- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
March 31, 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 April 30, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
In Millions
Three Months Ended
March 31
---------------------
1997 1996
-------- ------
<S> <C> <C>
Gross income ........................................... $ 194.0 $ 179.3
Costs and expenses
Operating expenses ................................. 84.1 81.8
Interest ........................................... 29.3 26.1
Provision for depreciation and amortization ........ 38.0 31.3
Selling, general and administrative ................ 18.6 14.3
------ ------
170.0 153.5
------ ------
Income before income taxes and equity in net
earnings of affiliated companies ................... 24.0 25.8
Income taxes ........................................... 9.7 9.7
------ ------
Income before equity in net earnings of
affiliated companies ................................ 14.3 16.1
Equity in net earnings of affiliated
companies .......................................... 2.3 4.3
------ ------
Net income ............................................. $ 16.6 $ 20.4
====== ======
<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 three months ended March 31, 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
March 31 December 31
1997 1996
---------- ------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents .......................... $ 18.2 $ 20.7
Trade receivables - net ............................ 62.6 83.7
Operating lease assets and facilities:
Railcars and support facilities .............. 2,506.1 2,436.5
Tank storage terminals and pipelines ......... 1,374.5 1,377.8
-------- --------
3,880.6 3,814.3
Less - Allowance for depreciation .................. (1,586.5) (1,558.7)
-------- --------
2,294.1 2,255.6
Due from GATX Corporation .......................... 415.9 408.3
Investments in affiliated companies ................ 191.6 189.2
Other assets ....................................... 117.8 104.8
-------- --------
TOTAL ASSETS ....................................... $ 3,100.2 $ 3,062.3
======== ========
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDER'S EQUITY
March 31 December 31
1997 1996
---------- ----------
(Unaudited)
<S> <C> <C>
Accounts payable ......................................... $ 113.5 $ 128.8
Accrued expenses ......................................... 46.4 40.8
Debt
Short-term debt .................................... 267.4 166.9
Long-term debt ..................................... 1,181.0 1,230.0
Capital lease obligations .......................... 104.0 108.1
-------- --------
1,552.4 1,505.0
Deferred income taxes .................................... 351.2 352.1
Other deferred items ..................................... 260.2 261.3
-------- --------
Total liabilities and deferred items ............... 2,323.7 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 ................................ 438.0 431.4
Cumulative foreign currency translation adjustment . 3.5 7.9
-------- --------
Total shareholder's equity .................... 776.5 774.3
-------- --------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY ........................... $ 3,100.2 $ 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
March 31
-------------------
1997 1996
------- ------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ............................................ $ 16.6 $ 20.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and amortization .... 38.0 31.3
Deferred income taxes .......................... 1.0 4.8
Other (includes working capital) ...................... 5.3 (9.8)
----- ------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............. 60.9 46.7
INVESTING ACTIVITIES
Additions to operating lease assets and facilities
Railcars and support facilities .................... (82.6) (81.3)
Tank storage terminals and pipelines ............... (10.7) (36.7)
Investments in affiliated companies and other ......... .7 (.9)
----- ------
Capital additions .................................. (92.6) (118.9)
Proceeds from asset dispositions ...................... 1.7 .9
----- ------
NET CASH USED IN INVESTING ACTIVITIES ................. (90.9) (118.0)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt .............. -- 100.0
Repayment of long-term debt and other ................. (48.4) (5.1)
Net increase (decrease) in short-term debt ............ 97.6 (1.0)
Repayment of capital lease obligations ................ (4.1) (3.7)
Cash dividends paid to GATX Corporation ............... (10.0) (11.8)
Net increase in amount due from GATX Corporation ...... (7.6) (9.9)
----- ------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............ 27.5 68.5
----- ------
NET DECREASE IN CASH AND CASH EQUIVALENTS ................. $ (2.5) $ (2.8)
===== ======
</TABLE>
4
<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS
COMPARISON OF FIRST THREE MONTHS OF 1997
TO FIRST THREE MONTHS OF 1996
GENERAL
General American Transportation Corporation's (GATC's) net income for the first
quarter of 1997 was $17 million compared to $20 million for the first quarter of
1996. While Transportation benefitted from more railcars on lease, higher rates,
and the consolidation of CGTX, Terminals reported a loss for the quarter due to
competitive pricing pressures and the recognition of transformation costs. For
the first quarter 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.
