Amtrak 2014 Annual Report Download

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GOVERNANCE:
Quality Control Review of the Independent Audit of
Amtrak’s Consolidated Financial Statements for
Fiscal Year Ended 2014
OIG-A-2016-004| February 4, 2016

Table of contents

  • Page 1
    GOVERNANCE: Quality Control Review of the Independent Audit of Amtrak's Consolidated Financial Statements for Fiscal Year Ended 2014 OIG-A-2016-004| February 4, 2016

  • Page 2
    ... Officer From: Tom Howard Inspector General February 4, 2016 Date: Subject: Governance: Quality Control Review of the Independent Audit of Amtrak's Consolidated Financial Statements for Fiscal Year Ended 2014 (OIG-A-2016-004) Amtrak (the company) contracted with the independent certified public...

  • Page 3
    ... operating changes, restructurings, or bankruptcy might occur. In its FY 2014 Report of Independent Auditors on Internal Controls Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards...

  • Page 4
    ... from an audit in accordance with generally accepted government auditing standards, were not intended to enable us to express an audit opinion. We do not express an opinion on the company's consolidated financial statements or conclusions about the effectiveness of internal controls and compliance...

  • Page 5
    ... Amtrak's economy, efficiency, and effectiveness; preventing and detecting fraud, waste, and abuse; and providing Congress, Amtrak management and Amtrak's Board of Directors with timely information about problems and deficiencies relating to Amtrak's programs and operations. Available at our website...

  • Page 6

  • Page 7
    CONSOLIDATED FINANCIAL STATEMENTS National Railroad Passenger Corporation and Subsidiaries (Amtrak) Years Ended September 30, 2014 and 2013 With Report of Independent Auditors Ernst & Young LLP

  • Page 8
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Financial Statements Years Ended September 30, 2014 and 2013 Contents Report of Independent Auditors...1 Audited Consolidated Financial Statements Consolidated Balance Sheets ...3 Consolidated Statements of Operations ...

  • Page 9
    ... Corporation We have audited the accompanying consolidated financial statements of National Railroad Passenger Corporation and subsidiaries (Amtrak or the Company), which comprise the consolidated balance sheets as of September 30, 2014 and 2013, and the related consolidated statements of operations...

  • Page 10
    ... financial position of National Railroad Passenger Corporation and subsidiaries at September 30, 2014 and 2013, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. Federal Government Funding...

  • Page 11
    ... Materials and supplies, net of allowances of $46,074 and $45,423 at September 30, 2014 and 2013, respectively Prepaid expenses Other current assets Total current assets Property and equipment: Locomotives Passenger cars and other rolling stock Right-of-way and other properties Construction-in...

  • Page 12
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Balance Sheets (continued) (In Thousands of Dollars, Except Share Data) September 30, 2014 2013 Liabilities and capitalization Current liabilities: Accounts payable Accrued expenses and other current liabilities Deferred...

  • Page 13
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Statements of Operations (In Thousands of Dollars) Year Ended September 30, 2014 2013 Revenues: Passenger related Commuter Other Total revenues Expenses: Salaries, wages, and benefits Train operations Fuel, power, and ...

  • Page 14
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Statements of Comprehensive Loss (In Thousands of Dollars) Year Ended September 30, 2014 2013 Net loss Other comprehensive loss: Pension and other postretirement benefit items: Net loss (gain) arising during the period ...

  • Page 15
    ... Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Statements of Changes in Capitalization (In Thousands of Dollars) Preferred Stock Balance at September 30, 2012 Federal paid-in capital Net loss Total pension and other postretirement benefit items Balance at September 30, 2013...

  • Page 16
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Statements of Cash Flows (In Thousands of Dollars) Year Ended September 30, 2014 2013 Cash flows from operating activities Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation...

  • Page 17
    ... Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements Years Ended September 30, 2014 and 2013 1. Nature of Operations The National Railroad Passenger Corporation (Amtrak or the Company) was incorporated in 1971 pursuant to the Rail Passenger Service...

  • Page 18
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 2. Funding (continued) September 30, 2014, $1.2 billion of the funding from the enactments had been received. Amtrak received the remaining $153.7 million in the fiscal year ...

  • Page 19
    ... a new railroad terminal in the City of Chicago. The name was officially changed to Chicago Union Station Company on May 7, 1915. Amtrak acquired 50% stock ownership interest in CUS in 1976 as part of the conveyance of the Northeast Corridor (NEC) and off-Corridor properties. Amtrak purchased the...

  • Page 20
    ... restricted funds for certain operations of the Amtrak Police Department (ii) restricted cash from a contractor performing work for the Illinois Department of Transportation, (iii) restricted cash held for Amtrak' s Office of Inspector General and used to reimburse the cost of program management and...

  • Page 21
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 3. Basis of Presentation and Summary of Significant Accounting Policies (continued) Materials and Supplies Materials and supplies, which are stated at weighted-average cost, net ...

