Amtrak 2015 Annual Report Download

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CONSOLIDATED FINANCIAL STATEMENTS
National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Years Ended September 30, 2015 and 2014
With Report of Independent Auditors
Ernst & Young LLP

Table of contents

  • Page 1
    CONSOLIDATED FINANCIAL STATEMENTS National Railroad Passenger Corporation and Subsidiaries (Amtrak) Years Ended September 30, 2015 and 2014 With Report of Independent Auditors Ernst & Young LLP

  • Page 2
    ... Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Financial Statements Years Ended September 30, 2015 and 2014 Table of Contents Report of Independent Auditors ...1 Audited Consolidated Financial Statements Consolidated Balance Sheets ...Consolidated Statements of Operations...

  • Page 3
    ... Report on the Financial Statements 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, 2015 and 2014, and the related consolidated...

  • Page 4
    ... financial position of National Railroad Passenger Corporation and subsidiaries at September 30, 2015 and 2014, 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 5
    ... Materials and supplies, net of allowances of $27,782 and $46,074 at September 30, 2015 and 2014, 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...

  • Page 6
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Balance Sheets (continued) (In Thousands of Dollars, Except Share Data) September 30, 2015 2014 Liabilities and capitalization Current liabilities: Accounts payable Accrued expenses and other current liabilities Deferred...

  • Page 7
    ... Corporation and Subsidiaries (Amtrak) Consolidated Statements of Operations (In Thousands of Dollars) Year Ended September 30, 2015 2014 Revenues: Passenger related Commuter Other Total revenues Expenses: Salaries, wages, and benefits Train operations Fuel, power, and utilities Materials Facility...

  • Page 8
    ... Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Statements of Comprehensive Loss (In Thousands of Dollars) Year Ended September 30, 2015 2014 Net loss Other comprehensive loss: Pension and other postretirement benefit items: Net loss arising during the period Prior service...

  • Page 9
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Statements of Changes in Capitalization (In Thousands of Dollars) Accumulated Other Comprehensive Loss Preferred Stock Common Stock Other Paid-in Capital Accumulated Deficit Total Balance as of September 30, 2013 ...

  • Page 10
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Consolidated Statements of Cash Flows (In Thousands of Dollars) Year Ended September 30, 2015 2014 Cash flows from operating activities Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation...

  • Page 11
    ... 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 certain states and transit agencies, provides equipment and right-of-way maintenance...

  • Page 12
    ...following two quarters. PRRIA 2015 directs the formation of committees and, where applicable, requires Amtrak to work in partnership with stakeholders including representatives of transit, state and Federal rail transportation authorities to plan, implement, and fund certain rail programs. There are...

  • Page 13
    ... using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Principles of Consolidation The Consolidated Financial Statements reflect the consolidated operations of Amtrak and its four subsidiaries, Chicago Union Station Company...

  • Page 14
    ... current earnings in the Consolidated Statements of Operations. Changes in the fair value of its fuel derivative contracts are recorded as a component of "Fuel, power, and utilities" in the Consolidated Statements of Operations. Amtrak periodically enters into interest rate swap agreements to manage...

  • Page 15
    ... their estimated useful lives or their respective lease terms, and the related depreciation expense is reported within "Depreciation and amortization" in the Consolidated Statements of Operations. Land is carried at cost. For assets depreciated under the group method, upon normal sale or retirement...

  • Page 16
    ...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 17
    ... September 30, 2015 and 2014 is included in "Casualty reserves" in the Consolidated Balance Sheets. The reserve balance as of September 30, 2015 includes the Company's best estimate of the liability for passenger and employee claims incurred related to the derailment of Amtrak's Train #188, which...

  • Page 18
    ... Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 3. Basis of Presentation and Summary of Significant Accounting Policies (continued) Year Ended September 30, 2015 2014 Ticket State contribution Food and beverage Total passenger related...

  • Page 19
    ... of 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, and health care cost trend rates), estimated costs for...

