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
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-2328
GATX Corporation
Incorporated in the IRS Employer Identification Number
State of New York 36-1124040
500 West Monroe Street
Chicago, Illinois 60661-3676
(312) 621-6200
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class or series on which registered
- ----------------------------- ------------------------
Common Stock New York Stock Exchange
Chicago Stock Exchange
London Stock Exchange
$2.50 Cumulative Convertible Preferred Stock New York Stock Exchange
Chicago Stock Exchange
$2.50 Cumulative Convertible Preferred New York Stock Exchange
Stock, Series B Chicago Stock Exchange
$3.875 Cumulative Convertible Preferred Stock New York Stock Exchange
Chicago Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
------
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
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As of March 8, 1996, 20,148,305 common shares were outstanding, and the
aggregate market value of the common shares (based upon the March 8, 1996
closing price of these shares on the New York Stock Exchange) of GATX
Corporation held by nonaffiliates was approximately $919.3 million.
Documents Incorporated by Reference
Portions of the GATX Annual Report to Shareholders for the year ended
December 31,1995 are incorporated by reference into Parts I and II. Portions of
GATX's proxy statement dated March 13, 1996 are incorporated by reference into
Part III.
<PAGE>
PART I
Item 1. Business
GATX Corporation is a holding company whose subsidiaries engage in the leasing
and management of railroad tank cars and specialized freight cars; own and
operate tank storage terminals, pipelines and related facilities; provide
equipment and capital asset financing and related services; engage in Great
Lakes shipping; and provide distribution and logistics support services and
warehousing facilities. Information concerning financial data of business
segments and the basis for grouping products or services is contained in Exhibit
13, GATX Annual Report to Shareholders for the year ended December 31, 1995 on
page 31 and pages 36 through 39, which is incorporated herein by reference (page
references are to the Annual Report to Shareholders).
INDUSTRY SEGMENTS
RAILCAR LEASING AND MANAGEMENT
The Railcar Leasing and Management segment (Transportation), headquartered in
Chicago, Illinois, is principally engaged in leasing specialized railcars,
primarily tank cars, under full service leases. As of December 31, 1995, its
domestic fleet consisted of approximately 64,900 railcars, including 53,900 tank
cars and 11,000 specialized freight cars, primarily Airslide covered hopper cars
and plastic pellet cars. In addition, Transportation has approximately 1,500
railcars in its Mexican fleet. Transportation has upgraded its fleet over time
by adding new larger capacity cars and retiring older smaller capacity cars.
Transportation's railcars have a useful life of approximately 30 to 33 years.
The average age of the railcars in Transportation's fleet is approximately 15
years.
The following table sets forth the approximate tank car fleet capacity of
Transportation as of the end of each of the years indicated and the number of
cars of all types added to Transportation's fleet during such years:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1995 1994 1993 1992 1991
------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Tank car fleet capacity
(in millions of gallons) 1,176 1,090 1,024 993 977
Number of railcars added to domestic fleet 6,200 4,900 3,000 1,600 1,500
</TABLE>
Transportation's customers use its railcars to ship over 700 different
commodities, primarily chemicals, petroleum, food products and minerals. For
1995, approximately 54% of railcar leasing revenue was attributable to shipments
of chemical products, 21% to petroleum products, 18% to food products and 7% to
other products. Many of these products require cars with special features;
Transportation offers a wide variety of sizes and types of cars to meet these
needs. Transportation leases railcars to over 700 customers, including major
chemical, oil, food and agricultural companies. No single customer accounts for
more than 4% of total railcar leasing revenue.
Transportation typically leases new railcars to its customers for a term of
five years or longer, whereas renewals or leases of used cars are typically for
periods ranging from less than a year to seven years with an average lease term
of about three years. The utilization rate of Transportation's domestic railcars
as of December 31, 1995 was approximately 95%.
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<PAGE>
Under its full service leases, Transportation maintains and services its
railcars, pays ad valorem taxes, and provides many ancillary services. Through
its Car Status Service System, for example, the company provides customers with
timely information about the location and readiness of their leased cars to
enhance and maximize the utilization of this equipment. Transportation also
maintains a network of major service centers consisting of four domestic and one
foreign service center, and 25 mobile trucks in 17 locations. Transportation
also utilizes independent third-party repair shops.
Transportation purchases most of its new railcars from Trinity Industries, Inc.
(Trinity), a Dallas-based metal products manufacturer, under a contract entered
into in 1984 and extended from time to time thereafter, most recently in 1992.
Transportation anticipates that through this contract it will continue to be
able to satisfy its customers' new car lease requirements. Transportation's
engineering staff provides Trinity with design criteria and equipment
specifications, and works with Trinity's engineers to develop new technology
where needed in order to upgrade or improve car performance or in response to
regulatory requirements.
The full-service railcar leasing industry is comprised of Transportation, Union
Tank Car Company, General Electric Railcar Services Corporation, Shippers Car
Line division of ACF Industries, Incorporated, and many smaller companies. Of
the approximately 207,000 tank cars owned and leased in the United States at
December 31, 1995, Transportation had approximately 53,900. Principal
competitive factors include price, service and availability.
TERMINALS AND PIPELINES
GATX Terminals Corporation (Terminals) is engaged in the storage, handling and
intermodal transfer of petroleum and chemical commodities at key points in the
bulk liquid distribution chain. All of its terminals are located near major
distribution and transportation points and most are capable of receiving and
shipping bulk liquids by ship, rail, barge and truck. Many of the terminals also
are linked with major interstate pipelines. In addition to storing, handling
and transferring bulk liquids, Terminals provides blending and testing services
at most of its facilities. Terminals, headquartered in Chicago, Illinois, owns
and operates 28 terminals in 11 states, and eight terminals in the United
Kingdom. Terminals also has joint venture interests in 14 international
facilities. Additionally, Terminals owns or holds interests in four refined
product pipeline systems.
As of December 31, 1995, Terminals had a total storage capacity of 75 million
barrels. This includes 55 million barrels of bulk liquid storage capacity in the
United States, 7 million barrels in the United Kingdom, and an equity interest
in another 13 million barrels of storage capacity in Europe and the Far East.
Terminals' smallest bulk liquid facility has a storage capacity of 95,000
barrels while its largest facility, located in Pasadena, Texas, has a capacity
of over 12 million barrels. Capacity utilization at Terminals' wholly owned
facilities was 85% at the end of 1995; throughput for the year was 655 million
barrels.
For 1995, 75% of Terminals' revenue was derived from petroleum products, 23%
from a variety of chemical products, and 2% from other products. Demand for
Terminals' facilities is dependent in part upon demand for petroleum and
chemical products and is also affected by refinery output, foreign imports,
availability of other storage facilities, and the expansion of its customers
into new geographical markets.
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<PAGE>
Terminals serves approximately 300 customers, including major oil and chemical
companies as well as trading firms and larger independent refiners. No single
customer accounts for more than 5% of Terminals' revenue. Customer service
contracts are both short term and long term. Terminals along with two Dutch
companies, Paktank N.V. and Van Ommeren N.V., are the three major international
public terminalling companies. The domestic public terminalling industry
consists of Terminals, Paktank Corporation, International-Matex Tank Terminals,
and many smaller independent terminalling companies. In addition to public
terminalling companies, oil and chemical companies also have significant storage
capacity in their own private facilities. Terminals' pipelines compete with
rail, trucks and other pipelines for movement of liquid petroleum products.
Principal competitive factors include price, location relative to distribution
facilities, and service.
FINANCIAL SERVICES
GATX Financial Services, through its principal subsidiary, GATX Capital
Corporation, provides asset-based financing of transportation and industrial
equipment through capital leases, secured equipment loans, and operating leases.
GATX Capital also provides related financial services which include the
arrangement of lease transactions for investment by other lessors and the
management of lease portfolios for third parties. In these underwriting and
management activities, GATX Capital seeks fee income and residual participation
income. In addition to its San Francisco headquarters, GATX Capital has offices
in four U.S. cities and five foreign countries.
The financial services industry is both crowded and efficient. GATX Capital is
one of the larger non-bank capital services companies. GATX Capital competes
with captive leasing companies, leasing subsidiaries of commercial banks,
independent leasing companies, lease underwriters and brokers, investment
bankers, and also with the manufacturers of equipment. Financing companies
compete on the basis of service, effective rates and transaction structuring
skills.
GATX Capital participates in selected areas where it believes the application of
its strengths can result in above-market returns in exchange for assuming
appropriate levels of risk. GATX Capital has developed a portfolio of assets
diversified across industries and equipment classifications, the largest of
which include aircraft and rail. At December 31, 1995, GATX Capital had
approximately 800 financing contracts with 600 customers, aggregating $1.5
billion of investments before reserves. Of this amount, 39% consisted of
investments associated with commercial jet aircraft, 18% railroad equipment, 13%
warehouse and production equipment, 10% information technology equipment, 7%
marine equipment, 4% golf courses, and 9% other.
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<PAGE>
GREAT LAKES SHIPPING
American Steamship Company (ASC), with the largest carrying capacity of the
domestic Great Lakes vessel fleets, provides modern and efficient waterborne
transportation of dry bulk materials to the integrated steel, electric utility
and construction industries. ASC's fleet is entirely comprised of self-unloading
vessels which do not require any shoreside assistance to discharge cargo. ASC's
eleven vessels range in size from 635 feet to 1,000 feet, transport cargoes from
17,000 net tons up to 70,000 net tons depending on vessel size, and can unload
at speeds from 2,800 net tons per hour up to 10,000 net tons per hour. Because
the Great Lakes are fresh water, Great Lakes vessels are not subject to the
severe rusting condition typical of salt water vessels. As a result, ASC's
vessels have expected lives of 50 to 75 years.
In 1995, ASC carried 25.5 million tons of cargo. The primary materials ASC
transported were iron ore, coal and limestone aggregates. Other commodities
transported include sand, salt, potash, gypsum, grain, marble chips and slag.
ASC's revenue source by industry served during 1995 was 49% steel, 23% power
generation; 20% construction and 8% other. No single customer accounts for more
than 24% of ASC's revenue.
ASC competes with three other U.S. flag Great Lakes commercial fleets, which
include U.S.S. Great Lakes Fleet, Inc., Oglebay Norton Company, and Interlake
Steamship, and with all steel companies which operate captive fleets. Great
Lakes shipping is the only major activity of GATX which consumes substantial
quantities of petroleum products; fuel for these operations is presently in
adequate supply. Competition is based primarily on service and price. ASC is
headquartered in Williamsville, New York, with one regional office.
LOGISTICS AND WAREHOUSING
GATX Logistics, Inc. (Logistics) is one of the largest third-party providers of
distribution and logistics support services and warehousing facilities in the
United States. Logistics, headquartered in Jacksonville, Florida, operates 104
facilities covering approximately 24 million square feet of warehousing space in
North America with utilization of 97 percent at the end of 1995. Value-adding
services are strategically the most important benefit GATX Logistics provides.
Examples of these services are logistics planning, information systems,
just-in-time delivery systems, packaging, sub-assembly, and returns management.
GATX Logistics serves about 650 customers, many of which are Fortune 1000-type
companies. Most customers are manufacturers, but the customer base also includes
retailers. In the warehousing sector, GATX Logistics competes primarily with
in-house or private operations and with other national operators as well as
multi-regional and local operators. In providing transportation and logistics
services, GATX Logistics competes with the major trucking companies and
providers of specialized distribution services.
GATX Logistics' revenue source by industry served during 1995 was 22% motor
vehicle parts and components, 16% grocery, 14% consumer products, 11% major
appliances, 8% farm and construction equipment, 7% electronics, 5% chemical, 3%
health care, and 14% other. No single customer accounts for more than 9% of
Logistics' revenue.
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<PAGE>
Trademarks, Patents and Research Activities
- -------------------------------------------
Patents, trademarks, licenses, and research and development activities are not
material to these businesses taken as a whole.
