SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION
--- 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
--- TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Year Ended Commission File Number
December 31, 1993 I-8319
GATX CAPITAL CORPORATION
Incorporated in the IRS Employer Identification Number
State of Delaware 94-1661392
Four Embarcadero Center
San Francisco, CA 94111
(415) 955-3200
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
and (2) has been subject to such filing requirements for the past
90 days.
Yes X NO
--- ---
All Common Stock of Registrant is held by GATX Financial
Services, Inc. (a wholly-owned subsidiary of GATX Corporation).
As of March 18, 1994, Registrant has outstanding 1,031,250 shares
of $1 par value Common Stock.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING
THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
Registration Statement on Form S-1 Part IV Item 14(a)3
filed with the Commission on
December 23, 1981 (file No. 2-75467)
Amendment No. 1 to Form S-1 filed Part IV Item 14(a)3
with the Commission on
February 23, 1982
Amendment No. 2 to Form S-1 filed Part IV Item 14(a)3
with the Commission on March 2, 1982
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1982 filed with the
Commission on March 28, 1983
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1985 filed with the
Commission on March 24, 1986
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1989 filed with the
Commission on March 30, 1990
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1990 filed with the
Commission on March 30, 1991
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1992 filed with the
Commission on March 31, 1993
<PAGE>
PART I
Item 1. Business
The principal business of GATX Capital Corporation (the "Company")
is to provide asset-based financing of transportation and
industrial equipment through capital leases, secured equipment
loans, and operating leases. The Company also provides related
financial services which include the arrangement of lease
transactions for investment by other lessors and the management of
lease portfolios for third parties. GATX Capital Corporation is a
wholly-owned subsidiary of GATX Corporation.
GATX Capital Corporation, a Delaware corporation, was founded in
1968 as GATX Leasing Corporation to own, sell and finance equipment
independent of GATX Corporation's other specialized equipment
activities. During 1968 and 1969, the Company emphasized the
leasing of commercial aircraft. Since that time, however, it has
developed a portfolio of earning assets diversified across a wide
range of industries. At December 31, 1993, the Company had
approximately 750 financing contracts with 509 customers,
aggregating $1.3 billion of investments before reserves. Of this
amount, 47% consisted of investments associated with commercial jet
aircraft, 15% railroad equipment, 8% real estate, 8% golf courses,
7% warehouse and production equipment, 6% marine equipment and 9%
other equipment.
Although GATX Capital's original business purpose was to invest in
tax-oriented capital equipment financing leases, the equipment
knowledge and financial expertise derived from these activities
have enabled the Company to pursue other financial services
objectives as well. In addition to pursuing financing leases,
operating leases and equipment secured loans for its own account,
GATX Capital also arranges such investment opportunities for
others. The Company also develops and manages lease portfolios on
behalf of other owners. In these underwriting and management
activities, the Company seeks fee income and residual participation
income.
Item 2. Properties
The Company leases all of its office space and owns no materially
important physical properties other than those related directly to
its investment portfolio. The Company's principal offices are
rented under a twelve year lease expiring in 2003.
Item 3. Legal Proceedings
There are no legal proceedings pending to which the Company is a
party, other than routine litigation in the normal course of
business of the Company. The Company believes that the outcome of
any lawsuit or claim which is pending or threatened will not have
a material adverse effect on its financial condition or operations.
Item 4. Submission of Matters to a Vote of Security Holders
Omitted under provisions of the reduced disclosure format.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
Not applicable. All common stock of the Registrant is held by GATX
Financial Services, Inc. (a wholly-owned subsidiary of GATX
Corporation). Information regarding dividends is shown on the
consolidated statement of stockholder's equity included in Item 8.
Item 6. Selected Financial Data
GATX CAPITAL CORPORATION AND SUBSIDIARIES
<TABLE>
Five Year Balance Sheets and Statements of Income
(in thousands)
<CAPTION>
Consolidated Balance Sheets 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 12,950 $ 12,827 $ 16,187
Investments:
Direct financing leases 275,605 243,284 288,599
Leveraged leases 224,953 257,174 223,788
Operating lease equipment -
net of depreciation 254,651 245,302 239,743
Secured loans 226,073 245,971 261,669
Investment in joint ventures 197,720 182,113 187,245
Assets held for sale or lease 56,777 118,496 120,831
Other investments 24,298 53,922 41,549
Investment in future residuals 14,071 16,510 18,582
Less: Allowance for possible
losses (88,193) (101,323) (71,864)
---------- ---------- ----------
Total investments 1,185,955 1,261,444 1,310,142
Due from (to) GATX Corporation 42,638 35,654 17,469
Intangible assets 4,027 4,192 4,508
Other assets 11,028 16,347 21,563
---------------------------------
Total Assets $1,256,598 $1,330,469 $1,369,869
=================================
Liabilities and Stockholder s Equity
Accrued interest and other
payables $ 58,126 $ 47,718 $ 48,406
Debt financing:
Commercial paper and
bankers acceptances 104,164 144,758 207,868
Notes payable 17,771 53,333 35,118
Obligations under capital
leases 22,442 31,364 34,866
Senior term notes 624,850 596,198 555,324
Subordinated term notes - - -
--------- --------- ---------
Total debt financing 769,227 825,653 833,176
Nonrecourse obligations 68,058 100,822 98,997
Deferred income 62,965 73,551 85,885
Deferred income taxes 11,053 5,789 18,572
Stockholder s equity:
Convertible preferred stock 1,027 1,027 1,027
Common stock 1,031 1,031 1,031
Additional paid-in capital
- convertible preferred stock 123,973 123,973 123,973
- common stock 27,929 27,929 27,929
Reinvested earnings 133,570 123,771 130,968
Equity adjustment from
foreign currency translation (361) (795) (95)
---------------------------------
Total Stockholder's equity 287,169 276,936 284,833
Total Liabilities ---------------------------------
and Stockholder's Equity $1,256,598 $1,330,469 $1,369,869
=================================
</TABLE>
GATX CAPITAL CORPORATION AND SUBSIDIARIES
<TABLE>
Five Year Balance Sheets and Statements of Income
(in thousands)
<CAPTION>
Consolidated Balance Sheets 1990 1989
--------- ---------
<S> <C> <C>
Assets
Cash and cash equivalents $ 23,039 $ 3,753
Investments:
Direct financing leases 313,539 276,448
Leveraged leases 178,453 142,758
Operating lease equipment -
net of depreciation 84,950 69,231
Secured loans 331,073 317,998
Investment in joint ventures 127,490 53,079
Assets held for sale or lease 24,538 6,705
Other investments 43,253 108,128
Investment in future residuals 68,984 76,192
Less: Allowance for possible
losses (59,148) (47,031)
----------------------
Total investments 1,113,132 1,003,508
Due from (to) GATX Corporation (34,327) (40,002)
Intangible assets 5,092 5,035
Other assets 18,710 13,917
----------------------
Total Assets $1,125,646 $ 986,211
======================
Liabilities and Stockholder s Equity
Accrued interest and other
payables $ 47,021 $ 35,787
Debt financing:
Commercial paper and
bankers acceptances 101,624 277,326
Notes payable 148,601 4,871
Obligations under capital
leases 38,121 41,106
Senior term notes 406,632 302,225
Subordinated term notes - 10,000
--------- ---------
Total debt financing 694,978 635,528
Nonrecourse obligations 97,714 52,982
Deferred income 15,548 -
Deferred income taxes 8,980 14,165
Stockholder s equity:
Convertible preferred stock 1,027 1,027
Common stock 1,031 1,031
Additional paid-in capital
- convertible preferred stock 123,973 123,973
- common stock 18,509 18,509
Reinvested earnings 116,726 103,063
Equity adjustment from
foreign currency translation 139 146
----------- ----------
Total Stockholder's Equity 261,405 247,749
----------- ----------
Total Liabilities
and Stockholder's Equity $1,125,646 $ 986,211
=========== ==========
</TABLE>
GATX CAPITAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Income
Year ended December 31, (in thousands) 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Earned income:
Leases $125,457 $115,631 $110,244
Gain on disposition
of equipment 44,434 22,277 50,510
Interest 19,666 21,494 28,133
Investment in joint ventures 8,383 12,445 15,457
Fees 8,680 13,964 7,839
Other 5,777 4,305 9,123
--------- -------- --------
212,397 190,116 221,306
Expenses:
Interest 65,358 71,889 71,374
Selling, general and
administrative 37,458 38,466 41,785
Provision for possible losses 29,000 81,000 38,000
Operating leases 35,277 21,814 16,330
Other 2,418 3,449 2,783
--------- -------- ---------
169,511 216,618 170,272
--------- -------- ---------
Income (Loss) Before Income
Taxes and Cumulative Effect
of Accounting Changes 42,886 (26,502) 51,034
--------- ------------------
Income taxes:
Current income tax expense 14,535 5,911 35,902
Deferred income tax expense
(benefit) 6,826 (15,760) (13,353)
--------- --------- ---------
21,361 (9,849) 22,549
--------- --------- ---------
Income (Loss) Before Cumulative
Effect of Accounting
Changes 21,525 (16,653) 28,485
Cumulative effect of
accounting changes - 9,456 -
---------- --------- ---------
Net Income (Loss) $ 21,525 $ (7,197) $28,485
========== ========== =========
</TABLE>
GATX CAPITAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Income
Year ended December 31, (in thousands) 1990 1989
--------- ---------
<S> <C> <C>
Earned income:
Leases $ 83,782 $ 68,075
Gain on disposition of equipment 47,062 34,485
Interest 30,622 38,024
Investment in joint ventures 3,992 2,551
Fees 13,270 16,268
Other 10,526 10,036
--------- ---------
189,254 169,439
--------- ---------
Expenses:
Interest 57,167 53,609
Selling, general and administrative 39,459 34,770
Provision for possible losses 27,100 20,750
Operating leases 10,895 8,912
Other 337 318
--------- ---------
134,958 118,359
--------- ---------
Income (Loss) Before Income
Taxes and Cumulative Effect
of Accounting Changes 54,296 51,080
--------- ---------
Income taxes:
Current income tax expense 24,048 15,174
Deferred income tax expense (benefit) (1,355) 7,762
--------- ---------
22,693 22,936
--------- ---------
Income (Loss) Before Cumulative
Effect of Accounting Changes 31,603 28,144
Cumulative Effect of Accounting
Changes - -
--------- ---------
Net Income (Loss) $31,603 $ 28,144
========= =========
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operation - Comparison of 1993 to 1992
GATX Capital Corporation reported net income of $21.5 million
for 1993. The increase from the 1992 net loss of $7.2 million was
primarily due to the reduction in the provision for losses, coupled
with an increase in gains on disposition of equipment.
Earned income increased between the years as a result of
increases in lease income and gains on disposition, partially
offset by decreases in fee income and income from joint ventures.
Disposition gains, which do not fall evenly from year to year, were
higher in 1993 due to a $16.6 million gain from an insurance
settlement related to marine equipment and a greater number of
lease terminations in 1993.
Lease income reached an all-time high in 1993 as a result of
the significant amount ($216.0 million) invested in new leases
during the year. Partially offsetting this increase was a decline
in fee income due to a reduced number of transactions in the
international market. The slight decrease in interest income
corresponds to the decrease in the average secured loan balance
between the years.
Income generated by the Company s investments in joint
ventures was lower in 1993 due in part to a revision of residual
estimates at one of the Company s technology finance joint ventures
which resulted in no income recognition in 1993. Also, during 1992,
a $2.7 million gain was recognized on the sale of a real estate
investment.
The decrease in total expenses is primarily due to the $52
million reduction in the loss provision. The large 1992 loss
provision reflected the continued deterioration in older Boeing 747
aircraft, primarily freighters, and real estate areas of the
Company s portfolio. Interest expense declined due to the decrease
in the average outstanding debt balance between years and generally
lower interest rates. These were offset by an increase in operating
lease expense stemming from a full year of aircraft depreciation
and the acquisition and subsequent sale leaseback of a significant
rail operating lease portfolio.
The federal tax rate increase of 1%, which was retroactive to
January 1, 1993, resulted in an increase to tax expense of $2.1
million. Of this, $1.6 million was related to the cumulative effect
of the rate increase on the deferred tax balance as of December 31,
1992.
Total investments before the allowance for possible losses
declined $88.6 million. Much of this decline resulted from real
estate sales and various asset write-downs which are reflected in
the reduction in assets held for sale or lease. Also, in the fourth
quarter of 1993, the Company sold half of its investment in a
cogeneration facility, the remainder of which is now accounted for
using the equity method. The impact of this sale on the Company s
balance sheet was primarily a reduction in other investments of
$36.3 million and a reduction in nonrecourse debt of $37.8 million.
