The original Rock Island Railroad, chartered in 1847,646 was completed between Chicago and Rock Island in 1854. Construction was continued from Rock Island to Council Bluffs3 across the state of Iowa, under the charter of the Mississippi & Missouri, until 1866, when this company was merged4 with the original Rock Island Railroad Company, and after 1866 under the Rock Island charter until the extension was completed in 1869. Unlike the Atchison, the Rock Island passed through a fairly well-settled territory, which was at the same time one of the most fertile in the United States. In 1870, according to the census6 returns, Iowa produced 28,708,312 bushels of spring wheat out of a total for the United States of 112,549,733 bushels, more than any other state in the union; while Illinois in its yield of winter wheat was surpassed by Indiana and Ohio alone. Of Indian corn Iowa and Illinois together produced 198,856,460 bushels against 562,088,089 for all other states combined. Manufactures were well begun, and even mining had attained7 a considerable development, particularly in the extraction of bituminous coal in Illinois. Naturally the road was prosperous; gross earnings9 increased from $3,154,236 in 1866 to $5,995,226 in 1870, and to $9,409,833 in 1879; while net earnings attained the very considerable sum of $4,548,117 in 1879, being 48 per cent of the gross receipts. At the same time the capitalization was very moderate, due to the relatively10 level character of the country through which the road ran, and, not less important, to the absence of speculative11 financial operations in the course of its construction. To build 1231 miles had cost in 1879 but $35,664,200, of which $4,702,202 had been supplied from earnings; leaving a total of bonds and stocks of312 $30,962,000, or $25,151 per mile. Fixed12 charges were, therefore, low. In 1875, when net earnings were $3,853,676, interest on bonds, taxes, and all other necessary disbursements took but $1,065,395; and in 1879 the payments were markedly less. Is it strange that the troubles of the road came from too great earnings rather than from too small, and that instead of striving to maintain solvency13 the directors had to seek ways and means for concealing14 or getting rid of earnings without arousing the hostility15 of legislators to whom 10 per cent dividends seemed high, and anything over 10 per cent proof of extortion? Between 1866 and 1876 four cash distributions of 10 per cent were made to stockholders, five of 8 per cent, one of 8? per cent, and one of 7? per cent. The dividend2 for 1879 was again 10 per cent, that of 1878 8 per cent, and that for 1879 9? per cent. Meanwhile large sums were carried to surplus. The balance, after all disbursements, never after 1873 fell below $665,000, and in 1879 was nearly equal to the dividend declared; that is, while distributing $1,993,086, or 9.5 per cent, the road earned, over and above charges, $3,947,065, or 18.8 per cent.
It was inevitable17 that some attempt should be made to increase the distribution to stockholders; and the most obvious method was the one adopted, viz., a watering of the stock. The plan devised in 1880 was as follows: It was proposed to consolidate18 various branches of the railroad company, hitherto operated as separate corporations, with the main line; and to do this through the formation of a new company, which should exchange its stock for the stock of the previously19 existing corporations in the ratio of two to one. Practically all the stock retired20 was owned by the Chicago, Rock Island & Pacific Railroad Company, so that the only increase in stock outstanding came through the distribution to the stockholders of the parent company. In March the executive committee of the Rock Island passed the following resolution: “Resolved, that the proposition to consolidate the capital stock, property, rights, franchises21, and privileges of the Chicago, Rock Island & Pacific Railroad Company with the capital stock, property, rights, franchises, and privileges of the Iowa Southern & Missouri Northern Railroad Company, the Newton & Monroe Railroad Company, the Avoca, Macedonia & Southwestern Railroad Company, and the Atlantic & Audubon313 Railroad Company into a consolidated22 Railroad Company, with an authorized23 capital of $50,000,000, and such powers as shall be assumed in the articles of consolidation24, be submitted to a vote of the stockholders of this company at their annual meeting.”647 Of the roads named only the Iowa Southern & Missouri Northern was of importance, extending 270 miles from Washington, Iowa, to Leavenworth, with branches which raised its total to 347 miles. This company had been organized as the Chicago & Southwestern Railroad Company, and the main line had been completed in 1871. The Chicago, Rock Island & Pacific Railroad Company had guaranteed its $5,000,000 main-line bonds, with a provision that it could demand foreclosure if called upon to pay either interest or principal, and in return had secured a lease in perpetuity. The road had been sold under foreclosure and reorganized in 1875 as the Iowa Southern & Missouri Northern, and had issued its stock to the Rock Island in return for money advanced by that company, the stock to be held in trust to 1926, and then to become the property of the lessee25. The other roads did not together possess more than 80 miles of line, so that the operation was a genuine case of stock-watering. The opinion of the stockholders may be inferred from the quotations26 of their shares. Between January 2 and June 1, 1880, the quotations of Rock Island common rose from 149 to 189, with few sales, in anticipation27 of the distribution. On June 2 the stockholders formally gave their approval, and on June 4 the Chicago, Rock Island & Pacific Railway started on its career.648 The price of the new stock was of course less than that of the old. It started at 106?, but by December it had reached 122?, and by June the following year had risen to over 141.
This may be called Rock Island’s first reorganization. It doubled the stock of the road, and increased its indebtedness by the assumption of the $5,000,000 bonds of the Iowa Southern & Missouri Northern; but the new stock involved no increase in fixed charges, and the new bonds a nominal28 increase only. Instead of being occasioned by too little prosperity it was caused by too much; and instead of being carried through after active opposition29 from many of the interests concerned, and reluctant acquiescence30 from the others,314 it occasioned a rise in price of the common stock of 27 per cent in six months.
Between this date and 1902 no reorganization occurred. A rapid review of the period brings out, however, certain interesting features: First, that the stockholders and the directors were extremely conservative; second, that this conservatism did not keep the road from sharing in the expansion of mileage31 from 1887–9, which was so general in the Middle West; third, that this expansion decreased the average receipts per mile, and consequently the rate of dividends, and occasioned a fall in stock quotations from 140? to 63?; fourth, that though weakened the road went through the panic of 1893 and the subsequent depression without suspending dividends; and fifth, that the year 1901 saw the beginning of a new expansion of the system, accompanied by a change in control and the carrying out of more ambitious plans than had ever occurred to the men of the previous generation.