Seasonal Nature of Business
- ---------------------------
Great Lakes shipping is seasonal due to the effects of winter weather
conditions. However, seasonality is not considered significant to the operations
of GATX and its subsidiaries taken as a whole.
Customer Base
- -------------
GATX and its subsidiaries are not dependent upon a single customer or a few
customers. The loss of any one customer would not have a material adverse effect
on any segment or GATX as a whole.
Employees
- ---------
GATX and its subsidiaries have approximately 5,900 active employees, of whom 25%
are hourly employees covered by union contracts.
Environmental Matters
- ---------------------
Certain operations of GATX's subsidiaries (collectively GATX) present potential
environmental risks principally through the transportation or storage of various
commodities. Recognizing that some risk to the environment is intrinsic to its
operations, GATX is committed to protecting the environment, as well as
complying with applicable environmental protection laws and regulations. GATX,
as well as its competitors, is subject to extensive regulation under federal,
state and local environmental laws which have the effect of increasing the costs
and liabilities associated with the conduct of its operations. In addition,
GATX's foreign operations are subject to environmental regulations in effect in
each respective jurisdiction.
GATX's policy is to monitor and actively address environmental concerns in a
responsible manner. GATX has received notices from the U.S. Environmental
Protection Agency (EPA) that it is a potentially responsible party (PRP) for
study and clean-up costs at 11 sites under the requirements of the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund). Under Superfund and comparable state laws, GATX may be required to
share in the cost to clean-up various contaminated sites identified by the EPA
and other agencies. In all but one instance, GATX is one of a number of
financially responsible PRPs and has been identified as contributing only a
small percentage of the contamination at each of the sites. Due to various
factors such as the required level of remediation and participation in clean-up
efforts by others, GATX's total clean-up costs at these sites cannot be
predicted with certainty; however, GATX's best estimates for remediation and
restoration of these sites have been determined and are included in its
environmental reserves.
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<PAGE>
Future costs of environmental compliance are indeterminable due to unknowns such
as the magnitude of possible contamination, the timing and extent of the
corrective actions that may be required, the determination of the company's
liability in proportion to other responsible parties, and the extent to which
such costs are recoverable from third parties including insurers. Also, GATX may
incur additional costs relating to facilities and sites where past operations
followed practices and procedures that were considered acceptable at the time
but in the future may require investigation and/or remedial work to ensure
adequate protection to the environment under current or future standards. If
future laws and regulations contain more stringent requirements than presently
anticipated, expenditures may be higher than the estimates, forecasts, and
assessments of potential environmental costs provided below. However, these
costs are expected to be at least equal to the current level of expenditures. In
addition, GATX has provided indemnities for environmental issues to the buyers
of three divested companies for which GATX believes it has adequate reserves.
GATX's environmental reserve at the end of 1995 was $94 million and reflects
GATX's best estimate of the cost to remediate its environmental conditions.
Additions to the reserve were $14 million in 1995 and $27 million in 1994; 1994
included $13 million recorded in conjunction with terminal acquisitions.
Expenditures charged to the reserve amounted to $16 million and $12 million in
1995 and 1994, respectively.
In 1995, GATX made capital expenditures of $18 million for environmental and
regulatory compliance compared to $15 million in 1994. These projects included
marine vapor recovery, discharge prevention compliance, waste water systems,
impervious dikes, tank modifications for emissions control, and tank car
cleaning systems. Environmental projects authorized or currently under
consideration would require capital expenditures of approximately $28 million in
1996. GATX anticipates it will make annual expenditures at a similar level over
the next five years.
Item 2. Properties
Information regarding the location and general character of certain properties
of GATX is included in Item 1, Business, of this document and in Exhibit 13,
GATX Annual Report to Shareholders for the year ended December 31, 1995 on page
68, GATX Location of Operations (page reference is to the Annual Report to
Shareholders). The major portion of Terminals' land is owned; the balance is
leased. Most of the warehouses operated by GATX Logistics are leased; the others
are managed for third parties.
Item 3. Legal Proceedings
A railcar owned by Transportation was involved in a derailment near Dunsmuir,
California, in July 1991 that resulted in a spill of metam sodium into the
Sacramento River. Various lawsuits seeking damages in unspecified amounts have
been filed against General American Transportation Corporation (GATC), or an
affiliated company, most of which have been consolidated in the Superior Court
of the State of California for the City and County of San Francisco (Nos. 2617
and 2620). GATC has now been dismissed by the class plaintiffs in those cases,
and has resolved the claims of the plaintiffs who opted out of the class. There
was one other case seeking recovery for response costs and natural resource
damages: State of California, et al, vs. Southern Pacific, et al, filed in the
Eastern District of California (CIV-S-92 1117). All other actions were
consolidated with these two cases. GATC was also
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<PAGE>
named as a potentially responsible party by the State of California with respect
to the assessment and remediation of possible damages to natural resources which
claim was also consolidated in the suit in the Eastern District of California.
GATC has now entered into settlement agreements with the United States of
America, the State of California, Southern Pacific and certain other defendants
settling all material claims arising out of the above incident in an amount not
material to GATC.
On July 14, 1995, a judgment in the amount of $9.7 million was entered against
GATC by the U.S. District Court for the Northern District of Illinois in the
matter of General American Transportation Corporation v. Cryo-Trans,
Incorporated (Case No. 91 C 1305), a case involving an alleged patent
infringement by GATC in the construction and use of its ArcticarTM cryogenically
cooled railcar. That judgment has been reduced to approximately $9 million. GATC
was also permanently enjoined from any further infringement of the patent as of
August 1, 1995, subsequently extended to September 1, 1995. Of GATC's 65,000
railcar fleet, the injunction affected only 180 railcars, 80 of which were on
lease and 100 on order. GATC has filed an appeal of the decision with the
Federal Circuit Court of Appeals. Even in the event of an adverse decision on
appeal, GATX does not believe the costs associated with the disposition of the
affected cars will have a material adverse effect on GATX.
Various lawsuits 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. Those suits, all of which were filed in
the County of San Bernardino unless otherwise indicated, are: Aguilar, et al, v.
Calnev Pipe Line Company, et al, filed February 1990 in the County of Los
Angeles (No. 0751026); Alba, et al, v. Southern Pacific Railroad Co., et al,
filed November 1989 (No. 252842); Terry, et al, v. Southern Pacific, et al,
filed December 1989 (No. 253604); Charles, et al, v. Calnev Pipe Line, Inc., et
al, filed May 1990 (No. 256269); Abrego, et al, v. Southern Pacific
Transportation Corporation, et al, filed May 1990 in the County of Los Angeles
(No. BC 000947) and settled November, 1995; Glaspie, et al, v. Southern Pacific
Transportation, et al, filed May 1990 in the County of Los Angeles (No.
BC002047) and settled November 1995; Burney, et al, v. Southern Pacific, et al,
filed May 1990 in the County of Los Angeles (BC000876) and settled May, 95;
Ledbetter, et al, v. City of San Bernardino, et al, filed May 1990 (No. 256173)
and settled April,1995; Mary Washington v. Southern Pacific, et al, filed May
1990 (No. 256346); Stewart, et al, v. Southern Pacific Railroad Co., et al,
filed May 1990 (No. 256464); Pearson v. Calnev Pipe Line Company, et al, filed
May 1990 in the County of San Bernardino (No. 256206); Pollack v. Southern
Pacific Transportation, et al, filed May 1992 (No. 271247); Davis v. Calnev Pipe
Line Company, et al, filed May 1990 (No. 256207); J. Roberts, et al, v. Southern
Pacific Transportation, et al, filed November 1992 (No. 275936); Brooks, et al,
v. Southern Pacific, et al, filed May 1990 (No. 256176) and settled February
1994; Goldie, et al, v. Southern Pacific, et al, filed May 1990 and dismissed
July 1993, appeal pending; Irby, et al, v. Southern Pacific, et al, (No. 255715)
filed April 1990; Esparza, et al, v. Southern Pacific, et al, (No. 256433) filed
May 1990 and settled February 1994; Reese, et al, v. Southern Pacific, et al
(No. 256434) filed May 1990; Nancy Washington, et al, v.Southern Pacific, et al,
(No. 256435) filed May 1990. As Terminals' insurance carriers have assumed the
defense of these lawsuits without a reservation of rights and have paid all of
the settlements entered to date, GATX believes that the likelihood of a material
adverse effect on GATX's consolidated financial position or operations is
remote.
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<PAGE>
In October 1991, GATX and five of its senior officers were named as defendants
in Searls vs. Glasser, et al, filed in the U.S. District Court for the Northern
District of Illinois, a class action lawsuit filed on behalf of certain
purchasers of GATX's common stock alleging violation of the securities laws,
common law fraud and negligent misrepresentation in various public statements
made by GATX during 1991 concerning 1992 forecasted earnings. Upon the
completion of extensive discovery, the District Court granted a motion for
summary judgment in favor of GATX. That judgment was appealed and in August 1995
the U.S. Court of Appeals for the 7th Circuit affirmed the decision of the
District Court. The plaintiffs then filed a petition with the Court of Appeals
for a Rehearing In Banc which was denied. As the time for filing an appeal from
the decision of the Court of Appeals has expired, that decision is now final.
Accordingly, as there are no further avenues of appeal available to the
plaintiff, this matter is now closed.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Pursuant to General Instruction G(3), the following information regarding
executive officers is included in Part I in lieu of inclusion in the GATX Proxy
Statement:
Office
Held
Name Office Held Since Age
- ---------------- ---------------------------------- ------- -----
James J. Glasser Chairman of the Board 1978 61
Ronald H. Zech President and Chief Executive Officer 1996 52
David M. Edwards Vice President, Finance and 1994 44
Chief Financial Officer
David B. Anderson Vice President, Corporate Development, 1995 54
General Counsel and Secretary
William L. Chambers Vice President, Human Resources 1993 58
Ralph L. O'Hara Controller 1986 51
Brian A. Kenney Treasurer 1995 36
Officers are elected annually by the Board of Directors. Previously, Mr.
Zech was President of GATX Financial Services from 1985 to 1994. In 1994 Mr.
Zech was elected as President and Chief Operating Officer of GATX. On January 1,
1996, he was elected as Chief Executive Officer. Mr. Edwards was Senior Vice
President - Finance and Administration of GATX Financial Services from 1990 to
1994. Mr. Anderson was Vice President, Corporate Development, General Counsel
and Secretary of Inland Steel Industries from 1986 until 1995. Concurrently, he
served as President of Inland Engineered Materials Corporation. Mr. Chambers was
engaged in human resource consulting from 1991 until 1993. Mr. Kenney was
Managing Director, Corporate Finance and Banking, for AMR Corporation from
1990-1995.
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PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters
Information required by this item is contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1995 on page 63, which is
incorporated herein by reference (page reference is to the Annual Report to
Shareholders).
Item 6. Selected Financial Data
Information required by this item is contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1995, on pages 64 and 65, which
is incorporated herein by reference (page references are to the Annual Report to
Shareholders).
Item 7. Management Discussion and Analysis of Financial Condition and Results
of Operations
Information required by this item is contained in Item 1, Business, section of
this document and in Exhibit 13, GATX Annual Report to Shareholders for the year
ended December 31, 1995, the management discussion and analysis of 1995 compared
to 1994 on pages 33, 34, 35, 41, 43, 45 and 46, the financial data of business
segments on pages 36 through 39, and the management discussion and analysis of
1994 compared to 1993 on pages 66 and 67, which is incorporated herein by
reference (page references are to the Annual Report to Shareholders).
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements of GATX Corporation, included in
Exhibit 13, GATX Annual Report to Shareholders for the year ended December 31,
1995, which is incorporated herein by reference (page references are to the
Annual Report to Shareholders):
Statements of Consolidated Income and Reinvested Earnings -- Years ended
December 31, 1995, 1994 and 1993 on page 40.
Consolidated Balance Sheets -- December 31, 1995 and 1994, on page 42.
