bus. The new company, in close coordination with the operations of Hamish Turner and the partnership, affording direct connections and operating through busses under lease arrangement, would start with five (and increase to eight) daily trips between Charlotte and Columbus via Rock Hill, Chester, Union, Augusta, and Macon. There would be connecting schedules between Macon and Americus. Operating rights of Hamish Turner on the Charlotte-Union or CharlotteUnion-Whitmire-Saluda segment, those of the partnership on the remaining segment to Augusta, and those of the new company (acquired as a result of the merger), on the Augusta-Macon-Columbus and Macon-Americus segments would be utilized on this routing. Coordinated operations between these and other principal points served by the three carriers would be conducted in a similar manner. Operations over the acquired Macon-Athens and Macon-Gainesville routes would be continued without change.

The estimated increase in passenger-operating revenue of $61,480 for 1945, had the new company conducted the operations in the manner described, is based on an estimated increase, as a result of the proposed service, of two additional passengers on each trip, moving from the Hamish Turner-partnership area, particularly Charlotte, to points in Georgia or beyond; and on a resulting estimated increase revenue of 3 cents a mile as applied to an estimated annual 2,049,348 miles 20 operated on the Augusta-Macon-Columbus and Macon-Americus segments involved in the through service described. The estimates on additional passengers and the resulting increase in mileage revenue are based on experience gained in purchases by Hamish Turner of two other operations 21 where the results have been in excess of the estimates. However, applicants presented no figures in support of the estimates made and the results experienced in those two purchases; and, in connection with the proposed through service and the estimated increases in passengers and revenue upon consummation of the instant transactions, presented no supporting figures on the density of traffic or on the number of passengers interchanged by or with the old company or with other connecting carriers.

The statement of estimated income projected for 1947, introduced to show that the new company could assume the fixed charges and other obligations resulting from the proposed transactions, shows an estimated income of $235,558, and an "available income" of $106,887 after provision for a 20-percent anticipated decline during 1947 and provision for income tax. On this basis, after retiring the purchase

20 Based, on the actual mileage of the old company during August 1946, multiplied by 12 months.

21 Described in Turner-Purchase-Eagle Bus Lines, Inc., 40 M. C. C. 829, decided January 15, 1946, and in Turner-Purchase-Dunlap, 40 M. C. C. 840, decided April 3, 1946.

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price obligations due during the year,22 there would remain $18,059 net earnings after all deductions. The estimated income of $235,558 is based on the sum of two other estimates, one being an estimate of $138,637 as the net income, before income tax, of the old company for 1946, based on its monthly average income for the first 8 months, and the other being the estimate of $96,921 previously mentioned which the new company expects to realize each year in excess of the income realized by the old company.

Counsel for applicants, in their exceptions, state that the results of operations of the old company for 1946, available since the hearing, show an actual income for it (before income taxes) of $112,707,23 as compared with their estimate of record for the same period of $138,637, but they urge that a recomputation of their total estimate, using the actual rather than the estimated old company income for 1946, would show a total estimated "available income of roughly $100,000” for 1947 if the new company conducted operations in the proposed manner; and that this income would be more than sufficient to retire the obligations (see footnote 22) resulting from approval. Not taken into consideration in the above estimates to show the adequacy of the available income is the amount $40,000 required for station improvements in Georgia and amounts which may be required for purchase of automotive equipment or for settlement of the contingent tax claim, in the event it is substantiated. To the extent the funds in the special controlled bank account might be used for any of these requirements, they would not otherwise be available for use if needed.

