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, 1994 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 17, 1995, Registrant has outstanding 1,031,250 shares of $1 par
value Common Stock.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
J(1) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
------------ -----------------------
Annual Report to Stockholder for Part II Items 6,7 & 8
Fiscal Year Ended December 31, 1994
(the "Annual Report")
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 Ende 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 and subsidiaries (the
"Company") is to provide and arrange equipment leases and other loan
financing. The Company also manages a portfolio of leased equipment for its
own account and the account of others. GATX Capital Corporation is a wholly-
owned subsidiary of GATX Corporation.
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.
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
Corporation. Information regarding dividends is shown on the consolidated
statements of income and reinvested earnings included in Item 8.
Item 6. Selected Financial Data
---------------------------------------
Omitted under provisions of the reduced disclosure format.
Item 7. Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------------------------
Results of Operations
---------------------
Incorporate herein by reference to the Annual Report, pages 19, 21, 22 and 25,
included as Exhibit 13 of this document.
Item 8. Financial Statements and Supplementary Data
-----------------------------------------------------
The following consolidated financial statements of GATX Capital Corporation,
included in the 1994 Annual Report (Exhibit 13), are incorporated herein by
reference (page references are to the Annual Report):
Consolidated Statements of Income and Reinvested Earnings
Years Ended December 31, 1994, 1993 and 1992 Page 20
Consolidated Balance Sheets
As of December 31, 1994 and 1993 Page 23
Consolidated Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992 Page 24
Notes to Consolidated Financial Statements Pages 26-33
Item 9. Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------------
Financial Disclosure
---------------------
None.
PART III
Item 10(a). Directors of the Registrant
----------------------------------------------
Name Office Held Since Age
------- -------------- -------- -------
James J. Glasser Chairman of the Board 1971 60
Joseph C. Lane President and Director 1994 41
Alan C. Coe Executive Vice President
and Director 1994 43
Jesse V. Crews Executive Vice President
and Director 1994 42
David M. Edwards Director 1990 43
Frederick L. Hatton Executive Vice President
and Director 1984 52
Ronald H. Zech Director 1984 51
Item 10(b). Executive Officers of the Registrant
Name Office Held Since Age
------- -------------- -------- -------
Joseph C. Lane President, Director, and
Chief Executive Officer 1994 41
Frederick L. Hatton Executive Vice President
and Director 1984 52
Alan C. Coe Executive Vice President
and Director 1994 43
Jesse V. Crews Executive Vice President
and Director 1994 42
Michael E. Cromar Vice President and Chief
Financial Officer 1994 47
Cal C. Harling Senior Vice President 1994 46
Robert J. Sammis Senior Vice President 1993 48
Thomas C. Nord Vice President, General Counsel,
and Secretary 1980 54
George R. Prince Vice President and Treasurer 1983 50
Curt F. Glenn Principal Accounting Officer, 1992 40
Vice President and Controller
Valerie C. Williams Vice President - Human Resources 1989 50
JOSEPH C. LANE, President, Director and Chief Executive Officer since 1994.
Mr. Lane joined the Company in 1979 as a Financial Analyst and has served as
District Manager, Regional Manager, Vice President, Senior Vice President and
Executive 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 currently serves
as a Director of the Equipment Leasing Association Board. He received a BA
from Yale University in 1975.
FREDERICK L. HATTON, Executive Vice President and Director since 1984. Mr.
Hatton joined the Company in 1983 as Senior Vice President and President of
GATX Air. He is currently responsible for GATX Airlog. 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.
ALAN C. COE, Executive Vice President and Director since 1994. Mr. Coe joined
the Company in 1977 as a Financial Analyst and has held a variety of positions
both domestically and internationally. Prior to 1977, Mr. Coe served as an
officer in the United States Air Force (four years) and as Vice President -
Corporate Finance - with Rotan Mosle in Houston, Texas (three years). Mr. Coe
received a BA from Southern Methodist University in 1973 and his MBA from
Golden Gate University in 1976.
JESSE V. CREWS, Executive Vice President and Director since 1994. Mr. Crews
joined the Company in 1977 as a Financial Analyst and had a variety of
positions, including Regional Manager of the Singapore (two years) and New
Orleans/Houston (five years) offices before returning to San Francisco in
1985. He has been broadly responsible for the development of new business
investment opportunities for the Company's own portfolio since 1986 and as
head of the Corporate Finance Group from 1990 to 1994. Mr. Crews received a
BA from Yale and an MBA from the University of Virginia.
MICHAEL E. CROMAR, Vice President and Chief Financial Officer since October
1994. Prior to joining GATX, Mr. Cromar was Vice President, Treasurer and
Chief Financial Officer at The Harper Group, Inc., a San Francisco based
international logistics services company (two years). Previously, he served
S.A. Louis-Dreyfus & Cie., principally as Senior Vice President, Finance
and Information, for Gearbulk Ltd. an industrial bulk shipping joint venture
in Bergen, Norway (four years). From 1982 to 1988 (five years) he was
corporate controller and a director of information technology for American
President Companies, Ltd. From 1975, he held a variety of financial
management positions with Natomas Co., an energy resources company. Mr.
Cromar began his career with Touche Ross & Co. where he was a Certified Public
Accountant. He received a BS degree in Business Administration in 1972 from
the University of Utah and was an infantry officer in the U.S. Army, including
service in Vietnam.
CAL C. HARLING, Senior Vice President since 1994. Mr Harling joined the
Company in 1987 as Vice President, Technology Financing. Prior to 1987 Mr.
Harling was an independent consultant for two years. Mr. Harling worked for
Decimus Corporation, a subsidiary of BankAmerica Corporation, for ten years
starting in 1975. While at Decimus Mr. Harling held various positions
including Vice President of Vendor Operating Leasing, Vice President of
Portfolio Management, and other management positions in systems development.
Mr. Harling received a BS from California State University, Sacramento in
1973.
ROBERT J. SAMMIS, Senior Vice President - Corporate Development since 1993.
Mr. Sammis joined the Company in 1975 as Associate Counsel. He has served as
a Senior Vice President in charge of Equipment Management and as Managing
Director, International. Mr. Sammis is a Fulbright scholar and, in that
capacity, taught law at the University of Los Andes, Bogota, Columbia. Prior
to joining the Company, he was with Pillsbury, Madison & Sutro as Associate
Counsel. Mr. Sammis received a BA from the University of California and a JD
from the University of Michigan.
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 and 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; was 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
----------------------
Omitted under provisions of the reduced disclosure format.
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
included in the Annual Report for the year ended December 31, 1994, are
incorporated by reference in Item 8.
Consolidated Balance Sheets
As of December 31, 1994 and 1993
Consolidated Statements of Income and Reinvested Earnings
Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992
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 incorporated by reference
in Item 8.
Item 14.(a) (continued)
---------------------------
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) Second Amendment, dated June 14, 1994, to Credit Agreement referred
to in 10(f).(8)
10(h) Third Amendment, dated December 1, 1994, to Credit Agreement
referred to in 10(f).(8)
10(i) Amendment No. 1, dated December 1, 1994, to Credit Agreement
referred to in 10(e).(8)
10(j) First Amendment, dated June 20, 1993, to Credit Agreement referred
to in 10(f).(8)
12 Computation of Ratio of Earnings to Fixed Charges.(8)
13 Annual Report to Shareholder, pages 19-34.(8)
23 Consent of Independent Auditors.(8)
27 Financial Data Schedule.(8)
99 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) Submitted to the Securities and Exchange Commission with the
electronic filing of this document.