Net cash provided by operating activities increased $14 million, from $47
million for the first three months of 1996 to $61 million for the first three
months of 1997. The increase includes changes in working capital and inclusion
of CGTX's operating cash flows.
Capital additions for the quarter totaled $93 million, $26 million lower than
the 1996 first quarter. Transportation invested $83 million in its railcar fleet
and facilities, similar to the level of spending for the first quarter of 1996;
the number of railcars added was approximately the same for both quarters.
Terminals' capital additions declined from the year ago period primarily because
the first quarter of 1996 included $20 million for the Central Florida Pipeline
expansion project which was completed late in 1996.
GATC had available unused committed lines of credit of $208 million at March 31,
1997. Under a $650 million shelf registration for pass through certificates and
debt securities, $207 million had been issued as of the end of the first quarter
of 1997; no notes were issued during the quarter.
5
<PAGE>
RESULTS OF OPERATIONS
Following is a discussion of the operating results of GATC's business segments:
RAILCAR LEASING AND MANAGEMENT (TRANSPORTATION)
- --------------------------------------------------------------------------------
Three Months Ended
(In Millions) March 31
----------------------
1997 1996 Change
-------- -------- -----------------
Gross Income $116.2 $ 97.2 $ 19.0 20%
Net Income $ 18.0 $ 15.7 $ 2.3 15%
- --------------------------------------------------------------------------------
Transportation's gross income for the first quarter 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 2,400 more cars on lease as well as higher overall average lease
rates. About 73,900 tank and freight railcars were on lease throughout North
America at quarter end, including 8,900 cars in Canada. With a total fleet of
78,700 railcars, utilization ended the quarter at 94%, up from about 93% at
March 31, 1996. For the first three months, almost 1,300 new and existing
railcars were acquired, roughly comparable to the first quarter of 1996.
Net income increased 15% from the first quarter 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 quarter 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's railcars are
financed with debt and, therefore, CGTX asset ownership costs are recorded as
depreciation and interest. For the first quarter of 1996, the operating results
for CGTX were recorded as equity in net earnings of affiliates, whereas for the
first quarter of 1997, CGTX's revenues and costs were fully consolidated.
6
<PAGE>
TERMINALS AND PIPELINES
- --------------------------------------------------------------------------------
Three Months Ended
(In Millions) March 31
---------------------
1997 1996 Change
------- -------- -----------------
Gross Income $ 70.5 $ 72.8 $ (2.3) (3)%
Net Income (Loss) $ (1.4) $ 4.7 $ (6.1) (130)%
- --------------------------------------------------------------------------------
Terminals' 1997 first quarter gross income declined 3% from the year ago period.
Petroleum storage pricing pressures have continued from last year. Low petroleum
inventory levels have created a supply-demand imbalance, substantially weakening
the petroleum bulk liquid storage market. While the petroleum storage market has
been and continues to be difficult, chemical storage revenue has remained more
steady, and Terminals' pipelines reported a revenue increase as compared to the
first quarter of 1996. Throughput of petroleum and chemical products at
Terminals' facilities was 165 million barrels compared to 169 million barrels
for the first three months of 1996. Capacity utilization at wholly-owned
facilities was 89% at the end of the quarter versus 85% a year ago.
Terminals reported a $1.4 million loss for the quarter, a significant decrease
from last year's $4.7 million profit. Included in first quarter 1997 results is
$1.8 million (pretax) of costs for transformation initiatives as Terminals
continues its rationalization process and evaluation of its markets and
facilities. Asset ownership costs (depreciation and interest) were approximately
$4 million over the prior year's quarter reflecting the full impact of business
expansion and facilities improvements in the prior year. Due to the decrease in
revenues, asset ownership costs now represent a higher percentage of revenues.
Equity in net earnings of affiliated companies were $2.2 million, $.6 million
lower than the first quarter of 1996, primarily due to lower earnings from
several international joint ventures.
