SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 2-54754
General American Transportation Corporation
Incorporated in the IRS Employer Identification Number
State of New York 36-2827991
500 West Monroe Street
Chicago, Illinois 60661-3676
312/621-6200
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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 March 4, 1994.
General American Transportation Corporation meets the conditions set
forth in General Instruction J(1) of Form 10-K and therefore is filing this
form with the reduced disclosure format.
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PART I
Item 1. Business
General American Transportation Corporation (GATC) is a wholly-owned subsidiary
of GATX Corporation (GATX) and is engaged in the leasing and management of
railroad tank cars and specialized freight cars and owns and operates tank
storage terminals, pipelines and related facilities.
Industry Segments
Railcar Leasing and Management
The Railcar Leasing and Management segment (Transportation) is principally
engaged in leasing specialized railcars, primarily tank cars, under full service
leases. As of December 31, 1993, its fleet consisted of approximately 55,800
railcars, including 48,000 tank cars and 7,800 specialized freight cars,
primarily Airslide covered hopper cars and plastic pellet cars. Transportation
has upgraded its fleet over time by adding new larger capacity cars and retiring
older, smaller capacity cars. Transportation's railcars have a useful life of
approximately 30 to 33 years. The average age of the railcars in
Transportation's fleet is approximately 15 years.
<TABLE>
The following table sets forth the approximate tank car fleet capacity of
Transportation as of the end of each of the years indicated and the number of
cars of all types added to Transportation's fleet during such years:
<CAPTION>
Year Ended December 31,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Tank car fleet capacity
(in millions of gallons) 1,024 993 977 964 939
Number of cars added to fleet 3,000 1,600 1,500 1,700 2,900
</TABLE>
Transportation's customers use its railcars to ship over 700 different
commodities, primarily chemicals, petroleum, food products and minerals. For
1993, approximately 55% of railcar leasing revenue was attributable to shipments
of chemical products, 21% to petroleum products, 18% to food products and 6% to
other products. Many of these products require cars with special features;
Transportation offers a wide variety of sizes and types of cars to meet these
needs. Transportation leases railcars to over 700 customers, including major
chemical, oil, food and agricultural companies. No single customer accounts for
more than 6% of total railcar leasing revenue.
Transportation typically leases new equipment to its customers for a term of
five years or longer, whereas renewals or leases of used cars are typically for
periods ranging from less than a year to seven years with an average lease term
of about three years. The utilization rate of Transportation's railcars as of
December 31, 1993 was approximately 93%.
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Under its full service leases, Transportation maintains and services its
railcars, pays ad valorem taxes, and provides many ancillary services. Through
its Car Status Service System, for example, the company provides customers with
timely information about the location and readiness of their leased cars to
enhance and maximize the utilization of this equipment. Transportation also
maintains a network of service centers consisting of four major service centers
and 23 mobile trucks in 16 locations. Transportation also utilizes independent
third-party repair shops.
Transportation purchases most of its new railcars from Trinity Industries, Inc.
(Trinity), a Dallas-based metal products manufacturer, under a contract entered
into in 1984 and extended from time to time thereafter, most recently in 1992.
Transportation anticipates that through this contract it will continue to be
able to satisfy its customers' new car lease requirements. Transportation's
engineering staff provides Trinity with design criteria and equipment
specifications, and works with Trinity's engineers to develop new technology
where needed in order to upgrade or improve car performance or in response to
regulatory requirements.
The full-service railcar leasing industry is comprised of Transportation, Union
Tank Car Company, General Electric Railcar Service Corporation, Shippers Car
Line division of ACF Industries, Incorporated, and many smaller companies. Of
the approximately 192,000 tank cars owned and leased in the United States at
December 31, 1993, Transportation had approximately 48,000. Principal
competitive factors include price, service and availability.
Terminals and Pipelines
GATX Terminals Corporation (Terminals) is engaged in the storage, handling and
intermodal transfer of petroleum and chemical commodities at key points in the
bulk liquid distribution chain. All of its terminals are located near major
distribution and transportation points and most are capable of receiving and
shipping bulk liquids by ship, rail, barge and truck. Many of the terminals are
also linked with major interstate pipelines. In addition to storing, handling
and transferring bulk liquids, Terminals provides blending and testing services
at most of its facilities. Terminals also owns or holds interests in four
refined product pipeline systems. As of December 31, 1993, Terminals owned and
operated 27 terminals in 14 states, nine of which are associated with Terminals'
pipeline interests, and eight facilities in the United Kingdom; Terminals also
had joint venture interests in 12 international facilities.
As of December 31, 1993, Terminals had a total storage capacity of 71 million
barrels. This includes 53 million barrels of bulk liquid storage capacity in
the United States, 6 million barrels in the United Kingdom, and an equity
interest in another 12 million barrels of storage capacity in Europe and the Far
East. Terminals' smallest bulk liquid facility has a storage capacity of
100,000 barrels while its largest facility, located in Pasadena, Texas, has a
capacity of over 12 million barrels. During 1993, Terminals handled
approximately 635 million barrels of product through its wholly-owned bulk
liquid storage facilities, with capacity utilization of 92% at the end of 1993.
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For 1993, 77% of Terminals' revenue was derived from petroleum products and 20%
from a variety of chemical products. Demand for Terminals' facilities is
dependent in part upon demand for petroleum and chemical products and is also
affected by refinery output, foreign imports, and the expansion of its customers
into new geographical markets.
Terminals serves nearly 200 customers, including major oil and chemical
companies as well as trading firms and larger independent refiners. No single
customer accounts for more than 7% of Terminals' revenue. Customer service
contracts are both short term and long term.
Terminals along with two Dutch companies, Paktank N.V. and Van Ommeren N.V., are
the three major international public terminalling companies. The domestic
public terminalling industry consists of Terminals, Paktank Corporation,
International-Matex Tank Terminals, and many smaller independent terminalling
companies. In addition to public terminalling companies, oil and chemical
companies, which generally do not make their storage facilities available to
others, also have significant storage capacity in their own private facilities.
Terminals' pipelines compete with rail, trucks and other pipelines for movement
of liquid petroleum products. Principal competitive factors include price,
location relative to distribution facilities, and service.
Trademarks, Patents and Research Activities
Patents, trademarks, licenses, and research and development activities are
not material to these businesses taken as a whole.
Customer Base
GATC and its subsidiaries are not dependent upon a single customer or a few
customers. The loss of any one customer would not have a material adverse
effect on any segment or GATC as a whole.
Employees
GATC and its subsidiaries have approximately 1,800 active employees, of whom
35% are hourly employees covered by union contracts.
Item 2. Properties
Information regarding the location and general character of certain properties
of GATC is included in Item 1, Business, of this document. The major portion of
Terminals' land is owned; the balance is leased.
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Item 3. Legal Proceedings
A railcar owned by Transportation was involved in a derailment near Dunsmuir,
California in July 1991 that resulted in a spill of metam sodium into the
Sacramento River. Various lawsuits seeking damages in unspecified amounts have
been filed against GATC, or an affiliated company, most of which have been
consolidated in the Superior Court of the State of California for the City and
County of San Francisco (Nos. 2617 and 2620). GATC has now been dismissed by
the class plaintiffs in those cases but remains in the cases with respect to the
plaintiffs who have opted out of the class and with respect to indemnity and
contribution claims. There is one other case seeking recovery for response costs
and natural resource damages: State of California, et al, vs. Southern Pacific,
et al, filed in the Eastern District of California (CIV-S-92 1117).
All other actions have been consolidated with these two cases.
GATC also has been named as a potentially responsible party by the State of
California with respect to the assessment and remediation of possible damages to
natural resources which claim has also been consolidated in the suit in the
Eastern District of California. GATC has entered into provisional settlement
agreements with the United States of America, the state of California, Southern
Pacific and certain other defendents settling all material claims arising out of
the above incident in an amount not material to GATC. Such settlement, however,
is conditional on further court action. It is the opinion of management that if
damages are assessed and taking into consideration the probable insurance
recovery, this matter will not have a material effect on GATC's consolidated
financial position or results of operations.
Various lawsuits have been filed in the Superior Court for the State of
California and served upon Terminals, Calnev Pipe Line Company, or another GATX
subsidiary seeking an unspecified amount of damages arising out of the May 1989
explosion in San Bernardino, California. Those suits, all of which were filed
in the County of San Bernardino unless otherwise indicated, are: Aguilar, et
al, v. Calnev Pipe Line Company, et al, filed February 1990 in the County of Los
Angeles (No. 0751026); Alba, et al, v. Southern Pacific Railroad Co., et al,
filed November 1989 (No. 252842); Terry, et al, v. Southern Pacific
Transportation Corporation, et al, filed December 1989 (No. 253603) and settled
February 1994; Terry, et al, v. Southern Pacific, et al, filed December 1989
(No. 253604); Charles, et al, v. Calnev Pipe Line, Inc., et al, filed May 1990
(No. 256269); Raman, et al, v. Southern Pacific Railroad Company, et al, filed
May 1990 (No. 256181) and settled October 1993; Abrego, et al, v. Southern
Pacific Transportation Corporation, et al, filed May 1990 in the County of Los
Angeles (No. BC 000947); Glaspie, et al, v. Southern Pacific Transportation, et
al, filed May 1990 in the County of Los Angeles (No. BC002047); Jackson, et al,
v. City of San Bernardino, et al, filed May 1990 (No. 256172) and settled
February 1993; Burney, et al, v. Southern Pacific, et al, filed May 1990 in the
County of Los Angeles (BC000876); Hawkins, et al, v. Southern Pacific, et al,
filed May 1990 in the County of Los Angeles (BC000825) and since dismissed as to
all GATX subsidiaries; Ledbetter, et al, v. City of San Bernardino, et al, filed
May 1990
(No. 256173); Mary Washington v. Southern Pacific, et al, filed May 1990
(No. 256346); Stewart, et al, v. Southern Pacific Railroad Co., et al, filed May
1990 (No. 256464); Yost, et al, v. Southern Pacific Railroad, et al, filed June
1989 (No. 250308) and dismissed January 1993; Riley, et al, v. Lake Minerals
Corp., et al, filed May 1990 (No. 256163) and settled September 1993; Pearson v.
Calnev Pipe Line Company, et al, filed May 1990 in the County of San Bernardino
(No. 256206); Pollack v. Southern Pacific Transportation, et al, filed May 1992
(No. 271247); Davis v. Calnev Pipe Line Company, et al, filed May 1990 (No.