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>
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, 1994 and 1993, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, 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 LLP
San Francisco, California
January 24, 1995
<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/ Joseph C. Lane
------------------------------
Joseph C. Lane
President, Director, and
Chief Executive Officer
March 27, 1995
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/ Joseph C. Lane By /s/ Michael E. Cromar
---------------------- ---------------------------
Joseph C. Lane Michael E. Cromar
President, Director, and Vice President and
Chief Executive Officer Chief Financial Officer
Dated: March 27, 1995 Dated: March 27, 1995
By /s/ Curt F. Glenn By /s/ David M. Edwards
---------------- ---------------------------
Curt F. Glenn David M. Edwards
Principal Accounting Officer and Director
Vice President & Controller
Dated: March 27, 1995 Dated: March 27, 1995
By /s/ Jesse V. Crews By /s/ Alan C. Coe
----------------------- ---------------------
Jesse V. Crews Alan C. Coe
Executive Vice President Executive Vice President
and Director and Director
Dated: March 27, 1995 Dated: March 27, 1995
Exhibit 12
------------
<TABLE>
<CAPTION>
GATX Capital Corporation
Ratio of Earnings to Fixed Charges
Year Ended December 31,
(in thousands)
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Fixed Charges:
Interest on indebtedness
and amortization of debt
discount and expense $ 62,744 $ 65,454 $ 71,889 $ 71,374 $ 57,167
Capitalized interest 292 279 731 2,549 7,574
Portion of rents
representing interest
factor (assumed to
approximate 33%) 5,120 3,012 2,440 1,346 1,201
-------- ------ ------ ------- ------
Total fixed charges $ 68,158 $ 68,745 $ 75,060 $ 75,269 $ 65,942
===== ===== ===== ===== =====
Earnings available for fixed charges:
Net income (loss) $ 24,851 $ 21,525 $ (7,197) $ 28,485 $ 31,603
Add (deduct):
Income taxes (benefit) 18,785 21,361 (9,849) 22,549 22,693
Cumulative effect of
accounting changes - - (9,456) - -
Equity in net earnings of
joint ventures, net of
dividends received 14,322 16,222 40,161 7,109 -
Fixed charges (excluding
capitalized interest) 67,864 68,466 74,329 72,720 58,368
-------- ------ ------ ------ --------
Total earnings available
for fixed charges $ 125,822 $127,574 $ 87,988 $ 130,863 $112,664
====== ====== ===== ===== ======
Ratio of earnings to
fixed charges 1.85 1.86 1.17 1.74 1.71
====== ====== ===== ===== ======
</TABLE>
Management's Discussion and Analysis
----------------------------------
Overview
--------
GATX Capital Corporation and subsidiaries (the "Company") provide and
arrange equipment leases and other loan financing. The Company also
manages a portfolio of leased equipment for its own account and the
account of others. The compensation for managing these portfolios is
heavily dependent upon performance.
In 1994, the improvement in the economy, a resurgence in bank earnings,
and the resulting oversupply of equity chasing available financings
conspired to keep lease rates uncharacteristically low. However, recent
increases in interest rates have helped make the lease financing option
more attractive to potential lessees. Capital equipment spending in 1995
is improving. Consequently, a better balancing of lessor supply with
lessee financing demand should result in more opportunities, as well as
better returns, for investors such as GATX Capital.
Commercial airlines in the United States posted a collective profit for
the first time in many years. Although lower fuel prices were a major
contributor to that profit, the industry is also making improvements in
cost controls. Aircraft demand in the near-term is expected to remain
weak. However, with aircraft production rates lower and more older
aircraft being retired than in recent years, oversupply of aircraft is being
reduced and lease rates for certain aircraft are firming.
The outlook for GATX Rail continues to be quite positive. Utilization
rates are approaching 100% for both our railcar and locomotive fleets. We
are encouraged by continued traffic growth in the rail sector and, in
particular, increased movements of intermodal freight and bulk
commodities. The focus of GATX Rail has and will become more global in
nature as we pursue opportunities outside of North America, with specific
emphasis in Europe.
The outlook for Technology Asset Funding is positive. The technology and
communications industry is beginning to expand again after reduced
spending by equipment users. The cycle of price performance improvement
continues to accelerate, and additional services provided by lessors are
becoming a more important part of the overall financing package. These
trends are expected to continue through the 1990s, and GATX Capital is
well positioned to take advantage of them.
The success of our strategy in Golf Capital was evident by the record
profits in 1994 from this activity. The challenge going forward will be to
identify additional golf course management companies with whom we feel
confident and see growth opportunities.
The prospects for Venture Finance continue to be positive. We expect
industry-wide venture capital investment to be in the $2-$3 billion range
in 1995. However, we expect some increase in the intensity of
competition in 1995 from both existing competitors and new market
entrants
A pie chart entitled "ASSET CONCENTRATION" appears here depicting the
following information:
<TABLE>
<CAPTION>
INDUSTRY %
-------- ---
<S> <C>
Air 43.2%
Rail 22.6%
Warehouse/Production 7.3%
Marine 8.0%
Golf 5.1%
Real Estate 3.8%
Other 10.0%
</TABLE>
Page 19
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME AND REINVESTED EARNINGS
<CAPTION>
Year ended December 31, (in thousands) 1994 1993 1992
------ ----- -----
<S> <C> <C> <C>
Earned Income
Leases $143,639 $125,457 $115,631
Gain on disposition of equipment 21,444 44,434 22,277
Fees 10,111 8,680 13,964
Interest 27,085 19,666 21,494
Investment in joint ventures 9,242 8,383 12,445
Other 4,511 5,777 4,305
-------- -------- ---------
216,032 212,397 190,116
Expenses
Interest 62,744 65,358 71,889
Operating leases 50,621 35,277 21,814
Selling, general and administrative 39,296 37,458 38,466
Provision for losses on investments 19,000 29,000 81,000
Other 735 2,418 3,449
-------- -------- ---------
172,396 169,511 216,618
Income (Loss) Before Income Taxes
and Cumulative Effect of
Accounting Changes 43,636 42,886 (26,502)
Income Taxes
Current income tax expense 12,112 14,535 5,911
Deferred income tax expense (benefit) 6,673 6,826 (15,760)
-------- -------- ---------
18,785 21,361 (9,849)
-------- -------- ---------
Income (Loss) Before Cumulative
Effect of Accounting Changes 24,851 21,525 (16,653)
Cumulative Effect of Accounting Changes _ _ 9,456
-------- -------- ---------
Net Income (Loss) 24,851 21,525 (7,197)
Reinvested Earnings at Beginning of Year 133,570 123,771 130,968
Dividends Paid to Stockholder (12,385) (11,726) _
-------- -------- ---------
Reinvested Earnings at End of Year $146,036 $133,570 $123,771
======== ========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
Page 20
<PAGE>
Management's Discussion and Analysis
-----------------------------------
Results of Operations
------------------
Net income of $24.9 million in 1994 exceeded the prior year by $3.4
million. The increase in earned income was primarily generated by
increased lease and interest income, offset by lower gains from disposition
of equipment. The increase in total expenses resulted from higher operating
lease expense, offset by a lower provision for losses and a decrease in tax
expense. The increase in net income between 1992 and 1993 was primarily
due to the reduction in the provision for losses, coupled with an increase in
gains on disposition of equipment.
Lease income has been increasing primarily because of the significant
amount invested, both on and off the balance sheet, in new operating leases
each year. The operating lease portfolio generated $21.8 million more
income in 1994 than in 1993. Approximately $7.2 million of this increase
was due to an acquisition of a large railcar portfolio which generated a full
year's income in 1994 but only six months of income in 1993. Income from
finance leases decreased $3.6 million from 1993 to 1994. The decrease is
primarily due to the impact of revised residual estimates on older aircraft
subject to leveraged leases.
Interest income increased in 1994 due to several loan repayments and
higher interest rates. Two large golf loans were prepaid in 1994, generating
$2.4 million of interest income from prepayment premiums. An additional
$3.0 million of interest, which had not been accrued due to its uncertain
nature, was realized from a real estate loan and an investment in purchased
notes. The effect of higher interest rates on variable rate loans led to a $2.1
million increase in income from 1993.
Disposition gains are primarily realized from asset remarketing both at
lease end and in response to market opportunities. The amount of income
from this activity fluctuates between periods.
A stacked bar chart entitled "EARNED INCOME" appears here depicting the
components of earned income for the years 1992, 1993, and 1994 as shown on
the income statement on page 20.
Page 21
<PAGE>
Fee income is generated from managing and re-marketing assets on behalf
of others, and from providing broker services. The Company's remarketing
fees are generally performance-based and can fluctuate significantly
depending on market conditions and the timing of lease maturities. The
amount of fee income from managing portfolios for others has been
increasing each year as the size of managed portfolios expands.
Joint venture income in 1992 included a $2.7 million gain on the sale of a
real estate investment. Income in 1993 was lower, in part, due to a revision
of residual estimates at one of the Company's technology finance joint
ventures.
Operating Lease expense has been increasing primarily because of growth
in the lease portfolio and accelerated depreciation on older wide body
aircraft. The increase in depreciation from 1993 to 1994 of $7.2 million
included accelerated depreciation on aircraft of $4.2 million. Operating
lease rental expense increased $6.5 million in 1994 because of a large sale
leaseback of railcars in late 1993. The increase in repairs and maintenance
expense of $1.3 million in 1994 reflects the acquisition of that same railcar
fleet in mid-1993.
Tax expense decreased in 1994 as a result of a lower effective tax rate,
43.0%, compared to the 49.8% effective rate in 1993. The 1993 effective
rate included the 3.7% effect of the Federal tax rate increase which
occurred that year.
The provision for losses on investments in 1992 and 1993 reflected
continued concern for the values of certain types of aircraft and real estate.