The conservatism of the stockholders is shown in the election, year after year, of the same men to positions of authority. Rock Island was not a speculative road; the high price of its stock forbade. Stockholders regarded their shares as permanent investments, and, satisfied with the returns secured, loyally supported the management in good times and in bad. Between 1875 and 1897 there were but two presidents, Mr. Riddle32 holding the position until 1883, and then giving way to Mr. R. R. Cable, who, after directing the policy of the company for fourteen years, served as chairman of the board of directors from 1898 to 1901. Among the five members of the executive committee, if the reckoning is begun with the year 1881, three had been in office five years by 1886, one 2 years, and one 1 year, or an average of 3? years. In 1891 two members had been in 10 years, one 7 years, one 6 years, and one 1 year, or an average of 6? years; and in 1901 one member had been in 20 years, one 17 years, one 8 years, one 3 years, and one 2 years, or an average of 10 years. The board of directors showed the same general tendency. In 1890 seven of the thirteen directors had served for 9 years, and the average service was 6-3/13 years; in 1897 four of the directors had served for 16 years, and the average was 9-10/13.649 It was but natural that men315 working under these conditions should have been apt to err5 on the side of caution rather than on the side of recklessness; and we find them, therefore, slow to extend their system, and slow to stretch into new territory where traffic returns were uncertain, and where the road had to create its business as it went. At the date of the consolidation the company had become the owner of 1038 miles and operated under lease 273 miles more, or a total of 1311 miles. By 1883 this had been increased to 1381; but in 1887 the total was only 1384.2, showing a total construction of little over three miles in four years.
This policy had to be abandoned, for other roads were extending their lines in Iowa and Illinois, and the Rock Island’s share of Western business tended to fall off with the construction of rival lines west of the Missouri. As the report of 1889 expressed it, “while the lines of this company terminated at the Missouri its competitors for business had extended beyond, reaching in many cases the extreme western boundaries of population and even further. Thus the volume of traffic received by the company for carriage to and from the West was materially affected33, while in order to restore the equilibrium34 overbalanced by the reduction in rates, the reverse was necessary, a larger rather than a smaller share of the tonnage to and from points west of the Missouri was demanded by the situation.” The directors were forced against their will to take active measures in self-protection. As early as 1884 a bond issue was approved for construction from Minneapolis westward35 to an eventual36 junction37 with the Northern Pacific.650 Building was to be carried on in the name of the Wisconsin, Minnesota & Pacific Railroad Company, and the securities of this company were to be received by the Rock Island as collateral38 for the issue which it made.651 Two years later more extensive plans were put on foot, and the Chicago, Kansas & Nebraska Railroad Company was organized to carry out construction west of the Missouri. The new company had a capital stock of $15,000,000, and then (1887) of $30,000,000, and an indebtedness in 1889 of $25,141,316000 6 per cent first mortgage bonds; and turned over all of its bonds, and practically all of its stock to the Chicago, Rock Island & Pacific Railway in consideration of advances made to it. The Rock Island Company in its turn reserved the branch-line bonds as collateral, and issued against them its own 5 per cent collateral and extension bonds; agreeing to supply all money needed for construction and equipment,652 and leasing the new railway at a rental39 of 30 per cent of its gross earnings.653 Under this arrangement 1388 miles were built by 1889 and 276 leased, making a total of 1664.4. In 1889 it was thought more convenient to consolidate the two systems, so interest was defaulted on the Chicago, Kansas & Nebraska bonds, and foreclosure proceedings40 commenced; resulting in 1891, in spite of protests by municipalities along the route, in a foreclosure sale and union of the two properties in name as well as in fact. The collateral bonds of the Chicago, Rock Island & Pacific now became a direct instead of an indirect lien41 upon the Kansas & Nebraska mileage.654
Owing to these operations the mileage of the system increased from 1384 in 1887 to 3257 in 1889, and to 3408 in 1891. The greater part now lay in Kansas, Nebraska, and Colorado instead of in Illinois and Iowa, while at the same time the addition of the new mileage through sparsely42 settled districts decreased the density43 of traffic and the gross and net receipts per mile of line. In 1887 the Rock Island was earning the very high return of $8899 gross per mile operated; in 1891 this had fallen to $5126; in 1887 the net return was $3478 per mile; in 1891 it had fallen to $1484; in other words, the new mileage brought an increase in traffic, but not nearly so great a traffic per mile as the Iowa and Illinois lines had enjoyed, while the financing of the new construction swelled44 the annual charges from $1,795,351 to $4,775,601, and even with the larger mileage increased the charges per mile from $1295 in 1887 to $1400 in 1891. We need not, therefore, be surprised that the rate of dividends dropped from 7 per cent to 5? per cent and then to 4 per cent; nor that the price of common stock fell from its high level of 140? in May, 1887, to 63? in March, 1891.
It was in this weakened condition that the Rock Island encountered the panic of 1893 and the years of depression which followed,317 and yet, in spite of the marked decrease in business in the years 1895–6–7, it continued to pay dividends, and showed no signs of financial distress45 except the lowering of its rate to 2 per cent. As a matter of fact the road was still in these years one of the strongest in the United States. Its lines were well located, its management was conservative, and consequently trusted, and its credit was good; so that at a time when some of the largest systems in the United States were being forced to the wall, it was enabled to preserve its solvency and even to keep up fairly liberal expenditures46 for maintenance of way and rolling stock. Little new construction was of course indulged in. In 1892 an extension was begun from Minco, the terminus of the Rock Island in the northwest corner of the Indian Territory, southwards;655 in 1893 the southern boundary of the Territory was reached, and the Chicago, Rock Island & Texas Railway Company was organized to build through Texas;656 and in 1894 a combined line was opened to Fort Worth; but exclusive of the Chicago, Rock Island & Texas, the total mileage increased by but 360 miles between 1890 and 1900, being an average of 33 miles a year.