Statements of Consolidated Cash Flows -- Years ended December 31, 1995,
1994 and 1993, on page 44.
Notes to Consolidated Financial Statements on pages 47 through 62.
Quarterly results of operations are contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1995 on page 63, which is
incorporated herein by reference (page reference is to the Annual Report to
Shareholders).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this item regarding directors is contained in sections
entitled "Nominees For Directors" and "Additional Information Concerning
Nominees" in the GATX Proxy Statement dated March 13, 1996, which sections are
incorporated herein by reference. Information regarding officers is included at
the end of Part I.
Item 11. Executive Compensation
Information required by this item regarding executive compensation is contained
in sections entitled "Compensation of Directors" and "Compensation of Executive
Officers" in the GATX Proxy Statement dated March 13, 1996, which sections are
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item regarding the Company's Common Stock is
contained in sections entitled "Nominees For Directors," "Security Ownership of
Management" and "Beneficial Ownership of Common Stock" in the GATX Proxy
Statement dated March 13, 1996, which sections are incorporated herein by
reference. The following are the only persons known to the Company who
beneficially owned as of March 12, 1996 more than 5% of the Company's $3.875
Cumulative Convertible Preferred Stock ("CCP Stock"):
Name and Address of Shares Beneficially
Beneficial Owner Owned Percent of Class
- ------------------- ------------------- ----------------
Fiduciary Trust 300,700 8.87%
Company International (1)
Two World Trade Center,
New York, New York
SAFECO Corporation (2) 221,000 6.52%
SAFECO Plaza
Seattle, Washington 98135
(1) According to Schedule 13Gs dated February 1, 1996 furnished to the
Company, United Nations Joint Staff Pension Fund ("UN") and its appointed
Investment Advisor, Fiduciary Trust Company ("Fiduciary"), share voting
and dispositive power with respect to 300,000 shares of the CCP Stock and
Fiduciary has sole dispositive and sole voting power over 700 shares of
the CCP Stock. The 300,700 shares represent voting over 1.28% of the
shares of Company Stock entitled to vote at the Company's Annual Meeting.
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(2) According to a Form 13F filed with the Securities and Exchange Commission
on January 26, 1996, SAFECO Corporation has sole voting authority over and
shares investment discretion over 221,000 shares of the CCP Stock, 111,000
of which are managed by General Insurance Company of America and 110,000
of which are managed by SAFECO Asset Management Company. The 221,000
shares of CCP Stock represent .94% of the shares of the Company stock
entitled to vote at the Company's Annual Meeting.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Financial Statement Schedules, Reports on Form 8-K and Exhibits.
a) 1. -Financial Statements
The following consolidated financial statements of GATX
Corporation included in the Annual Report to Shareholders
for the year ended December 31, 1995, are filed in response
to Item 8:
Statements of Consolidated Income and Reinvested Earnings
-- Years ended December 31, 1995, 1994 and 1993
Consolidated Balance Sheets -- December 31, 1995 and 1994
Statements of Consolidated Cash Flows -- Years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. -Financial Statement Schedules:
Page
Schedule I Condensed Financial
Information of Registrant............. 17
Schedule II Valuation and Qualifying Accounts....... 21
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and, therefore, have been
omitted.
-11-
<PAGE>
b) EXHIBIT INDEX
Exhibit
Number Exhibit Description Page
3A. Restated Certificate of Incorporation of GATX Corporation,
as amended, incorporated by reference to GATX's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1991, file number 1-2328.
3B. By-Laws of GATX Corporation, as amended and restated as
of July 29, 1994, incorporated by reference to GATX's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, file number 1-2328.
10A. GATX Corporation 1985 Long Term Incentive Compensation
Plan, as amended, and restated as of April 27, 1990,
incorporated by reference to GATX's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990,
file No. 1-2328. Amendment to said Plan effective as of
April 1, 1991, incorporated by reference to GATX's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, file number 1-2328.
10B. GATX Corporation 1995 Long Term Incentive Compensation
Plan, incorporated by reference to GATX's Quarterly
Report on Form 10-Q for the quarterly period ended
March 31, 1995, file number 1-2328.
10C. Management Incentive Plan dated January 1, 1995,
file number 1-2328, incorporated by reference to GATX's
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1995, file number 1-2328.
10D. Management Incentive Plan dated January 1, 1996, file
number 1-2328. Submitted to the SEC along with the
electronic submission of this Report on Form 10-K.
10E. GATX Corporation Deferred Fee Plan for Directors,
effective April 1982, as amended, incorporated by
reference to GATX's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, file number 1-2328.
10F. 1984 Executive Deferred Income Plan Participation
Agreement between GATX Corporation and participating
directors and executive officers dated September 1,
1984, as amended, incorporated by reference to GATX's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, file number 1-2328.
10G. 1985 Executive Deferred Income Plan Participation
Agreement between GATX Corporation and participating
directors and executive officers dated July 1, 1985, as
amended, incorporated by reference to GATX's Annual
Report on Form 10-K for the fiscal year ended December 31,
1991, file number 1-2328.
-12-
<PAGE>
Exhibit
Number Exhibit Description Page
10H. 1987 Executive Deferred Income Plan Participation Agreement
between GATX Corporation and participating directors and
executive officers dated December 31, 1986, as amended,
incorporated by reference to GATX's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991, file number
1-2328.
10I. Amendment to Executive Deferred Income Plan Participation
Agreements between GATX and certain participating directors and
participating executive officers entered into as of January 1,
1990, incorporated by reference to GATX's Annual Report on Form
10-K for the fiscal year ended December 31, 1989, file number
1-2328.
10J. Retirement Supplement to Executive Deferred Income Plan
Participation Agreements entered into as of January 23,
1990, between GATX and certain participating directors
incorporated by reference to GATX's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989,
file number 1-2328 and between GATX and certain other
participating directors incorporated by reference to GATX's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, file number 1-2328.
10K. Amendment to Executive Deferred Income Plan Participation
Agreements between GATX and participating executive officers
entered into as of April 23, 1993, incorporated by reference to
GATX's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, file number 1-2328.
10L. Director Retirement Plan effective January 1, 1992,
incorporated by reference to GATX's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992, file number
1-2328.
10M. Agreement for Continued Employment Following Change of Control
or Disposition of a Subsidiary between GATX Corporation and
certain executive officers dated as of January 1, 1995,
incorporated by reference to GATX's Quarterly Report on Form
10-Q for the quarterly period ended March 31,1995, file number
1-2328.
10N. Agreements for Continued Employment Following Change of Control
or Disposition of a Subsidiary between GATX Corporation and an
additional executive officer dated as of July 1, 1995 and
between GATX and another executive officer dated as of January
1, 1996 file number 1-2328. Submitted to the SEC along with the
electronic transmission of this Annual Report on Form 10-K.
10O. Agreement dated July 29, 1994, supplementing the Agreement for
Continued Employment Following Change of Control or Disposition
of a Subsidiary between GATX Corporation and Ronald H. Zech,
incorporated by reference to GATX's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, file number
1-2328.
-13-
<PAGE>
Exhibit
Number Exhibit Description Page
10P. Letter Agreement dated August 17, 1993 between William Chambers
and GATX, incorporated by reference to GATX's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1995, file
number 1-2328.
10Q. Letter Agreement dated May 31, 1995 between David B. Anderson
and GATX, file number 1-2328. Submitted to the SEC along with
the electronic transmission of this Annual Report on Form 10-K.
10R. Arrangements between James J. Glasser and GATX associated with
Mr. Glasser's retirement from GATX as described on page 11 in
the Section of the GATX Proxy Statement dated March 13, 1996
entitled "Termination of Employment and Change of Control
Arrangements" are incorporated herein by reference thereto,
file number 1-2328.
11A. Statement regarding computation of per share earnings. 22
11B. Statement regarding computation of per share earnings
(full dilution) 23
12. Statement regarding computation of ratios of earnings to combined
fixed charges and preferred stock dividends. 24
13. Annual Report to Shareholders for the year ended December 31,
1995, pages 31-70, with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1995, file number
1-2328. Submitted to the SEC along with the electronic
submission of this Report on Form 10-K.
21. Subsidiaries of the Registrant. 25
23. Consent of Independent Auditors. 26
24. Powers of Attorney with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1995, file number
1-2328. Submitted to the SEC along with the electronic
submission of this Report on Form 10-K.
27. Financial Data Schedule for GATX Corporation for the fiscal
year ended December 31, 1995, file number 1-2328. Submitted to
the SEC along with the electronic submission of this Report on
Form 10-K.
99A. Undertakings to the GATX Corporation Salaried Employees
Retirement Savings Plan, incorporated by reference to GATX's
Annual Report on Form 10-K for the fiscal year ended December
31, 1982, file number 1-2328.
99B. Undertakings to the GATX Corporation 1995 Long Term Incentive
Compensation Plan for the fiscal year ended December 31, 1995,
file number 1-2328. Submitted to the SEC along with the
electronic submission of this Report on Form 10-K.
-14-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders
and Board of Directors
GATX Corporation
We have audited the consolidated financial statements and related schedules of
GATX Corporation and subsidiaries listed in Item 14 (a)(1) and (2) of the Annual
Report on Form 10-K of GATX Corporation for the year ended December 31, 1995.
These financial statements and related schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and related schedules 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 and related schedules.
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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of GATX
Corporation and subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statements schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects, the information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois
January 23, 1996
-15-
<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 CORPORATION
(Registrant)
/s/Ronald H. Zech
--------------------------
Ronald H. Zech
President,
Chief Executive Officer and Director
March 22, 1996
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.
