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
September 30, 1994 Number 2-54754
GENERAL AMERICAN TRANSPORTATION CORPORATION
Incorporated in the IRS Employer Identification No.
State of New York 36-2827991
500 West Monroe Street
Chicago, Illinois 60661-3676
(312) 621-6200
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 90 days. Yes X No
----- -----
Registrant had 1,000 shares of common stock outstanding (all owned by GATX
Corporation) as of October 28, 1994.
<PAGE>
PART I--FINANCIAL INFORMATION
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
IN MILLIONS
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1994 1993 1994 1993
---- ----- ---- -----
<S> <C> <C> <C> <C>
Gross income.......................... $ 161.5 $ 150.7 $ 472.1 $ 445.4
Costs and expenses
Operating expenses.................. 73.5 68.9 215.0 198.2
Interest............................ 20.2 18.9 58.0 59.9
Provision for depreciation
and amortization.................. 27.6 25.8 82.1 78.7
Selling, general and administrative. 11.6 10.7 34.6 30.6
------- ------ --------- ------
132.9 124.3 389.7 367.4
------- ------ --------- ------
Income before income taxes and equity
in net earnings of affiliated
companies .......................... 28.6 26.4 82.4 78.0
Income taxes.......................... 10.7 16.6 31.1 35.5
------ ------ ------- ------
Income before equity in net earnings
of affiliated companies ............ 17.9 9.8 51.3 42.5
Equity in net earnings
of affiliated companies............. 4.3 4.2 12.7 11.2
------- ------- -------- ------
Net income............................ $ 22.2 $ 14.0 $ 64.0 $ 53.7
======= ======= ======== ========
<FN>
Note - The consolidated balance sheet at December 31, 1993 has been derived from
the audited financial statements at that date. All other consolidated financial
statements are unaudited but include all adjustments, consisting only of normal
recurring items, which management considers necessary for a fair statement of
the consolidated results of operations and financial position for the respective
periods. Operating results for the nine months ended September 30, 1994 are not
necessarily indicative of the results that may be achieved for the entire year
ending December 31, 1994. Certain amounts in the 1993 financial statements have
been reclassified to conform to the 1994 presentation.
</FN>
</TABLE>
-1-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
IN MILLIONS
<CAPTION>
ASSETS
SEPTEMBER 30 DECEMBER 31
1994 1993
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents...................... $ 8.7 $ 11.7
Trade receivables - net........................ 45.5 45.3
Property, plant and equipment
Railcars and support facilities.............. 1,773.3 1,735.8
Tank storage terminals and pipelines......... 1,099.6 1,014.8
--------- ---------
2,872.9 2,750.6
Less - Allowances for depreciation........... (1,255.3) (1,193.3)
--------- ---------
1,617.6 1,557.3
Due from GATX Corporation...................... 376.2 361.5
Investments in affiliated companies............ 169.9 148.2
Other assets................................... 91.8 91.6
--------- ---------
TOTAL ASSETS $ 2,309.7 $ 2,215.6
========= =========
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDER'S EQUITY
SEPTEMBER 30 DECEMBER 31
1994 1993
(UNAUDITED)
<S> <C> <C>
Accounts payable............................... $ 95.2 $ 98.4
Accrued expenses............................... 43.1 36.0
Debt
Short-term debt.............................. 90.0 104.2
Long-term debt............................... 783.9 731.9
Capital lease obligations.................... 121.8 126.8
--------- --------
995.7 962.9
Deferred income taxes.......................... 274.3 265.6
Other deferred items........................... 210.9 208.8
--------- --------
Total liabilities and deferred items 1,619.2 1,571.7
Shareholder's equity
Common Stock - par value $1 per share;
1,000 shares authorized, issued and
outstanding (owned by GATX Corporation)..... - -
Additional capital........................... 335.0 335.0
Reinvested earnings.......................... 335.6 306.5
Cumulative foreign currency translation
adjustment.................................. 19.9 2.4
--------- -------
Total shareholder's equity 690.5 643.9
--------- -------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY $ 2,309.7 $ 2,215.6
========= =========
</TABLE>
-3-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
IN MILLIONS
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 22.2 $ 14.0 $ 64.0 $ 53.7
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 27.6 25.8 82.1 78.7
Deferred income taxes 2.2 8.4 9.4 11.1