256207); J. Roberts, et al, v. Southern Pacific
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<PAGE>
Transportation, et al, filed November 1992 (No. 275936); Brooks, et al, v.
Southern Pacific, et al, filed May 1990 (No. 256176) and settled February 1994;
Goldie, et al, v. Southern Pacific, et al, filed May 1990 and dismissed July
1993, appeal pending; Irby, et al, v. Southern Pacific, et al,
(No. 255715) filed April 1990; Esparza, et al, v. Southern Pacific, et al, (No.
256433) filed May 1990 and settled February 1994; Reese, et al, v. Southern
Pacific, et al (No. 256434) filed May 1990; Nancy Washington, et al, v. Southern
Pacific, et al, (No. 256435) filed May 1990. In addition, GATC is aware of
approximately 10 other cases (the majority involving multiple plaintiffs)
seeking damages arising out of this incident which have named but not served a
subsidiary of GATC or a subsidiary officer. 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 4. Submission of Matters to a Vote of Security Holders
Not required.
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters
GATX Corporation owns all of the outstanding common stock of GATC.
Item 6. Selected Financial Data
Not required.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
GATC's reported net income for 1993 of $74 million compared to $66 million in
1992. The comparison between years is impacted by the Federal tax rate increase
in 1993 and the adoption of two accounting pronouncements in 1992. Overall,
operating income improved in 1993 compared to 1992 due to better results at both
Transportation and Terminals. Transportation's earnings increased as higher
revenues and lower ownership costs were somewhat offset by increased fleet
repair expenses. Income at Terminals increased as a result of higher revenues,
reduced interest expense, and improved margins which were partially offset by
higher SG&A expense and decreased earnings at its foreign affiliates.
Transportation's 1992 earnings compared to 1991 were unfavorably affected by a
weak economy and regulatory pressure on the industry which increased repair
costs. Terminals' results in 1992 improved over 1991 as margins increased due
to domestic facility improvements and cost controls, combined with increased
earnings from foreign affiliates.
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As a result of new tax legislation which increased the federal income tax rate
from 34% to 35% retroactively to January 1, 1993, net income for 1993 included
an increase to income taxes of $7 million for the cumulative increase in
deferred income taxes and a $1 million increase for the current year. The
impact of the tax rate change by segment is shown in a table on page 35.
In 1992, GATC adopted Statement of Financial Accounting Standards (SFAS) No. 106
and SFAS No. 109. SFAS No. 106 changed the method of accounting for
postretirement benefits from the pay-as-you-go method to the accrual basis.
This resulted in a one-time charge to earnings of $45 million for the transition
obligation. SFAS No. 109 revised the method of accounting for deferred income
taxes to the liability method which resulted in a $38 million favorable
adjustment. These adjustments are shown by segment in a table on page 35.
GROSS INCOME
Consolidated gross income for 1993 of $602 million exceeded 1992 revenue of $579
million and 1991 revenue of $559 million.
Transportation's 1993 gross income of $302 million increased $13 million from
1992. Rental revenues increased 4% attributable to an average of 940 additional
cars on lease and higher average rental rates. The increased level of additions
to the fleet was in anticipation of increased demand for new tank cars.
Transportation had approximately 51,900 railcars on lease at
December 31, 1993 compared to 50,100 a year earlier and fleet utilization
improved to 93% from 92% at the end of 1992.
Terminals' 1993 gross income of $281 million increased $15 million from 1992
reflecting continuing strong demand for tanks and blending services at domestic
petroleum terminals. Capacity utilization at the wholly-owned facilities was
92% at year end, up from 91% a year ago. Throughput from these facilities of
635 million barrels was down 4 million barrels from 1992 reflecting changes in
the operating pattern of certain customers.
Transportation's 1992 gross income of $289 million increased $4 million over
1991. Higher average rental rates were offset by a slightly lower average
number of railcars on lease during the year. Average cars on lease of 49,800
were down 200 cars from 1991. Fleet utilization at December 31, 1992 was 92% on
a fleet size of 54,400 railcars compared to 93% on a fleet size of 53,600 at the
end of 1991.
Terminals' 1992 gross income of $266 million increased $17 million from 1991.
This increase was the result of the completion of a number of capital projects
and strong results at many domestic operations. Capacity utilization at
Terminals' wholly-owned facilities increased 3% from 1991 to 91% at the end of
1992. Throughput of 639 million barrels was down slightly from 650 million
barrels in 1991.
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COSTS AND EXPENSES
Operating expenses in 1993 increased $16 million over 1992. Transportation's
operating expenses of $119 million increased $15 million from 1992 due to
increased railcar repair costs and higher operating lease expenses which
increased due to the increased level of operating lease assets. Transportation
continues to utilize sale leasebacks to finance its railcar additions. The
leaseback is recorded as an operating lease which removes the asset and related
liability from the balance sheet; the payments under the operating leases are
recorded as operating lease expense. Fleet repair costs increased 9% over 1992
reflecting higher volumes as a result of regulatory and customer requirements.
Operating margins decreased slightly as the increase in fleet repair costs
exceeded the growth in revenues. The pressure on operating margins is expected
to continue as Transportation's own commitment to provide its customers with
well maintained railcars coupled with stricter maintenance standards in the
industry and increased work required as a result of mandated inspection programs
continue to increase repair costs. The project to upgrade the company's repair
facilities is intended to control costs by improving the efficiency and
productivity of the repair process for the company's railcars.
Terminals operating costs of $153 million increased $1 million over 1992. Even
though revenues increased, operating costs were flat with 1992 due to cost
controls, resulting in improved operating margins. However, ongoing maintenance
spending is expected to continue to grow in keeping with GATC's commitment to
operate environmentally responsible facilities.
Operating expenses in 1992 increased $25 million over 1991. Transportation's
operating expenses of $104 million increased $13 million from 1991 due to
increased fleet repair costs and additional operating lease rentals. Terminals'
operating costs of $152 million increased $12 million over 1991 largely due to
higher maintenance, remediation and claims expenses.
Interest expense of $79 million in 1993 decreased $17 million from 1992 due to
lower interest rates, the full-year effect of the 1992 refinancings at lower
rates, and the effect of interest rate swaps. A portion of the decrease in
interest expense is offset by the increase in the operating lease rent component
of operating expenses as a result of the sale leasebacks.
During 1993, GATC implemented the findings of an asset liability management
study at Transportation which affirmed the correlation between certain railcar
lease rates and interest rates. As a result, interest rate swaps were entered
into to better match the maturity of the debt portfolio to the terms of the
railcar leases. This program will be managed on an ongoing basis.
Interest expense of $96 million in 1992 decreased $5 million from 1991 due to
lower interest rates and a reduced debt balance as a result of the
sale/leasebacks. At 1992 year end, total debt was $34 million less than the
1991 year-end balance. During the year $151 million of debt was refinanced at
lower rates.
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The provision for depreciation and amortization increased $4 million from 1992
which in turn increased $3 million over 1991. Depreciation increased as result
of the continued growth in capital assets.
Selling, general and administrative expenses of $41 million increased $3 million
from 1992 primarily due to higher relocation costs, contract consulting fees,
and information systems costs at Terminals. Selling, general and administrative
expenses of $38 million in 1992 decreased $3 million from 1991 primarily due to
the elimination of regional offices at Terminals.
Income tax expense of $45 million was $13 million higher than 1992 expense due
to the increased level of income and the change in the federal tax rate from 34%
to 35% retroactive to January 1, 1993. The 1993 effective tax rate of 43%
exceeded the statutory rate primarily as the result of the increase in deferred
taxes due to the increased tax rate. Income tax expense in 1992 of $32 million
increased $3 million over 1991. The effective tax rate of 36% in 1992 was 3%
higher than in 1991 as the result of the elimination of the deferred tax
turnaround under the prior method of accounting for income taxes.
EQUITY IN NET EARNINGS OF AFFILIATED COMPANIES
Equity in net earnings of affiliated companies of $15 million decreased $2
million from 1992 which had in turn increased $2 million from 1991. Terminals'
equity earnings decreased in 1993 reflecting the weak economies in Europe and
Japan, partially offset by favorable results at the Singapore affiliates due to
expansion and demand for services. The 1992 increase was primarily due to the
expansion of Terminals' Singapore operations. Transportation's 1993 equity
earnings in a Canadian railcar leasing company were comparable to 1992 and 1991
earnings.
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES
Income before the cumulative effect of accounting changes increased $1 million
from 1992. An increase in income from operations of $9 million in 1993 was
largely offset by the $8 million increase in taxes as the result of the change
in the tax rate which increased Transportation's taxes by $5 million and
Terminals' taxes by $3 million. Income before the cumulative effect of
accounting changes in 1992 decreased $1 million from 1991.
Transportation's 1993 income from operations increased 7% over 1992 as higher
revenues and lower ownership costs were somewhat offset by increased fleet
repair expenses. Ownership costs, consisting of rental expense, depreciation
and interest, decreased slightly despite an increased fleet size due to lower
interest rates, debt refinancings and interest rate swaps which were executed to
more closely match Transportation's debt with the railcar lease terms.
Terminals' 1993 income from operations increased 24% from the prior year.
Higher revenues, reduced interest expense reflecting lower interest rates and
debt refinancings, and improved margins were partially offset by higher SG&A
expense and decreased earnings at foreign affiliates.
Transportation's 1992 income from operations decreased 11% from 1991 as
operating margins continued to decline. The gain in 1991 from the sale of its
Mexican affiliates further adversely affected the comparison of 1992 results.
Also, earnings for 1992 reflected a $1 million pretax charge related to
refinancing equipment trust certificates at favorable rates.
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Terminals' 1992 income from operations increased 23% from 1991. Late in 1991,
Terminals established a business unit structure and eliminated its regional
offices to better control margins. The improved results represent increased
margins due to domestic facility improvements and cost controls, combined with
increased earnings from foreign affiliates. Earnings in 1992 were negatively
affected by $2 million of pretax charges relating to the recognition of debt
issuance costs and call premiums associated with debt refinancings at favorable
terms and interest rates.
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
The cumulative effect of accounting changes generated a $7 million reduction in
1992 net income. This adjustment resulted from the recording of a one-time non-
cash net accounting charge for postretirement benefits and deferred taxes. SFAS
No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
requires that certain postretirement benefits, principally health care and life
insurance, be recognized in the financial statements on an accrual basis rather
than on a pay-as-you-go basis. GATC recorded a one-time aftertax charge of $45
million for the transition obligation related to the implementation of this
Standard.