7
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Other than as previously reported, neither the registrant nor any of its
subsidiaries is currently a party to any material pending legal proceeding,
other than ordinary routine litigation incidental to the business, and to the
belief of the registrant, no such proceeding is contemplated.
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K. Page
<S> <C> <C>
(a) 12 Statement regarding computation of ratios of earnings to fixed charges. 10
27 Financial Data Schedule for GATC for the quarter ended March 31,
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>
8
<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: May 9, 1997
9
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
GENERAL AMERICAN TRANSPORTATION CORPORATION
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
In Millions, Except For Ratios
Three Months Year Ended
Ended March 31 December 31
-------------- -----------
1997 1996 1996
----- ----- -----------
(Unaudited)
<S> <C> <C> <C>
Earnings available for fixed charges:
Net income ...................................... $ 16.6 $ 20.4 $ 80.3
Add (deduct):
Income taxes ................................ 9.7 9.7 41.3
Equity in net earnings of affiliated
companies, net of distributions received (1.5) (3.0) (9.6)
Interest on indebtedness and amortization
of debt discount and expense ........... 29.3 26.1 118.2
Amortization of capitalized interest ........ .3 .3 1.1
Portion of rents representative of interest
factor (deemed to be one-third) ........ 6.8 5.8 27.0
----- ----- ------
Total earnings available for fixed charges ........... $ 61.2 $ 59.3 $ 258.3
===== ===== ======
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense ................ $ 29.3 $ 26.1 $ 118.2
Capitalized interest ............................ .2 1.3 3.7
Portion of rents representative of interest
factor (deemed to be one-third) ............. 6.8 5.8 27.0
----- ----- ------
Total fixed charges .................................. $ 36.3 $ 33.2 $ 148.9
===== ===== ======
Ratio of earnings to fixed charges(A) ................ 1.69x 1.79x 1.73x
<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 and fixed charges, less
equity in net earnings of affiliated companies, net of distributions
received.
</FN>
</TABLE>
10
<PAGE>
EXHIBITS FILED WITH DOCUMENT
(a) 12 Statement regarding computation of ratios of earnings to fixed
charges.
27 Financial Data Schedule for GATC for the quarter ended March 31,
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
In Millions, Except For Ratios
Three Months Year Ended
Ended March 31 December 31
-------------- -----------
1997 1996 1996
----- ----- -----------
(Unaudited)
<S> <C> <C> <C>
Earnings available for fixed charges:
Net income ...................................... $ 16.6 $ 20.4 $ 80.3
Add (deduct):
Income taxes ................................ 9.7 9.7 41.3
Equity in net earnings of affiliated
companies, net of distributions received (1.5) (3.0) (9.6)
Interest on indebtedness and amortization
of debt discount and expense ........... 29.3 26.1 118.2
Amortization of capitalized interest ........ .3 .3 1.1
Portion of rents representative of interest
factor (deemed to be one-third) ........ 6.8 5.8 27.0
----- ----- ------
Total earnings available for fixed charges ........... $ 61.2 $ 59.3 $ 258.3
===== ===== ======
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense ................ $ 29.3 $ 26.1 $ 118.2
Capitalized interest ............................ .2 1.3 3.7
Portion of rents representative of interest
factor (deemed to be one-third) ............. 6.8 5.8 27.0
----- ----- ------
Total fixed charges .................................. $ 36.3 $ 33.2 $ 148.9
===== ===== ======
Ratio of earnings to fixed charges(A) ................ 1.69x 1.79x 1.73x
<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 and fixed charges, less
equity in net earnings of affiliated companies, net of distributions
received.
</FN>
</TABLE>
10
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 68
<ALLOWANCES> 6
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 3881
<DEPRECIATION> 1587
<TOTAL-ASSETS> 3100
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 1285 <F2>
0
0
<COMMON> 0
<OTHER-SE> 777
<TOTAL-LIABILITY-AND-EQUITY> 3100
<SALES> 0
<TOTAL-REVENUES> 194
<CGS> 0
<TOTAL-COSTS> 84 <F3>
<OTHER-EXPENSES> 38 <F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> 24 <F5>
<INCOME-TAX> 10
<INCOME-CONTINUING> 17
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17
<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 1,181 million
and Capital Lease Obligations of 104 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>
