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, 1994
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
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Registrant had 1,000 shares of common stock outstanding (all owned by
GATX Corporation) as of March 10, 1995.
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.
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, 1994, its fleet consisted of
approximately 59,800 railcars, including 50,700 tank cars and 9,100
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,
--------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Tank car fleet capacity
(in millions of gallons) 1,090 1,024 993 977 964
Number of cars added to fleet 4,900 3,000 1,600 1,500 1,700
</TABLE>
Transportation's customers use its railcars to ship over 700 different
commodities, primarily chemicals, petroleum, food products and minerals. For
1994, approximately 54% of railcar leasing revenue was attributable to
shipments of chemical products, 21% to petroleum products, 18% to food
products and 7% 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 5% 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, 1994 was approximately 95%.
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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 24 mobile trucks in 17 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 Services Corporation,
Shippers Car Line division of ACF Industries, Incorporated, and many smaller
companies. Of the approximately 193,000 tank cars owned and leased in the
United States at December 31, 1994, Transportation had approximately 50,700.
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 owns and
operates 25 terminals in 11 states, two pipeline systems, and eight terminals
in the United Kingdom; Terminals also has joint venture interests in 13
international facilities.
As of December 31, 1994, Terminals had a total storage capacity of 76 million
barrels. This includes 57 million barrels of bulk liquid storage capacity in
the United States, 7 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. Capacity utilization at Terminals'
wholly-owned facilities was 94% at the end of 1994; throughput for the year
was 671 million barrels.
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For 1994, 76% of Terminals' revenue was derived from petroleum products and
21% 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 approximately 300 customers, including major oil and
chemical companies as well as trading firms and larger independent refiners.
No single customer accounts for more than 6% 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 2,000 active employees, of whom
34% 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
defendants 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. Further, 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, et al, filed December 1989 (No. 253604); Charles, et al, v.
Calnev Pipe Line, Inc., et al, filed May 1990 (No. 256269); 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); Burney, et al, v. Southern Pacific, et al, filed May 1990 in the
County of Los Angeles (BC000876); 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 and settled February 1995 (No. 256346);
Stewart, et al, v. Southern Pacific Railroad Co., et al, filed May 1990 and
settled May 1994 (No. 256464); 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 Transportation, et al, filed November 1992 and
settled February 1995 (No. 275936); Goldie, et al, v. Southern Pacific, et
al, filed May 1990 and settled July 1994; Irby, et al, v. Southern Pacific,
et al, filed April 1990 and settled May 1994 (No. 255715); Reese, et al, v.
Southern Pacific, et al
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filed May 1990 and settled April 1994 (No. 256434); Nancy Washington, et al,
v. Southern Pacific, et al, filed May 1990 and settled March 1994
(No. 256435); and Zamarripa, et al, vs. Southern Pacific Railroad Company, et
al, filed November 1993 (No. 526684). 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.
The San Bernardino County, California, District Attorney has notified Calnev
Pipe Line Company that the District Attorney expects to pursue an action
against Calnev for the alleged violation of Section 25507 of the California
Health & Safety Code by failing to report, until May 23, 1994, a purported
release of hazardous materials first discovered in July 1993. According to
the District Attorney, violations of that Section are criminal misdemeanors
punishable by a fine of $25,000 for each day that the release remained
unreported. Calnev does not believe that it violated the reporting
requirement of the Code and intends to vigorously defend any action brought
by the District Attorney which alleges such a violation.
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 reported record net income of $87 million for 1994 compared to $74
million in 1993 and $66 million in 1992. The improvement was the result of
strong operating results at both Transportation and Terminals. Operating
results at Transportation improved in 1994 due to significantly more railcars
on lease. Terminals reported record earnings in 1994 as the result of
increased utilization and throughput. Transportation's 1993 earnings
increased as higher revenues and lower ownership costs were somewhat offset
by increased fleet repair expenses. Income at Terminals increased in 1993 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. The comparison between the years was impacted by the
federal income tax rate increase in 1993 and the adoption of two accounting
pronouncements in 1992.
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<PAGE>
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 38.
In 1992, GATC adopted Statement of Financial Accounting Standards (SFAS) No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
and SFAS No. 109, Accounting for Income Taxes. 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 38.
GROSS INCOME
Consolidated gross income for 1994 of $643 million exceeded 1993 revenue of
$602 million and 1992 revenue of $579 million.
Transportation's 1994 gross income of $322 million increased $20 million from
1993. Rental revenues increased 7% attributable to an average of 3,000
additional railcars on lease and slightly higher average fleet rental rates.
The level of fleet additions increased in response to improved demand for new
tank cars, which is expected to continue in 1995. At the end of 1994,
Transportation had 56,500 railcars on lease compared to 51,900 at the end of
1993 and fleet utilization was 95% compared to 93%.
Terminals' record gross income of $303 million in 1994 was the result of
strong performance at a number of individual terminal and pipeline
operations. The increase of $22 million or 8% over 1993 was due to high
petroleum demand and improved chemical activity which resulted in both
increased throughput and higher utilization. Capacity utilization at
Terminals' wholly-owned facilities was 94% at the end of 1994 compared to 92%
a year earlier. Throughput was 671 million barrels, up 6% from 1993,
reflecting the overall improvement in the U.S. economy.
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 or 5% from
1992 reflecting continued 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.
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COSTS AND EXPENSES
Operating expenses in 1994 increased $21 million or 8% over 1993.
Transportation's operating expenses of $129 million increased $10 million
from 1993 as a result of the increased level of operating lease assets and
increased fleet repair costs, partially offset by lower environmental
expense. 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 10% over 1993 reflecting the increased number of cars
repaired. Transportation's commitment to provide its customers with well
maintained railcars, coupled with stricter maintenance standards in the
industry and mandated inspection programs, will continue to increase repair
costs. Transportation has been upgrading its repair facilities to control
costs by improving the efficiency and productivity of the repair process and
reducing the time a car is out of service. Operating margins were in line
with 1993. Pressure on operating margins is expected to continue as higher
standards of repair without compensating revenue increases characterize the
industry today.
Terminals' 1994 operating costs of $164 million increased $11 million over
the prior year. Operating expenses increased mainly due to higher repair and
maintenance spending, higher environmental costs and other costs as a result
of expanded operations. Operating margins increased 1% through revenue
improvement while controlling costs. Environmental and maintenance spending
is expected to continue to grow in keeping with GATX's commitment to improve
terminalling assets and to operate environmentally responsible facilities.
Operating expenses in 1993 increased $16 million over 1992. Transportation's
operating expenses of $119 million increased $15 million from 1992 as a
result of increased railcar repair costs and higher operating lease expenses
which increased due to the increased level of operating lease assets. 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.
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.
Interest expense decreased slightly in 1994 to $78 million primarily as a
result of slightly lower average interest rates, partially offset by a higher
average debt balance. A portion of the decrease in interest expense was
offset by an increase in the operating lease rent component of operating
expenses as a result of the sale leasebacks at Transportation. The increase
in interest rates in the last half of 1994 and into 1995 should have minimal
effect on results as assets are for the most part match funded. Other assets
offer repricing opportunities as contracts are renewed. The company
continues to use interest rate swaps to better match the duration of the debt
portfolio to the terms of the railcar leases. The effect of the swaps was to
reduce interest expense in 1994 and 1993.
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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, the effect of interest rate swaps and a reduced debt balance as
a result of the sale leasebacks.
The provision for depreciation and amortization increased $7 million from
1993 which in turn increased $4 million over 1992. Depreciation expense
increased as result of the continued growth in assets.
Selling, general and administrative expenses of $47 million increased $5
million from 1993 which in turn increased $3 million from 1992 primarily due
to expanded operations and higher training and information systems costs at
Terminals.
Income tax expense of $43 million decreased $2 million from 1993. The
effective tax rate for 1994 was 38%. The 1993 effective tax rate of 43%
exceeded the statutory rate primarily as the result of the increase in
deferred taxes due to the increase in the federal income tax rate from 34% to
35%. Income tax expense of $32 million for 1992 reflected an effective tax
rate of 36%. The effective tax rate for all years was higher than the
statutory rate because of state taxes and nondeductible items.
EQUITY IN NET EARNINGS OF AFFILIATED COMPANIES
Equity in net earnings of affiliated companies of $17 million increased $2
million from 1993 which had in turn decreased $2 million from 1992. The
increase in 1994 was primarily due to higher equity earnings from certain
European terminals as a result of improved results and favorable foreign
exchange rates. Terminals' equity earnings decreased $2 million 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.
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.
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NET INCOME
Consolidated net income of $87 million in 1994 increased $13 million from
1993 as a result of improved operating performance. In addition, net income
for 1993 was reduced by a charge of $7 million for the cumulative increase in
deferred income taxes. Transportation's 1994 income from operations
increased 6% over 1993 due to significantly more railcars on lease.
Increased rental income and lower environmental expense were partially offset
by increased fleet repair costs, higher ownership costs and lower investment
earnings. Ownership costs, consisting of rental expense, depreciation and
interest, increased 9% primarily due to the high level of railcar additions.