The principal change resulting from SFAS No. 109, Accounting for Income Taxes,
is the recording of deferred taxes at amounts ultimately considered payable,
which resulted in a $38 million favorable adjustment.
NET INCOME
Consolidated net income of $74 million in 1993 increased $8 million from 1992
primarily due to improved operating performance in 1993. Consolidated net income
in 1992 decreased $8 million from 1991 primarily due to the cumulative effect of
accounting changes.
ASSETS
Total assets of $2.2 billion were slightly higher than 1992.
Property, plant and equipment increased $94 million to $2.8 billion.
Transportation invested $171 million in new and used railcars and $24 million to
upgrade its repair shops, which was partially offset by the sale and leaseback
of $138 million of railcar additions. As the leaseback qualified as an
operating lease, the assets were removed from the balance sheet. Terminals
invested $78 million for tank construction and other modifications and
improvements.
LIABILITIES AND EQUITY
Total debt decreased $29 million primarily due to sale leasebacks at
Transportation. Proceeds were used to repay short-term debt and fund investment
activities.
Deferred income taxes increased $16 million primarily due to the increase in the
federal tax rate from 34% to 35%.
Other deferred items increased $13 million primarily due to increased
environmental reserves and accrued rents payable.
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Consolidated equity increased $25 million attributable to 1993 earnings of $74
million partially reduced by dividends paid to GATX Corporation of $43 million.
The balance of the change is attributable to foreign currency translation
adjustments.
LIQUIDITY AND CAPITAL RESOURCES
GATC generates a significant amount of cash from operations. Most of its
capital expenditures represent additions to its railcar fleet and expansion and
upgrades to its service centers, terminals and pipelines and are considered
discretionary capital expenditures. However, the non-discretionary level of
Terminals' capital program has grown due to the increasing regulatory and
environmental requirements of the terminalling business. The level of
discretionary capital spending can be rapidly adjusted as conditions in the
economy or GATC's businesses warrant.
Cash provided by operating activities in 1993 of $206 million increased $16
million compared to 1992. Net income adjusted for non-cash items generated $193
million of cash, up $5 million from 1992. Other generated $11 million more cash
than last year primarily as the result of the increase in payables.
Cash provided by operating activities in 1992 of $190 million increased $13
million compared to 1991. Net income adjusted for non-cash items generated $189
million of cash, up $4 million from 1991. Other generated $9 million more cash
than in 1991 primarily due to the timing of operating lease rental payments.
Cash used in investing activities increased $10 million in 1993 from the prior
year. Capital additions of $273 million were up $80 million from last year's
level of $193 million. Transportation invested $171 million in the railcar
fleet, up $63 million from the prior year. In addition, Transportation invested
$24 million on its multi-year program to significantly upgrade its repair
facilities, up $16 million from 1992. Terminals expended $78 million in 1993,
similar to 1992 levels, for tank construction and other modifications and
improvements. Proceeds from asset dispositions of $152 million in 1993 included
$138 million received on the sale leaseback of railcar additions at
Transportation. GATC has used this method of financing its railcar fleet as an
attractive opportunity given GATX's alternative minimum tax position.
Cash used in investing activities in 1992 increased $8 million from 1991.
Capital additions of $193 million were up $5 million from 1991's level of $188
million. Transportation invested $108 million in the railcar fleet, up modestly
from the $101 million invested in the prior year, and $8 million as it began its
multi-year program to significantly upgrade its repair facilities. Terminals
invested $76 million in tank construction and other modifications and
improvements in 1992 compared to $85 million in 1991. Proceeds from other asset
dispositions of $82 million in 1992 included $75 million received on the sale
leaseback of railcar additions at Transportation.
Cash used in financing activities was $79 million in 1993, comparable to 1992.
GATC finances its capital additions mainly through cash generated by operating
activities, debt financings, and the sale leaseback of railcars. During the
year, $63 million of long-term debt was issued and $67 million of long-term
obligations were repaid. Short-term debt decreased by $29 million to a balance
of $104 million.
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Cash used in financing activities was $80 million in 1992 compared to $116
million in the prior year. Significant financing activity in 1992 involved
refinancing existing debt obligations to take advantage of current low interest
rates and to secure the economic benefit to the company. Transportation's
equipment trust certificates totaling $66 million were redeemed. A total of $60
million of Terminals' long-term floating rate bonds were refinanced with fixed-
rate bonds. Terminals also refinanced three series of fixed-rate industrial
revenue bonds totaling $25 million; two of these series were delayed settlements
whose cash closings occurred in 1993 or will occur in 1994. GATC recognized
charges of $3 million related to these refinancings but is now receiving the
benefit of the lower interest costs.
GATC and GATX Terminals have revolving credit facilities. GATC also has a
commercial paper program and uncommitted money market lines which are used to
fund operating needs. In late 1992, GATC signed a new four-year credit
facility. Under the covenants of the commercial paper programs and rating
agency guidelines, GATC must keep unused revolver capacity at least equal to the
amount of commercial paper and money market lines outstanding. At December 31,
1993, GATC and its subsidiaries had available unused committed lines of credit
amounting to $188 million.
In February 1994, GATC filed a $650 million shelf registration for pass through
trust certificates and debt securities, none of which have been issued. At year
end, GATC had $115 million of commitments to acquire assets, $114 million of
which is scheduled to fund in 1994.
Environmental Matters
Certain of GATC's operations present potential environmental risks principally
through the transportation or storage of various commodities. Recognizing that
some risk to the environment is intrinsic to its operations, GATC is committed
to protecting the environment, as well as complying with applicable
environmental protection laws and regulations. GATC, as well as its
competitors, is subject to extensive regulation under federal, state and local
environmental laws which have the effect of increasing the costs and liabilities
associated with the conduct of its operations. In addition, GATC's foreign
operations are subject to environmental regulations in effect in each respective
jurisdiction.
GATC's policy is to monitor and actively address environmental concerns in a
responsible manner. GATC has received notices from the U.S. Environmental
Protection Agency (EPA) that it is a potentially responsible party (PRP) for
study and clean-up costs at 11 sites under the requirements of the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund). Under Superfund and comparable state laws, GATC may be required to
share in the cost to clean-up various contaminated sites identified by the EPA
and other agencies. In all but one instance, GATC is one of several financially
responsible PRPs and has been identified as contributing only a small percentage
of the contamination at each of the sites. Due to various factors such as the
required level of remediation and participation in clean-up efforts by others,
GATC's total clean-up costs at these sites cannot be predicted with certainty;
however, GATC's best estimates for remediation and restoration of these sites
have been determined and are included in its environmental reserves.
-11-
<PAGE>
Future costs of environmental compliance are indeterminable due to unknowns such
as the magnitude of possible contamination, the timing and extent of the
corrective actions that may be required, the determination of the company's
liability in proportion to other responsible parties, and the extent to which
such costs are recoverable from third parties including insurers. Also, GATC
may incur additional costs relating to facilities and sites where past
operations followed practices and procedures that were considered acceptable at
the time but in the future may require investigation and/or remedial work to
ensure adequate protection to the environment under current standards. If
future laws and regulations contain more stringent requirements than presently
anticipated, expenditures may be higher than the estimates, forecasts, and
assessments of potential environmental costs provided below. However, these
costs are expected to be at least equal to the current level of expenditures.
GATC's environmental reserve at the end of 1993 was $65 million and reflects
GATC's best estimate of the cost to remediate its environmental conditions.
Additions to the reserve were $17 million in both 1993 and 1992. Expenditures
charged to the reserve amounted to $10 million and $12 million in 1993 and 1992,
respectively.
In 1993, GATC made capital expenditures of $18 million for environmental and
regulatory compliance compared to $16 million in 1992. These projects included
marine vapor recovery, discharge prevention compliance, impervious dikes and
tank car cleaning systems. Environmental projects authorized or currently under
consideration would require capital expenditures of approximately $25 million in
1994. It is anticipated that GATC will make annual expenditures at a similar
annual level over the next five years for regulatory and environmental
requirements.
-12-
<PAGE>
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted under Item 14 (a)(1) of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Not required.
Item 11. Executive Compensation
Not required.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Not required.
Item 13. Certain Relationships and Related Transactions
Not required.
PART IV
Item 14. Financial Statement Schedules, Reports on Form 8-K and Exhibits
(a) (1) Financial Statements
The consolidated financial statements of General American
Transportation Corporation and its subsidiaries which are
required in Item 8 are listed below:
PAGE
Statements of Consolidated Income and Reinvested Earnings--
years ended December 31, 1993, 1992 and 1991............. 19
Consolidated Balance Sheets--December 31, 1993 and 1992..... 20
Statements of Consolidated Cash Flows--
years ended December 31, 1993, 1992 and 1991.............. 22
Notes to Consolidated Financial Statements.................. 23
-13-
<PAGE>
PART IV (CONT'D)
Item 14. Financial Statement Schedules, Reports on Form 8-K and Exhibits
PAGE
(2) Financial Statement Schedules
Schedule IV Indebtedness of and to Related Parties....... 37
Schedule V Property, Plant and Equipment ............... 38
Schedule VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and
Equipment ............................... 42
Schedule VIII Valuation and Qualifying Accounts............ 46
Schedule IX Short-Term Borrowings ....................... 47
Schedule X Supplementary Income Statement
Information ................................. 48
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been
omitted.
(b) No reports on Form 8-K were filed during the reporting
period.
(c) Exhibit Index
Exhibit
Number Exhibit Description Page
3A. Certificate of Incorporation of General American
Transportation Corporation, incorporated by reference to the
GATC Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, file number 2-54754.
3B. Bylaws of General American Transportation Corporation,
incorporated by reference to the GATC Annual Report on Form
10-K for the fiscal year ended December 31, 1991, file
number 2-54754.
4A. Indenture dated October 1, 1987, incorporated by reference
to Exhibit 4.1 to the GATC Registration Statement on Form
S-3 filed October 8, 1987, file number 33-17692; Indenture
Supplement dated May 15, 1988, incorporated by reference to
the GATC Quarterly Report on Form 10-Q for the quarter ended
June 30, 1988, file number 2-54754. Second Supplemental
Indenture dated as of March 15, 1990, incorporated by
reference to GATC Quarterly Report on Form 10-Q for the
quarter ended March 30, 1990, file number 2-54754.
