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, 1995
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 8, 1996.
General American Transportation Corporation meets the conditions set forth
in General Instruction J(1) of Form 10-K and therefore is filing this form with
the reduced disclosure format.
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PART I
Item 1. Business
General American Transportation Corporation (GATC) is a wholly-owned subsidiary
of GATX Corporation (GATX) and is engaged in the leasing and management of
railroad tank cars and specialized freight cars and owns and operates tank
storage terminals, pipelines and related facilities.
INDUSTRY SEGMENTS
RAILCAR LEASING AND MANAGEMENT
The Railcar Leasing and Management segment (Transportation), headquartered in
Chicago, Illinois, is principally engaged in leasing specialized railcars,
primarily tank cars, under full service leases. As of December 31, 1995, its
domestic fleet consisted of approximately 64,900 railcars, including 53,900 tank
cars and 11,000 specialized freight cars, primarily Airslide covered hopper cars
and plastic pellet cars. In addition, Transportation has approximately 1,500
railcars in its Mexican fleet. 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.
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:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Tank car fleet capacity
(in millions of gallons) 1,176 1,090 1,024 993 977
Number of railcars added to domestic fleet 6,200 4,900 3,000 1,600 1,500
</TABLE>
Transportation's customers use its railcars to ship over 700 different
commodities, primarily chemicals, petroleum, food products and minerals. For
1995, 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 4% of total railcar leasing revenue.
Transportation typically leases new railcars 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 domestic railcars
as of December 31, 1995 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 major service centers consisting of four domestic and
one foreign service center, and 25 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 207,000 tank cars owned and leased in the United States at
December 31, 1995, Transportation had approximately 53,900. 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, headquartered in Chicago, Illinois, owns
and operates 28 terminals in 11 states, and eight terminals in the United
Kingdom. Terminals also has joint venture interests in 14 international
facilities. Additionally, Terminals owns or holds interests in four refined
product pipeline systems.
As of December 31, 1995, Terminals had a total storage capacity of 75 million
barrels. This includes 55 million barrels of bulk liquid storage capacity in the
United States, 7 million barrels in the United Kingdom, and an equity interest
in another 13 million barrels of storage capacity in Europe and the Far East.
Terminals' smallest bulk liquid facility has a storage capacity of 95,000
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 85% at the end of 1995; throughput for the year was 655 million
barrels.
For 1995, 75% of Terminals' revenue was derived from petroleum products, 23%
from a variety of chemical products, and 2% from other 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,
availability of other storage facilities, and the expansion of its customers
into new geographical markets.
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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 5% 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 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
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Patents, trademarks, licenses, and research and development activities are not
material to these businesses taken as a whole.
Customer Base
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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
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GATC and its subsidiaries have approximately 2,000 active employees, of whom 36%
are hourly employees covered by union contracts.
Item 2. Properties
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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.
Item 3. Legal Proceedings
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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 General American Transportation Corporation (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,
and has resolved the claims of the plaintiffs who opted out of the class. There
was 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 were
consolidated with these two cases. GATC was also 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 was also
consolidated in the suit in the Eastern District of California. GATC has now
entered into 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.
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On July 14, 1995, a judgment in the amount of $9.7 million was entered against
GATC by the U.S. District Court for the Northern District of Illinois in the
matter of General American Transportation Corporation v. Cryo-Trans,
Incorporated (Case No. 91 C 1305), a case involving an alleged patent
infringement by GATC in the construction and use of its ArcticarTM cryogenically
cooled railcar. That judgment has been reduced to approximately $9 million. GATC
was also permanently enjoined from any further infringement of the patent as of
August 1, 1995, subsequently extended to September 1, 1995. Of GATC's 65,000
railcar fleet, the injunction affected only 180 railcars, 80 of which were on
lease and 100 on order. GATC has filed an appeal of the decision with the
Federal Circuit Court of Appeals. Even in the event of an adverse decision on
appeal, GATC does not believe the costs associated with the disposition of the
affected cars will have a material adverse effect on GATC.
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) and settled November, 1995; Glaspie, et al, v. Southern Pacific
Transportation, et al, filed May 1990 in the County of Los Angeles (No.
BC002047) and settled November 1995; Burney, et al, v. Southern Pacific, et al,
filed May 1990 in the County of Los Angeles (BC000876) and settled May, 95;
Ledbetter, et al, v. City of San Bernardino, et al, filed May 1990 (No. 256173)
and settled April,1995; Mary Washington v. Southern Pacific, et al, filed May
1990 (No. 256346); Stewart, et al, v. Southern Pacific Railroad Co., et al,
filed May 1990 (No. 256464); 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 (No. 275936); Brooks, et al,
v. Southern Pacific, et al, filed May 1990 (No. 256176) and settled February
1994; Goldie, et al, v. Southern Pacific, et al, filed May 1990 and dismissed
July 1993, appeal pending; Irby, et al, v. Southern Pacific, et al, (No. 255715)
filed April 1990; Esparza, et al, v. Southern Pacific, et al, (No. 256433) filed
May 1990 and settled February 1994; Reese, et al, v. Southern Pacific, et al
(No. 256434) filed May 1990; Nancy Washington, et al, v. Southern Pacific, et
al, (No. 256435) filed May 1990. As Terminals' insurance carriers have assumed
the defense of these lawsuits without a reservation of rights and have paid all
of the settlements entered to date, GATC believes that the likelihood of a
material adverse effect on GATC's consolidated financial position or operations
is remote.
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.
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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 $94 million for 1995 compared to $87 million
in 1994 and $74 million in 1993. The increase was due to record earnings at
Transportation reflecting significant growth in the number of railcars on lease
and higher income on invested funds. Terminals' net income decreased slightly
from 1994's record level as capacity utilization declined at certain terminals.
This resulted from lower worldwide petroleum storage demand, significantly lower
utilization of tanks in the Northeast due to reduced buildup of heating oil
inventories, and lower demand and price competition in Los Angeles. Chemical
markets, pipelines and income from European terminal joint ventures remained
strong.
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. Net income for 1993 was negatively
impacted by a charge of $7 million for the cumulative increase in deferred
income taxes as a result of the federal income tax rate increase from 34% to
35%. The impact of the tax rate change by segment is shown on page 36.
GROSS INCOME
Consolidated gross income for 1995 of $709 million exceeded 1994 revenue of $643
million and 1993 revenue of $602 million.
Transportation's gross income of $361 million increased $39 million from 1994.
Rental revenues increased 12% due to the increase in the number of railcars on
lease, higher average rental rates and new operations in Mexico. At the end of
1995, Transportation had 61,400 railcars on lease in the United States versus
56,500 a year ago. Domestic fleet utilization of 95% at the end of the year was
slightly higher than the prior year due to the continued high demand for tank
cars. Over 6,200 new and used railcars were added to the domestic fleet in 1995,
which is 1,400 more than were added in 1994. In addition, 1,200 cars were leased
in from the Mexican National Railroad. Fleet additions in 1996 are expected to
be at lower levels than the exceptionally high level of railcars added in 1995.
Terminals' gross income of $313 million increased 3% over 1994 reflecting
incremental revenues from newly-acquired terminals and strong petroleum activity
in the first half of 1995, especially in the Los Angeles market. However,
revenues in the latter part of the year were less than in 1994 as a result of
lower worldwide petroleum storage demand, significantly lower utilization of
tanks in the Northeast due to reduced buildup of heating oil inventories, and
lower demand and price competition in Los Angeles. Revenues from chemical
markets remained strong. Revenues at the two pipelines serving the Las Vegas and
Orlando markets continue to increase as demand for clean products remains
strong. The non-strategic Wyco pipeline was sold early in 1995. Capacity
utilization at Terminals' wholly-owned facilities was 85% at the end of 1995
compared to 94% a year earlier, reflecting the effects of lower industry-wide
petroleum inventory levels and tanks out of service for repairs and upgrades.
Throughput was 655 million barrels compared to 671 million barrels the year
before. Incremental throughput from newly-acquired terminals was offset by the
absence of throughput at Wyco. Lower overall throughput reflected mild weather
in early 1995, lower blending activity, refinery turnarounds, tanks out of
service, and a contract termination with a large customer.
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<PAGE>
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 was 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.
COSTS AND EXPENSES
Operating expenses in 1995 increased $19 million or 7% over 1994.
Transportation's operating expenses of $148 million increased $19 million over
1994 as a result of increased operating lease expense and increased fleet repair
costs due to the expanded fleet size. 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 11% over 1994 as a result of the increased
fleet size and number of cars repaired, primarily at Transportation's service
centers. 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. During
the year, Transportation completed the major upgrade program for its four
domestic service centers. This three year project was designed to control costs
by improving the efficiency and productivity of the repair process and reducing
the time a car is out of service. The number of cars repaired at GATC service
centers increased 15% from last year. Average throughput days for a railcar in
the repair shop has been reduced by almost 30% as a result of this project to
approximately 32 days at year end. Terminals' 1995 operating costs of $164
million approximated 1994 levels.
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. Fleet
repair costs increased 10% over 1993 reflecting the increased number of cars
repaired. Operating margins were in line with 1993. 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.
Interest expense increased $21 million in 1995 to $99 million as the result of
higher average debt balances to fund the growth of the business and higher
interest rates. Interest expense at Transportation increased primarily due to
the increased fleet size, investments in GATC service centers, and the new
operations in Mexico. Interest expense grew at Terminals as additional debt was
incurred to finance acquisitions as well as maintenance, regulatory and
environmental expenditures. Environmental and maintenance spending continue to
grow in keeping with GATC's commitment to improve terminalling assets and to
operate its facilities in an environmentally responsible manner. The increase
in interest rates had a minimal effect on results as assets are either match
funded or offer repricing opportunities as lease contracts are renewed.