Terminals' 1994 income from operations increased 11% from 1993 reflecting
higher revenues, slightly improved margins and increased earnings by its
foreign affiliates which were partially offset by higher SG&A expenses.
Overall, the continuing focus on improving physical assets, information
systems and people to provide for the long-term success of Terminals may
constrain near-term earnings growth.
Consolidated net income of $74 million in 1993 increased $8 million from 1992
primarily due to improved operating performance. Net income for 1993 was
reduced $7 million for the cumulative increase in deferred income taxes and
$1 million for the current year impact of the tax rate increase. Net income
for 1992 was reduced $7 million for the cumulative effect of accounting
changes. 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 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.
ASSETS
Total assets at year end of $2.5 billion were $251 million higher than 1993.
Property, plant and equipment increased $279 million to $3.0 billion.
Transportation invested $264 million in new and used railcars and $18 million
to upgrade its repair shops, which was partially offset by the sale leaseback
of $130 million of such railcar additions. As these leasebacks qualified as
operating leases, the assets were removed from the balance sheet. Terminals
invested $154 million for tank construction, facility improvements, and
terminal acquisitions.
Investments in affiliated companies increased $34 million. New investments
of $13 million included a European rail joint venture and an increased
ownership interest in a Singapore terminal facility. Equity income of $17
million and $7 million of unrealized translation gains and other changes were
partially offset by $3 million of cash distributions.
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LIABILITIES AND EQUITY
Total debt increased $152 million to fund a portion of the significant volume
of capital additions made during the year.
Consolidated equity increased $60 million attributable to 1994 earnings of
$87 million partially reduced by dividends paid to GATX Corporation of $47
million. The balance of the change is attributable to foreign currency
translation adjustments.
LIQUIDITY AND CAPITAL RESOURCES
GATC generates significant cash from its operating activities. Most of its
capital requirements represent additions to the railcar fleet, terminal and
pipeline facilities, and joint ventures, 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 adjusted as conditions in the economy or GATC's
businesses warrant.
Cash provided by operating activities in 1994 of $201 million decreased $5
million compared to 1993. Net income adjusted for non-cash items generated
$209 million of cash, up $16 million from 1993. Other generated $22 million
less cash than in 1993 primarily as a result of a decrease in working
capital.
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 in 1992 primarily as the result of the increase in payables.
Cash used in investing activities increased $181 million from 1993. Capital
additions of $440 million were up $167 million from 1993. Transportation
invested $264 million in the railcar fleet versus $171 million in the prior
year; $18 million also was invested in a multi-year program to significantly
upgrade its repair facilities versus $24 million in 1993. This program
should be completed in 1995. Terminals' capital spending of $154 million
increased $77 million from 1993 and included the acquisition of six
additional terminal facilities plus the expansion or upgrading of several
existing terminal facilities. Proceeds from asset dispositions of $137
million in 1994 included a $130 million sale leaseback of certain railcars 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 increased $10 million in 1993 from the
prior year. Capital additions of $273 million were up $80 million from 1992'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.
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Cash provided by financing activities was $104 million in 1994 compared to
$79 million of cash used in financing activities in 1993. GATC finances its
capital additions through cash generated from operating activities, debt
financings, and the sale leasebacks of railcars. During the year $182
million of long-term debt was issued and $56 million of long-term obligations
were repaid. Short-term debt increased by $25 million to a balance of $129
million.
Cash used in financing activities was $79 million in 1993, comparable to
1992. During 1993, $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.
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 1994, GATC amended its credit facility to extend
until 1998. 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, 1994, GATC and its subsidiaries had available unused committed
lines of credit amounting to $196 million.
GATC has a $650 million shelf registration for debt securities and pass
through trust certificates under which $175 million of notes and $93 million
of pass through trust certificates have been issued. At year end, GATC had
$174 million of commitments to acquire assets, all of which are scheduled to
fund in 1995.
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 a number of
financially responsible PRPs and has been identified as contributing only a
small percentage of the contamination at each of the sites. Due to various
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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.
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 or future
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. In addition, GATC has provided
indemnities for environmental issues to the buyers of two divested companies
for which GATC believes it has adequate reserves.
GATC's environmental reserve at the end of 1994 was $80 million and reflects
GATC's best estimate of the cost to remediate its environmental conditions.
Additions to the reserve were $27 million in 1994 and $17 million in 1993;
1994 included $13 million recorded in conjunction with terminal acquisitions.
Expenditures charged to the reserve amounted to $12 million and $10 million
in 1994 and 1993, respectively.
In 1994, GATC made capital expenditures of $15 million for environmental and
regulatory compliance compared to $18 million in 1993. These projects
included marine vapor recovery, discharge prevention compliance, waste water
systems, impervious dikes, tank modifications for emissions control, and tank
car cleaning systems. Environmental projects authorized or currently under
consideration would require capital expenditures of approximately $30 million
in 1995. It is anticipated that GATC will make annual expenditures at a
similar annual level over the next five years.
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.
-12-
<PAGE>
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 PAGE
The consolidated financial statements of General American
Transportation Corporation and its subsidiaries which are
required in Item 8 are listed below:
Statements of Consolidated Income and Reinvested Earnings--
years ended December 31, 1994, 1993 and 1992.............. 19
Consolidated Balance Sheets--December 31, 1994 and 1993..... 20
Statements of Consolidated Cash Flows--
years ended December 31, 1994, 1993 and 1992.............. 22
Notes to Consolidated Financial Statements.................. 23
(2) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts................40
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.
-13-
<PAGE>
Item 14. Financial Statement Schedules, Reports on Form 8-K and Exhibits
(b) General American Transportation Corporation filed a Current
Report on Form 8-K dated December 7, 1994, with respect to the
offering of $100 million principal amount of 8-5/8% Notes due
December 1, 2004. Copies of the Note and Underwriting Agreement
entered into by GATC as part of this transaction were filed as part
of the 8-K Report.
(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. By-Laws of General American Transportation Corporation,
as amended and restated as of June 15, 1994, file
number 2-54754. Submitted to the SEC along with
the electronic submission of this Report on Form 10-K.
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.
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.
-14-
<PAGE>
Exhibit
Number Exhibit Description Page
- ---------- ---------------------------------------------- -----
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.
4F. General American Transportation Corporation Notices 1 and
2 dated June 8, 1994, Notices 3 through 6 dated June 17,
1994, and Notices 7 through 11 dated July 18, 1994,
defining the rights of the holders of GATC's Medium-Term
Notes Series E issued during those periods. Notices 1
through 6 are incorporated by reference to the GATC
Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, and Notices 7 through 11 are incorporated
herein by reference to the Form 424(b)(5) dated July 18,
1994, file number 2-54754.
4G. Form of 8-5/8% Note due December 1, 2004 filed with the SEC on
Current Report on Form 8-K on December 7, 1994, file number
2-54754.
-15-
<PAGE>
Exhibit
Number Exhibit Description Page
- ---------- ---------------------------------------------- -----
10A. Third Amended and Restated Revolving Credit Agreement for
GATC dated as of March 31, 1994, incorporated by
reference to GATC's Quarterly Report on Form 10-Q for the
period ended March 31, 1994, 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 41
to fixed charges.
23. Consent of Independent Auditors 42
27. Financial Data Schedule for GATC for the fiscal year
ended December 31, 1994, file number 1-2328. Submitted
to the SEC along with the electronic submission of this
report on Form 10-K.
Any instrument defining the rights of security holders with
respect to nonregistered long-term debt not being filed on
the basis that the amount of securities authorized does
not exceed 10 percent of the total assets of the company
and subsidiaries on a consolidated basis will be furnished
to the Commission upon request.