-14-
<PAGE>
Exhibit
Number Exhibit Description Page
4B. General American Transportation Corporation Notices 1
through 6 dated from November 6, 1987 through April 12, 1988
defining the rights of holders of GATC's Medium-Term Notes
Series A issued during that period, incorporated by
reference to the GATC Quarterly Report on Form 10-Q for the
quarter ended June 30, 1988, file number 2-54754.
4C. General American Transportation Corporation Notices 1
through 3 dated from October 17, 1988 through October 24,
1988 and 4 through 6 dated from November 7, 1988 through
March 3, 1989 defining the rights of holders of GATC's
Medium-Term Notes Series B issued during those periods,
Notices 1 through 3 incorporated by reference to the GATC
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, and Notices 4 through 6 incorporated by
reference to the GATC Annual Report on Form 10-K for the
fiscal year ended December 31, 1988, file number 2-54754.
4D. General American Transportation Corporation Notices 1 and 2 dated from
March 30, 1989 through March 31, 1989, Notices 3 through 8 dated from
April 4, 1989 through June 29, 1989, Notices 9 through 16 dated from
July 19, 1989 through September 29, 1989, and Notices 17 through 21
dated from October 2, 1989 through October 9, 1989 defining the rights
of the holders of GATC's Medium-Term Notes Series C issued during
those periods. Notices 1 and 2, Notices 3 through 8 and Notices 9
through 16 are incorporated by reference to the GATC Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1989, June 30, 1989 and
September 30, 1989, respectively, and Notices 17 through 21
incorporated by reference to the GATC Annual Report on Form 10-K for
the fiscal year ended December 31, 1989, file number 2-54754.
4E. General American Transportation Corporation Notices 1 and 2 dated
February 27, 1992, Notices 3 through 5 dated from December 7, 1992
through December 14, 1992 and notices 6 through 10 dated from May 18,
1993 through May 25, 1993 defining the rights of the holders of GATC's
Medium-Term Notes Series D issued during those periods. Notices 1 and
2 are incorporated by reference to the GATC Quarterly Report on Form
10-Q for the quarter ended March 31, 1992, Notices 3 through 5 are
incorporated by reference to the GATC Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, and Notices 6 through 10 are
incorporated by reference to the GATC Quarterly Report on Form 10-Q
for the quarter ending June 30, 1993, file number 2-54754.
-15-
<PAGE>
Exhibit
Number Exhibit Description Page
10A. Second Amended and Restated Revolving Credit Agreement dated as of
November 13, 1992, incorporated by reference to GATC's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992, file number
2-54754.
10B. Revolving Credit Facility Agreement for GATX Terminals Limited as
borrower and GATC as guarantor dated as of July 13, 1993, incorporated
by reference to GATC's Quarterly Report on Form 10-Q for the period
ended September 30, 1993, file number 2-54754.
12. Statement regarding computation of ratios of earnings 49
to fixed charges.
24. Consent of Independent Auditors 50
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 21, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
/s/D. Ward Fuller
----------------------------------
D. Ward Fuller
President, Chief Executive Officer
and Director
March 21, 1994
/s/Melvin D. Kusta
----------------------------
Melvin D. Kusta
Controller and
Principal Accounting Officer
March 21, 1994
/s/James J. Glasser
---------------------------
James J. Glasser
Director
March 21, 1994
/s/Paul A. Heinen
---------------------------
Paul A. Heinen
Director
March 21, 1994
-17-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
General American Transportation Corporation
We have audited the consolidated financial statements and related schedules of
General American Transportation Corporation (a wholly-owned subsidiary of GATX
Corporation) and subsidiaries listed in Item 14(a)(1) and (2) of the Annual
Report on Form 10-K of General American Transportation Corporation for the year
ended December 31, 1993. These financial statements and related schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and related schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and related schedules.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of General American
Transportation Corporation and subsidiaries at December 31, 1993 and 1992, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with generally accepted
accounting principles. Also, it is our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects, the information set forth
therein.
As discussed in the notes to the consolidated financial statements, in 1992 the
Company changed its method of accounting for postretirement benefits other than
pensions and income taxes.
ERNST & YOUNG
Chicago, Illinois
January 25, 1994
-18-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
STATEMENTS OF CONSOLIDATED INCOME AND REINVESTED EARNINGS
(IN MILLIONS)
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Gross income--Note C $601.7 $579.2 $558.9
Costs and expenses
Operating expenses 271.9 255.8 230.7
Interest 78.8 96.0 100.7
Provision for depreciation and amortization 104.9 101.2 98.0
Selling, general and administrative 41.5 38.0 41.0
------ ------ ------
497.1 491.0 470.4
------ ------ ------
Income before income taxes, equity in net
earnings of affiliated companies and
cumulative effect of accounting changes 104.6 88.2 88.5
Income taxes--Note J 45.1 31.7 29.0
------ ------ ------
Income before equity in net earnings of
affiliated companies and cumulative
effect of accounting changes 59.5 56.5 59.5
Equity in net earnings
of affiliated companies--Notes D and E 14.6 16.3 14.7
------ ------ ------
Income before cumulative effect
of accounting changes 74.1 72.8 74.2
Cumulative effect of
accounting changes--Notes I and J - (6.7) -
------ ------ ------
Net income 74.1 66.1 74.2
Reinvested earnings at beginning of year 275.7 247.9 212.5
Dividends paid to GATX Corporation (43.3) (38.3) (38.8)
------ ------ ------
Reinvested earnings at end of year $306.5 $275.7 $247.9
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
-19-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<CAPTION>
December 31
1993 1992
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 11.7 $ 5.5
Trade receivables--net 45.3 39.7
Property, plant and equipment--Notes B and G:
Railcars and support facilities 1,735.8 1,706.9
Tank storage terminals and pipelines 1,014.8 949.6
--------- ---------
2,750.6 2,656.5
Less - Allowances for depreciation (1,193.3) (1,118.5)
--------- ---------
1,557.3 1,538.0
Due from GATX Corporation--Note C 361.5 358.7
Investments in affiliated companies--Note D 148.2 137.5
Other assets 91.6 84.7
TOTAL ASSETS $ 2,215.6 $ 2,164.1
========= =========
</TABLE>
See notes to consolidated financial statements.
-20-
<PAGE>
<TABLE>
<CAPTION>
December 31
1993 1992
LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY
<S> <C> <C>
Accounts payable $ 98.4 $ 70.5
Accrued expenses 36.0 37.6
Debt--Notes B, F and G
Short-term debt 104.2 133.3
Long-term debt 731.9 723.8
Capital lease obligations 126.8 135.0
--------- ---------
962.9 992.1
Deferred income taxes--Note J 265.6 249.3
Other deferred items 208.8 195.7
--------- ---------
Total liabilities and deferred items 1,571.7 1,545.2
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 306.5 275.7
Cumulative foreign currency
translation adjustment 2.4 8.2
--------- ---------
Total shareholder's equity 643.9 618.9
--------- ---------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY $ 2,215.6 $ 2,164.1
========= =========
</TABLE>
-21-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN MILLIONS)
<CAPTION>
Year Ended December 31
1993 1992 1991
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 74.1 $ 66.1 $ 74.2
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation
and amortization 104.9 101.2 98.0
Deferred income taxes 14.5 14.6 12.8
Cumulative effect of accounting changes - 6.7 -
Other (includes working capital) 13.0 1.6 (7.9)
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 206.5 190.2 177.1
INVESTING ACTIVITIES
Additions to property, plant & equipment:
Railcars and support facilities (195.3) (116.6) (102.4)
Tank storage terminals and pipelines (75.9) (76.2) (82.9)
Investments in affiliated companies (1.9) - (2.2)
------- ------- -------
Capital additions (273.1) (192.8) (187.5)
Proceeds from asset dispositions 151.6 81.6 83.8
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (121.5) (111.2) (103.7)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 63.3 125.2 -
Repayment of long-term debt (58.8) (197.2) (62.3)
Net (decrease) increase in short-term debt (29.1) 54.6 19.6
Repayment of capital lease obligations (8.1) (3.9) (3.6)
Cash dividends paid to GATX Corporation (43.3) (38.3) (38.8)
Net increase in amount
due from GATX Corporation (2.8) (19.9) (31.1)
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (78.8) (79.5) (116.2)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 6.2 $ (.5) $ (42.8)
======= ======= =======
</TABLE>
-22-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of General American Transportation Corporation
(GATC) and its consolidated subsidiaries are discussed below.
Consolidation: The consolidated financial statements include the accounts of
GATC and its majority-owned subsidiaries. Investments in 20 to 50 percent-owned
companies and joint ventures are accounted for under the equity method and are
shown as investments in affiliated companies. Less than 20 percent-owned
affiliated companies are recorded using the cost method.
Cash Equivalents: GATC considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. The carrying
amounts reported in the balance sheet for cash and cash equivalents approximate
the fair value of those assets.
Property, Plant and Equipment: Property, plant and equipment are stated
principally at cost. Assets acquired under capital leases are included in
property, plant and equipment and the related obligations are recorded as
liabilities. Provisions for depreciation include the amortization of the cost
of capital leases and are computed by the straight-line method which results in
equal annual depreciation charges over the estimated useful lives of the assets.
Goodwill: GATC has classified as goodwill the cost in excess of the fair value
of net assets acquired. Goodwill, which is included in other assets, is being
amortized on a straight-line basis over 40 years. Goodwill, net of accumulated
amortization of $1.9 million and $1.3 million, was $18.7 million and $18.5
million as of December 31, 1993 and 1992, respectively. Amortization expense
was $.5 million for each year 1993, 1992 and 1991.
Income Taxes: In February 1992, Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes, was issued by the Financial Accounting
Standards Board (FASB) which, among other things, requires that recognition of
deferred income taxes be measured by the provisions of enacted tax laws in
effect at the date of the financial statements. This Statement was adopted by
GATC in the first quarter of 1992. The cumulative effect of the adoption of
this Statement was to reduce the deferred tax liability by $37.8 million in
1992. This amount was added to net income and thereby to shareholders' equity.
United States income taxes have not been provided on the undistributed earnings
of foreign subsidiaries and affiliates which GATC intends to permanently
reinvest in these foreign operations. The cumulative amount of such earnings
was $89.5 million at December 31, 1993.
Other Deferred Items: Other deferred items include the accrual for
postretirement benefits other than pensions in addition to environmental,
general liability, and workers' compensation reserves and other deferred
credits.
-23-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Environmental Liabilities: Expenditures that relate to current or future
operations are expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations and do not contribute to
current or future revenue generation are charged to environmental reserves.
