- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
September 30, 1998 2-54754
General American Transportation Corporation
Incorporated in the IRS Employer Identification No.
State of New York 36-2827991
500 West Monroe Street
Chicago, IL 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 October 31, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
----------
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
In Millions
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------------- ---------------------------------
1998 1997 1998 1997
---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Gross income....................................... $210.1 $200.8 $619.2 $596.2
Costs and expenses
Operating expenses............................. 89.6 85.8 267.4 256.7
Interest....................................... 29.4 30.2 86.6 89.7
Provision for depreciation and amortization.... 34.9 38.1 105.6 113.8
Selling, general and administrative............ 19.1 19.0 57.1 56.4
---------------- -------------- -------------- ---------------
173.0 173.1 516.7 516.6
---------------- -------------- -------------- ---------------
Income before income taxes and equity
in net earnings of affiliated companies........ 37.1 27.7 102.5 79.6
Income taxes....................................... 14.9 10.8 39.8 30.8
---------------- -------------- -------------- ---------------
Income before equity in net earnings of
affiliated companies........................... 22.2 16.9 62.7 48.8
Equity in net earnings of affiliated companies..... 3.4 4.2 11.0 9.9
---------------- -------------- -------------- ---------------
Net income......................................... $ 25.6 $ 21.1 $ 73.7 $ 58.7
================ ============== ============== ===============
<FN>
Note - The consolidated balance sheet at December 31, 1997 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 nine months ended September 30, 1998 are not
necessarily indicative of the results that may be achieved for the entire year
ending December 31, 1998.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
-----
CONSOLIDATED BALANCE SHEETS
In Millions
ASSETS
September 30 December 31
1998 1997
-------------------- -------------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents.............................. $ 20.3 $ 14.0
Trade receivables - net................................ 57.8 52.7
Operating lease assets and facilities
Railcars and support facilities.................... 2,508.3 2480.5
Tank storage terminals and pipelines............... 1,154.5 1,128.9
-------------------- -------------------
3662.8 3,609.4
Less - Allowance for depreciation.................. (1,660.3) (1,593.8)
-------------------- -------------------
2,002.5 2,015.6
Due from GATX Corporation.............................. 391.8 392.1
Investments in affiliated companies.................... 207.0 200.1
Other assets........................................... 151.7 153.7
-------------------- -------------------
TOTAL ASSETS........................................... $2,831.1 $2,828.2
==================== ===================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDER'S EQUITY
September 30 December 31
1998 1997
-------------------- -------------------
(Unaudited)
<S> <C> <C>
Accounts payable....................................... $ 134.1 $ 140.5
Accrued expenses....................................... 52.6 44.7
Debt
Short-term debt................................... 169.5 190.5
Long-term debt.................................... 1,123.1 1,120.5
Capital lease obligations......................... 91.4 100.2
-------------------- -------------------
1,384.0 1,411.2
Deferred income taxes.................................. 338.7 315.7
Other deferred items................................... 236.6 251.4
-------------------- -------------------
Total liabilities and deferred items............ 2,146.0 2,163.5
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................................ 382.7 347.2
Accumulated other comprehensive income............. (32.6) (17.5)
-------------------- -------------------
Total shareholder's equity 685.1 664.7
-------------------- -------------------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDER'S EQUITY............................ $2,831.1 $2,828.2
==================== ===================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN TRANSPORTATION CORPORATION
AND SUBSIDIARIES
------
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 1998
In Millions
Accumulated
Other
Common Additional Reinvested Comprehensive
Stock Capital Earnings Income (a) Total
------- ---------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C>
Beginning balance 7/1/98 $ - $335.0 $370.5 $(26.5) $679.0
Comprehensive income:
Net income 25.6 25.6
Other comprehensive income
Foreign currency translation
adjustment (6.1) (6.1)
----------
Comprehensive income 19.5
----------