-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 22, 1995
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 22, 1995
/s/Donald J. Schaffer
----------------------------------
Donald J. Schaffer
Vice President, Finance and
Chief Financial Officer
March 22, 1995
/s/James J. Glasser
----------------------------------
James J. Glasser
Director
March 22, 1995
/s/Ronald H. Zech
----------------------------------
Ronald H. Zech
Director
March 22, 1995
/s/David M. Edwards
----------------------------------
David M. Edwards
Director
March 22, 1995
-17-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
General American Transportation Corporation
We have audited the consolidated financial statements and related schedule 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, 1994. These financial statements and related
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
related schedule 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 schedule. 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, 1994 and
1993, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, it is our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents 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 LLP
Chicago, Illinois
January 24, 1995
-18-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
STATEMENTS OF CONSOLIDATED INCOME AND REINVESTED EARNINGS
(IN MILLIONS)
<CAPTION>
Year Ended December 31
---------------------------
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Gross income $642.6 $601.7 $579.2
Costs and expenses
Operating expenses 293.0 271.9 255.8
Interest 78.3 78.8 96.0
Provision for depreciation and
amortization 111.8 104.9 101.2
Selling, general and administrative 46.7 41.5 38.0
-------- -------- -------
529.8 497.1 491.0
-------- -------- -------
Income before income taxes, equity in net
earnings of affiliated companies and
cumulative effect of accounting changes 112.8 104.6 88.2
Income taxes 42.7 45.1 31.7
-------- -------- -------
Income before equity in net earnings of
affiliated companies and cumulative
effect of accounting changes 70.1 59.5 56.5
Equity in net earnings
of affiliated companies 16.9 14.6 16.3
-------- -------- -------
Income before cumulative effect
of accounting changes 87.0 74.1 72.8
Cumulative effect of
accounting changes - - (6.7)
-------- -------- -------
Net income 87.0 74.1 66.1
Reinvested earnings at beginning of year 306.5 275.7 247.9
Dividends paid to GATX Corporation (46.6) (43.3) (38.3)
-------- -------- -------
Reinvested earnings at end of year $346.9 $306.5 $275.7
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
-19-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<CAPTION>
December 31
----------------------
1994 1993
---------- ----------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 14.5 $ 11.7
Trade receivables--net 52.3 45.3
Property, plant and equipment:
Railcars and support facilities 1,857.4 1,735.8
Tank storage terminals and pipelines 1,171.8 1,014.8
---------- ----------
3,029.2 2,750.6
Less - Allowances for depreciation (1,274.3) (1,193.3)
---------- ----------
1,754.9 1,557.3
Due from GATX Corporation 362.4 361.5
Investments in affiliated companies 182.1 148.2
Other assets 100.4 91.6
---------- ----------
TOTAL ASSETS $ 2,466.6 $ 2,215.6
========= =========
</TABLE>
See notes to consolidated financial statements.
-20-
<PAGE>
<TABLE>
<CAPTION>
December 31
----------------------
1994 1993
---------- ----------
LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY
<S> <C> <C>
Accounts payable $ 106.4 $ 98.4
Accrued expenses 35.7 36.0
Debt
Short-term debt 129.4 104.2
Long-term debt 864.1 731.9
Capital lease obligations 121.8 126.8
---------- --------
1,115.3 962.9
Deferred income taxes 271.3 265.6
Other deferred items 234.5 208.8
---------- --------
Total liabilities and deferred items 1,763.2 1,571.7
Shareholder's equity
Common Stock--par value $1 per share,
1,000 shares authorized, issued and
outstanding (owned by GATX Corporation) - -
Additional capital 335.0 335.0
Reinvested earnings 346.9 306.5
Cumulative foreign currency
translation adjustment 21.5 2.4
---------- --------
Total shareholder's equity 703.4 643.9
---------- --------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY $ 2,466.6 $ 2,215.6
========= =========
</TABLE>
-21-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN MILLIONS)
<CAPTION>
Year Ended December 31
----------------------------
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 87.0 $ 74.1 $ 66.1
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for depreciation
and amortization 111.8 104.9 101.2
Deferred income taxes 10.7 14.5 14.6
Cumulative effect of accounting
changes - - 6.7
Other (includes working capital) (8.7) 13.0 1.6
------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 200.8 206.5 190.2
INVESTING ACTIVITIES
Additions to property, plant & equipment:
Railcars and support facilities (281.8) (195.3) (116.6)
Tank storage terminals and pipelines (144.9) (75.9) (76.2)
Investments in affiliated companies (13.1) (1.9) -
------- -------- --------
Capital additions (439.8) (273.1) (192.8)
Proceeds from asset dispositions 137.3 151.6 81.6
------- -------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (302.5) (121.5) (111.2)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 182.4 63.3 125.2
Repayment of long-term debt (50.7) (58.8) (197.2)
Net increase (decrease) in short-term debt 25.2 (29.1) 54.6
Repayment of capital lease obligations (4.9) (8.1) (3.9)
Cash dividends paid to GATX Corporation (46.6) (43.3) (38.3)
Net increase in amount
due from GATX Corporation (.9) (2.8) (19.9)
------- -------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 104.5 (78.8) (79.5)
------- ------ -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 2.8 $ 6.2 $ (.5)
======= ======= =======
</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. 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
Goodwill: GATC has classified the cost in excess of the fair value of net
assets acquired as goodwill. Goodwill, which is included in other assets, is
being amortized on a straight-line basis over 40 years. Goodwill, net of
accumulated amortization of $2.2 million and $1.9 million, was $19.5 million
and $18.7 million as of December 31, 1994 and 1993, respectively.
Amortization expense was $.5 million for 1994, 1993 and 1992.
Income Taxes: In February 1992, Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income Taxes, was issued by the Financial
Accounting Standards Board 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 $121.3 million at December 31, 1994.
-23-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
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.
Off-Balance-Sheet Financial Instruments: GATC uses interest rate and
currency swaps and currency forwards to set interest and exchange rates on
existing or anticipated transactions. GATC may also, on occasion, use caps,
forwards, and other similar contracts. These contracts qualify for hedge
accounting. Fair values of GATC's off-balance 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. The fair values of the hedge contracts are not
recognized in the financial statements. Net amounts paid or received on such
contracts are recognized over the term of the contract as an adjustment to
interest expense or the basis of the hedged financial instrument.
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 which 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.
Revenue Recognition: The majority of GATC's gross income is derived from the
rentals of railcars and terminalling and other services.
Foreign Currency Translation: The assets and liabilities of GATC 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 gains (losses) recorded in the cumulative foreign currency
translation adjustment account were $19.1 million, $(5.8) million and $(2.8)
million during 1994, 1993, and 1992, respectively.
Reclassifications: Certain amounts in the 1993 and 1992 financial statements
have been reclassified to conform to the 1994 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.
-24-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE B--ACCOUNTING FOR LEASES (CONT'D)
<TABLE>
Minimum future receipts: Minimum future rental receipts from noncancelable
operating leases by year at December 31, 1994 were (in millions):
<CAPTION>
<S> <C>
1995 $ 413.7
1996 284.1
1997 215.8
1998 159.2
1999 100.1
Years thereafter 359.8
--------
$1,532.7
========
</TABLE>
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 $153.1 million and $70.0 million,
respectively, at December 31, 1994 and $153.2 million and $63.5 million,
respectively, at December 31, 1993 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, 1994, 1993, and 1992 was $50.3 million, $39.8 million, and $29.8
million, respectively.
<TABLE>
Minimum future rental payments: Future minimum rental payments due under
noncancelable leases at December 31, 1994 were (in millions):
<CAPTION>
<S> <C> <C>
Capital Operating
Leases Leases
--------- ----------
1995 $ 17.5 $ 36.1
1996 17.0 45.5
1997 17.6 44.5
1998 17.4 46.1
1999 17.4 41.4
Years thereafter 116.0 741.7
--------- ----------
Total minimum rental payments $202.9 $955.3
======
Less - Amounts representing
interest (81.1)
------
Present value of future
minimum capital lease payments $121.8
======
</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 $11.3 million in 1994, $11.8 million
in 1993, and $12.3 million in 1992.
-25-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C--ADVANCES TO/FROM PARENT
Interest income on advances to GATX, which is included in gross income on the
income statement, was $17.4 million in 1994, $18.4 million in 1993, and $23.4
million in 1992. Interest income was based on an interest rate which was
periodically adjusted in accordance with short-term commercial paper rates
and averaged 4.09% in 1994, 4.30% in 1993, and 6.20% in 1992.
Interest expense on advances from GATX to GATC was $1.8 million in 1994, $2.2
million in 1993, and $2.7 million in 1992. These advances have no fixed
maturity date. Interest expense was based on interest rates computed as
described in the preceding paragraph.
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 $2.6 million in 1994, and
$3.1 million in both 1993 and 1992.
<TABLE>
Summarized operating results for all affiliated companies in their entirety
were (in millions):
<CAPTION>
For the Year
--------------------------
1994 1993 1992
------- ------- ------
<S> <C> <C> <C>
Revenues $206.8 $176.8 $174.5
Net income 35.7 32.4 35.8
</TABLE>
<TABLE>
Summarized balance sheet data for all affiliated companies in their entirety
were (in millions):
<CAPTION>
December 31
----------------
1994 1993
------ ------
<S> <C> <C>
Total assets $773.2 $623.4
Long-term liabilities 339.0 282.7
Other liabilities 97.8 129.2
------ ------
Shareholders' equity $336.4 $211.5
====== ======
</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 1994, 1993 and 1992 was $16.9
million, $14.6 million and $16.3 million, respectively. The foreign
identifiable assets of
-26-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE E--FOREIGN OPERATIONS (CONT'D)
GATC are investments in affiliated companies and a United Kingdom
terminalling operation which is fully consolidated.
<TABLE>
<CAPTION>
December 31
--------------------------
1994 1993
-------- ---------
<S> <C> <C>
Identifiable Assets (in millions):
Foreign $ 273.1 $ 212.6
United States 2,193.5 2,003.0
-------- ---------
$2,466.6 $2,215.6
======== ========
</TABLE>
Foreign cash flows generated are used to meet local operating needs and for
reinvestment. The translation of the foreign balance sheets into U.S.
dollars results in an increase or decrease to the unrealized foreign currency
translation account.