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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 company continues to utilize interest rate swaps to better match the
duration of the debt portfolio to the terms of the railcar leases and floating
rate assets. The effect of the swaps was to reduce interest expense in 1995,
1994 and 1993.
The provision for depreciation and amortization increased $10 million from 1994
which in turn increased $7 million over 1993. Depreciation expense increased as
result of the continued growth in assets and updated service centers.
Selling, general and administrative expenses of $55 million increased $8 million
from 1994 due to increased employee costs, information systems costs, and
consulting expenses. In addition, expenses increased related to new railcar
operations in Mexico. SG&A increased $5 million in 1994 primarily due to
expanded operations and higher training and information systems costs at
Terminals.
Income tax expense of $47 million increased $4 million from 1994. The effective
tax rate for 1995 and 1994 was 39% and 38%, respectively. 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%. The effective tax rate for all years was higher than the statutory rate
because of state taxes, minority interest, and nondeductible items.
EQUITY IN NET EARNINGS OF AFFILIATED COMPANIES
Equity in net earnings of affiliated companies of $20 million increased $3
million from 1994 which in turn increased $2 million from 1993. The increase in
1995 was due to strong chemical demand at Terminals' European and Singapore
terminals and Transportation's Canadian railcar joint venture. Terminals'
newly-acquired 25% interest in the Olympic Pipeline Company also contributed to
the increase. 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.
NET INCOME
Consolidated net income of $94 million in 1995 increased $7 million from 1994.
Transportation's 1995 net income increased $8 million over 1994 reflecting the
higher revenues, the increase in income generated from invested funds due to
higher interest rates, and higher equity earnings from Transportation's Canadian
affiliate. Operating margins improved slightly as the growth in revenues
exceeded the increase in fleet repair costs and SG&A expense. Pressure on
operating margins is expected to continue as higher standards of repair without
compensating revenue increases characterize the industry today. Ownership costs,
consisting of rental expense, depreciation and interest, increased 21% due to
the increased fleet size, investments in GATC service centers, and the new
operations in Mexico.
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Terminals' 1995 net income decreased $1 million from 1994. Higher revenues,
slightly improved operating margins and increased earnings from foreign
affiliates were offset by higher SG&A and interest expenses. Overall, the
continuing long-term focus on improving physical assets, information systems and
people may constrain near-term earnings. Terminals' business environment at year
end was characterized by continuing low distillate storage demand, historically
low petroleum industry inventory levels, lower pricing due to increased
competition and low refinery margins. This environment is expected to continue
into 1996. Terminals plans to selectively acquire and construct facilities both
domestically and overseas.
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
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.
ASSETS
Total assets at year end of $2.6 billion were $164 million higher than in 1994
as the high level of capital additions and investments in affiliates more than
offset the depreciation of capitalized assets. GATC also utilizes additional
railcars which are obtained through off-balance-sheet operating leases and
therefore are not included on the balance sheet.
Net property, plant and equipment increased $100 million to $1.9 billion.
Transportation invested $350 million in new and used railcars, $17 million in
new operations in Mexico and $15 million in facility improvements, which were
partially offset by $250 million of railcar sale leasebacks. As these leasebacks
qualified as operating leases, the assets were removed from the balance sheet.
Terminals invested $129 million for tank construction, facility improvements and
expansion, and the acquisition of terminal facilities.
Investments in affiliated companies increased $39 million. New investments of
$30 million included an additional investment in a European rail joint venture
and the purchase of a 25% equity interest in the Olympic Pipeline Company.
Equity income of $20 million was partially offset by $7 million of cash
distributions and $4 million of unrealized translation losses and other charges.
LIABILITIES AND EQUITY
Total debt increased $118 million to fund a portion of the significant volume of
capital additions made during the year.
Consolidated equity increased $37 million attributable to 1995 earnings of $94
million partially reduced by dividends paid to GATX Corporation of $48 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.
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Cash provided by operating activities in 1995 of $211 million increased $10
million compared to 1994. Net income adjusted for non-cash items generated $233
million of cash, up $24 million from 1994. Other generated $14 million less cash
than in 1994 primarily as a result of a decrease in working capital.
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
in 1993 primarily as the result of a decrease in working capital.
Cash used in investing activities in 1995 decreased $32 million from 1994.
Capital additions of $541 million increased $101 million from 1994.
Transportation invested $365 million in its domestic railcar fleet; $28 million
also was invested in international operations in Mexico and Europe in 1995.
During the year, Transportation completed a major upgrade program for its four
strategically located domestic service centers. Terminals' capital spending of
$149 million was $6 million lower than in 1994. Spending in 1995 included the
expansion or upgrading of several existing terminal facilities, including the
expansion of an existing pipeline in Central Florida, and the acquisition of an
interest in a pipeline in the Northwest. Proceeds from asset dispositions of
$271 million in 1995, including $250 million of sale leasebacks of certain
railcars at Transportation, increased $133 million from 1994. GATC has used sale
leasebacks as a cost effective method of financing assets given GATX's
alternative minimum tax position.
Cash used in investing activities in 1994 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. 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.
Cash provided by financing activities was $58 million in 1995 compared to $104
million in 1994. GATC finances its capital additions through cash generated from
operating activities, debt financings, and the sale leasebacks of railcars.
During the year $200 million of long-term debt was issued and $92 million of
long-term obligations were repaid. Short-term debt increased $15 million to a
balance of $145 million.
Cash provided by financing activities was $104 million in 1994 compared to $79
million of cash used in financing activities in 1993. During 1994 $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.
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 1995, GATC amended its credit facility to extend until
2000. 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, 1995,
GATC and its subsidiaries had available unused committed lines of credit
amounting to $212 million.
In December 1995, a $650 million GATC shelf registration for pass through trust
certificates and debt securities became effective; none had been issued at year
end. At year end, GATC had $171 million of commitments to acquire assets, all of
which are scheduled to fund in 1996.
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Environmental Matters
Certain operations of GATC and its subsidiaries (collectively GATC) 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
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 1995 was $78 million and reflects
GATC's best estimate of the cost to remediate its environmental conditions.
Additions to the reserve were $14 million in 1995 and $27 million in 1994; 1994
included $13 million recorded in conjunction with terminal acquisitions.
Expenditures charged to the reserve amounted to $16 million and $12 million in
1995 and 1994, respectively.
In 1995, GATC made capital expenditures of $18 million for environmental and
regulatory compliance compared to $15 million in 1994. 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 $28 million in
1996. GATC anticipates it will make annual expenditures at a similar level over
the next five years.
-10-
<PAGE>
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted under Item 14 (a)(1) of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Not required.
Item 11. Executive Compensation
Not required.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Not required.
Item 13. Certain Relationships and Related Transactions
Not required.
PART IV
Item 14. Financial Statement Schedules, Reports on Form 8-K and Exhibits Page
(a) (1) Financial Statements
The consolidated financial statements of General American
Transportation Corporation and its subsidiaries which are
required in Item 8 are listed below:
Statements of Consolidated Income and Reinvested Earnings--
years ended December 31, 1995, 1994 and 1993................... 17
Consolidated Balance Sheets--December 31, 1995 and 1994.......... 18
Statements of Consolidated Cash Flows--
years ended December 31, 1995, 1994 and 1993................... 20
Notes to Consolidated Financial Statements....................... 21
(2) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts............... 37
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.
-11-
<PAGE>
PART IV
Item 14.Financial Statement Schedules, Reports on Form 8-K and Exhibits
(Cont'd) Page
(b)(1) GATC filed a Current Report on Form 8-K dated January 26,
1996, with respect to the Medium Term Notes, Series F. Copies
of the forms of the underlying documents entered into by GATC
as part of this transaction were filed as part of the Form 8-K
Report.
(2) GATC filed a Current Report on Form 8-K dated March 4, 1996
with respect to the offering of $100 million principal amount
of 6-3/4% Notes due March 1, 2006. A copy of the Note entered
into by GATC as part of this transaction was filed as part of
the Form 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, incorporated by
reference to the GATC Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, file number 2-54754.
Indenture dated October 1, 1987, incorporated by reference to
4A. 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. Third
Supplemental Indenture dated as of June 15, 1990, incorporated
by reference to GATC Quarterly Report on Form 10-Q for the
quarter ended June 30, 1990, file number 2-54754. Fourth
Supplemental Indenture dated as of January 15, 1996 filed with
the SEC on Current Report on Form 8-K on January 26, 1996,
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.
-12-
<PAGE>
Exhibit
Number Exhibit Description Page
4C. General American Transportation Corporation Notices 1 through
3 dated from October 17, 1988 through October 24, 1988 and 4
through 6 dated from November 7, 1988 through March 3, 1989
defining the rights of holders of GATC's Medium-Term Notes
Series B issued during those periods, Notices 1 through 3
incorporated by reference to the GATC Quarterly Report on Form
10-Q for the quarter ended September 30, 1988, and Notices 4
through 6 incorporated by reference to the GATC Annual Report
on Form 10-K for the fiscal year ended December 31, 1988, file
number 2-54754.
