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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended Commission File Number
June 30, 1997 2-54754
General American Transportation Corporation
Incorporated in the IRS Employer Identification No.
State of New York 36-2827991
500 West Monroe Street
Chicago, Illinois 60661-3676
(312) 621-6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Registrant had 1,000 shares of common stock outstanding (all owned by GATX
Corporation) as of July 31, 1997.
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<PAGE>
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
In Millions
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Gross income ................................... $ 201.4 $ 182.3 $ 395.4 $ 361.6
Costs and expenses
Operating expenses ........................ 86.8 78.8 170.9 160.6
Interest .................................. 30.2 28.8 59.5 54.9
Provision for depreciation
and amortization ...................... 37.7 33.0 75.7 64.3
Selling, general and administrative ....... 18.8 14.6 37.4 28.9
------ ------ ------ ------
173.5 155.2 343.5 308.7
------ ------ ------ ------
Income before income taxes and equity
in net earnings of affiliated companies ... 27.9 27.1 51.9 52.9
Income taxes ................................... 10.3 10.0 20.0 19.7
------ ------ ------ ------
Income before equity in net earnings
of affiliated companies ................... 17.6 17.1 31.9 33.2
Equity in net earnings
of affiliated companies ................... 3.4 4.6 5.7 8.9
------ ------ ------ ------
Net income ..................................... $ 21.0 $ 21.7 $ 37.6 $ 42.1
====== ====== ====== ======
<FN>
Note - The consolidated balance sheet at December 31, 1996 has been derived from
the audited financial statements at that date. All other consolidated financial
statements are unaudited but include all adjustments, consisting only of normal
recurring items, which management considers necessary for a fair statement of
the consolidated results of operations and financial position for the respective
periods. Operating results for the six months ended June 30, 1997 are not
necessarily indicative of the results that may be achieved for the entire year
ending December 31, 1997.
</FN>
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
In Millions
ASSETS
June 30 December 31
1997 1996
-------- -----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents ........................ $ 12.7 $ 20.7
Trade receivables - net .......................... 57.8 83.7
Operating lease assets and facilities
Railcars and support facilities ............. 2,558.3 2,436.5
Tank storage terminals and pipelines ........ 1,392.2 1,377.8
-------- --------
3,950.5 3,814.3
Less - Allowance for depreciation ........... (1,616.0) (1,558.7)
-------- --------
2,334.5 2,255.6
Due from GATX Corporation ........................ 414.8 408.3
Investments in affiliated companies .............. 191.5 189.2
Other assets ..................................... 123.3 104.8
-------- --------
TOTAL ASSETS ..................................... $3,134.6 $3,062.3
======== ========
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDER'S EQUITY
June 30 December 31
1997 1996
--------- -----------
(Unaudited)
<S> <C> <C>
Accounts payable ....................................... $ 101.8 $ 128.8
Accrued expenses ....................................... 42.9 40.8
Debt
Short-term debt ..................................... 327.0 166.9
Long-term debt ...................................... 1,154.2 1,230.0
Capital lease obligations ........................... 103.3 108.1
-------- --------
1,584.5 1,505.0
Deferred income taxes .................................. 359.8 352.1
Other deferred items ................................... 257.7 261.3
-------- --------
Total liabilities and deferred items ............ 2,346.7 2,288.0
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 ................................. 448.2 431.4
Cumulative foreign currency translation adjustment .. 4.7 7.9
-------- --------
Total shareholder's equity ..................... 787.9 774.3
-------- --------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY ............................. $3,134.6 $3,062.3
======== ========
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
In Millions
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income ........................................ $ 21.0 $ 21.7 $ 37.6 $ 42.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization . 37.7 33.0 75.7 64.3
Deferred income taxes ....................... 7.2 4.7 8.2 9.5
Other (includes working capital) .................. (20.3) (7.0) (15.0) (16.8)
------ ------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...... 45.6 52.4 106.5 99.1
INVESTING ACTIVITIES
Additions to operating lease assets and facilities:
Railcars and support facilities ................ (60.6) (87.6) (143.2) (168.9)
