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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended Commission File Number
March 31, 1994 1-2328
GATX Corporation
Incorporated in the IRS Employer Identification No.
State of New York 36-1124040
500 West Monroe Street
Chicago, Illinois 60661-3676
312/621-6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- ------
Registrant had 19,851,242 shares of common stock outstanding as of
April 29, 1994.
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<PAGE>
PART I--FINANCIAL INFORMATION
GATX CORPORATION AND SUBSIDIARIES
-------------------
<TABLE>
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<CAPTION>
Three Months Ended
March 31
------------------
1994 1993
------- -------
<S> <C> <C>
Gross income.......................................... $ 260.7 $ 237.1
Costs and expenses
Operating expenses................................... 128.5 110.4
Interest............................................. 33.1 38.2
Provision for depreciation and amortization.......... 37.9 35.0
Provision for possible losses........................ 6.0 4.0
Selling, general and administrative.................. 28.5 26.6
------- -------
234.0 214.2
------- -------
Income before income taxes and equity in
net earnings of affiliated companies................ 26.7 22.9
Income taxes.......................................... 10.9 9.2
------- -------
Income before equity in net earnings of affiliated
companies........................................... 15.8 13.7
Equity in net earnings of affiliated companies........ 4.4 4.9
------- -------
Net income............................................ $ 20.2 $ 18.6
======= =======
Per common share:
Net income........................................... $ .84 $ .77
Net income, assuming full dilution................... $ .84 $ .77*
Dividends declared................................... .375 .35
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* Conversion of Preferred Stock is excluded from computation of fully diluted
earnings because of antidilutive effects.
<FN>
Note - The consolidated balance sheet at December 31, 1993 has been derived from
the audited financial statements at that date. All other consolidated financial
statements are unaudited but include all adjustments, consisting only of normal
recurring items, which management considers necessary for a fair statement of
the consolidated results of operations and financial position for the respective
periods. Operating results for the three months ended March 31, 1994 are not
necessarily indicative of the results that may be achieved for the entire year
ending December 31, 1994.
</FN>
</TABLE>
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<PAGE>
GATX CORPORATION AND SUBSIDIARIES
---------------
<TABLE>
CONSOLIDATED BALANCE SHEETS
IN MILLIONS
ASSETS
<CAPTION>
March 31 December 31
1994 1993
------------ -----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents...................... $ 12.8 $ 26.2
Receivables
Trade accounts................................ 83.5 88.0
Finance leases................................ 549.8 537.0
Secured loans................................. 257.7 226.1
Less - Allowance for possible losses.......... (101.6) (96.0)
--------- --------
789.4 755.1
Property, plant and equipment
Railcars and support facilities............... 1,785.0 1,735.8
Tank storage terminals and pipelines.......... 1,042.1 1,014.8
Great Lakes vessels........................... 203.5 203.4
Operating lease investments and other......... 413.6 351.1
--------- --------
3,444.2 3,305.1
Less - Allowances for depreciation............ (1,366.8) (1,342.8)
--------- --------
2,077.4 1,962.3
Investments in affiliated companies............ 330.4 329.1
Other assets................................... 324.5 319.4
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TOTAL ASSETS $3,534.5 $3,392.1
======== ========
</TABLE>
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<PAGE>
<TABLE>
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDERS' EQUITY
<CAPTION>
March 31 December 31
1994 1993
---------- -----------
(Unaudited)
<S> <C> <C>
Accounts payable............................... $ 181.4 $ 190.6
Accrued expenses............................... 51.3 53.0
Debt
Short-term debt............................... 374.5 226.1
Long-term debt................................ 1,438.6 1,446.5
Capital lease obligations..................... 263.2 267.3
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2,076.3 1,939.9
Deferred income taxes.......................... 250.9 248.2
Other deferred items........................... 367.9 370.5
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Total liabilities and deferred items 2,927.8 2,802.2
Shareholders' equity
Preferred Stock............................... 3.4 3.4
Common Stock.................................. 14.1 14.1
Additional capital............................ 316.9 312.4
Reinvested earnings........................... 314.5 305.1
Cumulative foreign currency
translation adjustment..................... 4.9 2.0
------- -------
653.8 637.0
Less - Cost of common shares in treasury...... (47.1) (47.1)
------- -------
Total shareholders' equity 606.7 589.9
------- -------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDERS' EQUITY $3,534.5 $3,392.1
========= ========
</TABLE>
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<PAGE>
GATX CORPORATION AND SUBSIDIARIES
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<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
IN MILLIONS
<CAPTION>
Three Months Ended
March 31
--------------------
1994 1993
------- -------
OPERATING ACTIVITIES
- --------------------
<S> <C> <C>
Net income $ 20.2 $ 18.6
Adjustments to reconcile net income to net cash
provided by operating activities:
Realized gain on disposition of leased equipment (4.8) (8.9)
Provision for depreciation and amortization 37.9 35.0
Provision for possible losses 6.0 4.0
