No. MC-F-2584

THE GREYHOUND CORPORATION-INVESTIGATION OF

CONTROL-SOUTHEASTERN STAGES, INC.

Submitted January 28, 1948. Decided July 15, 1948

Upon investigation, found that the evidence does not establish that control or management of Southeastern Stages, Inc., in a common interest with Atlantic Greyhound Corporation or other carriers affiliated with it, has been accomplished in violation of section 5 (4), Interstate Commerce Act. Investigation discontinued.

E. Smythe Gambrell, Allen Post, W. Glen Harlan, and James S. Wilson, Jr., for respondents.

Isaac K. Hay for Interstate Commerce Commission.

BY THE COMMISSION:

REPORT OF THE COMMISSION

Exceptions were filed by respondents to the proposed report of the examiner, counsel for the Commission replied, and the case was argued orally. Our conclusions differ from those of the examiner.

By order entered July 13, 1944, we instituted an investigation, on our own motion, under section 5 (7) of the Interstate Commerce Act, to determine whether control or management of Southeastern Stages, Inc., of Atlanta, Ga., herein called Southeastern, in a common interest with Atlantic Greyhound Corporation, of Charleston, W. Va., herein called Atlantic, and other carriers affiliated with it, may have been effectuated and may be continuing in violation of section 5 (4) of the act. The Greyhound Corporation, of Chicago, Ill., herein called Greyhound, which controls 79.74 percent of the outstanding common voting stock of Atlantic, the latter, and the following 18 individuals, who were then directors and officers of Greyhound, except as otherwise indicated, were named respondents: John W. Alspaugh, director of Atlantic, R. A. L. Bogan, director and executive vice president, Ivan Bowen, director and vice president, Merrill Buffington, secretary, and assistant secretary of Atlantic, O. S. Caesar, director and president, and director of Atlantic, Robert Driscoll, director, vice president, and general counsel, George S. Engle, director and president of Atlantic and director of Southeastern, J. L.

Gilmer, formerly director and vice president of Atlantic, who died January 31, 1947, R. L. Griggs, director, Arthur M. Hill, director and chairman of the executive committee, and director and chairman of the board of directors of Atlantic, P. D. Koontz, director of Atlantic, C. T. Leinbach, director and treasurer of Atlantic, A. Bliss McCrum, director, secretary, and general attorney of Atlantic, W. S. Moore, formerly comptroller, who is no longer associated with the Greyhound system, G. W. Traer, formerly director, who is no longer connected with that system, W. E. Travis, director of Greyhound and Atlantic, H. G. Wellington, director, and C. E. Wickman, director and chairman of the board of directors, and director of Atlantic. The following 5 individuals, who are stockholders and 3 of whom are also officers and directors of Southeastern, were named respondents: J. W. Hughes, director, vice president, and traffic manager, L. L. (Lessie Louise) Hughes, his wife, R. M. Medlock, director, vice president, secretary, and treasurer, A. C. Shipman, director, president, and general manager, and E. I. (Era Irene) Shipman, his wife. Hearing was held and briefs and reply briefs were filed by respondents and counsel for the Commission. Respondents' motion that the initial brief of counsel for the Commission be stricken from the record, because of alleged inaccuracies, is overruled.

CORPORATE HISTORY AND DESCRIPTION OF OPERATIONS

1

Greyhound is the parent company of the Nation-wide Greyhound bus system. In its own right, it operates, 1 pursuant to a certificate issued in No. MC-1501, between Boston, Mass., and St. Stephen and Woodstock, New Brunswick, Canada, under the name of Eastern Greyhound Lines of New England, and in Alabama, Florida, Georgia, Louisiana, and Mississippi, under the name of Teche Greyhound Lines, and controls through ownership of stock 21 subsidiaries (several of the latter, in turn, similarly control other subsidiaries) which, together with its own lines, operate in all States, except Wyoming and Nebraska, and in lower Canada. Greyhound's principal connecting carrier in the last 2 States is Interstate Transit Lines, doing business as Overland Greyhound Lines, in which it has a one-third stock interest. Greyhound's capital stock is widely distributed, the 10 principal stockholders owning in the aggregate approximately 17 percent of the common voting stock. Its corporate history and plan for the development of the national bus system are recited in Greyhound Corp.-Change in Terms

1 Operations referred to herein are operations in interstate or foreign commerce as a common carrier by motor vehicle of passengers over regular routes.

of Common Stock, 1 M. C. C. 77, and Greyhound Mergers, 1936, 1 M. C. C. 342.