In 1901 Messrs. William H. Moore and D. G. Reid were elected directors in place of Messrs. H. M. Flagler and H. A. Parker, and a new era in the road’s affairs began. Mr. Moore had not long been interested in railroad matters. Known as a daring and successful promoter of industrial companies, he had made large profits out of the organization of the National Biscuit and Diamond Match companies; had lost almost equally large amounts in speculation47 which had followed, and had then regained48 a fortune through the organization and promotion49 of companies which were absorbed into the United Steel Corporation. In these last operations he had come into contact with Mr. W. B. Leeds, who, though originally318 a railroad man, had acquired wealth through a tin-plate plant which was afterwards turned over to this same Steel Corporation. Mr. Moore was apparently50 in 1901 seeking for an investment. He was too well acquainted with industrial properties to care to sink his money in them, while he realized that for obvious reasons good railroad property was as safe, and might be made as profitable as anything else to which he could turn. The Chicago, Rock Island & Pacific was at the time the system most available for his purpose. It was not under the control of any large New York interests; it had an excellent financial record; its mileage was so placed as to admit of ready expansion; and, moreover, it is probable that to a man of Mr. Moore’s speculative disposition51 the very low capitalization of the road opened up vistas52 of almost indefinite increase.657 Just when Mr. Moore and his friends began their purchases, and what price they paid is of course largely a matter of conjecture53: large blocks of stock were, however, undoubtedly54 secured in the early months of 1901, during which time quotations ranged from 116? to 136; and it is probable that the larger part of the purchases were made nearer the upper than the lower level. During the following year the Moore party increased their holdings. It has been said that in April, 1901, Messrs. Moore and Reid were elected to the directorate. In November, 1901, at a special meeting of the stockholders, the directors were authorized to elect two new members to the executive committee, and Messrs. Moore and Wm. B. Leeds were chosen. In February, 1902, H. R. Bishop55, Tracey Dows, and F. E. Griggs resigned, and Geo. McMurtry, F. L. Hine, and F. S. Wheeler were elected directors in their place. Mr. McMurtry had formerly56 been president of the American Sheet Steel Company, merged in the Moore Steel Combine, and Mr. Hines, vice-president of the First National Bank of New York, presumably brought the backing of that powerful institution.658 Meanwhile Mr. James H. Moore had been chosen a director, and the Moore interest had gained control of the executive committee, so that a majority both of that committee and of319 the board of directors was in their hands. The new group of capitalists were not railroad men; their training had been on the financial side of corporation dealings, and the bulk of what experience they had had in actual management had been derived58 from industrial and not from railroad operations. It was natural, therefore, that the most striking results from their accession to power should appear on the financial rather than on the operating end, and that their ability to manipulate stocks and bonds should prove more unquestionable than their ability to handle railroad affairs. Results in the development of the Rock Island system were, however, attained, and for two reasons: in the first place, the Moores were able, and above all enterprising men, and untrammelled by traditions of conservatism, they were quick to see and bold to execute plans made possible by the admirable location of their 4000 miles of road; in the second place, they soon had large blocks of securities which they wished to sell, and were impelled59 to undertake large operations in the hope of raising quotations upon the Exchange.
In June, 1901, the stockholders authorized an increase in the capital stock from $50,000,000 to $60,000,000; stockholders of record June 28, 1901, to have the right to subscribe60 at par8.659 The proceeds were to go in part for extension from Liberal, Kansas, to El Paso, Texas, and in part for a new depot61 and elevation62 of tracks in Chicago, and for the improvement of the physical condition of the road. This El Paso extension plan was not new, since in December, 1900, the Chicago, Rock Island & Mexico, and the Chicago, Rock Island & El Paso had been incorporated to build a line from Liberal, Kansas, to Santa Rosa, New Mexico; there to connect with the El Paso & Northeastern, and to afford a through route to the Pacific coast and into Mexico. The other plans were, however, new. In April, 1903, the Chicago, Rock Island & Texas filed an amendment64 to its charter providing for an extension from Fort Worth to Galveston, 295 miles. The same month the sale of the Choctaw, Oklahoma & Gulf65 to the Rock Island was officially confirmed. This road has been, with one exception, the most important320 acquisition of the Moores. It stretches from Memphis, Tennessee, through the Indian Territory, Arkansas, and Oklahoma, to the border line of Texas, and furnishes a nearly direct line from those states to the Mississippi River; while a projected extension to New Mexico will connect with the Rock Island main lines to the southward, and make it a valuable link in the through route from El Paso to Memphis and Birmingham. The Rock Island paid $80 a share for the common stock and $60 for the preferred,660 and under the terms of the sale agreed to take at the same price all stock offered. The premium66 was very large. Choctaw preferred had been paying 5 per cent for some years, and the common had received 2 per cent in 1889, 4 per cent in 1900, and 4? per cent in 1901, plus 10 per cent in stock; but reckoned on a basis of 120 and 160 respectively, these returns sank to a very modest rate. The property is a valuable one, but will have to show great development to justify67 its purchase price. Payment was made by the issue of collateral trust 4 per cent bonds to the amount of $23,520,000, in return for which practically all of both issues of stock were deposited. Certain smaller roads were also bought in. In June, 1902, the stockholders voted to increase the capital stock from $60,000,000 to $75,000,000; and in July the directors decided68 to allow the stockholders to subscribe at par for $8,235,000 of the new issue in amounts equal to 12? per cent of their holdings;—the new stock to take up shares of the Burlington, Cedar69 Rapids & Northern, the Rock Island & Peoria, and the St. Louis, Kansas City & Colorado.661 The first of these roads connected the Rock Island system with Minneapolis and St. Paul.662 The Rock Island & Peoria was a short line in the state of Illinois. The St. Louis, Kansas City & Colorado was to afford, when finished, a more direct route between the important cities of St. Louis and Kansas City.
This is where matters stood when the reorganization plan of August, 1902, was brought forward. There had been a refunding70 put through in 1897 whereby some simplification of bond issues had321 been secured;663 but this scheme of 1902 was for a different purpose and differed radically71 in the methods employed. Its explanation is to be found in the character of the men in control. We have seen that Mr. Moore had made his reputation in the speculative promotion of industrial combinations, that he had entered Rock Island in search of an investment, and that he had thrown himself into the extension of the system in part because he saw the opportunity for development, in part because he hoped to pave the way for profitable manipulation of the stock. The time he had awaited seemed now to have arrived. His projects had caught public attention, comment on the whole had been favorable, and the price of his shares was at a high level; all indications pointed72 to the probable success of a scheme of stock-watering on an enormous scale. At the same time Mr. Moore was too well pleased with the position he had attained to wish to sacrifice it by the sale of his holdings; and his desire was, therefore, to devise an arrangement whereby the stock of the Rock Island should be inflated73 and large blocks sold to the confiding74 public, while the control should remain where it had been before,—in the hands of Mr. Moore and his followers75. It is to be noticed that there was no call for a reorganization by the creditors76 of the road, and no question of a default in interest, or even of a cessation of dividends upon the common stock; nor, on the other hand, were earnings so great that the managers felt it unwise to distribute them. The reason for the reorganization was entirely77 the financial ambition of the Moore group and the chance which its members saw of making larger profits than the earnings of the property would ever bring.