Much of the Company's older, Boeing 747 and McDonnell Douglas DC-10
aircraft and certain real estate investments were written down over the
last three years. These factors have resulted in the decline in the allowance
for losses, and charges to that allowance as a percentage of investments, as
well as a decline in the provision.
A bar chart entitled "OPERATING LEASE MARGIN" appears here depicting operating
lease expense (as shown on the income statement on page 20) and operating
lease income (as shown in the footnote entitled Earned Income from Leases
on page 27) for the years 1992, 1993, and 1994.
A bar chart entitled "ALLOWANCE FOR LOSSES" appears here depicting the
following information:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Allowance for losses
as a percentage of
total investments 6.40% 6.92% 7.43%
Charges to allowance
for losses as a
percentage of total
investments 2.14% 3.47% 3.83%
</TABLE>
Page 22
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
As of December 31, (in thousands) 1994 1993
------ ------
<S> <C> <C>
Assets
Cash and cash equivalents $ 9,407 $ 12,950
Investments:
Direct financing leases 245,441 275,605
Leveraged leases 252,651 224,953
Operating lease equipment - net of
depreciation 295,273 254,651
Secured loans 231,225 226,073
Investment in joint ventures 202,367 197,720
Assets held for sale or lease 24,320 56,777
Other investments 20,373 24,298
Investment in future residuals 13,157 14,071
Less: Allowance for losses on
investments (82,206) (88,193)
-------- ---------
Total investments 1,202,601 1,185,955
Due from GATX Corporation 42,515 42,638
Other assets 15,067 15,055
-------- ---------
Total Assets $1,269,590 $1,256,598
========= =========
Liabilities and Stockholder's Equity
Accrued interest $ 14,987 $ 14,489
Accounts payable and other liabilities 108,635 43,637
Debt financing:
Commercial paper and bankers'
acceptances 124,834 104,164
Notes payable 14,021 17,771
Obligations under capital leases 19,431 22,442
Senior term notes 613,600 624,850
-------- ---------
Total debt financing 771,886 769,227
Nonrecourse obligations 55,270 68,058
Deferred income 4,185 62,965
Deferred income taxes 15,390 11,053
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 146,036 133,570
Equity adjustment from foreign
currency translation (759) (361)
-------- ---------
Total stockholder's equity 299,237 287,169
-------- ---------
Total Liabilities and Stockholder's Equity $1,269,590 $1,256,598
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
Page 23
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year ended December 31, (in thousands) 1994 1993 1992
------ ----- -----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 24,851 $ 21,525 $ (7,197)
Reconciliation to net cash from
operating activities:
Provision for losses on investments 19,000 29,000 81,000
Depreciation expense 33,341 29,052 17,927
Cumulative effect of accounting
changes - - (9,456)
Provision for deferred income taxes
(benefits) 6,673 6,826 (15,760)
Gain on disposition of equipment (21,444) (44,434) (22,277)
Joint venture income (9,242) (8,383) (12,445)
Changes in assets and liabilities:
Accrued interest, accounts payable,
and other liabilities 61,836 6,254 253
Due from GATX Corporation 123 (6,984) (4,673)
Deferred income (48,072) 1,474 (273)
Other - net (6) (6,994) 2,120
------ ----- -----
Net cash flows from operating activities 67,060 27,336 29,219
------ ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in leased equipment, net of
nonrecourse borrowings for
leveraged leases (161,341) (215,974) (68,091)
Loans extended to borrowers (101,500) (39,390) (40,184)
Other investments (16,285) (46,199) (68,510)
-------- ------- -------
Total investments (279,126) (301,563) (176,785)
Lease rents received, net of earned income
and leveraged lease nonrecourse
debt service 24,234 33,893 6,932
Loan principal received 88,415 53,903 39,029
Proceeds from disposition of
equipment 75,697 101,429 52,502
Proceeds from disposition of
real estate 10,475 31,963 3,454
Joint venture investment recovery 23,564 24,603 52,606
-------- ------- -------
Recovery of investments 222,385 245,791 154,523
-------- ------- -------
Proceeds from disposition of other
assets - 90,604 -
-------- ------- -------
Net cash flows (used in) provided by
investing activities (56,741) 34,832 (22,262)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term
borrowings 16,920 (76,156) (44,895)
Proceeds from issuance of long-term
debt 55,000 120,000 100,000
Repayment of long-term debt (66,250) (91,347) (59,127)
Dividends paid to stockholder (12,385) (11,726) -
Other financing activities (7,147) (2,816) (6,295)
-------- ------- -------
Net cash flows used in financing
activities (13,862) (62,045) (10,317)
-------- ------- -------
Net (decrease) increase in cash and
cash equivalents (3,543) 123 (3,360)
Cash and cash equivalents at the
beginning of the year 12,950 12,827 16,187
-------- ------- -------
Cash and Cash Equivalents at
December 31 $ 9,407 $ 12,950 $ 12,827
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ 15,557 $ 25,707 $ 10,403
Interest paid $ 61,918 $ 65,861 $ 72,653
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
Page 24
<PAGE>
Management's Discussion and Analysis
----------------------------------
Cash Flow, Liquidity and Capital Resources
--------------------------------------
In 1994, the Company generated cash from operations of $67.1 million and
portfolio proceeds of $222.4 million, which were reinvested in $279.1
million of leased equipment, loans and other investments, and used to pay
$12.4 million in dividends.
Cash from operating activities was higher in 1994 compared to the two
prior years primarily due to the change in the Company's lease portfolio mix.
The Company has made increasing investments in operating leases, both on
and off the balance sheet, over the last three years. Cash from operating
leases, net of lease-in expense, represented $15.3 million of the increase in
cash from operations. Cash from loan interest increased $7.4 million. The
remaining $17.0 million increase between 1994 and 1993 is primarily due to
changes in certain assets and liabilities, which can vary between periods
depending on timing of fundings, and payments made to GATX Corporation.
The increase in accounts payable includes a $48.0 million reclassification
from deferred income related to aircraft that the Company must repurchase
in January, 1995, as a result of the lessee's exercise of an option to return
the aircraft.
Cash from investing activities decreased between 1993 and 1994 due to a
higher level of investment in new transactions, net of sale leaseback
transactions, and less cash recovery of investments. Total 1993
investments included the purchase of a significant rail operating lease fleet
which was subsequently sold and leased back from the purchaser, the
proceeds of which are shown as proceeds from disposition of other assets.
The Company had approved unfunded transactions totalling $191.6 million as
of December 31, 1994. Of this amount, $90.2 million is scheduled to be
funded in 1995 and the remainder beyond.
Recovery of investments decreased between 1994 and 1993 as a result of
lower proceeds from disposition of equipment and real estate offset by
higher principal repayments on loans. Disposition gains are discussed in the
results of operations. Real estate proceeds continue to decline as the
Company liquidates its remaining portfolio of owned real estate. Loan
principal received in 1994 included prepayments of two golf loans with
total principal balances of $41.8 million. Joint venture investment recovery
in 1992 included $17.4 million of proceeds from the sale of a real estate
joint venture investment.
Cash from financing activities is used to fund investments and to pay
dividends on the Company's common stock. Historically, dividends have been
paid on the Company's common stock at the rate of 50% of net income, which
is expected to continue in the future.
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 $125.2 million at
December 31, 1994. In addition, the Company has a $300.0 million shelf
registration for Series C medium-term notes, under which $55.0 million had
been issued as of December 31, 1994.
Total debt financing remained relatively constant between years while
stockholder's equity increased $12.1 million. As a result, the Company's
debt to equity ratio declined from 2.68:1 in 1993 to 2.58:1 in 1994. 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. In order to meet this
objective, derivative financial instruments, primarily interest rate swaps,
are often used to modify the interest characteristics of the Company's debt.
At December 31, 1994, the Company had $56.3 million more floating rate
debt than floating rate assets.
<TABLE>
The following table provides additional information with respect to the
Company's liquidity and financial position:
<CAPTION>
As of and For the Year
Ended December 31, 1994 1993 1992
------ ----- -----
<S> <C> <C> <C>
Ratios:
Interest coverage 1.85x 1.86x 1.17x
Floating rate exposure
to total capitalization 4.91% - -
Total debt financing
to stockholder's equity 2.58x 2.68x 2.98x
</TABLE>
Page 25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
SIGNIFICANT ACCOUNTING POLICIES
----------------------------
Business
--------
GATX Capital Corporation and subsidiaries (the "Company") provide and
arrange equipment leases and other loan financing. The Company also
manages a portfolio of leased equipment for its own account and the account
of others. GATX Capital Corporation is a wholly-owned subsidiary of GATX
Corporation.
Principles of Consolidation
------------------------
The consolidated financial statements include the accounts of the Company
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 equivalents.
