- --------------------------------------------------------------------------------
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 Quarterly Period Ended Commission File Number
September 30, 1996 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 20,247,743 shares of common stock outstanding as of October
31, 1996.
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<PAGE>
<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
In Millions, Except Per Share Amounts
Three Nine
Months Ended Months Ended
September 30 September 30
------------------------- -------------------------
1996 1995 1996 1995
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Gross income.............................................. $367.8 $315.4 $1,009.2 $923.3
Costs and expenses
Operating expenses.................................... 171.3 162.3 487.0 456.5
Interest.............................................. 55.2 43.6 148.2 126.4
Provision for depreciation and amortization........... 52.6 42.3 145.2 125.6
Provision for possible losses......................... 2.9 3.2 9.9 12.5
Selling, general and administrative................... 41.9 35.4 115.4 102.8
-------- -------- -------- --------
323.9 286.8 905.7 823.8
-------- -------- -------- --------
Income before income taxes and equity in
net earnings of affiliated companies................... 43.9 28.6 103.5 99.5
Income taxes.............................................. 17.8 12.2 41.3 41.8
-------- -------- --------- --------
Income before equity in net earnings
of affiliated companies................................ 26.1 16.4 62.2 57.7
Equity in net earnings of affiliated companies............ 7.3 10.1 21.6 24.4
--------- -------- --------- --------
Net income................................................ $ 33.4 $ 26.5 $ 83.8 $ 82.1
======= ======= ========== =======
Per common share:
Net income............................................ $ 1.47 $ 1.13 $ 3.61 $ 3.55
Net income, assuming full dilution.................... 1.37 1.08 3.43 3.36
Dividends declared.................................... .43 .40 1.29 1.20
<FN>
Note - The consolidated balance sheet at December 31, 1995 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 nine months ended September 30, 1996 are not
necessarily indicative of the results that may be achieved for the entire year
ending December 31, 1996. Certain amounts in the 1995 financial statements have
been reclassified to conform to the 1996 presentation.
</FN>
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
In Millions
ASSETS
September 30 December 31
1996 1995
------------ -------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents ........................ $ 87.9 $ 34.8
Receivables
Trade accounts ............................... 110.8 115.4
Finance leases ............................... 689.5 673.8
Secured loans ................................ 220.2 239.9
Less - Allowance for possible losses ......... (116.9) (100.0)
-------- --------
903.6 929.1
Property, plant and equipment
Railcars and support facilities .............. 2,437.7 1,945.1
Tank storage terminals and pipelines ......... 1,364.1 1,242.3
Great Lakes vessels .......................... 199.2 204.1
Operating lease investments and other ........ 558.2 510.7
-------- --------
4,559.2 3,902.2
Less - Allowance for depreciation ............ (1,747.9) (1,533.1)
-------- --------
2,811.3 2,369.1
Investments in affiliated companies .............. 444.3 408.7
Other assets ..................................... 317.3 301.2
-------- --------
TOTAL ASSETS ..................................... $ 4,564.4 $ 4,042.9
========= =========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDERS' EQUITY
September 30 December 31
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Accounts payable ................................... $ 260.8 $ 233.3
Accrued expenses ................................... 68.1 48.2
Debt
Short-term debt ............................... 423.0 330.2
Long-term debt ................................ 2,118.0 1,850.9
Capital lease obligations ..................... 228.0 241.6
-------- --------
2,769.0 2,422.7
Deferred income taxes .............................. 339.2 264.8
Other deferred items ............................... 355.1 356.1
-------- --------
Total liabilities and deferred items ...... 3,792.2 3,325.1
Shareholders' equity
Preferred Stock ............................... 3.4 3.4
Common Stock .................................. 14.3 14.3
Additional capital ............................ 327.7 324.8
Reinvested earnings ........................... 456.9 409.0
Cumulative unrealized equity adjustments ...... 17.0 13.4
-------- --------
819.3 764.9
Less - Cost of common shares in treasury ...... (47.1) (47.1)
-------- --------
Total shareholders' equity ................ 772.2 717.8
-------- --------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDERS' EQUITY ...................... $ 4,564.4 $ 4,042.9