NOTE F--SHORT-TERM LINES OF CREDIT
<TABLE>
Short-term debt and its weighted average interest rate as of year end were
(in millions):
<CAPTION>
December 31
1994 1993
-------------- --------------
Amount Rate Amount Rate
------- ----- ------- -----
<S> <C> <C> <C> <C>
Commercial paper $ 60.0 6.15% $ 25.5 3.50%
Other short-term borrowings 69.4 5.99 78.7 4.29
------ ------
$129.4 $104.2
====== ======
</TABLE>
Under a revolving credit agreement with a group of banks, GATC may borrow up
to $250.0 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 met its requirement to
maintain a minimum net worth of $550.0 million at December 31, 1994. While
at year end no borrowings were outstanding under the agreement, the available
line of credit was reduced by $60.0 million of commercial paper outstanding.
GATC had borrowings of $36.5 million under unsecured money market lines.
Also, GATX Terminals has a revolving credit agreement of pounds25.0 million
of which pounds4.0 million was available at year end.
Interest expense on short-term debt was $6.2 million in 1994, $4.2 million in
1993, and $3.9 million in 1992.
-27-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE G--LONG-TERM DEBT
<TABLE>
Long-term debt consisted of (in millions):
<CAPTION>
Interest Final December 31
Rates Maturity 1994 1993
---------- ---------- -------------
<S> <C> <C> <C> <C>
Fixed Rate:
Term notes 5.16%-10.8% 1995-2004 $776.2 $643.0
Industrial revenue bonds 6.625-7.3 2019-2024 87.9 88.9
------- ------
$864.1 $731.9
====== ======
</TABLE>
<TABLE>
Maturities of GATC's long-term debt as of December 31, 1994 for each of
the years 1995 through 1999 were (in millions):
<CAPTION>
Year Amount
----- -------
<S> <C>
1995 $91.5
1996 66.0
1997 65.0
1998 64.0
1999 84.1
</TABLE>
Interest cost incurred on long-term debt, net of capitalized interest, was
$59.0 million in 1994, $60.5 million in 1993, and $77.1 million in 1992.
Interest cost capitalized as part of the cost of acquisition or construction
of major assets was $2.7 million in 1994, $2.4 million in 1993, and $2.8
million in 1992. The loss recorded on the early retirement of debt was $.3
million in 1994 and $3.3 million in 1992.
NOTE H - OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, GATC enters into various types of
transactions that involve contract and financial instruments with off-
balance-sheet risk. These instruments are entered into to manage financial
market risk, including interest rate and foreign exchange risk.
<TABLE>
At December 31, 1994 GATC had the following off-balance-sheet financial
instruments (amounts in millions):
<CAPTION>
Pay Receive
Interest Rate Swaps Amount Rate/Index Rate/Index Maturity
- -------------------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
GATC pays fixed, receives floating $500.0 4.18-6.82% LIBOR 1995-1997
GATC pays floating, receives fixed 600.0 LIBOR 6.205-7.646% 2003-2006
</TABLE>
-28-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE H--OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (CONT'D)
<TABLE>
<CAPTION>
Currency Forwards and Swaps Deliver Purchase Maturity
- --------------------------- ------- ------- ----------
<S> <C> <C> <C>
Peso forwards $6.2 30.375 Pesos 1995
Singapore dollar forwards 9.6 14.0 Singapore 1995
</TABLE>
<TABLE>
GATC has had the following interest rate hedge activity (in millions):
<CAPTION>
Pay Pay
Interest Rate Swaps Fixed Floating
- ------------------- ----- --------
<S> <C> <C>
Balance at December 31, 1992 $ - $ -
Additions 400.0 500.0
Maturities - -
------ ------
Balance at December 31, 1993 400.0 500.0
Additions 200.0 100.0
Maturities (100.0) -
------ ------
Balance at December 31, 1994 $500.0 $600.0
====== ======
</TABLE>
GATC manages its assets and liabilities using interest rate swaps to better
match the duration of its debt portfolio to the lease terms of its railcar
assets. Railcar assets are financed with fixed rate long-term debt or
through sale leasebacks. Assets are placed on lease with average new lease
terms of 5 years; the average renewal term is 3 years. Rents are fixed over
these lease terms. In its swaps, GATC agrees to exchange, at specific
intervals, the difference between fixed and floating rate interest amounts
calculated on an agreed upon notional principal amount. The swaps have in
effect converted $100 million of long-term fixed rate debt into floating rate
debt and $500 million of long-term fixed rate debt into 1-3 year fixed rate
debt. As leases on railcars are renewed, the new lease rate should more
closely correlate with the terms of the swapped debt.
The net amount payable or receivable from the interest rate swap agreements
is accrued as an adjustment to interest expense. The fair value of its
interest rate swap agreements is the amount the company would receive or pay
to terminate the swap agreement; at year end, GATC would pay $45.2 million if
the swaps were terminated. At December 31, 1993, $900.0 million of interest
rate swaps were in effect; the fair value of the swap components would have
resulted in a net payment to GATC of $7.5 million if the swaps were
terminated at that time.
-29-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE H--OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (CONT'D)
Transportation has a contract to operate and manage a Mexican railcar
operation with an advance Peso payment due in January 1995. In December 1994,
a forward contract to purchase Pesos was entered into to convert U.S. $6.2
million to 30.375 million pesos. This contract was settled in January and the
subsequent loss recorded as an adjustment to the concession cost to be
amortized straight line over its life. In conjunction with the financing of
the purchase of an interest in a joint venture, Terminals has forward contracts
to purchase 14.0 million Singapore dollars in exchange for $9.6 million.
These contracts will settle between January and September 1995. Any gain or
loss from the settlement will be allocated over the term of the financing.
In the event that a counterparty fails to meet the terms of the interest rate
swap agreement or a foreign exchange contract, GATC's exposure is limited to
the interest rate or currency differential. GATC manages the credit risk of
counterparties by dealing only with institutions that the company considers
financially sound and by avoiding concentrations of risk with a single
counterparty. GATC considers the risk of nonperformance to be remote.
NOTE I - FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, defines
the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties. The following table presents the carrying amounts and estimated
fair values of GATC's financial instruments that are recorded on the balance
sheet at year end (in millions):
<TABLE>
<CAPTION>
December 31
----------------------------------------
1994 1993
----------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- ---------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 14.5 $ 14.5 $ 11.7 $ 11.7
Trade accounts receivables 52.3 52.3 45.3 45.3
Due from GATX Corporation 362.4 362.4 361.5 361.5
Liabilities:
Accounts payable - trade 106.4 106.4 98.4 98.4
Short-term debt 129.4 129.4 104.2 104.2
Long-term debt - fixed 864.1 883.3 731.9 822.2
</TABLE>
The carrying amounts shown in the table are included in the balance sheet
under the indicated captions.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and cash equivalents, trade receivables, trade payables and short-term
debt are carried at cost which approximates fair value because of the short
maturity of those instruments.
-30-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE I - FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS (CONT'D)
The carrying amounts reported in the balance sheet for the Due from GATX
Corporation approximate fair value.
The carrying amounts of variable rate long-term debt reported in the balance
sheet approximate fair value. The fair value of fixed rate long-term debt
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 rates for similar types of borrowing
arrangements.
NOTE J--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 $6.6 million in 1994, $6.7 million in 1993, and $5.1 million in 1992.
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 1994, 1993, and 1992 was $2.6 million, $3.4
million, and $3.4 million, respectively. Plan benefit obligations, plan
assets, and the components of net periodic cost for individual subsidiaries
of GATX have not been determined.
NOTE K--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 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.
-31-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE K--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONT'D)
<TABLE>
Net periodic postretirement cost included the following components (in
millions):
<CAPTION>
For the Year
------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Current service cost $ .4 $ .3 $ .2
Interest cost on accumulated
postretirement benefit obligation 4.7 5.9 6.3
------ ------ ------
Net periodic postretirement
benefit cost $ 5.1 $ 6.2 $ 6.5
===== ===== ======
Discount rate 7.75% 8.5% 9.0%
===== ===== ======
</TABLE>
<TABLE>
The following table sets forth the amounts recognized in GATC's
consolidated balance sheet (in millions):
<CAPTION>
December 31
----------------------
1994 1993
-------- --------
<S> <C> <C>
Accumulated postretirement benefit
obligation
Retirees $55.3 $67.6
Fully eligible active plan participants 2.6 3.4
Other active plan participants 4.5 4.8
-------- ------
Total accumulated
postretirement benefit obligation 62.4 75.8
Unrecognized gain (loss) 1.2 (9.4)
-------- --------
Accrued postretirement benefit liability $63.6 $66.4
===== =====
</TABLE>
The accrued postretirement benefit liability was determined using an assumed
discount rate of 7.75% for 1994 and 1993 and 8.5% for 1992. The effect of
the change in the discount rate assumption was a deferred loss of $4.2
million in 1993.