Deferred Income
--------------
Deferred income primarily represents income related to operating leases,
where the Company is the lessee, for which the earnings process has not
been completed. The income is recognized on a straight-line basis over the
lives of the operating leases. The 1993 balance included $48.0 million of
proceeds related to an aircraft sale which had been received in advance and
deferred pending the outcome of an option to return the aircraft held by the
purchaser. During 1994, the purchaser exercised its option to return the
aircraft in January, 1995, and the balance was reclassified to accounts
payable.
Lease and Loan Origination Costs
-----------------------------
Initial direct costs for originated direct finance and leveraged leases are
capitalized and amortized as an adjustment of yield over the term of the
lease. For operating leases, initial direct costs are deferred and amortized
on a straight-line basis over the lease term. Loan origination fees are
netted with loan costs and are deferred and recognized over the life of the
loan as an adjustment to interest income.
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.
<TABLE>
The components of the Company's investment in direct financing leases are as
follows:
<CAPTION>
At December 31, 1994 1993
----- -----
<S> <C> <C>
Lease contracts receivable $ 289,565 $ 340,885
Estimated residual value 82,940 90,373
Unearned and deferred income (127,064) (155,653)
-------- --------
Net investment $ 245,441 $ 275,605
======== ========
</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.
<TABLE>
The components of the Company's net investment in leveraged leases are as
follows:
<CAPTION>
At December 31, 1994 1993
------- -----
<S> <C> <C>
Lease contracts receivable $ 547,961 $ 569,669
Nonrecourse debt service (301,259) (333,447)
--------- ---------
Net receivable 246,702 236,222
Estimated net residual value 157,736 143,309
Unearned income (151,787) (154,578)
Investment in leveraged leases 252,651 224,953
Deferred taxes arising from
leveraged leases (63,610) (72,578)
--------- ---------
Net investment $ 189,041 $ 152,375
======== ========
</TABLE>
Page 26
<PAGE>
Operating Leases
---------------
Leases that do not qualify as direct finance or leveraged leases are
accounted for as operating leases. Rental income is reported on a
straight-line basis over the term of the lease. Equipment subject to
operating leases is stated at cost less accumulated depreciation plus
accrued rent and is generally depreciated to its estimated residual value
using the straight-line method. Aircraft are depreciated over their useful
lives, ranging from 25-30 years, while other equipment is generally
depreciated over the term of the lease. Depreciation expense of $33.3
million, $26.0 million, and $16.4 million is included in operating lease
expense for 1994, 1993, and 1992, respectively.
<TABLE>
Major classes of equipment on operating leases are as follows:
<CAPTION>
At December 31, 1994 1993
------- ------
<S> <C> <C>
Aircraft $ 239,200 $ 189,849
Railroad equipment 69,933 62,181
Other 25,945 22,859
------- ------
Total cost 335,078 274,889
Accumulated depreciation (47,791) (32,307)
------- ------
Net book value 287,287 242,582
Accrued rent and other 7,986 12,069
------- ------
Net investment $ 295,273 $ 254,651
======= =======
</TABLE>
Earned Income from Leases
------------------------
The sources of earned income from leases were as follows:
<TABLE>
<CAPTION>
At December 31, 1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Direct financing leases $ 28,612 $ 32,510 $ 36,529
Leveraged leases 25,894 25,606 25,555
Operating leases 89,133 67,341 53,547
------ ------ -----
Total Earned Income $143,639 $125,457 $115,631
======= ======= =======
</TABLE>
The tax expense related to leveraged lease income was $9.3 million, $10.0
million, and $9.6 million in 1994, 1993, and 1992, respectively.
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.
Financing Lease and Operating Lease Receivables and Loan Balance
-----------------------------------------------------------
As of December 31, 1994, 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:
<TABLE>
<CAPTION>
Financing Lease Operating Lease Loan
Year due Receivables Receivables Principal
------- ------------- -------------- --------
<S> <C> <C> <C>
1995 $ 90,213 $ 62,299 $ 39,858
1996 82,464 41,727 35,835
1997 58,488 36,817 32,778
1998 46,615 35,118 34,829
1999 48,373 23,709 18,673
After 1999 210,114 43,182 69,252
--------- ---------- ------
Total $536,267 $242,852 $231,225
======= ======== =======
</TABLE>
Investment in Joint Ventures
-------------------------
Investments in joint ventures include aircraft, rail, and technology
equipment leasing, asset residual guarantee, and cogeneration 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, adjusted by the Company's share of
undistributed earnings or losses of these ventures and reduced by cash
distributions.
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,
as reported by the joint venture, has been increased by $22.6 million in
1992 to adjust for equipment writedowns recorded as a loss by one joint
venture; the Company charged its share of the writedowns to the allowance
for losses on investments. Pre-tax income also has been increased by $27.3
million, $20.8 million, and $15.1 million in 1994, 1993 and 1992,
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 $472.2 million, $482.3 million,
and $393.6 million at December 31, 1994, 1993 and 1992, respectively, have
been reclassified from long-term liabilities to partners' equity.
Page 27
<PAGE>
Unaudited combined and condensed operating and balance sheet data as
adjusted are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Revenues $ 282,352 $ 224,179 $ 278,818
Pre-tax income 41,510 17,241 28,951
Total assets 1,257,794 1,161,123 1,055,627
Long-term liabilities 441,625 382,207 358,724
Total liabilities 558,679 481,846 452,410
Equity 699,115 679,277 603,217
</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 maturity, 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:
<TABLE>
<CAPTION>
At December 31, 1994 1993
----- ------
<S> <C> <C>
Real estate $16,945 $28,409
Aircraft 10,057 31,562
Other 3,375 3,605
----- ------
Total cost 30,377 63,576
Accumulated depreciation (6,057) (6,799)
----- ------
Net investment $24,320 $56,777
====== =======
</TABLE>
Other Investments
----------------
Other investments, as of December 31, 1994, primarily consist of the
Company's investment in a residential and commercial real estate
development, and progress payments for assets under construction.
The components of other investments are as follows:
<TABLE>
<CAPTION>
At December 31, 1994 1993
----- ------
<S> <C> <C>
Real estate development $16,623 $18,990
Progress payments and other 3,750 5,308
----- ------
Total investment $20,373 $24,298
======= ======
</TABLE>
Investment in Future Residuals
----------------------------
The Company has purchased interests in the residual values of equipment
leased by others. 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:
<TABLE>
<CAPTION>
At December 31, 1994 1993
----- ------
<S> <C> <C>
Purchased residuals $ 4,728 $ 6,517
Lease underwriting
deferred fees 8,429 7,554
----- ------
Total investment $13,157 $14,071
======= ======
</TABLE>
ALLOWANCE FOR LOSSES ON INVESTMENTS
------------------------------------
The Company maintains an allowance for losses on investments through
periodic provisions. The purpose of the allowance is to provide for credit
and collateral losses which are inherent in the investment portfolio. 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 losses on investments account was as
follows:
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Beginning balance $88,193 $101,323 $ 71,864
Provision 19,000 29,000 81,000
Charges to allowance (27,480) (44,180) (52,222)
Recoveries and other 2,493 2,050 681
------ ------ -----
Balance at end of year $82,206 $ 88,193 $101,323
====== ====== =======
</TABLE>
Page 28
<PAGE>
DEBT AND CAPITAL LEASE FINANCING
--------------------------------
Short-term Borrowing
-------------------
At December 31, 1994, the Company had commitments under its credit
agreements with a group of banks for revolving credit loans aggregating up
to $250 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,
1994, these covenants limited the Company's ability to transfer net assets
to its parent to no more than $100.1 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 commitment of the other facility, but is not
obligated to maintain compensating balances. At December 31, 1994
$125.2 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, 1994 the majority
of such borrowings were backed by or under the principal credit agreements.
The weighted average interest rate at the end of the period was 6.23% and
3.86% as of December 31, 1994 and 1993, respectively.
Senior Term Notes
----------------
Senior term notes include the following:
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993
----- ------
<S> <C> <C>
Variable rate:
Medium-Term Notes
due 1995-1999 $ 60,000 $ 30,000
Senior Bank Note
due 1995 10,000 10,000
----- ------
Subtotal - variable rate $ 70,000 $ 40,000
----- ------
Fixed rate:
5.45% - 10.30% Medium
Term Notes due 1995-2004 443,600 474,850
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
----- ------
Subtotal - fixed rate 543,600 584,850
----- ------
Total senior term notes $613,600 $624,850
======= ========
</TABLE>
Interest on variable rate senior term notes is calculated using LIBOR.