With these objects the following plan was put through. Instead of one Chicago, Rock Island & Pacific Company the Moores now proposed to have three companies, of which one was to operate the railroad, one was to hold the stock of the operating company, and one was to hold the stock of the company which held the stock of the operating company. That is to say, the Chicago, Rock Island & Pacific Railway Company was left undisturbed, while in Iowa a Chicago, Rock Island & Pacific Railroad Company was formed to hold the stock of the Railway Company, and in New Jersey322 a Rock Island Company was organized to hold the stock of the Railroad Company, and of such acquisitions as might afterwards be made. The retention79 of the Railway Company made unnecessary the consent of creditors, for the lien and interest rate of outstanding bonds remained the same as before; the formation of the Railroad Company served apparently to meet legal requirements; and the organization of the Rock Island Company seemed likely to make more easy the purchase of parallel and competing lines. But the great advantage of the new companies lay in the opportunities for stock inflation which they presented, together with the lessening80 of the amount of capital required for control. This appears plainly in the following: The old Railway Company had a capital stock of $75,000,000; the new Railroad Company issued stock to the amount of $125,000,000 and 4 per cent bonds to the amount of $75,000,000. The Rock Island Company issued common stock to a total of $96,000,000 and preferred stock to a total of $54,000,000; and the aggregate81, excluding the undisturbed bonds of the Railway Company, footed up to $425,000,000 instead of to $75,000,000 as before. From this total must be deducted82 $200,000,000, which represented issues of stock by one company to another, and $21,000,000 Rock Island Company stock and $1,500,000 Railroad Company bonds reserved for future extension, leaving a net increase from $75,000,000 to $202,500,000. This involved some increase in fixed charges, since 4 per cent on $75,000,000 became obligatory83; but the true significance lay in the inflation of principal rather than in the increase of interest charges, opening as it did an opportunity for great profit to the managers in the sale of the new securities. An incidental result was the transformation84 of the Rock Island shares from investment securities to media for speculation. At the same time the investment required for control was diminished. $75,000,000 of Railway stock was exchanged for $75,000,000 Railroad bonds, $96,000,000 Rock Island Company common stock, and $54,000,000 Rock Island Company preferred stock. Of these the bonds obviously had no voting rights. To both the common and preferred stock the right to vote was given, but in unequal degrees. “Until the number thereof shall be increased,” read the certificate of incorporation85 of the Rock Island Company, “the number of directors323 shall be nine. There shall be five classes of directors. The first class shall contain a majority of the whole number of the directors as fixed at any time by the by-laws.... The holders16 of the preferred stock shall have the right, to the exclusion86 of the holders of the common stock, to choose directors of the first class....” In other words, to the preferred stock, which constituted a minority of the whole, was given the right to elect a majority of the board of directors; so that whereas in the old Railway Company 51 per cent of $75,000,000 common stock, selling at from 120 to 179, had been required for control, in the new combination of companies 51 per cent of $54,000,000 Rock Island Company preferred stock, selling at 83?, was sufficient to the same end, in spite of a doubling of the stock outstanding.
To repeat: Two new corporations were formed, of which the Chicago, Rock Island & Pacific Railroad Company of Iowa issued $125,000,000 stock to the Rock Island Company of New Jersey78, and in return received $127,500,000 Rock Island preferred and common stock. With this stock, and with $75,000,000 of its own bonds, the Railroad Company purchased the $75,000,000 stock of the Chicago, Rock Island & Pacific Railway Company, paying for every $100 in shares
$100 in Rock Island Company common stock;
??70 in Rock Island Company preferred stock; and
?100 in its own 4 per cent bonds.
The Railway shares acquired were pledged for the Railroad bonds, and from them came the total income of the Railroad Company; and dividends upon the Railroad shares, together with dividends upon shares of other companies which it might chance to own, constituted the total income of the Rock Island Company. After thus receiving indirectly87 the earnings of the Railway Company through two sets of dividends, the Rock Island Company paid dividends on its own shares, which were held by the public; the preferred stock being entitled to 4 per cent from 1903 to 1909 inclusive, to 5 per cent from 1910 to 1916 inclusive, and to 6 per cent thereafter.
Other provisions were as follows: The Rock Island common stock might be increased from time to time according to law, but the amount of the preferred stock could not be increased except with the assent88 of the holders of two-thirds of the entire preferred stock and324 two-thirds of the entire common stock at the time outstanding, given at a meeting called for that purpose. Preferred stock was to be preferred as to principal as well as to interest; it had the right, as has been said, to elect a majority of the board of directors, but this right could be surrendered by the affirmative vote of the holders of two-thirds in amount of the preferred stock at the time outstanding at a special meeting of the holders of the preferred stock called for that purpose. A Finance Committee might be appointed from and by the directors which should have such powers as the directors and stockholders should choose to give it, and which should have all the powers of the directors when the board was not in session. The directors might accumulate working capital, but no reservation for working capital should be made in any year out of the surplus or net profits of such year until after the payments for such year of the dividends on the preferred stock of the company. The directors might also use the working capital in purchasing or acquiring the shares of the capital stock of the company as they might deem expedient89, but shares so purchased might be resold unless retired for the purpose of decreasing the capital stock of the company.664 This last provision aroused so much criticism that the directors gave up the right of dealing57 in the shares of their own company by resolution of November 5, 1902.
The important features of this reorganization were, as has been indicated, those in connection with the inflation of the capitalization and with the control of the property. In this connection it may be asked, first, whether the Moores made a profit by the deal; second, how large an investment they have had to keep in the property in order to retain control; and third, what cost to them this investment represents.
On January 2, 1902, Chicago, Rock Island & Pacific Railway Company common was quoted at 154. On February 1 it was 162?, on April 1, 179, on July 1, 172?, on August 1, 190, on October 1, 200, and on November 1, 199?. It is safe to assume that the rise from 172? to 200 was due to the publication of the plan, and it may be that some of the earlier increase in value was owing to purchases by insiders, or by people who had obtained some inkling of what was325 being considered; but a comparison of the aggregate value of the securities given for the railway common stock on January 3, 1903, with the price of the stock on July 1, 1902, shows that the former exceeded the latter by 22.3 points, with the error tending toward an understatement of the excess. That is, for every $172? invested in July, 1902, the Moores, and other stockholders with them, held securities worth $194.8 in January of the following year. During 1903 the Rock Island securities fell with others upon the market, till on January 2, 1904, the aggregate value of the stocks and bonds in question was only $132.2; but the decline was temporary, and by January 3, 1905, recovery to $176.6 had taken place. The operations therefore did result in a chance for large profits, and gave renewed evidence that the public demand for stocks and bonds does not fall off proportionately to an increase in their volume.665
It is obvious that neither before nor after the reorganization could the Moores have sold all their holdings and yet have kept control. Starting again with the price of 172? for Chicago, Rock Island & Pacific Railway common on July 1, 1902, it may be calculated that the cost of a majority of the issue then footed up to $64,687,672. If this had been carried on margin90, and the brokers91 had demanded on every share a deposit of $40, with $40 more instantly available if needed, the total investment required for control would have been $15,000,040, with as much more held in readiness for any emergency. On January 2, 1903, Rock Island preferred stock was selling at 83?, and the cost of a majority of the whole issue would have been $22,545,083; which, if carried on margin with a deposit of $20 a share, would have represented an investment of $5,400,020, with as much more in reserve. In other words, while all went well, less than $11,000,000 sufficed to control properties with a total mileage of 7718 miles of line, a bonded92 indebtedness of $201,660,475, and an outstanding capital stock of $118,249,007. It is of course improbable that the Moores in 1903 carried all, or even a large part of their holdings on margin; supposing, therefore, that all of their stock was326 bought and paid for, the fact still remains93 that with $22,545,083 they were able to control a system capitalized at $319,909,482.
