<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<S> <C>
[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
</TABLE>
<TABLE>
<S> <C>
FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER
MARCH 31, 1999 2-54754
</TABLE>
------------------------
GENERAL AMERICAN TRANSPORTATION CORPORATION
<TABLE>
<S> <C>
INCORPORATED IN THE IRS EMPLOYER IDENTIFICATION NO.
STATE OF NEW YORK 36-2827991
500 WEST MONROE STREET
CHICAGO, IL 60661-3676
(312) 621-6200
</TABLE>
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, 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------
1999 1998
------- -------
<S> <C> <C>
GROSS INCOME $ 215.9 $ 207.4
COSTS AND EXPENSES
Operating expenses 94.7 93.5
Provision for depreciation and amortization 35.6 35.2
Interest 26.3 28.3
Selling, general and administrative 18.0 18.8
------- -------
174.6 175.8
------- -------
INCOME BEFORE INCOME TAXES AND
SHARE OF AFFILIATES' EARNINGS 41.3 31.6
INCOME TAXES 16.6 11.9
------- -------
INCOME BEFORE SHARE OF
AFFILIATES' EARNINGS 24.7 19.7
SHARE OF AFFILIATES' EARNINGS 4.6 4.0
------- -------
NET INCOME $ 29.3 $ 23.7
======= =======
</TABLE>
Note - The consolidated balance sheet at December 31, 1998 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, 1999 are not
necessarily indicative of the results that may be achieved for the entire year
ending December 31, 1999. Certain amounts in 1998 have been reclassified to
conform to the current presentation.
1
<PAGE> 3
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
-------- -----------
<S> <C> <C>
ASSETS (Unaudited)
CASH AND CASH EQUIVALENTS $ 23.4 $ 21.2
TRADE RECEIVABLES - NET 60.1 59.8
OPERATING LEASE ASSETS AND FACILITIES
Railcars and service facilities 2,656.0 2,567.1
Tank storage terminals and pipelines 1,183.3 1,168.2
-------- --------
3,839.3 3,735.3
Less - Allowance for depreciation (1,700.1) (1,669.3)
-------- --------
2,139.2 2,066.0
DUE FROM GATX CORPORATION 397.5 389.1
INVESTMENTS IN AFFILIATED COMPANIES 262.4 212.3
OTHER ASSETS 123.7 148.7
-------- --------
$3,006.3 $2,897.1
======== ========
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDER'S EQUITY
ACCOUNTS PAYABLE $ 120.9 $ 146.7
ACCRUED EXPENSES 57.1 49.6
DEBT
Short-term debt 265.6 145.7
Long-term debt:
Recourse 1,070.7 1,093.5
Nonrecourse 70.9 70.5
Capital lease obligations 85.1 91.3
-------- --------
1,492.3 1,401.0
DEFERRED INCOME TAXES 348.9 347.9
OTHER DEFERRED ITEMS 269.3 249.0
-------- --------
TOTAL LIABILITIES AND DEFERRED ITEMS 2,288.5 2,194.2
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 416.7 400.1
Accumulated other comprehensive loss (33.9) (32.2)
-------- --------
TOTAL SHAREHOLDER'S EQUITY 717.8 702.9
-------- --------
$3,006.3 $2,897.1
======== ========
</TABLE>
2
<PAGE> 4
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------
1999 1998
------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 29.3 $ 23.7
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for depreciation and amortization 35.6 35.2
Deferred income taxes 8.8 6.3
Other, including working capital (23.9) (9.2)
------- -------
Net cash provided by operating activities 49.8 56.0
INVESTING ACTIVITIES
Additions to operating lease assets and facilities:
Railcars and service facilities (90.5) (100.1)
Tank storage terminals and pipelines (6.4) (8.3)
Investments in affiliated companies (26.6) --
------- -------
Capital additions (123.5) (108.4)
Proceeds from other asset sales 43.6 5.0
------- -------
Net cash used in investing activities (79.9) (103.4)
FINANCING ACTIVITIES
Repayment of long-term debt and other (60.7) (19.0)
Net increase in short-term debt 119.9 91.0
Repayment of capital lease obligations (5.8) (5.3)
Cash dividends paid to GATX Corporation (12.7) (12.3)
Net increase in amount due from GATX Corporation (8.4) (3.6)
------- -------
Net cash provided by financing activities 32.3 50.8
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 2.2 $ 3.4
======= =======
</TABLE>
3
<PAGE> 5
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------
1999 1998
------- -------
<S> <C> <C>
Net income $ 29.3 $ 23.7
Other comprehensive loss, net of tax:
Foreign currency translation adjustment (1.7) (.4)
------- -------
COMPREHENSIVE INCOME $ 27.6 $ 23.3
======= =======
</TABLE>
4
<PAGE> 6
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