========= ========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
GATX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
In Millions
Three Months Ended Nine Months Ended
September 30 September 30
------------------- ------------------
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income ........................................................ $ 33.4 $ 26.5 $ 83.8 $ 82.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Realized gain on disposition of leased
equipment .............................................. (4.9) (5.5) (24.2) (31.4)
Provision for depreciation and amortization ................ 52.6 42.3 145.2 125.6
Provision for possible losses .............................. 2.9 3.2 9.9 12.5
Deferred income taxes ...................................... 2.3 3.6 6.3 10.4
Net change in trade receivables, inventories,
accounts payable and accrued expenses ......................... 52.1 1.9 42.9 (59.7)
Other ............................................................. (20.2) (10.5) (46.2) (30.5)
------ ------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES ..................... 118.2 61.5 217.7 109.0
INVESTING ACTIVITIES
Additions to property, plant and equipment ........................ (101.4) (183.8) (362.0) (404.0)
Additions to equipment on lease,
net of nonrecourse financing .................................. (71.7) (55.6) (268.5) (179.6)
Secured loans extended ............................................ (8.4) (12.6) (108.7) (58.2)
Investments in affiliated companies ............................... (3.0) (32.1) (36.0) (38.3)
Other investments and progress payments ........................... (92.7) (8.3) (129.9) (20.1)
------ ------ ------ ------
Capital additions and portfolio investments ................... (277.2) (292.4) (905.1) (700.2)
Portfolio proceeds:
From disposition of leased equipment .......................... 13.9 10.5 66.2 123.3
From return of investment ..................................... 131.0 22.6 217.2 103.0
------ ------ ------ ------
Total portfolio proceeds ................................... 144.9 33.1 283.4 226.3
Proceeds from other asset dispositions ............................ 216.2 251.5 223.5 269.4
------ ------ ------ ------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES ................................... 83.9 (7.8) (398.2) (204.5)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt .......................... 75.6 .3 394.6 203.9
Repayment of long-term debt ....................................... (32.4) (36.7) (233.5) (115.6)
Net (decrease) increase in short-term debt ........................ (172.7) (19.6) 120.4 43.8
Repayment of capital lease obligations ............................ (5.1) (4.9) (13.6) (12.9)
Issuance of Common Stock under employee
benefit programs .............................................. .5 2.8 1.7 5.1
Cash dividends .................................................... (12.0) (11.4) (36.0) (34.0)
------ ------ ------ ------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES ................................... (146.1) (69.5) 233.6 90.3
------ ------ ------ ------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ......................................... $ 56.0 $ (15.8) $ 53.1 $ (5.2)
====== ====== ====== ======
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS
COMPARISON OF FIRST NINE MONTHS OF 1996
TO FIRST NINE MONTHS OF 1995
GENERAL
GATX Corporation's net income for the first nine months of 1996 was $84 million
or $3.61 per common share compared to net income of $82 million or $3.55 per
common share for the first nine months of 1995. On a fully diluted basis,
earnings per share were $3.43 compared to fully diluted earnings of $3.36 per
share for the 1995 period.
Gross income increased 9% while net income increased 2% primarily as a result of
the additional number of railcars on lease and modestly higher average fleet
rental rates at GATX's railcar leasing and management subsidiary
(Transportation) and increased fee and lease income at Financial Services. These
were partially offset by lower revenues at GATX's terminals and pipeline
subsidiary (Terminals). In addition, corporate expense was lower due to the
reversal of a $2.6 million after-tax litigation reserve following the successful
defense of previously reported litigation against GATX.
Operating activities provided $218 million of cash flow during the first nine
months of 1996, an increase of $109 million from the first nine months of 1995.
Net income adjusted for non-cash items generated $221 million, up $22 million
from last year. The $7 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. Changes in working capital and other generated $87 million more cash
in 1996 largely due to remarketing proceeds on a managed portfolio which are
repayable to a third party, and the $48 million refund in the first quarter of
1995 of a deposit as the result of a lessee's exercise of its option to return
four DC-10 aircraft.