Reserves are recorded in accordance with accounting guidelines to cover work at
identified sites when GATC's liability for environmental clean-up is both
probable and a minimum estimate of associated costs can be made; adjustments to
initial estimates are recorded as necessary.
Off-Balance Sheet Financial Instruments: Fair values of GATC's off-balance
sheet financial instruments (futures, swaps, forwards, options, and purchase
commitments) are based on current market prices, settlement values or fees
currently charged to enter into similar agreements.
Revenue Recognition: The majority of GATC's gross income is derived from the
rentals of railcars and terminals and other services.
Foreign Currency Translation: The assets and liabilities of operations located
outside the United States are translated at exchange rates in effect at year
end, and income statements are translated at the average exchange rates for the
year. Gains or losses resulting from the translation of foreign currency
financial statements are deferred and recorded as a separate component of
consolidated shareholder's equity. Incremental unrealized translation (losses)
gains recorded in the cumulative foreign currency translation adjustment account
were $(5.8) million, $(2.8) million and $4.8 million during 1993, 1992, and
1991, respectively.
Reclassifications: Certain amounts in the 1992 and 1991 financial statements
have been reclassified to conform to the 1993 presentation.
NOTE B--ACCOUNTING FOR LEASES
The following information pertains to GATC as a lessor:
Operating leases: Railcar and tankage assets included in property, plant and
equipment are classified as operating leases.
<TABLE>
Minimum future receipts: Minimum future rental receipts from non-cancellable
operating leases by year at December 31, 1993 are (in millions):
<CAPTION>
<S> <C>
1994 $ 361.8
1995 237.7
1996 175.6
1997 127.3
1998 82.3
Years thereafter 295.5
--------
$1,280.2
========
</TABLE>
-24-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE B--ACCOUNTING FOR LEASES (CONT'D)
The following information pertains to GATC as a lessee:
Capital leases: Certain railcars are leased by GATC under capital lease
agreements. Property, plant and equipment includes cost and related allowances
for depreciation of $153.2 million and $63.5 million, respectively, at December
31, 1993 and $159.9 million and $60.3 million, respectively, at December 31,
1992 for these railcars. The cost of these assets is amortized on the
straight-line basis with the charge included in depreciation expense.
Operating leases: GATC has financed railcars through sale leasebacks which are
accounted for as operating leases. In addition, GATC leases certain other
assets and office facilities. Total rental expense for the years ended December
31, 1993, 1992, and 1991 was $39.8 million, $29.8 million, and $22.0 million,
respectively.
<TABLE>
Minimum future rental payments: Future minimum rental payments due under
noncancellable leases at December 31, 1993 are (in millions):
<CAPTION>
Capital Operating
Leases Leases
<S> <C> <C>
1994 $ 16.4 $ 28.6
1995 17.5 34.0
1996 17.1 33.1
1997 17.6 32.6
1998 17.4 34.4
Years thereafter 133.5 573.3
------ ------
Total minimum rental payments 219.5 $736.0
======
Less - Amount representing interest (92.7)
------
Present value of future
minimum capital lease payments $126.8
======
</TABLE>
The above capital lease amounts do not include the cost of licenses, taxes,
insurance and maintenance which GATC is required to pay. Interest expense on
the above capital lease obligations was $11.8 million in 1993, $12.3 million in
1992, and $12.7 million in 1991.
NOTE C--ADVANCES TO/FROM PARENT
Interest income on advances to GATX, which is included in gross income on the
income statement, was $18.4 million in 1993, $23.4 million in 1992, and $23.9
million in 1991. Interest income was based on an interest rate which was
periodically adjusted in accordance with short-term commercial paper rates and
averaged 4.30% in 1993, 6.20% in 1992, and 6.34% in 1991.
Interest expense on advances from GATX to GATC was $2.2 million in 1993, $2.7
million in 1992, and $2.7 million in 1991. These advances have no fixed
maturity date. Interest expense was based on interest rates computed as
described in the preceding paragraph.
The carrying amounts reported in the balance sheet for the Due from GATX
Corporation at December 31, 1993 approximate fair value.
-25-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE D--INVESTMENTS IN AFFILIATED COMPANIES
GATC has investments in 20 to 50 percent-owned companies and joint ventures
which are accounted for using the equity method. These investments include a
Canadian railcar company and foreign tank storage terminals. Distributions
received from such jointly-owned companies were $3.1 million, $3.1 million, and
$3.2 million in 1993, 1992, and 1991, respectively.
<TABLE>
Summarized operating results for all affiliated companies in their entirety are
(in millions):
<CAPTION>
For the Year
1993 1992 1991
<S> <C> <C> <C>
Revenues $176.8 $174.5 $162.0
Net income 32.4 35.8 31.6
</TABLE>
<TABLE>
Summarized balance sheet data for all affiliated companies in their entirety are
(in millions):
<CAPTION>
December 31
1993 1992
<S> <C> <C>
Total assets $623.4 $565.4
Long-term liabilities 282.7 219.4
Other liabilities 129.2 141.4
------ ------
Shareholders' equity $211.5 $204.6
====== ======
</TABLE>
NOTE E--FOREIGN OPERATIONS
Foreign operations were not material to the consolidated gross income or pretax
income of GATC for any of the years presented. GATC has investments in
affiliated companies which are located in foreign countries. Equity income from
these foreign affiliates for 1993, 1992 and 1991 was $14.6 million, $16.3
million and $14.7 million, respectively. The foreign identifiable assets of
GATC are investments in affiliated companies and a United Kingdom terminalling
operation which is fully consolidated.
<TABLE>
<CAPTION>
(In millions)
1993 1992
<S> <C> <C>
Identifiable Assets:
Foreign $ 212.6 $ 197.3
United States 2,003.0 1,966.8
-------- --------
$2,215.6 $2,164.1
======== ========
</TABLE>
-26-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE F--SHORT-TERM DEBT AND LINES OF CREDIT
<TABLE>
Short-term debt consisted of (in millions):
<CAPTION>
December 31
1993 1992
<S> <C> <C>
Commercial paper $ 25.5 $ 45.0
Other short-term borrowings 78.7 88.3
-------- --------
$104.2 $133.3
======== ========
</TABLE>
Under a revolving credit agreement with a group of banks, GATC may borrow up to
$200.0 million. The revolving credit agreement contains various restrictive
covenants which include, among other things, minimum net worth, restrictions on
additional indebtedness, and requirements to maintain certain financial ratios
for GATC. Under the agreement GATC was required to maintain a minimum net worth
of $528.2 million at December 31, 1993. While at year end no borrowings were
outstanding under the agreement, the available line of credit was reduced by
$25.5 million of commercial paper outstanding. GATC had borrowings of $55.0
million under unsecured money market lines. Also, GATX Terminals has a
revolving credit agreement of pounds25.0 million of which pounds9.0 million was
available at year end.
The carrying amounts reported in the balance sheet for short-term debt at
December 31, 1993 approximate fair value.
Interest expense on short-term debt was $4.2 million in 1993, $3.9 million in
1992, and $4.8 million in 1991.
NOTE G--LONG-TERM DEBT
<TABLE>
Long-term debt consisted of (in millions):
<CAPTION>
Interest December 31
Rates Maturity 1993 1992
<S> <C> <C> <C> <C>
Fixed Rate:
Term notes 5.16%-10.8% 1994-2004 $643.0 $634.4
Industrial revenue bonds 6.65 -10.875 1994-2023 88.9 89.4
------ ------
$731.9 $723.8
====== ======
</TABLE>
The fair value of the fixed rate debt was $822.2 million and $791.2 million at
December 31, 1993 and 1992, respectively. Fair value was estimated by
aggregating the notes and performing a discounted cash flow calculation using a
weighted average note term and market rate based on GATC's current incremental
borrowing rate for similar types of borrowing arrangements.
-27-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE G--LONG-TERM DEBT (CONT'D)
<TABLE>
Aggregate maturities of long-term debt for each of the years 1994 through 1998
are (in millions):
<CAPTION>
Year Amount
<S> <C>
1994 $46.6
1995 92.0
1996 51.5
1997 55.3
1998 64.3
</TABLE>
Interest cost incurred on long-term debt, net of capitalized interest, was
$60.5 million in 1993, $77.1 million in 1992, and $80.5 million in 1991.
Interest cost capitalized as part of the cost of acquisition or construction of
major assets was $2.4 million in 1993, $2.8 million in 1992, and $2.8 million in
1991. In 1992, a loss of $3.3 million was recorded on the early retirement of
debt.
In 1990, GATC entered into a currency swap agreement to finance the purchase of
a United Kingdom terminalling operation. GATC swapped a U.S. dollar borrowing
of $59.7 million with interest stated at 10.125% for a liability of pounds 37.0
million with associated interest at 12.87%. The exchange of interest and
principal payments over the 12 year term of the notes was fixed accordingly.
The swap was terminated in 1993, resulting in a net cash payment to GATC of $2.3
million; at the same time, an offsetting translation loss was recognized for the
unrealized loss on the translation of pounds into dollars.
GATC uses interest rate swaps, caps, forwards and other similar contracts to set
interest rates on existing or anticipated transactions. At December 31, 1993,
GATC has used $900 million of interest rate swaps to better match the duration
of the debt portfolio to the lease terms of the railcar assets. Net amounts
paid or received on these contracts that qualify as hedges are recognized over
the term of the contract as an adjustment to interest expense of the hedged
financial instrument. The fair values of the swap components at year end would
result in a net payment to GATC of $7.5 million if the swaps were terminated.
These financial instruments terminate in 1994-2006. GATC manages the credit
risk of counterparties by only dealing with institutions that are considered
financially sound and by avoiding concentrations of risk with a single
counterparty.
NOTE H--PENSION BENEFITS
GATC and its subsidiaries contributed to several pension plans sponsored by GATX
which cover substantially all employees. Benefits under the plans are based on
years of service and/or final average salary. The funding policy for all plans
is based on an actuarially determined cost method allowable under Internal
Revenue Service regulations. Contributions to these plans were $6.7 million
in 1993, $5.1 million in 1992, and $6.0 million in 1991.
-28-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE H-- PENSION BENEFITS (CONT'D)
Costs pertaining to the GATX plans are allocated to GATC on the basis of payroll
costs with respect to normal cost and on the basis of actuarial determinations
for prior service cost.
Net periodic pension cost for 1993, 1992, and 1991 was $3.4 million, $3.4
million, and $3.3 million, respectively. Plan benefit obligations, plan assets,
and the components of net periodic cost for individual subsidiaries of GATX have
not been determined.
