New-York tribune., 1922-09-25

they would prove expensive and is guarantee to the
Preferred stockholders that the indebtedness is only
temporary and will be eliminated promptly. 1t
never the intention Of the Company that the Deben-
tvres should remain outstanding in any considerable
volume for than few years. but their maturity
date was fixed at 1866 that the general credit posi-
ton OF the Company would not be impaired because
OF short term debt outstanding, and to insure the
Preferred stockholders that the Indebtedness would IN
no way ieopardize their ultimate safety.
The other Debentures are alike in this principle but
differ as to the capital stocks into which they are con-
vertbc, the only exception being Series "a which is
somewhat different in the conversion principle The
Series "A' Debentures were issued in 1918 in TIE
amount, including warrants, of 81 2Io734 and have
since been reduced by conversion TO the negligible bal
ance of $27,21o
The remarkable change in investment conditioos
which has taken place during the past twelve rnontks
has permitted Cities Service Company establish salts
factory arrangements under which its principal opera
ing subsidiaries should longer be Obliged to depend
upon the parent corporation for the capital required
their regular growth and development On the other
hand they getting back a basis Of dividend rea-
ton with the parent company.
in point is that OF the Toledo situation. For
nearly ten years that subsidiary was obliged to call
upon Cities Service Company from time to time for
money which the Toledo Company could not raise on
It's own name to enlarge its power station or make
other improvements complicated street railway fran
chiSc problem largely at the bottom OF this diff
Guilty it intercred with the credit standing that the
successful electric light power business would other
wise have enjoyed In due the problem was sue
cesstuIy solved; the railway segregated and now
both Of them have become Independent of financial
assistance by Cities Service Company. In particular
the electric light and power division of the business
now known the Toledo Edison Company is able
to raise any reasonable required in its business
through the ready market which is now available for
the sale OF its own securities to investors The bonds
OF the company readily saleable, and the demand
Tor its Prior Preferred stock Is indicated by the fac,
that there tenders on September u on the
seU
company S2S,ooo worth at los
This Illustration could be multipled bv n. ,rnl,,,
ton OF the greatly strengthened financial position Of
eight other subsidiaries which were grouped together 70
form the Ohio Public Service Company; by descrip-
ton OF the recent rc-fnancing Of the Empire Gas and
Fuel Company, the principal petroleum producing re-
fning and marketing subsidiary of Cities Service Com
pany by recountng numerous other similar improve
ments, not to mention plans now under wav for
greater perfection of the entire situation
Not only have these refnancing and refundine on.r,
tons modhed conditions which originally required the
Issuance of Cities Service Debcntures but thew have
taken care OF more than $4,000 600 of subsidiary in
debedness represented by bonds notes which have
natured or were to mature in the course of few vears
Inc schedule OF early maturtes of the obligations Of
subsidiaries has been reduced to what might pronerl
be regarded as small amount. In addition Cities Ser
wee company has been able through these operations
among the subsidiaries TO obtain repayment of large
sums heretofore advanced hem and to collect earnings
winch formerly the subsidiaries had to retain to meet
oOooOO OF new working capital has come into the stu
ation as whole through these programs Cities Service
Company therefore may turn its attention to
the redemption OF its own funded debt
The Board of Directors of Cities Service Companv
on August %, 1922, authorized the officers of the
company to call tor redemption retire all or anv
part OF any series OF Debenures of the Company At
any time, or from time to time I'D to total synount
OF ten million dollars (Slooo0ooo) par value of all
such series Under this policy it has been determined
to effect substantial reduction in the near future of
the Convertible Gold Debentures, Series "B", by r.
demption conversion
Under the terms of the agreement dated January
1918, and the resolution pursuant to which Series app
Deoentures were issued, the Company is REQUIRED
acorong to certain conditions, first to invite tenders
OF these Debentures at prices not exceedng 100 .nd
accrued interest ~
Inasmuch as the present market vat,a os .h
Debenures and of the Preferred and Common stock f
the Company into which such Debentures at anv time
may n De- converted much in excess of the cali price
II would not be to the advantage of the holder OF th
Debentures TO tender the same at the call price and
the notice printed above is, therefore, published onv
10 comply with the requirements of the agreements
win the trustee pursuant to which the Debentrres
were issued.
There IS a substantial increase in the nrincnal os
the original investment, the Series "B" Debentpres
are quoted on the market at about 1909 of mar b,t
1t would appear that there is no income tax to he
taken INTO account the ruling of the rreasur,,
vision: ' pfo-
Where the owner of bond exercises the rich,
PROVIDED tor in the bond of converting the bond into
STOCK In the oblgor corporation such transaction ds
not result IN realization of profit or loss the trans
action not being closed for purposes of income tav
unth such stock Is sold"
1t is our understanding of subsequent rulings Of the
treasury Department, particularly Article 1861 thar an
owner who sells part Of his stock woald subject him
sen to the payment of an income tax on anv nroSt
realized from such sale, after computing all ,,
IT'S market value at the date of conversion and that
an accounting OF the realization of profit must be
returned In the income tax report if anv noron -
the converted stocks be sold '''NOH u
IL may be proper to add in closing that tbe ;vo,.
whns nsnI o. Ine Cities Service Company situation as
whois ~ Dy no means confined to the strengtbere5
credit position outlined above Operating cond;t;on -
a a. OF Inc subsidiaries have equally improved in the
@ .msase ao months and many of the companies are
now DONG the greatest business in their history NV
CITIES SERVICE COMPANY.
BY HENRY L. DoHrRry, pyesdeu,
September a. 1922