FINANCIAL DATA OF BUSINESS SEGMENTS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
RAILCAR TERMINALS
LEASING AND AND
THREE MONTHS ENDED MARCH 31, 1999 MANAGEMENT PIPELINES OTHER TOTAL
- --------------------------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
PROFITABILITY
Gross income $ 137.6 $ 71.8 $ 6.5 $ 215.9
Interest expense (12.4) (12.7) (1.2) (26.3)
Depreciation and amortization (24.4) (11.2) -- (35.6)
Income before taxes and share
of affiliates' earnings 27.0 9.2 5.1 41.3
Share of affiliates' earnings .8 3.8 -- 4.6
Net income 17.5 8.5 3.3 29.3
ITEMS AFFECTING CASH FLOW
Net cash provided by (used in)
operating activities 42.1 (0.3) 8.0 49.8
Capital additions 102.2 21.3 -- 123.5
FINANCIAL POSITION
Identifiable assets 1,617.6 985.7 403.0 3,006.3
THREE MONTHS ENDED MARCH 31, 1998
PROFITABILITY
Gross income $ 130.5 $ 70.0 $ 6.9 $ 207.4
Interest expense (13.5) (13.3) (1.5) (28.3)
Depreciation and amortization (24.1) (11.1) -- (35.2)
Income before taxes and
share of affiliates' earnings 24.8 1.3 5.5 31.6
Share of affiliates' earnings .5 3.5 -- 4.0
Net income 15.9 4.3 3.5 23.7
ITEMS AFFECTING CASH FLOW
Net cash provided by
operating activities 40.3 5.6 10.1 56.0
Capital additions 100.1 8.3 -- 108.4
FINANCIAL POSITION AT DECEMBER 31, 1998
Identifiable assets 1,539.9 958.4 398.8 2,897.1
</TABLE>
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF FIRST THREE MONTHS OF 1999
TO FIRST THREE MONTHS OF 1998
General American Transportation Corporation's (GATC) net income for the first
quarter of 1999 was $29 million compared to $24 million for the first of quarter
1998. Gross income of $216 million increased by $9 million from the prior year
quarter, while net income was $6 million higher. General American benefited from
more railcars on lease and revenues at Terminals increased due to improved
market conditions and a gain from the sale of rights it owned along the Central
Florida Pipeline that will be used to increase fiber optic capacity.
Net cash provided by operating activities for the first quarter of 1999 was $50
million, a $6 million decrease from last year's quarter, due to the timing of
working capital requirements.
Capital additions for the quarter totaled $124 million, an increase of $15
million from the first quarter of 1998. General American invested $102 million,
comparable to the first quarter 1998, in its railcar fleet, facilities, and
international operations including affiliates. Terminals' investment of $21
million increased $13 million over the prior year quarter primarily due to
investments in joint ventures. Full year capital spending is expected to be
approximately $500 million. This projection may change significantly depending
on market conditions and opportunities to acquire desirable assets. Internally
generated cash flow and GATC's external recourse and nonrecourse financing
sources will fund capital additions.
GATC had unused committed lines of credit of $259 million at March 31, 1999.
Additional financing needs were met by cash flow from operations and short-term
debt. GATC has a $650 million shelf registration for pass-through certificates
and debt securities of which $100 million of notes and $106 million of
pass-through certificates have been issued through March 31, 1999. Subsequent to
March 31, 1999, GATC issued $120 million of 10-year term notes. GATC has
guaranteed a two-year $150 million credit facility for a Terminals affiliate.
Exposure to GATC is mitigated by, among other things, a third party cross
guaranty.
YEAR 2000 READINESS DISCLOSURE
GATC continues to address what is commonly referred to as the Year 2000 problem.
GATC has completed the assessment phase of reviewing its critical information
systems for Year 2000 compliance. Efforts are well underway in both 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. Several remediation
projects and systems replacements are already in place, and efforts are
continuing on others. Most projects should be completed by mid-year 1999.
Additionally, other less critical information systems have been reviewed and
corrective action is being taken where indicated.
6
<PAGE> 8
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 in
process where there is indicated need.
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.