NOTE I--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
GATC provides health care, life insurance and other benefits for certain retired
employees who meet established criteria. Most domestic employees are eligible
for health care and life insurance benefits if they retire from GATC with
immediate pension benefits under the GATX pension plan. The plans are either
contributory or non-contributory, depending on various factors.
In 1992, GATC implemented Statement of Financial Accounting Standards (SFAS)
No. 106 - "Employers' Accounting for Postretirement Benefits Other Than
Pensions" using the immediate recognition transition method, effective as of
January 1, 1992. SFAS No. 106 requires recognition of the cost of
postretirement benefits during an employee's active service life. GATC's
previous practice was to expense these costs as they were paid. GATC recorded a
charge of $44.5 million ($68.6 million pretax) in the first quarter of 1992 to
reflect the cumulative effect of the change in accounting principle for periods
prior to 1992. Aside from the one-time impact of the transition obligation,
adoption of SFAS No. 106 was not material to 1992 financial results.
<TABLE>
Net periodic postretirement cost includes the following components (in millions):
<CAPTION>
1993 1992
<S> <C> <C>
Current service cost $ .3 $ .2
Interest cost on accumulated
postretirement benefit obligation 5.9 6.3
------ ----
Net periodic postretirement benefit cost $ 6.2 $6.5
===== =====
Discount rate 8.5% 9.0%
===== =====
</TABLE>
Prior to 1992, the cost of providing these benefits to retired employees was
recognized primarily as payments were made and totaled $6.7 million in 1991.
-29-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE I--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONT'D)
<TABLE>
The following table sets forth the amounts recognized in GATC's consolidated
balance sheet (in millions):
<CAPTION>
12/31/93 12/31/92
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $67.6 $64.6
Fully eligible active plan participants 3.4 2.9
Other active plan participants 4.8 3.2
----- -----
Total accumulated
postretirement benefit obligation 75.8 70.7
Unrecognized loss (9.4) (2.9)
----- -----
Accrued postretirement benefit liability $66.4 $67.8
===== =====
</TABLE>
The accrued postretirement benefit liability was determined using an assumed
discount rate of 7.75% for 1993, 8.5% for 1992, and 9.0% at January 1, 1992 when
the transition obligation was calculated. The effect of this change in the
discount rate assumption was a deferred loss of $4.2 million in 1993 and $2.4
million in 1992.
For measurement purposes, blended rates ranging from 13% decreasing to 5% over
the next four years and remaining at that level thereafter were used for the
increase in the per capita cost of covered health care benefits. The health
care cost trend rate assumption has a significant effect on the amount of the
obligation and periodic cost reported. An increase in the assumed health care
cost trend rates by 1% would increase the accumulated postretirement benefit
obligation by $4.6 million and would increase aggregate service and interest
cost components of net periodic postretirement benefit cost by $.4 million per
year.
NOTE J--INCOME TAXES
Effective January 1, 1992, GATC changed its method of accounting for income
taxes from the deferred method to the liability method required by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." As
permitted under the new rules, prior years' financial statements have not been
restated. The cumulative effect of adopting Statement 109 as of January 1, 1992
was to increase net income by $37.8 million. Aside from the one-time impact due
to the reassessment of deferred taxes, adoption of SFAS No. 109 was not material
to 1992 financial results.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
-30-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE J--INCOME TAXES (CONT'D)
<TABLE>
Significant components of GATC's deferred tax liabilities and assets were (in
millions):
<CAPTION>
1993 1992
<S> <C> <C>
Deferred tax liabilities:
Book/tax basis differences due to depreciation $320.6 $307.6
Other 20.6 21.5
------ ------
Total deferred tax liabilities 341.2 329.1
Deferred tax assets:
Accruals not currently deductible for tax purposes 34.6 36.3
Postretirement benefits other than pensions 23.5 23.4
Lease accounting (other than leveraged) 12.3 11.8
Alternative minimum tax credit 5.2 8.3
------ ------
Total deferred tax assets 75.6 79.8
------ ------
Net deferred tax liabilities $265.6 $249.3
====== ======
</TABLE>
At December 31, 1993, GATC has an alternative minimum tax credit of $5.2
million that can be carried forward indefinitely to reduce future regular tax
liabilities.
The results of operations of GATC and its United States subsidiaries are
included in the consolidated federal income tax return of GATX. Current
provisions for federal income taxes represent amounts payable to GATX resulting
from inclusion of GATC's operations in the consolidated federal income tax
return. Amounts shown as currently payable for federal income taxes represent
taxes payable due to the alternative minimum tax.
GATC's sources of income before income taxes and equity in net earnings of
affiliated companies were almost entirely domestic.
<TABLE>
Income taxes consist of (in millions):
<CAPTION>
Liability Deferred
Method Method
For the Year 1993 1992 1991
<S> <C> <C> <C>
Current-
Domestic:
Federal $29.6 $15.9 $12.3
State and local .7 .8 3.5
------ ------ ------
30.3 16.7 15.8
Foreign .3 .4 .4
------ ------ ------
30.6 17.1 16.2
------ ------ ------
Deferred-
Domestic:
Federal 12.1 12.6 11.8
State and local 2.4 2.0 1.0
------ ------ ------
14.5 14.6 12.8
------ ------ ------
Income tax expense $45.1 $31.7 $29.0
====== ====== ======
Income taxes paid $28.0 $20.1 $13.2
====== ====== ======
</TABLE>
-31-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE J--INCOME TAXES (CONT'D)
The reasons for the differences between reported income tax expense (credit) and
the amount computed by applying the statutory federal income tax rate of 35% in
1993 and 34% in 1992 and 1991 to income before income taxes were (in millions):
<TABLE>
<CAPTION>
Liability Deferred
Method Method
For the Year 1993 1992 1991
<S> <C> <C> <C>
Federal income taxes at statutory rate $36.6 $30.0 $30.1
Add (deduct) effect of:
Tax rate increase on deferred taxes 6.7 - -
Purchase accounting adjustments 2.2 .9 .9
State income taxes 2.0 1.9 3.0
Deferred tax turnaround - - (4.5)
Investment tax credit - - (2.2)
Other (2.4) (1.1) 1.7
------ ---- -----
$45.1 $31.7 $29.0
====== ===== =====
</TABLE>
<TABLE>
The components of deferred income tax expense for the year ended December 31,
1991 were (in millions):
<CAPTION>
1991
<S> <C>
Charge (credit):
Accelerated depreciation for income tax purposes $10.5
Investment tax credit utilized 8.2
Deferred tax turnaround (4.5)
Difference between book and tax accounting
for lease transactions (2.9)
Alternative minimum tax (2.2)
Amortization of investment tax credit (2.2)
Prior accrued taxes 2.1
Other 3.8
------
$12.8
=====
</TABLE>
NOTE K--COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK
GATC's revenues are derived from a wide range of industries and companies.
However, approximately 85% of total revenues are generated from the
transportation and storage of products for the chemical and petroleum
industries.
Under its lease agreements, GATC retains legal ownership of the asset. GATC
performs credit evaluations prior to approval of a lease contract. Subsequently,
the creditworthiness of the customer is monitored on an ongoing basis. GATC
maintains an allowance for possible losses to provide for future losses should
customers become unable to discharge their obligations to GATC.
-32-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE K--COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK (CONT'D)
At December 31, 1993 GATC had firm commitments to acquire railcars and to
upgrade facilities totaling $115 million.
GATC and its subsidiaries are engaged in various matters of litigation and have
a number of unresolved claims pending, including proceedings under governmental
laws and regulations related to environmental matters. While the amounts
claimed are substantial and the ultimate liability with respect to such
litigation and claims cannot be determined at this time, it is the opinion of
management that such liability, to the extent not recoverable from third parties
including insurers, is not likely to be material to GATC's consolidated
financial position or results of operations.
NOTE L--FINANCIAL DATA OF BUSINESS SEGMENTS
GATC is engaged in the following businesses:
Railcar Leasing and Management represents General American Transportation
Corporation and its foreign affiliate, which lease and manage tank cars and
other specialized railcars.
Terminals and Pipelines represents GATX Terminals Corporation and its domestic
and foreign subsidiaries and affiliates, which own and operate tank storage
terminals, pipelines and related facilities.
Intersegment sales are not significant in amount or meaningful to an
understanding of GATC's business segments.
The following presentation of segment profitability includes the direct costs
incurred at the segment's operating level plus expenses allocated by GATX. These
allocated expenses represent costs for services provided by GATX which these
operations would have incurred otherwise and are determined on a usage basis;
management believes that this method is reasonable. Such costs do not include
general corporate expense nor interest on debt of GATX.
Interest costs associated with segment indebtedness are included in the
determination of profitability of each segment since interest expense directly
influences any investment decision and the evaluation of subsequent operational
performance. Interest costs by segment have been shown separately so the reader
can ascertain segment profitability before deducting interest expense.
-33-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE L--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)
<TABLE>
<CAPTION>
(In millions)
1993 1992 1991
Gross Income:
<S> <C> <C> <C>
Railcar Leasing and Management $ 302.2 $ 289.3 $ 285.3
Terminals and Pipelines 281.1 266.5 249.7
-------- -------- --------
Subtotal 583.3 555.8 535.0
Intersegment amounts
with other GATX segments 18.4 23.4 23.9
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 601.7 $ 579.2 $ 558.9
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Income Before Income Taxes, Equity
in Net Earnings of Affiliated Companies,
and Cumulative Effect of Accounting Changes:
<S> <C> <C> <C>
Railcar Leasing and Management $ 74.4 $ 68.4 $ 73.6
Terminals and Pipelines 30.2 19.8 14.9
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 104.6 $ 88.2 $ 88.5
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Equity in Net Earnings
of Affiliated Companies:
<S> <C> <C> <C>
Railcar Leasing and Management $ 4.5 $ 4.5 $ 4.5
Terminals and Pipelines 10.1 11.8 10.2
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 14.6 $ 16.3 $ 14.7
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Income Before Cumulative
Effect of Accounting Changes:
<S> <C> <C> <C>
Railcar Leasing and Management $ 47.6 $ 49.4 $ 55.2
Terminals and Pipelines 26.5 23.4 19.0
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 74.1(A) $ 72.8(B) $ 74.2
======== ======== ========
</TABLE>
(A) Income has been reduced by $7.7 million as a result of the change in the
federal tax rate (see following table for breakdown by segment).
(B) Income was further reduced by $6.7 million for the cumulative effect of
accounting changes resulting in net income of $66.1 million (see following
table for a breakdown by segment).
