price is payable $250,000 in cash (less a payment of $25,000 made as of February 2, 1946), with the remaining $470,000 payable by the new company to Wilkinson in monthly installments of $5,000 each, commencing 30 days after approval herein. The deferred payments would bear interest at 22 percent per annum, and would be represented by 94 notes of $5,000 each, numbered serially P-1 through P-94, and the interest on the unpaid balances would be represented by 94 separate interest notes, numbered serially I-1 through I-94, with 1 interest note to be due each month as in the case of the notes covering the principal. All notes would be made by the new company payable to "Frank L. Wilkinson, or order." Immediately upon acquisition by the new company of the stock from Wilkinson, and its simultaneous acquisition of the remaining share of stock from Kitchens for $5,000 payable in cash pursuant to a separate agreement," the new company would take over all assets and assume all liabilities of the old company, and the latter would be dissolved. Immediately upon the dissolution of the old company, and to secure payment of the notes, the new company would execute its bill of sale (assignable, and with right of foreclosure in the event of default in payment) in favor of Wilkinson covering the operating rights and physical property acquired, and property which it might subsequently acquire, and the Wilkinson interests would terminate their connection with the new company. The agreement of November 9, 1945, as amended by one of the agreements of February 2, 1946, provides that, simultaneously with its execution of the described bill of sale, the new company:

shall deposit in an account which shall not be withdrawn except by the counter signature of Wilkinson or purchase government securities which shall be placed in a joint lock box which shall not be withdrawn except by the consent of Wilkinson, which sums of money as shown by audit of December 31, 1945, which are not required by the corporation [the new company] to pay its current liabilities or tax claims of the United States or State of Georgia which are not now carried as current liabilities of Southern Stages, Inc. [the old company], but which might subsequently accrue. However, should Southern Stages [the new company] elect to do so, it shall have the right to pay to Wilkinson such sums of money which are not necessary to pay current liabilities or tax claims in lieu of freezing the same as heretofore provided, which said payments shall be applied by Wilkinson on the unpaid balance [of the notes].

Under an agreement of November 9, 1945, Kitchens granted an option to Turner to purchase, for $5,000 cash, his one share of stock in the old company, the purchase to be made within 10 days of the purchase by Turner, or a corporation formed by him, of the remaining shares of stock from Wilkinson.

The agreement of November 9, 1945, further provides that the new company may use any or all of the above funds or Government securities, with Wilkinson's consent, which he agrees to give, for the purchase of additional equipment or property for its use, executing in favor of Wilkinson as further security its bill of sale covering the equipment or property purchased with the funds or bonds so released. The agreements provide further that, until final payment of the indebtedness to Wilkinson, the new company's current assets shall at all times be equal to its current liabilities, excluding from consideration the amounts which may be due Wilkinson; that it shall discharge all debts of the old company; that salaries of its executive officers shall not exceed the amount of salaries paid such officers by the old company; that it shall not lend money to its officers or stockholders or pay dividends to its stockholders except out of earnings; that Hamish Turner or the new company shall pay Wilkinson's attorneys fees in a reasonable amount, but not to exceed $1,000, for prosecution of necessary applications before regulatory bodies; and, that, in the event of a strike by the new company's employees 10 causing suspension of its operations, monthly payments due Wilkinson may be suspended during the period of the strike, and such payments shall be extended for a similar period, with interest, however, to continue to accrue on the unpaid balance. It is further provided that any or all payments by the new company may be anticipated by it; that upon breach of any of the conditions, or failure to pay installments of principal or interest for a period of 15 days, the entire indebtedness shall become due at the option of Wilkinson; and, that, pending final determination herein, the old company shall not increase the salaries of its executive officers or pay any dividends to Wilkinson. The parties involved have, by corporate action or orally, ratified and adopted the provisions of the several agreements.

The agreement of August 1, 1946, as supplemented by testimony at the hearing, provided, at Wilkinson's request, that, in the event of approval of the applications prior to February 15, 1947, the cash payment on the purchase price would be reduced from $250,000 to $200,000 and an additional note for $50,000 due on the latter date and bearing interest at 212 percent would be issued. This would have increased the aggregate principal amount to be represented by notes to $520,000. However, in view of the inapplicability of the provision, and in conformity with the intent of the parties, our consideration herein is on the basis of the originally proposed cash payment of $250,000 and issuance of notes in the aggregate principal amount

10 The new company proposes to take over the old company's entire personnel with the exception of Wilkinson.

of $470,000. Expenses in issuing the notes are estimated at not exceeding $10,000 for legal expenses.

The Georgia Public Service Commission has approved the proposed transfer from the old company to the new company, to be effective if and when the transaction is approved by this Commission, and in its approval, required that $72,000 be set aside for station improvements in Georgia. Approximately $40,000 of that amount remains to be supplied.

