In a few localities the lines of the companies are parallel or close together. In other instances while the lines are not parallel, they serve the same points.
The purpose of Study II was to examine all these instances to determine whether any lines could be abandoned and still maintain good service to all important shipping and receiving points without loss in revenue or increase in expense. Attached Schedule A summarizes the instances where it is felt the merged company would be able to make such abandonments and shows the estimated salvage value, the cost of new construction necessary in connection with such abandonments, the non-recurring income tax savings which would result, the savings in operating expenses., the estimated improvement in net income which would result, the estimated number of diesel locomotive units which would be released, and other related information.
It will be noted that the miles of road which could be abandoned are estimated at 96-3. The salvage is estimated at $1,542,450, the cost of new construction is estimated at $2,058,168, and non-recurring income tax savings are estimated at $1,299,607. The abandonments would thus increase net cash by $723,391 and, at the same time, would effect an annual increase in net income before income taxes of $662,083.
The longest single line included in the study is the Erie line from Hillside Junction to Hawley, a distance of 41.1 miles. This line is used primarily for through service between the Wyoming Valley and northeastern New Jersey points which under merger would be maintained via the DL&W's present line, and no loss of revenue is anticipated from this abandonment.
The Erie line from Coming to Wayland, a distance of 36 miles, parallels the Lackawanna main line. With the exception of small segments to protect industries and interchange, this line would be retired with estimated annual savings of over $200,000. New connections with the Lackawanna would permit way freight and switching service to be performed by the merged company with only minor loss of freight revenue.
In addition to the savings shown, switching, transfer and mine run service savings made as a result of retiring duplicate lines numbers 2, 3 and 6 were included in Study I.
Summary of Net Cash Realized and Estimated Savings
1 2 5 4 5 6
Erie Erie Erie Erie Erie DL&W
Hillside Jct.- Rock Jct.- Dunmore- Binghamton- Wayland- E. Buffalo-
Hawley Gypy Grove East Jct. Great Bend Corning Black Rock Total
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A. Miles of Road Abandoned 41.1 1.7 2.2 11.6 36.0 3.7 96.5
B. Net Cash Realized From Merger
1. Salvage From Property Retired $ 628,120 G $52,496 G $25,644 G $ 410,980 $284,129 G $143,081 G $1,542,450 G
2. Extraorinary Expenditures
Next Four Years --- --- --- --- --- --- ---
3. Cost of Property Acquired --- --- 40,815 L 1,542,413 L 146,060 L 328,880 L 2,058,168 L
4. Goat of Relocating Property --- --- --- 9,270 L 7,630 L 43,598 L 60,498 L
5. Non-Recurring Income Tax Saving 620,778-G 44,109 G 39,187 G 173,279 G 288,376 G 133,878 G 1,299,607 G
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6. Total Net Cash Realized $1,248,898 G $96,605 G $24,016 G $967,424 L $418,815 G $ 97,519 L $723,391 G
Estimated Net Savings
C. Revenue Lost
1. Freight Service --- --- --- --- 487 L --- 487 L
2. Passenger Service --- --- --- --- --- --- ---
3. Miscellaneous --- --- --- --- --- --- ---
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4. Total Revenue Lost --- --- --- --- $ 487 L --- 487 L
D. Expenses Saved
MW&S
1. Cost of Normalized Maintenance $116,520 $10,195 $5,465 $97,290 $80,454 $28,702 $338,626
2. Depreciation 28,567 3,584 2,472 8,684 L 23,635 4,851 54,225
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3. Total Maintenance of Way and
Structures $144,887 $13,779 $7,957 $88,606 $104,089 $33,555 $392,853
Station Expenses
4. Combination $ --- --- --- $ 4,808 $ --- --- $ 4,808
5. Freight 9,425 --- --- --- 26,904 --- 36,327
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6. Total Station Expenses $ 9,423 --- --- $ 4,808 $ 26,904 --- $ 41,135
Other Operating Expenses
7. Freight Train Service $ 94,555 $ --- --- --- $ 39,605 --- $133,940
8. Passenger Train Service --- --- --- --- --- --- ---
9. Yard Transportation Forces --- 8,578 --- --- --- --- 8,578
10. Joint Facility - Expenses --- --- --- --- --- --- ---
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11. Total Other Expense $ 94,335 $ 8,578 --- --- $ 39,605 --- $142,518
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12. Total Expense Saved $ 248,645 G $22,557 G $ 7,937 G $93,414 G $ 170,598 G $33,553 G $576,504 G
E. Railway Tax Accruals
1. Payroll Tax $ 20,491 G $ 2,351 G $ 505 G $ 9,727 G $ 14,689 G 2,203 G $ 49,896 G
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F. Total $ 269,066 G $24,708 G $ 8,442 G $103,141 G $ 184,800 G $35,756 G $625,913 G
G. Interest at 5% on Net Cash Realized
From Merger 62,445 G 4,830 G 1,201 G 48,371 L 20,941 G 4,876 L 361,170 G
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H. Total Net Savings $ 331,511 G $29,538 G $ 9,643 G $54,770 G $205.741 G $30,880 G $662,083 G
I. Road Diesel Locomotive Units Released 1 - - - 1 - 2