Proceeds of $283 million were generated from the portfolio compared to $226
million in the first nine months of 1995. Proceeds from the sale of leased
equipment of $66 million were $57 million less than the prior year; however,
proceeds from the return of investment increased $114 million due to the
increased lease runoff and loan repayments.
Capital additions and portfolio investments of $905 million for the first nine
months of 1996 increased $205 million from the comparable 1995 period. Portfolio
investments at Financial Services of $461 million, which included marine
equipment, railroad rolling stock and locomotives, aircraft, and information
technology equipment, were $190 million higher than the prior year.
Transportation invested $237 million in its domestic railcar fleet and
facilities versus $299 million last year. In addition, $92 million was invested
in operations in Mexico, Canada and Europe this year versus $20 million a year
ago; this includes $84 million expended for the remaining 55% interest in CGTX,
Transportation's Canadian railcar affiliate. Terminals' capital spending of $108
million increased $4 million from the comparable period of 1995 which is
primarily due to the expansion of the Central Florida Pipeline. Full year 1996
capital spending for GATX is forecasted to exceed $550 million; further,
portfolio investments are expected to exceed $500 million. A portion of these
1996 expenditures and investments may not be made depending on market
conditions. It is anticipated that capital expenditures and portfolio
investments will be funded by both internally generated funds and GATX's
available external financing sources.
-5-
<PAGE>
GATX had available unused committed lines of credit of $474 million at September
30, 1996. General American Transportation Corporation (GATC) has a $650 million
shelf registration for pass through trust certificates and debt securities,
under which $100 million of notes and $107 million of pass through trust
certificates have been issued. During the quarter, GATC completed a sale
leaseback of GATC railcars totaling $150 million, $107 million of which was the
debt portion. GATX Capital has a $300 million shelf registration, under which
$68 million of medium-term notes have been issued. Neither GATC nor GATX Capital
issued any medium-term notes during the quarter.
RESULTS OF OPERATIONS
Following is a discussion of the operating results of GATX's business segments:
RAILCAR LEASING AND MANAGEMENT (TRANSPORTATION)
- --------------------------------------------------------------------------------
Nine Months Ended
(In Millions) September 30
---------------------
1996 1995 Change
-------- -------- ------------------
Gross Income $310.2 $266.4 $43.8 16%
Net Income $ 50.6 $ 46.5 $ 4.1 9%
- --------------------------------------------------------------------------------
Transportation's gross income increased 16% from the comparable prior year
period due to approximately 2,500 additional domestic railcars on lease compared
to a year ago, slightly higher lease rates, and the addition of CGTX.
Transportation added 8,700 Canadian cars to its fleet as a result of the July
1996 acquisition of the remaining interest in CGTX. Transportation previously
owned 45 percent of Canadian-based CGTX as an equity investment. Approximately
72,800 railcars were on lease at quarter end, including 700 in Mexico and 8,700
in Canada, compared to 61,000 a year ago. Domestic fleet utilization at
September 30, 1996 was 95%, the same level as a year ago.
Net income increased 9% from the first nine months of 1995. Higher revenues were
partially offset by increased fleet repair and ownership costs and higher SG&A
expenses due in part to the inclusion of CGTX. Operating margins increased
slightly as the revenue growth rate exceeded the rate of increase in fleet
repair and operating costs. Fleet repair costs were 7% greater than in 1995
primarily due to the increased fleet size. Average year-to-date throughput at
September 30, 1996, for railcars in GATX repair facilities decreased to 32 days,
down from 40 days a year ago, reflecting the improved productivity at
Transportation's upgraded service centers. Ownership costs, consisting of rental
expense, depreciation, and interest, increased 24% compared to last year
reflecting increased domestic fleet size and the acquisition of CGTX.