Tank storage terminals and pipelines ........... (19.8) (49.2) (30.5) (85.9)
Investments in affiliated companies and other ..... (1.6) (1.3) (.9) (2.2)
------ ------ ------ ------
Capital additions .............................. (82.0) (138.1) (174.6) (257.0)
Proceeds from asset dispositions .................. 3.6 6.2 5.3 7.1
------ ------ ------ ------
NET CASH USED IN INVESTING ACTIVITIES .......... (78.4) (131.9) (169.3) (249.9)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt .......... -- -- -- 100.0
Repayment of long-term debt ....................... (26.8) (62.2) (75.2) (67.3)
Net increase in short-term debt ................... 64.6 161.5 162.2 160.5
Repayment of capital lease obligations ............ (.7) -- (4.8) (3.7)
Cash dividends paid to GATX Corporation ........... (10.9) (11.0) (20.9) (22.8)
Net decrease (increase) in amount due from
GATX Corporation ............................... 1.1 (6.6) (6.5) (16.5)
------ ------ ------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES ...... 27.3 81.7 54.8 150.2
------ ------ ------ ------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ........................... $ (5.5) $ 2.2 $ (8.0) $ (.6)
====== ====== ====== ======
</TABLE>
-4-
<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS
COMPARISON OF FIRST SIX MONTHS OF 1997 TO FIRST SIX MONTHS OF 1996
GENERAL
General American Transportation Corporation's (GATC's) net income for the first
six months of 1997 was $38 million compared to $42 million for the first half of
1996. While Transportation benefitted from more railcars on lease, higher rates,
and the consolidation of CGTX, Terminals' lower results reflected competitive
pricing pressures as well as transformation costs. For the first six months of
1996, Transportation's 45% interest in CGTX, a Canadian railcar company, was
accounted for as equity in earnings of affiliates. Transportation acquired the
remaining 55% interest in July 1996, whereupon those operations became fully
consolidated.
Despite lower net income, net cash provided by operating activities increased $8
million, from $99 million for the first half of 1996 to $107 million for the
first half of 1997.
Capital additions for the first six months of 1997 totaled $175 million, $82
million lower than the comparable 1996 period. Transportation invested $143
million in its railcar fleet and facilities, $26 million below the first half of
1996; approximately 300 fewer railcars were added to the fleet in 1997.
Terminals' capital additions declined from last year primarily because the first
half of 1996 included $31 million for the Central Florida Pipeline expansion
project which was completed later in the year.
GATC had available unused committed lines of credit of $205 million at June 30,
1997. Under a $650 million shelf registration for pass through certificates and
debt securities, $207 million had been issued as of the end of 1996; no pass
through certificates or medium term notes were issued during the first half of
1997.
-5-
<PAGE>
RESULTS OF OPERATIONS
Following is a discussion of the operating results of GATC's business segments:
RAILCAR LEASING AND MANAGEMENT (TRANSPORTATION)
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Six Months Ended
(In Millions) June 30
----------------
1997 1996 Change
------ ------ --------------
Gross Income $234.9 $196.4 $38.5 20%
Net Income $ 36.5 $ 32.8 $ 3.7 11%
- --------------------------------------------------------------------------------
Transportation's gross income for the first six months of 1997 increased 20%
from the comparable prior year period. The consolidation of CGTX accounted for
$14 million of the increase with the remaining revenue increase primarily due to
approximately 2,100 more cars on lease as well as higher overall average lease
rates. About 74,300 tank and freight cars were on lease throughout North America
at the end of the first half of the year, including 8,900 cars in Canada. With a
total fleet of 79,000 railcars, utilization ended the first half at 94%, up from
slightly under 93% at June 30, 1996.
Net income increased 11% from the first six months of 1996 primarily due to the
same reasons that revenues increased. While all major cost areas (asset
ownership, repairs, and SG&A) increased, total costs as a percentage of revenue
were approximately the same as for the first six months of 1996. Because the
majority of U.S. railcar additions have been financed using sale-leasebacks in
recent years, those asset ownership costs are included as operating lease
expense (a component of operating expenses), whereas CGTX railcars are financed
with debt and, therefore, CGTX asset ownership costs are recorded as
depreciation and interest. For the first six months of 1996, the operating
results of CGTX were recorded as equity in net earnings of affiliates, whereas
in 1997 CGTX's revenues and costs were fully consolidated.