Counsel also argue, from certain per-mile expense data pertaining to the old company and to Hamish Turner set out in their exceptions, that the new company, under the more efficient management of Hamish Turner, would realize a saving in operating expenses over those of the old company. In their reply to applicants' exceptions, counsel for protestant Smoky Mountain Stages, Inc., set out comparative data pertaining to the partnership, and allege that Hamish Turner, the manager of both carriers, operates his own line (Carolina Stages) at the expense of the partnership. The data contained in the exceptions and in the reply are not of record and may not properly be considered by us in the disposition of the proceedings. Data in evidence, however, show, for 1945, and the first 8 months of 1946, per-mile revenue,

Listed by applicants as aggregating $88,828 for the first year, consisting of payment on principal $60,000, payment on interest $12,250, and amortization (based on $165,779 over a 10-year period) of intangibles $16,578. The last item, however, would be approximately $31,790 if the $152,093 representing the write-up of tangible property were included in the "Other Intangible Property" account on the giving-effect balance sheet statement. The old company's annual report for 1946 filed with the Commission shows operating revenues of $788,316, and net income of $112,707 before, and $70.813 after, provision for income taxes, the net income being after the inclusion of $6,005 gain from insurance on burned vehicles and $1,200 gain from sale of a vehicle.

and per-mile expense (in parentheses), in cents, for Hamish Turner of 22.45 (22.36) and 23.56 (21.52), respectively, and for the partnership of 29.19 (25.92) and 25.65 (25.62), respectively. Similar data for the old company for 1945 and the first 6 months of 1946, show per-mile revenue, and per-mile expense (in parentheses), in cents, of 37.77 (27.07) and 32.17 (26.55), respectively. The last two figures reflect a decrease of 5.60 cents per mile in the old company's revenue and decrease of 0.52 cent per mile in its expense. As indicated, however, the old company's net per mile in both periods substantially exceeded the net of Hamish Turner and of the partnership, which raises some doubt as to the soundness of the estimated increased earnings under Turner management.

In connection with the income estimates, based partially on additional traffic expected to result from the proposed coordination of schedules and on the past income of the old company, the record shows that military installations near Charlotte, Spartanburg, Greenville, and Columbia were served by the Turner interests, and those near Athens, Augusta, Macon, and Columbus were served by the old company. No evidence was submitted on the relative volume of traffic handled by the carriers to and from these installations. Protestants introduced evidence to show the trends of revenue and income of the partnership and the old company, and urge that operating results experienced during the war and immediately thereafter do not accurately reflect the probable results of operations under peacetime conditions. The partnership's average annual operating revenue increased from $210,199 for the 3-year period 1939-41, to $894,063 for the 3-year period 1942-44, and its net income increased from $15,189 in 1939 to $320,889 in 1943, and thereafter declined to $164,801 in 1944 and to $110,013 in 1945. The old company's operating revenue increased from $175,916 in 1939 to $337,199 in 1941, $694,850 in 1942, and $975,173 in 1944, with a decline to $950,632 in 1945; and, its net income (before provisions for income taxes) increased from $22,977 in 1939 to $75,715 in 1941, $214,593 in 1942, and $318,861 in 1943, with a decline to $313,486 in 1944, to $281,461 in 1945, and to $112,707 in 1946.

In passing upon applications under section 5 we must find, before we may approve the transaction, that the resulting fixed charges will not be contrary to the public interest. As a result of the proposed acquisition and merger, the new company would be obligated to pay in equal monthly installments a principal amount aggregating $60,000 a year for a period of almost 8 years, and to pay interest in monthly installments, beginning with $979 and reduced by an amount of approximately $10 each month thereafter, over the same period. Aggregate interest would be approximately $11,060, the first year, and $9,560

the second year. Retirement of these obligations is dependent to a large extent on estimates of future traffic and earnings of the new company. Earnings of operators were abnormally enhanced during the war and immediately thereafter by unparalleled travel demands. There is already evidence of declining traffic, revenue, and net income, as shown by the foregoing discussion. Although the new company provided for some decline in net income in submitting its estimates, the sufficiency of the allowance made appears doubtful in the light of the old company's revenues and net income for the prewar years. On the evidence of record, we conclude that assumption by the new company of the fixed charges resulting from the transactions proposed would not be consistent with the public interest.

