UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
- ---- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
- ---- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
March 31, 1996 1-8319
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 April 30, 1996, Registrant has outstanding 1,031,250 shares of $1 par
value Common Stock.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GATX CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND REINVESTED EARNINGS
(in thousands)
Three Months Ended
March 31,
1996 1995
---------- ----------
(Unaudited)
EARNED INCOME:
Leases $ 43,603 $ 34,371
Gain on sale of assets 6,773 9,889
Fees 3,096 7,334
Interest 5,960 5,929
Investment in joint ventures 3,688 3,112
Other 2,313 458
---------- ----------
65,433 61,093
---------- ----------
EXPENSES:
Interest 19,451 16,445
Operating leases 14,646 11,974
Selling, general & administrative 12,084 9,600
Provision for losses on investments 3,000 6,000
Other 782 164
---------- ----------
49,963 44,183
---------- ----------
Income before income taxes 15,470 16,910
---------- ----------
INCOME TAXES:
Current income taxes 5,773 6,292
Deferred income taxes 492 557
---------- ----------
6,265 6,849
---------- ----------
NET INCOME 9,205 10,061
Reinvested earnings at beginning of period 162,400 146,036
Dividends paid to stockholder (4,343) (3,776)
---------- ----------
REINVESTED EARNINGS AT END OF PERIOD $ 167,262 $ 152,321
========== ==========
<PAGE>
GATX CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands) March 31, December 31,
1996 1995
----------- -----------
(Unaudited)
ASSETS
Cash and cash equivalents $ 17,541 $ 19,905
Investments:
Direct financing leases 440,829 406,950
Leveraged leases 188,360 220,407
Operating lease equipment-net of depreciation 345,518 315,707
Secured loans 244,506 239,873
Investment in joint ventures 228,042 205,292
Assets held for sale or lease 17,844 28,230
Other investments 89,729 77,604
Investment in future residuals 21,706 23,223
Allowance for losses on investments (103,922) (92,489)
----------- -----------
Total investments 1,472,612 1,424,797
Due from GATX Corporation 35,613 44,337
Other assets 30,866 29,344
----------- -----------
TOTAL ASSETS $1,556,632 $1,518,383
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued interest $ 13,027 $ 15,053
Accounts payable and other liabilities 69,154 80,045
Debt financing:
Commercial paper and bankers' acceptances 209,724 130,600
Notes payable 31,122 54,883
Obligations under capital leases 15,091 15,802
Senior term notes 653,100 679,600
----------- ---------
Total debt financing 909,037 880,885
Nonrecourse obligations 200,923 193,446
Deferred income 4,662 4,392
Deferred income taxes 32,051 27,562
Stockholder's equity:
Convertible preferred stock 1,027 1,027
Common stock 1,031 1,031
Additional paid-in capital 151,902 151,902
Reinvested earnings 167,262 162,400
Unrealized gains on marketable equity
securities, net of tax 6,330 -
Foreign currency translation adjustment 226 640
----------- -----------
Total stockholder's equity 327,778 317,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,556,632 $1,518,383
=========== ===========
<PAGE>
GATX CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
1996 1995
---------- ----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,205 $ 10,061
Reconciliation to net cash provided by operating
activities:
Provision for losses on investments 3,000 6,000
Depreciation expense 7,636 7,138
Provision for deferred income taxes 492 557
Gain on sale of assets (6,773) (9,889)
Joint venture income (3,688) (3,112)
Changes in assets and liabilities:
Accrued interest, accounts payable,
and other liabilities (12,917) (65,971)
Due from GATX Corporation 8,724 5,926
Deferred income 270 (104)
Other - net 6,355 3,832
---------- ----------
Net cash flows provided by(used in) operating
activities 12,304 (45,562)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in leased equipment, net of nonrecourse
borrowings for leveraged leases (72,392) (41,225)
Loans extended to borrowers (19,295) (4,547)
Other investments (37,233) (1,736)
---------- ----------
Total investments (128,920) (47,508)
---------- ----------
Lease rents received, net of earned income
and leveraged lease nonrecourse debt service 35,462 18,323
Loan principal received 11,328 6,948
Proceeds from sale of assets 24,788 69,468
Joint venture investment recovery 5,025 4,774
---------- ----------
Recovery of investments 76,603 99,513
---------- ----------
Net cash flows(used in) provided by investing
activities (52,317) 52,005
---------- ----------
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in short-term borrowings 62,207 43,101
Proceeds from issuance of long-term debt 78,500 -
Proceeds from other nonrecourse obligations 21,616 -
Repayment of long-term debt (105,000) (48,000)
Repayment of nonrecourse obligations (14,273) (1,006)
Dividends paid to stockholder (4,343) (3,776)
Other financing activities (1,058) (939)
---------- ----------
Net cash flows provided by(used in)
financing activities 37,649 (10,620)
---------- --------
Net decrease in cash and cash equivalents (2,364) (4,177)
Cash and cash equivalents at beginning of period 19,905 9,407
---------- ----------
Cash and cash equivalents at end of period $ 17,541 $ 5,230
========== ==========
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS, CONTINUED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996, AND 1995
1. The consolidated balance sheet of GATX Capital Corporation ("the Company")
at December 31, 1995 was derived from the audited financial statements at that
date. All other consolidated financial statements are unaudited and include
all adjustments, consisting only of normal recurring items, which management
considers necessary for a fair statement of the consolidated results of
operations and financial position for and as of the end of the indicated
periods. Operating results for the three-month period ended March 31, 1996 are
not necessarily indicative of the results that may be achieved for the entire
year.
2. Certain prior year amounts have been reclassified to conform to current
presentation.
