Amtrak 2015 Annual Report Download - page 38

National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
10. Commitments and Contingencies (continued)
36
claim reserve liability (excluding the expected FY2016 medical payments) and the insurance receivable are
both classified as long term as of September 30, 2015, as the claims are unlikely to settle in FY2016.
In addition, Amtrak suffered property damage in the incident. The estimated replacement cost of property
damaged is $57.6 million. All damages in excess of Amtrak’s property insurance deductible of $10.0 million
are expected to be covered by insurance. As a result of the incident, Amtrak recorded in FY2015 insurance
recoveries of $18.7 million based on estimated losses recognized related to capitalized assets and expenses
incurred in FY2015. Amtrak recorded $4.5 million as an increase in Accumulated Depreciation related to
damaged assets and $14.2 million as a reduction of “Other” expenses related to losses recognized on leased
assets and cost incurred. As of August 3, 2016, the Company has received insurance proceeds of $25.5 million,
of which $10.0 million was received in FY2015 and $15.5 million was received in FY2016. The amount
received in FY2016 in excess of the amount recognized in the Consolidated Statement of Operations and
Consolidated Balance Sheets for FY2015 will be recognized in FY2016.
Labor Agreements
Excluding employees within Amtrak’s OIG, approximately 85% of Amtrak’s labor force is covered by labor
agreements. Under the Railway Labor Act, labor contracts never expire but are instead opened periodically
for renegotiation. Although there are no timeframes for negotiations to be completed, it is likely there could
be retroactive wage increases in settlements, consistent with prior agreements. On January 2, 2015, all of
Amtrak’s labor contracts except for the one with the Fraternal Order of Police (FOP) were opened for
renegotiation. The FOP contract was opened on October 2, 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 for retroactive wage
increases resulting from settlements of such agreements for services through that date. There was no accrual
as of September 30, 2014, as all unions had ratified contracts as of that date.
Legal Proceedings
In May 2008, APU, corporate successor to Penn Central, filed a lawsuit in federal court in Cincinnati, Ohio,
asserting that Amtrak “eroded” the value of its common stock. APU sought $52.0 million plus 40 years of
interest. APU owns 55.8% of Amtrak’s common stock. Under the Rail Passenger Service Act of 1970, APU
was permitted to have Amtrak assume APU’s responsibility to operate intercity passenger rail service in
return for paying Amtrak one-half of APU’s 1969 passenger service losses. APU took advantage of that
opportunity, entered into a 1971 agreement with Amtrak, paid $52.0 million as required, and chose to receive
Amtrak common stock at par value (rather than tax deductions of equal value). APU’s claims were litigated
in arbitration proceedings and before the federal court. In an order dated June 21, 2011, the federal court
granted Amtrak’s motion to dismiss APU’s lawsuit. In a second order dated September 13, 2011, the court
also denied APU’s motion to alter the court’s judgment for Amtrak. APU filed an appeal to the U.S. Court
of Appeals for the Sixth Circuit. The Sixth Circuit affirmed the District Court’s dismissal of APU’s complaint
except for one procedural due process claim that was remanded to the District Court. On remand, the District
Court granted Amtrak’s motion to dismiss the case, for a second time, and also dismissed APU’s subsequent
motion to reconsider or alter that decision. APU appealed the second dismissal on June 29, 2015. Legal