Other (includes working capital) (.1) 4.2 (6.1) 15.2
------- ------ ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 51.9 52.4 149.4 158.7
INVESTING ACTIVITIES
Additions to property, plant and equipment:
Railcars and support facilities (80.1) (66.7) (191.3) (160.4)
Tank storage terminals and pipelines (28.4) (20.3) (80.0) (49.0)
Investments in affiliated companies - - - (1.9)
------- ------- ------- -------
Capital additions (108.5) (87.0) (271.3) (211.3)
Proceeds from other asset dispositions 131.4 147.7 135.6 149.4
------- ------- ------- -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 22.9 60.7 (135.7) (61.9)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 25.0 - 82.7 63.3
Repayment of long-term debt (12.0) - (30.7) (13.7)
Net decrease in short-term debt (64.4) (82.2) (14.2) (88.8)
Repayment of capital lease obligations (2.8) (6.2) (4.9) (8.1)
Cash dividends paid to GATX Corporation (11.7) (10.7) (34.9) (31.9)
Net increase in amount due from
GATX Corporation (6.5) (2.8) (14.7) (9.2)
------- ------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (72.4) (101.9) (16.7) (88.4)
------- ------- ------- -------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 2.4 $ 11.2 $ (3.0) $ 8.4
======= ======= ======= =======
</TABLE>
-4-
<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS
COMPARISON OF FIRST NINE MONTHS OF 1994 TO FIRST NINE MONTHS OF 1993
GENERAL
General American Transportation Corporation's (GATC's) net income for the first
nine months of 1994 was $64 million compared to net income of $54 million for
the first nine months of 1993. As a result of the federal tax legislation
enacted in the third quarter of 1993 which increased the federal income tax rate
from 34% to 35% retroactively to January 1, 1993, net income for 1993 included
an increase in income tax expense of $7 million for the cumulative increase in
deferred income taxes. Improved operating performance at Transportation due
to 3,000 more railcars on lease and at Terminals due to increased
utilization and throughput resulted in higher net income.
Cash provided by operating activities in the first nine months of 1994 decreased
$9 million from the comparable 1993 period. The decrease is principally due to
changes in working capital, partially offset by increased net income.
Capital additions in the first nine months of 1994 totaled $271 million compared
to $211 million in the comparable 1993 period. Capital additions at
Transportation included $179 million for railcars and railcar improvements
compared to $142 million in 1993; approximately $12 million was expended on the
upgrade to the repair facilities in 1994 compared to $18 million in 1993.
Terminals invested $80 million in tank construction, other modifications and
improvements, and the acquisition of two additional terminal facilities in 1994;
$51 million was expended in the 1993 period. GATC's full year 1994 capital
spending is forecasted to be approximately $440 million compared to $273
million in 1993. A portion of the 1994 expenditures may not be effected
depending on market conditions. It is anticipated that capital expenditures
will be funded by both internally generated funds and GATC's available
financing sources.
Cash proceeds from other asset dispositions in 1994 and 1993 included $130
million and $138 million, respectively, of proceeds received from the sale
leaseback of railcars at Transportation.
GATC had available unused committed lines of credit totaling $220 million at
September 30, 1994. GATC has a $650 million shelf registration for debt
securities and pass through trust certificates, under which $75 million of
medium-term notes and $93 million of pass through trust certificates have been
issued. During the quarter, GATC issued $25 million of medium-term notes and
completed a sale leaseback of railcars for $130 million, $93 million of which
was the debt portion.
-5-
<PAGE>
RESULTS OF OPERATIONS
Following is a discussion of the operating results of GATC's business segments:
<TABLE>
RAILCAR LEASING AND MANAGEMENT (TRANSPORTATION)
<CAPTION>
Nine Months Ended
(In Millions) September 30
1994 1993 Change
<S> <C> <C> <C> <C>
Gross Income $ 238.8 $ 224.7 $14.1 6%
Net Income $ 40.7 $ 34.8 $ 5.9 17%
</TABLE>
Transportation's gross income of $239 million for the first nine months of
1994 increased 6% from the comparable prior year period. The improvement
resulted from 3,000 additional railcars on lease and slightly higher overall
lease rates. At quarter end, the active fleet totaled 54,500 railcars
compared to 51,500 railcars on lease a year ago. Fleet utilization at
September 30, 1994 was 93% compared to 92% a year ago.