Nonrecourse Obligations
---------------------
Nonrecourse obligations consist primarily of debt collateralized by
aircraft and their related lease contracts, and real estate projects. The
carrying amount of this collateral at December 31, 1994 was $81.3 million.
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.
During 1994, the Company had the following non-cash transactions.
Nonrecourse debt of $6.5 million was assumed in exchange for an additional
investment in real estate, nonrecourse debt of $8.4 million was settled with
a reduction in an investment in aircraft, and nonrecourse debt of $7.3 was
assumed by the purchaser of certain real estate.
Nonrecourse obligations include the following:
<TABLE>
<CAPTION>
At December 31, 1994 1993
----- ------
<S> <C> <C>
Variable rate:
Notes due 2002 $39,378 $42,009
Notes due 1997 _ 8,425
Notes due 2000 3,535 3,785
Other 5,908 6,263
------- -------
Subtotal - variable rate 48,821 60,482
------- -------
Fixed rate:
9.25% Note due 1996 _ 7,309
8.25% Note due 1996 6,449 _
Other _ 267
------- -------
Subtotal - fixed rate 6,449 7,576
------- -------
Total nonrecourse debt $55,270 $ 68,058
======= ======
</TABLE>
Interest on variable rate nonrecourse obligations is calculated using the
Prime rate or LIBOR.
Page 29
<PAGE>
Obligations Under Capital Lease
---------------------------
Obligations under capital lease consist of equipment subject to capital
lease financing which has been subleased. Such subleases are classified as
direct financing leases having carrying values of $18.9 million and $23.6
million at December 31, 1994 and 1993, respectively. Minimum future lease
payments receivable under the subleases aggregate $27.1 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 and renewal options under the leases which allow it
to accommodate similar options exercisable by sublessees.
Maturities
---------
Maturities of debt financings, obligations under capital leases and
nonrecourse obligations are presented in the following table. Imputed
interest on capital leases totalled $6.0 million at December 31, 1994. This
table assumes that the commercial paper, notes payable and bankers'
acceptances are retired by the unused revolving commitments.
<TABLE>
<CAPTION>
Converted Obligations Total
Revolving Senior Under Capital Debt Nonrecourse
Year due Credit Loans Term Notes Leases Financing Obligations
----------- ---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C>
1995 $ _ $ 104,000 $ 3,629 $ 107,629 $ 6,214
1996 _ 105,000 3,627 108,627 10,531
1997 138,855 105,000 2,067 245,922 4,171
1998 _ 75,000 1,378 76,378 5,470
1999 _ 83,600 1,477 85,077 4,830
After 1999 _ 141,000 7,253 148,253 24,054
--------- --------- ------- -------- -------
Total $138,855 $613,600 $ 19,431 $771,886 $ 55,270
======== ======== ======== ======== ========
</TABLE>
DERIVATIVE FINANCIAL INSTRUMENTS
---------------------------------
The Company has significant amounts of floating rate lease and loan
investments, as well as transactions denominated in foreign currencies,
giving rise to market risks from changes in interest and foreign exchange
rates. Derivative financial instruments are used to reduce those risks.
The Company enters into interest rate swap agreements to modify the
interest characteristics of its outstanding debt from a fixed to a floating
basis. These agreements involve the receipt of fixed rate amounts in
exchange for floating rate interest payments over the life of the agreement
without an exchange of the underlying principal amount. The differential to
be paid or received is calculated based on the notional amounts and a widely
used floating rate index (6 month LIBOR). It is accrued as interest rates
change and is recognized as an adjustment to interest expense related to the
debt. Interest expense was reduced by $2.2 million, $3.1 million and $0.9
million in 1994, 1993, and 1992, respectively, as a result of interest rate
swaps. The related amount payable to or receivable from counterparties is
included in accrued interest. The fair values of the swap agreements are not
recognized in the financial statements. The total notional principal of all
interest rate swaps as of December 31, 1994 was $180.0 million, with
termination dates ranging from 1995 to 2003.
The Company has also entered into a currency swap agreement to protect
itself from the risk that the eventual dollar net cash in-flow from a foreign
denominated investment will be adversely affected by changes in exchange
rates. The currency swap exchanges a U.S. borrowing of $3.7 million with
interest based on LIBOR for a liability of $5.0 million Canadian with
interest based on the Bankers' Acceptance rate.
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 $16.1 million, $9.8 million and $7.7 million in 1994, 1993 and 1992,
respectively. The aircraft and rolling stock under these leases have been
subleased, generating lease income of $17.4 million, $12.8 million and $4.9
million in 1994, 1993 and 1992, respectively.
Future rentals payable by the Company through 2011 and sublease
receivables under noncancellable operating leases through 2008 are as
follows:
<TABLE>
<CAPTION>
Obligations Under Sublease
Year Due Operating Leases Receivables
------- ---------------- -----------
<S> <C> <C>
1995 $ 17,460 $17,902
1996 17,304 13,639
1997 16,837 13,404
1998 16,804 11,601
1999 16,536 11,168
After 1999 135,640 29,447
------- -------
Total $220,581 $97,161
======== =======
</TABLE>
Page 30
<PAGE>
CAPITAL STOCK
-------------
As of December 31, 1994 and 1993, all issued common and preferred stock
of the Company was held by GATX Corporation.
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 2004 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.
INCOME TAXES
------------
GATX Corporation files a consolidated federal income tax return which
includes the Company. 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.
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 of $46.1
million from GATX Corporation resulting from the reassumption of a portion
of these deferred taxes through December 31, 1994. Offsetting this
receivable is $3.5 million due to GATX Corporation which consists of
amounts owed for dividends, overhead, and taxes pursuant to the
intercompany tax agreement.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
At December 31, 1994 1993
----- ------
<S> <C> <C>
Deferred tax liabilities
Leveraged leases $ 63,610 $ 72,578
Other leases (non-leveraged) 51,158 63,506
Investment in joint ventures 15,505 12,174
Alternative minimum
tax adjustment 1,318 _
Other 3,388 _
----- ------
Total deferred tax
liabilities $134,979 $148,258
-------- ---------
Deferred tax assets:
Allowance for losses
on investments $ 32,245 $ 34,594
Loans 2,488 11,119
Other 5,915 12,551
Total deferred tax assets 40,648 58,264
-------- ---------
Net deferred tax
liabilities $ 94,331 $ 89,994
======== ========
Tax account balances:
Deferred income tax
liabilities $ 15,390 $ 11,053
Preferred stock and related
additional paid-in capital 125,000 125,000
Due from GATX Corporation (46,059) (46,059)
-------- ---------
Net deferred tax
liabilities $ 94,331 $ 89,994
======== ========
</TABLE>
Income before income taxes from foreign operations was $1.8 million, $3.0
million, and $2.1 million in 1994, 1993 and 1992, respectively. Foreign tax
expense was $1.9 million, $2.0 million, and $1.2 million in 1994, 1993, and
1992, respectively.
A reconciliation between the federal statutory tax rate and the Company's
effective tax rate is shown below:
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 34.0%
State tax provision,
net of federal tax benefit 4.1% 3.9% 4.8%
Impact of federal tax rate increase _ 3.7% _
Sale of consolidated subsidiary _ 1.3% _
Other 3.9% 5.9% (1.7)%
------ ------ -----
Effective tax rate 43.0% 49.8% 37.1%
==== === ====
</TABLE>
Page 31
<PAGE>
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:
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Earned income:
Domest $ 179,709 $ 171,047 $ 151,809
Export 26,436 29,866 28,548
Foreign 10,505 11,851 11,815
Eliminations (618) (367) (2,056)
------ ------ -----
$ 216,032 $ 212,397 $ 190,116
======== ========= ========
Net income(loss):
United States $ 20,596 $ 16,590 $ (10,557)
Foreign 4,192 4,929 3,353
Eliminations 63 6 7
------ ------ -----
$ 24,851 $ 21,525 $ (7,197)
======== ========= ========
Total assets:
United States $1,038,762 $1,050,117 $1,143,587
Foreign 236,828 213,169 187,989
Eliminations (6,000) (6,688) (1,107)
------ ------ -----
$1,269,590 $1,256,598 $1,330,469
======== ========= ========
</TABLE>
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. Contributions to the Plan made by the
Company through GATX Corporation and pension expense allocated to the
Company are not material to these financial statements.
In addition to pension benefits, the Company provides other
postemployment 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 Plan.
COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK
-------------------------------------------------------------
At December 31, 1994, the Company had approximately 650 financing
contracts with 450 customers, aggregating $1.3 billion of investments
before reserves. Of this amount, 46% consisted of investments associated
with commercial jet aircraft, 17% railroad equipment, 8% warehouse and
production equipment, 8% marine equipment, 6% golf courses, 4% real
estate, and 11% other equipment.