Atlantic, incorporated November 9, 1936, in Virginia, pursuant to a certificate issued August 11, 1947, in No. MC-1504, operates in territory generally bounded by Washington, D. C., Pittsburgh, Pa., and Cincinnati, Ohio, on the north, Huntington, W. Va., Knoxville, Tenn., Atlanta, and Jacksonville, Fla., on the west and south, and the Atlantic Ocean on the east. It has more than 500 motor busses in revenue service, in which 22,594,798 passengers were transported in 1946.

Southeastern was incorporated May 1, 1933, in Georgia, and has outstanding 500 shares of common voting stock with a par value of $100 each. Members of the Shipman and Hughes families owned all but 1 share until August 30, 1943, when they consummated the sale of 200 shares to Atlantic, in the manner later discussed. Under certificates issued December 17, 1945, and March 6, 1947, in Nos. MC29623 and MC-29623 (Sub-No. 11), respectively, Southeastern operates between Atlanta and Savannah, Ga., via Athens, Thomson, and Augusta, Ga., and Allendale and Yemassee, S. C.; between Atlanta and Thomson via Madison; between Augusta and Charleston, S. C., via Bamberg, S. C.; between Charleston and Elko, S. C., via Summerville, Walterboro, and Barnwell; between Savannah and Waynesboro, Ga., via Sylvania; between Augusta and Statesboro, Ga., via Waynesboro; and between Madison and Monroe, Ga., via Milledgeville, Gray, and Monticello, serving most intermediate points on these routes. On August 12, 1939, in No. MC-12135, a license was issued to Southeastern authorizing it to engage in operations as a broker in connection with the transportation of passengers by motor vehicle between Athens, on the one hand, and, on the other, points in the United States. Southeastern has not exercised its rights as a broker. It has approximately 45 motorbusses in revenue service, in which 1,912, 528 passengers were transported in 1946.

FINANCIAL DATA

Greyhound's balance sheet as of December 31, 1946, shows assets aggregating $55,044,328, consisting of: Current assets $12,000,919, principally cash $8,776,402 and temporary cash investments $2,630,630; tangible property, less depreciation, $48,364; intangible property $1; investment securities and advances (chiefly investments in associated companies), less amortization, $38,125,358; special funds $4,842,810; and deferred debits $26,881. Liabilities were: Current liabilities

* Exclusive of its New England and Teche operating divisions.

$2,381,378, principally taxes accrued; equipment obligations-other $5,000,000; reserves-other $108,348; capital stock, 44 cumulative preferred $5,768,800 and common $25,336,618; premium on capital stock $221,647; and earned surplus $16,227,537. Its income statements for 1944, 1945, and 1946 show net incomes of $4,855,849, $4,762,088, and $11,826,773, before provision for income taxes, and $4,679,332, $4,605,331, and $11,326,628, after such provision, respectively. For the corresponding years, the operating revenues of the Greyhound system were $156,578,879, $153,943,100, and $173,917,424; and net incomes were $57,205,774, $50,422,014, and $44,622,238, before provision for income taxes, and $14,324,099, $12,840,460 and $25,857,383, after such provision.