  • Page 22
    ... differences in the service life or salvage value of individual property units within the same class. This excludes computer equipment and software, which are stated at cost and are individually depreciated on a straight-line basis over their estimated useful lives, which are generally five to ten...

  • Page 23
    ...to operating expense when the work is performed. The cost of internally developed software is capitalized and amortized over its estimated useful life, which is generally five to ten years. The Company accounts for asset retirement obligations (AROs) in accordance with Financial Accounting Standards...

  • Page 24
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 3. Basis of Presentation and Summary of Significant Accounting Policies (continued) settlement of the liability Amtrak either settles the obligation for its recorded amount or ...

  • Page 25
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 3. Basis of Presentation and Summary of Significant Accounting Policies (continued) Impairment of Long-Lived Assets Properties and other long-lived assets are reviewed for ...

  • Page 26
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 3. Basis of Presentation and Summary of Significant Accounting Policies (continued) expense increased the Company' s net loss during FY2014 and FY2013 by $31.7 million and $39.7 ...

  • Page 27
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 3. Basis of Presentation and Summary of Significant Accounting Policies (continued) "Commuter" revenue includes the revenues earned under contractual arrangements to operate ...

  • Page 28
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 3. Basis of Presentation and Summary of Significant Accounting Policies (continued) Income Taxes The Company accounts for its income taxes in accordance with FASB ASC Topic 740, ...

  • Page 29
    ...long-lived assets, estimates of wrecked and damaged equipment, estimates of casualty reserves, pension and other postretirement employee benefits expense and obligations (including expected return on plan assets, discount rates, rate of future compensation increases, and health care cost trend rates...

  • Page 30
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 3. Basis of Presentation and Summary of Significant Accounting Policies (continued) In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which ...

  • Page 31
    ... expected to impact the Company' s fair value disclosures on pension assets, but it will not have an impact on the Company' s consolidated statements of financial condition or results of operations. 4. Accounting and Reporting for Federal Payments Certain funds are provided to Amtrak during the year...

  • Page 32
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 4. Accounting and Reporting for Federal Payments (continued) The 2013 CR appropriated $19.4 million to directly fund operations of Amtrak' s Office of Inspector General (OIG) to ...

  • Page 33
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 4. Accounting and Reporting for Federal Payments (continued) terms and is secured by all rolling stock owned by Amtrak. Neither of the notes bears interest, unless prepaid, which...

  • Page 34
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 5. Preferred and Common Stock (continued) In May 2008, American Premier Underwriters, Inc. (APU) owner of 55.8% of Amtrak' s common stock through its corporate predecessor, Penn ...

  • Page 35
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 6. Mortgages and Debt (continued) Letters of Credit The Company has an unsecured commercial letter of credit of $2.5 million that supports the issuance of auto fleet insurance. ...

  • Page 36
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 6. Mortgages and Debt (continued) Frequency Converter Facility During FY2001, PEDFA completed two issues of exempt facilities revenue bonds, the net proceeds of which were used ...

  • Page 37
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 6. Mortgages and Debt (continued) deposits, and other" in the Consolidated Balance Sheets and are being amortized to interest expense over the term of each bond issuance. As of ...

  • Page 38
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 6. Mortgages and Debt (continued) refund the 2003 PEDFA Garage Bonds outstanding at that time plus accrued and unpaid interest and to pay other costs of the financing. In FY2013,...

  • Page 39
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 6. Mortgages and Debt (continued) continuing through June 20, 2021 in the case of Term Loan A and June 20, 2024 in the case of Term Loan B. As of September 30, 2014, the ...

  • Page 40
    ... ended September 30, 2014 and 2013, respectively, that were capitalized and recorded in "Construction-in-progress" in the Consolidated Balance Sheets. Amtrak pays a 4.424% credit risk premium on all amounts advanced under the RRIF Loan program. The credit risk premium may be returned by the FRA to...

  • Page 41
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 6. Mortgages and Debt (continued) Scheduled Debt Maturities On September 30, 2014, scheduled maturities of debt are (in thousands): Year Ending September 30, 2015 2016 2017 2018 ...

  • Page 42
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 7. Leasing Arrangements Amtrak leases equipment, primarily passenger cars and locomotives, and related maintenance infrastructure under capital leasing arrangements. Amtrak has ...

  • Page 43
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 7. Leasing Arrangements (continued) Amtrak has the right to terminate the lease and purchase any or all of the locomotives at any time during the lease term by paying the ...

  • Page 44
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 7. Leasing Arrangements (continued) Operating Rights and Leases As of September 30, 2014, Amtrak is obligated for the following minimum rental payments under operating rights and...

  • Page 45
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 8. Fair Value Measurements FASB ASC Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value for financial reporting, establishes a framework ...

  • Page 46
    ...estimated fair values of the non-derivative financial instruments listed above are based upon discounted cash flow analyses using interest rates available to Amtrak at September 30, 2014 and 2013, for debt with the same remaining maturities. For pension assets, all fair value measurement disclosures...