4D. General American Transportation Corporation Notices 1 and 2
dated from March 30, 1989 through March 31, 1989, Notices 3
through 8 dated from April 4, 1989 through June 29, 1989,
Notices 9 through 16 dated from July 19, 1989 through
September 29, 1989, and Notices 17 through 21 dated from
October 2, 1989 through October 9, 1989 defining the rights of
the holders of GATC's Medium-Term Notes Series C issued during
those periods. Notices 1 and 2, Notices 3 through 8 and
Notices 9 through 16 are incorporated by reference to the GATC
Quarterly Reports on Form 10-Q for the quarters ended March
31, 1989, June 30, 1989 and September 30, 1989, respectively,
and Notices 17 through 21 incorporated by reference to the
GATC Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, file number 2-54754.
4E. General American Transportation Corporation Notices 1 and 2
dated February 27, 1992, Notices 3 through 5 dated from
December 7, 1992 through December 14, 1992 and notices 6
through 10 dated from May 18, 1993 through May 25, 1993
defining the rights of the holders of GATC's Medium-Term Notes
Series D issued during those periods. Notices 1 and 2 are
incorporated by reference to the GATC Quarterly Report on Form
10-Q for the quarter ended March 31, 1992, Notices 3 through 5
are incorporated by reference to the GATC Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, and
Notices 6 through 10 are incorporated by reference to the GATC
Quarterly Report on Form 10-Q for the quarter ending June 30,
1993, file number 2-54754.
4F. General American Transportation Corporation Notices 1 and 2
dated June 8, 1994 and 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.
-13-
<PAGE>
Exhibit
Number Exhibit Description Page
4G. General American Transportation Corporation Notices 12 through
14 dated February 24, 1995, Notices 15 through 20 dated May
11, 1995, amended May 24, 1995, and Notices 21 through 30
dated from November 8, 1995 through November 13, 1995 defining
the rights of the holders of GATC's Medium-Term Notes Series E
issued during those periods. Notices 12 through 14 are
incorporated by reference to the Form 424(b)(5) dated February
24, 1995, Notices 15 through 20 are incorporated by reference
to the Form 424(b)(5) dated May 11, 1995, and Notices 21
through 30 are incorporated by reference to the Form 424(b)(5)
dated from November 8, 1995 through November 13, 1995, file
number 2-54754.
4H. 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.
4I. Form of 6-3/4% Note due March 1, 2006 filed with the SEC on
Current Report on Form 8-K on March 4, 1996, file number
2-54754.
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. Amendment Number 1
thereto dated as of April 21, 1995; submitted to the SEC along
with the electronic transmission of this Annual Report on Form
10-K.
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. Amendment effective June 30, 1994 and amendment dated
June 19, 1995; submitted to the SEC along with the electronic
submission of this Report on Form 10-K.
12. Statement regarding computation of ratios of earnings to fixed
charges. 38
23. Consent of Independent Auditors 39
27. Financial Data Schedule for GATC for the fiscal year ended
December 31, 1995, file number 2-54754. 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.
-14-
<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, 1996
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 /s/David M. Edwards
- ----------------------------------- -----------------------------
D. Ward Fuller David M. Edwards
President, Chief Executive Officer Director
and Director March 22, 1996
March 22, 1996
/s/Donald J. Schaffer /s/David B. Anderson
- ---------------------------------- -----------------------------
Donald J. Schaffer David B. Anderson
Vice President, Finance and Chief Director
Financial Officer March 22, 1996
March 22, 1996
/s/Ronald H. Zech
- -------------------------------
Ronald H. Zech
Director
March 22, 1996
-15-
<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, 1995. 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, 1995 and 1994, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, 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.
ERNST & YOUNG LLP
Chicago, Illinois
January 23, 1996
-16-
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME AND REINVESTED EARNINGS
(In Millions)
Year Ended December 31
------------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Gross income $709.2 $642.6 $601.7
Costs and expenses
Operating expenses 312.2 293.0 271.9
Interest 99.4 78.3 78.8
Provision for depreciation and amortization 121.4 111.8 104.9
Selling, general and administrative 55.2 46.7 41.5
------ ------ ------
588.2 529.8 497.1
------ ------ ------
Income before income taxes and equity in net
earnings of affiliated companies 121.0 112.8 104.6
Income taxes 47.2 42.7 45.1
------ ------ ------
Income before equity in net earnings of
affiliated companies 73.8 70.1 59.5
Equity in net earnings
of affiliated companies 20.1 16.9 14.6
------ ------ ------
Net income 93.9 87.0 74.1
Reinvested earnings at beginning of year 346.9 306.5 275.7
Dividends paid to GATX Corporation (48.1) (46.6) (43.3)
------ ------ ------
Reinvested earnings at end of year $392.7 $346.9 $306.5
====== ====== ======
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Millions)
December 31
------------------------
1995 1994
------ ------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 13.4 $ 14.5
Trade receivables--net 64.8 52.3
Property, plant and equipment:
Railcars and support facilities 1,945.1 1,857.4
Tank storage terminals and pipelines 1,242.3 1,171.8
-------- --------
3,187.4 3,029.2
Less - Allowance for depreciation (1,332.3) (1,274.3
-------- --------
1,855.1 1,754.9
Due from GATX Corporation 373.9 362.4
Investments in affiliated companies 221.2 182.1
Other assets 102.6 100.4
-------- --------
TOTAL ASSETS $ 2,631.0 $ 2,466.6
======== ========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
December 31
----------------------------
1995 1994
--------- ---------
LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY
<S> <C> <C>
Accounts payable $ 89.9 $ 106.4
Accrued expenses 36.4 35.7
Debt
Short-term debt 144.8 129.4
Long-term debt 972.9 864.1
Capital lease obligations 115.1 121.8
-------- --------
1,232.8 1,115.3
Deferred income taxes 281.1 271.3
Other deferred items 250.0 234.5
-------- --------
Total liabilities and deferred items 1,890.2 1,763.2
Shareholder's equity
Common Stock--par value $1 per share,
1,000 shares authorized, issued and
outstanding (owned by GATX Corporation) - -
Additional capital 335.0 335.0
Reinvested earnings 392.7 346.9
Cumulative foreign currency
translation adjustment 13.1 21.5
-------- --------
Total shareholder's equity 740.8 703.4
-------- --------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY $ 2,631.0 $ 2,466.6
========= =========
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Millions)
Year Ended December 31
----------------------------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 93.9 $ 87.0 $ 74.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation
and amortization 121.4 111.8 104.9
Deferred income taxes 18.2 10.7 14.5
Other (includes working capital) (22.3) (8.7) 13.0
--------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 211.2 200.8 206.5
INVESTING ACTIVITIES
Additions to property, plant & equipment:
Railcars and support facilities (382.0) (281.8) (195.3)
Tank storage terminals and pipelines (128.9) (144.9) (75.9)
Investments in affiliated companies (30.3) (13.1) ( 1.9)
--------- -------- --------
Capital additions (541.2) (439.8) (273.1)
Proceeds from asset dispositions 270.7 137.3 151.6
--------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (270.5) (302.5) (121.5)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 200.4 182.4 63.3
Repayment of long-term debt (91.5) (50.7) (58.8)
Net increase (decrease) in short-term debt 15.4 25.2 (29.1)
Repayment of capital lease obligations (6.5) (4.9) (8.1)
Cash dividends paid to GATX Corporation (48.1) (46.6) (43.3)
Net (increase) in amount due from GATX Corporation (11.5) (.9) (2.8)
--------- -------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 58.2 104.5 (78.8)
--------- -------- --------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS $ (1.1) $ 2.8 $ 6.2
========= ======== =========
</TABLE>
-20-
<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 5-40 years
Machinery and related equipment 3-25 years
Goodwill: GATC has classified as goodwill the cost in excess of the fair value
of net assets acquired. Goodwill, which is included in other assets, is being
amortized on a straight-line basis over 40 years. GATC continually evaluates the
existence of goodwill impairment on the basis of whether the goodwill is
recoverable from projected undiscounted net cash flows of the related business.
Goodwill, net of accumulated amortization of $2.7 million and $2.2 million, was
$18.3 million and $19.5 million as of December 31, 1995 and 1994, respectively.
Amortization expense was $.5 million for each of 1995, 1994, and 1993.
Income Taxes: 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 $141.3 million at December 31, 1995.
Other Deferred Items: Other deferred items include the accrual for
postretirement benefits other than pensions; environmental, general liability
and workers' compensation reserves; and other deferred credits.
-21-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Off-Balance-Sheet-Financial Instruments: GATC uses interest rate and currency
swaps, forwards and similar contracts to set interest and exchange rates on
existing or anticipated transactions. These instruments qualify for hedge
accounting. Fair values of GATC's off-balance-sheet financial instruments
(futures, swaps, forwards, options and purchase commitments) are based on
current market prices, settlement values or fees currently charged to enter into
similar agreements. 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 terminals 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 $(8.4) million, $19.1million and $(5.8) million during 1995, 1994,
and 1993, respectively.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as revenues and expenses during the reporting
period. Actual amounts when ultimately realized could differ from those
estimates.
Reclassifications: Certain amounts in the 1994 and 1993 financial statements
have been reclassified to conform to the 1995 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.
-22-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE B--ACCOUNTING FOR LEASES (CONT'D)
Minimum future receipts: Minimum future rental receipts from noncancelable
operating leases by year at December 31, 1995 were (in millions):
1996 $ 457.2
1997 332.0
1998 242.6
1999 171.9
2000 105.4
Years thereafter 363.2
--------
$1,672.3
========
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 $152.8 million and $76.5 million, respectively, at December
31, 1995 and $153.1 million and $70.0 million, respectively, at December 31,
1994 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,
1995, 1994, and 1993 was $65.1 million, $50.3 million, and $39.8 million,
respectively.
