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Don Phillips column about Amtrak accounting

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Information regarding Amtrak's depreciation policies and practices can be found on Pages 14 - 16, Notes to Consolidated Financial Statements, of the company's 2012 Consolidated Financial Statements.  These are the lastest audited annual financial reports. Amtrak uses the group method to depreciate classes of capital investment. This means, for example, that all the equipment in a class, i.e. Superliner I sleeping cars, would be depreciated over the same time period at a constant rate even though they may have gone into service over a year. Grouping significant capital assets for depreciation is not unusual. In reading the notes I noted that Amtrak periodically engages engineering firms to assess its depreciation schedules, i.e. useful lives, fair value, salvage values, rates, etc.  Firms that do this work are not likely to sully their reputations by bending their best judgement of Amtrak's depreciation practices to play to management or a special interest audience. How much depreciation do the long distance trains wear?  Without access to Amtrak's detailed property records, it is impossible to say. It is reasonable to conclude, I believe, that the bulk of Amtrak's depreciation is driven by its investments in the NEC. In several of my analysis's  I have arbitrarily assigned 80 per cent of the depreciation to the NEC and 10 per cent to each of the other product lines, i.e. short haul corridor trains and long distance trains. I wrote (real paper and envelope) to Mr. Phillips asking him from whom he got his information regarding Amtrak's cost allocation information. It is important to support the conclusions that he arrived at. I am seeking information regarding the company's depreciation schedules, inasmuch as they could be quite informative. I have not heard from him. The depreciation expense driven by the long haul trains would be primarily on the locomotives and cars, plus any allocated depreciation when these trains are operating over Amtrak's owned infrastructure and any billed depreciation from the hoist railroads. Amtrak's depreciation in FY12 was $663.7 million.  The long distance trains lost $600.9 million in FY12 before depreciation, interest, and ancillary charges. They wiped out the NEC operating profit without any help from depreciation. Their results are worse after application of depreciation, interest and ancillary charges. In an analysis that I performed on FY10 numbers year or so ago, I calculated that the fully allocated loss per passenger mile for the NEC was 20.8 cents vs. 16.5 cents for the short haul corridor trains and 23.1 cents for the long distance trains. Again, I had to make some assumptions about depreciation, interest, and ancillary charges. Phillips and others are correct when they say that the Acela or NEC is not profitable.  They had an operating profit of $281.9 million before depreciation, etc. in FY12.  However, if my assumption that the NEC wears 80 per cent of Amtrak's depreciation is anywhere near being correct, then the loss on the NEC, which would be skewed onto the Acela because of the capital improvements made to hoist it, would be in the neighborhood of $241.2 million.  Again, without access to Amtrak's books, my assumptions could be wrong.  The loss could be greater or less.
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