-6-
<PAGE>
TERMINALS AND PIPELINES
- --------------------------------------------------------------------------------
Nine Months Ended
(In Millions) September 30
---------------------
1996 1995 Change
-------- -------- ------------------
Gross Income $220.1 $237.1 $(17.0) (7)%
Net Income $ 11.3 $ 24.9 $(13.6) (55)%
- --------------------------------------------------------------------------------
Terminals' 1996 gross income decreased 7% reflecting general softness in the
petroleum markets as pricing and/or utilization issues continue to impact the
domestic and international markets. Lower petroleum inventories and
backwardation in the futures market continue to negatively impact revenue. On
the positive side, pipeline volumes remain strong due to continued high demand,
and the chemical markets remain stable. Year-to-date throughput of 518 million
barrels was 7% greater than last year, primarily as a result of the colder
winter in the Northeast and increased inventory turns of customers' products.
Capacity utilization at Terminals' wholly-owned facilities was 84% at the end of
the third quarter of 1996 compared to 87% a year ago as reduced spot business
and tanks out of service for repair contributed to the reduction.
Terminals' net income decreased $14 million from 1995 reflecting the weakness in
the domestic and international petroleum markets. Due to the heavy fixed cost
nature of this business, net income for the nine months was 55% behind last
year's levels. Earnings also were affected by $2 million of after-tax charges
related to a termination program and the costs of a number of studies to
evaluate business conditions in each of its markets. Terminals continues to
evaluate its existing operations and organization structure. Operating margins
decreased slightly as a result of a greater decrease in revenues relative to
cost reductions achieved. Terminals' operating expenses were $1 million lower
than last year primarily due to lower maintenance costs, insurance recoveries,
and savings in various other operating costs. Interest expense increased $5
million over 1995 as total debt grew to finance the capital additions. Equity in
net earnings of affiliated companies of $9 million decreased $2 million
principally due to lower results at the Singapore and Belgium terminals as a
result of reduced petroleum activity, partially offset by increased earnings at
the Kobe, Japan, terminal which has been completely restored after last year's
earthquake, and incremental earnings from the Olympic pipeline which was
acquired in August of 1995.
-7-
<PAGE>
FINANCIAL SERVICES
- --------------------------------------------------------------------------------
Nine Months Ended
(In Millions) September 30
--------------------
1996 1995 Change
-------- -------- ------------------
Gross Income $219.1 $163.2 $55.9 34%
Net Income $ 39.1 $ 29.2 $ 9.9 34%
- --------------------------------------------------------------------------------
Financial Services' year-to-date gross income increased 34% from the first nine
months of 1995. The increase was principally due to higher fee income, new lease
and loan volume, and the acquisition of Sun Financial in late 1995. Fee income
increased $7 million as a result of fees related to the remarketing of assets in
its managed portfolio. Pretax disposition gains, which do not occur evenly
period to period, were $26 million for the first nine months of 1996 compared to
$29 million in 1995. Other income increased $7 million as a result of real
estate sales, venture leasing stock sales, and incremental income from Sun
Financial.
Net income of $39 million increased $10 million from the comparable 1995 period
due to the increased revenues, partially offset by increased interest, SG&A, and
operating lease expenses. The provision for possible losses of $10 million
decreased $2 million from the prior year. The loss reserve at September 30,
1996, was $107 million compared to $92 million at December 31, 1995, reflecting
the year-to-date provision and recoveries.
GREAT LAKES SHIPPING
- --------------------------------------------------------------------------------
Nine Months Ended
(In Millions) September 30
--------------------
1996 1995 Change
-------- -------- ------------------
Gross Income $57.5 $57.4 $ .1 -
Net Income $ 4.1 $ 5.5 $(1.4) (25)%
- --------------------------------------------------------------------------------
-8-
<PAGE>
American Steamship Company's gross income for the first nine months of 1996 was
slightly above the prior year period as an increase in revenue per ton was
offset by less tonnage carried. The reduction in tonnage carried is due to the
severe weather and ice conditions in the first half of the year which
significantly hampered vessel operations at the start of the sailing season, and
two vessels which were temporarily out of service during the third quarter.