Minimum future rental payments: Future minimum rental payments due under
noncancellable leases at December 31, 1995 were (in millions):
Capital Operating
Leases Leases
--------- ---------
1996 $ 17.0 $ 53.3
1997 17.5 61.5
1998 17.3 63.0
1999 17.3 58.4
2000 17.2 59.2
Years thereafter 98.7 1,033.1
--------- ---------
185.0 $ 1,328.5
=========
Less - Amount representing interest (69.9)
---------
Present value of future
minimum capital lease payments $ 115.1
=========
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 $10.6 million in 1995, $11.3 million in
1994, and $11.8 million in 1993.
-23-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE C--ADVANCES TO/FROM PARENT
Interest income on advances to GATX, which is included in gross income on the
income statement, was $34.8 million in 1995, $17.4 million in 1994, and $18.4
million in 1993. Interest expense on advances from GATX to GATC was $6.2 million
in 1995, $1.8 million in 1994, and $2.2 million in 1993. These advances have no
fixed maturity date. Interest income/expense on advances to/from GATX were based
on an interest rate which is adjusted annually in accordance with an estimate of
short-term borrowing rates and averaged 7.45% in 1995, 4.09% in 1994, and 4.30%
in 1993.
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 are in
businesses similar to GATC's operations. They include Canadian and European
railcar leasing and foreign and domestic tank storage terminals and pipelines.
Distributions received from such jointly-owned companies were $7.3 million, $2.6
million, and $3.1 million in 1995, 1994, and 1993, respectively.
Summarized operating results for all affiliated companies in their entirety were
(in millions):
For the Year
----------------------------------
1995 1994 1993
------ ------ ------
Revenues $233.8 $206.8 $176.8
Net income 44.0 35.7 32.4
Summarized balance sheet data for all affiliated companies in their entirety
were (in millions):
December 31
----------------------
1995 1994
------- -------
Total assets $868.0 $773.2
Long-term liabilities 347.6 339.0
Other liabilities 151.5 97.8
------- -------
Shareholder's equity $368.9 $336.4
======= =======
-24-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE E--FOREIGN OPERATIONS
GATC has a number of investments in subsidiaries and affiliated companies which
are located in or derive income from foreign countries. Foreign entities
contribute significantly to equity in net earnings of affiliated companies. The
foreign identifiable assets are primarily investments in affiliated companies;
and a United Kingdom terminalling operation and a Mexican railcar operation,
which are fully consolidated.
GROSS INCOME (IN MILLIONS) 1995 1994 1993
- -------------------------- -------- ------- -------
Foreign $ 35.5 $ 30.6 $ 26.5
United States 673.7 612.0 575.2
-------- ------- -------
$ 709.2 $ 642.6 $ 601.7
======== ======= =======
INCOME BEFORE INCOME TAXES AND
EQUITY IN NET EARNINGS OF AFFILIATED
COMPANIES (IN MILLIONS) 1995 1994 1993
- --------------------------------- -------- -------- -------
Foreign $ .7 $ 2.8 $ 2.7
United States 120.3 110.0 101.9
-------- -------- -------
$ 121.0 $ 112.8 $ 104.6
======== ======== =======
EQUITY IN NET EARNINGS OF
AFFILIATED COMPANIES (IN MILLIONS) 1995 1994 1993
- --------------------------------- ------- ------- -------
Foreign $ 19.6 $ 16.9 $ 14.6
United States .5 - -
------- ------- -------
$ 20.1 $ 16.9 $ 14.6
======= ======= =======
IDENTIFIABLE ASSETS (IN MILLIONS) 1995 1994 1993
- -------------------------------- -------- -------- --------
Foreign $ 318.2 $ 273.1 $ 212.6
United States 2,312.8 2,193.5 2,003.0
-------- -------- --------
$2,631.0 $2,466.6 $2,215.6
======== ======== ========
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.
-25-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE F--SHORT-TERM DEBT AND LINES OF CREDIT
Short-term debt and its weighted average interest rate as of year end were (in
millions):
December 31
--------------------------------------
1995 1994
Amount Rate Amount Rate
------- ------- ------ -------
Commercial paper $ 44.6 6.02% $ 60.0 6.15%
Other short-term borrowings 100.2 6.41 69.4 5.99
------- ------
$ 144.8 $129.4
======= ======
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 $573.4 million at December 31, 1995. While at year end no borrowings
were outstanding under the agreement, the available line of credit was reduced
by $44.6 million of commercial paper outstanding. GATC had borrowings of $62.9
million under unsecured money market lines. Also, GATX Terminals has a revolving
credit agreement of (pound)28.0 million of which (pound)4.0 million was
available at year end.
Interest expense on short-term debt was $8.5 million in 1995, $6.2 million in
1994, and $4.2 million in 1993.
NOTE G--LONG-TERM DEBT
Long-term debt consisted of (in millions):
December 31
Interest Final ----------------
Rates Maturity 1995 1994
Fixed Rate: ---------- --------- ------ ------
Term notes 5.16%-10.8% 1996-2007 $885.0 $776.2
Industrial revenue bonds 6.625-7.3 2019-2024 87.9 87.9
------ ------
$972.9 $864.1
====== ======
-26-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE G--LONG-TERM DEBT (CONT'D)
Maturities of GATC's long-term debt as of December 31, 1995 for each of the
years 1996 through 2000 were (in millions):
Year Amount
1996 $ 66.0
1997 65.0
1998 81.0
1999 84.0
2000 103.1
Interest cost incurred on long-term debt, net of capitalized interest, was $74.1
million in 1995, $59.0 million in 1994, and $60.5 million in 1993. Interest cost
capitalized as part of the cost of acquisition or construction of major assets
was $4.6 million in 1995, $2.7 million in 1994, and $2.4 million in 1993. A loss
of $.3 million was recorded on the early retirement of debt in 1994.
NOTE H--OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, GATC enters into various types of
transactions that involve financial instruments with off-balance-sheet risk
which are used to manage financial market risk, including interest rate and
foreign exchange risk.
At December 31, 1995 GATC had the following off-balance sheet financial
instruments (in millions):
Pay Recieve
Interest Rate Swaps Amount Rate/Index Rate/Index Maturity
- --------------------- ------- ---------- ------------- ---------
GATC pays fixed, receives floating $765.5 4.7%-7.585% LIBOR 1996-2000
GATC pays floating, receives fixed 850.0 LIBOR 6.205%-7.646% 2003-2006
Currency Forwards Deliver Purchase Maturity
- ----------------- -------- -------------- ---------
Singapore dollar forwards $ 7.1 10.0 Singapore 1996
-27-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE H--OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (CONT'D)
GATC had the following interest rate hedge activity (in millions):
Pay Pay
Interest Rate Swaps Fixed Floating
- -------------------- ------- ---------
Balance at January 1, 1994 $400.0 $500.0
Additions 200.0 100.0
Maturities (100.0) -
------- -------
Balance at December 31, 1994 500.0 600.0
Additions 365.5 250.0
Maturities (100.0) -
------- -------
Balance at December 31, 1995 $765.5 $850.0
======= ======
GATC manages its assets and liabilities using interest rate swaps and on
occasion uses interest rate forwards for anticipated transactions. Interest rate
swaps are utilized to better match the duration of GATC's debt portfolio to the
duration of its railcar leases. Railcar assets are financed with long-term fixed
rate debt or through sale leasebacks. However, the railcar 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. Interest rate swaps effectively
convert GATC's long-term fixed rate debt to fixed rate debt with maturities of 3
months to 3 years. Through the swap program, railcar lease rates are expected to
better reflect GATC's interest costs. At GATX Terminals Limited, an interest
rate swap is used to fix the interest rate on a portion of its floating rate
debt.
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 $84.5 million of
long-term fixed rate debt into floating rate debt and $765.5 million of
long-term fixed rate debt into 1-3 year fixed rate 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 an estimate of the amount the company would receive or
pay to terminate the swap agreement; at December 31, 1995, GATC would receive
$27.1 million if the swaps were terminated. At December 31, 1994, GATC would
have paid $45.2 million if the swaps were terminated at that time.
In conjunction with the financing of the purchase of an interest in a joint
venture, GATX Terminals has a forward contract to deliver 10.0 million Singapore
dollars in exchange for $7.1 million. The gain or loss from the final settlement
will be used to offset any gain or loss from the underlying transaction.
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.
-28-
<PAGE>
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 were recorded on the balance sheet at year end (in
millions):
December 31
----------------------------------------------
1995 1994
---------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- --------- -------- --------
Assets:
Cash and cash equivalents $ 13.4 $ 13.4 $ 14.5 $ 14.5
Trade receivables-net 64.8 64.8 52.3 52.3
Due from GATX Corporation 373.9 373.9 362.4 362.4
Liabilities:
Accounts payable 89.9 89.9 106.4 106.4
Short-term debt 144.8 144.8 129.4 129.4
Long-term debt - fixed 972.9 1,085.2 864.1 883.3
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, accounts payables and short-term
debt are carried at cost which approximates fair value because of the short
maturity of those instruments.
The carrying amounts reported in the balance sheet for the Due from GATX
Corporation approximate fair value.
The fair value of fixed rate long-term debt was estimated by performing a
discounted cash flow calculation using the note term and market interest rate
based on GATC's current incremental borrowing rates for similar 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 $3.5 million in
1995, $6.6 million in 1994, and $6.7 million in 1993.
-29-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE J-- PENSION BENEFITS (CONT'D)
Costs pertaining to the GATX plans are allocated to GATC on the basis of payroll
costs with respect to normal cost and on the basis of actuarial determinations
for prior service cost. Net periodic pension cost for 1995, 1994, and 1993 was
$3.1 million, $2.6 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.