James J. Glasser Chairman of the Board By /s/David B. Anderson
and Director ----------------------
(David B. Anderson,
/s/Ronald H. Zech Attorney-in-Fact)
- ----------------------- Date: March 22, 1996
Ronald H. Zech President,
March 22, 1996 Chief Executive Officer and Director
/s/David M. Edwards
- -----------------------
David M. Edwards Vice President Finance and
March 22, 1996 Chief Financial Officer
/s/Ralph L. O'Hara
- -----------------------
Ralph L. O'Hara Controller and
March 22, 1996 Principal Accounting Officer
Franklin A. Cole Director By /s/David B. Anderson
James W. Cozad Director ---------------------
James M. Denny Director (David B. Anderson,
William C. Foote Director Attorney-in-Fact)
Deborah M. Fretz Director
Richard A. Giesen Director
Miles L. Marsh Director
Charles Marshall Director
Michael E. Murphy Director
Date: March 22, 1996
-16-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
GATX CORPORATION
(PARENT COMPANY)
STATEMENTS OF INCOME
(In Millions)
Year Ended December 31
---------------------------------
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Gross loss $ (1.0) $ (3.2) $ (5.5)
Costs and expenses
Interest 31.7 17.2 18.4
Provision for depreciation .8 .7 .4
Selling, general and administrative 20.4 18.3 23.2
-------- -------- -------
52.9 36.2 42.0
-------- -------- -------
Loss before income taxes and share of net
income of subsidiaries (53.9) (39.4) (47.5)
Income taxes (credit) (21.3) (14.2) (17.5)
-------- -------- -------
Loss before share of net income
of subsidiaries (32.6) (25.2) (30.0)
Share of net income of subsidiaries 133.4 116.7 102.7
------- ------- ------
Net income $ 100.8 $ 91.5 $ 72.7
====== ====== ======
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONT'D)
GATX CORPORATION
(PARENT COMPANY)
BALANCE SHEETS
(In Millions)
ASSETS
December 31
------------------------
1995 1994
-------- ----------
<S> <C> <C>
Cash and cash equivalents $ .4 $ 1.1
Property, plant and equipment 9.2 8.4
Less - Allowance for depreciation (2.4) (1.6)
-------- --------
6.8 6.8
Investment in subsidiaries 1,223.1 1,169.0
Other assets 12.9 11.7
--------- ---------
TOTAL ASSETS $1,243.2 $ 1,188.6
======== ========
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDERS' EQUITY
December 31
-------------------------
1995 1994
-------- ----------
<S> <C> <C>
Accounts payable and accrued expenses $ 24.9 $ 27.7
Due to subsidiaries 458.6 444.2
Other deferred items 41.9 54.3
--------- ----------
Total liabilities and deferred items 525.4 526.2
Shareholders' equity:
Preferred Stock 3.4 3.4
Common Stock 14.3 14.2
Additional capital 324.8 318.1
Reinvested earnings 409.0 353.5
Cumulative foreign currency
translation adjustment 13.4 20.3
-------- ----------
764.9 709.5
Less - Cost of shares in treasury (47.1) (47.1)
---------- ----------
Total shareholders' equity 717.8 662.4
--------- ----------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDERS' EQUITY $ 1,243.2 $ 1,188.6
========= ==========
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONT'D)
GATX CORPORATION
(PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(In Millions)
Year Ended December 31
------------------------------
1995 1994 1993
-------- -------- -------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 100.8 $ 91.5 $ 72.7
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for depreciation .8 .7 .4
Deferred income taxes (credit) (10.8) (5.8) (9.1)
Share of net income of subsidiaries
less dividends received (61.0) (49.0) (33.7)
Other (includes working capital) (4.3) 9.3 8.0
-------- ------- -------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 25.5 46.7 38.3
INVESTING ACTIVITIES
Additions to property, plant & equipment (.9) (.5) (7.1)
-------- ------- --------
NET CASH USED IN
INVESTING ACTIVITIES (.9) (.5) (7.1)
FINANCING ACTIVITIES
Issuance of Common Stock under
employee benefit programs 5.5 4.6 4.7
Cash dividends to shareholders (45.3) (43.1) (40.7)
Advances (to) from subsidiaries 14.5 (6.7) 4.7
-------- ------- ------
NET CASH USED IN
FINANCING ACTIVITIES (25.3) (45.2) (31.3)
-------- -------- --------
NET (DECREASE) INCREASE
IN CASH AND CASH EQUIVALENTS $ (.7) $ 1.0 $ (.1)
======= ======= ========
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
GATX CORPORATION AND SUBSIDIARIES
(In Millions)
- ---------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
- ---------------------------------------------------------------------------------------------
Additions
DESCRIPTION Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts- Deductions- at End
of Period Expenses Describe Describe of Period
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for possible
losses - Note A $ 89.6 $ 18.4 $5.2(B) $ 13.2(C) $100.0
Year ended December 31, 1994:
Allowance for possible
losses - Note A $ 96.0 $ 19.2 $ 2.5(B) $ 28.1(C) $ 89.6
Year ended December 31, 1993:
Allowance for possible
losses - Note A $110.9 $ 29.6 $ 2.1(B) $ 46.6(C) $ 96.0
<FN>
Note A - Deducted from asset accounts.
Note B - Represents recovery of amounts previously written off and a transfer from other accounts.
Note C - Represents principally reductions in asset values charged off
or transferred to claims and uncollectible amounts.
</FN>
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11A
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER SHARE OF
COMMON STOCK AND COMMON STOCK EQUIVALENTS
(In Millions, Except Per Share Amounts)
Year Ended December 31
-----------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Average number of shares
of Common Stock outstanding 20.0 19.9 19.6 19.4 19.3
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 .4 .3 .3 * .2
------- ------ ------ ------ ------
Total 20.4 20.2 19.9 19.4 19.5
======= ====== ====== ====== ======
Net income (loss) $ 100.8 $ 91.5 $ 72.7 $(16.5) $ 82.7
Deduct - Dividends paid and
accrued on Preferred Stock 13.2 13.3 13.3 13.3 13.3
------- ------ ------ ------ ------
Net income (loss), as adjusted $ 87.6 $ 78.2 $ 59.4 $(29.8) $ 69.4
======= ====== ====== ====== ======
Net income (loss) per share $ 4.30 $ 3.88 $ 2.99 $(1.53) $ 3.56
======= ====== ====== ====== ======
<FN>
* Common share equivalents are not considered in the computation of loss per share.
</FN>
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11B
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER SHARE OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS ASSUMING FULL DILUTION
(PRINCIPALLY CONVERSION OF ALL OUTSTANDING PREFERRED STOCK)
(In Millions, Except Per Share Amounts)
Year Ended December 31
------------------------------------------------
1995 1994 1993 1992 1991
------- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Average number of shares used to
compute primary earnings per share 20.4 20.2 19.9 19.4 19.5
Common Stock issuable upon assumed
conversion of Preferred Stock 4.0 4.0 * * 4.1
------- ------ ------ ------ ------
Total 24.4 24.2 19.9 19.4 23.6
======= ====== ====== ====== ======
Net income (loss) as adjusted
per primary computation $ 87.6 $ 78.2 $ 59.4 $(29.8) $ 69.4
Add - Dividends paid and
accrued on Preferred Stock 13.2 13.3 * * 13.3
------- ------ ------ ------- ------
Net income (loss), as adjusted $ 100.8 $ 91.5 $ 59.4 $(29.8) $ 82.7
======= ====== ====== ======= ======
Net income (loss) per share,
assuming full dilution $ 4.13 $ 3.78 $ 2.99 $(1.53) $ 3.51
======= ====== ====== ======= ======
<FN>
* Conversion of Preferred Stock is excluded from computation of fully diluted
earnings because of antidilutive effects.
</FN>
Additional fully diluted computation (1)
Average number of shares used to
compute primary earnings per share 19.6 19.4
Common stock issuable upon assumed
conversion of Preferred Stock, and
stock option exercises 4.4 4.3
------- -------
24.0 23.7
Net income (loss) as adjusted
per primary computation $ 59.4 $(29.8)
Add - Dividends paid and accrued
on Preferred Stock 13.3 13.3
------- -------
$ 72.7 $(16.5)
======= =======
Net income (loss) per share,
assuming full dilution $ 3.03 $( .70)
======= =======
<FN>
(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.
</FN>
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(In Millions Except For Ratios)
1995 1994 1993
-------- -------- ------
<S> <C> <C> <C>
Earnings available for fixed charges:
Net income $ 100.8 $ 91.5 $ 72.7
Add:
Income taxes 47.6 48.8 51.4
Equity in net earnings of affiliated companies,
net of distributions received 6.5 3.7 8.0
Interest on indebtedness and amortization
of debt discount and expense 170.1 148.2 151.8
Amortization of capitalized interest 1.1 1.1 1.1
Portion of rents representative of
interest factor (deemed to be one-third) 43.9 37.9 31.4
-------- -------- ------
Total earnings available for fixed charges $ 370.0 $ 331.2 $ 316.4
======== ======== ======
Preferred dividend requirements $ 13.2 $ 13.3 $ 13.3
Ratio to convert preferred
dividends to pretax basis (A) 169% 171% 197%
-------- -------- --------
Preferred dividend factor on pretax basis 22.3 22.7 26.2
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense 170.1 148.2 151.8
Capitalized interest 6.2 3.0 2.7
Portion of rents representative of interest
factor (deemed to be one-third) 43.9 37.9 31.4
-------- ------- -------
Combined fixed charges and
preferred stock dividends $ 242.5 $ 211.8 $ 212.1
======== ======== =======
Ratio of earnings to combined fixed charges
and preferred stock dividends (B) 1.53x 1.56x 1.49x
<FN>
(A) To adjust preferred dividends to a pretax basis, income before income
taxes and equity in net earnings of affiliated companies is divided
by income before equity in net earnings of affiliated companies.
(B)
The ratios of earnings to combined fixed charges and preferred stock
dividends represent the number of times "fixed charges and preferred
stock dividends" were covered by "earnings." "Fixed charges and
preferred stock dividends" consist of interest on outstanding debt
and capitalized interest, one-third (the proportion deemed
representative of the interest factor) of rentals, amortization of
debt discount and expense, and dividends on preferred stock adjusted
to a pretax basis. "Earnings" consist of consolidated net income
before income taxes and fixed charges, less equity in net earnings
of affiliated companies, net of distributions received.
</FN>
</TABLE>
-24-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of subsidiaries included in GATX's consolidated
financial statements (excluding a number of subsidiaries which, considered in
the aggregate, would not constitute a significant subsidiary), and the state of
incorporation of each:
General American Transportation Corporation (New York)--includes one domestic
subsidiary, three foreign subsidiaries and interests in two foreign
affiliates, Business Segment--Railcar Leasing and Management GATX Terminals
Corporation (Delaware)--three domestic subsidiaries, one foreign subsidiary,
one domestic affiliate, and interests in ten foreign affiliates,
Business Segment--Terminals and Pipelines
GATX Financial Services, Inc. (Delaware)--54 domestic subsidiaries (which
includes GATX Capital Corporation), 12 foreign subsidiaries and eight
domestic affiliates, Business Segment--Financial Services
GATX Logistics, Inc. (Florida)--29 domestic subsidiaries and two foreign
subsidiaries, Business Segment--Logistics and Warehousing
American Steamship Company (New York)--12 domestic subsidiaries, Business
Segment--Great Lakes Shipping
-25-
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following: (i) Registration
Statement No. 2-92404 on Form S-8, filed July 26, 1984; (ii) Registration
Statement No. 2-96593 on Form S-8, filed March 22, 1985; (iii) Registration
Statement No. 33-38790 on Form S-8 filed February 1, 1991; (iv) Registration
Statement No. 33-41007 on Form S-8 filed June 7, 1991; and (v) Registration
Statement No. 33-61183 filed on July 20, 1995 of GATX Corporation, of our report
dated January 23, 1996 with respect to the consolidated financial statements and
schedules of GATX Corporation included and/or incorporated by reference in the
Annual Report on Form 10-K for the year ended December 31, 1995.
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1996
-26-
<PAGE>
EXHIBIT FILED WITH DOCUMENT
10D. Management Incentive Plan dated January 1, 1996, file number
1-2328. Submitted to the SEC along with the electronic submission
of this Report on Form 10-K.
10N. Agreements for Continued Employment Following Change of Control
or Disposition of a Subsidiary between GATX Corporation and an
additional executive officer dated as of July 1, 1995 and
between GATX and another executive officer dated as of January
1, 1996 file number 1-2328. Submitted to the SEC along with the
electronic transmission of this Annual Report on Form 10-K.
10Q. Letter Agreement dated May 31, 1995 between David B. Anderson
and GATX, file number 1-2328. Submitted to the SEC along with
the electronic transmission of this Annual Report on Form 10-K.
11A. Statement regarding computation of per share earnings.
11B. Statement regarding computation of per share earnings
(full dilution)
12. Statement regarding computation of ratios of earnings to combined
fixed charges and preferred stock dividends.
13. Annual Report to Shareholders for the year ended December 31,
1995, pages 31-70, with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1995, file number
1-2328. Submitted to the SEC along with the electronic
submission of this Report on Form 10-K.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
24. Powers of Attorney with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1995, file number
1-2328. Submitted to the SEC along with the electronic
submission of this Report on Form 10-K.
27. Financial Data Schedule for GATX Corporation for the fiscal
year ended December 31, 1995, file number 1-2328. Submitted to
the SEC along with the electronic submission of this Report on
Form 10-K.
99B. Undertakings to the GATX Corporation 1995 Long Term Incentive
Compensation Plan for the fiscal year ended December 31, 1995,
file number 1-2328. Submitted to the SEC along with the
electronic submission of this Report on Form 10-K.
<PAGE>
January 1, 1996
GATX CORPORATION
MANAGEMENT INCENTIVE PLAN
1. OBJECTIVE.
This Management Incentive Plan (the "Plan"), which is administered by
the Compensation Committee of the Board of Directors (the "Committee"), is
established for the period January 1 through December 31, 1996 (the "Plan
Year"), to motivate and reward those employees whose activities and
contributions have a significant bearing on the success and profitability of
GATX Corporation and its Subsidiaries (collectively, the "Company").
