New-York tribune., 1920-09-18
I'D. L. & w. Asks
Segregation of
Coal Properties
PLAN for Capitalization of
Company's Entire Undi.
vided Surplus Announced,
With Possible 2OO% Melon
NewConcern Seems Likely
Conformity to Pennsylvania
Law Given as One Reason: :
1. c. c. Approval Sought
NewC Concern Seems Likely

The Delaware, 14ackawanna & West
ern Railroad yesterday filed with the
! Interstate Commerce Commission in
Washington an application for permis-
sion to divest itself Of its valuable
/ coal properties and at the same time
70 capitalize its surplus as whole or
IN part through stock dividend dis
tribution to shareholders.
II the commission grants the petit
tion and permits capitalization of the
company's entire undivided surplus
, fully S900o0,000 would be added to the
SA2 2,277,000 stock now outstanding.
Such q distribution would be equiva-
lent to more than 200 per cent. The
| commission, however, may order that
only part of the surplus may be
capitalized
In the petition requesting that the
company be allowed to segregate its
coal properties no mention is made Of
plans for the formation of separate
this action will follow the commissions
approval OF the segregation plan,
Concerning the reasons for the
recapitalization prog am it is pointed
out that. one of the FIRST steps neces-
sary to bring this about is the company's
onformation to the Pennsylvania
statute that forbids railroads incor-
porated in that state from increasing
their capital if they are also engaged
IN the business of producing coal.
Rail Investments
Polntlng out that its rail investment
now exceeds s87 ,O0O 900, the applica-
ton to the commission recited that
tne railroad company ownership and
operation Of coal lands had subjected
it TO l. preventing it from expand
n 70
the growth of its assets, as it would
otaerwlse have had the right to do,
1t is now ready the company adds.
10 segregate is coal properties from
us railroad properties and to there
after conilnde as transportation COM
pany only, and thus place itself in
position, subject to this commissions
assent, to accept the benefits of the gem
nral laws Of Pennsylvania permitting
IL TO increase its capitalization to more
nearly conform to its assets and to
,"Aat such capitalization would doubt
less have been but for the operation of
such restrictive laws.
The declaration of dividends ~
rate a5normally high when compared
with the dividend rate Of other rail
roads operating in the same territory
mas icd TO the Cnwarran.cd conclusion
on the part of the public that applicant
has earned and is earning a grossly
excessive return on its investment in
property devoted to public use. An in
crease IN capital stock, as is here pro-
posed. would tend to remove this
source OF dlstrust and suspicion"
Counsel's Opinion
An opinion of ". S. Jenney' general
counsel Of the Delaware, Lacka wanna
& Western, which was attached to the
company's application to increase it's
capitalization and segregate its coal
properties, said in part:
1T is the desire of the company to
extend and improve its lines of rail-
roads by acquisition of or consolidation
with other lines. It is believed that
much better terms can be obtained in
connection with voluntary consolida-
t;cn if our capital stock represents
more nearly our value than as az
present. 1t is universally true with
prosperous and progressive corpora
as whole IS increased as,it is en-
larged. In other words, our present
stock Of S42 900, 900 which in the past
has averaged around 200 in market
value $3.50 shares), shows an aggregate
value of sl63, 600 COO If increased to
100000 900, for example, we have no
doubt that its aggregate market value
would increase to ct least 100000. 900.
Market values will have an almost con-
trolling influence upon the terms Of
voluntary consolidation"
Partly because Of history of the
company, partly because of fear that
if it should d:vest itself of it's coal
properties the same might be acquired
b. competitive interest and the coal
tonnage diverted from its lines, the
board of managers Of the company
have been unwilling in the past to seq
regate rs coal properties. The result
has been that there has been no in
crease in the amount Of its capital
amounted to s26 200, 900, except on two
occasions. In 1908. on merger and ex-
change, some $4,000 900 of stock was
distributed as Is per cent stock divi-
dend; in 1914 the stockholders for
s12,oooo0o of new stock for the con-
struction of a thirty-mile cutoff line
in the State of Pennsylvania.
From the foregoing it is apparent
that the financial policies of the COM
wise, have been controlled by it's
ownership Of coal mines and it's charter
restrictions growing out Of such owner
ship. But for this relationship to Goa!
properties and the consequent legal
restrictions, its financial policies and
capitalization would have been entirely
different.
"Under these circum stances, IL we
are now to change fundamentally the
plan and purpose Of the company, divest
it Of its coal properties and convert
it into transportation industry alone,
we should readjust its financial struc-
ture so as to make it conform now to
what it would undoubtedly have been
except for the conditions which are
now to be changed.
"Manifestly there. can otherwise be
no justification for accepting the dis
advantages Of disposing of our coal
properties. To establish for the com
pany q normal and adequate financial
structure adapted to the company's
changed conditions and its expected
growth and expansion as a transporta-
ton company only, is an essential part
of our plan"
Financial Items