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ERIE - LACKAWANNA MERGER STUDY

APPENDIX E

Summary of Estimated Net Cash Required For Merger During the First Five Years After Merger at Current Cost Levels



                                                                    1st              2nd                3rd             4th              5th              Total
  I   Common Points                                              $294,629-L      $2,983,377-L       $ 925,976-L        -----            -----         $4,208,982-L

 II   Duplicate Lines                                               ---             636,615           161,529-L        -----            -----            475,086

VII   Equipment Pools
         L-Locomotives                                            143,685           287,565           143,682        143,685            -----            718 415
         P-Passenger Train Cars                                     8,809            17,618             8,809          8,809            -----             44,045
         W-Work Equipment                                          25,949            47,896            25,949         25,949            -----            119,743
         M-Marine Equipment (Freight)                               5,122             6,244             5,122          3,122            -----             15,610

VIII  General Repair Facilities - Equipment
         F-Freight Train Cars                                      25,404            46,809            23,404          ---              -----             93,617
         P-Passenger Train Cars                                    80,255           160,469            80,255          ---              -----            320,939

IX   Material and Supplies Stocks, and
     Purchases and Stores Organizations                           496,097           496,097           496,097        198,438           297,658         1,984,587

XI   Communications Facilities                                    388,556-L         259,058-L          ---            ---                                647,594-L

XV   Effect of Merger on Expense of Operating
        Lines Retained                                            231,959           579,898         1,159,796        347,938            -----          2,319,591

XVI  Labor Contracts                                              298,386-L         671,569-L         345,144-L      119,554-L          59,677-L       1,491,930-L

   Total Net Cash Realized or Required at
     Current Goat Levels
       A. By years                                               $ 29,687        $1,639,775-L       $ 508,445       $606,585          $237,981
       B. Cumulative                                               29,687         1,610,086-L       1,101,641-L      495,056-L         257,075-L

   No Symbol - Gain             L - Lose

            Methods Used in Showing Estimated Net Cash Realized or Required During the First Five Years After Merger

       It is believed that all of the estimated cash involved
would be realized or required within the first five years follow Years
he effective date of merger. The table has been set up on a                                                               Years After Merger
five year basis although some additional time might be required to
realize cash from income tax savings.
                                                                                   Study                                1st   2nd  3rd    4th   5th
       In Study I, Common Points, and Study II, Duplicate Lines,
an analysis as made of for point or line and weighted percentages                     I   Common Points                   7    71   22     -     -
of realization were developed for each study. Study XVI, Labor                       II   Duplicate Lines                 -    75   25     -     -
Contracts, was developed by years and the per cents shown in the                    VII   Equipment Pools                20    40   20     20    -
table are shown for comparative purposes. The more important                       VIII   Repair Facilities              25    50   25     -     -
reasons underlying the allocations for all studies are explained                     IX   Materials & Supplies           25    25   25     10    15
in Appendix D. A summary of the percentages used in each study is                    XI   Communication Facilities       60    40   -      -     -
shown in the table on the right, and the percentages represent the                   XV   Effect on Retained Lines       10    25   50     15    -
proportion of total net cash which would be realized or required in                 XVI   Labor Contracts                20    45   23     8     4
each year.  The amounts shown above are at current levels and the
methods used to adjust 1956 total net cash to current levels are
also described in Appendix F.