The Company's backlog was $191.6 million and $232.8 million,
respectively, at December 31, 1994 and 1993.
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 and financial guarantees. 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:
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993
------- -------
<S> <C> <C>
Guarantees $ 99,094 $60,184
Stand-by loan commitments 5,800 12,500
</TABLE>
Guarantees are commitments issued by the Company to guarantee the
value of 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 1995 to 2015. 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.
The commitments expire in 1998.
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 may involve guarantees or other
assets as collateral. All commitments having off-balance-sheet risk are
reviewed regularly for potential exposure and a provision for possible loss
is made if required.
Page 32
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Generally accepted accounting principles require disclosure of the
estimated fair value of the Company's financial instruments, excluding
lease transactions accounted for under SFAS 13. Fair value is a subjective
and imprecise measurement that is based on assumptions and market data.
The use of different market assumptions and valuation methodologies may
have a material effect on the estimated fair value amounts. Accordingly,
management cannot provide assurance that the fair values presented are
indicative of the amounts that the Company could realize in a current
market exchange.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Short-term Financial Instruments
------------------------------
The carrying amounts included on the balance sheet approximate fair value
because of the short maturity of these instruments. This approach applies to
cash and cash equivalents, accrued interest, accounts payable, commercial
paper, and bankers' acceptances.
Secured Loans
------------
The fair values of the fixed rate loans are estimated using discounted
cash flow analyses, at interest rates currently offered for loans with
similar terms to borrowers of similar credit quality. The fair values of the
variable rate secured loans are assumed to be equal to their carrying values.
Senior Notes and Nonrecourse Debt
------------------------------
The fair value of fixed rate senior notes and nonrecourse debt 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. The fair values of variable rate
senior notes and nonrecourse debt are assumed to be equal to their carrying
values.
Interest Rate Swaps
-----------------
The fair value of the interest rate swaps is estimated by discounting the
fixed cash flows received under each swap using the rate at which the
Company could enter into new swaps of similar remaining maturities. The
carrying amount shown on the following table represents the amount of accrued
interest payable or receivable at the end of the period. The fair value
represents the accrued amount plus the amount that the Company would have
to pay or would receive in the current market to unwind the swaps.
Other Off-Balance Sheet Financial Instruments
------------------------------------------
It is not practicable to estimate the fair value of the Company's other
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.
Summary of Fair Values
--------------------
The following table presents the fair values of only those financial
instruments required to be presented by generally accepted accounting
principles. Proceeds from senior term notes are invested in a variety of
activities, including both financial instruments shown in this table, as well
as leases and joint venture investments, for which fair value disclosures
are not required. When evaluating the extent to which estimated fair value
of borrowings exceeds the related carrying amount, users should consider
that the fair value of the fixed rate payment streams for leases would increase
as well.
<TABLE>
<CAPTION>
Carrying Fair
At December 31, 1994 Amount Value
--------- -------
<S> <C> <C>
Assets:
Secured loans $231,225 $221,239
Liabilities:
Senior term notes 613,600 614,600
Nonrecourse debt 55,270 55,298
Interest rate swaps (76) 10,454
<CAPTION>
Carrying Fair
At December 31, 1993 Amount Value
--------- -------
<S> <C> <C>
Assets:
Secured loans $226,073 $228,300
Liabilities:
Senior term notes 624,850 678,700
Nonrecourse debt 68,058 68,882
Interest rate swaps 1,074 (2,346)
</TABLE>
Page 33
<PAGE>
Report of Independent Auditors
Board of Directors
GATX Capital Corporation
We have audited the accompanying consolidated balance sheets of GATX
Capital Corporation (a wholly-owned subsidiary of GATX Corporation) and
subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income and reinvested earnings and consolidated
cash flows for each of the three years in the period ended December 31,
1994. These 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 referred to above present fairly,
in all material respects, the consolidated financial position of GATX Capital
Corporation and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, 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 LLP
San Francisco, California
January 24, 1995
Page 34
Second Amendment To Credit Agreement
This Second Amendment to Credit Agreement (the "Amendment") dated as
of June 14, 1994, by and among GATX Leasing National Ltd., GATX
Corporate Leasing, Inc., as Borrowers, GATX Capital Corporation, as
Guarantor, and Bank of Montreal, as the Bank;
W I T N E S S E T H:
WHEREAS, the Borrowers, the Guarantor, and the Bank have heretofore
executed and delivered that certain Credit Agreement dated as of
December 14, 1992, as amended by the First Amendment thereto dated as
of June 20, 1993 (as so amended, the "Credit Agreement"); and
WHEREAS, the Borrowers, the Guarantor, and the Bank desire to amend the
Credit Agreement to extend its Revolving Credit Termination Date and to
reduce the Bank's Revolving Credit Commitment;
NOW, THEREFORE, for good and valuable consideration the receipt of which
is hereby acknowledged, the Borrowers, the Guarantor, and the Bank hereby
agree as follows:
1. The date "June 15, 1994" in Section 1.1 of the Credit Agreement is
hereby deleted and in place thereof is inserted the date "June 9, 1995."
2. Notwithstanding the notice provisions contained in Section 1.5 of
the Credit Agreement, the Revolving Credit Commitment shall be reduced
to $10,000,000 on the date hereof.
3. Each Borrower and the Guarantor each represents and warrants to
the Bank that (a) each of the representations and warranties set forth in
Article 3 of the Credit Agreement (or, in the case of each Borrower only,
Sections 3.2-3.6 thereof) is true and correct on and as of the date of this
Amendment (except for the representations and warranties incorporated
herein through Section 3.1 from Sections 7.03 and 7.08(b) of the Parent
Credit Agreement and except that any representation or warranty in
Article 3 that is expressly stated to have been made as of the specific
date need only be true as of such specific date); (b) no Default or Event of
Default has occurred and is continuing; and (c) without limiting the effect
of the foregoing, each Borrower's and the Guarantor's execution, delivery
and performance of this Amendment has been duly authorized, and this
Amendment has been executed and delivered by a duly authorized officer
of each Borrower and the Guarantor.
This Amendment may be executed in any number of separate
counterparts and by the different parties hereto on separate counterpart
signature pages, each of which shall constitute one and the same
instrument. Except as specifically amended and modified hereby, all of
the terms and conditions of the Credit Agreement shall remain unchanged
and in full force and effect. No reference to this Amendment need be made
in any document, all references to the Credit Agreement in any document
to be deemed to be references to the Credit Agreement as amended hereby.
All capitalized terms used herein without definition shall have the same
meaning herein as they have in the Credit Agreement. This Amendment
shall become effective upon its execution by the Borrowers, the
Guarantor, and the Bank. This Amendment shall be construed and governed
by and in accordance with the internal laws of the Province of Ontario and
the federal laws of Canada applicable in such Province.
Dated as of the date first above written.
GATX Leasing National Ltd.
By
Title:
GATX Corporate Leasing, Inc.
By
Title:
GATX Capital Corporation, as Guarantor
By
Title:
Bank of Montreal
By
Title:
Third Amendment To Credit Agreement
This Third Amendment to Credit Agreement (the "Amendment") dated as
of December 1, 1994, by and among GATX Leasing National Ltd., GATX
Corporate Leasing, Inc., as Borrowers, GATX Capital Corporation, as
Guarantor, and Bank of Montreal, as the Bank;
W I T N E S S E T H:
WHEREAS, the Borrowers, the Guarantor, and the Bank have heretofore
executed and delivered that certain Credit Agreement dated as of
December 14, 1992, as amended through and including the Second
Amendment thereto dated as of June 14, 1994 (as so amended, the "Credit
Agreement"); and
WHEREAS, the Borrowers, the Guarantor, and the Bank desire to amend the
Credit Agreement to revise the commitment fee;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the Borrowers, the Guarantor, and the Bank hereby
agree as follows:
1. Section 1.8 of the Credit Agreement is hereby amended in its
entirety to read as follows:
Section 1.8. Commitment Fee. The Borrowers jointly and
severally agree to pay to the Bank in U.S. Dollars, quarterly in arrears on
the last day of March, June, September and December of each year,
commencing on March 31, 1993, and on the Revolving Credit Termination
Date or, if applicable, the Conversion Date, a commitment fee (i) for the
period from the Closing Date to but not including December 1, 1994 at the
rate of 3/8ths of 1% (0.375%) per annum, and (ii) thereafter at a rate per
annum from time to time equal to the rate set forth opposite the then
rating of the senior, unsecured long term debt of the Guarantor by S&P and
Moody's, respectively, in the schedule below, during all such periods
applied to the average daily unused portion of the Revolving Credit
Commitment, each change in such rate after December 1, 1994 based on a
change in any such rating to be effective on the date of such rating change:
<TABLE>
<CAPTION>
Rating Rate
------ ----
<S> <C>
Both ratings are greater than or equal to A- and A3 .1875%
The ratings are:
equal to BBB+ and Baa1 or
equal to A- ( or greater than A-) and Baa1 or equal
to BBB+ and A3 (or greater than A3) .2500%
The ratings are:
equal to BBB+ and Baa2 or equal to BBB and Baa1 .2500%
The ratings are:
equal to BBB and Baa2 or equal to BBB+ and Baa3 or
equal to BBB- and Baa1 .2500%
The ratings are:
equal to BBB and Baa3 or equal to BBB- and Baa2 .2500%
The ratings are
equal to BBB- and Baa3 .2500%
Either rating is lower than BBB-
and Baa3 or not rated by both Moody's and S&P .5000%
</TABLE>
To determine usage of the Revolving Credit Commitment through Loans
denominated in Canadian Dollars the daily average amount of such Loans
shall be determined for each calendar quarter in Canadian Dollars and such
amount shall be converted into U.S. Dollars based on the Bank's exchange
rate for buying U.S. Dollars with Canadian Dollars on the day such fee is
payable.