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. However, in the event that the company's efforts have not
addressed all potential systems problems, contingency plans are being developed
to enable business operations to continue. The total Year 2000 project cost is
estimated to not exceed $7 million. These costs have not and are not expected to
have a material adverse impact on the company's financial position, results of
operations or cash flows.
OTHER MATTERS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"),
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 SFAS No. 133 effective January 1, 2000.
This new accounting standard will require that all derivatives be recorded 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 the 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.
Management is currently assessing the impact that the adoption of SFAS No. 133
will have on the company's financial position, results of operations, and cash
flows.
Management's discussion includes statements that 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, chemical and rail industries.
7
<PAGE> 9
RESULTS OF OPERATIONS
Following is a discussion of the operating results of GATC's business segments:
RAILCAR LEASING AND MANAGEMENT (GENERAL AMERICAN)
- --------------------------------------------------------------------------------
General American's gross income for the first three months of 1999 increased 5%
from the comparable prior year period due to a larger active fleet.
Approximately 81,900 tank and freight cars were on lease throughout North
America at March 31, 1999, compared to 78,900 railcars a year ago. With a total
North American fleet of 86,500 railcars, utilization at the end of the period
was 95%, down from 96% a year ago.
Net income increased 10% from the first quarter of 1998 primarily due to a
larger fleet and repair costs in line with the prior year. Net income
approximated 13% of revenue, a slight improvement over the prior year. As a
percentage of gross income, asset ownership costs (depreciation, interest, and
lease expenses) decreased slightly from the prior year while SG&A expenses were
slightly higher.
TERMINALS AND PIPELINES (TERMINALS)
- --------------------------------------------------------------------------------
Terminals' gross income of $72 million increased $2 million from the prior year
quarter. Comparisons between periods are affected by locations sold after the
first quarter of 1998. Gross income from ongoing operations increased 16% over
the prior year. Improved market conditions and a gain from the sale of rights it
owned along the Central Florida Pipeline that will be used to increase fiber
optic capacity contributed positively to revenues in 1999. Throughput of
petroleum and chemical products was 111 million barrels for ongoing operations
during the first quarter of 1999, down from 118 million barrels for the same
quarter last year. Capacity utilization was 94% at the end of the first quarter
compared to 93% in the prior year period.
Terminals' net income of $9 million was $4 million higher than last year's first
quarter primarily due to increased revenues and benefits from the 1997 strategic
realignment.
As part of its 1997 strategic realignment, Terminals divested certain domestic
and foreign terminal locations in the first quarter of 1999. Also in the first
quarter of 1999, Terminals invested in a joint venture distillate blending and
distribution business.
OTHER
- --------------------------------------------------------------------------------
All financing activities considered non-operational to General American have
been isolated in the Other segment. Net income of $3 million is comparable to
the prior period quarter.
8
<PAGE> 10
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 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 (Trial Court). A trial of the claims of
twenty of the plaintiffs (Phase I) 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. On October 31, 1997, the
Louisiana Supreme Court held 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.
On February 24, 1999, the Louisiana Supreme Court, among other things, (a)
granted a writ requiring entry of a judgment on the Phase I compensatory
damages, and (b) authorized the Trial Court to enter a judgment awarding a
specific amount of punitive damages to the twenty Phase I plaintiffs (without
specifying the method of allocation of such damages) in order that there could
be an immediate review of the judgment.
On March 31, 1999, the Trial Court entered a judgment awarding punitive damages
against each of the five punitive defendants, including Terminals in favor of
each of the twenty claimants whose cases were tried in September of 1997. An
aggregate punitive judgment as to Terminals of approximately $472,220 was
allocated among the twenty claimants in proportion to the ratio that each
plaintiff's compensatory award bears to the total compensatory award in the
Phase I trial.
On April 19, 1999, a Motion (and supporting memorandum) for Judgment
Notwithstanding the Verdict, or in the alternative for New Trial and or
Remittitur regarding Punitive Damages was filed with the Trial Court. The Motion
asked for similar relief as to the award of compensatory damages as to both
Terminals and GATC.
The trial to determine the damages, if any, suffered by the second set of twenty
claimants is scheduled to commence on May 24, 1999. Two weeks after the
conclusion of this trial, a random selection of an additional group of twenty
plaintiffs will be made in order that the trial of their damage claims may
commence thereafter.
GATC believes that the compensatory damages awarded to the 20 plaintiffs in the
Phase I trial are excessive, and intends to pursue post-judgment review of the
awards, and if necessary, vigorous
9
<PAGE> 11
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 that the damages awarded
to the 20 plaintiffs whose claims have been tried.