Net periodic postretirement cost includes the following components (in
millions):
1995 1994 1993
-------- -------- --------
Current service cost $ .4 $ .4 $ .3
Interest cost on accumulated
postretirement benefit obligation 4.2 4.7 5.9
------- ------ -------
Net periodic postretirement benefit cost $ 4.6 $ 5.1 $ 6.2
======= ====== =======
Discount rate 7.75% 7.75% 8.5%
======= ====== =======
-30-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE K--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONT'D)
The following table sets forth the amounts recognized in GATC's consolidated
balance sheet (in millions):
December 31
1995 1994
------- -------
Accumulated postretirement benefit obligation
Retirees $48.2 $55.3
Fully eligible active plan participants 2.5 2.6
Other active plan participants 4.8 4.5
------- -------
Total accumulated
postretirement benefit obligation 55.5 62.4
Unrecognized gain 9.1 1.2
------- -------
Accrued postretirement benefit liability $64.6 $63.6
====== ======
The accrued postretirement benefit liability was determined using an assumed
discount rate of 7.75% for 1995 and 1994.
For measurement purposes, blended rates ranging from 9% decreasing to 5% over
the next two 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 $3.7 million and would increase aggregate service and interest
cost components of net periodic postretirement benefit cost by $.3 million per
year.
NOTE L--INCOME TAXES
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.
-31-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE L--INCOME TAXES (CONT'D)
Significant components of GATC's deferred tax liabilities and assets were (in
millions):
December 31
------------------
1995 1994
------ ------
Deferred tax liabilities:
Book/tax basis differences due to depreciation $329.4 $323.6
Other 30.1 31.0
------ ------
Total deferred tax liabilities 359.5 354.6
Deferred tax assets:
Accruals not currently deductible for tax purposes 34.4 34.7
Postretirement benefits other than pensions 22.8 22.4
Lease accounting 19.4 14.4
Other 1.8 11.8
------ ------
Total deferred tax assets 78.4 83.3
------ ------
Net deferred tax liabilities $281.1 $271.3
====== ======
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.
Income taxes consisted of (in millions):
For the Year
1995 1994 1993
------- ------- -------
Current-
Domestic:
Federal $ 26.7 $ 30.1 $ 29.6
State and local 2.2 1.7 .7
------- ------- -------
28.9 31.8 30.3
Foreign .1 .2 .3
------- ------- -------
29.0 32.0 30.6
Deferred-
Domestic:
Federal 16.7 8.4 12.1
State and local 1.0 1.5 2.4
------- ------- -------
17.7 9.9 14.5
Foreign .5 .8 -
------- ------- -------
18.2 10.7 14.5
Income tax expense $ 47.2 $ 42.7 $ 45.1
======= ======= =======
Income taxes paid $ 26.9 $ 31.9 $ 28.0
======= ======= =======
-32-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE L--INCOME TAXES (CONT'D)
The reasons for the differences between the effective income tax rate and the
federal statutory income tax rate were:
For the Year
----------------------------
1995 1994 1993
----- ----- -----
Federal statutory income tax rate 35.0% 35.0% 35.0%
Add (deduct) effect of:
Minority interest 2.0 .9 .8
State income taxes 1.7 1.9 1.9
Purchase accounting adjustments - .3 2.1
Tax rate increase on deferred taxes - - 6.4
Other .3 (.3) (3.1)
----- ----- -----
39.0% 37.8% 43.1%
===== ===== =====
NOTE M--COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK
GATC's revenues are derived from a wide range of industries and companies.
However, approximately 80% of total consolidated revenues are generated from the
transportation or storage of products for the chemical and petroleum industries.
Under its lease agreements, GATC retains legal ownership of the asset except
when such assets have been financed by sale leasebacks. 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 potential losses
should customers become unable to discharge their obligations to GATC.
At December 31, 1995 GATC had firm commitments to acquire railcars and to
upgrade facilities totaling $171 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 be paid by GATC is not likely to be material to GATC's
consolidated financial position or results of operations.
-33-
<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 (Terminals), 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.
-34-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE N--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)
(In millions)
1995 1994 1993
--------- --------- -------
Gross Income:
- -------------
Railcar Leasing and Management $ 360.9 $ 322.1 $ 302.2
Terminals and Pipelines 313.4 303.1 281.1
--------- --------- -------
Subtotal 674.3 625.2 583.3
Intersegment amounts
with other GATX segments 34.9 17.4 18.4
--------- --------- -------
CONSOLIDATED $ 709.2 $ 642.6 $ 601.7
========= ========= =======
Income Before Income Taxes and Equity
in Net Earnings of Affiliated Companies:
- ------------------------------------------
Railcar Leasing and Management $ 90.7 $ 79.6 $ 74.4
Terminals and Pipelines 30.3 33.2 30.2
--------- --------- -------
CONSOLIDATED $ 121.0 $ 112.8 $ 104.6
========= ========= =======
Equity in Net Earnings
of Affiliated Companies:
- ---------------------------
Railcar Leasing and Management $ 5.4 $ 4.7 $ 4.5
Terminals and Pipelines 14.7 12.2 10.1
--------- --------- -------
CONSOLIDATED $ 20.1 $ 16.9 $ 14.6
========= ========= =======
Net Income:
- -----------
Railcar Leasing and Management $ 62.9 $ 55.1 $ 47.6
Terminals and Pipelines 31.0 31.9 26.5
--------- --------- -------
CONSOLIDATED $ 93.9 $ 87.0 $ 74.1(A)
========= ========= =======
(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).
-35-
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE N--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)
FEDERAL TAX RATE CHANGE IN 1993
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.
Income
Net Before Tax Tax Rate Net
Income Rate Change Change(A) Income
--------- ------------- ---------- ------
In Millions 1994 1993
- ------------ --------- ----------------------------------
Railcar Leasing and Management $ 55.1 $ 51.9 $ (4.3) $ 47.6
Terminals and Pipelines 31.9 28.8 (2.3) 26.5
CONSOLIDATED $ 87.0 $ 80.7 $ (6.6) $ 74.1
(A) Effect of tax rate change on pre-1993 deferred taxes.
(In Millions)
1995 1994 1993
-------- -------- --------
Identifiable Assets:
Railcar Leasing and Management $2,041.9 $1,882.8 $1,701.0
Terminals and Pipelines 1,101.5 1,022.5 872.5
Other 1.0 .6 1.0
-------- -------- --------
3,144.4 2,905.9 2,574.5
Intersegment amounts (513.4) (439.3) (358.9)
-------- -------- --------
CONSOLIDATED $2,631.0 $2,466.6 $2,215.6
Capital Additions:
Railcar Leasing and Management $ 392.6 $ 285.4 $ 195.3
Terminals and Pipelines 148.6 154.4 77.8
-------- -------- --------
CONSOLIDATED $ 541.2 $ 439.8 $ 273.1
Provision for Depreciation and Amortization:
Railcar Leasing and Management $ 76.1 $ 68.3 $ 63.9
Terminals and Pipelines 45.3 43.5 41.0
-------- -------- --------
CONSOLIDATED $ 121.4 $ 111.8 $ 104.9
Interest Expense:
Railcar Leasing and Management $ 92.2 $ 70.0 $ 69.6
Terminals and Pipelines 46.4 39.7 39.0
-------- -------- --------
138.6 109.7 108.6
Intersegment amounts (39.2) (31.4) (29.8)
-------- -------- --------
CONSOLIDATED $ 99.4 $ 78.3 $ 78.8
-36-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
(In Millions)
- -------------------------------------------------------------------------------------------------------------------
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, 1995:
Allowance for possible losses
in collection of trade
receivables - Note A $ 5.4 $ .1 $ 1.2(B) $ 1.3(C) $ 5.4
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
<FN>
Note A - Deducted from asset accounts.
Note B - Transfer from other accounts.
Note C - Uncollectible accounts charged off.
</FN>
</TABLE>
-37-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In Millions Except For Ratios)
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Net Income $ 93.9 $ 87.0 $ 74.1 $ 66.1 $ 74.2
Add (deduct):
Income taxes 47.2 42.7 45.1 31.7 29.0
Cumulative effect of accounting changes - - - 6.7 -
Equity in net earnings of affiliated
companies, net of distributions received (12.8) (14.2) (11.5) (13.2) (11.5)
Interest on indebtedness and amortization
of debt discount and expense 99.4 78.3 78.8 96.0 100.7
Amortization of capitalized interest 1.1 1.1 1.1 1.1 .9
Portion of rents representative of interest
factor (deemed to be one-third) 21.7 16.8 13.2 9.3 7.3
------- ------- ------- ------- -------
Total earnings available for fixed charges $ 250.5 $ 211.7 $200.8 $ 197.7 $ 200.6
======= ======= ======= ======= =======
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense $ 99.4 $ 78.3 $ 78.8 $ 96.0 $ 100.7
Capitalized interest 4.6 2.7 2.4 2.8 2.8
Portion of rents representative of interest
factor (deemed to be one-third) 21.7 16.8 13.2 9.3 7.3
------- ------- ------- ------- -------
Total fixed charges $ 125.7 $ 97.8 $ 94.4 $ 108.1 $ 110.8
======= ======= ======= ======= =======
Ratio of earnings to fixed charges(A) 1.99x 2.16x 2.13x 1.83x 1.81x
<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>
-38-
<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, Registration Statement No. 33-52301 on
Form S-3 filed February 16, 1994 and Registration Statement No. 33-64697 on Form
S-3 filed December 1, 1995 of General American Transportation Corporation of our
report dated January 23, 1996 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, 1995.
