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1411-1359280 9
National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements
Years Ended September 30, 2013 and 2012
1. Nature of Operations
The National Railroad Passenger Corporation (“Amtrak” or the “Company”) was incorporated in
1971 pursuant to the Rail Passenger Service Act of 1970 and is authorized to operate a
nationwide system of passenger rail transportation. The United States government (the “Federal
Government”) through the United States Department of Transportation (the “DOT”) owns all
issued and outstanding preferred stock. Amtrak’ s principal business is to provide rail passenger
transportation service in the major intercity travel markets of the United States. The Company
also operates commuter rail operations on behalf of several states and transit agencies, provides
equipment and right-of-way maintenance services, and has leasing operations.
The Company has a history of recurring operating losses and is dependent on subsidies from the
Federal Government to operate the national passenger rail system and maintain the underlying
infrastructure. These subsidies are usually received through annual appropriations. In recent
fiscal years, appropriated funds for Amtrak have been provided to the DOT, which through its
agency the Federal Railroad Administration (the “FRA”), provides those funds to Amtrak
pursuant to operating and capital funds grant agreements. Amtrak’ s ability to continue operating
in its current form is dependent upon the continued receipt of subsidies from the Federal
Government (see Note 3).
2. Restatement of 2012 Financial Statements
During fiscal year 2013, the Company’ s independent auditor completed its audit of the
Company’ s fiscal year 2012 financial statements and issued its Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing Standards. This report
contained two significant deficiencies related to accounting for capital leases and accounting for
income taxes. In its efforts to remediate these findings, the Company performed a comprehensive
review of its capital lease accounting and also performed a detailed analysis to determine if the
Company’ s tax liability and related valuation allowance accounts were appropriately computed
and disclosed. As a result of its review, the Company identified and corrected several errors in its
accounting for capital leases and deferred taxes. While this review was underway, the Company
identified certain other errors in its prior period financial statements and has also corrected those
errors. Certain of the adjustments impacted periods prior to those being presented. The Company
has restated its previously issued consolidated financial statements for the year ended
September 30, 2012 to correct the errors that occurred during that fiscal year. Management of the
Company assessed the materiality of the errors identified in accordance with Financial