A balance sheet of the new company as of August 31, 1946, shows total assets of $261,000, consisting of cash $260,520 and organization expenses $480; with liabilities consisting solely of 2,610 shares of common capital stock, par value $100 each. The cash consists of $227,000 on deposit in a Spartanburg bank in the name of Scenic, Inc., as trustee for the new company, $8,520 on deposit in a Macon bank in the name of the new company, and $25,000 in the hands of Wilkinson as a payment on the instant transaction. As previously stated, the stock has been subscribed but not issued.

The balance sheet of the old company, as of August 31, 1946, shows assets aggregating $729,879, consisting of: Current assets $524,473, composed of cash $240,496, special deposits $2,043, U. S. Government bonds $225,000, accounts receivable $22,834, interest receivable $1,659, and material and supplies $32,441; carrier operating property, less depreciation," $114,905; intangible property $79,329; investment securities and advances $5,225; and deferred debits $5,947. Its liabilities were: Current liabilities $243,617, composed of account payable $51,988, wages payable $11,636, unredeemed tickets $35,182, taxes accrued (including $101,812 accrued and unpaid income tax for 1945) $141,464, and other current liabilities $3,347; capital stock $10,000; and surplus, unearned $20,000, and earned $456,262. Its income statements for 1944, 1945, and the first 8 months of 1946, show net incomes of $313,486, $281,461, and $92,425 before, and $61,799, $76,831, and $55,455 after, provision for income taxes, respectively. The foregoing balance-sheet and income figures were compiled without taking into account the outcome of a contingent tax claim by the Bureau of Internal Revenue for income and excess-profits taxes for the years 1940-43, inclusive, in the aggregate amount of $136,538.

A pro forma balance sheet of the new company, as of August 31, 1946, giving effect to the stock acquisition only (prepared on the basis of a $200,000 cash payment and the insurance of the additional note for $50,000), shows assets aggregating $781,000, consisting of cash $55,520, organization expenses $480, and investment in the old com

"The old company's annual rates of depreciation have been as follows: All busses on a 20-percent, and all office, station and shop equipment on a 10-percent, straight line basis; and depreciation on improvements to leasehold property over the period of the lease.

pany $725,000. Liabilities consisted of notes payable $520,000, and capital stock $261,000.

A pro forma balance sheet as of the same date, giving effect to the entire transaction (and prepared on a similar basis), shows assets aggregating $1,024,617, consisting of: Current assets $579,993, made up of cash $19,640, special bank account (described in the agreements) $276,376, special deposits $2,043, U. S. Government bonds $225,000 accounts receivable $22,834, interest receivable $1,659, and material and supplies $32,441; carrier operating property, less depreciation, $266,998; intangible property $166,454; other investments and advances $5,225; and deferred debits $5,947. The liabilities were: Current liabilities $243,617, composed of accounts payable $51,988, wages payable $11,636, unredeemed tickets $35,182, taxes accrued $141,464; and other current liabilities $3,347; other long-term obligations (purchase-price notes), $520,000; and capital stock $261,000. This statement, among other adjustments, includes: (1) A write-up of $152,093 in carrier operating property, representing (a) an increase of $145,903 in automotive equipment,12 evidence having been introduced to show that this would bring the value of each bus and the aggregate value up to Office of Price Administration ceiling prices at that time for similar equipment, and that this represents what the parties consider is the true market value; and (b) an increase of $6,190 in other equipment, furniture and fixtures, and improvements to lease-hold property, the justification being that this is the result of a "conservative appraisal;" (2) an increase of $86,645 14 over the total amount shown on the books for intangibles, bringing the total amount for intangibles to $166,454; and, (3) elimination of the new company's investment in, and the capital stock and surplus of, the old company in the manner indicated. It does not take into account the contingent liability represented by the tax claim previously mentioned, aggregating $136,538.

13

The balance sheet of Scenic, Inc., as of August 31, 1946, shows assets aggregating $301,823, consisting of: Current assets $3,359, composed of cash $859 and accounts receivable $2,500; tangible propertyimproved real estate (appraised value) $110,464; and investment in the new company $188,000. Its liabilities were: Notes payable $150,000; advance by stockholders $38,000; capital stock $78,769; and surplus $35,054, composed of $32,231 representing an increase as result

"Twenty-eight busses with depreciated book value of $89,290, purchased, 1 in 1939, 3 in 1940, 9 in 1941, 5 in 1942, 4 in 1944, 4 in 1945, and 2 in 1946.

"With an aggregate depreciated book value of $25,615.

Representing the remainder of the $725,000 purchase price for the stock after applying $10,000 against the stock liability, and $476,262 against the surplus account, of the old company, and $152,093 as a write-up in the carrier operating property.