  • Page 20
    ...ending September 30, 2017, with early adoption permitted. As the Company expects to continue to receive funding from the Federal Government, Amtrak does not expect the adoption of this ASU to have a significant impact on its consolidated statements of financial condition or results of operations. 18

  • Page 21
    ... material effect on Amtrak's consolidated financial statement presentation or disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU was issued to increase transparency and comparability among companies by requiring most leases to be included in the balance sheet...

  • Page 22
    ...cumulatively received $240.5 million and $133.7 million, respectively, which were recorded in "Other paid-in capital" in the Consolidated Balance Sheets and Statements of Changes in Capitalization. Additional appropriations are made to directly fund operations of Amtrak's Office of Inspector General...

  • Page 23
    ... Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 4. Accounting and Reporting for Federal Payments (continued) as of September 30, 2015 and 2014, was issued in 1983 and matures on November 1, 2082, with successive 99-year renewal terms...

  • Page 24
    ... Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 6. Mortgages and Debt Total debt is recorded at amortized cost in the Consolidated Balance Sheets and consists of the following (in thousands): September 30, 2015 Current Long-Term...

  • Page 25
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 6. Mortgages and Debt (continued) High Speed Maintenance Facilities On October 30, 2012, Amtrak purchased the equity ownership interests related to leveraged lease agreements ...

  • Page 26
    ... of the parking garage in "Right-of-Way and other properties" in the Consolidated Balance Sheets as of September 30, 2015 and 2014. The project was completed in FY2006. Term Loan A and Term Loan B On November 27, 2013, the Company entered into a $130.0 million credit facility with PNC National Bank...

  • Page 27
    ... for the years ended September 30, 2015 and 2014, respectively, which 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...

  • Page 28
    ...to Consolidated Financial Statements (continued) 6. Mortgages and Debt (continued) Equipment Loans In 2010 and 2009, Amtrak exercised early buyout options to purchase 40 locomotives and eight superliner passenger cars under capital leases. Amtrak assumed the debt related to the capital leases as new...

  • Page 29
    ... a default, and upon delivery of these audited financial statements, the Company will have satisfied all of its financial reporting covenant obligations. 7. Leasing Arrangements Amtrak leases equipment, primarily passenger cars and locomotives, and related maintenance infrastructure under capital...

  • Page 30
    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 31
    ... Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 7. Leasing Arrangements (continued) Operating Leases As of September 30, 2015, Amtrak is obligated for the following minimum rental payments under operating lease agreements (in thousands): Year...

  • Page 32
    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 for...

  • Page 33
    ... Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 8. Fair Value Measurements (continued) The estimated fair values of the non-derivative financial instruments listed above are based upon discounted cash flow analyses using interest rates...

  • Page 34
    ...2014 2015 Deferred tax assets: Net operating loss carryforward Pension and other postretirement employee benefits Capital leases Claims reserves Accrued vacation and other compensation accruals Other accruals Deferred gain on sale leaseback Insurance recoveries Inventory reserve Capital loss (rate...

  • Page 35
    ... payment schedule upon the contractor's successful completion of certain tasks (milestones) during the contract. As of September 30, 2015, the Company has incurred $178.4 million in project-related costs. Deliveries of the cars started in December 2014. As of September 30, 2015, the Company has...

  • Page 36
    ... be recognized by Amtrak until further confirmation of the assessed damages is agreed to by the insurers or additional cash is received. On September 17, 2014, the Company filed a lawsuit in the United States District Court for the Southern District of New York regarding insurance claims for losses...

  • Page 37
    ... on current and upcoming train operations. The NTSB adopted its final report on May 17, 2016. As of August 3, 2016, the Company has received a total of 242 claims related to the Train #188 Derailment; and 102 lawsuits have been filed on behalf of 132 passengers and 2 working employees. The Company...

  • Page 38
    ... 2015. As of August 3, 2016, Amtrak was still negotiating labor contracts with all of its unionized workforce. As of September 30, 2015, the Company has accrued $5.1 million within "Accrued expenses and other current liabilities" in the Consolidated Balance Sheet, which represents its best estimate...

  • Page 39
    ... rail transportation system served by Amtrak were required to be readily accessible to and usable by individuals with disabilities no later than July 26, 2010, 42 U.S.C. §12162 (e). This requirement applies to all components of a station used by the general public, including passenger platforms...

