Amtrak 2015 Annual Report Download - page 17

National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
3. Basis of Presentation and Summary of Significant Accounting Policies (continued)
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levels is the best estimate to be used of the future. At this approximate level of funding, the Company
determined that no indicators of impairment existed as of September 30, 2015. If future Federal Government
funding drops below historical levels, substantial impairment may occur as discussed in Note 2.
On October 29, 2012, Super Storm Sandy (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,
partial service was resumed on November 1st and full service was resumed on November 15th. Amtrak
sustained damage to tunnels and other structures in New York and New Jersey, requiring repair work and
disrupting passenger service. Costs incurred by Amtrak, including repairs to damaged property, during
FY2015 and FY2014 totaled approximately $15.7 million and $7.0 million, respectively. Amtrak currently
estimates that total damages related to Sandy will be at least $1.05 billion, most of which are related to
cleaning the tunnels and replacing certain assets inside them over time. The tunnels are currently operating
at full capacity, concurrently with the cleaning and replacement work. The Company determined that there
was no impairment to the tunnels as of September 30, 2015, and expenses related to cleaning and replacement
costs are being recognized as incurred. With the assistance of a third-party consultant, the Company reviewed
the impacted assets and determined that certain infrastructure assets associated with specific locations along
the NEC route would need to be replaced sooner than previously anticipated. Accordingly, the Company
assigned unique group depreciation rates to these assets. As a result, depreciation expense totaling
$193.1 million is being accelerated over the remaining life of these assets. Of this amount, $147.1 million
for ventilation facilities and bridges is being accelerated over a total of five years, $33.5 million for the East
River Tunnel is being accelerated over a total of 11 years, and $12.5 million for the North River Tunnel is
being accelerated over a total of 17 years. The acceleration of depreciation expense increased the Company’s
net loss by $31.7 million in both FY2015 and FY2014.
Casualty Losses and Claims
Provision is made for Amtrak’s portion of the estimated actuarial liability for unsettled casualty and other
claims. Personal injury liability and ultimate loss projections are undiscounted and estimated using standard
actuarial methodologies. These actuarial estimates include an estimate for unasserted claims. As of September
30, 2015 and 2014, the reserve for casualty losses and claims was $498.3 million and $196.7 million,
respectively. Of the total amount reserved as of September 30, 2015 and 2014, the estimated current claims
liability included in “Accrued expenses and other current liabilities” in the Consolidated Balance Sheets was
$57.6 million and $46.0 million, respectively. The balance of the reserve as of both 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 occurred on May 12, 2015 (the Train #188
Derailment). See Note 10, Commitment and Contingencies, for additional information on the derailment.
Revenue Recognition
“Passenger related” revenue in the Consolidated Statements of Operations includes ticket revenue, state
contribution revenue associated with requested service provided by Amtrak, and food and beverage revenue
as follows (in millions):