For measurement purposes, blended rates ranging from 11% decreasing to 5%
over the next three 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 $4.4 million and would increase
aggregate service and interest cost components of net periodic postretirement
benefit cost by $.4 million per year.
-32-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE L--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 SFAS 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 this Statement 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.
<TABLE>
Significant components of GATC's deferred tax liabilities and assets were (in
millions):
<CAPTION>
December 31
------------------
1994 1993
<S> ------- -------
Deferred tax liabilities: <C> <C>
Book/tax basis differences due to depreciation $323.6 $320.6
Other 31.0 32.7
------ ------
Total deferred tax liabilities 354.6 353.3
Deferred tax assets:
Accruals not currently deductible for tax purposes 34.7 34.6
Postretirement benefits other than pensions 22.4 23.5
Lease accounting 14.4 12.3
Alternative minimum tax credit 1.0 5.2
Other 10.8 12.1
------- -------
Total deferred tax assets 83.3 87.7
------- -------
Net deferred tax liabilities $271.3 $265.6
====== ======
</TABLE>
At December 31, 1994, GATC had an alternative minimum tax credit of $1.0
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.
-33-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE L--INCOME TAXES (CONT'D)
<TABLE>
Income taxes consisted of (in millions):
<CAPTION>
For the Year
----------------------
1994 1993 1992
-------- ------ -----
<S> <C> <C> <C>
Current-
Domestic:
Federal $30.1 $29.6 $15.9
State and local 1.7 .7 .8
----- ----- -----
31.8 30.3 16.7
Foreign .2 .3 .4
----- ----- -----
32.0 30.6 17.1
Deferred-
Domestic:
Federal 8.4 12.1 12.6
State and local 1.5 2.4 2.0
----- ----- ------
9.9 14.5 14.6
Foreign .8 - -
----- ----- ------
10.7 14.5 14.6
Income tax expense $42.7 $45.1 $31.7
===== ===== =====
Income taxes paid $31.9 $28.0 $20.1
===== ===== =====
</TABLE>
<TABLE>
The reasons for the differences between the effective income tax rate and
the federal statutory income tax rate were:
<CAPTION>
For the Year
-------------------
1994 1993 1992
----- ------ -----
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 34.0%
Add (deduct) effect of:
State income taxes 1.9 1.9 2.2
Purchase accounting adjustments .3 2.1 1.0
Tax rate increase on deferred taxes - 6.4 -
Other .6 (2.3) (1.3)
---- ----- -----
Effective income tax rate 37.8% 43.1% 35.9%
===== ===== =====
</TABLE>
-34-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE M--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.
At December 31, 1994, GATC had firm commitments to acquire railcars and to
upgrade terminal and repair facilities totaling $174 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.
-35-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE N--FINANCIAL DATA OF BUSINESS SEGMENTS
GATC is engaged in the following businesses:
Railcar Leasing and Management represents General American Transportation
Corporation and its foreign subsidiaries and affiliates (Transportation)
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.
-36-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE N--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)
<TABLE>
<CAPTION>
(In Millions)
--------------------------------
1994 1993 1992
--------------------------------
<S> <C> <C> <C>
Gross Income:
Railcar Leasing and Management $ 322.1 $ 302.2 $ 289.3
Terminals and Pipelines 303.1 281.1 266.5
-------- -------- --------
Subtotal 625.2 583.3 555.8
Intersegment amounts
with other GATX segments 17.4 18.4 23.4
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 642.6 $ 601.7 $ 579.2
======== ======== ========
</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 $ 79.6 $ 74.4 $ 68.4
Terminals and Pipelines 33.2 30.2 19.8
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 112.8 $ 104.6 $ 88.2
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Equity in Net Earnings
of Affiliated Companies:
<S> <C> <C> <C>
Railcar Leasing and Management $ 4.7 $ 4.5 $ 4.5
Terminals and Pipelines 12.2 10.1 11.8
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 16.9 $ 14.6 $ 16.3
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Income Before Cumulative
Effect of Accounting Changes:
<S> <C> <C> <C>
Railcar Leasing and Management $ 55.1 $ 47.6 $ 49.4
Terminals and Pipelines 31.9 26.5 23.4
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 87.0 $ 74.1(A) $ 72.8(B)
======== ======== ========
<FN>
(A) Income includes a $6.6 million charge for the cumulative increase in
deferred income taxes as a result of the 1993 federal tax rate change
(see following table for a 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).
</FN>
</TABLE>
-37-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE N--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)
FEDERAL TAX RATE CHANGE IN 1993
<TABLE>
The following table shows the effect of the federal tax legislation enacted
in 1993 which increased the federal income tax rate from 34% to 35%
retroactively to January 1, 1993.
<CAPTION>
- ------------------------------------------------------------------------------
Income
Before Tax
Net Tax Rate Rate Net
Income Change Change(A) Income
- ------------------------------------------------------------------------------
In Millions ---1994--- -----------------1993--------
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Railcar Leasing and Management $55.1 $51.9 $(4.3) $47.6
Terminals and Pipelines 31.9 28.8 (2.3) 26.5
- --------------------------------------------------------------------------------
TOTAL CONSOLIDATED AMOUNTS $87.0 $87.0 $(6.6) $74.1
- ------------------------------------------------------------------------------
</TABLE>
(A) Effect of tax rate change on pre-1993 deferred taxes.
ACCOUNTING CHANGES IN 1992
<TABLE>
The effect in 1992 on net income of adopting SFAS No. 106 and No. 109 for
each of GATC's segments is displayed below.
<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>
-38-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE N--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)
<TABLE>
<CAPTION>
(In Millions)
-------------------------------------
1994 1993 1992
-------------------------------------
Identifiable Assets:
<S> <C> <C> <C>
Railcar Leasing and Management $1,882.8 $1,701.0 $1,694.7
Terminals and Pipelines 1,022.5 872.5 816.2
Other .6 1.0 .9
-------- -------- --------
2,905.9 2,574.5 2,511.8
Intersegment amounts (439.3) (358.9) (347.7)
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $2,466.6 $2,215.6 $2,164.1
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Capital Additions:
<S> <C> <C> <C>
Railcar Leasing and Management $ 285.4 $ 195.3 $ 116.6
Terminals and Pipelines 154.4 77.8 76.2
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 439.8 $ 273.1 $ 192.8
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Provision for Depreciation and Amortization:
<S> <C> <C> <C>
Railcar Leasing and Management $ 68.3 $ 63.9 $ 62.6
Terminals and Pipelines 43.5 41.0 38.6
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 111.8 $ 104.9 $ 101.2
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Interest Expense:
<S> <C> <C> <C>
Railcar Leasing and Management $ 70.0 $ 69.6 $ 87.3
Terminals and Pipelines 39.7 39.0 40.3
-------- -------- --------
109.7 108.6 127.6
Intersegment amounts (31.4) (29.8) (31.6)
-------- -------- --------
TOTAL CONSOLIDATED AMOUNTS $ 78.3 $ 78.8 $ 96.0
======== ======= ========
</TABLE>
-39-
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
(IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- -----------------------------------------------------------------------------------------------------------------------
ADDITIONS
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, 1994:
Allowance for possible
losses in collection of
trade receivables - Note A $ 5.8 $ .1 $ - $ .5 (C) $ 5.4
Year ended December 31, 1993:
Allowance for possible
losses in collection of
trade receivables - Note A $ 5.8 $ .3 $ - $ .3 (C) $ 5.8
Year ended December 31, 1992:
Allowance for possible
losses in collection of
trade receivables - Note A $ 5.1 $ 1.1 $ - $ .4 (C) $ 5.8
Reserve for costs of closing
or disposing of certain
manufacturing
facilities - Note B 2.7 - - 2.7(D) -
<FN>
Note A - Deducted from asset accounts.
Note B - Included in other deferred items in the
consolidated balance sheet.
Note C - Uncollectible accounts charged off.
Note D - Represents transfer to non-asset related
reserves.
</FN>
</TABLE>
-40-
<PAGE>
EXHIBIT 12
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(IN MILLIONS EXCEPT FOR RATIOS)
<CAPTION>
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Net Income............................. $ 87.0 $ 74.1 $ 66.1 $ 74.2 $ 76.6
Add (deduct):
Income taxes......................... 42.7 45.1 31.7 29.0 29.9
Cumulative effect of accounting changes... - - 6.7 - -
Equity in net earnings of affiliated
companies, net of distributions received..(14.2) (11.5) (13.2) (11.5) (9.2)
Interest on indebtedness and amortization
of debt discount and expense.............. 78.3 78.8 96.0 100.7 106.3
Amortization of capitalized interest........ 1.1 1.1 1.1 .9 1.0
Portion of rents representative of interest
factor (deemed to be one-third)........... 16.8 13.2 9.3 7.3 2.9
------ ------ ------ ------ ------
Total earnings available for fixed charges.. $211.7 $200.8 $197.7 $200.6 $207.5
====== ====== ====== ====== ======
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense............ $ 78.3 $ 78.8 $ 96.0 $100.7 $106.3
Capitalized interest...................... 2.7 2.4 2.8 2.8 3.2
Portion of rents representative of interest
factor (deemed to be one-third)......... 16.8 13.2 9.3 7.3 2.9
------ ------ ----- ------ ------
Total fixed charges.................. $ 97.8 $ 94.4 $108.1 $110.8 $112.4
====== ====== ====== ====== ======
Ratio of earnings to fixed charges(A)......... 2.16x 2.13x 1.83x 1.81x 1.85x
<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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EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in 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 16, 1994 of our report dated
January 24, 1995 with respect to the consolidated financial statements and
schedule of General American Transportation Corporation included in this
Annual Report on Form 10-K for the year ended December 31, 1994.