During 1993, the Company entered into a lease transaction for
the sale leaseback of a large portfolio of rail equipment. The net
book value of the equipment is not shown on the balance sheet,
although the cash investment and subsequent disposition proceeds
appear on the cash flow statement. This transaction continues to
produce revenue and has certain associated operating expenses.
The provision for losses was $29.0 million in 1993 reflecting
continued concern for certain aircraft type values. After charges
to the allowance of $44.2 million and recoveries of $2.1 million,
the allowance for possible losses stood at $88.2 million, or 6.92%
of total investments at December 31, 1993.
The outlook for both GATX Capital and the leasing industry in
the near-term is one of cautious optimism. The leasing industry, in
general, has weathered a rough four to five year transition period
due to tax law changes, the weak economy, low interest rates,
weakness in certain equipment sectors and company consolidations.
As the economy slowly recovers, which in turn should increase
capital spending, we see many opportunities for GATX Capital s
leasing activities. At the same time, we expect increased
competition via new entrants to the leasing marketplace.
In the commercial airline industry, there have been some signs
of improvement in cost control. Losses for the worldwide industry,
while still significant, are less than in the two previous years.
Overcapacity in nearly all aircraft types is slowly being absorbed,
however, near-term aircraft demand will remain weak. New aircraft
production rates are being lowered and older aircraft are
forecasted to be retired at higher than historical rates. This
bodes well for aircraft leasing in the long-term.
The prospects for the rail industry and GATX Rail in 1994
appear to be very good. The railroads seem to be preparing for
significant traffic growth, based on accelerating economic activity
and the continuing diversion of domestic highway traffic to
railroad intermodal service. 1993 ended with very high utilization
rates for GATX Rail s operating lease fleet and we expect this
trend to continue in 1994.
The outlook for Golf Capital continues to be guardedly
positive. More equity capital is finding its way into the golf
industry, which in turn will provide a more active secondary market
for golf courses. This will have a positive effect relative to the
courses already financed, but could also have a negative effect if
it results in increased competition for our financing activities.
Certain segments of the commercial real estate marketplace
have shown signs of recovery as more capital is flowing into this
industry, largely from REITs (Real Estate Investment Trusts). This
has had a positive effect on us as evidenced by our increased
liquidation activity in 1993. There has been so much volatility in
the real estate marketplace, however, that drawing a trend
conclusion is difficult.
Results of Operation - Comparison of 1992 to 1991
GATX Capital Corporation reported a net loss of $7.2 million
for 1992. The decrease from 1991 s net income of $28.5 million was
principally due to an increased provision for losses and a decline
in disposition gains.
Earned income decreased between 1991 and 1992 primarily as a
result of a $28.2 million decline in gains from disposition of
equipment. Significantly fewer equipment and aircraft leases
reached termination in 1992 compared with 1991, resulting in the
expected decline in disposition income. The decrease in interest
income between 1991 and 1992 was due in part to an increase in the
number of real estate loans on which income ceased to be recognized
and in part to the early repayment of an aircraft loan in late
1991.
The increase in lease income between years was primarily a
result of the increase in the lease portfolio during the year. Fee
income was higher than 1991 due to the development of new equity
sources in the international market.
The Company s investments in joint ventures yielded $3.0
million less total income in 1992 than in 1991. The Company s share
of income from GATX-Airlog, a joint venture to convert Boeing 747
passenger and combi aircraft into freighters, was down $4.3 million
due to the softening of the aircraft freighter market. The
Company s investment in GATX/CL Air Leasing Cooperative Association
(GATX/CL Air), a commercial aircraft operating lease joint venture,
generated $1.3 million less joint venture income due to lower
operating lease rates and the effect of a change in depreciation
policy discussed below. These decreases were partially offset by
$2.7 million of joint venture income in 1992 from the sale of a
real estate investment.
The decrease in other income was partially due to lower income
from the Company s investment in a cogeneration facility and
partially due to a reduction in income generated from the accretion
of future residuals as certain assets came to normal lease
termination.
Effective July 1, 1992, the Company and its aircraft leasing
joint ventures changed their estimates of the useful lives and
salvage values of aircraft in their operating lease fleet. The
useful lives and salvage values of such aircraft previously varied
depending on a number of factors but are now standardized. The
aircraft are being depreciated on a straight-line basis over their
useful lives, which range from 25-40 years. Depreciation expense
related to aircraft in the operating lease fleet is recorded in
operating lease expense. The change in estimate had the impact of
decreasing joint venture income and increasing operating lease
expense for 1992 by $0.6 million and $1.7 million, respectively.
Total expenses were higher in 1992 compared to 1991
principally as a result of the $43.0 million increase in the
provision for possible losses. The increase in the provision was
due to a $60.0 million additional provision reflecting continuing
deterioration in older Boeing 747 aircraft, primarily freighters,
and real estate. After charges to the allowance of $52.2 million
and recoveries of $0.7 million during 1992, the allowance for
possible losses had a balance of $101.3 million, or 7.4% of total
gross investments at December 31, 1992. Interest expense was
virtually unchanged between years as higher average outstanding
debt balances were offset by lower interest rates. Selling, general
and administrative expenses were down from the prior year due
primarily to a decrease in the average number of employees, lower
outside service expenses, and reduced insurance costs. The increase
in operating lease expense is directly related to the increase in
the average operating lease portfolio between 1991 and 1992.
Liquidity and Capital Resources
The Company derives cash from operations and the proceeds from
its investment portfolio. This cash, supplemented as required by
short-term and long-term borrowing, is invested in activities to
expand the business. Disposition proceeds are a major component of
the annual cash in-flow and can vary significantly between years.
Historically, the largest components of proceeds from disposition
of equipment have been generated from aircraft and rail equipment
disposed at the end of a lease.
Occasionally, significant amounts of cash will be generated
from unusual or nonrecurring transactions. Proceeds from
disposition of other assets in 1993 included $90.6 million from a
single transaction whereby the Company purchased an operating lease
portfolio and subsequently sold it and is leasing it back from the
purchaser. Also, several real estate investments were liquidated in
1993 for total sales proceeds of $32.0 million and a loan repayment
of $7.4 million. During 1992, cash distributed from the Company s
investments in joint ventures included $17.4 million of proceeds
from the sale of a real estate investment. During 1991, the Company
received a prepayment of rent on an operating lease transaction of
$80.0 million in cash.
The Company s backlog was $224.2 million as of December 31,
1993. Of this amount, $151.0 million is scheduled for 1994 and the
remainder for 1995 and beyond.
The Company expects to fund a portion of future growth through
issuance of medium term notes, commercial paper, and bankers
acceptances. The commercial paper and bankers acceptances are
backed by credit agreements from a syndicate of domestic and
international commercial banks. The Company had unused capacity
under these agreements of $185.3 million at December 31, 1993. In
addition, the Company has a $300.0 million shelf registration for
Series C medium term notes, under which none have been issued.
Historically, dividends have been paid on the Company s common
stock at the rate of 50% of net income. During 1992, however,
dividends were not declared due to the net loss generated by the
Company. The 50% rate was resumed in 1993 for earnings before the
effect of the federal tax rate increase and is expected to continue
in the future.
Total debt financing decreased $56.4 million during 1993,
while stockholder s equity increased $10.2 million. As a result,
the Company s debt to equity ratio declined from 2.98:1 in 1992 to
2.68:1 in 1993. The leverage ratio as defined in the Company s
credit agreements remains well within the 4:1 limit. The Company
ensures a stable margin over its cost of funds by managing the
relationship of its fixed and floating rate lease and loan
financing to its fixed and floating rate borrowing. At December 31,
1993, the Company had $51.1 million more floating rate assets than
floating rate debt.
The following table provides additional information with
respect to the Company s liquidity and financial position:
<TABLE>
<CAPTION>
As of and for the year
ended December 31, 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Interest coverage ratio 1.86x 1.17x 1.74x
Allowance for losses as a
percentage of total investments 6.92% 7.43% 5.20%
Charges to allowance for losses
as a percentage of total
investments 3.47% 3.83% 1.96%
Ratio of floating rate exposure
to total capitalization - - 0.82%
Ratio of total debt financing
to stockholder s equity 2.68x 2.98x 2.93x
</TABLE>
<PAGE>
Item 8. Financial Statements and Supplementary Data
GATX CAPITAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Balance Sheets
As of December 31, (in thousands) 1993 1992
--------- ---------
<S> <C> <C>
Assets
Cash and cash equivalents $ 12,950 $12,827
Investments:
Direct financing leases 275,605 243,284
Leveraged leases 224,953 257,174
Operating lease equipment
- net of depreciation 254,651 245,302
Secured loans 226,073 245,971
Investment in joint ventures 197,720 182,113
Assets held for sale or lease 56,777 118,496
Other investments 24,298 53,922
Investment in future residuals 14,071 16,510
Less: Allowance for
possible losses (88,193) (101,323)
---------------------
Total investments 1,185,955 1,261,449
Due from GATX Corporation 42,638 35,654
Intangible assets 4,027 4,192
Other assets 11,028 16,347
----------------------
Total Assets $1,256,598 $1,330,469
======================
Liabilities and Stockholder s Equity
Accrued interest and other
payables $ 58,126 $ 47,718
Debt financing:
Commercial paper and
bankers acceptances 104,164 144,758
Notes payable 17,771 53,333
Obligations under capital
leases 22,442 31,364
Senior term notes 624,850 596,198
--------- ---------
Total debt financing 769,227 825,653
Nonrecourse obligations 68,058 100,822
Deferred income 62,965 73,551
Deferred income taxes 11,053 5,789
Stockholder's equity:
Convertible preferred stock,
par value $1.00 1,027 1,027
Authorized - 4,000,000 shares
Issued and outstanding - 1,027,050
shares in both years
Common stock, par value $1.00 1,031 1,031
Authorized - 2,000,000 shares
Issued and outstanding - 1,031,250
shares in both years
Additional paid-in capital
- convertible preferred stock 123,973 123,973
- common stock 27,929 27,929
Reinvested earnings 133,570 123,771
Equity adjustment from foreign
currency translation (361) (795)
----------------------
Total stockholder s equity 287,169 276,936
----------------------
Total Liabilities and
Stockholder's Equity $1,256,598 $1,330,469
======================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
GATX CAPITAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Income
Year ended December 31, (in thousands) 1993 1992 1991
------------------ ---------
<S> <C> <C> <C>
Earned income:
Leases $125,457 $115,631 $110,244
Gain on disposition of equipment 44,434 22,277 50,510
Interest 19,666 21,494 28,133
Investment in joint ventures 8,383 12,445 15,457
Fees 8,680 13,964 7,839
Other 5,777 4,305 9,123
------------------ ---------
212,397 190,116 221,306
------------------ ---------
Expenses:
Interest 65,358 71,889 71,374
Selling, general and
administrative 37,458 38,466 41,785
Provision for possible losses 29,000 81,000 38,000
Operating leases 35,277 21,814 16,330
Other 2,418 3,449 2,783
------------------ ---------
169,511 216,618 170,272
------------------ ---------
Income (Loss) Before Income
Taxes and Cumulative Effect
of Accounting Changes 42,886 (26,502) 51,034
Income taxes:
Current income tax expense 14,535 5,911 35,902
Deferred income tax expense
(benefit) 6,826 (15,760) (13,353)
----------------- ---------
21,361 (9,849) 22,549
----------------- ---------
Income (Loss) Before Cumulative
Effect of Accounting Changes 21,525 (16,653) 28,485
cumulative effect of
accounting changes - 9,456 -
------------------ ---------
Net Income (Loss) $ 21,525 $ (7,197) $28,485
================== =========
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
GATX CAPITAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Stockholder's Equity
Additional
Convertible Common Paid-In
Preferred Stock Capital
----------- ----------- -----------
<S> <C> <C> <C>
Balance at Jan. 1, 1991 $1,027 $1,031 $142,482
Net income - - -
Dividends paid to stockholder - - -
Contributed capital - - 9,420
Equity adjustment - - -
---------- ----------- -----------
Balance at Dec. 31, 1991 1,027 1,031 151,902
Net loss - - -
Dividends paid to stockholder - - -
Equity adjustment - - -
----------- ----------- -----------
Balance at Dec. 31. 1992 1,027 1,031 151,902
Net income - - -
Dividends paid to stockholder - - -
Equity adjustment - - -
----------- ----------- -----------
Balance at Dec. 31, 1993 $1,027 $1,031 $151,902
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholder's Equity
Equity Adjustment