In examining the cost to the Moores it is at once to be said that these gentlemen did not pay 172? for their old Railway stock. What they did pay is of course uncertain. It is known that much of their holdings was acquired in the early months of 1901, when prices ranged from 116? to 136. An average of 140 would represent a conservative estimate of what they paid, at which price a majority of the $75,000,000 would have cost $52,500,140. In return for this stock, at the prices of January 2, 1903, they obtained
$18,375,049 in Rock Island Company common stock, ?
?21,918,808 in Rock Island Company preferred stock, and ?
?32,765,712 in Chicago, Rock Island & Pacific Railroad Company 4 percent bonds. ?
Since the preferred stock sufficed for control, there were left $18,375,049 of Rock Island Company common, and $32,765,712 of Railroad Company bonds, or a total of securities with a nominal market value of $51,140,761. Deducting94 this from the original investment, which has been estimated at $52,500,140, there is left $1,359,379 to represent the actual cost to the Moore crowd of control of the great Rock Island property. Beneath all of these figures lies, of course, the erroneous assumption that it would have been possible to unload large blocks of securities upon the market without causing a break in price; and yet, though large deductions95 must be made on this account, the figures are eloquent96 of the skill with which the Moores have manipulated Rock Island issues, and of the slender basis on which their control rests. It has been truly said that the question is raised anew as to what is legitimate97 in corporate63 finance.
All this is very different from anything described before; and so far as motives98 go, the two Rock Island reorganizations stand by themselves. In the matter of methods some similarities appear. The great increase in capitalization resting on the Rock Island system was accomplished99 mainly by an inflation of stock, not of mortgage bonds, and involved a comparatively slight increase in fixed charges; the Rock Island Company closely resembled other holding companies in its method of operation, and seemed likely to offer some facilities for the consolidation of competing lines; and though the327 extraordinary privileges given the Rock Island preferred stock have perhaps never been paralleled in degree, the practice of granting such stock preferential treatment in other things than dividends is not unknown. On the whole, however, this kind of reorganization stands apart, and is rather instructive as showing what may be done in the handling of corporation securities than in indicating any sound principles on which bankrupt roads may proceed.
The reorganization plan aroused sharp criticism both from Wall Street666 and from the wider public, but met no opposition sufficient to prevent its being carried through. In September Attorney-General C. W. Mullen, of Iowa, in an opinion filed with the Governor of that state, held that the acts of the new Iowa corporation of the Rock Island, i. e. the Chicago, Rock Island & Pacific Railroad Company, were not outside the powers conferred by statute100.667 The Governor, in concurring101 with the opinion from a legal point of view, added, “the thing done is neither a merger102 nor a consolidation. Not a mile of track nor a dollar in value is added to the Rock Island property. It is simply a new device for watering securities; it is for the next General Assembly to say whether it is wise to permit our laws to so remain that such things are possible.”668 The various corporations were, therefore, organized, and the various issues of stocks and bonds put forth103.
During the past four years the events which require mention are four: First, the acquisition of the St. Louis & San Francisco; second, the connection of the Rock Island with the Gulf; third, the temporary control of the Chicago & Alton; and fourth, the issue of a new refunding mortgage.
In October, 1903, the Rock Island operated 7123 miles of line. Its tracks stretched southwest from Chicago to Santa Rosa, New Mexico, west from Memphis to Tucumcari, and northwest from Rock Island, Illinois, to Minneapolis and St. Paul, and to Watertown, South Dakota. This extensive mileage surrounded, however, instead of occupying, a large territory in Missouri, Kansas, Indian Territory, and Arkansas, and could claim no share in the vast traffic passing up and down the Mississippi Valley. One of the first acts of the Moores was to remedy this defect. In May, 1903, the Rock Island328 made a formal offer to purchase any and all shares of the St. Louis & San Francisco Railroad Company, providing $22,500,000 in par value should accept, at a rate of $60 par value in the common stock of the Rock Island Company and $60 par value in a new issue of 5 per cent gold bonds of 1913 of the Chicago, Rock Island & Pacific Railroad Company, for each $100 par value of Frisco common stock deposited; the new bonds to be secured by the stock acquired. This Frisco Company, it will be remembered, was the same that had previously been acquired and given up by the Atchison, Topeka & Santa Fe. Since that time it had greatly extended its mileage, had gained control of the prosperous Chicago & Eastern Illinois, with entrance into Chicago, and was altogether more valuable than it had been before. In relation to the Rock Island it possessed104 precisely105 the mileage which was required. It connected the latter’s terminus at Chicago with the terminus of the Choctaw, Oklahoma & Gulf at Memphis; it traversed Southern Illinois, Southern Missouri, Southeastern Kansas, and Indian Territory, to say nothing of lines in Oklahoma and in Texas; and by means of a line from Memphis to Birmingham it gave entrance into the heart of the South. In brief, it filled the gaps in the southeastern part of the Rock Island system, and afforded a solid foundation for further expansion. Good authorities consider the price which the Rock Island gave for the Frisco to have been too high. It is certain that the Frisco stockholders jumped at the chance. By June 1, 1903, the necessary $22,500,000 worth of stock had given their consent and only technical details remained to be carried through.669
With the St. Louis & San Francisco under its control the Rock Island could make a final advance to the Gulf. An attempt to complete a road through Texas occurred simultaneously106 with the Frisco purchase in 1903. The Moores, that is, arranged with the Southern Pacific for the purchase of a half-interest in the Houston & Texas329 Central, from Fort Worth to Houston and Galveston, with a branch to Austin, Texas; the Houston, East & West Texas, extending north from Houston to Shreveport, Louisiana; and the Texas & New Orleans, from Dallas to Sabine Lake on the Gulf of Mexico. As a part of the agreement the presidents of these lines were to be selected by the Rock Island Company.670 This would have established a line to the coast in a very satisfactory manner. Connection between Dallas and Fort Worth was to be completed in December, 1903, and from this point the two lines of the Houston & Texas Central and the Texas & New Orleans would have furnished direct outlets107 to the Gulf. The scheme did not go through, because the Texas Railroad Commissioners108 pronounced the contracts contrary to the state constitution, in that they amounted to a consolidation of the corporations concerned, and to the establishment of a community of interest between the Rock Island and the Southern Pacific, which would preclude109 competition between them in respect to their Texas business.671 The Rock Island was at first disposed to test part of the decision in the courts.672 It later decided that discretion110 was the better part of valor111, stopped the transaction, and cancelled the stock which it had issued as part of the purchase price.673
What the company could not do in Texas it could do, however, in Missouri, Louisiana, and Arkansas. As early as November, 1902, the St. Louis & San Francisco had purchased the entire capital stock of the St. Louis, Memphis & Southeastern Railroad, a line which was opened from St. Louis in 1904 to a junction with a branch of the Frisco above Memphis. From Memphis the Kansas City, Memphis & Birmingham stretched southeast through Mississippi into Alabama. These roads formed a basis for extension which was practicable though less convenient than the western route. Accordingly, in 1904, trackage agreements were concluded which gave to the Rock Island system:
(1) Trackage rights over the Mobile & Ohio and the New Orleans & Northeastern between Tupelo, Mississippi (on the Kansas City, Memphis & Birmingham), and New Orleans, Louisiana.