Net income of $41 million increased $6 million from the first nine months of
1993 which included a $4 million increase in the deferred tax provision as a
result of the increase in the federal income tax rate. Income before the tax
rate change was $39 million in 1993; on this more comparable basis, earnings
increased 4% over 1993. Increased rental income was partially offset by
increased fleet repair costs, ownership costs and lower investment earnings.
Operating margins decreased slightly due to the impact of increased fleet
repair costs.
-6-
<PAGE>
<TABLE>
TERMINALS AND PIPELINES (TERMINALS)
<CAPTION>
Nine Months Ended
(In Millions) September 30
1994 1993 Change
<S> <C> <C> <C> <C>
Gross Income $ 220.3 $ 206.9 $13.4 6%
Net Income $ 23.3 $ 18.8 $ 4.5 24%
</TABLE>
Terminals' gross income increased 6% from the first nine months of 1993
reflecting continuing strong demand at the pipeline operations, increased
chemical tanks and services at several terminals, and strong activity at
domestic petroleum terminals. Capacity utilization at Terminals' wholly-
owned facilities was 94 percent at the end of the third quarter compared to
92 percent a year ago. Throughput for the nine months was 513 million
barrels compared to 461 million barrels a year ago reflecting the overall
improvement in the U.S. economy.
Net income of $23 million increased $4 million from the first nine months of
1993; $2 million of this increase was due to a higher provision for deferred
taxes in 1993 as a result of the increase in the tax rate. Income in 1993
before the tax rate change was $21 million; on this more comparable basis,
earnings increased 10% over 1993. A slightly improved operating margin was
partially offset by higher selling, general and administrative costs
primarily attributable to higher compensation, training and information
system costs. Equity in net earnings of the foreign affiliates increased $1.5
million due to strong demand at the Belgium and Singapore terminals; the
Singapore terminals also benefitted from infrastructure growth.
-7-
<PAGE>
<TABLE>
FEDERAL TAX RATE CHANGE IN 1993
Following is a table showing the effect of the federal tax legislation which
increased the federal income tax rate from 34% to 35% retroactively affecting
all of 1993.
<CAPTION>
Income
Before Tax
Net Tax Rate Rate Net
Income Change Change(A) Income
In Millions,
Nine Months Ended Sept. 30 -----1994----- ----------1993-----------
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Railcar Leasing and Management $ 40.7 $ 39.1 $ (4.3) $ 34.8
Terminals and Pipelines 23.3 21.2 (2.4) 18.8
Other - .1 - .1
Total Consolidated Amounts $ 64.0 $ 60.4 (6.7) $ 53.7
====== ===== ===== ======
(A) Effect of tax rate change on pre-1993 deferred taxes.
</TABLE>
-8-
<PAGE>
COMPARISON OF THIRD QUARTER 1994 TO
THIRD QUARTER 1993
GENERAL
For the third quarter of 1994, net income was $22 million compared to $14
million for the third quarter of 1993.
<TABLE>
GROSS INCOME
<CAPTION>
- -----------------------------------------------------------------------------------
(In Millions) Three Months Ended
September 30
Business Segment 1994 1993 Change
<S> <C> <C> <C> <C>
Railcar Leasing and
Management $ 80.8 $ 76.2 $4.6 6%
Terminals and Pipelines 76.4 69.8 6.6 9
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
NET INCOME
- ----------------------------------------------------------------------------------
<CAPTION>
(In Millions) Three Months Ended
September 30
Business Segment 1994 1993 Change
<S> <C> <C> <C> <C>
Railcar Leasing and
Management $ 14.0 $ 9.1 $4.9 54%
Terminals and Pipelines 8.2 4.8 3.4 71
- -----------------------------------------------------------------------------------
</TABLE>
Increases and decreases in gross income and net income between these quarters
for all segments were principally due to the same reasons as previously
discussed in relation to the nine-month periods. As a result of the 1993
federal tax legislation, net income for the third quarter of 1993 includes a $7
million charge for the increase in deferred income taxes resulting from the
change in the tax rate.
-9-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
GATC has previously reported various lawsuits seeking damages arising out of the
May 1989 explosion in San Bernardino, California. Of those suits, Goldie, et
al, v. Southern Pacific, et al, filed May 1990 in the County of San Bernardino
was settled in July 1994. Based upon information known to management, it
remains management's opinion that if damages are assessed and taking into
consideration probable insurance recovery, the ultimate resolution of the
lawsuits arising out of the May 1989 explosion will not have a material effect
on GATC's consolidated financial position or results of operations.