From Foreign
Reinvested Currency
Earnings Translation
------------ -----------------
<S> <C> <C>
Balance at Jan. 1, 1991 $116,726 $139
Net income 28,485 -
Dividends paid to stockholder (14,243) -
Contributed capital - -
Equity adjustment - (234)
------------ ---------
Balance at Dec. 31, 1991 130,968 (95)
Net loss (7,197) -
Dividends paid to stockholder - -
Equity adjustment - (700)
------------ ---------
Balance at Dec. 31, 1992 123,771 (795)
Net income 21,525 -
Dividends paid to stockholder (11,726) -
Equity adjustment - 434
------------ ---------
Balance at Dec. 31, 1993 $133,570 $(361)
============ =========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
GATX CAPITAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Year ended December 31, (in thousands) 1993 1992 1991
--------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $21,525 $ (7,197) $28,485
Adjustments to reconcile
net income (loss)to net cash
from operating activities:
Provision for possible losses 29,000 81,000 38,000
Depreciation expense 29,052 17,927 13,277
Cumulative effect of accounting
changes - (9,456) -
Provision for deferred income
taxes (benefits) 6,826 (15,760) (13,353)
Gain on disposition of
equipment (44,434) (22,277) (50,510)
Joint venture income (8,383) (12,445) (15,457)
Changes in assets and liabilities:
Accrued interest and
other payables 6,254 253 5,061
Due from GATX Corporation (6,984) (4,673) (17,845)
Deferred income 1,474 (273) 46,337
Other - net (6,994) 2,120 (624)
--------- --------- ---------
Net cash flows from operating
activities 27,336 29,219 33,371
--------- --------- ---------
Cash Flows from Investing Activities
Investments in leased equipment,
net of nonrecourse borrowings
for leveraged leases (215,974) (68,091) (215,559)
Loans extended to borrowers (39,390) (40,184) (79,506)
Other investments (46,199) (68,510) (70,128)
--------- --------- ---------
Total investments (301,563) (176,785) (365,193)
--------- --------- ---------
Loan principal received 53,903 39,029 45,217
Lease rents received, net
of earned income and leveraged
lease nonrecourse debt service 33,893 6,932 46,944
Proceeds from disposition of
equipment 101,429 52,502 87,305
Proceeds from disposition of
real estate 31,963 3,454 2,680
Joint venture investment
recovery 24,603 52,606 22,566
-------- ---------- ---------
Recovery of investments 245,791 154,523 204,712
-------- ---------- ---------
Proceeds from disposition of
other assets 90,604 - -
-------- ---------- ---------
Net cash flows provided by
(used in) investing activities 34,832 (22,262) (160,481)
-------- ---------- ---------
Cash Flows from Financing Activities
Net decrease in short-term
borrowings (76,156) (44,895) (7,239)
Proceeds from issuance of
long-term debt 120,000 100,000 160,600
Proceeds from nonrecourse
borrowings 7,246 - -
Repayment of long-term debt (91,347) (59,127) (11,908)
Repayment of capital lease
obligations (3,860) (3,502) (3,255)
Repayment of nonrecourse
obligations (6,202) (2,793) (3,697)
Dividends paid to stockholder (11,726) - (14,243)
--------- --------- ---------
Net cash flows (used in)
provided by financing
activities (62,045) (10,317) 120,258
--------- --------- ---------
Net increase (decrease) in cash
and cash equivalents 123 (3,360) (6,852)
Cash and cash equivalents at the
beginning of the year 12,827 16,187 23,039
--------- --------- ---------
Cash and Cash Equivalents
at December 31 $12,950 $12,827 $16,187
========= ========= =========
Supplemental Disclosure of Cash Flow Information
Income taxes paid $25,707 $10,403 $54,137
Interest paid $65,861 $72,653 $75,548
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
GATX CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note A: Significant Accounting Policies
Business
The principal business of GATX Capital Corporation and
subsidiaries ("the Company") is to provide or arrange lease and
loan financing of equipment for commercial users. The Company also
provides loans to golf management companies which are
collateralized by the associated golf courses. GATX Capital
Corporation is a wholly-owned subsidiary of GATX Corporation. At
December 31, 1993, the Company had approximately 750 financing
contracts with 509 customers, aggregating $1.3 billion of in-
vestments before reserves. Of this amount, 47% consisted of
investments associated with commercial jet aircraft, 15% railroad
equipment, 8% real estate, 8% golf courses, 7% warehouse and
production equipment, 6% marine equipment and 9% other equipment.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries after elimination of significant
intercompany accounts and transactions. Investments in minority-
owned or non-controlled affiliated companies are accounted for
using the equity method.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equiv-
alents. The carrying amounts reported in the balance sheet for cash
and cash equivalents approximate the fair value of those assets.
Intangible Assets
Intangible assets consist of goodwill related to the cost of the
parent s investment in the Company in excess of underlying net
assets at the date of acquisition and the cost of acquired
companies in excess of the values assigned to their net assets. The
balance is amortized on a straight-line basis by annual charges to
income over periods ranging from 22 to 25 years.
Deferred Income
Deferred income primarily represents payments received from
customers for which the earnings process has not been completed.
Included in the balance at December 31, 1993 is $8.0 million of
advance rental payments which will be amortized to lease income
through the fourth quarter of 1994 and $48.0 million which will
either be recorded as disposition proceeds or returned to the
customer in 1994 upon exercise of their option to purchase or
return equipment currently on lease.
Reclassification
Certain amounts in the financial statements presented have been
reclassified to conform prior years data to the current
presentation.
Note B: Investments
Direct Financing Leases
The Company s investment in direct financing leases includes
lease contracts receivable plus the estimated residual value of the
equipment at the lease termination date, less unearned income.
Lease contracts receivable includes the total rent to be received
over the life of the lease reduced by rent already collected.
Initial unearned income is the amount by which the lease contract
receivable plus the estimated residual exceeds the initial
investment in the leased equipment at lease inception. The
remaining unearned income is amortized to lease income over the
lease term in a manner which produces a constant rate of return on
the net investment in the lease. Initial direct costs for
originated leases are capitalized and amortized to affect an
adjustment of yield over the term of the lease.
The components of the Company s investment in direct financing
leases are as follows (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
--------- ---------
<S> <C> <C>
Lease contracts receivable $340,885 $316,665
Estimated residual value 90,373 80,204
Less: Unearned and deferred income (155,653) (153,585)
--------- ---------
Investment in direct financing
leases $275,605 $243,284
========= =========
</TABLE>
Leveraged Leases
Financing leases which are financed principally with nonrecourse
borrowings at lease inception, and which meet certain other
criteria, are accounted for as leveraged leases. Leveraged lease
contracts receivable are stated net of the related nonrecourse
debt service, which includes unpaid principal and aggregate
remaining interest on such debt. Unearned income represents the
excess of anticipated cash flows (including estimated residual
values and after taking into account the related debt service)
over the Company s investment in the lease. Initial direct costs
associated with the origination of leveraged leases are charged to
unearned income at lease inception.
The components of the Company s net investment in leveraged
leases are as follows (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1994
--------- ---------
<S> <C> <C>
Lease contracts receivable $569,669 $693,851
Nonrecourse debt service (333,447) (412,335)
--------- ---------
Net lease contracts receivable 236,222 281,516
Estimated net residual value 143,309 167,662
Less: Unearned income (154,578) (192,004)
--------- ---------
Investment in leveraged leases 224,953 257,174
Deferred taxes arising from
leveraged leases (72,578) (80,498)
--------- ---------
Net investment in leveraged leases $152,375 $176,676
========= =========
</TABLE>
Operating Leases
Leases that do not qualify as direct financing or leveraged
leases are accounted for as operating leases. Equipment subject to
operating leases are stated at cost less accumulated depreciation
plus accrued rent and are generally depreciated to their estimated
residual values using the straight-line method. Aircraft are
depreciated over their useful lives, ranging from 25-40 years,
while other equipment is generally depreciated over the term of the
lease. Depreciation expense of $26.0 million, $16.4 million, and
$11.6 million is included in operating lease expense for 1993, 1992
and 1991, respectively.
Effective July 1, 1992, the Company and its aircraft leasing
joint ventures changed their estimates of the useful lives and
salvage values of aircraft in their operating lease fleet. The
change in estimate had the impact of decreasing joint venture
income and increasing operating lease expense for 1992 by $0.6
million and $1.7 million, respectively.
<TABLE>
Major classes of equipment on operating leases are as follows (in
thousands):
<CAPTION>
As of December 31, 1993 1992
--------- ---------
<S> <C> <C>
Aircraft $189,849 $192,784
Railroad equipment 62,181 61,300
Other 22,859 11,610
--------- ---------
Total cost 274,889 265,694
Accumulated depreciation (32,307) (23,037)
--------- ---------
Net book value 242,582 242,657
Accrued rent and other 12,069 2,645
Net investment in operating --------- ---------
lease equipment $254,651 $245,302
========= =========
</TABLE>
<TABLE>
Earned Income from Leases
The sources of earned income from leases were as follows (in
thousands):
<CAPTION>
Year ended December 31, 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Direct financing leases $ 32,510 $ 36,529 $ 39,090
Leveraged leases 25,606 25,555 21,625
Operating leases 67,341 53,547 49,529
--------- --------- ---------
$125,457 $115,631 $110,244
========= ========= =========
</TABLE>
Secured Loans
Investments in secured loans are stated at the principal amount
outstanding plus accrued interest. The loans are collateralized by
equipment, golf courses or real estate. At December 31, 1993, $15.5
million of the Company s $226.1 million loan portfolio were on
nonaccrual status. The Company does not believe an estimate of the
fair value of these loans on nonaccrual can be made at this time
without incurring excessive cost inasmuch as active markets for
these loans do not currently exist. The Company s estimate of
potential impairment due to collectibility concerns related to
these loans is included in the allowance for possible losses. The
fair value of the remaining loan portfolio ($210.6 million at
December 31, 1993 and $214.6 million at December 31, 1992) is
estimated to be $212.8 million and $220.7 million at December 31,
1993 and 1992, respectively. For variable-rate loans totaling
$108.1 million at December 31, 1993 and $104.9 million at December
31, 1992, fair values are based on carrying amounts. The fair
values of the fixed rate loans ($102.5 million at December 31, 1993
and $109.7 million at December 31, 1992) are estimated using
discounted cash flow analyses, using interest rates currently
offered for loans with similar terms to borrowers of similar credit
quality.
Financing Lease and Operating Lease Receivables and Loan Balance
As of December 31, 1993, financing lease receivables (net of
nonrecourse debt service related to leveraged leases), minimum
future rentals under operating leases and secured loan principal by
year due are as follows (in thousands):
<TABLE>
<CAPTION>
Lease Receivables
Year due Financing Operating Loan Principal
--------- -------------- --------------
<S> <C> <C> <C>
1994 $ 83,714 $ 62,942 $ 55,992
1995 87,109 37,232 30,597
1996 77,096 24,903 35,640
1997 52,376 21,586 27,630
1998 43,064 20,277 53,271
After 1998 233,749 45,545 22,943
--------- --------- ---------
Total $577,108 $212,485 $226,073
========= ========= =========
</TABLE>
Investment in Joint Ventures
Investments in joint ventures include aircraft, real estate,
cogeneration, and equipment leasing ventures which are accounted
for using the equity method. The extent of the Company s effective
ownership interest and/or level of management control dictates the
use of the equity method. Under such method, original investments
are recorded at cost and adjusted by the Company s share of
undistributed earnings or losses of these ventures and reduced by
cash distributions. Interest capitalized on investments in joint
ventures was $0.3 million, $0.7 million and $1.8 million in 1993,
1992 and 1991, respectively. Cash recovered from joint venture
investments was $24.6 million, $52.6 million and $22.6 million in
1993, 1992 and 1991, respectively.
The Company makes certain adjustments to net income as reported
by some of the joint ventures prior to the Company s calculation of
its share of that net income in order to provide consistency with
the Company s accounting policies. Due to the significance of the
adjustments made to two of the joint ventures, the combined and
condensed operating and balance sheet data have been restated to
reflect these adjustments. Pre-tax income has been increased by
$22.6 million in 1992 to adjust for equipment write-downs recorded
as a loss by one joint venture; the Company charged its share of
the write-downs to the allowance for possible losses. Pre-tax
income also has been increased by $20.8 million, $15.1 million and
$12.7 million in 1993, 1992 and 1991, respectively, to reverse
interest expense recognized on loans to a joint venture from its
partners; the Company records these loans as equity contributions.
The partner loan balances of $482.3 million, $393.6 million and
$251.3 million at December 31, 1993, 1992 and 1991, respectively,
have been reclassified from long-term liabilities to partners
equity.