2. ELIGIBILITY.
Recommendation for participation in the Plan is initiated by the
Subsidiary Presidents or the Vice President of Human Resources, and approved by
the Chief Executive Officer.
3. PARTICIPATION.
Participants under this Plan will be exempt salaried employees with the
Company who are individually authorized to participate (the "Participants").
Each Participant will be notified by the Subsidiary President or Corporate
Department Head of his or her participation and participation level ("Target
Bonus").
4. DEFINITIONS.
For purposes of this Plan, the following terms will have the following
meanings:
A. "Base Salary" will mean (1) the total salary (excluding any
incentive compensation or lump sum payments) paid to a Participant by the
Company before reduction for any contribution authorized under the GATX
Corporation Salaried Employees Retirement Savings Plan, plus (2) any
compensation which the Participant elects to defer under any deferred
compensation plan of the Company.
B. "Income Goals" will mean the net income goals established annually
by the Committee for GATX and each subsidiary. See Exhibit II.
C. "Bonus" will mean the amount payable to a Participant under this Plan
for the current Plan Year, calculated in accordance with the provisions of this
Plan, and approved by the Committee.
D. "Target Bonus" will mean the percentage of base salary payable if
100% of income goals and individual performance goals (if applicable)
are attained.
<PAGE>
Page 2
E. "Profit Attainment Percentage" will mean the quotient of income
divided by income goal expressed as a percentage.
F. "Payout Percentage" will mean the percentage of the Bonus paid for
the Company or Subsidiary performance as determined by the Profit Attainment
Percentage. The relationship between the Profit Attainment Percentage and the
Payout Percentage is approved by the Committee and presented in Exhibit III.
G. "Personal Evaluation Percentage" will mean the percentage of the
Bonus paid for the Participant's individual performance during the Plan Year.
See Exhibit IV.
H. "Threshold" will mean the minimum level of income required for
payout under the Earnings Portion of this Plan. See Exhibit II.
5. COMPONENTS OF THE BONUS.
The Bonus is composed of a GATX Earnings Portion, a Subsidiary Earnings
Portion and a Personal Portion. As soon as practical following the start of each
Plan Year, the Committee will establish Income Goals for GATX and each
participating subsidiary.
A. GATX Earnings Portion - The extent to which GATX meets its Income
Goal - determined by reference to the Profit Attainment Percentages (Exhibit
III) - will be the basis for the GATX Earnings Portion of the Bonus for both
corporate and subsidiary participants.
B. Subsidiary Earnings Portion - For subsidiary Participants, the
extent to which each subsidiary meets its Income Goal - determined by reference
to the Profit Attainment Percentages (Exhibit III) - will be the basis for that
subsidiary's Earnings Portion of the Bonus.
For corporate Participants, the Subsidiary Earnings Portion will
recognize the relative proportion of the Income Goals established for each
participating subsidiary. At the start of the Plan Year, each participating
subsidiary will be assigned a weight by the Committee calculated on the basis of
its Income Goal as a percent of the total of the Income Goals of all
participating subsidiaries, with a minimum weight of 5.0% (Exhibit II). The
extent to which each subsidiary meets its Income Goal - determined by reference
to the Profit Attainment Percentages (Exhibit III) - will be the basis for the
Subsidiary Earnings Portion of the Bonus.
C. Personal Portion - The Personal Portion recognizes the level of the
Participant's individual performance (Exhibit IV). The percentage of the Bonus
represented by the Personal Portion may vary depending upon whether or not the
Threshold levels established annually for the GATX Earnings Portion (for
corporate Participants) and the Subsidiary Earnings Portion (for subsidiary
Participants) are met.
<PAGE>
Page 3
6. WEIGHTING OF THE COMPONENTS OF THE BONUS.
As soon as practical following the start of each Plan Year, the
Committee will determine the weight to be allocated to each of the component
parts of the Bonus identified in paragraph 5 hereof. For the current Plan Year,
the component parts of the Bonus for each category of Participant are attached
as Exhibit I.
7. CALCULATION OF THE BONUS.
A. The weighting of the Income Goals is multiplied by a Participant's
Target Bonus to determine the Target Value for the Income Goal.
(Exhibit V, Section A).
B. Payout Percentages are determined from the Profit Attainment
Percentages as described in paragraph 5 (Exhibit V, Section B.)
C. Payout Percentages are multiplied by the Target Values of the Income
Goals to determine the Earnings Portion of the Bonus. (Exhibit V, Section C.)
The Personal Portion is determined by multiplying the Target Value of the
Personal Portion by the Personal Evaluation Percentage as determined from the
table attached as Exhibit IV.
D. The Bonus will be the sum of the Earnings Portions and the Personal
Portion of the Bonus, provided that no Bonus payment will be made with respect
to the Earnings Portions unless the Company and participating subsidiaries reach
Threshold levels as established by the Committee.
E. The Company's Chief Executive Officer or Subsidiary President may
increase or decrease the Bonus to an individual Participant by a maximum of 25%,
based on an assessment of that Participant's overall contribution or performance
related to a special project.
8. ADMINISTRATION OF THE PLAN.
A. Administration.
Administration of the Plan will be the responsibility of the
Committee which may delegate responsibility thereunder to the Corporate Director
of Compensation and Benefits, Corporate Human Resources Department.
B. New Participants.
Subject to the provisions of the following sentence, new
employees who join the Company during the Plan Year may be authorized to
participate in the Plan on a pro-rata basis with the approval of the Chief
Executive Officer. Participation under this Plan will not be available to any
new employee after October 1st of any Plan Year.
C. Transfers and Promotions.
If a Participant is transferred or promoted during the Plan
Year causing an adjustment in his Target Bonus, such Participant's bonus will be
calculated on a pro-rata basis to reflect this change.
<PAGE>
Page 4
D. Retirement, Death or Disability.
A Participant who retires, dies, or becomes totally and
permanently disabled, as that term is defined in the GATX Pension Plan for
Salaried Employees, during the Plan Year will be entitled to a pro-rated bonus
in accordance with Paragraph E.
E. Payment of Bonus.
Bonuses will be paid as soon as possible after the completion
of the Company's year-end audit, normally no later than March 1. The Participant
does not have a contractual right to receive the Bonus. Participants become
entitled to receive Bonus payments only after the payments have been approved
and authorized by the Committee.
F. Employment as a Condition Precedent.
No bonus will be paid, except pursuant to the provisions of
Paragraph D above, unless the Participant is an employee of the Company at the
end of the Plan Year.
G. No Employment Contract.
Neither the establishment of the Plan nor the authorization to
be a Participant in the Plan will be construed as giving the Participant the
right to be retained in the service of the Company.
H. Modification of Goals.
The Committee may, from time to time during the Plan Year,
modify the Plan as appropriate including (I) Income Goals, (ii) Thresholds,
(iii) Payout Percentages, (iv) assigned weights established for one or more
subsidiaries and (v) weighting of the Components of the Bonus if, in the sole
discretion of the Committee, any part of the Plan ceases to be a reasonable
measure of desired performance. Notwithstanding anything to the contrary
contained herein, the Committee shall have the authority and exclusive
discretion to determine whether income or expenses of an unusual or nonrecurring
nature are to be included with other income of the Company for purposes of
determining whether the established Income Goals have been achieved.
<PAGE>
EXHIBIT I
WEIGHTING OF THE COMPONENTS OF THE BONUS
1996 MANAGEMENT INCENTIVE PLAN
CHIEF EXECUTIVE OFFICER 100% GATX
and CHAIRMAN OF THE BOARD
OTHER SENIOR CORPORATE OFFICERS 30% GATX
and SUBSIDIARY PRESIDENTS 70% subsidiary or combined subsidiaries
100%
OTHER PARTICIPANTS 10% GATX
40% subsidiary or combined subsidiaries
50% Personal*
100%
*30% if Threshold not met
<PAGE>
EXHIBIT II
Exhibit intentionally omitted
<PAGE>
EXHIBIT III
Exhibit intentionally omitted
<PAGE>
EXHIBIT IV
PERFORMANCE EVALUATION PERCENTAGE DETERMINATION
1996 MANAGEMENT INCENTIVE PLAN
PERFORMANCE
EVALUATION
EVALUATION CRITERIA PERCENTAGE
Performance was truly outstanding; consistently 150%
exceeded job requirements and attained particularly
difficult and aggressive, high priority goals during the
performance period.
Performance was well above average; job requirements 125%
were often exceeded and difficult goals were attained
during the performance period.
Performance was fully satisfactory; met or at times 100%
exceeded job requirements and attained important
goals during the performance period.
Performance was less than satisfactory; some 50%
but not all job requirements were met and important
goals were not attained during the performance period.
Performance was not acceptable; few job 0%
requirements were met or goals attained during
the performance period.
<PAGE>
EXHIBIT V
Exhibit intentionally omitted
<PAGE>
EXHIBIT 10N
AGREEMENT FOR CONTINUED EMPLOYMENT FOLLOWING CHANGE
OF CONTROL OR DISPOSITION OF A SUBSIDIARY
This Agreement is made and entered into by and between GATX Corporation
("GATX") and David B. Anderson, (the "Executive") on the Execution Date shown
below, to be effective as of July 1, 1995.
W I T N E S S E T H
WHEREAS, GATX and the Executive desire to enter into this Agreement in
order to provide GATX and its consolidated subsidiaries stability of management
following a Change of Control or Disposition (as those terms are defined herein)
of GATX or one of its consolidated subsidiaries, to provide for the continued
employment of the Executive for a period of two years following the occurrence
of either such event, and to set forth the terms and conditions of such
continued employment and the obligations of the parties in the event of
termination thereof.
NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:
1. Definitions.
a. "Cause" means a willful and material breach of this Agreement
which has resulted or is likely to result in a material
detriment to the financial condition, business or prospects
of GATX.
b. "Change of Control" means the occurrence of any of the following events:
(1) Receipt by GATX of a Schedule 13D report confirming
that a person or group owns beneficially twenty
percent (20%) or more of the outstanding voting stock
of GATX.
(2) Any purchase under a non-GATX tender or exchange
offer for stock of GATX following which the offering
person or group owns beneficially twenty percent
(20%) or more of such stock.
(3) Shareholder approval of any merger in which GATX is
not the surviving corporation or survives only as a
subsidiary of another corporation, consolidation or
sale of all, or substantially all, of GATX's assets
in one transaction or in a series of transactions.
(4) A change in the majority of the Board of Directors of GATX not
recommended by the incumbent directors.
(The words "person" and "group", as used in this paragraph
1.b, shall have the meanings ascribed to them under Section
13(d) of the Securities Exchange Act of 1934.)
<PAGE>
-2-
c. "Company" includes GATX, its consolidated subsidiaries, any former
subsidiary of GATX by which the Executive was primarily employed on
the day prior to the Triggering Event and any successor to GATX or
such subsidiary by purchase of assets or otherwise.
d. "Company Unit" means any corporation, included within the term
"Company."
e. "Constructive Termination" or "Constructively Terminates" means the
effecting of any of the following actions by the Company following
which the Executive terminates the Executive's employment by the
Company:
(1) a significant reduction in the nature or scope of the
Executive's authority, duties, functions or
responsibilities or a material change in the location
at which they are to be performed or the imposition
of unreasonable travel requirements;
(2) a reduction in the Executive's compensation from that
provided to the Executive immediately prior to the
Triggering Event;
(3) a diminution in the Executive's eligibility to
participate in bonus, stock option, incentive award
and other benefit plans from the level at which the
Executive was participating therein immediately prior
to the Triggering Event;
(4) a diminution in employee benefits (including, but not
limited to medical, dental, life insurance and
disability plans) and other Perquisites applicable to
the Executive, from the level of benefits and other
Perquisites to which the Executive was entitled
immediately prior to the Triggering Event; and
(5) a reasonable determination by the Executive that, as
a result of a change in circumstances affecting the
Company or its management, the Executive is unable to
exercise effectively the authorities, duties,
functions and responsibilities consistent with those
attributable to the Executive's position immediately
prior to the Triggering Event.
f. "Disposition" of a Company Unit means any transaction,
including sale, consolidation, merger or spin-off of any
Company Unit, following which GATX no longer owns fifty
percent (50%) or more of the voting stock of such Company Unit
or the sale of all or substantially all of the assets of such
Company Unit.
g. "Employment Period" means the two (2) year period commencing on the
day of a Triggering Event and ending two years following such day.