(2) Trackage rights over the St. Louis, Iron Mountain & Southern330 and the Texas & Pacific from a point opposite Memphis, Tennessee, to a point opposite Baton112 Rouge113, Louisiana.
(3) Trackage rights over the Yazoo & Mississippi Valley between Baton Rouge, Louisiana, and New Orleans, Louisiana, and over certain tracks in the latter city.
This afforded alternative routes of considerable directness from Memphis to the Gulf, while from the junctions114 of the Frisco with the Southern roads freight could be sent north to St. Louis and Chicago over the Rock Island system’s own rails. Arrangements were made for the construction of terminals in New Orleans by a subsidiary company whose stock was to be owned and whose bonds were to be guaranteed by the Southern and the St. Louis & San Francisco companies.674
At the present time the Rock Island is reaching south at two points other than those so far mentioned. Under the name of the Rock Island, Arkansas & Louisiana Railroad Company,675 it has built almost due south from Little Rock, Arkansas, while from New Orleans to Houston it has completed a line which connects at Eunice, Louisiana, with the Rock Island, Arkansas & Louisiana, and at Houston with the Trinity & Brazos Valley Railway.676 This last line runs from Houston to Fort Worth and Dallas, Texas, and is controlled by a half-interest in its capital stock. The Rock Island is thus in fair shape to share in the south-bound grain movement from Kansas, Nebraska, and the Dakotas, and to take a part in the north and south business of the Mississippi Valley. There is no question but what the company is making a bold bid for an enormous traffic, and that failure will not be due to any narrowness of view.
About the time that it was struggling to reach the Gulf the Rock Island took hold of the Chicago & Alton in the north in order to have another and a more direct line between Kansas City and Chicago.331 A strong minority interest had previously been bought in the Alton by Mr. Harriman, and a board of directors had been elected. In 1904 the Rock Island bought within a few hundred shares of absolute control, and since the classification of the board prevented the displacement115 of its opponents for two years, arranged a compromise. Between them the Harriman and the Rock Island interests deposited a controlling number of Alton shares with the Central Trust Company of New York, to be held in a voting trust. Each of the rival interests was to have five directors, and the odd director was to be in alternate years first a Harriman and then a Rock Island man.677 The Rock Island was, further, to have an option on the Harriman holdings for two years. It was an unfortunate time to buy. Mr. Harriman had previously displayed his splendid dividend producing ability in Alton finance, and the road was short of money. Market conditions were unfavorable, bonds were hard to sell, and, after all, the Alton was not of vital importance to the Rock Island, although it opened up new territory of some considerable importance. By 1907 it seems that the Moores had become tired of their bargain. In June of that year they served notice on the union Pacific that the compromise agreement of 1904 was illegal and should be abrogated;678 and shortly after they sold their holdings to the Toledo, St. Louis & Western.679
All in all the growth of the Rock Island has been astounding116. Instead of the limited number of 7123 miles which the system possessed in 1903, or the 3819 of 1901, it comprises 14,270 miles of line operated in 1907. Gross earnings are $112,464,000 in 1907 as against $25,365,000 in 1901; net income $40,828,000 instead of $8,901,000; capitalization about $525,000,000 instead of $118,081,000. In fact, the very size of the system and the diverse nature of its interests make the economical management of the whole almost beyond the capacity of any one man. The Rock Island handles traffic from the West and South to Chicago, St. Louis, and Birmingham, and connects with the trunk lines to the Atlantic coast; it is also striving to receive and care for the constantly increasing business from the Northwest to the Gulf. It reaches into Mexico; it extends into Colorado, and sends branches into the Northwest; while at the other end332 it connects Kansas City, Memphis, and St. Louis by a triangle of lines. It was remarked a year ago that a contrast between the operations of the Rock Island and of the Atchison lines in the Southwest disclosed what might be called demoralization on the part of the former, and it is in the multiplicity of its operations that the cause must be sought.