GATX Terminals Corporation was served with two Complaints and Notice of
Opportunity for a Hearing by the United States Environmental Protection Agency,
Region 6, with respect to alleged violations of the Clean Air Act at each of
Terminals' Pasedena, Texas, and Galena Park, Texas, terminals. The civil
penalties assessed under the Complaints are less than $300,000 in the aggregate.
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.
10
<PAGE> 12
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K PAGE
-----
<S> <C> <C>
(a) 10 Form of 6 3/4% Note Due March 1, 2006 filed in connection
with, and incorporated by reference into, the Registration
Statement on Form S-3 (File No. 33-64697) of General American
Transportation Corporation, declared effective on December 7,
1995. Submitted to the SEC along with the electronic submission
of this report on Form 10-Q.
12 Statement regarding computation of ratios of earnings to fixed charges
27 Financial Data Schedule for GATC for the quarter ended March 31,
1999. 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>
11
<PAGE> 13
SIGNATURE
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)
Date: May 12, 1999
12
<PAGE> 1
If the registered owner of this Note (as indicated below) is The Depository
Trust Company (the "Depository") or a nominee of the Depository, this Note is a
global Note and the following legend is applicable: Unless this certificate is
presented by an authorized representative of The Depository Trust Company (55
Water Street, New York, New York) to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of CEDE & CO., or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, CEDE & CO., has
an interest herein.
No.1 $120,000,000
GENERAL AMERICAN TRANSPORTATION CORPORATION
6 3/4% Note Due May 1, 2009
CUSIP 368836 AF 9
GENERAL AMERICAN TRANSPORTATION CORPORATION, a New York corporation
(herein called the "Company"), for value received, hereby promises to pay to
CEDE & CO. or registered assigns, the principal sum of One Hundred Twenty
Million Dollars ($120,000,000) on May 1, 2009 (the "Maturity Date") at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, State of New York, and such other location or locations as may be provided
for pursuant to the Indenture referred to on the reverse hereof, and to pay
interest, semiannually on May 1 and November 1 of each year and on the Maturity
Date (each an "Interest Payment Date"), commencing on November 1, 1999, on said
principal sum at the rate of 6 3/4% (six and three-quarters per centum) per
annum from May 3, 1999 until the principal amount hereof becomes due and
payable; provided, however, that any payment of principal or interest to be made
on an Interest Payment Date or on the Maturity Date which is not a Business Day
shall be made on the next succeeding Business Day with the same force and effect
as if made on the Interest Payment Date or on the Maturity Date and no
additional interest shall accrue as a result of such delayed payment. The
interest so payable, and punctually paid or duly provided for, on any May 1 or
November 1 will be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on the April 15 or
October 15 (whether or not a Business Day) next preceding such May 1 or November
1, except that the first payment of interest on a Note originally issued between
a regular record date and an Interest Payment Date will be made on the Interest
Payment Date following the next succeeding regular record date to the registered
owner on such regular record date. Payment of the principal of this Note due at
maturity will be paid in immediately available funds to the registered holder
<PAGE> 2
hereof upon presentation of this Note. Payment of interest on this Note due on
any other Interest Payment Date will be made by check mailed to the address of
the person entitled thereto as such address shall appear on the books of the
office or agency maintained by the Company where the Notes may be presented for
registration of transfer or for exchange. Any interest not punctually paid or
duly provided for shall be payable as provided in the Indenture.
Except as otherwise provided in Section 2.15 of the Indenture, this
Note may be transferred, in whole but not in part, only to another nominee of
the Depository or to a successor Depository or to a nominee of such successor
Depository.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof and such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by or
on behalf of the Trustee under the Indenture referred to on the reverse hereof.
* * *
-2-
<PAGE> 3
IN WITNESS WHEREOF, General American Transportation Corporation has
caused this instrument to be signed in its name by its duly authorized officers,
and has caused a facsimile of its corporate seal to be affixed hereunto or
imprinted hereon.
Dated: May 3, 1999 GENERAL AMERICAN
TRANSPORTATION CORPORATION
By
-------------------------
Title
----------------------
(Corporate Seal)
By
-------------------------
Title
----------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series described herein and referred to in
the within-mentioned Indenture.