Deferred income taxes 2.0 2.0
Net change in trade receivables, inventories,
accounts payable and accrued expenses (3.3) 1.7
Other (7.3) (12.0)
----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES 50.7 40.4
INVESTING ACTIVITIES
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Additions to property, plant and equipment (89.7) (61.8)
Additions to equipment on lease, net of
nonrecourse financing (91.3) (16.7)
Secured loans extended (39.6) (13.0)
Investments in affiliated companies (.4) (13.1)
------ ------
Capital additions (221.0) (104.6)
Portfolio proceeds:
From disposition of leased equipment 13.2 13.8
From return of investment 18.3 33.4
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Total portfolio proceeds 31.5 47.2
Proceeds from other asset dispositions 2.7 .6
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NET CASH USED IN INVESTING ACTIVITIES (186.8) (56.8)
FINANCING ACTIVITIES
- --------------------
Proceeds from issuance of long-term debt 21.5 58.3
Repayment of long-term debt (36.0) (85.3)
Net increase in short-term debt 148.4 49.4
Repayment of capital lease obligations (4.1) (3.5)
Issuance of Common Stock under employee benefit programs 3.6 1.0
Cash dividends (10.7) (10.1)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 122.7 9.8
------ ------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS $ (13.4) $ (6.6)
======= =======
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS
COMPARISON OF FIRST THREE MONTHS OF 1994 TO FIRST THREE MONTHS OF 1993
GENERAL
- -------
GATX Corporation's net income for the first quarter of 1994 was $20 million or
$.84 per common share compared to net income of $19 million or $.77 per common
share for the first quarter of 1993. First quarter 1994 net income increased 9%
over the first quarter of 1993. Transportation and Terminals reported higher
net income due to increased railcar and terminal rental income, partially offset
by increased selling, general and administrative costs primarily attributable to
higher compensation, training and information systems costs. Increased fee and
lease income at Financial Services were more than offset by lower disposition
gains and joint venture income and a higher loss provision. American
Steamship's results were higher in 1994 primarily reflecting recognition of
fixed costs within the 1993 quarter for a vessel that was not expected to
operate in 1993. Results were lower at GATX Logistics.
Operating activities provided $51 million of cash flow during the first quarter
of 1994, an increase of $10 million from the 1993 first quarter. Net income
adjusted for non-cash items generated $61 million of cash, up $11 million from
the 1993 quarter. The $4 million decrease in realized gains on disposition of
leased equipment effectively increased cash from operating activities as the
full amount of proceeds was included under investing activities as portfolio
proceeds.
Proceeds of $32 million were generated from the portfolio compared to $47
million in the first quarter of 1993. Disposition proceeds of $13 million were
slightly lower than last year. Proceeds of $18 million from return of
investment decreased $15 million due to lower recovery of lease and loan
principal, partially offset by an increase in cash generated from joint
ventures.
Capital additions for the quarter totaled $221 million, up $116 million from the
1993 first quarter principally due to increased expenditures at Financial
Services. Additions at Financial Services of $132 million, a $90 million
increase from last year, included $65 million to acquire a 50% interest in two
aircraft on lease to an international carrier and a $25 million loan against the
cash flows of a lease portfolio for which Financial Services is providing
management services. Transportation invested $56 million in the railcar fleet
versus $42 million in last year's first quarter; approximately $4 million was
expended on the repair facilities in both quarters. Terminals expended $27
million in the quarter for tank construction and other modifications and
improvements compared to $12 million in last year's first quarter. Logistics
expended $2 million in the 1994 first quarter, down $3 million from last year.
Full year 1994 capital spending is forecasted to approximate $700 million
compared to $596 million in 1993. A portion of the 1994 expenditures may not be
effected depending on market conditions. It is anticipated that capital
expenditures will be funded by both internally generated funds and GATX's
available external financing sources.
GATX had available unused committed lines of credit of $276 million at March 31,
1994. During the quarter, General American Transportation Corporation (GATC)
filed a $650 million shelf registration for pass through trust certificates and
debt securities, none of which has yet been issued. GATX Capital has a $300
million shelf registration for medium-term notes; $20 million was issued during
the quarter.
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<PAGE>
RESULTS OF OPERATIONS
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Following is a discussion of the operating results of GATX's business segments:
<TABLE>
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RAILCAR LEASING AND MANAGEMENT (TRANSPORTATION)
<CAPTION>
Three Months Ended
(In Millions) March 31
---------------------
1994 1993 Change
------- ------- -----------------
<S> <C> <C> <C> <C>
Gross Income $ 78.0 $ 73.5 $ 4.5 6 %
Net Income $ 13.2 $ 12.4 $ .8 6 %
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</TABLE>
Transportation's gross income for the first quarter of 1994 increased 6% from
the comparable prior year period due to higher revenues attributable to
additional railcars on lease and slightly higher lease rates. Fleet utilization
at March 31, 1994 was 93% on a fleet size of 56,400 compared to 92% on a fleet
size of 54,900 a year ago. At quarter end, the active fleet totaled 52,600
compared to 50,250 a year ago.