-34-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE L--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)
FEDERAL TAX RATE CHANGE IN 1993
The following table shows the effect of the new federal tax legislation enacted
in 1993 which increased the federal income tax rate from 34% to 35%
retroactively to January 1, 1993. The income amounts for 1992 are shown before
the cumulative effect of accounting changes (SFAS No. 106 and No. 109) for
comparative purposes to 1993 income before the tax rate change.
<TABLE>
<CAPTION>
Income
Before
Income Cumulative
Before Tax Effect of Net
Tax Rate Rate Net Accounting Income
Change Change Income Changes (Loss)
In Millions ---------1993----------- -------1992-------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $52.7 $(5.1) $47.6 $49.4 $55.6
Terminals and Pipelines 29.1 (2.6) 26.5 23.4 18.7
Other - - - - (8.2)
TOTAL CONSOLIDATED AMOUNTS $81.8 $(7.7) $74.1 $72.8 $66.1
</TABLE>
<TABLE>
ACCOUNTING CHANGES IN 1992
The effect in 1992 of adopting SFAS No. 106 and No. 109 on net income for each of GATC's segments was:
<CAPTION>
Income Cumulative Effect of
Before Accounting Changes
Cumulative SFAS 106
Effect of Post- SFAS 109 Net
Accounting Retirement Income Income
Changes Benefits Taxes (Loss)
In Millions ------------------1992------------------
<S> <C> <C> <C> <C>
Railcar Leasing and Management $49.4 $(32.5) $38.7 $55.6
Terminals and Pipelines 23.4 (7.7) 3.0 18.7
Other - (4.3) (3.9) (8.2)
TOTAL CONSOLIDATED AMOUNTS $72.8 $(44.5) $37.8 $66.1
</TABLE>
-35-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE L--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)
<TABLE>
<CAPTION>
(In millions)
1993 1992 1991
Identifiable Assets:
<S> <C> <C> <C>
Railcar Leasing and Management $1,701.0 $1,694.7 $1,678.3
Terminals and Pipelines 872.5 816.2 781.7
Other 1.0 .9 .7
-------- -------- --------
2,574.5 2,511.8 2,460.7
Intersegment amounts (358.9) (347.7) (324.5)
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $2,215.6 $2,164.1 $2,136.2
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Capital Additions:
<S> <C> <C> <C>
Railcar Leasing and Management $ 195.3 $ 116.6 $ 102.4
Terminals and Pipelines 77.8 76.2 85.1
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 273.1 $ 192.8 $ 187.5
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Provision for Depreciation and Amortization:
<S> <C> <C> <C>
Railcar Leasing and Management $ 63.9 $ 62.6 $ 62.2
Terminals and Pipelines 41.0 38.6 35.8
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 104.9 $ 101.2 $ 98.0
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Interest Expense:
<S> <C> <C> <C>
Railcar Leasing and Management $ 69.6 $ 87.3 $ 92.3
Terminals and Pipelines 39.0 40.3 38.9
-------- -------- --------
108.6 127.6 131.2
Intersegment amounts (29.8) (31.6) (30.5)
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 78.8 $ 96.0 $ 100.7
======== ======== ========
</TABLE>
-36-
<PAGE>
<TABLE>
SCHEDULE IV - INDEBTEDNESS OF AND TO RELATED PARTIES
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
(IN MILLIONS)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
Balance at Balance
Beginning at End
Name of Related Party of Period Additions Deductions of Period
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
GATX Corporation $414.2 $ - $ 5.2(A) $409.0
American Steamship Company (55.5) 8.0(B) - (47.5)
------ ------ ------- -------
TOTAL $358.7 $ 8.0 $ 5.2 $361.5
======== ======== ======== ======
Year ended December 31, 1992:
GATX Corporation $383.2 $ 31.0(A) $ - $414.2
American Steamship Company (44.4) - 11.1(C) (55.5)
------ ------ ------- ------
TOTAL $338.8 $ 31.0 $ 11.1 $358.7
====== ======== ======== =======
Year ended December 31, 1991:
GATX Corporation $352.4 $ 30.8(A) $ - $383.2
American Steamship Company (44.7) .3(B) - (44.4)
------ ------ ------ -----
TOTAL $307.7 $ 31.1 $ - $338.8
====== ====== ====== ======
<FN>
Note A: Represents net cash transfers and accruals from
General American Transportation Corporation (GATC)
to GATX Corporation for operating purposes and, in
1992 and 1991, for acquisitions.
Note B: Represents a decrease in the payable as a result
of net cash transfers and accruals for operating
purposes.
Note C: Represents an increase in the payable as a result
of net cash transfers and accruals for operating
purposes.
</FN>
</TABLE>
-37-
<PAGE>
<TABLE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1993
(IN MILLIONS)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Other Charges - Balance
Beginning Additions Add (Deduct) - at End
CLASSIFICATION - NOTE A of Period at Cost Retirements Describe of Period
<S> <C> <C> <C> <C> <C>
Railcars and support facilities:
Railcars $1,649.8 $171.5 $ 20.5 $(143.3)(B) $1,657.5
Buildings and railcar
maintenance facilities 28.8 18.0 .5 - 46.3
Machinery and equipment 20.6 3.9 .1 - 24.4
Other assets 7.7 1.9 2.0 - 7.6
-------- ------ ------ ------- --------
Total railcars and
support facilities 1,706.9 195.3 23.1 (143.3) 1,735.8
Tank storage terminals and pipelines:
Land 36.1 - - - 36.1
Buildings and land
improvements 56.4 4.1 .1 (.1)(C) 60.3
Storage tanks and pipelines 283.2 21.3 1.1 (1.3)(C) 302.1
Docks 36.9 2.9 - (.1)(C) 39.7
Machinery, equipment
and fixtures 463.6 37.0 8.6 - 492.0
Construction in progress 31.7 8.9 - - 40.6
Other 41.7 3.6 1.0 (.3)(C) 44.0
-------- ------ ------ ------- --------
Total tank storage
terminals and pipelines 949.6 77.8 10.8 (1.8) 1,014.8
-------- ------ ------ ------- --------
TOTAL $2,656.5 $273.1 $ 33.9 $(145.1) $2,750.6
======== ====== ====== ======= ========
</TABLE>
See notes to Schedule V on page 41.
-38-
<PAGE>
<TABLE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (CONT'D)
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1992
(IN MILLIONS)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Other Charges - Balance
Beginning Additions Add (Deduct) - at End
CLASSIFICATION - NOTE A of Period at Cost Retirements Describe of Period
<S> <C> <C> <C> <C> <C>
Railcars and support facilities:
Railcars $1,642.6 $108.2 $ 19.6 $ (81.4)(B) $1,649.8
Buildings and railcar
maintenance facilities 21.6 7.3 .1 - 28.8
Machinery and equipment 19.9 .9 .2 - 20.6
Other assets 7.8 .2 .3 - 7.7
-------- ------ ------ ------- --------
Total railcars and
support facilities 1,691.9 116.6 20.2 (81.4) 1,706.9
Tank storage terminals and pipelines:
Land 36.4 .1 - (.4)(C) 36.1
Buildings and land
improvements 54.0 3.6 .1 (1.1)(C) 56.4
Storage tanks and pipelines 252.6 32.3 1.3 (.4)(C) 283.2
Docks 35.1 2.0 - (.2)(C) 36.9
Machinery, equipment
and fixtures 429.8 46.0 2.6 (9.6)(C) 463.6
Construction in progress 43.2 (11.0) - (.5)(C) 31.7
Other 39.3 3.2 - (.8)(C) 41.7
-------- ------ ------ ------- --------
Total tank storage
terminals and pipelines 890.4 76.2 4.0 (13.0) 949.6
-------- ------ ------ ------- --------
TOTAL $2,582.3 $192.8 $ 24.2 $ (94.4) $2,656.5
======== ====== ====== ======= ========
</TABLE>
See notes to Schedule V on page 41.
-39-
<PAGE>
<TABLE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (CONT'D)
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1991
(IN MILLIONS)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Other Charges - Balance
Beginning Additions Add (Deduct) - at End
CLASSIFICATION - NOTE A of Period at Cost Retirements Describe of Period
<S> <C> <C> <C> <C> <C>
Railcars and support facilities:
Railcars $1,639.8 $101.1 $ 20.6 $ (77.7)(B) $1,642.6
Buildings and railcar
maintenance facilities 21.5 .1 - - 21.6
Machinery and equipment 19.1 .9 .1 - 19.9
Other assets 7.5 .3 - 7.8
-------- ------ ------ ------- --------
Total railcars and
support facilities 1,687.9 102.4 20.7 (77.7) 1,691.9
Tank storage terminals and pipelines:
Land 36.5 - - (.1)(C) 36.4
Buildings and land
improvements 54.6 3.2 - (3.8)(C) 54.0
Storage tanks and pipelines 203.0 23.9 .4 26.1 (C) 252.6
Docks 33.1 1.2 - .8 (C) 35.1
Machinery, equipment
and fixtures 431.9 34.7 2.6 (34.2)(C) 429.8
Construction in progress 27.9 15.5 - (.2)(C) 43.2
Other 23.2 4.4 .2 11.9 (C) 39.3
-------- ------ ------ ------- --------
Total tank storage
terminals and pipelines 810.2 82.9 3.2 .5 890.4
-------- ------ ------ ------- --------
TOTAL $2,498.1 $185.3 $ 23.9 $ (77.2) $2,582.3
======== ====== ====== ======= ========
</TABLE>
See notes to Schedule V on page 41.
-40-
<PAGE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (CONT'D)
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
Note A - The estimated useful lives of depreciable assets are as follows:
Railcars 20-33 years
Buildings, leasehold improvements, storage
tanks and pipelines 5-45 years
Machinery and related equipment 3-20 years
Note B - Represents primarily the sale and leaseback of certain railcar
additions.
Note C - Represents adjustments associated with transfers and reclassification
of certain facilities and other assets and foreign currency
translation adjustments.