2. Each Borrower and the Bank acknowledge that the CIBC Agreement
referred to in Section 4.5 of the Credit Agreement has been terminated, so
that Section 4.5 of the Credit Agreement, and all references thereto in the
Credit Agreement, are hereby deleted.
3. Article 6 of the Credit Agreement is hereby amended by inserting
therein in proper alphabetical order the following additional definitions:
"Moody's" shall mean Moody's Investors Service, Inc. and its
successors and assigns provided that if such corporation (or its
successors and assigns) shall for any reason no longer perform the
functions of a securities rating agency, "Moody's" shall be deemed to
refer to any other nationally recognized securities rating agency approved
for purposes hereof by the Bank and the Guarantor.
"S&P" shall mean Standard & Poor's Corporation and its successor
and assigns, provided that if such corporation (or its successors and
assigns) shall for any reason no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other
nationally recognized securities rating agency approved for purposes
hereof by the Bank and the Guarantor.
4. Each Borrower and the Guarantor each represents and warrants to
the Bank that (a) each of the representations and warranties set forth in
Article 3 of the Credit Agreement (or, in the case of each Borrower only,
Sections 3.2-3.6 thereof) is true and correct on and as of the date of this
Amendment (except for the representations and warranties incorporated
into the Credit Agreement through Section 3.1 thereof from Sections 7.03
and 7.08(b) of the Parent Credit Agreement and except that any
representation or warranty in Article 3 that is expressly stated to have
been made as of the specific date need only be true as of such specific
date); (b) no Default or Event of Default has occurred and is continuing;
and (c) without limiting the effect of the foregoing, each Borrower's and
the Guarantor's execution, delivery and performance of this Amendment
has been duly authorized, and this Amendment has been executed and
delivered by a duly authorized officer of each Borrower and of the
Guarantor.
This Amendment may be executed in any number of separate
counterparts and by the different parties hereto on separate counterpart
signature pages, each of which shall constitute one and the same
instrument. Except as specifically amended and modified hereby, all of
the terms and conditions of the Credit Agreement shall remain unchanged
and in full force and effect. No reference to this Amendment need be made
in any document, all references to the Credit Agreement in any document
to be deemed to be references to the Credit Agreement as amended hereby.
All capitalized terms used herein without definition shall have the same
meaning herein as they have in the Credit Agreement. This Amendment
shall become effective upon its execution by the Borrowers, the
Guarantor, and the Bank. This Amendment shall be construed and governed
by and in accordance with the internal laws of the Province of Ontario and
the federal laws of Canada applicable in such Province.
Dated as of the date first above written.
GATX Leasing National Ltd.
By
Title:
GATX Corporate Leasing, Inc.
By
Title:
GATX Capital Corporation, as Guarantor
By
Title:
Bank of Montreal
By
Title:
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of December 1, 1994 to the CREDIT
AGREEMENT dated as of December 14, 1992 among GATX CAPITAL
CORPORATION, a Delaware corporation (the "Company"), the Banks
signatory thereto and THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION), as Agent.
W I T N E S S E T H:
WHEREAS, the Company, the Banks and the Agent are parties to the
Credit Agreement referred to above (the "Credit Agreement") pursuant to
which the Banks have agreed to extend credit to the Company as provided
therein.
WHEREAS, the Company has requested the Banks and the Agent to
amend the Credit Agreement as provided herein.
WHEREAS, the Banks and the Agent are agreeable to such amendment on
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein it is hereby agreed as follows:
1. Definitions.
All the terms defined in the Credit Agreement shall be used herein as
defined in the Credit Agreement unless otherwise defined herein or the
context otherwise requires.
2. Amendments to the Agreement.
(a) Section 1.01 of the Credit Agreement is hereby amended by
restating the definition of "Applicable Margin" to read as follows:
"'Applicable Margin' shall mean, with respect to Eurodollar Loans,
the percentage per annum from time to time equal to that percentage set
forth opposite the then current ratings of the senior, unsecured long-term
debt of the Company by S&P and Moody's, respectively, in the schedule
below, each change in the Applicable Margin based upon any change in any
such rating to be effective on and as of the date of such change:
<TABLE>
<CAPTION>
Rating Applicable Margin
(%p.a.)
------ -----
<S> <C>
Both ratings are greater than or equal to A- and A3 .2625%
The ratings are:
equal to BBB+ and Baa1 or equal to A- (or greater
than A-) and Baa1 or equal to BBB+ and A3
(or greater than A3) .2000%
The ratings are:
equal to BBB+ and Baa2 or equal to BBB and Baa1 .2500%
The ratings are:
equal to BBB and Baa2 or equal to BBB+ and Baa3 or
equal to BBB- and Baa1 .3750%
The ratings are:
equal to BBB and Baa3 or equal to BBB- and Baa2 .5000%
The ratings are equal to BBB- and Baa3 .6250%
Either rating is lower than BBB- and Baa3
or not rated by both Moody's and S&P .7500%"
</TABLE>
(b) Section 2.05(a) of the Credit Agreement is hereby amended by
restating it to read as follows:
"(a) The Company shall pay to the Agent for the account of each
Bank a facility fee on the daily average amount of such Bank's
Commitment (whether or not utilized), for the period from and including
December 1, 1994 to but not including the earlier of the date such
Commitment is terminated and the Commitment Termination Date, at a
rate per annum from time to time equal to the rate set forth opposite the
then rating of the senior, unsecured long-term debt of the Company by S&P
and Moody's, respectively, in the schedule below, each change in such rate
to be effective based on a change in any such rating to be effective on the
date of such change:
<TABLE>
<CAPTION>
Rating Rate
(%p.a.)
------ -----
<S> <C>
Both ratings are greater than or equal to A- and A3 .1875%
The ratings are:
equal to BBB+ and Baa1 or equal to A- (or greater
than A-) and Baa1 or equal to BBB+ and A3
(or greater than A3) .2500%
The ratings are:
equal to BBB+ and Baa2 or equal to BBB and Baa1 .2500%
The ratings are:
equal to BBB and Baa2 or equal to BBB+ and Baa3 or
equal to BBB- and Baa1 .2500%
The ratings are:
equal to BBB and Baa3 or equal to BBB- and Baa2 .2500%
The ratings are equal to BBB- and Baa3 .2500%
Either rating is lower than BBB- and Baa3
or not rated by both Moody's and S&P .5000%
</TABLE>
Accrued facility fees shall be payable on each Quarterly Date and on the
earlier of the date the relevant Commitment is terminated and the Commitment
Termination Date."
(c) The Company, the Banks and the Agent agree that as of the
Amendment Closing Date (as hereinafter defined), the Commitment of CIBC
Inc. shall be terminated and upon payment by the Company in full of any
amounts which may be due to CIBC Inc. under the Credit Agreement and its
Notes as of the Amendment Closing Date, CIBC, Inc. shall cease to be a
party to the Credit Agreement.
3. Representations and Warranties.
In order to induce the Banks and the Agent to make this Amendment,
the Company hereby represents that:
(a) the execution and delivery of this Amendment and the
performance of the Company thereunder and under the Credit Agreement as
amended hereby (i) have been duly authorized by all necessary corporate
action, will not violate any provision of law, or the Company's charter or
by-laws, or result in the breach of or constitute a default, or require a
consent, under any indenture or other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or their respective property may be bound or
affected, and (ii) each of this Amendment and the Credit Agreement as
amended and (ii) each of this Amendment and the Credit Agreement as
amended hereby constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms;
(b) The representations and warranties in Section 7 of the Credit
Agreement are true and correct as of the Amendment Closing Date as if
they were being made on such date; and
(c) no Event of Default or event which with notice or lapse of time,
or both, would constitute an Event of Default, has occurred and is continuing
on the Amendment Closing Date.