ERNST & YOUNG LLP
Chicago, Illinois
March 21, 1995
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061594
BY-LAWS OF
GENERAL AMERICAN TRANSPORTATION CORPORATION
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meeting. Every meeting of the shareholders of General
American Transportation Corporation (hereinafter called the Corporation) shall
be held at the principal office of the Corporation in the State of New York, or
at such other place in or out of said State as shall be specified in the notice
of such meeting or waiver of such notice.
Section 2. Annual Meetings. The annual meeting of the shareholders shall
be held at the hour specified in the notice of such meeting, or waiver of
such notice, on the fourth Thursday of April in each year (or if that day shall
be a legal holiday, then on the next succeeding business day) for the election
of directors and for the transaction of such other business as may properly come
before the meeting.
Section 3. Special Meetings. Special meetings of the shareholders may,
unless otherwise provided by law, be called by the President of the
Corporation, or by a majority of the Board of Directors of the Corporation
(hereinafter called the Board).
Section 4. Notice of Meetings. Notice of the time and place of holding
of each meeting of the shareholders and of the purpose or purposes for which
the meeting is called shall be in writing and signed by the President or a
Vice-President or the Secretary or an Assistant Secretary of the Corporation.
A copy of such notice shall be served, either personally or by mail, upon each
shareholder entitled to vote at the meeting not less than ten (10) nor more
than fifty (50) days before the meeting. If mailed, such copy shall be
directed to the shareholder at his address as it appears on the stock book,
unless he shall have filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other place, in which
case it shall be mailed to the address designated in such request. No notice
need be given of any adjourned meeting, except when expressly required by law.
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Section 5. Quorum. Unless otherwise provided by law or in the Certificate
of Incorporation of the Corporation as amended (hereinafter called the
Certificate of Incorporation), the presence of the holders of record, in
person or represented by proxy, of a majority of the shares of stock entitled
to be voted thereat shall be necessary to constitute a quorum for the
transaction of business at any meeting of shareholders. In the absence of a
quorum at any such meeting or any adjournment or adjournments thereof, a
majority in voting interest of those present in person or represented by
proxy, or in the absence therefrom of all the shareholders, any officer
entitled to preside at, or to act as secretary of, such meeting, may adjourn
such meeting from time to time until a quorum is present thereat. At any
adjourned meeting at which a quorum is present any business may be transacted
which might have been transacted at the meeting as originally called.
Section 6. Organization. At each meeting of the shareholders, the
President or a Vice-President designated for the purpose by the President
(with priority in the order named), or in the absence of said officers, a
chairman chosen by a majority vote of the shareholders present in person or
represented by proxy and entitled to vote thereat shall act as chairman.
The Secretary shall act as secretary at each meeting of shareholders, or in
his absence the chairman may appoint any person present to act as secretary
of the meeting.
Section 7. Order of Business. The order of business at all meetings of
the shareholders shall be determined by the chairman of the meeting.
Section 8. Voting. Unless otherwise provided by law or in the
Certificate of Incorporation, the Common Stock only shall have voting power.
Each holder of record of shares of stock of the Corporation entitled to be
voted at any meeting of the shareholders shall be entitled to one vote for
every such share of stock; provided that, in elections of directors, each
holder of record of Common Stock of the Corporation shall be entitled to as
many votes as shall equal the number of shares of such Common Stock held of
record by him, multiplied by the number of directors to be elected by
holders of Common Stock (which shall be all directors to be elected), and he
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<PAGE>
may cast all such votes for a single director or may distribute them among
the number to be voted for, or any two or more of them as he may see fit.
Shareholders may vote either in person or by proxy. Except as otherwise
provided by law or these By-Laws, or by the Certificate of Incorporation,
the majority of the votes cast shall prevail on all matters submitted to
vote at any meeting of the shareholders. Unless so directed by the chairman
of the meeting, the vote at such meeting need not be by ballot, except that
all elections of directors by shareholders shall be by ballot. At the
direction of such chairman that a vote by ballot be taken on any question,
such vote shall be taken. On a vote by ballot each ballot shall be signed
by the shareholder voting, or by his proxy as such if there be such proxy.
Except as otherwise provided by law or by these By-Laws all voting may be
viva voce.
Section 9. Action by Written Consent. Unless otherwise provided by
law or in the Certificate of Incorporation, any action required or permitted
to be taken by the shareholders may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding shares entitled to vote thereon; provided, however, that this
provision shall not be construed to alter or modify any provision in the
Certificate of Incorporation, not inconsistent with law, under which the
written consent of the holders of less than all outstanding shares is
sufficient for corporate action.
Section 10. Record Date. The Board may fix a day and hour not more
than fifty (50) days prior to the day and hour then fixed for the holding of
any meeting of shareholders as the time as of which shareholders entitled to
notice of and to vote at such meeting shall be determined, and all persons
who were holders of record of voting stock at such time and no others shall
be entitled to notice of and to vote at such meeting.
ARTICLE II
DIRECTORS
Section 1. Number, Election, Term, Powers. The Corporation shall have
such number of directors, not less than three (3) nor more than twenty-one
(21), as shall from time to time be determined by the vote of a majority of
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<PAGE>
the entire board. Except as otherwise provided herein, the directors shall
be chosen at the annual meeting of shareholders in each year, by a plurality
of the votes cast in the election therefor. The term of office of each
director shall (unless vacated as provided herein) be from the time of his
election and qualification until the annual meeting of shareholders next
succeeding his election and until his successor shall have been duly elected
and qualified, or until his earlier death, resignation or removal. The
directors shall act only as a board and the individual directors shall have
no power as such. The Board shall have, in the management of the Corporation's
affairs, all powers which are not inconsistent with the laws of the State of
New York or these By-Laws, or the Certificate of Incorporation. Any director
may be removed from office at any time, with or without cause, by vote of the
shareholders.
Section 2. Qualifications. All directors shall be at least twenty-one
(21) years of age.
Section 3. First Meeting. After each election of directors by the
shareholders, on the same day and at the conclusion of the meeting of
shareholders at which such election shall be held, and at the place where
such election is held, the newly elected Board shall meet for the purpose
of organization, the election of officers and the transaction of other
business. Notice of such meeting need not be given. If a quorum shall not
be present at such time and place, but at least one director is present,
then such meeting shall be adjourned as provided in Section 6 of this
Article II. If no director shall be present at such time and place, then
such meeting may be held at any other time and place which shall be specified
in a notice given as hereinafter provided for special meetings of the Board
or in a waiver of notice thereof.
Section 4. Regular Meetings. Regular meetings of the Board shall be
held at such times and places as the Board by resolution may determine.
If any day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which would
otherwise be held on that day shall be held at the same hour on the next
succeeding business day at said place. Except as provided by law or these
By-Laws, notice of regular meetings need not be given.
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<PAGE>
Section 5. Special Meetings. Special meetings of the Board shall be
held whenever called by the President or by the Secretary at the request of
a majority of the members of the Board. Except as otherwise provided by law,
notice of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least two
days before the day on which such meeting is to be held, or shall be sent
addressed to him at such place by telegraph, cable or wireless, or be
delivered personally or by telephone, not later than the day before the day
on which such meeting is to be held. Notice of any meeting of the Board
need not, however, be given to any director, if waived by him as in these
By-Laws provided. Except as otherwise specifically provided by law or these
By-Laws, the notice or waiver of notice of any meeting of the Board need not
contain any statement of the purposes of the meeting or any specification of
the business to be transacted thereat.
Section 6. Quorum. Unless otherwise provided by law or in the
Certificate of Incorporation or in these By-Laws, the presence of not less
than one-third of the number of directors as fixed in accordance with these
By-Laws shall be necessary to constitute a quorum for the transaction of
business by the Board. In the absence of a quorum, a majority of the
directors present may adjourn any meeting of the Board from time to time
until a quorum shall be present thereat. Notice of any adjourned meeting
need not be given. At any adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the
meeting as originally called.
Section 7. Voting. At all meetings of directors, a quorum being
present, all matters, except those the manner of deciding upon which is
otherwise provided by law or these By-Laws, or in the Certificate of
Incorporation, shall be decided by the vote of a majority of the directors
present.
Section 8. Organization. At each meeting of the Board the President or,
in the absence of said officers, a director chosen by a majority of the
directors present, shall act as chairman. The Secretary, or in his absence
any person appointed by the chairman, shall act as secretary of the meeting.