<PAGE>
PART I. FINANCIAL INFORMATION, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 1996 to Three Months Ended
- -------------------------------------------------------------------------
March 31, 1995
- --------------
The Company's net income for the three months ended March 31, 1996 was $0.9
million lower than for the comparable 1995 period. Earned income grew by $4.3
million, or 7%, largely the result of an increase in lease income offset by a
decrease in gains on the sale of assets and fee income. Expenses grew by $5.5
million, or 12%, due to increased interest, operating lease, and selling,
general and administrative expenses.
Late in 1995, the Company acquired 80% of the stock of Sun Financial Group,
Inc., which increased the lease investment balance by $141.0 million. This
acquisition had the effect of increasing lease income, operating lease expense,
and selling, general and administrative expenses, but it did not have a
material effect on net income during the first three months of 1996.
New investment in operating leases had the effect of increasing lease income,
depreciation expense and operating lease rent expense associated with off-
balance sheet lease financing. Interest expense increased due to higher
outstanding debt balances associated with portfolio growth, partially offset by
lower interest rates. Increased spending in support of continued business
growth, primarily in the area of human resources, resulted in an increase in
selling, general and administrative expense.
Gains from sales of assets are realized at lease end and in response to market
opportunities, and do not occur evenly between periods. The Company's
remarketing fees are generally performance-based and can fluctuate
significantly depending on market conditions and the timing of lease
maturities.
The allowance for losses increased during the first three months of 1996 as a
result of a $3.0 million provision for losses and a $7.7 million recovery of a
previously written off investment. At March 31, 1996 the allowance for losses
is 6.9% of investments, including off-balance sheet assets and after deducting
nonleveraged lease nonrecourse debt.
In January of 1996 the Company recorded the effect of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The effect was to increase stockholder's equity by $6.3
million (net of $4.1 million in deferred income taxes) to reflect the net
unrealized holding gain on securities classified as available-for-sale which
were previously carried at cost. Statement 115, which was effective as of
January 1, 1994, did not have a material effect on the Company's financial
statements in prior years.
<PAGE>
PART I. FINANCIAL INFORMATION, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
Floating rate debt financing represented 33.7% of the Company's capital
structure at March 31, 1996. These borrowings support leases and loans tied to
LIBOR or similar rates. Fluctuations in interest rates may impact earnings,
either negatively or positively, depending on the Company's net floating rate
asset or debt position. At March 31, 1996, the Company had $48.2 million more
floating rate debt than floating rate assets.
At March 31, 1996, the Company had approved unfunded transactions totaling
$344.9 million. Once approved for funding, a transaction may not be completed
for various reasons, or the investment may be shared with partners or sold. Of
the total approved at March 31, 1996, the Company expects to fund $306.8
million; including $102.3 million in 1996, and the remaining $204.5 million
thereafter. The Company generates cash from operations and from portfolio
proceeds and has certain facilities for borrowing. At March 31, 1996, the
Company had a $300.0 million shelf registration for Series C medium term notes,
of which $278.5 million had been issued and a $300.0 million shelf registration
for Series D medium term notes, of which none had been issued. The Company
also had unused capacity under its credit agreements of $63.7 million as of
March 31, 1996.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27. Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the three months
ended March 31, 1996.
Signatures
- -----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GATX CAPITAL CORPORATION
/s/ Michael E. Cromar
----------------------
Michael E. Cromar
Vice President and
Chief Financial Officer
/s/ Curt F. Glenn
----------------------------
Curt F. Glenn
Principal Accounting Officer,
Vice President and Controller
May 14, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF INCOME AND THE
CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY
TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 17,541
<SECURITIES> 0
<RECEIVABLES> 873,695<F1>
<ALLOWANCES> 103,922
<INVENTORY> 17,844<F2>
<CURRENT-ASSETS> 0<F4>
<PP&E> 345,518<F3>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 1,556,632
<CURRENT-LIABILITIES> 0<F4>
<BONDS> 869,114<F5>
<COMMON> 1,031<F6>
0
1,027<F6>
<OTHER-SE> 325,720<F7>
<TOTAL-LIABILITY-AND-EQUITY> 1,556,632
<SALES> 0
<TOTAL-REVENUES> 65,433
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 27,512<F8>
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> 19,451
<INCOME-PRETAX> 15,470
<INCOME-TAX> 6,265
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,205
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>CONSISTS OF DIRECT FINANCE LEASE RECEIVABLES OF 440,829, LEVERAGE LEASE
RECEIVABLES OF 188,360, AND SECURED LOANS OF 244,506.
<F2>CONSISTS OF ASSETS HELD FOR SALE OR LEASE.
<F3>CONSISTS OF COST OF EQUIPMENT LEASED TO OTHERS UNDER OPERATING LEASES,
NET OF DEPRECIATION.
<F4>GATX CAPITAL CORPORATION HAS AN UNCLASSIFIED BALANCE SHEET.
<F5>CONSISTS OF SENIOR TERM NOTES OF 653,100, OBLIGATIONS UNDER
CAPITAL LEASES OF 15,091, AND NONRECOURSE OBLIGATIONS OF 200,923.
<F6>PAR VALUE ONLY.
<F7>CONSISTS OF RETAINED EARNINGS OF 167,262, ADDITIONAL PAID-IN CAPITAL
OF 151,902 AND UNREALIZED GAIN ON MARKETABLE EQUITY SECURITIES, NET OF TAX
OF 6,330 AND FOREIGN CURRENCY TRANSLATION ADJUSTMENT OF 226.
<F8>CONSISTS OF OPERATING LEASE EXPENSE OF 14,646, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES OF 12,084, AND OTHER EXPENSES OF 782.
</FN>
</TABLE>