-6-
<PAGE>
TERMINALS AND PIPELINES
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Six Months Ended
(In Millions) June 30
----------------
1997 1996 Change
------ ------ --------------
Gross Income $146.2 $145.8 $ .4 -
Net Income $ 1.1 $ 9.3 $(8.2) (88)%
- --------------------------------------------------------------------------------
Terminals' gross income for the first half of 1997 is essentially unchanged from
the comparable 1996 period. Low petroleum inventory levels have created a
supply-demand imbalance, substantially weakening the petroleum bulk liquid
storage market. This imbalance continues to cause pricing pressure for petroleum
storage services. Chemical storage revenue approximates the prior year while
pipeline revenues increased compared to the first half of 1996. Throughput of
petroleum and chemical products was 347 million barrels for the first six months
of 1997 compared to 344 million barrels for the same period in 1996. Capacity
utilization at wholly-owned facilities was 91% at June 30, 1997 versus 86% a
year ago.
Terminals net income for the first six months of 1997 was $1 million, a
significant decrease from last year's $9 million. Included in the 1997 results
is $3.5 million (pretax) of costs for transformation initiatives as Terminals
continues its rationalization process and evaluation of its markets and
facilities. On a constant revenue base, asset ownership costs (depreciation and
interest) were almost $7 million over the first half of 1996 reflecting the full
impact of business expansion and facilities improvements in the prior year.
Equity earnings were $5.5 million, $.5 million lower than the first half of
1996, primarily due to lower earnings from a Japanese joint venture.
-7-
<PAGE>
COMPARISON OF SECOND QUARTER 1997 TO
SECOND QUARTER 1996
GROSS INCOME
- --------------------------------------------------------------------------------
(In Millions) Three Months Ended
June 30
------------------
Business Segment 1997 1996 Change
- ------------------------------------ ------ ------ ----------------
Railcar Leasing and Management $118.7 $ 99.2 $19.5 20%
Terminals and Pipelines 75.7 73.0 2.7 4
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NET INCOME
- --------------------------------------------------------------------------------
(In Millions) Three Months Ended
June 30
------------------
Business Segment 1997 1996 Change
- ------------------------------------ ------ ------ ----------------
Railcar Leasing and Management $ 18.5 $ 17.1 $ 1.4 8%
Terminals and Pipelines 2.5 4.6 (2.1) (46)
- --------------------------------------------------------------------------------
Increases and decreases in gross income and net income between these quarters
for both segments were principally due to the same reasons discussed previously
in relation to the six-month periods.
-8-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
A Final Judgement has been entered by the U.S. District Court for the Northern
District of Illinois in favor of General American Transportation Corporation in
the previously reported matter of General American Transportation Corporation v.
Cryo-Trans, Incorporated (Case No. 91 C 1305). A Petition for Writ of Certiorari
filed on behalf of Cryo-Trans, Incorporated was denied by the United States
Supreme Court.
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K Page
<S> <C>
(a) 12 Statement regarding computation of ratios of earnings to
fixed charges. 11
27 Financial Data Schedule for General American Transportation
Corporation for the quarter ended June 30, 1997. Submitted to the
SEC along with the electronic submission of this Quarterly Report
on Form 10-Q.
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.
(b) No reports on Form 8-K were filed during the reporting period.