Any meeting of the Board may be adjourned by the vote of a majority of the
directors present at such meeting.
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<PAGE>
Section 9. Vacancies. Any vacancy in the Board whether arising from
death, resignation, removal, an increase in the number of directors or any
other cause, may be filled by the vote of a majority of the remaining directors.
Section 10. Place of Meeting. The Board may hold its meetings at such
place or places within or without the State of New York as it may from time
to time by resolution determine or as shall be specified or fixed in the
respective notices or waivers of notice thereof.
Section 11. Indemnification. (a) The Corporation shall indemnify to
the fullest extent permitted by law, any person made, or threatened to be
made, a party to an action or proceeding, civil or criminal (including an
action by or in the right of the Corporation or by or in the right of any
other corporation of any type or kind, domestic or foreign, which any
director or officer of the Corporation served in any capacity at the request
of the Corporation), by reason of the fact that he, his testator or
intestate, was a director or officer of the Corporation (or served the
Corporation or such other corporation in any capacity), against judgments,
fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action
or proceeding, or any appeal therein, and the Corporation may pay, in
advance of final disposition of any such action or proceeding, expenses
incurred by such person in defending such action or proceeding. The
Corporation may indemnify, and make advancements to, any person made, or
threatened to be made, a party to any such action or proceeding by reason of
the fact that he, his testator or intestate, is or was an agent or employee
(other than a director or officer) of the Corporation (or served another
corporation at the request of the Corporation in any capacity), on such
terms, to such extent, and subject to such conditions, as the Board shall
determine.
(b) A person shall be presumed to be entitled to indemnification for any
act or omission covered by this By-Law. The burden of proof of establishing
that a person is not entitled to indemnification because of the failure to
fulfill some requirement of New York law, the Corporation's charter, or the
By-Laws shall be on the Corporation.
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(c) If a claim under this By-Law is not paid in full by the Corporation
within thirty days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting
such claim, including attorneys' fees.
Section 12. Action by Written Consent. Unless otherwise provided by
law or in the Certificate of Incorporation of the Corporation, any action
required or permitted to be taken by the Board or any committee thereof may
be taken without a meeting if all members of the Board or the committee
consent in writing to the adoption of a resolution authorizing the action.
The resolution and the written consents thereto by the members of the Board
or committee shall be filed with the minutes of the proceedings of the
Board or committee.
ARTICLE III
COMMITTEES
Section 1. Committees. On the terms, to the extent and subject to the
conditions, prescribed by law or by resolution of the Board, the Board, by
resolution adopted by a majority of the entire Board, may designate from
among its members an Executive Committee and other committees, each of which
shall consist of three or more directors and shall have the authority of the
Board. The Board may designate one or more directors as alternate members
of any committee, who may act in the place of any absent member or members
of such committee. The presence of not less than one-third of the number of
members of any committee or two members of such committee, whichever shall
be greater, shall be necessary to constitute a quorum of such committee and,
except as otherwise provided by law, the Certificate of Incorporation or these
By-Laws, a majority vote of the committee members present shall be the act
of the committee.
ARTICLE IV
OFFICERS
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Section 1. Number. The officers of the Corporation shall be a President,
who shall be a member of the Board, one or more Vice-Presidents, a Secretary,
a Treasurer and a Controller. The officers of the Corporation may also
include, at the option of the Board, a Chairman of the Board, one or more
Vice-Chairmen of the Board, each of whom shall be a member of the Board.
Two or more offices may be conferred upon one person, except the offices of
President and Secretary. The Board may require any officer, agent or
employee to give security for faithful performance of his duties.
Section 2. Election, Term of Office, Qualification. The officers of
the Corporation shall be chosen by the Board as soon as practicable after
each annual election of directors, each such officer to hold office until
his successor shall have been chosen and qualified, or until his earlier
death or resignation, or removal in the manner hereinafter provided.
Section 3. Subordinate Officers. The Board may appoint such subordinate
officers, assistant secretaries, assistant treasurers, agents or employees
as the Board may deem necessary or advisable, each of whom shall serve for
such period, have such authority and perform such duties as the Board may
from time to time determine or as may be set forth in these By-Laws. The
Board may delegate to any officer the power to appoint and remove subordinate
officers, assistant secretaries, assistant treasurers, agents or employees.
Section 4. (Deleted January 18, 1982)
Section 5. (Deleted January 18, 1982)
Section 6. The Chairman of the Board and The Vice-Chairman of the Board.
The Chairman of the Board and each Vice-Chairman of the Board shall have such
authority and perform such duties as may from time to time be assigned by
these By-Laws or the Board.
Section 7. The President. The President shall be the chief executive
officer of the Corporation, and shall have, subject to the control of the
Board, general and active supervision and direction over the property,
business and affairs of the Corporation and the personnel thereof.
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<PAGE>
Section 8. Vice-Presidents. Each Vice-President shall have such powers
and perform such duties as the Board or the President may from time to time
prescribe, and shall perform such other duties as may be prescribed by these
By-Laws. In case of the absence or inability to act of the President, then
one of the Vice-Presidents who shall be designated for the purpose by the
Board shall perform the duties of the President, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President.
Section 9. The Secretary. The Secretary shall act as secretary of, and
keep the minutes of, all meetings of the Board and of the shareholders; he
shall cause to be given such notice of all meetings of the shareholders and
directors as required; he shall be custodian of the seal of the Corporation
and shall affix the seal or cause it to be affixed to all certificates and
documents, the execution of which on behalf of the Corporation under its seal
shall have been specifically or generally authorized; he shall have charge of
the books, records and papers of the Corporation relating to its organization
as a corporation; and he shall in general perform all the duties incident to
the office of Secretary. He shall also have such other powers and perform
such other duties, not inconsistent with these By-Laws, as the President or
the Board shall from time to time prescribe.
Section 10. The Treasurer. The Treasurer shall have charge and custody
of, and be responsible for, all the funds and securities of the Corporation
and shall keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation and shall deposit all moneys and other
valuable effects in the name of and to the credit of the Corporation in such
banks or other depositaries as may be designated by the Board; he shall
disburse the funds of the Corporation, taking proper vouchers for such
disbursements, and shall render to the President or the Board, whenever any
one or more of them may require him so to do, a statement of all his
transactions as Treasurer; and, in general, he shall perform all the duties
incident to the office of Treasurer and such other duties as may from time
to time be assigned to him by the President or the Board.
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Section 11. The Controller. The Controller shall keep accurate accounts,
in such form as may be approved by the Board of Directors, of all financial
transactions of the Corporation; he shall supervise and direct the keeping
of all of the financial records and accounting records of the Corporation,
and shall have general charge, supervision and direction of the accounting
departments of the Corporation; he shall discharge such other duties and
have such other powers as may be required of or granted to him by the Board.
Section 12. Assistants to the President. Each Assistant to the
President shall, at the request of the President, aid and assist him in the
performance of his duties and the exercise of his powers, and have such other
powers and perform such other duties as may from time to time be assigned to
him by the President or the Board.
Section 13. Assistant Secretaries. In case of the absence or inability
to act of the Secretary, the Assistant Secretary, or, if there shall be more
than one, any of the Assistant Secretaries, shall perform the duties of the
Secretary, and, when so acting shall have all the powers of, and be subject
to all the restrictions upon, the Secretary. Each of the Assistant
Secretaries shall perform such other duties as from time to time may be
assigned to him by the President, the Secretary or the Board.
Section 14. Assistant Treasurers. In case of the absence or inability
to act of the Treasurer, the Assistant Treasurer, or, if there be more than
one, any of the Assistant Treasurers, shall perform the duties of the
Treasurer, and, when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the Treasurer. Each of the Assistant
Treasurers shall perform such other duties as from time to time may be
assigned to him by the President, the Treasurer or the Board.
Section 15. General Provisions. All officers shall serve under the
direction of and at the pleasure of the Board and be subject to removal
thereby at any time with or without cause. Any vacancy occurring in any
office may be filled by the Board.
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ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 1. Execution of Contracts. Except as otherwise provided by law
or in these By-Laws, the President or any Vice-President shall have authority
to execute and deliver any and all instruments for and in the name of the
Corporation. The President may authorize in writing any other officer,
employee or agent to execute and deliver any instrument for and in the name
of the Corporation and such authority may be general or confined to specific
instances. Unless authorized by the Board or by these By-Laws, no officer,
agent or employee shall have any power or authority to bind the Corporation
by any contract or engagement or to pledge its credit or to render it
pecuniarily liable for any purpose or for any amount.
Section 2. Indebtedness. No loans shall be contracted on behalf of the
Corporation and no negotiable paper shall be issued in its name unless
authorized by the resolutions of the Board. When authorized by the Board so
to do, any officer or agent of the Corporation thereunto authorized may
effect loans and advances for the Corporation from any bank, trust company or
other institution, or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds, or
other certificates or evidences of indebtedness of the Corporation and, when
authorized so to do, may pledge, hypothecate or transfer any securities or
other property of the Corporation as security for any such loans or advances.