It is to be expected, therefore, that the financial position of the company should not be secure. Operating expenses, fixed charges, and taxes absorbed 87 per cent of gross income in 1907 and 89 per cent the year before. We must not be blinded by the magnitude of the reported figures. Although $9,476,397 were carried to surplus in the year ending June 30, 1907, and $5,568,092 were paid out in dividends, these two items together comprise only about 13 per cent of gross income, and a bad year might readily see a decrease sufficient to sweep this margin away. Unlike the union Pacific and the Northern Pacific, moreover, the Rock Island has not made consistently heavy improvement expenditures from income. Less than $40,000 was deducted by either the Frisco or the Rock Island & Pacific Railway in 1905 or in 1907; less than half a million in 1904; a little over two millions in 1903 and in 1906. And this in spite of the fact that the mileage of the Rock Island system is greater than that of any other road which this study has taken up. The fate of the company’s refunding mortgage of 1904 probably testified as much to the distrust of the Moore group of financiers and of the soundness of the property which they control as it did to the general financial uneasiness of the time. This proposition for a refunding mortgage was first framed in July, 1903. It then comprised an issue of $250,000,000 4 per cent bonds, to be used for the refunding of outstanding obligations, future enlargements and construction, purchase of bonds and stocks of other companies, and for the reimbursing117 of the company for advances already made. Subscriptions118 were sought in New York in vain. Whereas the project was to have come up at a meeting of the stockholders on October 8, the managers obtained an adjournment119 of this meeting until January without action, and before that month arrived announced an indefinite postponement120 of operations. On March 21 the stockholders voted on and approved a modified version of the original scheme,333 whereby $163,000,000 instead of $250,000,000 were authorized, of which $15,000,000 were to be issued at once, and $82,025,000 were to be reserved for retiring certain outstanding obligations. It proved no easier to secure subscriptions to this than to the previous plan, and in April $5,000,000 4? per cent notes were issued instead and taken by the First National Bank of New York, which was already closely identified with the company. Not until November, 1904, after fourteen and one-half months of persistent121 effort, was a firm of bankers found to take the refunding issue. $25,108,000 were then sold to Speyer & Co. Mr. Speyer became a director of the Rock Island and entered the finance committee, while the proceeds of the sale went to reimburse122 the treasury123 for capital expended124, and to provide for the payment of obligations maturing in 1905. Since this time other blocks of the bonds have been sold.
It is thus evident that the Rock Island has not regained the position which it held prior to the operations of Mr. Moore and of his friends. The recent developments have done two things: they have piled upon the company a mass of excessive capitalization; and they have transformed it from a moderate sized railroad with a clearly defined flow of traffic into a great system sprawled125 over the Central West and handling at least three different currents of business. Neither one of these changes alone can account for the present condition of the road. Together they have made it what it is. It is only fair to say that large sums from capital account are being spent upon the property and that the managers announce an intention of bringing it up to the highest standard of physical condition. Over $4,000,000 were appropriated for additions and improvements in 1907, and nearly $3,500,000 in 1906, besides still greater sums for construction and equipment. Heavier rails have been laid down, bridges have been strengthened, equipment increased and improved. Meanwhile maintenance charges have not been unduly126 low, though not so high as on some other Western roads. It is true, nevertheless, that the Rock Island has lost its former stability and must await a period of lessened127 earnings with serious apprehension128.
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1
dividends
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| 红利( dividend的名词复数 )； 股息； 被除数； （足球彩票的）彩金 | |
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dividend
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| n.红利，股息；回报，效益 | |
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bluffs
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| 恐吓( bluff的名词复数 )； 悬崖； 峭壁 | |
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merged
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| （使）混合( merge的过去式和过去分词 )； 相融； 融入； 渐渐消失在某物中 | |
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err
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| vi.犯错误，出差错 | |
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census
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| n.(官方的)人口调查，人口普查 | |
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attained
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| （通常经过努力）实现( attain的过去式和过去分词 )； 达到； 获得； 达到（某年龄、水平、状况） | |
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par
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| n.标准，票面价值，平均数量；adj.票面的，平常的，标准的 | |
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earnings
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| n.工资收人；利润，利益，所得 | |
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relatively
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| adv.比较...地，相对地 | |
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speculative
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| adj.思索性的，暝想性的，推理的 | |
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fixed
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| adj.固定的，不变的，准备好的；(计算机)固定的 | |
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solvency
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| n.偿付能力，溶解力 | |
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concealing
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| v.隐藏，隐瞒，遮住( conceal的现在分词 ) | |
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hostility
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| n.敌对，敌意；抵制［pl.］交战，战争 | |
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holders
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| 支持物( holder的名词复数 )； 持有者； （支票等）持有人； 支托（或握持）…之物 | |
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inevitable
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| adj.不可避免的，必然发生的 | |
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consolidate
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| v.使加固，使加强；(把...)联为一体，合并 | |
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previously
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| adv.以前，先前（地） | |
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retired
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| adj.隐退的，退休的，退役的 | |
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franchises
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| n.（尤指选举议员的）选举权( franchise的名词复数 )；参政权；获特许权的商业机构（或服务）；（公司授予的）特许经销权v.给…以特许权，出售特许权( franchise的第三人称单数 ) | |
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consolidated
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| a.联合的 | |
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authorized
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| a.委任的，许可的 | |
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consolidation
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| n.合并,巩固 | |
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lessee
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| n.（房地产的）租户 | |
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quotations
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| n.引用( quotation的名词复数 )；[商业]行情（报告）；（货物或股票的）市价；时价 | |
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anticipation
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| n.预期，预料，期望 | |
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nominal
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| adj.名义上的；(金额、租金)微不足道的 | |
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opposition
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| n.反对，敌对 | |
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acquiescence
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| n.默许；顺从 | |
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mileage
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| n.里程，英里数；好处，利润 | |
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riddle
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| n.谜，谜语，粗筛；vt.解谜，给…出谜，筛，检查，鉴定，非难，充满于；vi.出谜 | |
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affected
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| adj.不自然的，假装的 | |
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equilibrium
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| n.平衡，均衡，相称，均势，平静 | |
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westward
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| n.西方，西部；adj.西方的，向西的；adv.向西 | |
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eventual
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| adj.最后的，结局的，最终的 | |
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junction
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| n.连接，接合；交叉点，接合处，枢纽站 | |
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collateral
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| adj.平行的；旁系的；n.担保品 | |
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rental
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| n.租赁，出租，出租业 | |
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proceedings
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| n.进程，过程，议程；诉讼(程序)；公报 | |
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lien
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| n.扣押权，留置权 | |
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sparsely
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| adv.稀疏地；稀少地；不足地；贫乏地 | |
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density
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| n.密集，密度，浓度 | |
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swelled
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| 增强( swell的过去式和过去分词 )； 肿胀； （使）凸出； 充满（激情） | |
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45
distress
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| n.苦恼，痛苦，不舒适；不幸；vt.使悲痛 | |
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46
expenditures
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| n.花费( expenditure的名词复数 )；使用；（尤指金钱的）支出额；（精力、时间、材料等的）耗费 | |
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47
speculation
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| n.思索，沉思；猜测；投机 | |
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48
regained
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| 复得( regain的过去式和过去分词 )； 赢回； 重回； 复至某地 | |
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49
promotion
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| n.提升，晋级；促销，宣传 | |
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50
apparently