Tonnage carried in the first nine months of 1996 was 16.6 million tons compared
to 17.4 million tons in the first nine months of 1995. Overall demand on the
Great Lakes remains strong from all of ASC's industry sectors, and it is
anticipated that total 1996 tonnage will approximate the 1995 level.
Net income decreased $1 million from the first nine months of 1995 reflecting
the decreased tonnage carried. Further, margins decreased as increased revenue
per ton was more than offset by higher operating costs as severe weather
conditions impeded efficient vessel operations early in the year, and by
increased fuel prices.
LOGISTICS AND WAREHOUSING
- --------------------------------------------------------------------------------
Nine Months Ended
(In Millions) September 30
-------------------
1996 1995 Change
-------- -------- ------------------
Gross Income $203.8 $199.8 $4.0 2%
Net Income $ .5 $ .1 $ .4 400%
- --------------------------------------------------------------------------------
GATX Logistics' gross income of $204 million increased 2% from the first nine
months of 1995. Strong volumes with certain existing customers, price increases,
and new customers all contributed to the higher revenues. This was partially
offset by the impact of lost business which was not replaced.
Net income was $.5 million compared to $.1 million in the first nine months of
1995. Margins improved slightly as the increased volume, price increases, and a
slight reduction in empty space costs were partially offset by higher
information systems costs. In addition, SG&A costs increased due to costs of
developing new business.
-9-
<PAGE>
COMPARISON OF THIRD QUARTER 1996 TO
THIRD QUARTER 1995
GENERAL
For the third quarter 1996, net income was $33 million or $1.47 per share as
compared to net income of $26 million or $1.13 per share for the third quarter
of 1995.
GROSS INCOME
- --------------------------------------------------------------------------------
(In Millions) Three Months Ended
September 30
---------------------
Business Segment 1996 1995 Change
- -------------------------------- -------- --------- --------------
Railcar Leasing and Management $113.8 $ 90.8 $ 23.0 25%
Terminals and Pipelines 74.3 77.7 (3.4) (4)
Financial Services 86.5 48.2 38.3 79
Great Lakes Shipping 29.6 29.2 .4 1
Logistics and Warehousing 64.9 70.1 (5.2) (7)
- --------------------------------------------------------------------------------
NET INCOME
- --------------------------------------------------------------------------------
(In Millions) Three Months Ended
September 30
--------------------
Business Segment 1996 1995 Change
- --------------------------------- -------- -------- --------------
Railcar Leasing and Management $ 17.8 $ 15.6 $ 2.2 14%
Terminals and Pipelines 2.0 8.2 (6.2) (76)
Financial Services 19.1 7.6 11.5 151
Great Lakes Shipping 2.6 2.9 (.3) (10)
Logistics and Warehousing .1 .2 (.1) (50)
- --------------------------------------------------------------------------------
Increases and decreases in gross income and net income between these quarters
for all segments were principally due to the same reasons as discussed
previously in relation to the nine-month periods.
-10-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
GATX has previously reported that various lawsuits seeking damages arising out
of the May 1989 explosion in San Bernardino, California, have been filed against
Terminals, Calnev Pipeline Company or another GATX subsidiary. Several of those
suits, all filed in the County of San Bernardino, have now been settled or
dismissed as follows: Alba, et al, v. Southern Pacific Railroad Co., et al,
filed November 1989 (No. 252842) and dismissed April 1996; Terry, et al, v.
Southern Pacific, et al, filed December 1989 (No. 253604) and dismissed March
1996; Charles, et al, v. Calnev Pipe Line, Inc., et al, filed May 1990 (No.
256269) and settled March 1996; Mary Washington, et al, v. Southern Pacific, et
al, filed May 1990 (No. 256346) and settled March 1995; Stewart, et al v.
