Amtrak 2013 Annual Report Download - page 32

Amtrak Annual Report 2013 | 33
In performing our impairment analysis, we assume future federal government subsidies at levels
consistent with the historical funding levels discussed in Note 3 to our Consolidated Financial
Statements. We believe funding at historical levels is the best estimate of the future. At this
approximate level of funding, we determined that no indicators of impairment existed as of
September 30, 2013. If future federal government funding drops below historical levels, substantial
impairment may occur.
On October 29, 2012, Sandy, one of the largest Atlantic storms on record, came ashore in the
Northeast and mid-Atlantic region of the United States. NEC service was suspended on October
29th and partial service resumed on November 1st with full service resuming by November 15th. We
sustained damages to tunnels and other structures in New York and New Jersey, requiring repair
work and disrupting passenger-related revenue. Costs incurred by us during FY 2013 totaled approx-
imately $21.7 million, including repairs to damaged property and emergency incurred expenses to
continue operating the affected tunnels. We currently estimate that total damages related to Sandy
will be at least $1.1 billion, most of which are related to cleaning the tunnels and replacing certain
assets inside them over time. The tunnels are currently operating in full capacity as normal,
concurrently with the cleaning and replacement work. We determined that there is no impairment to
the tunnels as of September 30, 2013, and future expenses related to cleaning and replacement costs
will be recognized when incurred. However, with the assistance of a third party consultant, we
reviewed the impacted assets and determined that certain infrastructure assets associated with
specific locations along the NEC route will need to be replaced sooner than previously anticipated.
Accordingly, we have assigned unique group depreciation rates to these assets and as a result
depreciation expense totaling $231.8 million will be accelerated beginning in FY 2013 over the
remaining life of these assets. Of this amount, $175.5 million for ventilation facilities and bridges is
being accelerated over five years, $40.3 million for the East River Tunnel is being accelerated over
11 years and $16.0 million for the North River Tunnel is being accelerated over 17 years.
Casualty Losses and Claims
Casualty reserves represent accruals for personal injury, occupational injury, passenger liability and
miscellaneous liability claims. The ultimate loss projections are undiscounted and estimated using
standard actuarial methodologies, including estimates for provisions for incurred but not reported
claims. As of September 30, 2013 and 2012, the actuarial reserves for casualty losses and claims were
$190.2 million and $190.0 million, respectively.
Environmental
As further described in Note 12 to the Consolidated Financial Statements included elsewhere in this
Annual Report, we are subject to extensive and complex federal and state environmental laws and
regulations that can give rise to environmental issues. As a result of our operations and acquired
properties, we are from time to time involved in administrative and judicial proceedings and
administrative inquiries related to environmental matters. Our policy is to accrue estimated
liabilities and capitalize such amounts of remediation costs relating to properties acquired with
existing environmental conditions and to expense remediation costs incurred on properties for
environmental clean-up matters occurring after acquisition. The liability is periodically adjusted
based on our present estimate of the costs we will incur related to these sites and/or actual
expenditures made. Some of our real estate properties may have the presence of asbestos-containing
building materials. If these properties undergo major renovations or are demolished, certain
environmental regulations that are in place may specify the manner in which the asbestos containing
materials must be assessed, handled, and disposed. We have identified a number of locations for