The Chase Manhattan Bank,
as Trustee
By:
---------------------------
Authorized Officer
-3-
<PAGE> 4
[REVERSE SIDE OF NOTE]
GENERAL AMERICAN TRANSPORTATION CORPORATION
6 3/4% Note Due May 1, 2009
This Note is one of a duly authorized issue of debentures, notes, bonds
or other obligations of the Company (herein called the "Securities"), of the
series hereinafter specified, all issued or to be issued under and pursuant to
an indenture, dated as of October 1, 1987, duly executed and delivered by the
Company to The Chase Manhattan Bank, Trustee (hereinafter called the "Trustee"),
as supplemented by a First Supplemental Indenture, dated as of May 15, 1988, a
Second Supplemental Indenture, dated as of March 15, 1990, a Third Supplemental
Indenture, dated as of June 15, 1990, and a Fourth Supplemental Indenture, dated
as of January 15, 1996, each between the Company and the Trustee (as so
supplemented, the "Indenture") to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Securities. The Securities may be
issued in one or more series, which different series may be issued in various
aggregate principal amounts, may mature at different times, may bear interest,
if any, at different rates, may be subject to different redemption provisions,
if any, may be subject to different sinking, purchase or analogous funds, if
any, and may otherwise vary as in the Indenture provided. This Note is one of a
series designated as "6 3/4% Notes Due May 1, 2009" of the Company, limited in
aggregate principal amount to $120,000,000. References herein to "Note" or
"Notes" shall mean the Notes of said 6 3/4% Notes Due May 1, 2009.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
The Notes are not subject to any sinking fund.
The Notes will be redeemable in whole or in part at any time and from
time to time, at the option of the Company, at a redemption price equal to the
greater of (i) 100% of the principal amount of the Notes to be redeemed or (ii)
the sum of the present values of the remaining scheduled payments of principal
and interest thereon (exclusive of interest accrued to the date of redemption)
discounted to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the then current Treasury Rate plus
20 basis points, plus, in each case, accrued and unpaid interest on the
principal amount being redeemed to the date of redemption.
"Treasury Rate" means, for any redemption date, (i) the yield, under
the heading which represents the average for the immediately preceding week,
appearing in the most recently
<PAGE> 5
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption "Treasury
Constant Maturities," for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the Remaining Life,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such redemption date. The Treasury
Rate shall be calculated on the third Business Day preceding the redemption
date.
"Business Day" means any day other than a Saturday or Sunday and other
than a day on which banking institutions in Chicago, Illinois, or New York, New
York, are authorized or obligated by law or executive order to close.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term ("Remaining Life") of the Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Notes.
"Comparable Treasury Price" means the average of two Reference Treasury
Dealer Quotations for such redemption date.
"Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by the Trustee after consultation with the Company.
"Reference Treasury Dealer" means each of Salomon Smith Barney Inc.,
and J.P. Morgan Securities Inc. and their successors; provided, however, that if
any of the foregoing or their successors shall cease to be a primary U.S.
Government securities dealer (a "Primary Treasury Dealer"), the Company will
substitute for it another nationally recognized investment bank that is a
Primary Treasury Dealer.
"Reference Treasury Dealer Quotation" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Independent Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third Business Day preceding such redemption
date.
<PAGE> 6
The Company will mail notice of a redemption to holders of Notes by
first-class mail at least 30 and not more than 60 days prior to the date fixed
for redemption. If fewer than all of the Notes are to be redeemed, the Trustee
will select, not more than 60 days prior to the redemption date, the particular
Notes or portions thereof for redemption from the outstanding Notes not
previously called by such method as the Trustee deems fair and appropriate.
In case an Event of Default, as defined in the Indenture, with respect
to the Notes shall have occurred and be continuing, the principal hereof and any
accrued interest hereon may be declared, and upon such declaration shall become,
due and payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the written consent of the holders of a majority in principal
amount of the Securities at the time outstanding of all series to be affected
(with each series voting as a class), evidenced as in the Indenture provided, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or any supplemental
indenture or modifying in any manner the rights of the holders of the Securities
of each such series; provided, however, that no such supplemental indenture
shall (i) change the maturity of any Security or the principal amount thereof,
the rate of or the time of payment of any interest on any Security, reduce any
premium payable upon the redemption thereof, waive a Default in the payment of
the principal of or interest on any Security, make any Security payable in money
other than that stated therein, make any change in respect of the percentage of
Securities of any series, the consent of the holders of which is required to
waive an existing Default, or impair or affect the right of any holder to bring
suit for the payment thereof, or (ii) reduce the aforesaid percentage of
Securities of any series, the consent of the holders of which is required for
any such supplemental indenture, without the consent of the holder of each
Security affected. It is also provided in the Indenture that, with respect to
certain Defaults regarding the Securities of any series, the holders of a
majority in aggregate principal amount of the Securities of such series at the
time outstanding may on behalf of the holders of all of the Securities of such
series waive any past Default and its consequences, except a Default in the
payment of the principal of or interest on any of the Securities. Any such
consent or waiver by the holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Note and of any Note which may be issued upon the
registration for transfer hereof or in exchange or substitution herefor,
irrespective of whether or not any notation or such consent or waiver is made
upon this Note or such other Note.