3

Atlantic's consolidated balance sheet as of December 31, 1946, shows assets aggregating $15,803,339, consisting of: Current assets $8,686,182, principally cash $1,227,077 and temporary cash investments $5,672,313; carrier operating property, less depreciation, $2,569,906 and noncarrier operating property, less depreciation, $277,310; intangible property, less amortization, $2,727,030; investment securities and advances $1,330,126; and prepayments $212,785. Liabilities were: Current liabilities $3,998,008, chiefly accounts payable $1,131,016 and taxes accrued $2,311,740; advances payable $36,600; equipment obligations $607,760 and other long-term obligations $19,167; reserves for postwar extraordinary expenses $541,600; capital stock, 4 percent cumulative preferred $1,666,000 and common $1,018,154; premium on capital stock $83,300; and surplus, unearned $18,059 and earned $7,814,691. Its income statements for 1944, 1945, and 1946 show net incomes of $6,790,545, $5,969,686 and $5,230,907, before provision for income taxes, and $1,667,631, $1,414,412, and $3,053,686, after such provision, respectively.

Southeastern's balance sheet as of December 31, 1946, shows total assets of $1,009,974, consisting of: Current assets $657,252, principally cash $143,931 and temporary cash investments $400,000; carrier operating property, less depreciation, $265,265; intangible property $47,007; investment securities and advances $18,860; and deferred debits $21,590. Liabilities were: Current liabilities $408,096, chiefly unredeemed tickets $122,645 and taxes accrued $208,692; deferred credits $48; reserves $2,028; capital stock $50,000; and surplus, unearned $3,989 and earned $545,813. Its income statements for 1944, 1945, and 1946

Includes Clinch Valley Transit Company, a wholly owned subsidiary, authorized to operate between Bristol, Va., and Pikeville, Ky., under a certificate issued in No. MC-2476, which rights have been leased to another carrier, but does not include Pan American Greyhound Lines, Inc., another wholly owned subsidiary, whose operating rights and properties have been merged into Atlantic pursuant to authority granted in Atlantic Greyhound Corp.— Merger, 45 M. C. C. 830, herein called the merger case.

show net incomes of $675,223, $695,820, and $510,761, before provision for income taxes, and $176,419, $185,347, and $305,531 after such provision respectively.

HISTORICAL BACKGROUND

During the period intervening between the date of its incorporation in May of 1933 and early 1942, Southeastern's operations were extended and its assets increased. To this progress, Shipman and Hughes contributed their labor, experience, and the major portion of their financial resources. Reflecting on their advancing years, the uncertain prospects for motorbus transportation, the desirability of diversifying their investments, and believing that the time was favorable for selling the Southeastern stock, Hughes and Shipman discussed the matter with Courts & Company, investment brokers of Atlanta, which presumably was acting for an undisclosed principal. They lost interest when approximately $600,000 was the highest figure mentioned by that firm. The stock was next offered to Queen City Coach Company, of Charlotte, N. C., for $1,100,000 or $1,000,000, but the proposal was rejected. During the latter half of 1942, Hughes approached Engle, then vice president of Atlantic, and offered to sell the stock for $1,100,000. This amount was considered excessive by the latter, and discussions were terminated. In June of 1943, Hughes again contacted Engle and expressed a willingness to sell all of Southeastern's 500 shares for $1,000,000 or 200 shares for $400,000. The latter was interested in this proposition, and negotiations culminated in the agreement next described.

AGREEMENT AND CONSUMMATION OF TRANSACTION

Under agreement of July 16, 1943, between Atlantic, on the one hand, and, on the other, Shipman, Hughes, and their wives, Atlantic contracted to purchase 200 shares (40 percent) of Southeastern's stock for $380,000, payable upon delivery of the stock registered in Atlantic's name not later than 45 days from that date. The agreement was based on an annexed map showing Southeastern's routes, a list of 41 busses, free of encumbrance, with a book value of $110,061 as of May 31, 1943, comparative balance sheets as of December 31, 1938–42, and May 31, 1943, and comparative income statements for the years 1938 to 1942 and for the first 5 months of 1943. The agreement also provided that Southeastern had no liabilities or commitments other than those spe

• Hereinafter called Queen City, which operates over a network of routes in Georgia, North Carolina, South Carolina, and Tennessee under certificates issued in No. MC-61599 and subnumbered proceedings.