Unaudited combined and condensed operating and balance sheet data
as adjusted are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended/As of December 31, 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Revenues $ 224,179 $ 278,818 $ 246,423
Pre-tax income 17,241 28,951 26,102
Total assets 1,161,123 1,055,627 1,076,629
Long-term liabilities 382,207 358,724 444,387
Total liabilities 481,846 452,410 584,272
Equity 679,277 603,217 492,357
</TABLE>
Assets Held for Sale or Lease
Assets held for sale or lease consist of equipment which has been
repossessed or returned by the lessee after normal lease
termination, and real estate upon which the Company foreclosed when
the debtors owning the property were unable to discharge their
obligations or which has been recorded as an in-substance
foreclosure. Upon foreclosure, properties are recorded at the lower
of their then carrying amount or fair market value. Generally,
depreciation is only recorded on aircraft available for sale or
lease which is held for more than six months.
The major classes of assets held for sale or lease are as follows
(in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
--------- ---------
<S> <C> <C>
Real estate $28,409 $ 63,317
Aircraft 31,562 40,380
Mining equipment - 12,968
Other 3,605 3,678
--------- ---------
Total costs 63,576 120,343
Accumulated depreciation (6,799) (1,847)
--------- ---------
Net assets held for sale
or lease $56,777 $118,496
========= =========
</TABLE>
Other Investments
Other investments, as of December 31, 1993, primarily consist of
the Company s investment in a residential and commercial real
estate development, payments toward the acquisition of leased
assets and progress payments for assets under construction.
In 1993, a wholly-owned subsidiary of the Company became the
majority owner of a residential and commercial real estate
development which was formerly accounted for using the equity
method and is now fully consolidated. Also during 1993, the Company
sold half of its interest in a cogeneration facility, the remainder
of which is now accounted for using the equity method. Prior to the
sale, there was depreciation expense on the facility of $1.5
million, $1.8 million, and $1.8 million in 1993, 1992 and 1991,
respectively, included in other expense. The other investment
balance at December 31, 1992 is net of $3.8 million of accumulated
depreciation. The facility was financed by nonrecourse debt (see
Note D) having a balance of $37.8 million at December 31, 1992.
The components of other investments are as follows (in
thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
------------------
<S> <C> <C>
Real estate development $18,990 $ -
Progress payments and other 5,308 17,745
Cogeneration facility - 36,177
------------------
$24,298 $ 53,922
==================
</TABLE>
Investment in Future Residuals
The Company has purchased interests in the residual values of
leased equipment. Residuals purchased prior to July 1, 1985 are
accreted to their estimated future value. For lease residuals
purchased after June 30, 1985, the Company does not accrete the
carrying value over time; the difference between initial cost and
future value is recognized upon disposition.
Under certain lease underwriting compensation formulas, the
Company earns a fee based on the future residual owned by the
equity investor for whom the lease was arranged. With respect to
transactions concluded prior to June 18, 1986, fees may be
recognized as income at lease inception at the net present value of
estimated future cash flows from residual realization. Such stated
amounts are accreted in a manner designed to produce a constant
rate of return on such net present value. This accretion is also
included in fee income. Recognition of all fees from transactions
concluded after June 17, 1986 occur upon realization.
The components of the Company s recorded investment in future
residuals are as follows (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1993 1992
------------------
<S> <C> <C>
Purchased residuals $ 6,517 $ 8,468
Lease underwriting deferred fees 7,554 8,042
------------------
Investment in future residuals $14,071 $16,510
==================
</TABLE>
Note C: Allowance for Possible Losses
The Company maintains an allowance for possible losses through
periodic provisions. The purpose of the allowance is to provide for
potential credit and collateral losses and permanent declines in
investment values. It is the Company s policy to charge off amounts
which, in the opinion of management, are not recoverable from
obligors or the disposition of collateral.
Activity within the allowance for possible losses account was as
follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
------------------ ---------
<S> <C> <C> <C>
Balance at beginning of year $101,323 $ 71,864 $ 59,148
Provision for possible losses 29,000 81,000 38,000
Charges to allowance for
possible losses
(net of recoveries of $2,050
in 1993, $681 in 1992
and $1,773 in 1991) (42,130) (51,541) (25,284)
------------------ ---------
Balance at end of year $88,193 $101,323 $ 71,864
========= ========= =========
</TABLE>
The increase in the 1992 provision reflected continued
deterioration in older Boeing 747 aircraft, primarily freighters,
and real estate areas of the Company s portfolio.
Note D: Debt and Capital Lease Financing
At December 31, 1993, the Company had commitments under its
credit agreements with a group of banks for revolving credit loans
aggregating up to $290 million. The credit agreements contain
various covenants which include, among other factors, minimum net
worth, restrictions on dividends and requirements to maintain
certain financial ratios. At December 31, 1993, such covenants
limited the Company s ability to transfer net assets to its parent
to no more than $82.9 million. The revolving commitments are
available for borrowing, repaying and reborrowing at any time and
contain various pricing options. The Company pays a facility fee on
one facility and a commitment fee on the unused commitments of the
other two facilities, but is not obligated to maintain compensating
balances. At December 31, 1993, $185.3 million of the commitments
in excess of amounts backing commercial paper and bankers
acceptances were available and unused.
The Company obtains short-term financing by issuance of
commercial paper and bankers acceptances through its dealers in
the United States and Canada, and from notes payable to banks. At
December 31, 1993, the majority of such borrowings were backed by
or under the principal credit agreements. Activity related to these
short-term financings was as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992
--------- ---------
<S> <C> <C>
Maximum amount outstanding $239,493 $242,942
Minimum amount outstanding 104,949 174,240
Average amount outstanding 174,382 202,069
Weighted average interest
rate during the period 4.13% 4.93%
Weighted average interest
rate at end of period 3.86% 4.16%
</TABLE>
The carrying amounts reported in the balance sheet for
commercial paper and bankers acceptances and variable notes
payable approximate the fair value of those liabilities.
<TABLE>
Senior term notes include the following (in thousands):
<CAPTION>
Year ended December 31, 1993 1992
--------- ---------
<S> <C> <C>
Variable rate:
Medium Term Notes due 1994-1995 $ 30,000 $ 44,150
Senior Bank Note due 1995 10,000 35,000
--------- ---------
Subtotal - variable rate 40,000 79,150
Fixed rate:
5.45% - 10.30% Medium Term
Notes due 1994-2003 474,850 399,350
9-3/8% Senior Notes due 1997 50,000 50,000
10% Senior Notes due 1996 50,000 50,000
Other Senior Note 9-3/8% due 1994 10,000 17,698
--------- ---------
Subtotal - fixed rate 584,850 517,048
--------- ---------
$624,850 $596,198
========= =========
</TABLE>
The variable rate debt, including fixed rate debt subject to
variable rate swaps, at December 31, 1993 and 1992 approximates its
fair value. At December 31, 1993, the fair value of the fixed rate
senior term notes less the $180.0 million which were swapped for
variable rates ($404.9 million) is $458.7 million. At December 31,
1992, the fair value of fixed rate senior term notes was $551.9
million. Fair value was estimated by aggregating the notes and
performing discounted cash flow analyses using a weighted average
note term and the current market rate for similar types of
borrowing arrangements.
Nonrecourse obligations include the following:
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992
--------- ---------
<S> <C> <C>
Variable rate:
Notes due 2002 $42,009 $ 44,408
Notes due 1996 8,425 10,678
Notes due 2000 3,785 -
Other 6,263 -
--------- ---------
Subtotal-variable rate 60,482 55,086
Fixed rate:
8.32% Note due 2013 - 37,827
9% Note due 1994 - 515
9.25% Note due 1996 7,309 7,394
Other 267 -
--------- ---------
Subtotal-fixed rate 7,576 45,736
--------- ---------
$68,058 $100,822
========= =========
</TABLE>
Nonrecourse obligations consist primarily of debt
collateralized by aircraft, and their related lease contracts, and
real estate projects. The nonrecourse obligation associated with
one aircraft will become recourse to the Company to the extent of
the then remaining debt balance in 2002 when a balloon payment of
$7.3 million is due.
The carrying amount of the variable rate debt at December 31,
1993 and 1992 approximates its fair value. The fair value of the
fixed rate notes at December 31, 1993 and 1992 is $8.4 million and
$44.4 million, respectively. Fair value was estimated by
aggregating the notes and performing a discounted cash flow
analysis using a weighted average note term and the current market
rate for similar types of borrowing arrangements.
Obligations under capital leases consist of equipment subject
to capital lease financing which has been subleased. Such subleases
are classified as direct financing leases having a carrying value
of $23.6 million and $32.1 million at December 31, 1993 and 1992,
respectively. Minimum future lease payments receivable under the
subleases aggregate $29.8 million receivable over a period ending
in 2003. The obligations under capital leases and the related
subleases have the same term and call for fixed rental payments.
The Company has purchase or renewal options under the leases which
allow it to accommodate similar options exercisable by sublessees.
Maturities of debt financings, obligations under capital leases
and nonrecourse obligations for each of the years 1994 through 1998
and in total thereafter are presented in the following table (in
thousands). This table assumes that the commercial paper, notes
payable and bankers acceptances are retired by the unused
revolving commitments.
<TABLE>
<CAPTION>
Converted Obligations Total
Year Revolving Senior Under Capital Debt Nonrecourse
Due Credit Loans Term Notes Leases Financing Obligations
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 $ 0 $ 66,250 $ 3,011 $ 69,261 $ 7,597
1995 0 104,000 3,629 107,629 6,710
1996 121,935 105,000 3,627 230,562 12,103
1997 0 85,000 2,067 87,067 4,049
1998 0 75,000 1,377 76,377 5,342
After 1998 0 189,600 8,731 198,331 32,257
--------- --------- --------- --------- ---------
Total $121,935 $624,850 $22,442 $769,227 $68,058
========= ========= ========= ========= =========
</TABLE>
The Company uses interest rate swaps in addition to commercial
paper and floating rate medium term notes to fund its floating rate
lease and loan investments. The Company pays interest on the
notional principal amounts of the swaps based on a widely used
floating rate index (6 month Libor). No actual lending or borrowing
is involved. The total notional principal of all swaps as of
December 31, 1993 was $180.0 million with termination dates ranging
from 1995 to 2003. The fair value of the swaps at December 31, 1993
approximate their notional principal amounts.
Note E: Capital Stock
As of December 31, 1993 and 1992, all issued common and
preferred stock of the Company was indirectly owned by GATX
Corporation through its wholly-owned subsidiary, GATX Financial
Services, Inc.
The preferred stock has a conversion price of $100 per share
and may be exchanged for common stock on a one-for-one basis.
Dividends on preferred stock are payable on a share-for-share basis
at the same rate per share as common stock when and as declared by
the board of directors. Conversions of preferred stock will
commence in the year 2003 unless GATX Corporation continues to
extend the initial redemption date.
The preferred stock redemption schedule calls for 51,355 shares
to be redeemed in each of the first two conversion years, 77,030
shares in each of the subsequent two years, 102,705 shares in each
of the following three years and 154,055 shares in each of the
succeeding three years. Conversion is conditioned on the Company
being in compliance with provisions of all of its debt agreements.
Note F: Income Taxes
Effective January 1, 1992, the Company changed its method of
accounting for income taxes from the deferred method to the
liability method required by Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The cumulative
effect of adopting Statement 109 as of January 1, 1992 was to
increase net income by $10.1 million.
GATX Corporation files a consolidated federal income tax return
which includes the Company and its subsidiaries. Under an
intercompany tax agreement, the parent reimburses the Company to
the extent the Company s operating losses and investment tax
credits are utilized in the consolidated federal return. Should the
Company generate taxable income, the agreement provides for payment
by the Company of any resulting additional federal tax liability
incurred by GATX Corporation. However, in the past the Company had
deferred a portion of such payments to the parent arising from
certain types of transactions as permitted under the intercompany
tax agreement. Such deferrals of tax payments to the parent were
reflected as a component of due to/from GATX Corporation. During
1991, the majority of the remaining balance of such deferrals, $9.4
million, was converted into an additional investment by the parent
in the Company.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. The Company has recorded these differences in its
deferred tax accounts, inter-company accounts receivable, and
equity accounts. In exchange for cash payments, GATX Corporation
has assumed a portion of GATX Capital s deferred tax liability.
GATX Corporation re-contributed these amounts through the purchase
of Redeemable Preferred Stock over the period from 1975 to 1985. In
addition, GATX Capital has an account receivable due from GATX
Corporation resulting from the reassumption of a portion of these
deferred taxes through December 31, 1993 of $46.1 million (see Note
H).