  • Page 47
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 9. Income Taxes There was no provision or benefit for income taxes for the fiscal years ended September 30, 2014 and 2013, which differed from the expected amount computed by ...

  • Page 48
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 9. Income Taxes (continued) Deferred income tax assets and liabilities were comprised of the following (in thousands): September 30, 2014 2013 Deferred tax assets: Net operating ...

  • Page 49
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 10. Commitments and Contingencies Financial Assistance Amtrak receives significant financial assistance from the Federal Government in the form of grants and entitlements. The ...

  • Page 50
    ... 30, 2014. Amtrak operates a majority of its passenger rail service on tracks owned by freight railroads. Amtrak indemnifies these railroads for certain liabilities that arise as a result of its operations on freight tracks. Its indemnity generally applies to bodily injury and property damage claims...

  • Page 51
    ... 30, 2014, Amtrak has ratified five-year labor contracts with all of its unionized workforce, which includes the Transportation Communications International Union; Joint Council of Carmen, Coach Cleaners and Helpers; Amtrak Service Workers Council; Brotherhood of Locomotive Engineers; American Train...

  • Page 52
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 10. Commitments and Contingencies (continued) With the exception of the Fraternal Order of Police, the agreements for the unions provide for specified general wage increases ...

  • Page 53
    ... to bring its stations into ADA compliance. This plan is regularly updated and adjusted based on new information and external factors, such as direction the Company receives from the FRA and other government agencies. On June 9, 2015, the Department of Justice (DOJ) provided Amtrak with a Letter of...

  • Page 54
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 10. Commitments and Contingencies (continued) Amtrak is working to obtain sufficient funding to achieve full ADA compliance of all station components for which it is responsible ...

  • Page 55
    ... be estimated at this time. Kansas City Terminal Railway Co. (KCT) is a Class III railroad whose property is located in and around Kansas City, Missouri. Currently, Amtrak operates four Missouri state-supported service trains and two Amtrak long distance trains over KCT' s rail lines each day. Under...

  • Page 56
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 11. Environmental Matters The Company is subject to extensive and complex federal and state environmental laws and regulations that can give rise to environmental issues. As a ...

  • Page 57
    ... defined benefit retirement plan (the Retirement Income Plan) whose assets are held in trust covering non-union employees and certain union employees who at one time held non-union positions. Amtrak provides medical benefits to its qualifying retirees and life insurance to some retirees in limited...

  • Page 58
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) On March 18, 2015, Amtrak' s Board of Directors approved an amendment to freeze benefits under the Retirement Income Plan, ...

  • Page 59
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Obligations and Funded Status The liability of the Company' s pension benefits under its Retirement Income Plan, as well as other...

  • Page 60
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Pension and other postretirement benefit amounts recognized in the Consolidated Balance Sheets at September 30, 2014 and 2013 are...

  • Page 61
    ... market funds 18-38% 20-40 13-23 6-34 0-10 0-5 2013 29.8% 28.4 16.1 18.6 5.0 2.1 The investment strategy for Retirement Income Plan assets is to invest the assets in a manner whereby long-term return on the assets provide adequate funding for retiree pension payments. The investment objectives...

  • Page 62
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Assets are strategically allocated among equity, fixed income, real estate and global asset allocation managers who have the ...

  • Page 63
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Money Market Funds Money market funds generally transact subscription and redemption activity at a $1.00 stable NAV. However, on ...

  • Page 64
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) value of $49.2 million and $46.8 million at September 30, 2014 and 2013, respectively) seeks maximum real return, consistent with...

  • Page 65
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) stock exchange and the value of the Eaton units is determined daily by calculating NAV. The investments in the Eaton Vance Fund ...

  • Page 66
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Total September 30, 2013 Agency backed bonds $ U.S. government securities Corporate bonds Government bonds Municipal bonds Asset-...

  • Page 67
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Estimated Future Benefit Payments Prior to consideration of the impact of the changes which occurred subsequent to September 30, ...

  • Page 68
    ... Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Weighted-average assumptions used to determine net periodic benefit cost for the years ended September 30, 2014 and 2013 are as follows: Pension Benefits 2014 2013 Discount rate Expected long-term return on assets...

  • Page 69
    ... under this plan. 13. Subsequent Events Train Derailment On May 12, 2015, Amtrak Train 188, traveling from Washington, D.C., northbound for New York' s Penn Station, derailed north of 30th Street Station while traveling through a curve. There were 250 passengers and eight Amtrak employees on board...

  • Page 70
    ... out of the derailment to that court for inclusion in a Multi-District Litigation proceeding. The Company' s current estimate of liability for passenger claims is $163.9 million. The on-duty employee claims and lawsuits are governed by the Federal Employers Liability Act which sets the negligence...

  • Page 71
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 13. Subsequent Events (continued) Modification to Retirement Programs On March 18, 2015, Amtrak' s Board of Directors approved changes to certain of Amtrak' s retirement programs...

  • Page 72
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