4. Miscellaneous.
(a) This Amendment shall be effective as of December 1, 1994
when counterparts of this Amendment shall have been executed by the
Company, the Banks and the Agent, and such date shall be the "Amendment
Closing Date".
(b) Except as specifically amended hereby, all the provisions of the
Credit Agreement shall remain unamended and in full force and effect, and
the term "Credit Agreement", and words of like import shall be deemed to
refer to the Credit Agreement as amended by this Amendment unless
otherwise provided herein or the context otherwise requires. Nothing
herein shall affect the obligations of the Company under the Credit
Agreement with respect to any period prior to the effective date hereof.
(c) This Amendment may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(d) This Amendment shall be governed by and construed and
interpreted in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized officers as of the day and year
first above written.
GATX CAPITAL CORPORATION
By
Name:
Title:
Exhibit 23 - 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 24, 1995, with respect to the consolidated financial
statements included in this Annual Report on Form 10-K for the year ended
December 31, 1994.
ERNST & YOUNG LLP
San Francisco, California
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED INCOME STATMENT OF GATX CAPITAL
CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 9407
<SECURITIES> 0
<RECEIVABLES> 729317<F1>
<ALLOWANCES> 82206
<INVENTORY> 24320<F2>
<CURRENT-ASSETS> 0<F3>
<PP&E> 295,273<F4>
<DEPRECIATION> 0<F5>
<TOTAL-ASSETS> 1,269,590
<CURRENT-LIABILITIES> 0<F3>
<BONDS> 688,301<F6>
<COMMON> 1,031
0
1,027
<OTHER-SE> 297,179
<TOTAL-LIABILITY-AND-EQUITY> 1,269,590
<SALES> 0
<TOTAL-REVENUES> 216,032<F7>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 90,652<F8>
<LOSS-PROVISION> 19,000
<INTEREST-EXPENSE> 62,744
<INCOME-PRETAX> 43,636
<INCOME-TAX> 18,785
<INCOME-CONTINUING> 24,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,851
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>RECEIVABLES CONSISTS OF DIRECT FINANCING LEASES OF $245,441, LEVERAGED LEASES
OF $252,651, AND SECURED LOANS OF $231,225.
<F2>INVENTORY CONSISTS OF ASSETS HELD FOR SALE OR LEASE.
<F3>THIS IS NOT APPLICABLE BECAUSE GATX CAPITAL CORPORATION DOES NOT HAVE A
CLASSIFIED BALANCE SHEET.
<F4>PP&E CONSISTS OF OPERATING LEASE EQUIPMENT, NET OF DEPRECIATION.
<F5>ACCUMULATED DEPRECIATION IS NETTED AGAINST THE PP&E BALANCE. SEE FOOTNOTE 4.
<F6>BONDS CONSIST OF OBLIGATIONS UNDER CAPITAL LEASES OF $19,431, SENIOR-TERM NOTES
OF $613,600 AND NONRECOURSE DEBT OF $55,270. SHORT-TERM DEBT IS NOT INCLUDED
HERE.
<F7>TOTAL REVENUE CONSISTS OF EARNED INCOME FROM LEASES OF $143,639, GAIN ON
DISPOSITION OF EQUIPMENT OF $21,444, FEES OF $10,111, INTEREST OF $27,085,
INVESTMENT IN JOINT VENTURES OF $9,242, AND OTHER OF $4,511.
<F8>OTHER EXPENSES CONSIST OF OPERATING LEASE EXPENSE OF $50,621, SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES OF $39,296, AND OTHER EXPENSE OF $735.
</FN>
</TABLE>
<TABLE>
Medium Term Notes
<CAPTION>
FIXED:
<S> <C> <C>
$2,000,000 02/28/95 10.22
$300,000 03/01/95 9.20
$4,700,000 03/01/95 9.20
$5,000,000 03/01/95 9.20
$6,000,000 03/01/95 9.20
$20,000,000 03/31/95 10.30
$10,000,000 06/30/95 9.65
$1,000,000 11/01/95 9.75
$10,000,000 03/11/96 9.68
$5,000,000 01/30/98 10.00
$2,000,000 02/25/98 9.76
$7,000,000 03/10/98 10.00
$10,000,000 03/16/98 10.00
$2,000,000 03/19/98 10.00
$6,000,000 03/19/98 10.00
$5,000,000 03/20/98 9.93
$10,000,000 04/01/98 10.00
$5,000,000 03/22/99 9.90
$16,000,000 04/15/99 9.90
$32,600,000 05/05/99 9.85
$4,000,000 05/10/00 10.20
$5,000,000 03/21/01 10.00
$5,000,000 03/22/01 10.00
$20,000,000 04/11/01 10.00
$25,000,000 11/20/95 6.32
$30,000,000 03/18/96 5.45
$15,000,000 03/22/96 5.48
$25,000,000 01/15/97 7.90
$10,000,000 05/05/97 8.20
$5,000,000 03/10/98 8.670
$13,000,000 04/30/98 6.120
$5,000,000 05/07/98 6.110
$5,000,000 10/15/98 8.780
$10,000,000 11/15/99 6.375
$17,000,000 07/26/00 6.210
$10,000,000 10/11/00 6.500
$2,000,000 10/30/00 9.280
$6,000,000 11/15/00 9.120
$10,000,000 10/08/01 9.125
$2,000,000 10/08/01 9.050
$15,000,000 01/10/02 9.500
$10,000,000 01/10/02 9.500
$20,000,000 06/03/03 7.200
$5,000,000 04/04/02 7.460
$5,000,000 04/14/04 7.920
$5,000,000 04/14/04 7.920
FLOATING:
$5,000,000 07/31/95
$5,000,000 06/30/95
$10,000,000 07/03/95
$20,000,000 04/07/97
$20,000,000 02/16/99
</TABLE>
First Amendment To Credit Agreement
This First Amendment to Credit Agreement (the "Amendment") dated as
of June 20, 1993, by and among GATX Leasing National Ltd., GATX Corporate
Leasing, Inc., as Borrowers, GATX Capital Corporation, as Guarantor, and
Canadian Imperial Bank of Commerce, as the Bank;
WITNESSETH:
WHEREAS, the Borrowers, the Guarantor, and the Bank have heretofore
executed and delivered that certain Credit Agreement dated as of December
14, 1994 (the "Credit Agreement"); and
WHEREAS, the Borrowers, the Guarantor, and the Bank desire to amend
the Credit Agreement to extend its Revolving Credit Termination Date;
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, the Borrowers, the Guarantor, and the Bank
hereby agree as follows:
1. The date "December 9, 1993" in Section 1.1 of the Credit
Agreement is hereby deleted and in place thereof is inserted the date "June
15, 1994."
2. Each Borrower and the Guarantor each represents and warrants to
the Bank that (a) each of the representations and warranties set forth in
Article 3 of the Credit Agreement (or, in the case of each Borrower, only
Sections 3.2-3.6 thereof) is true and correct on and as of the date of this
Amendment (except for the representations and warranties incorporated
herein through Section 3.1 from Sections 7.03 and 7.08(b) of the Parent
Credit Agreement and except that any representation or warranty in Article
3 that is expressly stated to have been made as of the specific date need
only be true as of such specific date); (b) no Default or Event of Default
has occurred and is continuing; and (c) without limiting the effect of the
foregoing, each Borrower's and the Guarantor's execution, delivery and
performance of this Amendment has been duly authorized, and this Amendment
has been executed and delivered by a duly authorized officer of each
Borrower and of the Guarantor.
This Amendment may be executed in any number of separate
counterparts and by the different parties hereto on separate counterpart
signature pages, each of which shall constitute one and the same
instrument. Except as specifically amended and modified hereby, all of the
terms and conditions of the Credit Agreement shall remain unchanged and in
full force and effect. No reference to this Amendment need be made in any
document, all references to the Credit in any document to be deemed to be
references to the Credit Agreement as amended hereby. All capitalized terms
used herein without definition shall have the same meaning herein as they
have in the Credit Agreement. This Amendment shall become effective upon
its execution by the Borrowers, the Guarantor, and the Bank.
This Amendment shall be construed and governed by and in accordance with
the laws of the Province of Ontario and the laws of Canada applicable in
such Province.
Dated as of the date first written above.
GATX LEASING NATIONAL, LTD.
By:
Title:
GATX CORPORATE LEASING, INC.
By:
Title:
GATX CAPITAL CORPORATION, as
Guarantor
By:
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE
By:
Title:
