Amtrak 2014 Annual Report Download - page 33

National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
1509-1694994 25
4. Accounting and Reporting for Federal Payments (continued)
terms and is secured by all rolling stock owned by Amtrak. Neither of the notes bears interest,
unless prepaid, which Amtrak does not intend to do. The Federal Government is entitled to
repayment and interest in the event Amtrak ceases operations, is acquired by another entity, or
seeks relief under bankruptcy or insolvency laws. The amount due to the Federal Government on
the first note may be accelerated by enactment of federal law or upon the occurrence of an event
of default under the leases and mortgage entered into by Amtrak and PSL on June 20, 2001 (see
Penn Station mortgage in Note 6), or upon the occurrence of various actions concerning an
Amtrak bankruptcy, reorganization, or assignment for the benefit of creditors.
5. Preferred and Common Stock
For funds received from the Federal Government prior to December 2, 1997, the Rail Passenger
Service Act (49 U.S.C. 24304) required Amtrak to issue to the Secretary preferred stock equal in
par value to all federal operating payments and most federal capital payments received
subsequent to October 1, 1981, as well as capital and certain operating payments received prior
to that date. As of September 30, 2014 and 2013, 109,396,994 shares of $100 par value preferred
stock were authorized, all of which were issued and outstanding. All issued and outstanding
preferred shares are held by the Secretary for the benefit of the Federal Government. The Amtrak
Reform and Accountability Act of 1997 (the Act) resulted in significant modifications to
Amtrak’ s capital structure. Prior to the Act, dividends were to be fixed at a rate not less than 6%
per annum, and were cumulative. No dividends were ever declared. The Act abolished the voting
rights and the liquidation preference of the preferred stockholder and established that no
additional preferred stock be issued by Amtrak in exchange for federal grants received. At the
time of enactment of the Act, the minimum undeclared cumulative preferred dividend in arrears
for all series issued and currently outstanding approximated $5.8 billion and ranged between
$0.02 and $97.08 per share. Each share of preferred stock is convertible into ten shares of
common stock at the option of the preferred stockholder.
As of September 30, 2014 and 2013, 10,000,000 shares of $10 par value common stock were
authorized, of which 9,385,694 shares were issued and outstanding. The common stockholders,
who acquired their stock from four railroads whose intercity rail passenger operations Amtrak
assumed in 1971, have voting rights for amendments to Amtrak’ s Articles of Incorporation
proposed by the Board of Directors. The Act also required Amtrak to redeem at fair market value
the shares of common stock outstanding as of December 2, 1997, by the end of FY2002. In an
effort to comply with the Act, Amtrak made an offer to the stockholders to redeem the stock for
cash at a price of $0.03 per share. By a letter, dated November 2, 2000, counsel for the four
common stockholders responded to Amtrak and rejected the offer.