Dividends declared (13.4) (13.4)
------------ ------------- -------------- ------------------- ----------
Ending balance 9/30/98 $ - $335.0 $382.7 $(32.6) $685.1
============ ============= ============== =================== ==========
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 1997
In Millions
<S> <C> <C> <C> <C> <C>
Beginning balance 7/1/97 $ - $335.0 $448.2 $ 4.7 $787.9
Comprehensive income:
Net income 21.1 21.1
Other comprehensive income
Foreign currency translation
adjustment (1.4) (1.4)
----------
Comprehensive income 19.7
----------
Dividends declared (11.0) (11.0)
------------ ------------- -------------- ------------------- ----------
Ending balance 9/30/97 $ - $335.0 $458.3 $ 3.3 $796.6
============ ============= ============== =================== ==========
<FN>
(a) The beginning balance of accumulated other comprehensive income
consists solely of foreign currency translation adjustment for both
years.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN TRANSPORTATION CORPORATION
AND SUBSIDIARIES
------
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998
In Millions
Accumulated
Other
Common Additional Reinvested Comprehensive
Stock Capital Earnings Income (a) Total
------- ---------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C>
Beginning balance 1/1/98 $ - $335.0 $347.2 $(17.5) $664.7
Comprehensive income:
Net income 73.7 73.7
Other comprehensive income
Foreign currency translation
adjustment (15.1) (15.1)
----------
Comprehensive income 58.6
----------
Dividends declared (38.2) (38.2)
------------ ------------- -------------- ------------------- ----------
Ending balance 9/30/98 $ - $335.0 $382.7 $(32.6) $685.1
============ ============= ============== =================== ==========
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997
In Millions
<S> <C> <C> <C> <C> <C>
Beginning balance 1/1/97 $ - $335.0 $431.4 $ 7.9 $774.3
Comprehensive income:
Net income 58.7 58.7
Other comprehensive income
Foreign currency translation
adjustment (4.6) (4.6)
----------
Comprehensive income 54.1
----------
Dividends declared (31.8) (31.8)
------------ ------------- -------------- ------------------- ----------
Ending balance 9/30/97 $ - $335.0 $458.3 $ 3.3 $796.6
============ ============= ============== =================== ==========
<FN>
(a) The beginning balance of accumulated other comprehensive income consists
solely of foreign currency translation adjustment for both years.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
---------
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
In Millions
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 25.6 $ 21.1 $73.7 $ 58.7
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 34.9 38.1 105.6 113.8
Deferred income taxes 7.9 6.1 20.8 14.3
Other (includes working capital) (10.3) (14.9) (22.6) (29.9)
------------- ------------ ----------- -------------
Net cash provided by operating activities 58.1 50.4 177.5 156.9
INVESTING ACTIVITIES
Additions to operating lease assets and facilities:
Railcar and support facilities (98.4) (71.8) (298.2) (215.0)
Tank storage terminals and pipelines (16.7) (17.2) (43.0) (47.7)
Investments in affiliated companies and other - (1.7) - (2.6)
------------- ------------ ----------- -------------
Capital additions (115.1) (90.7) (341.2) (265.3)
Proceeds from asset dispositions 215.3 170.8 230.5 176.1
------------- ------------ ----------- -------------
Net cash provided by (used in) investing activities 100.2 80.1 (110.7) (89.2)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 36.0 - 36.0 -
Repayment of long-term debt (25.2) (23.4) (52.2) (98.6)
Net (decrease) increase in short-term debt (157.1) (104.7) 2.0 57.4
Repayment of capital lease obligations (3.1) (2.9) (8.4) (7.7)
Cash dividends paid to GATX Corporation (13.4) (11.0) (38.2) (31.8)
Net decrease in amount due from GATX Corporation 6.5 13.5 0.3 7.0
------------- ------------ ----------- -------------
Net cash used in financing activities (156.3) (128.5) (60.5) (73.7)
------------- ------------ ----------- -------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 2.0 $ 2.0 $ 6.3 $ (6.0)
============= ============ =========== =============
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS
COMPARISON OF FIRST NINE MONTHS OF 1998 TO FIRST NINE MONTHS OF 1997
GENERAL
General American Transportation Corporation's ("GATC" or "Company") net income
for the first nine months of 1998 was a record $74 million, 26% higher than the
first nine months of 1997. Transportation benefitted from more railcars on lease
and higher rates. Terminals' net income increase reflected the market
improvement for storage, rate increases on contract renewals, and benefits from
the restructuring taken in the fourth quarter of last year.
Net cash provided by operating activities of $178 million for the first nine
months of 1998 was $21 million higher than last year.