  • Page 40
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 10. Commitments and Contingencies (continued) specified in the rule. In October 2015, Congress passed the Surface Transportation Extension Act of 2015, which included a three-year...

  • Page 41
    ... in "Right-ofway and other properties" in the Consolidated Balance Sheets as of September 30, 2015 and 2014, respectively, relates to estimated future capital expenditures for environmental remediation. Amtrak has not recorded any receivables for recoveries from other parties or from insurance...

  • Page 42
    ...exchange. Amtrak funds a tax-advantaged health reimbursement account to assist retirees with medical expenses. Eligibility requirements for future retirees were changed to age 55 with ten years of service, or age 60 with five years of service for employees who were age 50 or over as of June 30, 2015...

  • Page 43
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) • Employees less than age 50 on June 30, 2015 are no longer eligible for subsidized benefits under the Plan. These ...

  • Page 44
    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 as of September 30, 2015 and 2014 ...

  • Page 45
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Plan Assets The Company's pension plan asset allocation at September 30, 2015 and 2014, and target allocation for 2016, are as ...

  • Page 46
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Domestic Equity Securities This investment category consists of common stock issued by U.S. corporations and American Depository ...

  • Page 47
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Fixed Income Securities This investment category consists of Agency bonds, U.S. government securities, Corporate bonds, Government...

  • Page 48
    ... and reviewed JP Morgan's Money Market Funds Annual Report and reviewed the investment valuation for JPMorgan 100% U.S. Treasury Securities Money Market Fund in the significant accounting policies section of the report, which states that, "Each Fund has elected to use the amortized cost method...

  • Page 49
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) The following table represents the fair values of the Company's pension assets by level within the fair value hierarchy as of ...

  • Page 50
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Total Level 1 Level 2 Level 3 September 30, 2014 Agency bonds U.S. government securities Corporate bonds Government bonds ...

  • Page 51
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Pension Benefits Other Benefits Year ending September 30, 2016 2017 2018 2019 2020 2021-2025 $ 22,263 $ 23,887 25,329 26,565 27...

  • Page 52
    ... Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 12. Postretirement Employee Benefits (continued) Assumed health care cost trend rates have a significant effect on the amounts reported for the other defined benefit post retirement plans...

  • Page 53
    National Railroad Passenger Corporation and Subsidiaries (Amtrak) Notes to Consolidated Financial Statements (continued) 13. Subsequent Events (continued) plus 1.0%; or (b) the LIBOR rate option, which is equal to the LIBOR rate for the applicable period plus a margin based on the Company's Standard...

  • Page 54
    ... the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of National Railroad Passenger Corporation and subsidiaries (Amtrak or the Company), which comprise the consolidated balance sheet...

  • Page 55
    ... Amtrak' s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. The status of prior year instances of deficiencies is presented in Appendix B. 1607-2003957 A member firm of Ernst & Young Global Limited...

  • Page 56
    ...integral part of an audit performed in accordance with Government Auditing Standards in considering the entity' s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ey August 3, 2016 1607-2003957 A member firm of Ernst & Young Global Limited 54

  • Page 57
    ... 2015 audit, we have identified two significant deficiencies that when aggregated result in a material weakness in the design and operation of information systems controls. The significant deficiencies relate to information technology general controls, specifically user access and change management...

  • Page 58
    ... the financial reporting. Consistent, current and complete system security documentation prepared by all system owners. Follow relevant Amtrak guidance during the review and approval of all program changes. Documentation should be prepared and retained for all phases of the change management process...

  • Page 59
    Appendix A - Material Weaknesses in Internal Control Over Financial Reporting (continued) Management' s Response: We agree with these recommendations and have implemented several corrective action plans to address the root causes. Many improvements have been made in the third and fourth quarters of...

  • Page 60
    ... accurate and timely financial statements. Two significant deficiencies related to information technology general controls, user access and change management controls that aggregate to a material weakness in the design and operation of the information systems controls. Material Weakness Remediated...

  • Page 61
    ... of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2016 Ernst & Young LLP. All Rights Reserved. ey.com