ESTIMATES OF FUTURE EARNINGS AVAILABLE FOR INTEREST COMPARED WITH SUBSEQUENT EARNINGS AVAILABLE FOR THAT PURPOSE OF 15 LARGEST RAILROADS CONCERNING WHICH THE COMMISSION APPROVED PLANS OF REORGANIZATION FINDING COMMON STOCK OF OTHER SECURITIES TO BE WITHOUT VALUE RAILROADS EMBRACED IN THIS COMPILATION Central of Georgia Railway Co. Chicago & Eastern Illinois Railway Co. Chicago Great Western Railroad Co. Chicago, Milwaukee, St. Paul & Pacific Railroad Co. Chicago & North Western Railway Co. Chicago, Rock Island & Pacific Railway Co. Denver & Rio Grande Western Railroad Co. Florida East Coast Railway Co. Minneapolis, St. Paul & Sault Ste. Marie Railway Co. St. Louis, Southwestern Railway Co. CENTRAL OF GEORGIA RAILWAY CO. (a) Decisions of Commission Original decision approving plan: July 13, 1945, 261 ICC 263 Supplemental report modifying plan: November 6, 1945, 261 ICC 501 (b) Estimate of future earnings available for interest Normal future year estimate by witness for debtor's trustee___ Earnings available for interest which would result from an increase of 10 percent over revenues forecast for the normal future year, which increase the trustee testified would not be an unreasonable expectation---- $926, 656 --- 1,682, 647 The Commission made no estimate of the normal future year. With respect to the above estimate, the Commission stated: "The trustee and the traffic officers appear to have taken a highly conservative view of the future earnings of this property." It pointed out that capitalization of $1,682,647 at 5 percent would produce a new capitalization of $33,652,940. The capitalization approved by the Commission was $84,408, 798, which is equal to an amount which would be produced by capitalizing $4,220,440 at 5 percent. Original decision approving plan: November 4, 1938, 230 I. C. C. 199 (b) Estimate of future earnings available for interest Normal year estimated by debtor.. $3,052,000 The Commission made no estimate and did not specifically adopt the fore of the estimated earnings in a normal year, the necessity for setting aside liberal amounts for additions and betterments and the necessity for payment of large amounts for social-security, railroad retirement, income, and undistributed-profits taxes, and in order to make more certain earnings that are adequate on the capital involved." The Commission pointed out that capitalization of the above amount at 5 perecent would produce $61,040,000. The capitalization approved by the Commission was $61,000,000. Original decision approving plan: August 4, 1938, 228 ICC 583 Supplemental report modifying plan: April 17, 1939, 233 ICC 63 (b) Estimate of future earnings available for interest The debtor later argued on brief that a subsequently authorized rate increase would result in additional earnings of $900,000 a year (228 ICC 612). No precise estimate of future earnings was made by the Commission and it did not adopt the forecast of the debtor. For purposes of comparison, the Commission pointed out (228 I. C. C. 612) that the average earnings available for fixed charges forecast by the debtor for the years 1937 to 1941, capitalized at 5 percent, would give approximately $46,000,000, that the maximum forecast for 1941 would produce about $57,000,000, and that considered from the standpoint of earnings alone "it thus appears that capitalization of the reorganized company should be within the limits of from $44,000,000 to $61,000,000. But other factors should be given consideration." The Commission in its original decision approved a capitalization of $62,291,827. In its supplemental report it increased this amount to $63,091,827. (c) Actual earnings available for interest CHICAGO, MILWAUKEE, ST. PAUL & PACIFIC RAILROAD CO. (a) Decisions of Commission Original decision approving plan: February 12, 1940, 239 ICC 485. Supplemental reports modifying plan: June 4, 1940, 240 ICC 257; December 6, 1943, 254 ICC 707; April 10, 1944, 257 ICC 223. (b) Estimates of future earnings Debtor's estimate at hearing on June 16, 1937, of the income which would be available for fixed charges in the years indicated: Normal future year as estimated by the group of institutional investors.. 19, 355, 000 15, 894, 000 (The Commission made no estimate, and did not adopt the above estimate of a normal future year. The Commission's report (239 ICC 485, at p. 540), recited that capitalization of the estimated future normal year at 4.7 percent would produce $338,170,213. The capitalization actually approved was approximately $533,000,000, which is an amount which would be produced by capitalizing $25,051,000 at 4.7 percent.) Original decision approving plan: December 12, 1939, 236 ICC 575 (b) Estimates of future earnings Normal future year estimate adopted by the Commission as a basis for its plan. (The amount shown includes estimated earnings of the Chicago & North Western and of its subsidiary, Chicago, St. Paul, Minneapolis & Omaha Railway Company)_. $14, 625, 000 Amount $11, 740, 285 13, 860, 682 6, 710, 810 12, 848, 723 Year 1947_ 11, 680, 767 1948 19, 558, 043 1949 29, 641, 344 1950_ 46, 399, 218 1951. 