Capital additions for the first nine months of 1998 totaled $341 million, $76
million more than the comparable 1997 period. While Terminals' year-to-date
capital investments were $5 million lower than last year, Transportation
invested $81 million more. Throughout North America, Transportation purchased
almost 5,100 new and existing railcars for the first three quarters, compared to
about 3,400 last year. Full year capital spending for GATC is expected to be
over $450 million, based primarily on Transportation's railcar additions. This
forecast is subject to possible material change depending on domestic and
international market conditions and acquisition opportunities.
GATC has a $350 million and C$50 million revolving credit facility. As of
September 30, 1998, GATC had $25 million of commercial paper outstanding,
resulting in unused committed lines of credit of $325 million. Under a $650
million shelf registration for pass-through certificates and debt securities,
$100 million of notes and $107 million of pass-through certificates have been
issued.
In September 1998, GATC completed a sale-leaseback of $208 million of railcars,
$159 million of which was in the form of pass-through certificates. The lease
obligations are non-recourse in nature in that they rely on the underlying cash
flows from the subleasing of the cars. To effect the nonrecourse transaction,
Transportation sold 3,380 recently delivered railcars to a special purpose
corporation which has been funded with a leveraged lease. The railcars will
continue to be managed by Transportation.
Year 2000 Readiness Disclosure
GATC continues to address what is commonly referred to as the Year 2000 problem.
GATC has completed an assessment of its critical information systems and is
modifying and replacing its in-house developed software as well as upgrading its
vendor-supported software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. Additionally, other less
critical information systems have been reviewed and corrective action is being
taken where indicated.
GATC also is reviewing its operating assets to determine any exposure to
time-sensitive controls which may be embedded in the equipment. These situations
are being assessed on an ongoing basis and replacement or remediation is being
undertaken where indicated.
GATC is inquiring of both customers and vendors where the Company's information
systems interface directly with third parties to ensure that the interfaces and
the third party systems are or will be Year 2000 compliant. Where considered
appropriate, the Company is working directly with such third parties to test or
remediate such systems. The Company also interacts electronically with certain
external entities but has no means of ensuring that they will be Year 2000
ready. Additionally, GATC has been inquiring of key vendors in an effort to
establish the ability of the provider to deliver product or services on a timely
basis in the year 2000.
7
<PAGE>
GATC believes it has an effective program in place to resolve the Year 2000
issue in a timely manner and to minimize the Company's exposure. If these steps
were not taken, or are not completed timely, the Year 2000 issue could have a
significant impact on the operations of the Company. The project is estimated to
be completed during 1999, which is prior to any anticipated impact on its
operating systems. Based on the progress and results of the Year 2000 project
thus far, GATC believes that the Year 2000 issue should not pose significant
operational problems. The total Year 2000 project cost is estimated to be
immaterial to GATC's results of operations.
Other Matters
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is required
to be adopted in years beginning after June 15, 1999. GATC, which utilizes
fundamental derivatives to hedge changes in interest rates and foreign
currencies, expects to adopt the new Statement effective January 1, 2000. The
Statement will require GATC to recognize all derivatives on the balance sheet at
fair value. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. GATC is reviewing the
potential effect of Statement 133 on the earnings and financial position.
As previously noted, GATC reported record results for the third quarter and
year-to-date 1998. Many economists believe that the U.S. economy is entering a
recessionary environment, but GATC's quarterly results reported herein have not
been impacted to any significant extent. However, should a recession develop,
GATC's prospective results would not be immune from the effects thereof if there
were significant changes in demand for its services or assets provided.
Management's discussion includes statements which may constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. This information may involve risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements. Although the company believes that the expectations
reflected in such forward-looking statements are based on reasonable
assumptions, such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected. These risks and
uncertainties include, but are not limited to, unanticipated changes in the
markets served by GATC such as the petroleum and chemical industries.
8
<PAGE>
RESULTS OF OPERATIONS
Following is a discussion of the operating results of GATC's business segments.