-41-
<PAGE>
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1993
(IN MILLIONS)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Additions
Balance at Charged to Other Charges - Balance
Beginning Costs and Add (Deduct) - at End
DESCRIPTION of Period Expenses Retirements Describe of Period
<S> <C> <C> <C> <C> <C>
Railcars and support facilities:
Railcars $ 768.7 $ 62.0 $ 15.5 $ (5.4)(A) $ 809.8
Buildings and railcar
maintenance facilities 14.7 .3 .4 - 14.6
Machinery and equipment 16.0 1.0 .2 - 16.8
Other assets 5.3 .5 2.0 - 3.8
-------- ------ ------ ------- --------
Total railcars and
support facilities 804.7 63.8 18.1 (5.4) 845.0
Tank storage terminals and pipelines:
Buildings and land
improvements 24.7 2.6 - (.1)(B) 27.2
Storage tanks and pipelines 91.0 10.8 .4 (.3)(B) 101.1
Docks 17.7 1.6 - - 19.3
Machinery, equipment
and fixtures 162.3 22.0 3.7 (.6)(B) 180.0
Other 18.1 3.5 .8 (.1)(B) 20.7
-------- ------ ------ ------- --------
Total tank storage
terminals and pipelines 313.8 40.5 4.9 (1.1) 348.3
-------- ------ ------ ------- --------
TOTAL $1,118.5 $104.3 $ 23.0 $ (6.5) $1,193.3
======== ====== ====== ======= ========
</TABLE>
See notes to Schedule VI on page 45.
-42-
<PAGE>
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT (CONT'D)
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1992
(IN MILLIONS)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Additions
Balance at Charged to Other Charges - Balance
Beginning Costs and Add (Deduct) - at End
DESCRIPTION of Period Expenses Retirements Describe of Period
<S> <C> <C> <C> <C> <C>
Railcars and support facilities:
Railcars $ 724.8 $ 60.4 $ 14.8 $ (1.7)(A) $ 768.7
Buildings and railcar
maintenance facilities 14.4 .4 .1 - 14.7
Machinery and equipment 15.4 .8 .2 - 16.0
Other assets 4.6 1.0 .3 - 5.3
-------- ------ ------ ------- --------
Total railcars and
support facilities 759.2 62.6 15.4 (1.7) 804.7
Tank storage terminals and pipelines:
Buildings and land
improvements 22.4 2.4 .1 - 24.7
Storage tanks and pipelines 81.6 10.3 .7 (.2)(B) 91.0
Docks 16.1 1.6 - - 17.7
Machinery, equipment
and fixtures 144.4 20.6 2.3 (.4)(B) 162.3
Other 14.9 3.2 - - 18.1
-------- ------ ------ ------- --------
Total tank storage
terminals and pipelines 279.4 38.1 3.1 (.6) 313.8
-------- ------ ------ ------- --------
TOTAL $1,038.6 $100.7 $ 18.5 $ (2.3) $1,118.5
======== ====== ====== ======= ========
</TABLE>
See notes to Schedule VI on page 45.
-43-
<PAGE>
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT (CONT'D)
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1991
(IN MILLIONS)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Additions
Balance at Charged to Other Charges - Balance
Beginning Costs and Add (Deduct) - at End
DESCRIPTION of Period Expenses Retirements Describe of Period
<S> <C> <C> <C> <C> <C>
Railcars and support facilities:
Railcars $ 682.9 $ 60.4 $ 14.6 $ (3.9)(A) $ 724.8
Buildings and railcar
maintenance facilities 14.0 .4 - - 14.4
Machinery and equipment 14.7 .7 - - 15.4
Other assets 3.9 .7 - - 4.6
-------- ------ ------ ------- --------
Total railcars and
support facilities 715.5 62.2 14.6 (3.9) 759.2
Tank storage terminals and pipelines:
Buildings and land
improvements 20.6 2.3 - (.5)(B) 22.4
Storage tanks and pipelines 85.1 9.7 .1 (13.1)(B) 81.6
Docks 14.6 1.5 - - 16.1
Machinery, equipment
and fixtures 119.6 19.0 1.2 7.0 (B) 144.4
Other 6.0 3.0 .2 6.1 (B) 14.9
-------- ------ ------ ------- --------
Total tank storage
terminals and pipelines 245.9 35.5 1.5 (.5) 279.4
-------- ------ ------ ------- --------
TOTAL $ 961.4 $ 97.7 $ 16.1 $ (4.4) $1,038.6
======== ====== ====== ======= ========
</TABLE>
See notes to Schedule VI on page 45.
-44-
<PAGE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT (CONT'D)
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
Note A - In 1993, represents $2.8 million of accumulated depreciation related to
the sale leaseback of railcars and $3.5 million related to the early
disposal of railcars, offset by $.9 million of reserves for the cost of
scrapped railcars. In 1992, represents $6.0 million of accumulated
depreciation related to the sale leaseback of railcars and $1.2 million
for an early disposal, offset by $5.5 million of reserves for the cost
of scrapped railcars. In 1991, represents $3.0 million of accumulated
depreciation related to the sale leaseback of railcars increased by a
$.9 million loss on the cost of scrapped railcars.
Note B - Represents adjustments associated with transfers and reclassifications
of certain facilities and other assets and foreign currency translation
adjustments.
-45-
<PAGE>
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
(IN MILLIONS)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
ADDITIONS
(1) (2)
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts- Deductions- at End
DESCRIPTION of Period Expenses Describe Describe of Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowance for possible
losses in collection of
trade receivables - Note A $ 5.8 $ .3 $ - $ .3(D) $ 5.8
Year ended December 31, 1992:
Allowance for possible
losses in collection of
trade receivables - Note A $ 5.1 $ 1.1 $ - $ .4(D) $ 5.8
Reserve for costs of closing
or disposing of certain
manufacturing
facilities - Note B 2.7 - - 2.7(E) -
Year ended December 31, 1991:
Allowance for possible
losses in collection of
trade receivables - Note A $ 3.8 $ 1.8 $ - $ .5(D) $ 5.1
Reserve for costs of closing
or disposing of certain
manufacturing
facilities - Note B 2.4 - .3(C) - 2.7
<FN>
Note A - Deducted from asset accounts.
Note B - Included in other deferred items in the consolidated balance sheet.
Note C - Represents recovery of amount previously written off.
Note D - Uncollectible accounts charged off.
Note E - Represents transfer to non-asset related reserves.
</FN>
</TABLE>
-46-
<PAGE>
<TABLE>
SCHEDULE IX - SHORT-TERM BORROWINGS
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
(IN MILLIONS)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
CATEGORY OF AGGREGATE at End of Interest During the During the During the
SHORT-TERM BORROWINGS Period Rate Period Period (C) Period (D)
<S> <C> <C> <C> <C> <C>
At December 31, 1993:
Commercial paper (A) $ 25.5 3.50% $ 73.6 $ 36.6 3.41%
Other short-term
borrowings (B) 78.7 4.29 124.3 67.8 4.36 (E)
------
TOTAL $104.2
======
At December 31, 1992:
Commercial paper (A) $ 45.0 4.17% $ 52.5 $ 21.6 4.18%
Other short-term
borrowings (B) 88.3 4.61 88.3 55.7 5.44 (E)
------
TOTAL $133.3
======
At December 31, 1991:
Commercial paper (A) $ 21.0 6.24% $ 40.0 $17.9 6.24%
Other short-term
borrowings (B) 57.7 8.16 79.6 44.4 8.02 (E)
------
TOTAL $ 78.7
======
<FN>
Note A - Commercial paper generally matures within three months from date of issuance with
no provision for the extension of its maturity.
Note B - Other short-term borrowings represent borrowings under lines of credit.
Note C - The average amount outstanding during the period was calculated by adding the
average monthly balances and dividing by 12.
Note D - The weighted average interest rate during the period was computed by dividing the
actual interest expense by the average short-term financing outstanding.
Note E - Weighted average interest rate during the period includes interest charges on
overdrafts.
</FN>
</TABLE>
-47-
<PAGE>
<TABLE>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
(IN MILLIONS)
<CAPTION>
COL. A COL. B
ITEM Charged to Costs and Expenses
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs $ 88.6 $ 83.1 $ 75.6
====== ====== ======
Taxes (other than payroll and income taxes):
Railcars $ 3.9 $ 3.8 $ 3.3
Franchise and miscellaneous 1.5 1.2 .3
Real estate and personal property 12.2 10.9 10.7
------ ------ ------
$ 17.6 $ 15.9 $ 14.3
====== ====== ======
<FN>
Note: Amounts for royalties, advertising costs, and amortization of intangibles are not presented as such amounts are
less than 1% of gross income.
</FN>
</TABLE>
-48-
<PAGE>
EXHIBIT 12
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(IN MILLIONS EXCEPT FOR RATIOS)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Net Income.................................... $ 74.1 $ 66.1 $ 74.2 $ 76.6 $ 76.8
Add (deduct):
Income taxes................................ 45.1 31.7 29.0 29.9 34.7
Cumulative effect of accounting changes..... - 6.7 - - -
Equity in net earnings of affiliated
companies, net of distributions received.. (11.5) (13.2) (11.5) (9.2) (5.7)
Interest on indebtedness and amortization
of debt discount and expense.............. 78.8 96.0 100.7 106.3 91.0
Amortization of capitalized interest........ 1.1 1.1 .9 1.0 .7
Portion of rents representative of interest
factor (deemed to be one-third)........... 13.2 9.3 7.3 2.9 2.3
------ ------ ------ ------ ------
Total earnings available for fixed charges.... $200.8 $197.7 $200.6 $207.5 $199.8
====== ====== ====== ====== ======
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense................ $ 78.8 $ 96.0 $100.7 $106.3 $ 91.0
Capitalized interest.......................... 2.4 2.8 2.8 3.2 1.7
Portion of rents representative of interest
factor (deemed to be one-third)............. 13.2 9.3 7.3 2.9 2.3
------ ------ ------ ------ ------
Total fixed charges........................... $ 94.4 $108.1 $110.8 $112.4 $ 95.0
====== ====== ====== ====== ======
Ratio of earnings to fixed charges(A)........... 2.13x 1.83x 1.81x 1.85x 2.10x
<FN>
(A) The ratio of earnings to fixed charges represents 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, fixed charges, and, in 1992, the cumulative effect of accounting changes, less equity in net earnings of
affiliated companies, net of distributions received.
</FN>
</TABLE>
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<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement
No. 33-33073 on Form S-3 filed January 17, 1990, Registration Statement
No. 33-48475 on Form S-3 filed July 30, 1992 and Registration Statement
No. 33-52301 on Form S-3 filed February 25, 1994 of our report dated
January 25, 1994 with respect to the consolidated financial statements and
schedules of General American Transportation Corporation included in this Annual
Report on Form 10-K for the year ended December 31, 1993.
ERNST & YOUNG
Chicago, Illinois
March 18, 1994
-50-
<PAGE>