Such authority may be general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts, and other orders
for the payment of moneys out of the funds of the Corporation and all notes
or other evidences of indebtedness of the Corporation shall be signed on
behalf of the Corporation in such manner as shall from time to time be
determined by resolution of the Board.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositaries as the Board
may select or as may be selected by any officer or officers, agent or agents
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<PAGE>
of the Corporation to whom such power may from time to time be delegated by
the Board; and, for the purpose of such deposit, the President, any
Vice-President, the Treasurer or the Secretary, or any other officer, agent
or employee of the Corporation to whom such power may be delegated by the
Board, may endorse, assign and deliver checks, drafts and other orders for
the payment of moneys which are payable to the order of the Corporation.
ARTICLE VI
SHARES AND DIVIDENDS
Section 1. Consideration for Issue of Stock. No stock shall be issued
except for money, labor done or property actually received for the use and
lawful purposes of the Corporation. The judgment of the Board shall be
conclusive as to the value of labor done or property received.
Section 2. Certificates. Each holder of record of shares of stock of
the Corporation shall be entitled to have a certificate or certificates, in
such form as shall be approved by the Board, signed by the President or a
Vice-President and the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary, and sealed with the seal of the Corporation,
which seal may be an engraved or printed facsimile, certifying the number of
shares owned by him in the Corporation. The signatures of the officers upon
a certificate may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the Corporation
itself or its employee. In case any such person who shall have signed, or
whose facsimile signature has been placed upon, such certificate shall have
ceased to hold such position before such certificate is issued, it may be
issued by the Corporation with the same effect as if such person had not
ceased to hold such position at the date of its issue.
Section 3. Transfer of Shares. Shares of stock of the Corporation shall
be transferable on the stock book of the Corporation by the holder thereof
in person or by his attorney thereunto authorized by power of attorney duly
executed and filed with the agent or officer in charge of such book, subject
to such proof or guarantee of signature as the Corporation or its transfer
agent may require. Except as hereinafter provided in the case of loss,
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destruction or mutilation of certificates, no transfer of stock shall be
entered until the previous certificate given for the same shall have been
duly endorsed, surrendered and cancelled. The Board may make such additional
rules and regulations as it may deem expedient concerning the issue and
transfer of certificates representing shares of stock of the Corporation. The
person in whose name shares stand on the stock book of the Corporation shall
be deemed by the Corporation to be the owner thereof for all purposes.
Section 4. Record Date. The Board may fix a day and hour not exceeding
fifty (50) days preceding the date fixed for the payment of any dividend or
the making of any distribution, or for the delivery of evidences of rights or
evidences of interests arising out of any changes, conversion or exchange of
capital stock, as a record time for the determination of the shareholders
entitled to receive such dividend, distribution, rights or interests, and in
such case only shareholders of record at the time so fixed shall be entitled
to receive such dividend, distribution, rights or interests.
Section 5. Lost, Stolen, Destroyed or Mutilated Certificates. A
certificate for shares of the stock of the Corporation may be issued in
place of any certificate lost, stolen, destroyed or mutilated, but only on
delivery to the Corporation, unless the Board of Directors otherwise
determines, of a bond of indemnity, in form and amount and with one or more
sureties satisfactory to the Board, or such officer or officers of the
Corporation or such transfer agent as the Board may from time to time
designate, and of such evidence of such loss, theft, destruction or
mutilation as the Board, or such officer or officers or transfer agent, may
require.
ARTICLE VII
OFFICES AND BOOKS
Section 1. Offices. The Board may from time to time and at any time
establish offices of the Corporation or branches of its business at whatever
place or places seem to it expedient. Offices or agencies for the transfer
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and registration of stock shall at all times be maintained in the City of
New York. Additional such offices or agencies may be maintained elsewhere,
in the discretion of the Board.
Section 2. Books. There shall be kept at the office of the Corporation
in Chicago, Illinois, correct books of all the business and transactions of
the Corporation, and, at the office of the Corporation in the State of
New York, or at the office of a transfer agent of the Corporation in such
State, the stock book of the Corporation, which shall contain the names,
alphabetically arranged, of all persons who are shareholders of the
Corporation, showing their respective places of residence, the number of
shares held by them respectively, and the time when they respectively became
the owners thereof. The stock book shall at all times during business hours
be open to the inspection of all persons permitted by law to inspect the same.
ARTICLE VIII
SEAL
Section 1. The common seal of the Corporation shall consist of a round
seal with the words "GENERAL AMERICAN TRANSPORTATION CORPORATION" in the
margin and the words "NEW YORK, 1975" in the center thereof.
ARTICLE IX
WAIVER OF NOTICE
Section 1. Whenever any notice whatever is required to be given by
these By-Laws or the Certificate of Incorporation or by law, the person
entitled thereto may, in person, or in the case of a shareholder, by his
duly authorized attorney, waive such notice in writing (which shall include
the use of telegraph, cable, radio or wireless), whether before or after the
meeting or other matter or event in respect of which such notice is to be
given, and in such event such waiver shall be equivalent to such notice and
such notice need not be given to such person, and any action to be taken
after such notice or after the lapse of a prescribed period of time may be
taken without such notice and without the lapse of any period of time. The
presence of a director at any meeting of the Board shall constitute waiver
of notice thereof by him.
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ARTICLE X
FISCAL YEAR
Section 1. The fiscal year of the Corporation shall end on the
thirty-first day of December in each year.
ARTICLE XI
AMENDMENTS
Section 1. These By-Laws may be altered, changed, amended or repealed
and new by-laws adopted at any regular or special meeting of the Board of
Directors, by a majority vote of all the Directors, provided notice of the
proposed alteration, change, amendment or repeal shall have been given with
notice of the meeting.
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EXHIBIT 12
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
<TABLE>
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(IN MILLIONS EXCEPT FOR RATIOS)
<CAPTION>
1994 1993 1992 1991 1990
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Net Income.................... $ 87.0 $ 74.1 $ 66.1 $ 74.2 $ 76.6
Add (deduct):
Income taxes................. 42.7 45.1 31.7 29.0 29.9
Cumulative effect of accounting
changes........................ - - 6.7 - -
Equity in net earnings of affiliated
companies, net of distributions
received....................... (14.2) (11.5) (13.2) (11.5) (9.2)
Interest on indebtedness and amortization
of debt discount and expense........ 78.3 78.8 96.0 100.7 106.3
Amortization of capitalized interest.... 1.1 1.1 1.1 .9 1.0
Portion of rents representative of interest
factor (deemed to be one-third)......... 16.8 13.2 9.3 7.3 2.9
----- ----- ----- ---- ----
Total earnings available for fixed charges.... $211.7 $200.8 $197.7 $200.6 $207.5
======== ======= ====== ====== ======
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense............ $ 78.3 $ 78.8 $ 96.0 $100.7 $106.3
Capitalized interest..................... 2.7 2.4 2.8 2.8 3.2
Portion of rents representative of interest
factor (deemed to be one-third).......... 16.8 13.2 9.3 7.3 2.9
------ ------ ------ ------ ------
Total fixed charges...................... $ 97.8 $ 94.4 $108.1 $110.8 $112.4
======= ====== ====== ====== ======
Ratio of earnings to fixed charges(A)......... 2.16x 2.13x 1.83x 1.81x 1.85x
<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>
-41-
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in 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 16, 1994 of our report
dated January 24, 1995 with respect to the consolidated financial
statements and schedule of General American Transportation
Corporation included in this Annual Report on Form 10-K for the
year ended December 31, 1994.
ERNST & YOUNG LLP
Chicago, Illinois
March 21, 1995
-42-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Consolidated Income Statement and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 14
<SECURITIES> 0
<RECEIVABLES> 58
<ALLOWANCES> 5
<INVENTORY> 0
<CURRENT-ASSETS> 0<F5>
<PP&E> 3029
<DEPRECIATION> 1274
<TOTAL-ASSETS> 2467
<CURRENT-LIABILITIES> 0<F5>
<BONDS> 986<F1>
<COMMON> 0
0
0
<OTHER-SE> 703
<TOTAL-LIABILITY-AND-EQUITY> 2467
<SALES> 0
<TOTAL-REVENUES> 643
<CGS> 0
<TOTAL-COSTS> 293<F2>
<OTHER-EXPENSES> 112<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> 113<F4>
<INCOME-TAX> 43
<INCOME-CONTINUING> 87
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>This value consists of two components: Long-term Debt of 864 million and
Capital Lease Obligations of 122 million. Short-term Debt is not included in
this value.
<F2>This value represents Operating Expenses on the Consolidated Income
Statement.
<F3>This value consists of the Provision for Depreciation and Amortization on
the Consolidated Income Statement.
<F4>This value represents Income Before Income Taxes and Equity in Net
Earnings of Affiliated Companies.
<F5>Not applicable because GATC has an unclassified balance sheet.
</FN>
</TABLE>