Net income increased 6% from the first quarter of 1993 as higher revenues and
slightly lower ownership costs were partially offset by increased fleet repair
costs. Ownership costs, consisting of rental expense, depreciation and
interest, decreased slightly despite an increased fleet size due to lower
interest rates and interest rate swaps which were executed to more closely match
the duration of Transportation's debt with the railcar lease terms. Operating
margins decreased as the increase in fleet repair costs exceeded the growth in
revenues.
<TABLE>
FINANCIAL SERVICES
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<CAPTION>
Three Months Ended
(In Millions) March 31
---------------------
1994 1993 Change
------- -------- ----------------
<S> <C> <C> <C> <C>
Gross Income $ 50.2 $ 44.2 $ 6.0 14 %
Net Income $ 5.9 $ 6.6 $ (.7) (11)%
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</TABLE>
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<PAGE>
Revenues at Financial Services increased 14% from the comparable prior year
quarter primarily due to increased lease and fee income, partially offset by
lower disposition gains. Pretax disposition gains, which do not fall evenly
period to period, were $4 million for the first quarter of 1994 compared to $9
million for the first quarter of 1993. The increase in lease income was the
result of new investment volume, including a railcar sale leaseback transaction
acquired during the second quarter of 1993. Fee income increased due to the
higher level of equipment remarketing fees generated during the first quarter of
1994.
Net income decreased 11% from the 1993 comparable period principally due to a
lower level of joint venture income and an increased provision for losses,
partially offset by lower interest expense and the favorable revenue variance.
The first quarter loss provision of $6 million was $2 million more than last
year's first quarter, bringing the loss reserve at quarter end to $94 million or
6.8% of portfolio investments. Equity in net earnings of affiliated companies
decreased $1 million from the comparable 1993 period primarily as no current
year income was recognized at one of the technology joint ventures due to
revised residual estimates.
<TABLE>
TERMINALS AND PIPELINES
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<CAPTION>
Three Months Ended
(In Millions) March 31
---------------------
1994 1993 Change
------- ------- -----------------
<S> <C> <C> <C> <C>
Gross Income $ 72.3 $ 69.2 $ 3.1 4 %
Net Income $ 7.5 $ 7.0 $ .5 7 %
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</TABLE>
Terminals' 1994 gross income increased 4% reflecting overall strong petroleum
activity at a number of its larger facilities and higher throughput. Throughput
for the first quarter was 174 million barrels compared to 152 million barrels a
year ago. Capacity utilization at Terminals' wholly-owned facilities was 87%
compared to 92% at year end and 91% at the end of the first quarter of 1993.
Utilization declined as a result of certain tankage being out of service for
maintenance and repairs and reduced utilization in the United Kingdom.
Terminals' net income of $7.5 million increased 7% from the 1993 comparable
period due to the higher revenues, slightly improved margins and a $.4 million
increase in earnings at the foreign affiliates.
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<PAGE>
<TABLE>
GREAT LAKES SHIPPING
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<CAPTION>
Three Months Ended
(In Millions) March 31
-------------------
1994 1993 Change
------- -------- --------------------
<S> <C> <C> <C> <C>
Gross Income $ .8 $ 1.3 $ (.5) (38)%
Net Income (Loss) $ .4 $ (.4) $ .8 200 %
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</TABLE>
American Steamship traditionally does not begin operations until late in the
first quarter due to ice conditions on the Great Lakes. Net income of $.4
million was recorded in the 1994 first quarter compared to a net loss of $.4
million in the 1993 first quarter. Net income in the current quarter includes a
$.2 million gain recognized on the sale of stock received in 1993 as part of a
bankruptcy settlement. The 1993 first quarter loss primarily reflected
recognition of fixed costs in that quarter for a vessel that was not expected to
operate in 1993. Pricing on the Great Lakes remains very competitive due to
continued vessel overcapacity.
<TABLE>
LOGISTICS AND WAREHOUSING
- -------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended
(In Millions) March 31
---------------------
1994 1993 Change
------- -------- ----------------
<S> <C> <C> <C> <C>
Gross Income $ 59.9 $ 50.0 $ 9.9 20 %
Net Loss $ (.7) $ (.3) $ (.4) (133)%
- -------------------------------------------------------------------------------------------
</TABLE>
GATX Logistics' gross income of $60 million increased 20% from the 1993 first
quarter due to new customers and increased volume. Total warehousing square
footage increased 3% over a year ago to 23.3 million square feet. Space
utilization was 91% at the end of the 1994 first quarter compared to 94% at year
end and 93% a year ago.