8, 597, 668 Average annual earn 27,903, 075 ings, 1939-51------ 18, 082, 279 The above figures include income of the Chicago, St. Paul, Minneapolis & Omaha Railway Co. but exclude interest income of the Chicago & North Western attributable to bonds of the former corporation owned by the latter. DENVER & RIO GRANDE WESTERN RAILROAD COMPANY (a) Decisions of Commission Original decision approving plan: July 11, 1939, 233 ICC 515 Supplemental reports modifying plan: April 2, 1940, 239 ICC 583; July 13, 1942, 254 ICC 5; June 14, 1943, 254 ICC 349 (b) Estimate of future earnings available for interest Normal future year estimate by debtor (Includes Denver & Rio Grande and The Commission made no estimate for a future normal year and did not specifically adopt the foregoing estimate. In its second supplemental report of July 13, 1942 (254 ICC 5,-), the Commission stated that the trend of earnings indicated that in 1942 the debtor's forecast for a future normal year would be exceeded, and that the forecast capitalized at 4 percent would amount to $155,385,600 and at 5 percent $124,308,500. The capitalization finally approved by the Commission was $155,173,127. For purposes of comparison, the requirements under the approved plan for charges (including sinking and capital fund payments) before dividends on stock amount to $4,584,689, and the total requirements for all charges, full dividends on the 5-percent preferred stock, and a 6-percent dividend on the common stock amounted to $8,321,305. Includes Denver & Salt Lake Railway Co., which was merged into the Denver Rio Grande Apr. 10, 1947. 2 Deficit. FLORIDA EAST COAST RAILWAY CO. (a) Decisions of Commission Original decision approving plan: April 6, 1942, 252 ICC 423 Supplemental reports modifying plan: August 10, 1942, 252 ICC 731; January 8, 1945, 261 ICC 151; April 8, 1947, 267 ICC 295; July 12, 1951, 282 ICC 81; October 25, 1951, 282 ICC 195 (b) Estimates of future earnings available for interest Amount which the Commission found in its report of Apr. 6, 1942, constituted a conservative and reasonably correct estimate of the prospective income available for interest for the average year of the 1941-45 period---- Amount which the Commission found in its report of Jan. 8, 1945, $1, 268, 000 1,500,000 2,300,000 (c) Actual earnings available for interest and fixed charges and CHICAGO, ROCK ISLAND & PACIFIC RAILWAY co. Original decision approving plan: October 31, 1940, 242 I. C. C. 298 (b) Estimates of future earnings available for interest Normal future year as estimated by management_. $10, 519, 429 12, 500,000 Oct. 31, 1940, to be reasonably well supported by the evidence. 11, 000, 000 (In its report of July 31, 1941, the Commission increased the capitalization taking into consideration the fact that the estimated "normal" income would be somewhat greater than $11,000,000.) MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE RAILWAY CO. (a) Decisions of Commission Original decision approving plan: March 17, 1942, 252 ICC 525 (b) Estimate of future earnings available for interest No estimate of future earnings was made by the parties or the Commission. For purposes of comparison the Commission indicated (252 ICC 525, 552) that the use of a rate of approximately 44 percent in capitalizing the earnings of the debtor would be proper in connection with its determination of the maximum allowable capitalization. Upon consideration of the earnings for 1941 of approximately $2,735,000 (without deduction of special equipment amortization charges), the much greater earnings in some of the past years since 1921, the prospect of a continuance of favorable earnings for at least the immediate future, and upon consideration of the physical value of the debtor's property, the Commission approved a capitalization of $95,000,000. This is approximately equal to an amount which would be produced by capitalizing $4,037,500 at 44 percent. (c) Actual earnings available for interest Original decision approving plan: January 10, 1940, 239 ICC 7 Supplemental reports modifying plan: April 9, 1940, 240 ICC 15; July 4, 1944, 257 ICC 479; October 9, 1944, 257 ICC 745; August 2, 1949, 275 ICC 59; December |