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1996
-39-
<PAGE>
EXHIBITS FILED WITH DOCUMENT
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. Amendment Number 1
thereto dated as of April 21, 1995; submitted to the SEC along
with the electronic transmission of this Annual Report on Form
10-K.
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. Amendment effective June 30, 1994 and amendment dated
June 19, 1995; submitted to the SEC along with the electronic
submission of this Report on Form 10-K.
12. Statement regarding computation of ratios of earnings
to fixed charges.
23. Consent of Independent Auditors
27. Financial Data Schedule for GATC for the fiscal year
ended December 31, 1995, file number 2-54754. Submitted
to the SEC along with the electronic submission of this
report on Form 10-K.
<PAGE>
EXHIBIT 10A
AMENDMENT NO. I TO THE THIRD AMENDED
AND RESTATED REVOLVING CREDIT AGREEMENT
This AMENDMENT NUMBER ONE TO THE THIRD AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT (this "Amendment") is made as of April 21, 1995 by and among
General American Transportation Corporation, a New York corporation (the
"Company"), the undersigned financial institutions, including Bankers Trust
Company ("BT"), in their capacities as lenders (the "Banks"), and BT, in its
capacity as the Agent for the Banks.
PRELIMINARY STATEMENT. The Company, the Banks and the Agent heretofore
entered into that certain Third Amended and Restated Revolving Credit Agreement
dated as of March 31, 1994 (the "Credit Agreement"). The Company, the Banks and
the Agent have agreed to amend the Credit Agreement as hereinafter set forth.
All capitalized terms used but not defined herein have the meanings ascribed to
such terms in the Credit Agreement.
SECTION 3- Amendments to Credit Agreement. The Credit Agreement is, as of
the date hereof, hereby amended as follows:
(i) The following new definition is hereby added to Section 1.01
of the Credit Agreement in the appropriate alphabetical order:
"First Amendment Date" shall mean April 21, 1995.
(ii) The definition of "Maturity Date" contained in Section 1.01
of the Credit Agreement is hereby deleted in its entirety and replaced
as follows:
"Maturity Date" shall mean April 21, 2000.
(iii) The definition of "Required Banks" contained in Section 1.01
of the Credit Agreement is hereby deleted in its entirety and replaced
as follows:
<PAGE>
"Required Banks" shall mean at any time Banks holding at
least fifty-one percent (51%) of the then aggregate unpaid principal
amount of the Loans, or, if no such principal amount is then
outstanding, Banks having at least fifty-one percent (51%) of the
aggregate Commitments.
(iv) Section 2.05(b) of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
(b) The Company agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan made to the Company on or
after, or then outstanding on, the First Amendment Date from the date
thereof (or from the First Amendment Date if such Eurodollar Loan is
already outstanding as of the First Amendment Date) to maturity of such
Loan (whether by acceleration or otherwise) at a rate per annum which
shall be equal to the Eurodollar Rate plus the percentage per annum set
forth below corresponding to the higher of the Company's Bond Ratings
as of the first day of the applicable Interest Period:
Bond Ratings Percentage
------------------- -----------------
A/A2 .200%
A-/A3 .225%
BBB+/Baal .250%
BBB/Baa2 .250%
BBB-/Baa3 or below .375%
(or unrated by
either or both of
the Agencies)
; provided, that, the Company agrees to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan made to the Company
prior to the First Amendment Date from the date thereof to but not
including the First Amendment Date (or to the earlier maturity of such
Eurodollar Loan) at a rate per annum which shall be equal to the
Eurodollar Rate plus the percentage per annum set forth below
corresponding to the lower of the Company's Bond Ratings as of the
first day of the applicable Interest Period:
-2-
<PAGE>
Bond Ratings Percentage
------------------- ---------------
A/A2 .225%
A-/A3 .235%
BBB+/Baal .240%
BBB/Baa2 .275%
BBB-/Baa3 or below .400%
(or unrated by
either or both of
the Agencies)
(v) Section 2. 10 (a) of the Credit Agreement is hereby deleted in its
entirety and replaced as follows:
(a) Facility Fees. The Company shall pay to the Agent for the
account of and pro rata distribution to each Bank a facility fee
(collectively, the "Facility Fees") for the period commencing on the
First Amendment Date and including the Maturity Date for such Bank (or
such earlier date as the Commitments shall have been terminated)
computed, subject to Section 2. 10 (b) below, at a rate equal to the
percentage per annum set forth below which corresponds to the higher of
the Company's Bond Ratings as of the applicable payment date on such
Bank's average daily Commitment during such quarter:
Bond Ratings Percentage
---------------------------- ---------------
A/A2 .100%
A-/A3 .125%
BBB+/Baal .150%
BBB/Baa2 .175%
BBB-/Baa3 or below .225%
(or unrated by
either or both of
the Agencies)
; provided, that, the Company shall pay to the Agent for the account of
and pro rata distribution to each Bank a Facility Fee for the period
commencing on the Third Restatement Date to but not including the First
Amendment Date for such Bank (or such earlier date as the Commitments
shall have been terminated) computed, subject to Section 2.10(b) below,
at a rate equal to the percentage per annum set forth below which
corresponds to the lower of the Company's Bonds Ratings as of the
applicable payment date on such Bank's average daily Commitment during
such quarter:
-3-
<PAGE>
Bond Ratings Percentage
--------------------- --------------
A/A2 .1250%
A-/A3 .1400%
BBB+/Baal .1875%
BBB/Baa2 .2250%
BBB-/Baa3 or below .2250%
(or unrated by
either or both of
the Agencies)
Such Facility Fees shall be payable in arrears on the last Business Day of
each January, April, July and October, and on the Maturity Date or such earlier
date as the Commitments shall be terminated.
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to the Banks and the Agent (i) that the execution,
delivery and performance of this Amendment and the consummation of the
transactions contemplated hereby by the Company have been duly authorized by all
necessary corporate action, (ii) that all of the representations and warranties
of the Company contained in the Credit Agreement or otherwise in writing, or
deemed (pursuant to Section 3.01 of the Credit Agreement) to be made by the
Company or any of its officers under or in connection with the credit Agreement,
are, as of the date hereof, true and correct in all material respects after
taking into account any changes permitted or contemplated by the Credit
Agreement, (iii) that no Event of Default or Default has occurred or is
continuing as of the date hereof, and (iv) that this Amendment is a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be subject to
(A) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and (B) general
principles of
-4-
<PAGE>
equity (regardless of whether such enforcement is sought in a proceeding in
equity or at law).
SECTION 3. Reference to and Effect on the credit Agreement.
(a) Upon the effectiveness of Section I hereof, on and after the
date hereof each reference in the Credit Agreement to "this Agreement,
"hereunder," "hereof," "herein," or words of 1ike import, and each reference to
the Credit Agreement in the Notes and all other documents executed and delivered
in connection therewith (collectively, together with the Credit Agreement, the
"Loan Documents") shall mean and be a reference to the Credit Agreement as
amended hereby.
(b) Except as specifically amended above, the Credit Agreement, the
Notes and all other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Banks or the Agent under the Credit Agreement, the Notes
or any of the other Loan Documents.
SECTION 4, Costs, Expenses and Taxes. Pursuant to the provisions of the
Credit Agreement, the Company agrees to pay on demand all reasonable costs and
expenses of the Agent in connection with the preparation, execution and delivery
of this Amendment, including the reasonable fees and out-of-pocket expenses of
counsel with respect thereto. In addition, the Company shall pay any and all
stamp and other taxes and fees payable or determined to be
-5-
<PAGE>
payable in connection with the execution and delivery of this Amendment and
agrees to save the Banks and the Agent harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
SECTION 5. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
SECTION 6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
INTERNAL CONFLICTS OF LAW PROVISIONS THEREOF.
SECTION 7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
SECTION 8. Effectiveness of the Amendment. The approval of each amendment
by each Bank pursuant to this Amendment is not conditioned upon the approval of
any other amendment by any Bank pursuant to this Amendment.
[signature pages follow]
-6-
<PAGE>
Amendment No. I to the
Third Amended and Restated Revolving Credit
Agreement dated as of April 21, 1995
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
GENERAL AMERICAN TRANSPORTATION
CORPORATION
By: /s/E. Paul Dunn
----------------------------------------
Its: Treasurer
----------------------------------------
BANKERS TRUST COMPANY, in its
individual capacity and as the Agent
By: /s/Mary Jo Jolly
-----------------------------------------
Its: Assistant Vice President
----------------------------------------
ABN AMRO BANK N.V.,
CHICAGO BRANCH
By:/s/David H. Hannah
-----------------------------------------
Its:Group Vice President
----------------------------------------
By:/s/James M. Minich
-----------------------------------------
Its:Assistant Vice President
----------------------------------------
-7-
<PAGE>
Amendment No. I to the
Third Amended and Restated Revolving Credit
Agreement dated as of April 21, 1995
THE BANK OF NEW YORK
By:/s/
----------------------------------------
Its: Assiatant Vice President
---------------------------------------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By: /s/Donna M. Schmitt
----------------------------------------
Its: Vice President
----------------------------------------
CHEMICAL BANK
By: /s/Julie S. Long
----------------------------------------
Its: Vice President
----------------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/William Artz
----------------------------------------
Its: Assistant Vice President
----------------------------------------
THE INDUSTRIAL BANK OF JAPAN. LTD
By: /s/Hiroaki Nakamura
----------------------------------------
Its: Joint General Manager
----------------------------------------
-8-
<PAGE>
Amendment No. I to the
Third Amended and Restated Revolving Credit
Agreement dated as of April 21, 1995
MELLON BANK, N.A.