Significant components of the Company s deferred tax
liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Leveraged leases $ 72,578 $ 80,498
Leases (other than leveraged) 63,506 88,907
Investment in joint ventures 12,174 287
Alternative minimum tax
adjustment - 9,056
Other - 9,932
--------- ---------
Total deferred tax
liabilities 148,258 188,680
--------- ---------
Deferred tax assets:
Allowance for possible losses 34,594 38,797
Loans 11,119 38,113
Other 12,551 27,040
--------- ---------
Total deferred tax assets 58,264 103,950
--------- ---------
Net deferred tax
liabilities $ 89,994 $ 84,730
========= =========
Tax account balances:
Deferred income tax
liabilities $ 11,053 $ 5,789
Preferred stock and
related additional
paid-in capital 125,000 125,000
Due from GATX Corporation (46,059) (46,059)
--------- ---------
$ 89,994 $ 84,730
========= =========
</TABLE>
The components of the provision for deferred income tax benefits
for the year ended December 31, 1991 under the deferred method were
as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1991
---------
<S> <C>
Differences between financial and tax reporting:
Depreciation $ 11,518
Lease income (13,435)
Interest expense 8,019
Gain on dispositions (19,921)
Provision for possible losses (12,559)
Effect of revaluation of
assets acquired in business
combinations 1,263
Interest income (6,576)
Joint venture income 10,151
Prior year tax return adjustments (2,981)
Alternative minimum tax adjustment 5,187
Other 5,981
---------
Deferred income tax benefits $(13,353)
=========
</TABLE>
Income before income taxes from foreign operations was $3.0
million, $2.1 million, and $2.2 million in 1993, 1992 and 1991,
respectively. Foreign tax expense was $2.0 million, $1.2 million,
and $0.9 million in 1993, 1992, and 1991, respectively.
The differences between total income tax expense and the amount
computed by applying the statutory federal income tax rate of 35%
in 1993 and 34% in prior years to pre-tax income are as follows (in
thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
--------- -------- ---------
<S> <C> <C> <C>
Expected federal tax expense
(benefit) from continuing operations
at statutory rates $15,010 $(9,011) $17,352
Effect of revaluation of assets
acquired in business combination - - 1,263
State tax provision (benefit),
net of federal tax benefit 1,678 (1,284) 1,973
Cumulative effect of federal tax
rate increase 1,574 - -
Sale of consolidated subsidiary 559 - -
Other 2,540 446 1,961
-------- --------- --------
Income tax expense (benefit) $21,361 $(9,849) $22,549
======== ========= ========
</TABLE>
Note G: Operating Lease Obligations
The Company is a lessee under certain aircraft, railroad rolling
stock, and office leases which are classified as operating leases.
Total rental expense was $9.8 million, $7.7 million and $7.6
million in 1993, 1992 and 1991, respectively. The aircraft and
rolling stock under these leases have been subleased, generating
lease income of $12.8 million, $4.9 million and $4.9 million in
1993, 1992 and 1991, respectively.
During 1993, the Company entered into a lease transaction for the
sale leaseback of a large portfolio of rail equipment. The net book
value of the equipment is not shown on the balance sheet. The gain
realized on the sale has been deferred and is being credited to
income over the lease term.
Future rentals payable by the Company and sublease receivables
under noncancellable operating leases over a period ending in 2012
are as follows (in thousands):
<TABLE>
<CAPTION>
Obligations Under Sublease
Year due Operating Leases Receivables
----------------- -----------
<S> <C> <C>
1994 $ 15,662 $18,432
1995 15,286 12,314
1996 15,184 9,955
1997 14,767 9,720
1998 14,730 7,916
After 1998 137,804 29,912
------------------ -----------
Total $ 213,433 $88,249
================== ============
</TABLE>
Note H: Intercompany Transaction and Obligations
The amount due from GATX Corporation at December 31, 1993
consists primarily of an advance of $46.1 million related to the
reassumption of deferred taxes (see Note F). Offsetting this
receivable is $3.4 million due to GATX Corporation which consists
of amounts owed for overhead and taxes pursuant to an intercompany
tax agreement (see Note F).
Note I: Foreign Operations
In addition to its domestic operations, the Company provides or
arranges equipment financing for nonaffiliated entities outside the
United States. Selected information related to foreign operations
is summarized below (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Earned income:
Domestic $ 171,047 $ 151,809 $ 85,108
Export 29,866 28,548 25,260
Foreign 11,851 11,815 13,588
Eliminations (367) (2,056) (2,650)
---------- ---------- ----------
$ 212,397 $ 90,116 $ 21,306
========== ========== ==========
Net income:
United States $ 16,590 $ 10,557) $ 23,878
Foreign 4,929 3,353 4,599
Eliminations 6 7 8
---------- ---------- -----------
$ 21,525 $ (7,197) $ 28,485
========== ========== ==========
Total assets:
United States $1,050,117 $1,143,587 $1,222,349
Foreign 213,169 187,989 151,061
Eliminations (6,688) (1,107) (3,541)
----------- ----------- ----------
$1,256,598 $1,330,469 $1,369,869
=========== =========== ==========
</TABLE>
Note J: Retirement Benefits
The Company participates in the GATX Non-Contributory Pension
Plan for Salaried Employees (the "Plan"), a defined benefit pension
plan with GATX Corporation covering substantially all employees.
Pension cost for each GATX subsidiary included in the plan is
determined by independent actuaries. However, accumulated plan
obligation information, plan assets and the components of net
periodic pension costs pertaining to each subsidiary have not been
separately determined. Pension expense allocated to the Company for
1993, 1992 and 1991 was $0.7 million, $0.6 million and $0.5
million, respectively. Contributions to the Plan were made by the
Company through GATX Corporation and amounted to $0.4 million, $0.5
million and $0.5 million in 1993, 1992 and 1991, respectively.
In addition to pension benefits, the Company provides other
postretirement benefits, including limited health care and life
insurance benefits, for certain retired employees who meet
established criteria. Most domestic employees are eligible if they
retire from the Company with immediate pension benefits under the
GATX Pension Plan.
Effective January 1, 1992, the Company adopted FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions , which changed the accounting for postretirement benefits
to the accrual method. The cumulative effect of this accounting
change as of January 1, 1992 on years prior to 1992 was a $0.6
million liability, net of the income tax effect, which resulted in
a decrease in net income for 1992.
Note K: Commitments
The Company s backlog was $224.2 million and $198.3 million,
respectively at December 31, 1993 and 1992. Loans comprised $16.5
million and $12.5 million of the total at December 31, 1993 and
1992, respectively. The fair value of these loans was $0.3 million
at December 31, 1993 and $0.2 million at December 31, 1992. Fair
value was calculated by estimating the current fees which would be
charged for similar commitments.
The Company is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include
commitments to extend credit, financial guarantees and forward
purchase contracts. Such instruments involve, to varying degrees,
elements of credit and market risk which are not recognized in the
consolidated balance sheets. The contractual amount of the
instruments are shown below (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
--------- ---------- ---------
<S> <C> <C> <C>
Guarantees $60,184 $62,397 $53,046
Stand-by loan commitments 12,500 14,000 31,600
Future purchase contracts 8,621 13,396 14,321
</TABLE>
Guarantees are commitments issued by the Company to guarantee a
certain return on an asset at the end of the lease, or to guarantee
performance of an affiliate to a third party. These commitments
have fixed expiration dates ranging from 1994 to 2012. Since many
of the assets on lease are expected to retain their value, the
total amount guaranteed does not necessarily represent future cash
requirements.
Stand-by loan commitments represent an agreement to lend funds
to a customer upon the occurrence of certain events as defined in
the contract. Collateral related to this commitment is an income-
producing commercial property.
Future purchase contracts are contracts to purchase leased assets
at the end of their lease term (1995) for a specified purchase
price. Risk arises when the fair market value of an asset at the
end of the lease term is less than the contractual purchase price.
It is not practicable to estimate the fair value of the Company s
off-balance sheet financial instruments because there are few
active markets for these transactions, and the Company is unable at
this time to estimate fair value without incurring excessive costs.
The Company uses essentially the same credit policies in making
commitments and conditional obligations as it does for funded
transactions. All investments are subject to normal credit
policies, collateral requirements and senior management review.
For example, lease provisions require lessees to meet certain
standards for maintenance and return conditions, and provide for
repossession upon default. Loans are generally secured by equipment
or real estate, and occasionally involve guarantees or other assets
as collateral. All the commitments having off-balance-sheet risk
are reviewed quarterly for potential exposure and a provision for
possible loss is made if required.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
<PAGE>
PART III
Item 10(a). Directors of the Registrant
Name Office Held Since Age
- ------------------------------------------------------------------------------
James J. Glasser Chairman of the Board 1971 59
Ronald H. Zech President and Director 1984 50
John F. Chlebowski,Jr. Director 1985 48
Frederick L. Hatton Executive Vice President
and Director 1984 51
Paul A. Heinen Director 1985 64
Joseph C. Lane Executive Vice President
and Director 1987 40
David M. Edwards Senior Vice President
and Director 1990 42
Item 10(b). Executive Officers of the Registrant
Name Office Held Since Age
- ------------------------------------------------------------------------------
Ronald H. Zech President, Director, and Chief 1984 50
Executive Officer
Frederick L. Hatton Executive Vice President
and Director 1984 51
Joseph C. Lane Executive Vice President
and Director 1987 40
David M. Edwards Senior Vice President -
Finance and Administration,
Chief Financial Officer,
and Director 1990 42
Thomas C. Nord Vice President, General
Counsel, And Secretary 1980 53
George R. Prince Vice President and Treasurer 1983 49
Curt F. Glenn Principal Accounting Officer, 1992 39
Vice President & Controller
Valerie C. Williams Vice President - Human
Resources 1989 49
RONALD H. ZECH, President, Director and Chief Executive Officer
since 1984. Mr. Zech joined the Company in 1977 and served as Vice
President - Finance for one year. He was promoted to Senior Vice
president Finance and Administration in 1978 and Executive Vice
President in 1983. Prior to joining GATX, he served in a variety
of managerial capacities for The First National Bank of Chicago,
including Vice President and Manager of First Chicago's San
Francisco office. Prior to 1970, he was an Assistant Professor of
Business Administration at Valparaiso University for four years.
Mr. Zech received a BSEE from Valparaiso University in 1965 and an
MBA from the University of Wisconsin in 1967.
FREDERICK L. HATTON, Executive Vice President, Director and Air
Division President since 1984. Mr. Hatton joined the Company in
1983 as Senior Vice President. Prior to 1983, he served as Vice
President-Marketing for two years, and Executive Vice President for
four years with International Air Service Company (IASCO). Prior
to IASCO, Mr. Hatton served in a number of managerial capacities
for Flying Tiger Lines. He received a BS from Yale University in
1964, an MS in aerospace management from the University of Southern
California in 1971, and an MBA from the Wharton School in 1972.
Mr. Hatton served as a U.S. Marine Corps fighter pilot from 1964 to
1970 including a tour in Vietnam.
JOSEPH C. LANE, Executive Vice President, Director, President of
GATX Leasing. Mr. Lane joined the Company in 1979 as a Financial
Analyst and has served as District Manager, Regional Manager, Vice
President and Senior Vice President. Mr. Lane was formerly Vice
President - Corporate Finance for Rotan Mosle Investment Bankers
(two years) and a member of the Yale University Development Faculty
(three years). Mr. Lane received a BA from Yale University in
1975.
DAVID M. EDWARDS, Senior Vice President - Finance and
Administration, Chief Financial Officer and Director since 1990.
Mr. Edwards joined the Company in 1981 as Director-Credit
Management. He was promoted to Vice President-Credit and Contracts
Administration in 1981. In 1985, he was promoted to Assistant to
the President of GATX Corporation. In 1988, he was promoted to
Vice President-Finance and Administration of GATX Realty. Prior to
1981, Mr. Edwards was Vice President for Security Pacific National
Bank. Mr. Edwards received his BA in 1973 and MA in 1975 in
Economics from the University of California, Davis.
THOMAS C. NORD, Vice President and General Counsel since 1980. Mr.
Nord joined the Company as Associate Counsel in 1977 and became
Assistant General Counsel in 1978. Prior to 1977, Mr. Nord served
as Counsel for Charter New York Leasing, an affiliate of Irving
Trust Company (three years), and as an Associate in the New York
law firm of Seward and Kissel (five years). Mr. Nord received a BA
from Northwestern University in 1962 and a JD from the University
of North Carolina in 1969.
GEORGE R. PRINCE, Vice President and Treasurer since 1983. Mr.
Prince joined the Company in 1981 as Assistant Vice President -
Corporate Development. In 1983, he was promoted to Vice President
and Treasurer. Prior to 1981, Mr. Prince was Vice President for
Continental Bank. Mr. Prince received his BS in 1966 from Cornell
University and MBA in 1968 from Michigan State.
