SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended Commission File Number
September 30, 1998 333-58731
General American Railcar Corporation II
Incorporated in the IRS Employer Identification
State of Delaware 36-4247116
500 West Monroe Street
Chicago, IL 60661-3676
(312) 621-6451
The registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with a
reduced disclosure format.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90days. Yes No [X]
Registrant had 1,000 shares of common stock outstanding (all owned by
General American Transportation Corporation) as of October 31, 1998.
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PART I - FINANCIAL INFORMATION
GENERAL AMERICAN RAILCAR CORPORATION II
STATEMENT OF INCOME
(UNAUDITED)
PERIOD FROM JULY 8, 1998 (DATE OF INCORPORATION)
TO SEPTEMBER 30, 1998
In Thousands
<S> <C>
Gross income...................................................... $ 140
Costs and expenses
Operating lease expense....................................... 83
Other operating costs......................................... 11
--------------
94
--------------
Income before income taxes........................................ 46
Income taxes...................................................... 21
==============
Net income $ 25
==============
_________
<FN>
Note- The financial statements are unaudited but include all adjustments which
management considers necessary for a fair statement of the results of operations
and financial position for the period. Operating results for the period from
July 8, 1998 (date of incorporation) to September 30, 1998 are not indicative of
the results that may be achieved for the period from July 8, 1998 (date of
incorporation) to December 31, 1998.
</FN>
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<CAPTION>
GENERAL AMERICAN RAILCAR CORPORATION II
BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 1998
In Thousands
<S> <C>
ASSETS
Cash and cash equivalents................................................... $2,000
Due from General American Transportation Corporation (GATC) ................ 129
-----------------
TOTAL ASSETS................................................................ $2,129
=================
LIABILITIES AND SHAREHOLDER'S EQUITY
Trade accounts payable...................................................... $ 83
Income taxes payable........................................................ 15
Deferred taxes.............................................................. 6
-----------------
Total liabilities and deferred items................................... 104
Shareholder's equity
Common stock - par value $1 per share: authorized, issued and
outstanding, 1,000 shares (owned by GATC)............................... 1
Additional capital...................................................... 1,999
Reinvested earnings..................................................... 25
-----------------
Total shareholder's equity............................................. 2,025
-----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................. $2,129
=================
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<CAPTION>
GENERAL AMERICAN RAILCAR CORPORATION II
STATEMENT OF CASH FLOWS
(UNAUDITED)
PERIOD FROM JULY 8, 1998 (DATE OF INCORPORATION)
TO SEPTEMBER 30, 1998
In Thousands
<S> <C>
OPERATING ACTIVITIES
Net income .......................................................... $ 25
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes 6
Change in operating assets and liabilities..................... (31)
-----------------
Net cash provided by operating activities.............................. -
INVESTING ACTIVITIES
Purchases of equipment ............................................. (208,402)
Proceeds on disposal of equipment..................................... 208,402
-----------------
Net cash provided by investing activities.............................. -
FINANCING ACTIVITIES
Contributed capital from GATC ......................................... 2,000
-----------------
Net cash provided by financing activities.............................. 2,000
-----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 2,000
=================
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MANAGEMENT'S DISCUSSION OF OPERATIONS
GENERAL
General American Railcar Corporation II ("GARC II" or "the Company") is a newly
organized wholly-owned special purpose subsidiary of General American
Transportation Corporation ("GATC") which was formed on July 8, 1998. The
Company filed an S-3 registration statement with the Securities and Exchange
Commission which became effective on September 28, 1998. The Company is
structured so that based on existing facts, circumstances, and assumptions, the
Company is, in the opinion of counsel, "bankruptcy remote" in that, if a GATC
bankruptcy proceeding were to occur, the assets and liabilities of GARC II would
not be consolidated with those of GATC for purposes of the proceeding. However,
there could be no absolute assurance that in the event of insolvency the court
would not consolidate the assets, in particular if there were to be material
changes in the existing facts, circumstances and assumptions.
Commencing operations in September 1998, GARC II was organized for the primary
purposes of entering into a sale and leaseback of 3,380 specialized railcars and
subleasing those railcars to customers under full service leases. The fleet
composition is approximately 75% tank cars and 25% covered hopper cars. A full
service lease encompasses maintaining and servicing the railcars subject to
lease, paying ad valorem property taxes, and providing several ancillary
services.
The Company has entered into a management agreement with GATC, whereby GATC
maintains and services the railcars, for which GARC II pays GATC a monthly
management fee. Additionally, the Company was initially capitalized by a
$2,000,000 equity contribution from GATC.
As part of the management agreement, the Company's transactions are processed on
GATC's information systems. GATC believes that it has an effective program in
place to address what is commonly referred to as the Year 2000 issue in a timely
manner. If GATC's plan is not completed on a timely basis, the Year 2000 issue
could have a significant impact on GATC and the Company. Based on the progress
and results of the Year 2000 project thus far, GATC believes that the Year 2000
issue should not pose significant operational problems.
Management's discussion includes statements which may constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. This information may involve risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements. Although the company believes that the expectations
reflected in such forward-looking statements are based on reasonable
assumptions, such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected. These risks and
uncertainties include, but are not limited to, unanticipated changes in the
markets served by GARC II, such as the petroleum and chemical industries.
RESULTS OF OPERATIONS
On September 29, 1998, GARC II commenced leasing its 3,380 railcars to its 82
customers, whose businesses fall within the chemical, petroleum, agricultural
and mineral industries. Consistent with its expectations of leasing the railcars
at an average rate of $622 per month (roughly $21 per day), revenues for the two
days of operations in the period ending September 30, 1998 were $140,000. After
operating lease expense, management fees, and other costs, net income was
$25,000, or 18% of revenue.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) 27 Financial Data Schedule for General
American Transportation Corporation
for the quarter ended September 30, 1998.
Submitted to the SEC along with the
electronic submission of this
Quarterly Report on Form 10-Q.
(b) No reports on Form 8-K were filed
during the reporting period.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GENERAL AMERICAN RAILCAR CORPORATION II
(Registrant)
/s/D. Ward Fuller
-------------------------------------------------------------------------
D. Ward Fuller
President and Director
(Duly Authorized Officer)
/s/Donald J. Schaffer
-------------------------------------------------------------------------
Donald J. Schaffer
Principal Financial and Accounting Officer
Date: November 13, 1998
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EXHIBITS FILED WITH DOCUMENT
27 Financial Data Schedule for General
American Transportation Corporation
for the quarter ended September 30, 1998.
Submitted to the SEC along with the
electronic submission of this
Quarterly Report on Form 10-Q.
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<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Balance Sheet
and Income Statement of GARC II and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> other
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> SEP-28-1998
<PERIOD-END> SEP-30-1998
<CASH> 2000
<SECURITIES> 0
<RECEIVABLES> 129
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2129
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 2024
<TOTAL-LIABILITY-AND-EQUITY> 2129
<SALES> 0
<TOTAL-REVENUES> 140
<CGS> 0
<TOTAL-COSTS> 94<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 46
<INCOME-TAX> 21
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Not applicable because GARC has an unclassified Balance Sheet.
<F2>This value represents cost and expenses on hte Income Statement.
</FN>
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