The Commission's reasoning at the time of its approval of the capital ratios involved in the previous financing program is still applicable to the present modified program so long as the power agreement with the AEC remains in effect. Of course, the Commission's action herein does not affect the jurisdiction reserved in its previous orders reserving jurisdiction to reexamine the issues under Section 10 of the Act. In noting the reservation of jurisdiction without a definitive resolution of the issues involved under Section 10, the Commission said:

"As in the Electric Energy, Inc. case, the applicants here are willing for us to retain jurisdiction over the question of whether the acquisition and retention of such interests may be definitively approved after the conclusion of the present national emergency." "

The Commission, therefore, has decided to enter an order granting and permitting the application-declaration, as amended, to become effective forthwith. The order will include a reservation over fees and expenses incurred in connection with the proposed transactions, which are to be supplied by amendment at a later date.

An appropriate order will be entered.

By the Commission (Chairman Demmler and Commissioners Adams, Armstrong, and Goodwin), Commissioner Rowen not participating.

• Ohio Valley Electric Corporation, 34 8.E.C. 323 (1952), at p. 333.

IN THE MATTER OF

MUNTZ TV INC.

TELE-VOGUE, INC.

and

MUNTZ INDUSTRIES, INC.

Promulgated June 7, 1955.

(Corporate Reorganization)

REPORT ON PROPOSED PLAN OF REORGANIZATION

This is an advisory report filed pursuant to Section 173 of Chapter X of the Bankruptcy Act on the Trustees' Plan of Reorganization filed April 21, 1955, for the reorganization of Muntz TV Inc. and two wholly-owned subsidiaries. The plan of reorganization proposed by C. Wylie Allen and Floyd G. Dana, Trustees, has been referred to the Commission by the District Court for examination and report.

It is the conclusion of the Commission that the proposed plan of reorganization is fair and equitable to all classes of creditors and stockholders.

The Commission concludes, however, that the trustees' plan of reorganization is not feasible since the total amount of the proposed debt now estimated to be assumed by the reorganized company would constitute too high a ratio of the indicated value of the company's assets. The plan can be rendered feasible if amended (1) to provide for the issuance of common stock to the creditors for some portion of their claim and (2) to provide for an appropriate extension of the period within which the remaining debt can be paid without imposing a handicap on management in its operation of the business.

Muntz TV Inc., the principal debtor, has two wholly-owned subsidiaries, Tele-Vogue, Inc. and Muntz Industries, Inc. Muntz

36 S. E. 0.-CR-95

TV Inc. was incorporated under the laws of the State of Delaware on April 5, 1950. Tele-Vogue, Inc. was incorporated under the laws of the State of Illinois on April 6, 1949, and Muntz Industries, Inc. was incorporated under the laws of the State of Illinois on October 3, 1952.

The predecessor of Muntz TV Inc. was a company of the same name incorporated under the laws of the State of California on October 23, 1948. That corporation issued its common stock to Muntz Car Company, a California corporation, in exchange for television sets, manufacturing facilities, engineering developments and other assets having an aggregate value of $133,997. Additional shares of stock were sold to various individuals. The principal promoter of the foregoing enterprises is Earl W. Muntz, who is now a holder of approximately 18% of the outstanding capital stock of Muntz TV Inc.

From November 1948 until April 1949 the operations of Muntz TV Inc. (California) were conducted in Los Angeles. In April 1949 assembly operations were transferred from Los Angeles to the Howard Radio Corporation plant in Chicago. At the same time Muntz TV Inc. (California), together with Lawrence J. Ryan and Thomas J. Sullivan, organized Tele-Vogue, Inc. Approximately half of the stock of Tele-Vogue was owned by Muntz TV Inc. Tele-Vogue thereupon entered into a lease with Howard Radio Corporation for the latter company's plant in Chicago and became the sole supplier of Muntz TV Inc. (California).

The principal debtor was incorporated for the purpose of acquiring through statutory merger the assets and business of Muntz TV Inc. (California). In connection with the merger, the Delaware corporation also acquired all of the stock of Tele-Vogue, Inc., that company thereupon becoming a wholly-owned subsidiary. Tele-Vogue continued to sell its entire output of television receiving sets to the Delaware corporation.

Shortly after the organization of Muntz TV Inc. of Delaware, a registration statement under the Securities Act of 1933 was filed covering the sale of 400,000 shares of stock which was publicly offered by a prospectus dated May 11, 1950. The stock of the company is listed on the American Stock Exchange.