CURT F. GLENN, Principal Accounting Officer, Vice President &
Controller since 1992. Mr. Glenn joined the company in 1980 as
Assistant Tax Manager, was appointed Tax Manager in 1985 and
elected Vice President in 1989. Prior to joining the Company, Mr.
Glenn was a Senior Tax Analyst at GATX Corporation (two years) and
a Senior Tax Accountant with Trans Union Corporation (four years).
Mr. Glenn received a B.S. in Accounting from DePaul University in
1977. Mr. Glenn is currently Chairman of the Federal Tax Committee
of the Equipment Leasing Association of America.
VALERIE C. WILLIAMS, Vice President - Human Resources since 1989.
Prior to joining GATX, Ms. Williams was President of VC Williams &
Associates, a human resources consulting firm; director, Corporate
Compensation and Incentives at Carson Pirie Scott & Co. and
Consultant, Compensation with A.S. Hansen, Inc. Ms. Williams
received her MBA from Lake Forest College in 1980.
Items 11, 12 & 13
Items 11, 12 and 13 are omitted under provisions of the reduced
disclosure format.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) 1. Financial statements
The following consolidated financial statements of GATX
Capital Corporation are included in Item 8.
Consolidated Balance Sheets - As of December 31, 1993 and
1992
Consolidated Statements of Income - Years Ended December
31, 1993, 1992, and 1991
Consolidated Statements of Stockholder's Equity - Years
Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows - Years Ended
December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
2. Financial statement schedules
All financial statement schedules have been omitted
because they are not applicable or because required
information is provided in the financial statements,
including the notes thereto, which are included in Item 8.
3. Exhibits Required by Item 601 of Regulation S-K
Exhibit
Number
3(a) Restated Certificate of Incorporation of the Company 1
3(b) By-laws of the Company 2
4(d) Term Loan Agreement between the Company and a Bank dated as
of December 26, 1990. 3
10(a) Office Leases, Four Embarcadero Center, dated October 1, 1990
and June 1, 1991, between the Company and Four Embarcadero
Center Venture. 3
10(b) Tax Operating Agreement dated January 1, 1983 between GATX
Corporation and GATX Leasing Corporation. 4
10(c) Preferred Stock and Tax Assumption program and Issuance of
Common Stock. 5
10(d) Preferred Stock Redemption Agreement 6
10(e) Credit Agreement among the Company, the Subsidiaries
listed in Schedule II thereto, the Banks listed on the
signature pages thereto, and Chase Manhattan Bank, as
agent for the Banks, dated December 14, 1992 7
10(f) Credit Agreement among the Company, its two
subsidiaries operating in Canada, and the Bank of
Montreal, dated December 14, 1992 7
10(g) Credit Agreement among the Company, its two
subsidiaries operating in Canada, and the Canadian
Imperial Bank of Commerce, dated December 14, 1992 7
12 Computation of Ratio of Earnings to Fixed Charges 8
24 Consent of Independent Auditors 8
28 Listing of Medium Term Notes 8
The Registrant agrees to furnish to the Commission upon request a
copy of each instrument with respect to issues of long-term debt of
the Registrant the authorized principal amount of which does not
exceed 10% of the total assets of Registrant.
1 Incorporated by reference to Form 10-K filed with the
Commission on March 30, 1990.
2 Incorporated by reference to Registration Statement on
Form S-1, as amended, (file number 2-75467) filed with the
Commission on December 23, 1981, page II-4.
3 Incorporated by reference to Form 10-K filed with the
Commission on March 30, 1991.
4 Incorporated by reference to Form 10-K filed with the
Commission on March 28, 1983.
5 Incorporated by reference to Form 10-K filed with the
Commission on March 24, 1986.
6 Included in the Restated Certificate of Incorporation
incorporated by reference herein.
7 Incorporated by reference to Form 10-K filed with the
Commission on March 31, 1993.
8 Included as an Exhibit hereto.
Item 14(b). Reports on Form 8-K
No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
<PAGE>
Item 14(c)(1). Separate Financial Statements of Subsidiaries not
Consolidated and Fifty Percent or Less Owned Persons
Report of Independent Auditors
The General Members of GATX/CL Air Leasing Cooperative Association
and the Board of Management and Stockholders of GATX/CL Air N.V.
We have audited the accompanying combined balance sheet as of
December 31, 1993 and 1992 of GATX/CL Air Leasing Cooperative
Association and GATX/CL Air N.V. and the related combined
statements of operations, stockholders' and members' equity, and
cash flows for each of the three years in the period ended December
31, 1993. These financial statements are the responsibility of the
companies' management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position
of GATX/CL Air Leasing Cooperative Association and GATX/CL Air N.V.
at December 31, 1993 and 1992, and the combined results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally
accepted accounting principles.
MORET ERNST & YOUNG
March 11, 1994
Except for Note 11, as to which the date is
March 24,1994.
<PAGE>
GATX/CL Air Leasing Cooperative Association
and GATX/CL Air N.V.
<TABLE>
Combined Balance Sheet
(In Thousands)
<CAPTION>
December 31
1993 1992
--------- ---------
<S> <C> <C>
Assets
Cash and cash equivalents $ 28,368 $ 16,233
Accounts receivable:
Manager 15,105 11,458
Co-Manager 2,291 1,992
--------- ---------
17,396 13,450
Investments:
Equipment on operating leases, net of
accumulated depreciation of $46,363
in 1993 and $23,592 in 1992 703,796 566,226
Direct financing leases 93,999 99,780
Aircraft delivery progress payments 15,128 47,330
--------- ---------
812,923 713,336
Other assets, net of accumulated
amortization of $2,501 in 1993
and $1,775 in 1992 5,543 4,204
--------- ---------
Total assets $864,230 $747,223
--------- ---------
Liabilities & Equity
Liabilities:
Accounts payable and accrued liabilities $ 770 $ 1,096
Accrued interest 6,230 3,591
Lessee deposits 42,079 30,924
Capital lease obligation 58,417 62,548
Nonrecourse obligations 116,827 124,841
Loans from members 482,302 393,046
--------- ---------
Total liabilities 706,625 616,046
Equity:
Association 155,005 131,401
Air N.V. 2,600 (224)
--------- ---------
Total equity 157,605 131,177
--------- ---------
Total liabilities and equity $864,230 $747,223
--------- ---------
See accompanying notes
</TABLE>
<PAGE>
GATX/CL Air Leasing Cooperative Association
and GATX/CL Air N.V.
<TABLE>
Combined Statement of Operations
(In Thousands)
<CAPTION>
Year ended December 31
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Income
Lease $ 56,311 $ 45,822 $ 38,251
Interest 1,244 1,074 1,136
Other 234 770 751
--------- --------- ---------
57,789 47,666 40,138
Expenses
Interest 33,009 29,196 26,874
Depreciation 22,771 16,439 7,153
Management fee 1,746 1,468 1,270
Guarantee fees (629) 1,230 -
Other 1,717 1,652 1,067
--------- --------- ---------
58,614 49,985 36,364
--------- --------- ---------
Net (loss) income $ (825) $(2,319) $ 3,774
--------- --------- ---------
See accompanying notes
</TABLE>
<PAGE>
GATX/CL Air Leasing Cooperative Association
and GATX/CL Air N.V.
<TABLE>
Combined Statement of Stockholders' Equity and Members' Equity
(In Thousands)
<CAPTION>
Air N.V.
----------------------------------------------------------
Equity adjust-
Accumu- ment from
lated foreign
Share deficit/ currency Elimin-
Capital earnings translation ation Total
--------- -------- ---------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance at Dec. 31, 1990 $ 44 $ (88) $ 9 $ - $ (35)
Members' capital
contributions:
Initial - - - - -
Premium - - - - -
Distribution to members - - - - -
Net income - 827 - - 827
--------- --------- ---------- ------ ------
Balances at Dec. 31, 1991 44 739 9 - 792
Members' capital
contributions:
Initial - - - - -
Premium - - - - -
Distribution to members - - - - -
Net loss - (1,016) - - (1,016)
--------- -------- ------- ------ -------
Balances at Dec. 31, 1992 44 (277) 9 - (224)
Members' capital
contributions:
Initial - - - - -
Premium - - - - -
Distribution to members - - - - -
Net income (loss) - 10 - 2,814 2,824
--------- -------- ------- ------ -------
Balances at Dec. 31, 1993 $ 44 $ (267) $ 9 $2,814 $ 2,600
--------- --------- ------- ------ -------
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
GATX/CL Air Leasing Cooperative Association
and GATX/CL Air N.V.
Combined Statement of Stockholders' Equity and Members' Equity
(In Thousands)
<CAPTION>
Association
--------------------------------------------
Initial Additional
Members Members Elimination
-------------------- ------------
<S> <C> <C> <C>
Balance at Dec. 31, 1990 $ 23,757 $ 16,156 $ -
Members' capital
contributions:
Initial 42,209 28,273 -
Premium 1,767 1,767 -
Distribution to members (6,020) (4,013) -
Net income 1,768 1,179 -
-------------------- ------------
Balances at Dec. 31, 1991 63,681 43,362 -
Members' capital
contributions:
Initial 18,349 12,234 -
Premium 765 764 -
Distribution to members (3,870) (2,581) -
Net loss (782) (521) -
-------------------- ------------
Balances at Dec. 31, 1992 78,143 53,258 -
Members' capital
contributions:
Initial 19,118 12,746 -
Premium 797 796 -
Distribution to members (3,722) (2,482) -
Net income (loss) (504) (334) (2,811)
-------------------- ------------
Balances at Dec. 31, 1993 $ 93,832 $ 63,984 $ (2,811)
-------------------- ------------
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
GATX/CL Air Leasing Cooperative Association
and GATX/CL Air N.V.
Combined Statement of Stockholders' Equity and Members' Equity
(In Thousands)
<CAPTION>
Association
---------------------------
Combined
Total Total
------------ -----------
<C> <C>
<S>
Balance at Dec. 31, 1990 $ 39,913 $ 39,878
Members' capital
contributions:
Initial 70,682 70,682
Premium 3,534 3,534
Distribution to members (10,033) (10,033)
Net income 2,947 3,774
--------- -----------
Balances at Dec. 31, 1991 107,043 107,835
Members' capital
contributions:
Initial 30,583 30,583
Premium 1,529 1,529
Distribution to members (6,451) (6,451)
Net loss (1,303) (2,319)
--------- -----------
Balances at Dec. 31, 1992 131,401 131,177
Members' capital
contributions:
Initial 31,864 31,864
Premium 1,593 1,593
Distribution to members (6,204) (6,204)
Net income (loss) (3,649) (825)
--------- -----------
Balances at Dec. 31, 1993 $ 155,005 $ 157,605
--------- -----------
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
GATX/CL Air Leasing Cooperative Association
and GATX/CL Air N.V.
Combined Statement of Cash Flows
(In Thousands)
<CAPTION>
Year Ended December 31
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities
Net (loss) income $ (825) $ (2,319) $ 3,774
Adjustments to reconcile net (loss)
income to net cash from
operating activities:
Amortization 726 950 718
Depreciation 22,771 16,439 7,153
Interest expense added to
member loans 1,258 - -
Changes in assets and liabilities:
Accrued interest and other
payables 2,314 (1,728) 3,630
Receivables (3,946) (1,760) (3,985)
Lessee deposits 11,155 9,293 7,699
Other - net 57 398 477
--------- --------- ---------
Net cash flows from operating
activities 33,510 21,273 19,466
Investing Activities
Investments in leased equipment (126,223) (108,410) (249,450)
Investment in progress payments (2,023) (12,476) (34,588)
--------- --------- ---------
Total investments (128,246) (120,886) (284,038)
Lease rents received, net of
earned income 5,059 5,043 7,385
--------- --------- ---------
Net cash flows used in
investing activities (123,187) (115,843) (276,653)
Financing Activities
Proceeds from issuance of nonrecourse
borrowings - - 105,200
Proceeds from capital lease obligation - - 66,881
Proceeds from issuance of member loans 129,818 191,530 264,745
Capital contributions from members 33,457 32,112 74,216
Repayment of nonrecourse borrowings (8,014) (58,322) (4,900)
Repayment of member loans (43,158) (55,225) (230,682)
Repayment of capital lease obligation (4,087) (3,308) -
Distributions to members (6,204) (6,451) (10,033)
--------- --------- ---------
Net cash flows from financing
activities 101,812 100,336 265,427
--------- --------- ---------
Net increase in cash & cash equivalents 12,135 5,766 8,240
Cash & cash equivalents at beginning
of year 16,233 10,467 2,227
--------- --------- ---------
Cash and cash equivalents at
December 31 $ 28,368 $ 16,233 $ 10,467
--------- --------- ---------
Supplemental cash flow disclosures
Interest paid $ 30,370 $ 29,065 $ 25,427
--------- --------- ---------
Taxes paid $ 11 $ 54 $ -
--------- --------- ---------
See accompanying notes
</TABLE>
<PAGE>
GATX/CL Air Leasing Cooperative Association
and GATX/CL Air N.V.