<PAGE>
-3-
h. "Perquisites" includes not only those incidental emoluments of
office commonly included within the term, such as a company
assigned car, club membership and financial planning
assistance, but also the benefits under corporate employee
benefit plans such as the GATX medical, life insurance and
Pension Plans (as defined herein) and other plans and
agreements relating thereto.
i. "Total Disability" means any disability that (1) entitles the
Executive to disability income benefits under the GATX
Corporation Long Term Disability Income Plan as in effect on
the day prior to the Triggering Event and (2) prevents the
Executive, for the duration of the Employment Period, from
engaging in the same or comparable type of employment as that
in which the Executive was engaged on the day prior to the
Triggering Event.
j. "Triggering Event" means the first to occur of a Change of
Control or the Disposition of the Company Unit by which the
Executive was primarily employed on the day prior to such
Change of Control or Disposition.
2. Employment. This Agreement shall have no effect on, nor shall any of
its provisions apply to, the Executive's employment or termination thereof that
occurs prior to the occurrence of a Triggering Event. However, if the Executive
is employed by the Company on the day prior to a Triggering Event, the Company
shall continue to employ the Executive and the Executive shall remain in the
employ of the Company for the duration of the Employment Period. Provided,
however, subject only to the provisions of paragraphs five (5) and six (6)
below, the Company may, at any time, terminate the employment of the Executive
at will.
3. Performance of Duties. During the Executive's employment by the
Company, the Executive shall devote his or her best efforts and full business
time exclusively to the business affairs and interests of the Company and shall
faithfully and efficiently perform such duties, consistent with the status of
the Executive's position, as may be assigned to the Executive from time to time
by the Chief Executive Officer of the Company or the Chief Executive Officer's
delegate.
4. Compensation. During the Executive's employment by the Company, he or
she shall receive a salary in such amount as may be established from time to
time by the Company Unit by which the Executive is primarily employed and shall
be
<PAGE>
-4-
entitled to participate, in accordance with the Company's policy and
consistent with the Executive's position and salary, in all plans and all
Perquisites applicable generally to other executives of the Company Unit.
5. Termination Payments. If the Company terminates or Constructively
Terminates the Executive's employment at any time during the Employment Period
for any reason other than Cause or Total Disability, the Company shall
promptly pay or cause to be paid to the Executive in a lump sum an amount
equal to:
a. Twice the Executive's annual salary before deductions and deferrals at
the level thereof as of the day prior to the Triggering Event, plus the bonus
that would have been payable to the Executive (for the year in which such
termination or Constructive Termination occurs) under the GATX Management
Incentive Plan (the "MIP")) as in effect on the day prior to the Triggering
Event, equal in amount to the product of (i) the Executive's annual salary as in
effect immediately prior to the Triggering Event and (ii) the Executive's Target
Bonus (as that term is defined in the MIP); minus
b. Any amounts paid to the Executive in accordance with the Company's
severance pay policies.
In addition to the amount set forth above, the Company shall:
(1) Permit the Executive to continue the Executive's
participation (or provide equivalent coverage) in the
Company Unit's medical, dental, disability and life
insurance programs provided under GATX's benefit plans as in
effect on the day prior to the Triggering Event until the
earlier to occur of (a) the second anniversary of the date
as of which the Executive's employment is terminated or
Constructively Terminated or (b) the date on which the
Executive becomes eligible for coverage under any other
employee benefit plans providing substantially equivalent
benefits at substantially equivalent levels;
(2) Reimburse the Executive (to a maximum of five thousand dollars
($5,000) per year) for financial and estate planning and tax return
preparation for the two (2) years immediately following the
Executive's termination or Constructive Termination of employment in
accordance with GATX's executive financial planning program in effect
on the day prior to a Triggering Event;
(3) Reimburse the Executive (to a maximum of thirty thousand dollars
($30,000)) for the cost of outplacement services plus up to one
thousand dollars ($1,000) of expenses incurred in seeking or
obtaining new employment.
<PAGE>
-5-
6. Retirement Benefits. In addition to the foregoing, if the Executive
survives for two (2) years following such termination or Constructive
Termination of employment:
a. The Company shall pay or cause to be paid to the Executive (or in the
event of the Executive's death following the expiration of such two
(2) year period to the Executive's surviving spouse) a Retirement
Income Benefit (as hereinafter defined) calculated and paid as
follows:
(1)
The Retirement Income Benefit shall be an amount equal to the
difference, if any, between (a) the monthly benefit the Executive
(or, in the event of the Executive's death, the Executive's
surviving spouse) would have received as a monthly pension benefit
under the GATX Corporation Non-Contributory Pension Plan for
Salaried Employees, (the "Salaried Pension Plan") the GATX
Corporation Excess Benefit Plan, the GATX Corporation Supplemental
Benefit Plan and any other written agreement between the Executive
and the Company regarding the Executive's retirement, all as in
effect on the day prior to the Triggering Event, ( hereinafter
collectively, the "Pension Plan") assuming the Executive's
employment had terminated two (2) years after the date of the
Executive's termination or Constructive Termination of employment,
and accordingly the Executive had accumulated two additional years
of service credit under the Pension Plan at a level of compensation
calculated in accordance with the immediately following sentence and
(b) the amount, if any, the Executive (or, in the event of the
Executive's death, the Executive's surviving spouse) actually
receives as a monthly benefit under the Pension Plan. For purposes
of subparagraph (a) of this paragraph, the Executive's compensation
for each of the two additional years of assumed service credit shall
be equal to the level of the Executive's compensation as in effect
immediately prior to the Triggering Event, plus an amount equal to
the average of the Covered Bonuses (as defined in Section 2.13 of
the Salaried Pension Plan) paid to the Executive during the five (5)
calendar year period immediately preceding the Triggering Event.
(2) Payment of the Retirement Income Benefit shall be made in the
same manner, simultaneously with and in the same form as payments
are, or would have been, made to the Executive (or in the event of
the Executive's death to the Executive's surviving spouse) under the
Pension Plan, but shall commence no sooner than two (2) years
following the Executives' termination or Constructive Termination of
employment. Any election available to and validly executed by the
Executive under the Pension Plan as to either an optional form of
payment or as to the date on which benefits are to commence, shall
be
<PAGE>
-6-
applicable to the Retirement Income Benefit and shall be utilized in
calculating the amount of the Retirement Income Benefit.
b. The Company shall permit the Executive to participate in (or
shall provide equivalent coverage) on the same basis as other GATX
employees who have terminated their employment at approximately the
same age and after a substantially equivalent number of years of
service in the GATX Corporation Medical Plan and the GATX
Corporation Life Insurance Plan, both as in effect on the day prior
to the Triggering Event. Such benefits shall be paid at the same
time, under the same conditions and to the same extent as if the
Executive's employment had continued for two (2) years after the
termination or Constructive Termination of the Executive's
employment.
Notwithstanding the foregoing, if the Executive would otherwise be entitled to
receive a Retirement Income Benefit hereunder but dies prior to the expiration
of a two (2) year period following termination or Constructive Termination of
the Executive's employment and leaves a surviving spouse, such surviving
spouse shall be entitled to receive such payments and Perquisites as would be
applicable to such surviving spouse under this Agreement, the Pension Plan and
all other GATX employee benefit plans and policies in effect on the day prior
to the Triggering Event, calculated and payable in the same manner as if the
Executive had been employed by the Company on the Executive's date of death.
7. Payment in Lieu. Except with respect to (a) compensation applicable to the
Executive's employment prior to the termination or Constructive Termination
thereof, (b) amounts payable under the severance pay policies described in
paragraph 5(b) above, and (c) such compensation as may be payable or rights as
may be exercisable on termination of employment under the GATX Salaried
Employees Retirement Savings Plan, the Executive Deferred Income Plans, the
Management Incentive Plan, the GATX Corporation 1985 Long Term Incentive
Compensation Plan or other similar programs, all as in effect on the day prior
to the Triggering Event, the amounts payable to the Executive under this
Agreement shall be in lieu of any other amount payable to the Executive by the
Company by reason of the Executive's termination or Constructive Termination
of employment.
8. Confidentiality. During and after the Executive's employment, the
Executive will not divulge or appropriate to the Executive's own use or to
the use of others any secret or confidential information or knowledge
pertaining to the business of the Company or any of its subsidiaries or
affiliates obtained by the Executive during such employment.
<PAGE>
-7-
9. Nonalienation. The interests of the Executive under the Agreement
are not subject to the claims of the Executive's creditors and may not
otherwise be voluntarily or involuntarily assigned, alienated or encumbered.
10. Tax Penalties. The Company will provide complete tax and compensation data
on a timely basis to the Executive and to an accounting firm designated by the
Executive to enable the Executive to determine the extent, if any, to which
the Executive's compensation under this Agreement and all other compensation
agreements, plans and programs of the Company may be considered to be a
parachute payment or excess parachute payment under section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"). In the event that any
such compensation is deemed to constitute an excess parachute payment that is
subject to tax under Section 4999 of the Code or any successor provision
thereto (the "Excise Tax"), the Company shall pay to the Executive an
additional amount (the "Gross-Up Amount") that, after payment of all Federal
and state income taxes thereof (assuming the Executive is at the highest
marginal federal and applicable state income tax rate in effect on the date of
payment of the Gross-Up Amount) and payment of the Excise Tax on the Gross-Up
Amount, is equal to the Excise Tax payable by the Executive on such excess
parachute payment. The Gross-Up Amount payable with respect to each excess
parachute payment shall be paid by the Company coincident with payment of such
excess parachute payment.
11. No Cumulation or Duplication of Benefits. The obligations of the Company
to make payments or provide benefits hereunder are the joint and several
obligations of the Company and the Company Units. Accordingly, if following
the termination or Constructive Termination of the Executive's employment the
Executive receives any form of compensation payments or benefits from the
Company or any Company Unit or from a successor thereto or affiliate thereof,
the amount of any such compensation or payment together with the fair market
value of any such benefits shall be deducted from any obligation of the
Company or applicable Company Unit to make payments or provide benefits to the
Executive under or by reason of this Agreement.
12. Reduction of Payments. Notwithstanding anything contained herein to
the contrary, any amounts payable hereunder shall be reduced by such amount as
may be necessary to make this agreement not unlawful under federal law.
13. Amendment. This Agreement may be amended by written agreement of the
parties without the consent of any other person and no person, other than the
parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof.
14. Extension. The Board of Directors of GATX may, at any time prior to
the expiration or termination of this Agreement, extend the term of this
Agreement for a period of up to two (2) years from the date on which the
<PAGE>
-8-
extension is approved, without any further action on the part of the Executive.
15. Successors. This Agreement shall be binding upon, and inure to the benefit
of, the heirs, executors and legal representatives of the Executive and the
successors and assigns of the Company and upon any person acquiring, whether
by merger, consolidation, purchase of assets or otherwise, all or
substantially all of the assets and business of any Company Unit. The Company
agrees that it will not effect the sale or other disposition of all or
substantially all of its assets unless either (a) the person or entity
acquiring the assets or a substantial portion of the assets shall expressly
assume by an instrument in writing all duties and obligations of the Company
under this Agreement or (b) the Company shall provide through the
establishment of a separate reserve for the payment in full of all amounts
that are or may be reasonably expected to become payable to the Executive
under this Agreement.
16. Nonwaiver. The waiver by either party of a breach of this Agreement
shall not be construed as a waiver of any subsequent breach.