RAILCAR LEASING AND MANAGEMENT (TRANSPORTATION)
- --------------------------------------------------------------------------------
Nine Months Ended
(In Millions) September 30
------------------------------
1998 1997 Change
----------- ------------ ----------------------
Gross Income $383.2 $355.2 $28.0 8%
Net Income $ 59.9 $ 55.3 $ 4.6 8%
- --------------------------------------------------------------------------------
Transportation's gross income for the first nine months of 1998 increased 8%
from the comparable prior year reflecting new car additions and fleet
acquisitions. Approximately 81,000 tank and freight cars were on lease
throughout North America at September 30, 1998, compared to 75,200 railcars a
year ago. With a total North American fleet of 84,600 railcars, utilization
ended the period at 96%, up slightly from 95% a year ago.
Net income increased 8% from the first nine months of 1997 primarily due to the
same reasons that revenues increased as well as equity earnings from a European
rail joint venture established in the fourth quarter of 1997. Net income
approximated 16% of gross income, a slight improvement over the prior year.
While all major cost areas rose, as a percentage of revenue asset ownership
(depreciation, interest, and lease expenses) and fleet repair costs were
generally consistent with the prior year while selling, general and
administrative expenses were slightly higher.
9
<PAGE>
TERMINALS AND PIPELINES (TERMINALS)
- --------------------------------------------------------------------------------
Nine Months Ended
(In Millions) September 30
-----------------------
1998 1997 Change
------- --------- ----------------------
Gross Income $215.4 $219.4 $(4.0) (2)%
Net Income $ 13.8 $ 3.4 $10.4 306%
- --------------------------------------------------------------------------------
Terminals' gross income for the first nine months of 1998 was 2% lower than the
prior year primarily due to nonrecurring 1997 revenue from facilities that were
designated for sale or closure as part of last year's restructuring. On a
comparable facility basis, revenues from ongoing operations increased by 5% as
the improved market for petroleum storage provided an opportunity for favorable
pricing on new contracts as well as on contract renewals. Throughput of
petroleum and chemical products, adjusted to reflect those facilities that are
considered ongoing, was approximately 430 million barrels for the first nine
months of 1998, up approximately 3% from last year. Capacity utilization on the
same basis as throughput was 93% at September 30, 1998, in line with a year ago.
Terminals' net income for the first nine months of 1998 was $14 million. The
increase of $10 million from last year was due to improved market conditions,
the impact of the restructuring program implemented during 1997, and
nonrecurring operating contribution from those facilities designated for sale or
closure. Equity earnings were $9 million for the first nine months of 1998,
comparable with the prior year.
10
<PAGE>
COMPARISON OF THIRD QUARTER 1998 TO
THIRD QUARTER 1997
GROSS INCOME
- --------------------------------------------------------------------------------
Three Months Ended
(In Millions) September 30
-------------------
Business Segment 1998 1997 Change
- ------------------------------- ------ ------- ----------------
Railcar Leasing and Management $129.4 $120.3 $9.1 8%
Terminals and Pipelines 74.0 73.2 .8 1
- --------------------------------------------------------------------------------
NET INCOME
- --------------------------------------------------------------------------------
Three Months Ended
(In Millions) September 30
----------------------
Business Segment 1998 1997 Change
- ------------------------------- ------- ------- ---------------
Railcar Leasing and Management $ 20.4 $ 18.8 $1.6 9%
Terminals and Pipelines 5.2 2.3 2.9 126
- --------------------------------------------------------------------------------
Increases in gross income and net income between these quarters for both
segments were principally due to the same reasons as discussed previously in
relation to the nine-month periods.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
General American Transportation Corporation ("GATC") and GATX Terminals
Corporation ("Terminals"), each subsidiaries of GATX Corporation, are two of
nine defendants in the matter of In re New Orleans Train Car leakage Fire
Litigation (No. 87-16374, Civil District Court for the Parish of Orleans), a
class action lawsuit arising out of a September 1987 tank car fire in the City
of New Orleans. The fire was caused by a leak of butadiene from a railcar owned
by GATC. The fire resulted in no deaths or significant injuries, and only minor
property damage, but did result in the overnight evacuation of a number of
residents from the surrounding area. Immediately after the fire a number of
lawsuits (representing approximately 8,000 claims) were brought against a number
of defendants, including GATC and its wholly-owned subsidiary, Terminals. The
suits were ultimately consolidated into a class action brought in the Civil
District Court in the Parish of Orleans (the "Trial Court"). A trial of the
claims of twenty of the plaintiffs resulted in a jury verdict in September 1997
which awarded the twenty plaintiffs approximately $1.9 million in compensatory
damages plus interest from the date of the accident. In addition, the jury
awarded punitive damages totaling $3.4 billion against five of the nine
defendants, including $190 million as to Terminals. Subsequently, the Louisiana
Supreme Court granted an application for a writ filed by one of the defendants,
CSX Transportation, Inc. ("CSX"), and on October 31, 1997, rendered an opinion
that a judgment incorporating the amount of punitive damages could not be
entered until all liability issues relating to all 8,000 class members have been
adjudicated. Having vacated the entire judgment in the process, the Louisiana
Supreme Court thus effectively precluded the defendants from seeking immediate
post-trial review of the finding of liability for punitive and compensatory
damages. Accordingly, the defendants filed a motion asking that the Trial Court
enter a judgment only on liability, and without reference to the amount of
damages, thereby permitting the defendants to seek review of the compensatory
and punitive liability findings but not the amount of damages.
