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In this table we see a sharply deteriorating position. Shareholders' equity between December 31, 1978 and September 30, 1979, declined from $80.9 million to $15.6 million by reason of the substantial losses realized in the first 9 months of 1979. It should be noted that had the Rock Island operated their system during the directed service period, even as well as the KCT operated the system, the losses incurred would have placed the carrier in a substantial negative equity position at the present time. Under such circumstances, continued operation would only continue with severe cannibalization of the plant.

Looking at working capital needs, a comfortable working capital position-which would require sufficient liquid assets to cover 1 month's operating expenses less depreciation plus net rents and taxes would approximate $30-$35 million. At present, the trustee has $10.8 million in cash. We do not know what other liquid assets they have or what their current liability position is. It is quite apparent, however, that all operating factors have been in a sharp decline for some years now, with the decline accelerating sharply in more recent times. Furthermore, the corporate structure represented by the balance sheet has also shown a severe deterioration to the extent that there is virtually no fat on the bones left which could give rise to any real hope of a resumption of Rock Island operations as they were once constituted.

363 I.C.C.

APPENDIX D

The abandonment should be conditioned upon the Rock Island offering the following portions of its system for sale, upon reasonable terms, for continued rail service.

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Chicago to Peoria, and Pekin, IL (including the Pullman Branch) --
West Davenport to Fruitland, IA

161

'30

Seymour to Centerville, IA

15

Quad City Area, Rock Island, Moline Davenport and East Moline (including service to the Rock Island Arsenal)---

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Memphis, TN to Fordyce, AR (via Little Rock) including the branch

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'Includes the following segments: Iowa Falls-Estherville, Little Rock-Rake, Buffalo Center-Dows, Woden-Hayfield Junction, and Royal-Palmer.

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