Courtesy of Aaron Schwarz
NP Valuation, Appendix 2
Introductory
The Spokane and Seattle Railway company was incorporated June 30, 1895, under the general laws of the State of Washington.
This company was controlled on October 3, 1900, by the Northern Pacific, through ownership of its outstanding capital stock. On the other hand, the records reviewed to not indicate that this company then controlled any common-carrier corporations.
The records reviewed do not indicate that the Spokane and Seattle Railway Company ever operated its railroad property. On date of sale 2.60 miles in the city of Spokane was leased to a union depot company. About 1.5 miles in that city was used by another carrier under trackage rights.
The Spokane and Seattle Railway Company owned 50.05 miles of single track, standard gauge railroad in the State of Washington, of which the section from Medical lake to Davenport, 29 miles, was conveyed to the Northern Pacific on March 17, 1899, and the remainder, from Spokane to Medical Lake, 21.05 miles, was conveyed to that company on October 3, 1900.
Development of Fixed Physical Property
The 50.05 miles of road owned by the Spokane and Seattle Railway Company had been acquired from the Seattle, Lake Shore and Eastern Railway Company through a bondholders committee.
The records reviewed indicate that a part of the road was abandoned and the track removed prior to the sale to the Northern Pacific but the details in connection with such abandonment were not ascertained.
History of Corporate Financing
Syndicating, banking and other financial arrangements. The plan of reorganization of the Seattle, Lake Shore and Eastern Railway Company provided for the formation of two new companies, to one of which (Seattle and International Railway Company) should be conveyed all of the property on the west side of the Cascade mountains, and to the other (Spokane and Seattle Railway Company) all of the property on the east side of those mountains. Depositing bondholders of the Seattle, Lake Shore and Eastern Railway Company were entitled under the plan to receive securities as indicated hereunder:
Of the corporation organized to acquire the west side property, new bonds equal to four-fifths, and now stock equal to four-tenths, of such holdings;
Of the corporation organized to acquire the east side property, new bonds equal to one-fifth, and new stock equal to one-tenth, of such holdings.
Capital stock and long-term debt. From the date of its incorporation to date of sale, the Spokane and Seattle Railway Company issued capital stock and long-term debt as indicated by its records, aggregating $1,712,000 par value, all of which was actually outstanding. The details are summarized below:
Stock: Capital Stock, par value: Issued $600,000
Long-term debt: Funded dept, par value: Issued $1,112,000
Total $1,712,000
Capital Stock. The authorized capital stock of the Spokane and Seattle Railway Company was $600,000 par value, divided into shares of $100 par value each not definitely designated as to the class, all of which was issued to the bondholders' committee of the Seattle, Lake Shore and Eastern Railway Company in part consideration for the property acquired from that company. The Spokane and Seattle Railway Company charged the par value of the stock to its investment in road and equipment account. The stock was not retired upon sale of the property. It was pledged under the prior lien mortgage of the Northern Pacific.
Funded debt. The Spokane and Seattle Railway Company issued $1,112,000 par value, first mortgage 4 per cent gold bonds, dated November 1, 1895, due November 1, 1926, to the bondholders committee of the Seattle, Lake Shore and Eastern Railway Company in part consideration for the property acquired from that company. The par value of the bonds was charged by the Spokane and Seattle Railway Company to its investment in road and equipment account. The bonds were not retired upon the sale of the property, but were acquired by the Northern Pacific and pledged under its prior lien mortgage.
Results of Corporate Operations
The results of corporate operations as shown in the income and profit and loss accounts of the Spokane and Seattle Railway Company, are given below.
Income Statement. A condensed summary of the income and accounts for the period from July 1, 1896 to October 3, 1900; follows.
Nonoperating income $59,492.17
Gross income $59,492.17
Deductions from gross income $60,601.77
Net deficit $1,109.60
Disposition of net income:
Income debit balance transferred to profit and loss $1,109.60
Profit and loss statement. A condensed summary of the profit and loss accounts for the period from July, 1 1896 to October 3, 1900, follows.
Credits:
Delayed income credits $1,159.60
Railway tax credits $1,159.60
Total $1,159.60
Debits:
Net debit balance transferred from income $1,109.60
Miscellaneous debits:
Adjustments or cancellations of balance sheet accounts $50.00
Total $1,159.60
Balance on date of sale None
Dividends. The Spokane and Seattle Railway Company had not declared any dividends on its capital stock to date of sale.
Investment in Road and Equipment
The investment of the Spokane and Seattle Railway Company in road and equipment, including land, on date of sale was stated in its books as $1,650,288.12, of which the following is a general analysis:
For property of the Seattle, Lake Shore and Eastern Railway Company east of the Cascade mountains, acquired through foreclosure proceedings $1,712,000.00
Capital stock issued, par value $600,000
Funded debt issued, par value $1,112,000
Less salvage from road abandoned, credited at $61,711.38
Total recorded on date of sale $,650,288.12
It is pointed out that while the Spokane and Seattle Railway Company abandoned a part of its road, it did not adjust, its investment in road and equipment account in connection with such abandonment. As indicated in the above general analysis, it recorded only the salvage value of the materials removed.
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