By: /s/
-----------------------------------------
Its: Vice President
----------------------------------------
BANK OF MONTREAL
By: /s/Randall B. Becker
-----------------------------------------
Its: Managing Director
----------------------------------------
SWISS BANK CORPORATION
By: /s/William A. McDonnell
-----------------------------------------
Its: Associate Director, Merchant Banking
----------------------------------------
By: /s/Nancy A. Russell
-----------------------------------------
Its: Associate Director, Merchant Banking
----------------------------------------
CITIBANK, N.A.
By: /s/Barbara A. Cohen
-----------------------------------------
Its: Vice President
----------------------------------------
J.P. MORGAN DELAWARE
By: /s/Jacqlyn Kennedy Sisson
-----------------------------------------
Its: Associate
----------------------------------------
-9-
<PAGE>
EXHIBIT 10B
To: The Borrower
The Guarantor
The Banks
From: Chemical Investment Bank Limited - Agency Dept.
19th June, 1995
Dear Sirs,
GATX TERMINALS LIMITED
-----------------------------------------------
pounds25,000,000 Revolving Credit Facility Agreement dated 13th July, 1993
----------------------------------------------------------------------------
We refer to the Revolving Credit Facility Agreement (the "Agreement")
dated 13th July, 1993, as amended by an Amendment Agreement effective from 30th
June, 1994, and made between (1) GATX Terminals Limited as Borrower, (2) General
American Transportation Corporation as Guarantor, (3) Chemical Bank as Arranger,
(4) Chemical Investment Bank Limited as Agent, and (5) the financial
institutions named therein as Banks.
Terms defined in the Agreement shall bear the same meaning herein.
A. The Borrower and the Guarantor have requested the agreement of the
Banks to amend certain definitions as follows:
(1) the definition of "Acceptance Commission Rate" shall be
amended to read as follows:
Quote
"Acceptance Commission Rate" in respect of any Bill means an acceptance
commission rate of:
(i) if on the day on which such Bill was made the Relevant S&P
Rating was A and the Relevant Moody's Rating was A2, 0.20 per cent.
per annum;
(ii) if on the day on which such Bill was made the Relevant S&P
Rating was A- and the Relevant Moody's Rating was A3, 0.225 per cent.
per annum;
<PAGE>
(iii) if on the day on which such Bill was made the Relevant S&P
Rating was BBB+ and the Relevant Moody's Rating was Baa1,
0.25 per cent. per annum;
(iv) if on the day on which such Bill was made the Relevant S&P
Rating was BBB and the Relevant Moody's Rating was Baa2, 0.25
per cent. per annum;
(ii) if on the day on which such Bill was made the Relevant S&P
Rating was BBB- and the Relevant Moody's Rating was Baa3, or
below either of these (or unrated by either Moody's Investors
Services, Inc. or Standard & Poor's Corporation), 0.375 per
cent. per annum;
Provided that where the combination of the Relevant S&P Rating and
Relevant Moody's Rating on the relevant day is not one of the
combinations listed above the relevant acceptance commission rate shall
be the acceptance commission rate per annum which is applicable to the
higher of (a) a Relevant S&P Rating equal to the then Relevant S&P
Rating and (b) a Relevant Moody's Rating equal to the then Relevant
Moody's Rating;
(2) the definition of "Facility Rate" shall be amended to read as
follows:
Quote
"Facility Rate" means a rate of:
(i) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was A and the Relevant
Moody's Rating was A2, 0.10 per cent. per annum;
(ii) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was A- and the Relevant
Moody's Rating was A3, 0.125 per cent. per annum;
(iii) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was BBB+ and the
Relevant Moody's Rating was Baa1, 0.15 per cent. per annum;
(iv) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was BBB and the Relevant
Moody's Rating was Baa2, 0.175 per cent. per annum;
(v) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was BBB- and the
Relevant Moody's Rating was Baa3, or below either of these (or
unrated by either Moody's Investors Services, Inc. or Standard
& Poor's Corporation), 0.225 per cent. per annum;
<PAGE>
Provided that where the combination of the Relevant S&P Rating and
Relevant Moody's Rating on the relevant day is not one of the
combinations listed above the relevant facility rate shall be the
facility rate per annum which is applicable to the higher of (a) a
Relevant S&P Rating equal to the then Relevant S&P Rating and (b) a
Relevant Moody's Rating equal to the then Relevant Moody's Rating;
Unquote
(3) the definition of "Margin" shall be amended to read as follows:
Quote
"Margin" in respect of any Advance means:
(i) if on the day on which such Advance was made the relevant S&P
Rating was A and the Relevant Moody's Rating was A2, 0.20 per
cent. per annum;
(ii) if on the day on which such Advance was made the relevant S&P
Rating was A- and the Relevant Moody's Rating was A3, 0.225
per cent. per annum;
(iii) if on the day on which such Advance was made the relevant S&P
Rating was BBB+ and the Relevant Moody's Rating was Baa1, 0.25
per cent. per annum;
(iv) if on the day on which such Advance was made the relevant S&P
Rating was BBB and the Relevant Moody's Rating was Baa2, 0.25
per cent. per annum;
(v) if on the day on which such Advance was made the relevant S&P
Rating was BBB- and the Relevant Moody's Rating was Baa3, or
below either of these (or unrated by either Moody's Investors
Services, Inc. or Standard & Poor's Corporation), 0.375 per
cent. per annum;
Provided that where the combination of the Relevant S&P Rating and
Relevant Moody's Rating on the relevant day is not one of the
combinations listed above the relevant margin shall be the rate per
annum which is applicable to the higher of (a) a Relevant S&P Rating
equal to the then Relevant S&P Rating and (b) a Relevant Moody's Rating
equal to the then Relevant Moody's Rating;
<PAGE>
Unquote
(4) the definition of "Instruction Group" shall be amended to read
as follows:
Quote
"Instruction Group" means:
(i) whilst no Advances or Bills are outstanding hereunder, a Bank
or group of Banks whose Commitments amount (or, if each Bank's
Commitment has been reduced to zero, did immediately before
such reduction to zero, amount) in total to more than
fifty-one per cent. of the Total Commitments; and
(ii) whilst at least one Advance or Bill is outstanding hereunder,
a Bank or group of Banks to whom in total more than fifty-one
per cent. of the Outstandings is owed;
Unquote
B. Clause 2 shall be amended to read as follows:
Quote
The Banks grant to the Borrower, upon the terms and subject to the
conditions hereof, a revolving cash advances and sterling acceptance
credit facility in an aggregate amount of pounds28,000,000 or its
equivalent from time to time in dollars.
Unquote
C. The First Schedule shall be amended to read that the Commitment of each
Bank is Seven Million Pounds Sterling (pounds7,000,000).
D. In addition the Borrower and Guarantor have requested that the Banks
waive the provisions of Clause 6.1 by hereby accepting the Second
Extension Notice giving notification to the Banks, before the expiry of
23 months from the date of the Agreement, to extend the term of the
Agreement by a further 36 months.
E. As a consequence of the amendment to alter the date of the Termination
Date of the Agreement Clause 6.7 shall be amended to read as follows:
<PAGE>
Quote
Save as each Bank may otherwise agree, if the Termination Date is to be
extended pursuant to this Clause 6, the Borrower shall ensure that on
the date which falls thirty-six months (or if the Termination Date is
extended twice pursuant to this Clause 6 eighty four months) after the
date hereof Outstandings under the facility at the close of business
(London time) on such date shall be zero.
Unquote
F. The Borrower and Guarantor further request that the Banks waive the
provisions of Clause 6.3 so that each Relevant Bank shall notify the
Agent on or before the seventh day following receipt by the Agent of
the Second Extension Notice whether or not it is willing to alter the
date of the Termination Date.
G. The Borrower and Guarantor confirm that, at the date hereof, the
representations set out in Clause 23 (other than Clause 23.3 (vii)) of
the Facility Agreement are true and no Event of Default or Potential
Event of Default has occurred.
H. The Guarantor further confirms that the Guarantee will continue in full
force and effect as detailed in Clauses 28 and 29 of the Facility
Agreement.
I. The amendments and waivers referred to herein shall become effective on
19th June, 1995 (the "Effective Date").
Kindly confirm your agreement to the amendments and waiver hereinbefore
referred to by countersigning the original and enclosed copy of this
letter and returning them to the undersigned.
Yours faithfully,
/s/Deborah Caulton
------------------------------------
for and on behalf of
Chemical Investment Bank Limited
Agency Department
We confirm our agreement to the foregoing.
GATX TERMINALS LIMITED
as Borrower
By:/s/S. Sexton
------------------------------
<PAGE>
GENERAL AMERICAN TRANSPORTATION CORPORATION
as Guarantor
By: /s/E. Paul Dunn
--------------------------------
ABN AMRO BANK
By: /s/Nick Claus
-------------------------------
BARCLAYS BANK PLC
By: /s/Brian Willatts
-------------------------------
CHEMICAL BANK
By: /s/Patrick J. Leahy
-------------------------------
CREDIT LYONNAIS
By: /s/Patrick J. Leahy
------------------------------
<PAGE>
To: The Banks
From: Chemical Investment Bank Limited - Agency Dept.