17. Resolution of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the alleged breach thereof, shall be settled by
arbitration in the City of Chicago, Illinois in accordance with the laws of
the State of Illinois b arbitrators, one of whom shall be appointed by the
Company or any successor thereto, one by the Executive and the third by the
other two. If the other two arbitrators cannot agree on the appointment of a
third arbitrator, or if either party fails within thirty (30) days after
receipt of written demand to appoint an arbitrator, then such arbitrator shall
be appointed by the Dean of the Business School of the University of Chicago
or his delegate. The arbitration shall be conducted in accordance with the
rules of the American Arbitration Association, except with respect to the
selection of arbitrators, which shall be as provided in this paragraph 17.
Judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof. In the event that it shall be necessary or
desirable for the Executive to retain legal counsel and/or incur other costs
and expenses in connection with the enforcement of any and all of his rights
under this Agreement, the Executive shall be entitled to recover from the
Company reasonable attorney's fees and costs and expenses incurred by the
Executive in connection with the enforcement of said rights. Payments shall be
made to the Executive by the Company at the time these attorney's fees and
costs and expenses are incurred by the Executive. If, however, the arbitrators
should later determine that under the circumstances it was unjust for the
Company to have made any of these payments of attorney's fees and costs and
expenses to the Executive, the Executive shall repay any such payments to the
Company in accordance with the order of the arbitrators. Any award of the
arbitrators shall include interest at a rate or rates considered just under
the circumstances by the arbitrators.
<PAGE>
-9-
18. Termination of Agreement. This agreement shall terminate on December 31,
1997, provided, however, if prior to such date, but after January 1, 1996,
there shall occur either (a) a Change of Control or (b) a Disposition of a
Company Unit by which the Executive is primarily employed on the day prior to
such Disposition, this agreement shall remain in effect until two years
following the date of the first to occur of such Change of Control or
Disposition.
Termination of this Agreement shall not affect any rights that shall have
accrued to the Executive under this Agreement prior to the termination date.
IN WITNESS WHEREOF, the Executive has hereunto set his hand, and GATX has
caused these presents to be executed in its name and on its behalf, and its
corporate seal to be hereunto affixed and attested by its Assistant Secretary.
/s/ David B. Anderson
-----------------------------------
Executive
GATX CORPORATION
By /s/ James J. Glasser
----------------------------------
Its Chairman of the Board
July 31, 1995
-----------------------------------
(Execution Date)
ATTEST:
/s/ Janet Dongarra
- ----------------------------------
Its Assistant Secretary
<PAGE>
EXHIBIT 10N
AGREEMENT FOR CONTINUED EMPLOYMENT FOLLOWING CHANGE
OF CONTROL OR DISPOSITION OF A SUBSIDIARY
This Agreement is made and entered into by and between GATX Corporation
("GATX") and Brian A. Kenney, (the "Executive") on the Execution Date shown
below, to be effective as of January 1, 1996.
W I T N E S S E T H
WHEREAS, GATX and the Executive desire to enter into this Agreement in
order to provide GATX and its consolidated subsidiaries stability of management
following a Change of Control or Disposition (as those terms are defined herein)
of GATX or one of its consolidated subsidiaries, to provide for the continued
employment of the Executive for a period of two years following the occurrence
of either such event, and to set forth the terms and conditions of such
continued employment and the obligations of the parties in the event of
termination thereof.
NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:
1. Definitions.
a. "Cause" means a willful and material breach of this Agreement
which has resulted or is likely to result in a material
detriment to the financial condition, business or prospects
of GATX.
b. "Change of Control" means the occurrence of any of the
following events:
(1) Receipt by GATX of a Schedule 13D report confirming
that a person or group owns beneficially twenty
percent (20%) or more of the outstanding voting stock
of GATX.
(2) Any purchase under a non-GATX tender or exchange
offer for stock of GATX following which the offering
person or group owns beneficially twenty percent
(20%) or more of such stock.
(3) Shareholder approval of any merger in which GATX is
not the surviving corporation or survives only as a
subsidiary of another corporation, consolidation or
sale of all, or substantially all, of GATX's assets
in one transaction or in a series of transactions.
(4) A change in the majority of the Board of Directors of
GATX not recommended by the incumbent directors.
(The words "person" and "group", as used in this paragraph
1.b, shall have the meanings ascribed to them under Section
13(d) of the Securities Exchange Act of 1934.)
<PAGE>
-2-
c. "Company" includes GATX, its consolidated subsidiaries, any
former subsidiary of GATX by which the Executive was
primarily employed on the day prior to the Triggering Event
and any successor to GATX or such subsidiary by purchase of
assets or otherwise.
d. "Company Unit" means any corporation, included within the term
"Company."
e. "Constructive Termination" or "Constructively Terminates"
means the effecting of any of the following actions by the
Company following which the Executive terminates the
Executive's employment by the Company:
(1) a significant reduction in the nature or scope of the
Executive's authority, duties, functions or
responsibilities or a material change in the location
at which they are to be performed or the imposition
of unreasonable travel requirements;
(2) a reduction in the Executive's compensation from that
provided to the Executive immediately prior to the
Triggering Event;
(3) a diminution in the Executive's eligibility to
participate in bonus, stock option, incentive award
and other benefit plans from the level at which the
Executive was participating therein immediately prior
to the Triggering Event;
(4) a diminution in employee benefits (including, but not
limited to medical, dental, life insurance and
disability plans) and other Perquisites applicable to
the Executive, from the level of benefits and other
Perquisites to which the Executive was entitled
immediately prior to the Triggering Event; and
(5) a reasonable determination by the Executive that, as
a result of a change in circumstances affecting the
Company or its management, the Executive is unable to
exercise effectively the authorities, duties,
functions and responsibilities consistent with those
attributable to the Executive's position immediately
prior to the Triggering Event.
f. "Disposition" of a Company Unit means any transaction,
including sale, consolidation, merger or spin-off of any
Company Unit, following which GATX no longer owns fifty
percent (50%) or more of the voting stock of such Company Unit
or the sale of all or substantially all of the assets of such
Company Unit.
g. "Employment Period" means the two (2) year period commencing
on the day of a Triggering Event and ending two years
following such day.
<PAGE>
-3-
h. "Perquisites" includes not only those incidental emoluments of
office commonly included within the term, such as a company
assigned car, club membership and financial planning
assistance, but also the benefits under corporate employee
benefit plans such as the GATX medical, life insurance and
Pension Plans (as defined herein) and other plans and
agreements relating thereto.
i. "Total Disability" means any disability that (1) entitles the
Executive to disability income benefits under the GATX
Corporation Long Term Disability Income Plan as in effect on
the day prior to the Triggering Event and (2) prevents the
Executive, for the duration of the Employment Period, from
engaging in the same or comparable type of employment as that
in which the Executive was engaged on the day prior to the
Triggering Event.
j. "Triggering Event" means the first to occur of a Change of
Control or the Disposition of the Company Unit by which the
Executive was primarily employed on the day prior to such
Change of Control or Disposition.
2. Employment. This Agreement shall have no effect on, nor shall any of
its provisions apply to, the Executive's employment or termination thereof that
occurs prior to the occurrence of a Triggering Event. However, if the Executive
is employed by the Company on the day prior to a Triggering Event, the Company
shall continue to employ the Executive and the Executive shall remain in the
employ of the Company for the duration of the Employment Period. Provided,
however, subject only to the provisions of paragraphs five (5) and six (6)
below, the Company may, at any time, terminate the employment of the Executive
at will.
3. Performance of Duties. During the Executive's employment by the
Company, the Executive shall devote his or her best efforts and full business
time exclusively to the business affairs and interests of the Company and shall
faithfully and efficiently perform such duties, consistent with the status of
the Executive's position, as may be assigned to the Executive from time to time
by the Chief Executive Officer of the Company or the Chief Executive Officer's
delegate.
4. Compensation. During the Executive's employment by the
Company, he or she shall receive a salary in such amount as may be established
from time to time by the Company Unit by which the Executive is primarily
employed and shall be entitled to participate, in accordance with the
<PAGE>
-4-
entitled to participate, in accordance with the Company's policy and
consistent with the Executive's position and salary, in all plans and all
Perquisites applicable generally to other executives of the Company Unit.
5. Termination Payments. If the Company terminates or Constructively
Terminates the Executive's employment at any time during the Employment Period
for any reason other than Cause or Total Disability, the Company shall
promptly pay or cause to be paid to the Executive in a lump sum an amount
equal to:
a. Twice the Executive's annual salary before deductions and
deferrals at the level thereof as of the day prior to the Triggering
Event, plus the bonus that would have been payable to the Executive
(for the year in which such termination or Constructive Termination
occurs) under the GATX Management Incentive Plan (the "MIP")) as in
effect on the day prior to the Triggering Event, equal in amount to
the product of (i) the Executive's annual salary as in effect
immediately prior to the Triggering Event and (ii) the Executive's
Target Bonus (as that term is defined in the MIP); minus
b. Any amounts paid to the Executive in accordance with the Company's
severance pay policies.
In addition to the amount set forth above, the Company shall:
(1) Permit the Executive to continue the Executive's participation (or
provide equivalent coverage) in the Company Unit's medical, dental,
disability and life insurance programs provided under GATX's benefit
plans as in effect on the day prior to the Triggering Event until
the earlier to occur of (a) the second anniversary of the date as of
which the Executive's employment is terminated or Constructively
Terminated or (b) the date on which the Executive becomes eligible
for coverage under any other employee benefit plans providing
substantially equivalent benefits at substantially equivalent
levels;
(2) Reimburse the Executive (to a maximum of five thousand dollars
($5,000) per year) for financial and estate planning and tax return
preparation for the two (2) years immediately following the
Executive's termination or Constructive Termination of employment in
accordance with GATX's executive financial planning program in effect
on the day prior to a Triggering Event;
(3) Reimburse the Executive (to a maximum of thirty thousand dollars
($30,000)) for the cost of outplacement services plus up to one
thousand dollars ($1,000) of expenses incurred in seeking or
obtaining new employment.
<PAGE>
-5-
6. Retirement Benefits. In addition to the foregoing, if the Executive
survives for two (2) years following such termination or Constructive
Termination of employment:
a. The Company shall pay or cause to be paid to the Executive (or in the
event of the Executive's death following the expiration of such two
(2) year period to the Executive's surviving spouse) a Retirement
Income Benefit (as hereinafter defined) calculated and paid as
follows:
(1) The Retirement Income Benefit shall be an amount equal to the
difference, if any, between (a) the monthly benefit the Executive
(or, in the event of the Executive's death, the Executive's
surviving spouse) would have received as a monthly pension benefit
under the GATX Corporation Non-Contributory Pension Plan for
Salaried Employees, (the "Salaried Pension Plan") the GATX
Corporation Excess Benefit Plan, the GATX Corporation Supplemental
Benefit Plan and any other written agreement between the Executive
and the Company regarding the Executive's retirement, all as in
effect on the day prior to the Triggering Event, ( hereinafter
collectively, the "Pension Plan") assuming the Executive's
employment had terminated two (2) years after the date of the
Executive's termination or Constructive Termination of employment,
and accordingly the Executive had accumulated two additional years
of service credit under the Pension Plan at a level of compensation
calculated in accordance with the immediately following sentence and
(b) the amount, if any, the Executive (or, in the event of the
Executive's death, the Executive's surviving spouse) actually
receives as a monthly benefit under the Pension Plan. For purposes
of subparagraph (a) of this paragraph, the Executive's compensation
for each of the two additional years of assumed service credit shall
be equal to the level of the Executive's compensation as in effect
immediately prior to the Triggering Event, plus an amount equal to
the average of the Covered Bonuses (as defined in Section 2.13 of
the Salaried Pension Plan) paid to the Executive during the five (5)
calendar year period immediately preceding the Triggering Event.
