Amtrak 2013 Annual Report Download - page 79

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National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
1411-1359280 40
7. Mortgages and Debt (continued)
certain of its borrowing arrangements to provide on a timely basis its audited financial statements
as of and for the year ended September 30, 2013. Waivers were received from certain lenders
where necessary to prevent a default, and upon delivery of these audited financial statements, the
Company will have satisfied all of its financial reporting covenant obligations.
8. Leasing Arrangements
Amtrak leases equipment, primarily passenger cars and locomotives, and related maintenance
infrastructure under capital leasing arrangements. Amtrak has entered into various lease
transactions in which the lease structure contains variable interest entities (VIEs). These VIEs
were created solely for the purpose of doing lease transactions and have no other activities, assets
or liabilities outside of the lease transactions. In some of the arrangements, Amtrak has the
option to purchase some or all of the assets at a fixed price, thereby creating variable interests for
Amtrak in the VIEs.
Amtrak maintains and operates the assets based on contractual obligations within the lease
arrangements, which set specific guidelines consistent within the industry. As such, Amtrak has
no control over activities that could materially impact the fair value of the leased assets. Amtrak
does not hold the power to direct the activities of the VIEs and, therefore, does not control the
ongoing activities that have a significant impact on the economic performance of the VIEs.
Additionally, Amtrak does not have the obligation to absorb losses, or the right to receive
benefits of the VIEs.
As of September 30, 2013 and 2012, the gross amount of assets recorded under capital leases
was $1.6 billion and $2.0 billion, respectively, with accumulated amortization of $0.8 billion and
$1.0 billion, respectively.
Amtrak is subject to various covenants and restrictions under its leasing arrangements. Amtrak
has given guarantees or entered into reimbursement agreements in connection with certain of
these lease transactions. A default by Amtrak or acceleration of Amtrak’ s indebtedness may
result in cross-default to other Amtrak indebtedness, and may have a material adverse effect on
the Company (see Note 7).