Notes to Combined Financial Statements
December 31, 1993
1. Basis of Presentation and Summary of Significant Accounting
Policies
Basis of Reporting
The accompanying combined financial statements are prepared in
accordance with accounting principles generally accepted in the
United States and presented in U.S. dollars.
Organization
GATX/CL Air Leasing Cooperative Association (the Association) was
formed in September 1990 as a Cooperative Vereniging under the
laws of the Netherlands Antilles to engage in the acquisition and
lease of aircraft for use in international commercial routes.
The Initial Members of the Association, each having a 30% share,
are GATX Capital Corporation (GATX) through its wholly owned
subsidiary, GATX Air Antilles, Inc. (GATX Air), and Credit
Lyonnais (CL), a bank organized under the laws of France.
Additional Members are four financial institutions, each having a
10% share. The initial term of the Association shall expire on
December 31, 2009.
GATX/CL Air N.V. (Air N.V.) was incorporated as a limited-
liability corporation on July 11, 1989 under the laws of the
Netherlands as a holding and leasing company. The authorized
share capital of Air N.V. is 500,000 Dutch guilders. It is
divided into 5,000 shares of 100 Dutch guilders each. Each
shareholder of Air N.V. is a member of the Association and holds
shares in Air N.V. in proportion to its interest in the
Association.
CL is the Managing Director and Co-Manager of the Association.
CLN Oyens Trust B.V. (an affiliate of CL) is a Managing Director
and administrative manager of Air N.V. GATX is the manager of
the Association and a Managing Director of Air N.V.
Basis of Combination
The accompanying financial statements combine the assets,
liabilities, equity, results of operations and cash flows
of the Association and Air N.V. (collectively, the Companies)
in recognition of their common ownership and control. All
significant intercompany transactions and accounts have been
eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with
a maturity of twelve months or less when purchased. The carrying
amounts reported in the balance sheet for cash and cash
equivalents at December 31, 1993 approximate the fair value of
these assets.
Operating Leases
Leases that do not qualify as direct financing leases are
accounted for as operating leases. Equipment subject to
operating leases is stated at cost less accumulated depreciation
plus accrued rent and is depreciated using the straight-line
method over its useful life, ranging from 25-30 years.
Effective July 1, 1992, the Companies changed their estimates of
useful lives and salvage values which had the impact of
increasing depreciation expense for 1992 by $884,000.
The Companies review the carrying value of equipment on operating
leases at least annually. If the review indicates that such
values have been permanently impaired, the carrying value is
reduced accordingly. Management believes that no such impairment
has occurred through the date of these financial statements.
Direct Financing Leases
The Companies' investment in direct financing leases includes
lease contracts receivable plus the estimated unguaranteed
residual value of the equipment at the lease termination date,
less unearned income. Lease contracts receivable includes the
total rent to be received over the life of the lease reduced by
rent collected. Initial unearned income is the amount by which
the lease contract receivable plus the estimated residual exceeds
the initial investment in the leased equipment at lease
inception. Unearned income is amortized to produce a level yield
over the lease term.
The residual value of equipment under direct financing leases is
the estimated amount to be received by the Companies from the
disposition of equipment upon expiration of the lease.
Management reviews residual value estimates at least annually.
If the review results in a lower estimate than had been
previously established and the decline is judged to be other than
temporary, the accounting for the transaction is revised using
the new estimate, and the resulting reduction in the net
investment is recognized as an expense in the period in which the
change is made. The Companies have had no such revisions to
their residual value estimates.
Aircraft Delivery Progress Payments
Payments made toward the future delivery of aircraft under
construction are recorded at cost, including capitalized
interest, and are classified as progress payments.
Credit Risk
The Companies' customers are concentrated in the commercial
airline industry. All investments are subject to normal credit
policies, collateral requirements and senior management review.
Lease provisions require lessees to meet certain standards for
maintenance and return conditions, and provide for repossession
upon default.
Profit and Income Taxes
Pursuant to Article 1, paragraph 1(a), of the Netherlands
Antilles National Profit Tax Ordinance of 1940, the Association
is subject to Netherlands Antilles profit tax. An advance tax
ruling has been obtained from the Netherlands Antilles tax
authorities in order to determine the tax position of the
Association. Based on this tax ruling, $96,000, $104,000 and
$96,000 have been recorded as an estimate for profit taxes in
1993, 1992 and 1991, respectively.
The Air N.V. is subject to Netherlands corporate income tax. An
advance tax ruling has been obtained from the Netherlands tax
authorities in order to determine the tax position of the Air
N.V. Based on this tax ruling $43,000, $36,000, and $42,000 have
been recorded as an estimate for corporate income taxes in 1993,
1992, and 1991, respectively.
No temporary differences exist between the computation of tax
liability for book and tax purposes which would give rise to
deferred income taxes.
Reclassification
Certain amounts in the financial statements presented have been
reclassified to conform the prior years' data to the current
presentation.
2. Association Capital Contributions, Loans and Allocation of
Income, Losses and Cash Distributions
Exposure Cap
Members are only committed to contribute to the Association a
maximum of equity contributions (excluding Premium Contributions)
and loans aggregating $300,000,000 and $100,000,000 for each
Initial Member and each Additional Member, respectively (Exposure
Cap) for a total of $1,000,000,000. Also, Premium Contributions
which may be required by the Additional Members may not exceed
$2,500,000 for each Additional Member. The amount of unused and
available equity and loan contributions from the Members at
December 31, 1993 is $201,000,000.
Capital Contributions
Each Initial Member and each Additional Member are committed to
contribute to the equity of the Association amounts aggregating
up to each member's Equity Commitment (Initial Contributions).
Such Equity Commitments aggregate $120,000,000 for the Initial
Members and $80,000,000 for the Additional Members. Amounts
contributed to the Association under this commitment through
December 31, 1993 aggregated approximately $171,315,000 and
represent each member's Equity Contribution. Each member's pro-
rata share of such Equity Contributions represents its Venture
Share of the Association.
Each Additional Member is also required to make Premium
Contributions at the time the Initial Contributions are paid. A
portion of the Premium Contributions are then reallocated to the
Initial Members. Premium Contributions contributed to the
Association through December 31, 1993 aggregated approximately
$8,566,000.
Allocation of Income and Losses
Income and losses are allocated to each member according to its
Venture Share.
Allocations of Cash Flow
Available cash flow, as defined by the Cooperative Agreement,
will be distributed to the members, and shall be allocated in
part as a Contingent Return to all members and in part as a
Contingent Management Fee to the Initial Members (Note 10). Upon
liquidation of the Association, remaining net assets of the
Association will be distributed among the members in proportion
to their respective Investment Share, as defined by the
Cooperative Agreement.
3. Operating Leases
The Companies lease aircraft and related equipment to South
American, Central American, European and Asian commercial
airlines under operating leases. Earned income from operating
leases in 1993, 1992, and 1991 was $50,910,000, $39,519,000, and
$22,526,000, respectively.
As of December 31, 1993, minimum future rentals under operating
leases are due as follows (in thousands):
<TABLE>
<CAPTION>
Year due
---------
<S> <C>
1994 $ 50,250
1995 49,077
1996 29,846
1997 16,675
1998 14,576
Thereafter 29,151
----------
$ 189,575
==========
</TABLE>
4. Direct Financing Leases
The Association leases aircraft and related equipment to a South
American commercial airline under direct-financing leases with
initial terms of 12 years. Earned income from direct financing
leases in 1993, 1992, and 1991 was $5,401,000, $6,303,000, and
$15,725,000, respectively. The components of the Association's
net investment in direct financing leases are as follows (in
thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992
----- -----
<S> <C> <C>
Lease contracts receivable $114,201 $130,740
Estimated unguaranteed
residual values 30,700 30,700
Less: Unearned income (50,902) (61,660)
Investment in direct
financing leases $ 93,999 $ 99,780
</TABLE>
As of December 31, 1993, minimum lease payments to be received
are as follows (in thousands):
<TABLE>
<CAPTION>
Year due
--------
<S> <C>
1994 $ 17,118
1995 15,959
1996 15,959
1997 15,959
1998 15,959
Thereafter 33,247
----------
$ 114,201
==========
</TABLE>
5. Lessee Deposits
Lessee deposits consist of security deposits and maintenance
reserves including accrued interest. At December 31, 1993 and
1992, security deposits are $9,740,000 and $9,945,000,
respectively, and maintenance reserves are $32,339,000 and
$20,979,000, respectively. Lessee deposits are paid by the
lessee prior to the inception of the lease and are refundable to
the lessee based on the terms of the various leases. Maintenance
reserves are charged to lessees based upon usage of the leased
aircraft. Such amounts will be reimbursed to the lessee as
required maintenance is performed. Interest due to lessees is
accrued on the outstanding security deposits and maintenance
reserves at rates ranging from 2.6250% to 3.5625% (based on 30-
day LIBOR). Accrued interest payable on lessee deposits at
December 31, 1993 and 1992 aggregated $3,169,000 and $2,454,000,
respectively.
6. Capital Lease Obligation
In November 1991, the Association sold delivery positions for the
two aircraft delivering that month to a third party and leased
back the aircraft for a term of ten years. No gain or loss was
recognized on the sale-leaseback. The terms of the agreement
require capital lease treatment by the Association. The aircraft
secure third party financing obtained by the lessor. This
financing is recourse to the Members in their respective
ownership shares.
As of December 31, 1993, future minimum lease payments on the
capital lease obligation are as follows (in thousands):
<TABLE>
<CAPTION>
Year due
--------
<S> <C>
1994 $ 8,937
1995 8,937
1996 8,937
1997 8,937
1998 8,937
Thereafter 39,079
-------
Total minimum lease payments 83,764
Amount representing
interest (7.9%) (25,347)
Present value of minimum --------
lease payments including
$4,415 of current
maturities $ 58,417
===========
</TABLE>
The capital lease obligation was reduced in 1991 by $11,891,000
which the Association irrevocably placed in a trust to be used
solely for the satisfaction of the obligation.
The Association has entered into an interest rate swap to manage
interest rate exposure by effectively converting the capital
lease obligation from a fixed rate to a floating rate borrowing.
The Association receives or pays interest on a notional principal
amount of $55,605,000 at December 31, 1993 based on the
difference between a nominal rate of 9.07% and the 180-day LIBOR.
No actual borrowing or lending is involved. The swap agreement
terminates in 2001.
The aircraft subject to capital lease financing were subleased to
a commercial airline on four-year operating leases commencing in
March 1992. Such subleases are classified as operating leases
with carrying values of $73,637,000, and $76,442,000 at December
31, 1993 and 1992, respectively. Depreciation expense of
$2,753,000 was recorded in 1993. Minimum future rentals to be
received under noncancelable subleases aggregate $14,939,000
receivable over a period ending in 1996. Such rentals are
included in the minimum future rentals under operating leases
disclosed in Note 3.
7. Nonrecourse Obligations
Nonrecourse obligations are secured by the underlying leases and
leased assets. In the event of lessee default, the lenders have
recourse only to the pledged equipment and the obligation is
nonrecourse to the general credit of the Association. The
Companies' investment in such leases at December 31, 1993 and
1992 (net of the related outstanding debt principal of
$116,827,000 and $124,841,000, respectively, included in
nonrecourse obligations) is $46,747,000 and $43,604,000,
respectively. The carrying amount of the nonrecourse obligations
at December 31, 1993 approximate their fair value.
Nonrecourse obligations include the following (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992
------------------------------------------------------
<S> <C> <C>
Variable Rate Note due in 2001 $ 68,643 $ 73,441
Variable Rate Note due in 2000 48,184 51,400
---------- -----------
$ 116,827 $ 124,841
========== ===========
</TABLE>
As of December 31, 1993, future principal payments on nonrecourse
obligations are as follows (in thousands):
<TABLE>
<CAPTION>
Year due
--------
<S> <C>
1994 $ 8,375
1995 8,909
1996 9,676
1997 10,528
1998 11,457
Thereafter 67,882
---------
$ 116,827
=========
</TABLE>
8. Loans from Members
At December 31, 1993 and 1992, loans from members bearing interest
at rates from 150 to 294 basis points over the 30-to-180-day LIBOR,
aggregated $482,302,000 and $393,046,000 respectively, with accrued
interest payable aggregating $4,580,880 and $2,422,000
respectively. Such borrowings are collateralized by the aircraft
delivery progress payments and leased assets.