In response to the defendants' motion, on June 18, 1998, the Trial Court entered
a judgment (a) finding each of the defendants responsible for compensatory
damages to the members of the plaintiff class in the specified percentages in
the jury verdict, including twenty percent as to GATC and ten percent to
Terminals, but without specifying the quantum of damages; and (b) finding five
of the defendants, including Terminals, liable for punitive damages in favor of
the plaintiff class. The Trial Court designated the judgment to be final and
appealable. On June 25, 1998, the defendants filed post judgment motions seeking
a new trial or alternatively seeking to overturn the finding of punitive
liability for lack of sufficient evidence. The motions were argued and taken
under advisement. The Trial Court has not yet released any ruling. Once that
ruling is released, GATC and Terminals will evaluate the need for appeal. The
defendants also moved the Trial Court to enter judgment on the compensatory
damages awarded by the jury to the twenty selected plaintiffs. By oral ruling on
July 17, 1998, the trial court denied the defendants' motion. The defendants
filed a writ application with the Fourth Circuit Court of Appeals (the "Fourth
Circuit") on August 17, 1998 requesting that the Fourth Circuit order the Trial
Court to enter judgment on the twenty compensatory damage verdicts. The writ
application was denied without comment on October 16, 1998. The defendants have
filed a writ of application with the Louisiana Supreme Court requesting the
court to clarify that its grant of CSX's writ application to vacate the punitive
damages judgments was not intended to preclude the entry of judgment on the
compensatory damages verdict.
Pursuant to a motion filed on behalf of the plaintiffs, the Trial Court also
ordered the commencement of trials of the claims of other members of the class.
The Defendants filed a writ application with the Fourth Circuit arguing that
additional trials should not start until exhaustion of appeals from the judgment
entered by the Trial Court. That writ was denied; a similar writ application has
been filed with the Louisiana Supreme Court.
12
<PAGE>
During a hearing conducted on September 17, 1998, the Trial Court reaffirmed its
intention to commence additional trials and directed that the plaintiffs and
defendants provide written submissions as to a new case management order which
will control the next trial or series of trials. The Trial Court will initially
address the number of plaintiffs who will appear at each trial and the means of
their selection. At this time it has not been determined when trials will
commence, which parties will be involved, or whether the trial will involve
issues of fault or only issues of causation and damages.
GATC believes that the compensatory damages awarded to the twenty plaintiffs are
excessive, and intends to pursue post-judgment review of the awards, and if
necessary, vigorous appeals of any final judgment. GATC also believes that the
punitive liability judgment is unsupported by law and evidence. Accordingly,
Terminals intends to pursue vigorous appeals of the punitive damages liability
judgment if it survives post-judgment review. In addition, GATC further believes
that the punitive damages awards rendered by the jury are clearly excessive. If
a judgment on the award against Terminals is entered by the trial court,
Terminals intends to pursue post-judgment review in the trial court, and if
necessary, vigorous appeal of that judgment as well.
Although more than 8,000 claims have been made, GATC believes that the damages,
if any, that are awarded to the remaining plaintiffs, whether by the trial or
appellate courts, will, on average, be substantially less than the damages
awarded to the twenty plaintiffs whose claims have been tried.