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GENERAL AMERICAN TRANSPORTATION CORPORATION
(Registrant)
/s/D. Ward Fuller
-----------------
D. Ward Fuller
President, Chief Executive Officer
and Director
(Duly Authorized Officer)
/s/Donald J. Schaffer
---------------------
Donald J. Schaffer
Vice President, Finance and Chief
Financial Officer
Date: August 13, 1997
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<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
GENERAL AMERICAN TRANSPORTATION CORPORATION
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Unaudited)
(In Millions, Except for Ratios)
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Earnings available for fixed charges:
Net income .................................... $ 21.0 $ 21.7 $ 37.6 $ 42.1
Add (deduct):
Income taxes .............................. 10.3 10.0 20.0 19.7
Equity in net earnings of affiliated
companies, net of distributions received (2.6) (4.3) (4.1) (7.3)
Interest on indebtedness and amortization
of debt discount and expense ........... 30.2 28.8 59.5 54.9
Amortization of capitalized interest ...... .3 .3 .6 .6
Portion of rents representative of interest
factor (deemed to be one-third) ........ 6.8 5.8 13.6 11.6
------ ------ ------ ------
Total earnings available for fixed charges .... $ 66.0 $ 62.3 $127.2 $121.6
====== ====== ====== ======
Fixed Charges:
Interest on indebtedness and amortization
of debt discount and expense .............. $ 30.2 $ 28.8 $ 59.5 $ 54.9
Capitalized interest .......................... .2 1.2 .4 2.5
Portion of rents representative of interest
factor (deemed to be one-third) ........... 6.8 5.8 13.6 11.6
------ ------ ------ ------
Total fixed charges ........................... $ 37.2 $ 35.8 $ 73.5 $ 69.0
====== ====== ====== ======
Ratio of earnings to fixed charges(A)................ 1.77x 1.74x 1.73x 1.76x
<FN>
(A) The ratios 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 and fixed charges, less
equity in net earnings of affiliated companies, net of distributions
received.
</FN>
</TABLE>
-11-
<PAGE>
EXHIBITS FILED WITH DOCUMENT
(a) 12 Statement regarding computation of ratios of earnings to
fixed charges.
27 Financial Data Schedule for General American Transportation
Corporation for the quarter ended June 30, 1997. Submitted to the
SEC along with the electronic submission of this Quarterly Report
on Form 10-Q.
<TABLE>
<CAPTION>
Exhibit 12
GENERAL AMERICAN TRANSPORTATION CORPORATION
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Unaudited)
(In Millions, Except for Ratios)
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Earnings available for fixed charges:
Net income .................................... $ 21.0 $ 21.7 $ 37.6 $ 42.1
Add (deduct):
Income taxes .............................. 10.3 10.0 20.0 19.7
Equity in net earnings of affiliated
companies, net of distributions received (2.6) (4.3) (4.1) (7.3)
Interest on indebtedness and amortization
of debt discount and expense ........... 30.2 28.8 59.5 54.9
Amortization of capitalized interest ...... .3 .3 .6 .6
Portion of rents representative of interest
factor (deemed to be one-third) ........ 6.8 5.8 13.6 11.6
------ ------ ------ ------
Total earnings available for fixed charges .... $ 66.0 $ 62.3 $127.2 $121.6
====== ====== ====== ======
Fixed Charges:
Interest on indebtedness and amortization
of debt discount and expense .............. $ 30.2 $ 28.8 $ 59.5 $ 54.9
Capitalized interest .......................... .2 1.2 .4 2.5
Portion of rents representative of interest
factor (deemed to be one-third) ........... 6.8 5.8 13.6 11.6
------ ------ ------ ------
Total fixed charges ........................... $ 37.2 $ 35.8 $ 73.5 $ 69.0
====== ====== ====== ======
Ratio of earnings to fixed charges(A)................ 1.77x 1.74x 1.73x 1.76x
<FN>
(A) The ratios 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 and fixed charges, less
equity in net earnings of affiliated companies, net of distributions
received.
</FN>
</TABLE>
<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> 6-Mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 13
<SECURITIES> 0
<RECEIVABLES> 63
<ALLOWANCES> 5
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 3951
<DEPRECIATION> 1616
<TOTAL-ASSETS> 3135
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 1257 <F2>
0
0
<COMMON> 0
<OTHER-SE> 788
<TOTAL-LIABILITY-AND-EQUITY> 3135
<SALES> 0
<TOTAL-REVENUES> 395
<CGS> 0
<TOTAL-COSTS> 171 <F3>
<OTHER-EXPENSES> 76 <F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60
<INCOME-PRETAX> 52 <F5>
<INCOME-TAX> 20
<INCOME-CONTINUING> 38
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Not applicable because GATC has an unclassified balance sheet.
<F2> This value consists of two components: Long-term Debt of 1,154 million
and Capital Lease Obligations of 103 million. Short-term debt is not
included in this calculation.
<F3> This value represents Operating Expenses on the Consolidated Income
Statement.
<F4> This value consists of the Provision for Depreciation and Amortization on
the Consolidated Income Statement.
<F5> This value represents Income Before Income Taxes and Equity in Net
Earnings of Affiliates.
</FN>
</TABLE>