Item 6. Exhibits and Reports on Form 8-K. Page
(a) 12 Statement regarding computation of ratio of earnings to
fixed charges. 12
27 Financial Data Schedule for General American Transportation
Corporation submitted to the SEC along with the electronic
submission of this Quarterly Report on Form 10-Q.
(b) GATC filed a Current Report on Form 8-K dated
August 12, 1994, with respect to the offering of Pass
Through Trust Certificates in connection with the
sale leaseback of 2,312 railcars. Copies of the
forms of the underlying documents entered into by
GATC as part of this transaction and the related
trust indentures were filed as part of the 8-K Report.
-10-
<PAGE>
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 TRANSPORTATION CORPORATION
(Registrant)
/s/D. Ward Fuller
--------------------------------------------
D. Ward Fuller
President, Chief Executive Officer
and Director
(Duly Authorized Officer)
/s/Donald J. Schaffer
-------------------------------------------
Donald J. Schaffer
Vice President, Finance
(Chief Financial Officer)
Date: November 10, 1994
-11-
EXHIBIT 12
GENERAL AMERICAN TRANSPORTATION CORPORATION
<TABLE>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
IN MILLIONS, EXCEPT FOR RATIOS
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Earnings available for fixed charges:
Net income................................... $ 22.2 $ 14.0 $ 64.0 $ 53.7
Add (deduct):
Income taxes............................... 10.7 16.6 31.1 35.5
Equity in net earnings of affiliated
companies, net of dividends received..... (3.4) (3.4) (10.4) (8.5)
Interest on indebtedness and amortization
of debt discount and expense............. 20.2 18.9 58.0 59.9
Amortization of capitalized interest....... .3 .3 .9 .9
Portion of rents representative of interest
factor (deemed to be one-third).......... 3.5 3.4 10.4 8.4
------ ------ ------ ------
Total earnings available for fixed charges... $ 53.5 $ 49.8 $154.0 $149.9
====== ====== ====== ======
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense............... $ 20.2 $ 18.9 $ 58.0 $ 59.9
Capitalized interest......................... .5 .7 1.9 2.1
Portion of rents representative of interest
factor (deemed to be one-third)............ 3.5 3.4 10.4 8.4
------ ------ ------ ------
Total fixed charges.......................... $ 24.2 $ 23.0 $ 70.3 $ 70.4
====== ====== ====== ======
Ratio of earnings to fixed charges(A).......... 2.21x 2.17x 2.19x 2.13x
<FN>
(A) The ratios of earnings to fixed charges represent the number of times
"fixed charges" are covered by "earnings." "Fixed charges" consist of
interest on outstanding debt and capitalized interest, one-third (the
proportion deemed representative of the interest factor) of rentals, and
amortization of debt discount and expense. "Earnings" consist of
consolidated net income before income taxes and fixed charges, less equity
in net earnings of affiliated companies net of distributions received.
</FN>
</TABLE>
-12-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED INCOME STATEMENT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 51
<ALLOWANCES> 6
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2873
<DEPRECIATION> 1255
<TOTAL-ASSETS> 2310
<CURRENT-LIABILITIES> 0
<BONDS> 906<F1>
<COMMON> 0
0
0
<OTHER-SE> 691
<TOTAL-LIABILITY-AND-EQUITY> 2310
<SALES> 0
<TOTAL-REVENUES> 472
<CGS> 0
<TOTAL-COSTS> 215<F2>
<OTHER-EXPENSES> 82<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> 83<F4>
<INCOME-TAX> 31
<INCOME-CONTINUING> 64
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THIS VALUE CONSISTS OF TWO COMPONENTS; LONG-TERM DEBT OF 784 MILLION AND
CAPITAL LEASE OBLIGATIONS OF 122 MILLION; SHORT-TERM DEBT IS NOT INCLUDED IN
THIS VALUE.
<F2>THIS VALUE REPRESENTS OPERATING EXPENSES ON THE CONSOLIDATED INCOME STATEMENT.
<F3>THIS VALUE CONSISTS OF PROVISION FOR DEPRECIATION ADN AMORTIZATION ON THE
CONSOLIDATED INCOME STATEMENT.
<F4>THIS VALUE REPRESENTS INCOME BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF
AFFILIATED COMPANIES.
</FN>
</TABLE>
