Evening star., 1933-06-22
EXPLAINS FINANCES
OF CITIES SERVICE
Trade Commission Account
ant Tells of Doubling of
Book Value.
BY the Associated Press.

BY the Associated Press.
Financing operations of the Arkansas
Natural Gas Corporation, that increased
outstanding securities from $24 1850, 600
in 1928 to $66. .442. .41O in 1880, and near
ly doubled the book value of common
stock largely owned by Cities Service
Co., were detailed to the Federal Trade
Commission today by Roger E. Barnes,
commission accountant.
It was his second day under examina-
ton by Robert Healy, commission coun-
sci. Previously, Barnes had told OF a
$4,000 COO writs-up in book assets OF the
corporation over assets of companies
from which it was merged in January,
1928.
Barnes today said capital issued to
acquire the assets of the merging com.
panies amounted to $24950, ,479, OF
which $21, ,165, 100 was from the sale OF
preferred stock and S3,785.379 was from
no par common stock.
Book Increase Explained.
Bv the end of 1880. the outstanding
securities had increased to $66, ,442, ,410
and consisted of S4.084225 in no par
common stock: S3522,5 521 in class A
common, s21. $4,000 in preferred, Sl2.-
$4,000 in first mortgage bonds. $4,000
in Pine Bluff bonds. S1,000,000 in three
year notes and $23567,563 in premiums
paid to surplus on class A stock.
It was the sale of class A stock. an
issue without voting rights and without
preference over the common stock,
Barnes said, that brought the big in
crease in book value of the no par COM
mon stock.
He added that In March, 1929, di-
rectors of Arkansas Natural Gas Cor
poration voted the issue of 100000
shares Of class A common to which
holders of common were entitled 10
one share for each share OF common at
81 a share. Cities Service, which owns
~ per cent of the common, bought
6l7.851 shares Of the class A stock at
81 a share.
Then the corporation sold 1892, ,521
shares of class A stock to the Cities
Service Securities Co. through Henry
L. Doherty & Co., its fiscal agent, for
an average price Of $7.69 share. The
net consideration to Arkansas Natural
Gas Corporation was $25,538,458
81 Entered as Capital
The directors of Arkansas Gas voted
that 81 of the consideration received
from each class A share should be en-
tered as capital and the balance paid
into surplus. This resulted in capital
entry of S3,522, ,521 and a capital sur
plus entry of S22,015,937 after deduc-
tions for marketing expenses.
Barnes said the net effect of the issue
of class A stock increased the book
value of the old common share from
S243 per share to $4.64 per share" He
added:
The capital surplus was created
from the new capital raised by the issue
of the class A stock, and it accrued to
all of the old common stockholders as
we'll as Cities Service Co. to the extent
of their pro-rata equity interest therein.
THE total capital surplus created
from the issue and sale of class A stock
amounted to $22,o15,937. Cities Service
Co.'S total equity entitled it to 40.62 per
cent of the capital surplus arising from
the sale of class A stock, or S8,942,873.
OF the total capital surplus so created,
Cities Service Co. contributed 81 1,853,550
through subscription to 617,85l shares
Of class A stock at 81 share"