Southern Pacific, et al, filed May 1990 (No. 256464) and settled May 1994;
Roberts, et al, v. Southern Pacific Transportation, et al, filed November 1992
(No. 275963) and settled June 1995; Irby, et al, v. Southern Pacific, et al,
filed April 1990 (No. 255715) and settled May 1994; Reese, et al, v. Southern
Pacific, et al, filed May 1990 (No. 256435) and settled May 1994; and Nancy
Washington, et al, v. Southern Pacific, et al, filed May 1990 (No. 256435) and
settled April 1994. As Terminals' insurance carriers have assumed the defense of
these lawsuits without reservation of rights and have paid all of the
settlements entered into to date, GATX believes that the likelihood of a
material adverse effect on GATX's consolidated financial position or operations
is remote.
GATX has previously reported GATC's appeal to the Federal Circuit Court of
Appeals of a judgment entered against GATC by the U. S. District Court for the
Northern District of Illinois in the approximate amount of $9 million which also
permanently enjoined GATC from any further infringement of the patent covering
the construction and use of its Arcticar TM cryogenically cooled railcar. The
Federal Circuit Court of Appeals has now reversed the judgment against GATC, and
the appellant's motion for a rehearing has been denied; however, the appellant
may still file for an appeal to the United States Supreme Court. Even in the
event of an adverse decision on appeal to the Supreme Court and reinstatement of
the original judgment against GATC, GATX does not believe the costs associated
with the disposition of the affected cars will have a material adverse affect on
GATX.
GATX has previously disclosed that in July 1996, GATX/Airlog Company ("Airlog"),
a California general partnership of which a subsidiary of GATX Capital
Corporation (a wholly-owned subsidiary of GATX Corporation) ("Capital") is a
partner, and Capital filed a complaint for Declaratory Judgment against
Evergreen International Airlines, Inc. ("Evergreen") in the United States
District Court for the Northern District of California (No. C 96-2494) seeking a
declaration that neither Capital nor Airlog has any liability to Evergreen as a
result of the issuance of Airworthiness Directive 96-01-03 (the "Airworthiness
Directive") by the Federal Aviation Administration (the "FAA"). The effect of
the Airworthiness Directive is to reduce significantly the amount of freight
that three of Evergreen's B747 aircraft, modified from passenger to freight
service by subcontractors of Airlog pursuant to contracts between Airlog and
Evergreen or one of its affiliates, may carry. Evergreen filed an answer and
counterclaim on August 1, 1996, asserting that Airlog and Capital are liable to
it under a number of legal theories in connection with the application of the
Airworthiness Directive to the three aircraft. In an initial disclosure
statement dated October 29, 1996, and served on Airlog and Capital pursuant to
applicable discovery rules in this litigation, Evergreen alleges to have
suffered damages which it has calculated as follows: (i) out-of-service costs
amounting to approximately $16.2 million as of October 15, 1996; (ii) denial of
access to currently favorable capital markets, resulting in an alleged inability
to issue shares in an initial public offering with a value of as much as $1.8
billion; (iii) lost flight revenues and profits amounting to approximately $25.8
million; (iv) lost business opportunities and profits attributable to
Evergreen's diminished 747 fleet capacity (which Evergreen has not quantified,
but has
-11-
<PAGE>
indicated is subject to further calculation); and (v) maintenance costs in
responding to the Airworthiness Directive (and to related airworthiness
directives issued by the FAA) of approximately $1.6 million as of March 1996.
While the results of any litigation are impossible to predict with certainty,
GATX believes that Evergreen's claims are without merit, and that Capital and
Airlog have adequate defenses thereto.
Item 6. Exhibits and Reports on Form 8-K Page
(a) 10 Summary of the Directors' Deferred Stock Plan
approved July 26, 1996 effective as of
April 26, 1996, file number 1-2328. Submitted
to the SEC along with the electronic submission
of this Quarterly Report on Form 10-Q.
11A Statement regarding computation of earnings per
share. 14
11B Statement regarding computation of earnings per
share assuming full dilution. 15
27 Financial Data Schedule for GATX Corporation
for the quarter ended September 30, 1996.
Submitted to the SEC along with the electronic
submission of this Quarterly Report on Form 10-Q.
(b) No reports on Form 8-K were filed during the
reporting period.