19th June, 1995
Dear Sirs,
GATX TERMINALS LIMITED
-----------------------------------------------
pounds25,000,000 Revolving Credit Facility Agreement dated 13th July, 1993
- --------------------------------------------------------------------------------
We refer to the Revolving Credit Facility Agreement (the "Agreement")
dated 13th July, 1993, and made between (1) GATX Terminals Limited as Borrower,
(2) General American Transportation Corporation as Guarantor, (3) Chemical Bank
as Arranger, (4) Chemical Investment Bank Limited as Agent, and (5) the
financial institutions named therein as Banks.
Terms defined in the Agreement shall bear the same meaning herein.
A. The Borrower and the Guarantor have requested the agreement of the
Banks to amend certain definitions as follows:
(1) the definition of "Acceptance Commission Rate" shall be
amended to read as follows:
Quote
"Acceptance Commission Rate" in respect of any Bill means an acceptance
commission rate of:
(i) if on the day on which such Bill was made the Relevant S&P
Rating was A and the Relevant Moody's Rating was A2, 0.225 per
cent. per annum;
(ii) if on the day on which such Bill was made the Relevant S&P
Rating was A- and the Relevant Moody's Rating was A3, 0.235
per cent. per annum;
(iii) if on the day on which such Bill was made the Relevant S&P
Rating was BBB+ and the Relevant Moody's Rating was Baa1, 0.24
per cent. per annum;
<PAGE>
(iv) if on the day on which such Bill was made the Relevant S&P
Rating was BBB and the Relevant Moody's Rating was Baa2, 0.275
per cent. per annum;
(ii) if on the day on which such Bill was made the Relevant S&P
Rating was BBB- and the Relevant Moody's Rating was Baa3, or
below either of these (or unrated by either Moody's Investors
Services, Inc. or Standard & Poor's Corporation), 0.40 per
cent. per annum;
Provided that where the combination of the Relevant S&P Rating and
Relevant Moody's Rating on the relevant day is not one of the
combinations listed above the relevant acceptance commission rate shall
be the acceptance commission rate per annum which is applicable to the
higher of (a) a Relevant S&P Rating equal to the then Relevant S&P
Rating and (b) a Relevant Moody's Rating equal to the then Relevant
Moody's Rating;
(2) the definition of "Commitment Rate" shall be replaced (and all
references thereto amended accordingly) by the definition
"Facility Rate" which shall read as follows:
Quote
"Facility Rate" means a rate of:
(i) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was A and the Relevant
Moody's Rating was A2, 0.125 per cent. per annum;
(ii) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was A- and the Relevant
Moody's Rating was A3, 0.140 per cent. per annum;
(iii) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was BBB+ and the
Relevant Moody's Rating was Baa1, 0.1875 per cent. per annum;
(iv) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was BBB and the Relevant
Moody's Rating was Baa2, 0.225 per cent. per annum;
(v) if on the first day of the period for which such rate falls to
be determined the Relevant S&P Rating was BBB- and the
Relevant Moody's Rating was Baa3, or below either of these (or
unrated by either Moody's Investors Services, Inc. or Standard
& Poor's Corporation), 0.250 per cent. per annum;
<PAGE>
Provided that where the combination of the Relevant S&P Rating and
Relevant Moody's Rating on the relevant day is not one of the
combinations listed above the relevant facility rate shall be the
facility rate per annum which is applicable to the higher of (a) a
Relevant S&P Rating equal to the then Relevant S&P Rating and (b) a
Relevant Moody's Rating equal to the then Relevant Moody's Rating;
Unquote
(3) the definition of "Margin" shall be amended to read as follows:
Quote
"Margin" in respect of any Advance means:
(i) if on the day on which such Advance was made the relevant S&P
Rating was A and the Relevant Moody's Rating was A2, 0.225 per
cent. per annum;
(ii) if on the day on which such Advance was made the relevant S&P
Rating was A- and the Relevant Moody's Rating was A3, 0.235
per cent. per annum;
(iii) if on the day on which such Advance was made the relevant S&P
Rating was BBB+ and the Relevant Moody's Rating was Baa1, 0.24
per cent. per annum;
(iv) if on the day on which such Advance was made the relevant S&P
Rating was BBB and the Relevant Moody's Rating was Baa2, 0.275
per cent. per annum;
(v) if on the day on which such Advance was made the relevant S&P
Rating was BBB- and the Relevant Moody's Rating was Baa3, or
below either of these (or unrated by either Moody's Investors
Services, Inc. or Standard & Poor's Corporation), 0.40 per
cent. per annum;
Provided that where the combination of the Relevant S&P Rating and
Relevant Moody's Rating on the relevant day is not one of the
combinations listed above the relevant margin shall be the rate per
annum which is applicable to the lower of (a) a Relevant S&P Rating
equal to the then Relevant S&P Rating and (b) a Relevant Moody's Rating
equal to the then Relevant Moody's Rating;
Unquote
<PAGE>
(4) the definition of "Relevant S&P Rating" shall be amended to
read as follows:
Quote
"Relevant S&P Rating" at any time means the rating accredited at such
time by Standard & Poor's Corporation to senior, unsecured long term
debt of Guarantor;:
Unquote
(5) The definition of "Relevant Moody's Rating" shall be amended
to read as follows:
Quote
"Relevant Moody's Rating" at any time means the rating accredited at
such time by Moody's Investor Service, Inc., to senior, unsecured long
term debt of the Guarantor;"
Unquote
B. Clause 35.1 shall be amended to read as follows:
Quote
The Borrower shall pay to the Agent for the account of each Bank a
facility fee on the amount of such Bank's Commitment from day to day
during the period beginning on the Effective Date and ending on the
termination Date, such facility fee to be calculated at the Facility
Rate and payable in arrears on the last Business Day of each March,
June, September and December which ends during such period and on the
Termination.
Unquote
C. In addition the Borrower and the Guarantor have requested that the
Banks waive the provisions of Clause 6.1 by hereby accepting the First
Extension Notice giving notification to the Banks, before the expiry of
11 months from the date of the Agreement, to extend the Termination
Date for a period of 12 months.
D. The amendments and waiver referred to herein shall become effective on
[30] June, 1994 (the "Effective Date").
<PAGE>
Kindly confirm your agreement to the amendments and waiver hereinbefore
referred to by countersigning the original and enclosed copy of this
letter and returning them to the undersigned.
Yours faithfully,
/s/Brian Scammell
---------------------------------
for and on behalf of
Chemical Investment Bank Limited
Agency Department
We confirm our agreement to the foregoing.
ABN AMRO BANK
By: /s/Alexander Drijver /s/Bernard Rubingh
-------------------------------------------
BARCLAYS BANK PLC
By: /s/Neil Staples
-----------------------------
CHEMICAL BANK
By: /s/John Empson (Vice President)
-------------------------------
CREDIT LYONNAIS
By: /s/Charles A. Bingham
-------------------------------
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In Millions Except For Ratios)
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Net Income $ 93.9 $ 87.0 $ 74.1 $ 66.1 $ 74.2
Add (deduct):
Income taxes 47.2 42.7 45.1 31.7 29.0
Cumulative effect of accounting changes - - - 6.7 -
Equity in net earnings of affiliated
companies, net of distributions received (12.8) (14.2) (11.5) (13.2) (11.5)
Interest on indebtedness and amortization
of debt discount and expense 99.4 78.3 78.8 96.0 100.7
Amortization of capitalized interest 1.1 1.1 1.1 1.1 .9
Portion of rents representative of interest
factor (deemed to be one-third) 21.7 16.8 13.2 9.3 7.3
------ ------ ------ ------ ------
Total earnings available for fixed charges $250.5 $211.7 $200.8 $197.7 $200.6
====== ====== ====== ====== ======
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense $ 99.4 $ 78.3 $ 78.8 $ 96.0 $100.7
Capitalized interest 4.6 2.7 2.4 2.8 2.8
Portion of rents representative of interest
factor (deemed to be one-third) 21.7 16.8 13.2 9.3 7.3
------ ------ ------ ------ ------
Total fixed charges $125.7 $ 97.8 $ 94.4 $108.1 $110.8
====== ====== ====== ====== ======
Ratio of earnings to fixed charges(A) 1.99x 2.16x 2.13x 1.83x 1.81x
<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>
<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, Registration Statement No. 33-52301 on
Form S-3 filed February 16, 1994 and Registration Statement No. 33-64697 on Form
S-3 filed December 1, 1995 of General American Transportation Corporation of our
report dated January 23, 1996 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, 1995.
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Consolidated Income Statement of GATC 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-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 70 <F1>
<ALLOWANCES> 5
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 3187
<DEPRECIATION> 1332
<TOTAL-ASSETS> 2631
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 1088 <F3>
0
0
<COMMON> 0
<OTHER-SE> 741
<TOTAL-LIABILITY-AND-EQUITY> 2631
<SALES> 0
<TOTAL-REVENUES> 709
<CGS> 0
<TOTAL-COSTS> 312 <F4>
<OTHER-EXPENSES> 121 <F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99
<INCOME-PRETAX> 121 <F6>
<INCOME-TAX> 47
<INCOME-CONTINUING> 94
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Receivables consists of three components: Trade Accounts 69 million and
finance leases of 1 million.
<F2> Not applicable because GATC has an unclassified balance sheet.
<F3> This value consists of two components: Long-term debt of 973 million and
Capital Lease Obligations of 115 million. Short-term debt is not included
in this calculation.
<F4> This value represents Operating Expenses on the Consolidated Income
Statement.
<F5> This value consists of the Provision for Depreciation and Amortization on
the Consolidated Income Statement.
<F6> This value represents Income Before Income Taxes and Equity in Net Earnings
of Affiliates.
</FN>
</TABLE>