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| adv.显然地；表面上，似乎 | |
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51
disposition
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| n.性情，性格；意向，倾向；排列，部署 | |
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52
vistas
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| 长条形景色( vista的名词复数 )； 回顾； 展望； （未来可能发生的）一系列情景 | |
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53
conjecture
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| n./v.推测，猜测 | |
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54
undoubtedly
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| adv.确实地，无疑地 | |
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55
bishop
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| n.主教，（国际象棋）象 | |
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56
formerly
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| adv.从前，以前 | |
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57
dealing
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| n.经商方法，待人态度 | |
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58
derived
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| vi.起源；由来；衍生；导出v.得到( derive的过去式和过去分词 )；（从…中）得到获得；源于；（从…中）提取 | |
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59
impelled
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| v.推动、推进或敦促某人做某事( impel的过去式和过去分词 ) | |
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60
subscribe
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| vi.(to)订阅，订购；同意；vt.捐助，赞助 | |
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61
depot
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| n.仓库，储藏处；公共汽车站；火车站 | |
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62
elevation
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| n.高度；海拔；高地；上升；提高 | |
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63
corporate
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| adj.共同的，全体的；公司的，企业的 | |
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64
amendment
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| n.改正，修正，改善，修正案 | |
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gulf
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| n.海湾；深渊，鸿沟；分歧，隔阂 | |
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premium
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| n.加付款；赠品；adj.高级的；售价高的 | |
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67
justify
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| vt.证明…正当(或有理)，为…辩护 | |
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decided
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| adj.决定了的，坚决的；明显的，明确的 | |
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69
cedar
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| n.雪松，香柏(木) | |
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70
refunding
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| n.借新债还旧债；再融资；债务延展；发行新债券取代旧债券v.归还，退还( refund的现在分词 ) | |
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71
radically
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| ad.根本地，本质地 | |
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pointed
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| adj.尖的，直截了当的 | |
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73
inflated
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| adj.（价格）飞涨的；（通货）膨胀的；言过其实的；充了气的v.使充气（于轮胎、气球等）( inflate的过去式和过去分词 )；（使）膨胀；（使）通货膨胀；物价上涨 | |
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74
confiding
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| adj.相信人的，易于相信的v.吐露（秘密，心事等）( confide的现在分词 )；（向某人）吐露（隐私、秘密等） | |
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followers
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| 追随者( follower的名词复数 )； 用户； 契据的附面； 从动件 | |
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creditors
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| n.债权人，债主( creditor的名词复数 ) | |
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entirely
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| ad.全部地，完整地；完全地，彻底地 | |
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jersey
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| n.运动衫 | |
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retention
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| n.保留，保持，保持力，记忆力 | |
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lessening
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| 减轻，减少，变小 | |
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aggregate
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| adj.总计的，集合的；n.总数；v.合计；集合 | |
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deducted
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| v.扣除，减去( deduct的过去式和过去分词 ) | |
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obligatory
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| adj.强制性的，义务的，必须的 | |
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transformation
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| n.变化；改造；转变 | |
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incorporation
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| n.设立，合并，法人组织 | |
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exclusion
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| n.拒绝，排除，排斥，远足，远途旅行 | |
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indirectly
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| adv.间接地，不直接了当地 | |
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assent
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| v.批准，认可；n.批准，认可 | |
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expedient
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| adj.有用的，有利的；n.紧急的办法，权宜之计 | |
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margin
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| n.页边空白；差额；余地，余裕；边，边缘 | |
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brokers
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| n.（股票、外币等）经纪人( broker的名词复数 )；中间人；代理商；（订合同的）中人v.做掮客（或中人等）( broker的第三人称单数 )；作为权力经纪人进行谈判；以中间人等身份安排… | |
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bonded
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| n.有担保的，保税的，粘合的 | |
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remains
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| n.剩余物，残留物；遗体，遗迹 | |
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deducting
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| v.扣除，减去( deduct的现在分词 ) | |
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deductions
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| 扣除( deduction的名词复数 )； 结论； 扣除的量； 推演 | |
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eloquent
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| adj.雄辩的，口才流利的；明白显示出的 | |
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legitimate
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| adj.合法的，合理的，合乎逻辑的；v.使合法 | |
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motives
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| n.动机，目的( motive的名词复数 ) | |
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accomplished
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| adj.有才艺的；有造诣的；达到了的 | |
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statute
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| n.成文法，法令，法规；章程，规则，条例 | |
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concurring
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| 同时发生的，并发的 | |
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merger
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| n.企业合并，并吞 | |
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forth
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| adv.向前；向外，往外 | |
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possessed
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| adj.疯狂的；拥有的，占有的 | |
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precisely
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| adv.恰好，正好，精确地，细致地 | |
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simultaneously
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| adv.同时发生地，同时进行地 | |
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outlets
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| n.出口( outlet的名词复数 )；经销店；插座；廉价经销店 | |
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commissioners
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| n.专员( commissioner的名词复数 )；长官；委员；政府部门的长官 | |
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preclude
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| vt.阻止，排除，防止；妨碍 | |
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discretion
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| n.谨慎；随意处理 | |
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valor
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| n.勇气，英勇 | |
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baton
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| n.乐队用指挥杖 | |
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rouge
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| n.胭脂，口红唇膏；v.(在…上)擦口红 | |
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junctions
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| 联结点( junction的名词复数 )； 会合点； （公路或铁路的）交叉路口； （电缆等的）主结点 | |
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displacement
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| n.移置，取代，位移，排水量 | |
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astounding
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| adj.使人震惊的vt.使震惊，使大吃一惊astound的现在分词) | |
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reimbursing
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| v.偿还，付还( reimburse的现在分词 ) | |
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subscriptions
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| n.（报刊等的）订阅费( subscription的名词复数 )；捐款；（俱乐部的）会员费；捐助 | |
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adjournment
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| 休会； 延期； 休会期； 休庭期 | |
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postponement
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| n.推迟 | |
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persistent
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| adj.坚持不懈的，执意的；持续的 | |
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122
reimburse
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| v.补偿，付还 | |
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123
treasury
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| n.宝库；国库，金库；文库 | |
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expended
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| v.花费( expend的过去式和过去分词 )；使用（钱等）做某事；用光；耗尽 | |
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sprawled
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| v.伸开四肢坐[躺]( sprawl的过去式和过去分词)；蔓延；杂乱无序地拓展；四肢伸展坐着（或躺着） | |
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unduly
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| adv.过度地，不适当地 | |
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lessened
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| 减少的，减弱的 | |
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128
apprehension
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| n.理解，领悟；逮捕，拘捕；忧虑 | |
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