From the beginning, the various Muntz corporations operated with the idea of eliminating distributors and retail dealers in the distribution system. Until the filing of the petition for reorganization, all sales were made direct from manufacturer to user. Under this method of distribution, the installment paper, warranties and service contracts were all handled by the manufacturer.

After the organization of Muntz TV Inc. (Delaware) there followed a period of rapid expansion. Company-owned stores were opened from coast to coast and by March of 1954 the company had a total of 78 branches. Units sold during the three years ended March 31, 1953 were 98,444 in the year ended March 31, 1951, 118,653 in 1952, and 201,368 in 1953. Net income after taxes on income for the same years was $931,853, $898,004, and $691,658. In December 1951, Muntz TV Inc. began buying sets from WilcoxGay Corporation in addition to Tele-Vogue and in January 1952 arranged to have Muntz Car Company manufacture their sets. Muntz Car Company ceased to manufacture sets in October 1952 when Muntz Industries, Inc. was organized and took over the operation of the Evanston plant previously occupied by Muntz Car Company. In addition to doing some manufacturing of television receivers for Muntz TV Inc., Muntz Industries, Inc. also engaged for a time in the manufacture of air conditioning units.

During the five-months period ending August 31, 1953, Muntz TV Inc. and subsidiaries lost $1,457,288 after a tax refund of $746,740. From August 31, 1953 to March 3, 1954, it appears that the loss was $2,954,141. Factors contributing to the debtors' financial difficulties include a general softening of the market, decentralizing of assembly operation, and depletion of working capital caused by too rapid expansion. The direct-from-factory plan of merchandising became very costly as business fell off since there was no easy way to reduce personnel at the branches and still maintain service and sales.

On March 2, 1954 an involuntary petition for reorganization under Chapter X of the Bankruptcy Act was filed against each of the debtor corporations. An order was entered approving the petition on March 3, 1954, and C. Wylie Allen and Floyd G. Dana were appointed trustees. The trustees, pursuant to the order of the Court, have continued with the operation and management of the debtors' business. Since their appointment, the trustees have carried on two types of activities. One of these has been the liquidation of assets not necessary to the type of manufacturing operation contemplated by them for the reorganized company. The other is the manufacture and sale of television sets. Manufacture and sale of the 1955 model television set did not get under way until September of 1954. The factory-to-purchaser method of distribution previously employed by Muntz TV Inc. has been discontinued under the trustees' operation, and sales are now made to independent dealers.

II. PROPERTIES AND OPERATIONS

The debtors are now engaged in the sole business of manufacturing black-and-white television receiving sets which they sell direct to retail dealers who in turn sell to the public. In most instances the dealers have exclusive sales territory. The debtors do not sell direct to the public nor do they sell customer warranty contracts or handle time-payment paper of buyers. The debtors presently manufacture table and console models in 21", 24" and 27" picture tube sizes. The sets are manufactured to sell in the lowest price field.

No patents are owned by the debtors. They do, however, have standard license agreements with the Radio Corporation of America and with Hazeltine Research, Inc., which are believed to be similar to the license agreements granted by those companies to other television set manufacturers.

All activities, other than temporary warehousing, are carried on at a plant located in Evanston, Illinois, which the debtors occupy under a lease expiring December 31, 1955. This building contains approximately 40,000 square feet of manufacturing space and 3,000 square feet of office space. Two fully equipped production lines are operated. Machinery and equipment, furniture and fixtures, and other equipment having a net book value of $213,678 ($381,045 cost less $167,367 depreciation) were owned by the debtors at March 31, 1955. Production with present facilities has not exceeded 8,413 sets in any one month but the plant is said to have a capacity of 10,000 sets a month on a twentyday one 8-hour shift basis.

III. LIABILITIES AND CAPITAL STOCK

Liabilities to be dealt with under the plan of reorganization as reflected by the books of the debtors at March 31, 1955 aggregate $7,806,599, consisting of the following:

Muntz TV Inc., the principal debtor, has authorized capital stock in the amount of 1,500,000 shares of $1.00 par value common stock, of which 1,115,376 shares are issued and outstanding. Tele-Vogue, Inc. has an authorized capitalization of 250,000 shares

1 It is contemplated that this lease will be renewed at or prior to the expiration of its term or that comparable facilities will be available.