GATC and its subsidiaries are engaged in various matters of litigation including
but not limited to those matters described above 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 damages, if any,
required to be paid by GATC and its subsidiaries in the discharge of such
liability are not likely to be material to GATC's consolidated financial
position or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) 12 Statement regarding computation of ratios of earnings
to fixed charges. 15
27 Financial Data Schedule for General American Transportation
Corporation for the quarter ended September 30, 1998. Submitted
to the SEC along with the electronic submission of this Quarterly
Report on Form 10-Q.
(b) No reports on Form 8-K were filed during the reporting period.
13
<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: November 13, 1998
14
<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 Nine Months Ended
September 30 September 30
---------------------------- --------------------------------
1998 1997 1998 1997
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Earnings available for fixed charges:
Net income......................................... $25.6 $21.1 $ 73.7 $ 58.7
Add (deduct):
Income taxes................................... 14.9 10.8 39.8 30.8
Equity in net earnings of affiliated
companies, net of distributions received... (2.8) (3.3) (9.4) (7.4)
Interest on indebtedness and amortization of
debt discount and expense.................. 29.4 30.2 86.6 89.7
Amortization of capitalized interest........... 0.3 0.3 0.9 0.9
Portion of rents representative of interest
factor (deemed to be one-third)............ 7.8 6.8 23.3 20.4
----------- ------------ ------------- -------------
Total earnings available for fixed charges......... $75.2 $65.9 $214.9 $193.1
=========== ============ ============= =============
Fixed Charges:
Interest on indebtedness and amortization
Of debt discount and expense.................... $29.4 $30.2 $ 86.6 $ 89.7
Capitalized interest................................ 0.3 0.3 0.8 0.7
Portion of rents representative of interest
factor (deemed to be one-third)................. 7.8 6.8 23.3 20.4
----------- ----------- ------------- -------------
Total fixed charges................................. $37.5 $37.3 $110.7 $110.8
=========== =========== ============= =============
Ratio of earnings to fixed charges (a).................. 2.01x 1.77x 1.94x 1.74x
<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>
15
<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 September 30, 1998. 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 Nine Months Ended
September 30 September 30
---------------------------- --------------------------------
1998 1997 1998 1997
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Earnings available for fixed charges:
Net income......................................... $25.6 $21.1 $ 73.7 $ 58.7
Add (deduct):
Income taxes................................... 14.9 10.8 39.8 30.8
Equity in net earnings of affiliated
companies, net of distributions received... (2.8) (3.3) (9.4) (7.4)
Interest on indebtedness and amortization of
debt discount and expense.................. 29.4 30.2 86.6 89.7
Amortization of capitalized interest........... 0.3 0.3 0.9 0.9
Portion of rents representative of interest
factor (deemed to be one-third)............ 7.8 6.8 23.3 20.4
----------- ------------ ------------- -------------
Total earnings available for fixed charges......... $75.2 $65.9 $214.9 $193.1
=========== ============ ============= =============
Fixed Charges:
Interest on indebtedness and amortization
Of debt discount and expense.................... $29.4 $30.2 $ 86.6 $ 89.7
Capitalized interest................................ 0.3 0.3 0.8 0.7
Portion of rents representative of interest
factor (deemed to be one-third)................. 7.8 6.8 23.3 20.4
----------- ----------- ------------- -------------
Total fixed charges................................. $37.5 $37.3 $110.7 $110.8
=========== =========== ============= =============
Ratio of earnings to fixed charges (a).................. 2.01x 1.77x 1.94x 1.74x
<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
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 20
<SECURITIES> 0
<RECEIVABLES> 63
<ALLOWANCES> 5
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 3663
<DEPRECIATION> 1660
<TOTAL-ASSETS> 2831
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1323<F2>
0
0
<COMMON> 0
<OTHER-SE> 685
<TOTAL-LIABILITY-AND-EQUITY> 2831
<SALES> 0
<TOTAL-REVENUES> 619
<CGS> 0
<TOTAL-COSTS> 267<F3>
<OTHER-EXPENSES> 106<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 103<F5>
<INCOME-TAX> 40
<INCOME-CONTINUING> 74
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74
<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 1,231 million and
Capital Lease Obligations of 92 million. Short-term Debt is not included.
<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 Taxes and Equity in Net Earnings of
Affiliates.
</FN>
</TABLE>