-12-
<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: November 8, 1996
-13-
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11A
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS
In Millions, Except Per Share Amounts
Three Months Ended Nine Months Ended
September 30 September 30
---------------- ---------------
1996 1995 1996 1995
------- ------- ------- ------
<S>
<C> <C> <C> <C>
Average number of shares of
Common Stock outstanding .......................... 20.2 20.1 20.2 20.0
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 .4 .3 .3
----- ----- ----- -----
Total shares .......................................... 20.5 20.5 20.5 20.3
===== ===== ===== =====
Net income ............................................ $33.4 $26.5 $83.8 $82.1
Deduct - Dividends paid and accrued on
Preferred Stock ................................... 3.3 3.3 9.9 9.9
----- ----- ----- -----
Net income, as adjusted ............................... $30.1 $23.2 $73.9 $72.2
===== ===== ===== =====
Net income per share .................................. $1.47 $1.13 $3.61 $3.55
===== ===== ===== =====
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11B
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS
ASSUMING FULL DILUTION
In Millions, Except Per Share Amounts
Three Months Ended Nine Months Ended
September 30 September 30
------------------- ----------------
1996 1995 1996 1995
-------- -------- ------- ------
<S> <C> <C> <C> <C>
Average number of shares used to
compute primary earnings per share ..... 20.5 20.5 20.5 20.3
Common Stock issuable upon assumed conversion
of Preferred Stock ..................... 4.0 4.0 4.0 4.1
------ ------ ------ ------
Total shares ................................. 24.5 24.5 24.5 24.4
====== ====== ====== ======
Net income as adjusted per primary computation $30.1 $23.2 $73.9 $72.2
Add - Dividends paid and accrued on
Preferred Stock ........................ 3.3 3.3 9.9 9.9
------ ------ ------ ------
Net income, as adjusted ...................... $33.4 $26.5 $83.8 $82.1
====== ====== ====== ======
Net income per share, assuming full dilution . $1.37 $1.08 $3.43 $3.36
====== ====== ====== ======
</TABLE>
-15-
<PAGE>
EXHIBITS INDEX
Exhibits filed with this document
(a) 10 Summary of the Directors' Deferred Stock Plan
approved July 26, 1996 effective as of
April 26, 1996, file number 1-2328. Submitted
to the SEC along with the electronic submission
of this Quarterly Report on Form 10-Q.
11A Statement regarding computation of earnings per
share.
11B Statement regarding computation of earnings per
share assuming full dilution.
27 Financial Data Schedule for GATX Corporation
for the quarter ended September 30, 1996.
Submitted to the SEC along with the electronic
submission of this Quarterly Report on Form 10-Q.
Summary
Directors' Deferred Stock Plan
To reflect an increased emphasis on the Company's common stock, the
Company has modified its Directors' compensation policy to provide for the
payment of a portion of the Directors' annual compensation in the Company's
common stock as follows:
(1) The annual retainer will be paid in quarterly installments in
arrears at the end of each July, October, January and April.
(2) Fifty percent (50%) of each quarterly installment will be
paid in cash.
(3) The balance of the quarterly installment will be paid in
phantom stock units which shall be credited to each director's
account. The number of phantom stock units to be credited to
each director's account will be determined by dividing the
amount of such payment by the average of the high and low
price of the company's stock on the last trading day of the
month in which the quarterly installment is paid.
(4) In addition to the retainer, each year the director's account
will be credited with two hundred and fifty (250) phantom
units, equal to two hundred and fifty (250) shares of the
company's common stock. The units will be credited in four (4)
equal payments at the end of July, October, January and April.
(5) On each dividend payment date, the director's phantom stock
account will be credited with additional phantom stock units
calculated by dividing (a) the product of (1) the dividend
declared on each share of the Company's common stock and (2)
the number of phantom stock units then credited to the
director's account, by (b) the average of the high and low
price of the Company's common stock on the date such dividend
is declared.
(6) Any director who serves on the board of directors for less
than a full quarter will receive a prorated payment reflecting
actual service.