The future principal payments on loans from members as of December
31, 1993 are based upon leases and approved amortization schedules
then in existence. Re-lease of the aircraft upon termination of
the current leases will extend the term of the loans.
As of December 31 1993, future principal payments on loans from
members are due as follows (in thousands):
<TABLE>
<CAPTION>
Year due
---------
<S> <C>
1994 $ 185,667
1995 65,971
1996 148,050
1997 29,031
1998 11,728
Thereafter 41,855
--------
$ 482,302
===========
</TABLE>
Interest on loans from members for 1993, 1992 and 1991 is as
follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
------------------------------------------------------
<S> <C> <C> <C>
Interest costs incurred $ 22,100 $ 18,425 $ 20,965
Accrued interest payable
added to loans from
members 2,596 4,791 7,066
Interest paid to members 17,346 12,033 14,228
</TABLE>
The Association has entered into an interest rate swap to manage
interest rate exposure by effectively converting a member loan from
a floating rate to a fixed rate borrowing. The Association
receives or pays interest on a notional principal amount of
$70,438,000 and $73,092,000 at December 31, 1993 and 1992,
respectively, based on the difference between a 10.47% fixed rate
and the 90-day LIBOR. No actual borrowing or lending is involved.
The swap agreement terminates in 2002.
The carrying amount of variable rate loans from members of
$411,864,000 and $319,954,000 at December 31, 1993 and 1992,
respectively, approximates their fair value. The fair value of the
fixed rate loans from members at December 31, 1993 and 1992 is
$83,131,000 and $90,322,000, respectively. The fair value was
estimated by performing a discounted cash flow analysis using the
term and current market rate for similar types of borrowing
arrangements.
9. Aircraft Delivery Progress Payments and Commitments
At December 31, 1993, the Association had lease commitments
outstanding for equipment with a net book value of $38,954,000 to
a commercial airline.
Interest cost incurred during 1993, 1992 and 1991 aggregated
$34,347,000, $32,476,000 and $34,363,000, respectively, of which
$1,338,000, $3,280,000 and $7,489,000, respectively, was
capitalized into progress payments. During 1993, 1992 and 1991,
$35,558,000, $48,296,000 and $109,232,000, respectively, were
transferred from aircraft delivery progress payments to investments
in leased assets.
At December 31, 1993, remaining obligations to vendors under
aircraft delivery positions aggregated $118,686,000. Obligations
under delivery positions, for which the final payments upon
delivery of the aircraft are subject to escalation clauses, will be
paid in each of the subsequent years ended December 31, as follows
(in thousands):
<TABLE>
<CAPTION>
Estimated
payments
upon expected
Fixed delivery date
Year ended December 31, obligations of aircraft Total
- -----------------------------------------------------------------
<S> <C> <C> <C>
1994 $ - $ - $ -
1995 784 - 784
1996 6,272 - 6,272
1997 6,272 - 6,272
1998 - 105,358 105,358
Thereafter - - -
----------- ------------- ---------
$ 13,328 $ 105,358 $ 118,686
=========== ============= =========
</TABLE>
10. Related Party Transactions
The Companies had related-party transactions as follows:
Management of the Association and Air N.V.
Pursuant to the Association Agreement and a Management Agreement,
both dated September 4, 1990, between the Association and GATX as
Manager and CL as Co-Manager, GATX and CL are to manage, lease and
administer the Association property, among other duties, for an
initial term of five years. As consideration for the performance
of their duties under the Management Agreement, the Manager and Co-
Manager jointly receive a monthly management fee. The management
fee is calculated for each leased item of equipment and is based
upon the amount by which the sum of rents, interest and loan or
commitment fees received by the Association exceed an assumed rate
of interest paid with respect to each leased asset (the Management
Fee). A Contingent Management fee will be paid to the Initial
Members after the repayment of all principal and interest on any
third-party debt, member loans, and member contributions and member
returns, as defined by the Cooperative Agreement. However, minimum
fees paid to the Manager and Co-Manager will not be less than
$1,200,000 per year.
Also, as consideration for certain management services provided by
the Manager and Co-Manager prior to the organization of the
Association, the Association was charged $1,268,000 by the Manager
and Co-Manager. The unamortized balance is reflected in other
assets.
The Association also reimburses the Manager and Co-Manager for
costs as allowed in the Management Agreement.
GATX and CLN Oyens Trust B.V, an affiliate of CL, are the Managing
Directors of Air N.V. They receive no consideration for
performance of their management duties.
In accordance with an informal Member agreement, guarantee fees
were accrued aggregating $1,131,985 for the Members guaranteeing
certain obligations of the Association from inception in 1991
through December 31, 1992. In August 1993, the Members agreed to
forego such fees. The reversal of such fees is shown as a
reduction of the 1993 guarantee fee expense in the statement of
operations.
The Association and Air N.V. are charged administrative fees by CLN
Oyens Trust N.V. (Curacao) and CLN Oyens Trust B.V., respectively,
both of which are affiliates of CL.
Cash on hand at December 31, 1993 and 1992 is on deposit with CL or
its affiliates.
Amounts owed to GATX and CL at December 31, 1993 and 1992,
management fees incurred and costs reimbursed for each of the three
years in the period ended December 31, 1993 are as follows (in
thousands):
<TABLE>
Management of the Association and Air N.V.
- -------------------------------------------
<CAPTION>
For the Year Ended Amount
December 31, 1993 receivable
------------------ (payable)at
Reimbursed December 31,
Costs Expense Income 1993
---------- ------- ------ ------------
<S> <C> <C> <C> <C>
GATX:
Management fee $ - $ 1,400 $ - $ (673)
Security deposits &
accrued interest - - 45 1,413
Maintenance reserves &
accrued interest - - 400 13,912
Insurance & lessee buyer
furnished equipment 2,846 - - 527
Guarantee fees - (218) - (74)
----------- ------- ------ ------------
2,846 1,182 445 15,505
CL (& affiliated companies):
Management fee $ - $ 346 $ - $ (147)
Security deposits &
accrued interest - - 79 2,512
Guarantee fees - (218) - (74)
----------- ------- ------ ------------
- 128 79 2,291
Other Members' guarantee fees - (288) - (101)
----------- ------- ------ ------------
Totals $ 2,846 $ 1,022 $ 524 $ 17,295
----------- ------- ------ ------------
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended Amount
December 31, 1992 receivable
------------------ (payable)at
Reimbursed December 31,
Costs Expense Income 1992
---------- ------- ------ ------------
<S> <C> <C> <C> <C>
GATX:
Management fee $ - $ 1,168 $ - $ (421)
Security deposits &
accrued interest - - 52 1,368
Maintenance reserves &
accrued interest - - 395 10,943
Insurance & lessee buyer
furnished equipment 7,667 - - (93)
Guarantee fees - 339 - (339)
----------- ------- ------ ------------
7,667 1,507 447 11,458
CL (& affiliated companies):
Management fee $ - $ 300 $ - $ (101)
Security deposits &
accrued interest - - 92 2,432
Guarantee fees - 339 - (339)
----------- ------- ------ ------------
- 639 92 1,992
Other Members' guarantee fees - 453 - (453)
----------- ------- ------ ------------
Totals $ 7,667 $ 2,599 $ 539 $ 12,997
----------- ------- ------ ------------
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended Amount
December 31, 1991 receivable
------------------ (payable)at
Reimbursed December 31,
Costs Expense Income 1991
---------- ------- ------ ------------
<S> <C> <C> <C> <C>
GATX:
Management fee $ - $ 1,003 $ - $ (264)
Security deposits &
accrued interest - - 78 1,315
Maintenance reserves &
accrued interest - - 421 8,753
Insurance & lessee buyer
furnished equipment 3,613 - - (1,236)
----------- ------- ------ ------------
3,613 1,003 449 8,568
CL (& affiliated companies):
Management fee $ - $ 267 $ - $ (82)
Security deposits &
accrued interest - - 138 2,338
----------- ------- ------ ------------
- 267 138 2,256
----------- ------- ------ ------------
Totals $ 3,613 $ 1,270 $ 637 $ 10,824
----------- ------- ------ ------------
</TABLE>
11. Subsequent Event
In March 1994, the Association was notified that the lessee of the five
aircraft under direct-financing leases intends to suspend rent payments
temporarily. Action may be required to respond to this situation. At this
time the Association has not determined the impact of this matter, if any,
on its financial position or future operating results.
<PAGE>
Report of Independent Auditors
Board of Directors
GATX Capital Corporation
We have audited the consolidated financial statements of
GATX Capital Corporation (a wholly owned subsidiary of
GATX Corporation) and subsidiaries listed in the
accompanying index to financial statements (Item 14(a)).
These financial statements are the responsibility of the
Company's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements listed in the
accompanying index to financial statements (Item 14(a))
present fairly, in all material respects, the
consolidated financial position of GATX Capital
Corporation and subsidiaries at December 31, 1993 and
1992, and the consolidated results of their operations
and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with
generally accepted accounting principles.
In 1992, the Company changed its method of accounting for
income taxes and postretirement benefits other than
pensions effective January 1, 1992.
ERNST & YOUNG
January 25, 1994
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GATX CAPITAL CORPORATION
(Registrant)
By /s/ Ronald H. Zech
----------------------
Ronald H. Zech
President, Director, and
Chief Executive Officer
March 18, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the date
indicated.
By /s/ Ronald H. Zech By /s/ David M. Edwards
- ---------------------- -----------------------
Ronald H. Zech David M. Edwards
President, Director, and Senior Vice President -
Chief Executive Officer Finance and Administration,
Chief Financial Officer, and Director
Dated: March 18, 1994 Dated: March 18, 1994
By /s/ Curt F. Glenn By /s/ John F. Chlebowski,Jr.
- -------------------- -----------------------------
Curt F. Glenn John F. Chlebowski, Jr.
Principal Accounting Officer and Director
Vice President & Controller
Dated: March 18, 1994 Dated: March 18, 1994
By /s/ Frederick L. Hatton By /s/ Joseph C. Lane
- -------------------------- ---------------------
Frederick L. Hatton Joseph C. Lane
Executive Vice President Executive Vice President
and Director and Director
Dated: March 18, 1994 Dated: March 18, 1994
<PAGE>
Exhibit 24 - Consent of Independent Auditors
We consent to the incorporation by reference in
Registration Statements No. 33-6910 on Form S-3 filed
July 7, 1986 (as amended by Amendment No. 1 filed
December 19, 1986, Amendment No. 2 filed January 7, 1987,
Amendment No. 3 filed December 23, 1987, and Amendment
No. 4 filed August 9, 1989), No. 33-30300 on Form S-3
filed August 2, 1989, No. 33-40327 on Form S-3 filed May
2, 1991, and No. 33-64474 on Form S-3 filed June 17, 1993
of GATX Capital Corporation of our report dated January
25, 1994, with respect to the consolidated financial
statements included in this Annual Report on Form 10-K
for the year ended December 31, 1993.
ERNST & YOUNG
San Francisco, California
March 25, 1994
<PAGE>
<TABLE>
<CAPTION> Exhibit 12
GATX Capital Corporation
Ratio of Earnings to Fixed Charges
Year Ended December 31,
(in thousands)
1993 1992 1991 1990 1989
Fixed Charges: ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Interest on indebtedness
and amortization
of debt discount
and expense $ 65,454 $ 71,889 $ 71,374 $ 57,167 $ 53,609
Capitalized interest 279 731 2,549 7,574 4,260
Portion of rents representing
interest factor (assumed
to approximate 33%) 3,012 2,440 1,346 1,201 764
-------- -------- ------- -------- --------
Total fixed charges $ 68,745 $ 75,060 $ 75,269 $ 65,942 $ 58,633
======== ======== ======== ======== ========
Earnings available for fixed charges:
Net income (loss) $ 21,525 $ (7,197) $ 28,485 $ 31,603 $ 28,144
Add (deduct):
Income taxes (benefit) 21,361 (9,849) 22,549 22,693 22,936
Cumulative effect of
accounting changes 0 (9,456) - - -
Equity in net earnings
of joint ventures,
net of dividends
received 16,222 40,161 7,109 - -
Fixed charges
(excluding capitalized
interest) 68,466 74,329 72,720 58,368 54,373
---------- -------- --------- -------- --------
Total earnings
available for
fixed charges $ 127,574 $ 87,988 $ 130,863 $112,664 $105,453
========== ======== ========= ======== ========
Ratio of earnings to
fixed charges 1.86 1.17 1.74 1.71 1.80
====== ====== ====== ===== =====
</TABLE>