Logistics' net loss for the first quarter of 1994 was $.7 million compared to
$.3 million for the first quarter of 1993. Despite the increase in gross
income, the expense of implementing new business, relocating existing customers,
and labor inefficiencies partly attributable to severe weather conditions offset
any contributions from the new business. Logistics' contribution margin
continues to be under pressure as the competitive environment is limiting
operating profits.
-8-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
GATX has previously reported a number of lawsuits which have been filed in the
Superior Court for the State of California and served upon Terminals, Calnev
Pipe Line Company or another GATX subsidiary seeking an unspecified amount of
damages arising out of the May 1989 explosion in San Bernardino, California. In
addition to those lawsuits, the case of Zamarripa, et al, vs. Southern Pacific
Railroad Company, et al, (No. 526684) was filed in November 1993 in the County
of San Bernardino. Based upon information known to management, it remains
management's opinion that if damages are assessed and taking into consideration
probable insurance recovery, the ultimate resolution of the lawsuits arising out
of the May 1989 explosion will not have a material effect on GATX's consolidated
financial position or results of operations.
The Environmental Protection Agency has issued a Complaint and Compliance Order
against Terminals, alleging among other things that its Tampa, Florida facility
exceeded the ninety-day limitation on the storage of hazardous materials and
failed to implement a hazardous waste analysis plan in violation of the
Resources Conservation and Recovery Act and Florida statues. The Complaint
seeks injunctive relief and penalties of $341,235. Terminals has admitted
certain portions of the Complaint and is vigorously defending the remaining
allegations.
Except as reported above and other than as previously reported, neither the
Registrant nor any of its subsidiaries is currently a party to any material
pending legal proceeding, other than ordinary routine litigation incidental to
the business, and to the belief of the Registrant, no such proceeding is
contemplated.
Item 6. Exhibits and Reports on Form 8-K. Page
- ------------------------------------------ ----
(a) 11A Statement regarding computation of earnings per share. 11
11B Statement regarding computation of earnings per share
(full dilution). 12
(b) No reports on Form 8-K were filed during the reporting
period.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GATX CORPORATION
(Registrant)
/s/David M. Edwards
----------------------------
David M. Edwards
Vice President, Finance and
Chief Financial Officer
(Duly Authorized Officer)
Date: May 10, 1994
-10-
<PAGE>
EXHIBIT 11A
GATX CORPORATION AND SUBSIDIARIES
---------------------
<TABLE>
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<CAPTION>
Three Months Ended
March 31
-----------------------
1994 1993
-------- --------
<S> <C> <C>
Average number of shares of Common Stock outstanding.. 19.8 19.5
Shares issuable upon assumed exercise of stock
options, reduced by the number of shares which
could have been purchased with the proceeds
from exercise of such options........................ .3 .3
-------- --------
Total................................................. 20.1 19.8
======== =========
Net income............................................ $ 20.2 $ 18.6
Deduct - Dividends paid and accrued on
Preferred Stock.................................... 3.3 3.3
-------- --------
Net income, as adjusted............................... $ 16.9 $ 15.3
======== ========
Net income per share.................................. $ .84 $ .77
======== ========
</TABLE>
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<PAGE>
EXHIBIT 11B
GATX CORPORATION AND SUBSIDIARIES
------------------
<TABLE>
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS
ASSUMING FULL DILUTION
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<CAPTION>
Three Months Ended
March 31
---------------------
1994 1993
-------- -------
<S> <C> <C>
Average number of shares used to
compute primary earnings per share.................. 20.1 19.8
Common Stock issuable upon assumed
conversion of Preferred Stock....................... 4.0 *
-------- ------
Total................................................. 24.1 19.8
======== =======
Net income, as adjusted per primary computation....... $ 16.9 $ 15.3
Add - Dividends paid and accrued on Preferred Stock... 3.3 *
-------- -------
Net income, as adjusted............................... $ 20.2 $ 15.3
======== ========
Net income per share, assuming full dilution.......... $ .84 $ .77
======== ========
* Conversion of Preferred Stock excluded from computation of fully diluted
earnings because of antidilutive effects.
Additional fully diluted computation (1)
- ---------------------------------------
Average number of shares used to
compute primary earnings per share.................. 19.5
Common Stock issuable upon assumed
conversion of Preferred Stock and
stock option exercises.............................. 4.4
--------
23.9
========
Net income, as adjusted per primary computation....... $ 15.3
Add - Dividends paid and accrued on Preferred Stock... 3.3
--------
$ 18.6
========
Net income per share assuming full dilution........... $ .78
========
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11), although it is contrary to paragraph 40 of APB Opinion
No. 15 because it produces an antidilutive result.
</TABLE>
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<PAGE>