As previously indicated, the proposal involves a cash payment of $250,000 (less $25,000 already paid) upon consummation, and issuance of notes in the aggregate principal amount of $470,000 with separate interest notes. Adjusting the new company's pro forma balance sheet statement as of August 31, 1946, giving effect to the entire transaction, so as to reflect the cash payment of $250,000, properly classifying current assets and current liabilities, and eliminating the write-up in carrier operating property, assets usually recognized as capitalizable, would consist of cash $246,016, material and supplies $32,441, and carrier operating property, less depreciation, $114,905, or an aggregate of $393,362, as against a proposed capitalization of $731,000 (consisting of notes payable $470,000 and capital stock $261,000), or an excess of the proposed capitalization over assets of $337,638. Counsel for applicants insist that the proposed capitalization of the new company is not $731,000. However, as shown above, upon approval herein it would have outstanding securities in the amounts of $470,000 representing a long-term indebtedness and $261,000 representing capital stock. They also contend that the write-up of $152,093 in carrier operating property should be included in the capitalizable-asset figure to reflect the property at its true value, thereby increasing the assets considered as capitalizable from $393,362 to $545,455. Even if this were done, the new company's capitalization upon consummation would still exceed the supporting assets by $185,545.

It should be noted that the assets considered above for discussion purposes as capitalizable include cash $246,016, of which $61,376 would actually need to be applied, with the $225,000 in U. S. Government bonds, to make up the funds in the special controlled account in the amount of $286,376, representing the difference in current assets (as adjusted, $529,993) and current liabilities (as adjusted, $243,617). In any event, cash, and U. S. Government bonds held in a company's treasury, may properly be regarded as

capitalizable assets only to the extent necessary to provide adequate working capital. A reasonable amount of cash and material and supplies as working capital essential to the performance of the service of transportation may be capitalized. An allowance of $278,457 (aggregate amount represented by cash $246,016 and material and supplies $32,441) as working capital appears excessive in the light of the old company's operating expenses, less depreciation charges, for the 8-month period of 1946, and the preceding 36-month period, which reflect average monthly operating expenses of $53,284 and $50,632, respectively. In view of this, approximately $80,000 would appear an adequate allowance for working capital to be capitalized. On this basis the excess of the proposed capitalization would be substantially increased and greatly aggravate an already objectionable situation. Counsel's argument that "working capital" is the difference between the current assets and the current liabilities is unsound. See Chesapeake & O. Ry. Co. Stock, 254 I. C. C. 653, Louisville & N. R. Co. Securities, 76 I. C. C. 718, and Delaware, L. & W. R. Co. Stock, 67 I. C. C. 426.

Counsel further contend that if it be said that the new company's balance sheet would reflect liquid assets in excess of that needed for working capital, it cannot be found that the fixed charges resulting from the proposed transaction would prove a burden to it, as such excess could be used to retire the obligations. However, if the liquid assets, including those in the special controlled account, are available for retirement of the proposed obligations, to that extent we would not be justified in finding that issuance of notes bearing fixed charges in the amount of 22-percent interest and constituting a direct lien on the new company's properties, is "necessary or appropriate for or consistent with the proper performance by the carrier of service to the public as a common carrier" and "is reasonably necessary and appropriate for such purpose", as required by section 214. Compare Dixie M. Coach Corp.-Control-Airline M. Coaches, Inc., 45 M. C. C. 309, 322.

Applicants maintain that the new company's stock is to be held by the Turner interests, and that only they would lose in the event of its failure as Wilkinson could repossess the properties and resume the operations. This argument ignores the fact that the notes proposed to be issued to Wilkinson would be negotiable. The declared policy of the act imposes upon us the duties, among others, to promote safe, adequate, economical, and efficient service, and to foster sound economic conditions in transportation among the several carriers. Under section 214 of the act, we may authorize the issuance of securities only upon findings that such issue is for some lawful object, is compatible with the public interest, is necessary or appropriate for or consistent