(7) At the expiration of the director's service on the board,
settlement of the phantom stock units will be made as soon as
is reasonably practical in common stock equal in number to the
number of phantom stock units then credited to his or her
account. Any fractional units will be paid in cash.
(8) It is the intention of the parties that this program be
unfunded for Federal and state tax purposes and Title 1 of
ERISA. Each director shall have the status of an unsecured
creditor of the Company, and payment obligations with respect
to the phantom stock units credited to the directors' accounts
will not be funded by the Company, nor will shares be set
aside to provide a source from which such payment will be
made.
<TABLE>
<CAPTION>
Exhibit 11A
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS
In Millions, Except Per Share Amounts
Three Months Ended Nine Months Ended
September 30 September 30
---------------- ---------------
1996 1995 1996 1995
------- ------- ------- ------
<S>
<C> <C> <C> <C>
Average number of shares of
Common Stock outstanding .......................... 20.2 20.1 20.2 20.0
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 .4 .3 .3
----- ----- ----- -----
Total shares .......................................... 20.5 20.5 20.5 20.3
===== ===== ===== =====
Net income ............................................ $33.4 $26.5 $83.8 $82.1
Deduct - Dividends paid and accrued on
Preferred Stock ................................... 3.3 3.3 9.9 9.9
----- ----- ----- -----
Net income, as adjusted ............................... $30.1 $23.2 $73.9 $72.2
===== ===== ===== =====
Net income per share .................................. $1.47 $1.13 $3.61 $3.55
===== ===== ===== =====
</TABLE>
-14-
<TABLE>
<CAPTION>
Exhibit 11B
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS
ASSUMING FULL DILUTION
In Millions, Except Per Share Amounts
Three Months Ended Nine Months Ended
September 30 September 30
------------------- ----------------
1996 1995 1996 1995
-------- -------- ------- ------
<S> <C> <C> <C> <C>
Average number of shares used to
compute primary earnings per share ..... 20.5 20.5 20.5 20.3
Common Stock issuable upon assumed conversion
of Preferred Stock ..................... 4.0 4.0 4.0 4.1
------ ------ ------ ------
Total shares ................................. 24.5 24.5 24.5 24.4
====== ====== ====== ======
Net income as adjusted per primary computation $30.1 $23.2 $73.9 $72.2
Add - Dividends paid and accrued on
Preferred Stock ........................ 3.3 3.3 9.9 9.9
------ ------ ------ ------
Net income, as adjusted ...................... $33.4 $26.5 $83.8 $82.1
====== ====== ====== ======
Net income per share, assuming full dilution . $1.37 $1.08 $3.43 $3.36
====== ====== ====== ======
</TABLE>
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Balance Sheet and Consolidated Income Statement of
GATX and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 88
<SECURITIES> 0
<RECEIVABLES> 1021 <F1>
<ALLOWANCES> 117
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 4559
<DEPRECIATION> 1748
<TOTAL-ASSETS> 4564
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 2346 <F3>
3
0
<COMMON> 14
<OTHER-SE> 755
<TOTAL-LIABILITY-AND-EQUITY> 4564
<SALES> 0
<TOTAL-REVENUES> 1009
<CGS> 0
<TOTAL-COSTS> 487 <F4>
<OTHER-EXPENSES> 145 <F5>
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 148
<INCOME-PRETAX> 104 <F6>
<INCOME-TAX> 41
<INCOME-CONTINUING> 84
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84
<EPS-PRIMARY> 3.61
<EPS-DILUTED> 3.43
<FN>
<F1> Receivables consists of three components: Trade Accounts of 111 million,
Finance Leases of 690 million, and Secured Loans of 220 million.
<F2> Not applicable because GATX has an unclassified balance sheet.
<F3> This value consists of two components: Long-term Debt of 2,118 million
and Capital Lease Obligations of 228 million.
<F4> This value represents Operating Expenses on the Consolidated Income
Statement.
<F5> This value represents the Provision for Depreciation and Amortization on
the Consolidated Income Statement.
<F6> This value represents Income Before Income Taxes and Equity in Net
Earnings of Affiliates.
</FN>
</TABLE>