No reference herein to the Indenture and no reference to any provision
of this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Note at the place, at the respective times, and at the rate
herein prescribed.
<PAGE> 7
The Notes are issuable in registered form without coupons in the
minimum denomination of $1,000 and integral multiples thereof. Notes may be
exchanged by the holder hereof without charge except for any tax or other
governmental charge imposed in connection therewith, for a like aggregate
principal amount of Notes of other authorized denominations in the manner and
subject to the limitations provided in the Indenture at the office or agency to
be maintained by the Company in The City of New York, State of New York, or at
such other location or locations as may be provided for in the Indenture.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in The City of New York, State of New York, one
or more new Notes of authorized denominations, for an equal aggregate principal
amount, will be issued to the transferee in exchange therefor subject to the
limitations provided in the Indenture, without charge except for any tax or
other governmental charge imposed in connection therewith.
Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any paying agent and the security registrar may deem and
treat the registered holder hereof as the absolute owner of this Note (whether
or not this Note shall be overdue and notwithstanding any notation of ownership
or other writing hereon), for the purpose of receiving payment of, or on account
of, the principal hereof, and, subject to the provisions on the face hereof,
interest hereon, and for all other purposes, and neither the Company nor the
Trustee nor any paying agent nor any security registrar shall be affected by any
notice to the contrary.
No recourse shall be had for the payment of the principal of or
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture supplemental
thereto, against any incorporator, stockholder, officer, director or employee,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
All capitalized terms used in this Note which are defined in the
Indenture shall have the meanings assigned to them therein.
This Note shall be governed and construed in accordance with the laws
of the State of New York.
<PAGE> 8
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS
INCLUDING POSTAL ZIP CODE OF ASSIGNEE
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing _______________________________ attorney to transfer said Note on the
books of the Company, with full power of substitution in the premises.
Dated:
---------------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN INSTRUMENT IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 12
GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT FOR RATIOS)
<TABLE>
<CAPTION>
Three Months Ended
March 31 Year Ended
------------------ December 31
1999 1998 1998
------- ------- -------
(Unaudited)
<S> <C> <C> <C>
Earnings available for fixed charges:
Net income $29.3 $23.7 $99.9
Add (deduct):
Income taxes 16.6 11.9 54.3
Share of affiliates' earnings, net of
distributions received (4.6) (4.0) (10.7)
Interest on indebtedness and amortization
of debt discount and expense 26.3 28.3 112.8
Amortization of capitalized interest 0.4 0.3 1.4
Portion of rents representative of interest
factor (deemed to be one-third) 9.3 7.7 33.7
------- ------- -------
Total earnings available for fixed charges $77.3 $67.9 $291.4
======= ======= =======
Fixed Charges:
Interest on indebtedness and amortization
of debt discount and expense $26.3 $28.3 $112.8
Capitalized interest 0.2 0.3 1.3
Portion of rents representative of interest
factor (deemed to be one-third) 9.3 7.7 33.7
------- ------- -------
Total fixed charges $35.8 $36.3 $147.8
======= ======= =======
Ratio of earnings to fixed charges (a) 2.16x 1.87x 1.97x
</TABLE>
- -----------
(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 share
of affiliates' earnings, net of distributions received.
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 65
<ALLOWANCES> 5
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,839
<DEPRECIATION> 1,700
<TOTAL-ASSETS> 3,006
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1156<F2>
0
0
<COMMON> 0
<OTHER-SE> 718
<TOTAL-LIABILITY-AND-EQUITY> 3,006
<SALES> 0
<TOTAL-REVENUES> 216
<CGS> 0
<TOTAL-COSTS> 95<F3>
<OTHER-EXPENSES> 36<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26
<INCOME-PRETAX> 41<F5>
<INCOME-TAX> 17
<INCOME-CONTINUING> 29
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Not applicable because GATC has an unclassified balance sheet.
<F2>This value consists of three components: Recourse Long-term debt of 1,071
million, Nonrecourse Long-term Debt of 71 million, and Capital Lease
Obligations of 85 million. Short-term Debt is not include 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 Share of Affiliates'
Earnings.
</FN>
</TABLE>