(2) Payment of the Retirement Income Benefit shall be made in the same
manner, simultaneously with and in the same form as payments are, or
would have been, made to the Executive (or in the event of the
Executive's death to the Executive's surviving spouse) under the
Pension Plan, but shall commence no sooner than two (2) years
following the Executives' termination or Constructive Termination of
employment. Any election available to and validly executed by the
Executive under the Pension Plan as to either an optional form of
payment or as to the date on which benefits are to commence, shall
be
<PAGE>
-6-
applicable to the Retirement Income Benefit and shall be utilized in
calculating the amount of the Retirement Income Benefit.
b. The Company shall permit the Executive to participate in (or shall
provide equivalent coverage) on the same basis as other GATX
employees who have terminated their employment at approximately the
same age and after a substantially equivalent number of years of
service in the GATX Corporation Medical Plan and the GATX
Corporation Life Insurance Plan, both as in effect on the day prior
to the Triggering Event. Such benefits shall be paid at the same
time, under the same conditions and to the same extent as if the
Executive's employment had continued for two (2) years after the
termination or Constructive Termination of the Executive's
employment.
Notwithstanding the foregoing, if the Executive would otherwise be entitled to
receive a Retirement Income Benefit hereunder but dies prior to the expiration
of a two (2) year period following termination or Constructive Termination of
the Executive's employment and leaves a surviving spouse, such surviving
spouse shall be entitled to receive such payments and Perquisites as would be
applicable to such surviving spouse under this Agreement, the Pension Plan and
all other GATX employee benefit plans and policies in effect on the day prior
to the Triggering Event, calculated and payable in the same manner as if the
Executive had been employed by the Company on the Executive's date of death.
7. Payment in Lieu. Except with respect to (a) compensation applicable to the
Executive's employment prior to the termination or Constructive Termination
thereof, (b) amounts payable under the severance pay policies described in
paragraph 5(b) above, and (c) such compensation as may be payable or rights as
may be exercisable on termination of employment under the GATX Salaried
Employees Retirement Savings Plan, the Executive Deferred Income Plans, the
Management Incentive Plan, the GATX Corporation 1985 Long Term Incentive
Compensation Plan or other similar programs, all as in effect on the day prior
to the Triggering Event, the amounts payable to the Executive under this
Agreement shall be in lieu of any other amount payable to the Executive by the
Company by reason of the Executive's termination or Constructive Termination
of employment.
8. Confidentiality. During and after the Executive's employment, the
Executive will not divulge or appropriate to the Executive's own use or to the
use of others any secret or confidential information or knowledge pertaining
to the business of the Company or any of its subsidiaries or affiliates
obtained by the Executive during such employment.
<PAGE>
-7-
9. Nonalienation. The interests of the Executive under the Agreement are not
subject to the claims of the Executive's creditors and may not otherwise be
voluntarily or involuntarily assigned, alienated or encumbered.
10. Tax Penalties. The Company will provide complete tax and compensation data
on a timely basis to the Executive and to an accounting firm designated by the
Executive to enable the Executive to determine the extent, if any, to which
the Executive's compensation under this Agreement and all other compensation
agreements, plans and programs of the Company may be considered to be a
parachute payment or excess parachute payment under section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"). In the event that any
such compensation is deemed to constitute an excess parachute payment that is
subject to tax under Section 4999 of the Code or any successor provision
thereto (the "Excise Tax"), the Company shall pay to the Executive an
additional amount (the "Gross-Up Amount") that, after payment of all Federal
and state income taxes thereof (assuming the Executive is at the highest
marginal federal and applicable state income tax rate in effect on the date of
payment of the Gross-Up Amount) and payment of the Excise Tax on the Gross-Up
Amount, is equal to the Excise Tax payable by the Executive on such excess
parachute payment. The Gross-Up Amount payable with respect to each excess
parachute payment shall be paid by the Company coincident with payment of such
excess parachute payment.
11. No Cumulation or Duplication of Benefits. The obligations of the Company
to make payments or provide benefits hereunder are the joint and several
obligations of the Company and the Company Units. Accordingly, if following
the termination or Constructive Termination of the Executive's employment the
Executive receives any form of compensation payments or benefits from the
Company or any Company Unit or from a successor thereto or affiliate thereof,
the amount of any such compensation or payment together with the fair market
value of any such benefits shall be deducted from any obligation of the
Company or applicable Company Unit to make payments or provide benefits to the
Executive under or by reason of this Agreement.
12. Reduction of Payments. Notwithstanding anything contained herein to the
contrary, any amounts payable hereunder shall be reduced by such amount as may
be necessary to make this agreement not unlawful under federal law.
13. Amendment. This Agreement may be amended by written agreement of the
parties without the consent of any other person and no person, other than the
parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof.
14. Extension. The Board of Directors of GATX may, at any time prior to the
expiration or termination of this Agreement, extend the term of this Agreement
for a
<PAGE>
-8-
period of up to two (2) years from the date on which the extension is
approved, without any further action on the part of the Executive.
15. Successors. This Agreement shall be binding upon, and inure to the benefit
of, the heirs, executors and legal representatives of the Executive and the
successors and assigns of the Company and upon any person acquiring, whether
by merger, consolidation, purchase of assets or otherwise, all or
substantially all of the assets and business of any Company Unit. The Company
agrees that it will not effect the sale or other disposition of all or
substantially all of its assets unless either (a) the person or entity
acquiring the assets or a substantial portion of the assets shall expressly
assume by an instrument in writing all duties and obligations of the Company
under this Agreement or (b) the Company shall provide through the
establishment of a separate reserve for the payment in full of all amounts
that are or may be reasonably expected to become payable to the Executive
under this Agreement.
16. Nonwaiver. The waiver by either party of a breach of this Agreement
shall not be construed as a waiver of any subsequent breach.
17. Resolution of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the alleged breach thereof, shall be settled by
arbitration in the City of Chicago, Illinois in accordance with the laws of
the State of Illinois b arbitrators, one of whom shall be appointed by the
Company or any successor thereto, one by the Executive and the third by the
other two. If the other two arbitrators cannot agree on the appointment of a
third arbitrator, or if either party fails within thirty (30) days after
receipt of written demand to appoint an arbitrator, then such arbitrator shall
be appointed by the Dean of the Business School of the University of Chicago
or his delegate. The arbitration shall be conducted in accordance with the
rules of the American Arbitration Association, except with respect to the
selection of arbitrators, which shall be as provided in this paragraph 17.
Judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof. In the event that it shall be necessary or
desirable for the Executive to retain legal counsel and/or incur other costs
and expenses in connection with the enforcement of any and all of his rights
under this Agreement, the Executive shall be entitled to recover from the
Company reasonable attorney's fees and costs and expenses incurred by the
Executive in connection with the enforcement of said rights. Payments shall be
made to the Executive by the Company at the time these attorney's fees and
costs and expenses are incurred by the Executive. If, however, the arbitrators
should later determine that under the circumstances it was unjust for the
Company to have made any of these payments of attorney's fees and costs and
expenses to the Executive, the Executive shall repay any such payments to the
Company in accordance with the order of the arbitrators. Any award of the
arbitrators shall include interest at a rate or rates considered just under
the circumstances by the arbitrators.
<PAGE>
-9-
18. Termination of Agreement. This agreement shall terminate on December 31,
1997, provided, however, if prior to such date, but after January 1, 1996,
there shall occur either (a) a Change of Control or (b) a Disposition of a
Company Unit by which the Executive is primarily employed on the day prior to
such Disposition, this agreement shall remain in effect until two years
following the date of the first to occur of such Change of Control or
Disposition. Notwithstanding the foregoing, the agreement shall terminate in
the event that (under circumstances not constituting Constructive Termination)
during the Employment Period the Executive ceases to be an officer of GATX or
the President (or Chairman of the Board) of a wholly-owned subsidiary of GATX.
Termination of this Agreement shall not affect any rights that shall have
accrued to the Executive under this Agreement prior to the termination date.
IN WITNESS WHEREOF, the Executive has hereunto set his hand, and GATX has
caused these presents to be executed in its name and on its behalf, and its
corporate seal to be hereunto affixed and attested by its Assistant Secretary.
/s/ Brian A. Kenney
-----------------------------------
Executive
GATX CORPORATION
By /s/ James J. Glasser
------------------------------------
Its Chairman of the Board
February 1, 1996
-----------------------------------
(Execution Date)
ATTEST:
/s/ Janet Dongarra
- ----------------------------------
Its Assistant Secretary
<PAGE>
EXHIBIT 10Q
GATX CORPORATION
500 WEST MONROE STREET
CHICAGO, IL 60661-3676
312 - 621- 6204
WILLIAM L. CHAMBERS
Vice President
Human Resources
May 31, 1995
Mr. David B. Anderson
845 Moseley Road
Highland Park, IL 60035
Dear David:
It's a real pleasure to confirm our offer to join GATX Corporation as Vice
President, Corporate Development, General Counsel and Secretary. In this
position you will report to James J. Glasser, Chairman of the Board and Chief
Executive Officer. The key elements of our offer are:
1. Your salary will be $275,000 per year. Your performance and base
salary will be reviewed twelve months from your starting date.
Thereafter it will be reviewed at the normal interval for your position
which currently is eighteen months. Any proposed salary revision will
be reviewed and approved by the Compensation Committee of the Board of
Directors.
2. Your annual incentive bonus target is 50% of base salary. We will
guarantee a minimum bonus of 50% of full year base salary, or $137,500,
for 1995. If corporate financial performance is greater than budget
your bonus for 1995 may be greater than 50% of a full year base salary.
3. We will ask the Board of Directors to approve 20,000 non-qualified
stock option shares for you in 1995 - 10,000 to be granted at the July
28, 1995 Board meeting and 10,000 to be granted at the October 27, 1995
meeting.
In subsequent years it is expected that you will be granted 10,000
stock option shares, or their then program equivalent number, per year.
Currently, 50% of options granted vest after one year, 25 % after two
years and the final 25 % after three years.
4. You will be eligible in 1996 to participate in the Individual
Performance Unit plan which currently applies to corporate officers and
subsidiary Presidents. This is a three year program and payouts through
the plan are currently determined by corporate return on equity. A
sample copy of the plan is attached.
<PAGE>
Mr. David B. Anderson
May 31, 1995
Page Two
5. In order to compensate you for the loss of benefits resulting from
terminating your current employment we will provide a hiring bonus of
$175,000.
6. In the event of your death or company initiated termination for reasons
other than cause prior to attaining five years of service, GATX will
provide to you or your spouse a payment approximately equal to the
benefit you or your spouse would have been eligible to receive under
the terms of the GATX Non-Contributory Pension Plan for Salaried
Employees had you attained five years of service prior to such
aforementioned events occurring. This provision will terminate when you
achieve five years of service.
7. Although your employment will be at will and terminable by either party
at any time we agree that if during a five year period beginning at
your date of hire neither James G. Glasser nor Ronald H. Zech is Chief
Executive Officer should you be terminated for reasons other than cause
we will provide a termination payment equal to one year's base salary
and target bonus.
8. You will be covered by our Change of Control Agreement, a sample copy
of which is attached.
9. You will be eligible to participate in our benefit programs, including
medical, dental and life insurance, pension plan and employee savings
(401K) plan. Summaries of these programs are attached.
10. You will have use of a company leased automobile. A portion of the
value of the use of the automobile will be imputed income to you.
11. GATX will reimburse you for dues and expenses for a downtown luncheon
club and for country club dues and expenses which are business related.
12. You will be eligible to receive financial planning assistance not to
exceed $5,000 in value each year.
13. You will be eligible for four weeks vacation per year.
<PAGE>
Mr. David B. Anderson
May 31, 1995
Page Three
David, all of us are enthusiastically looking forward to working with you as a
very key member of our senior management team. We expect that your experience
and style will greatly benefit GATX and its shareholders.
Please confirm your acceptance of this offer by signing and returning the
attached copy of this letter. Please let me know if you have any questions.
Sincerely,
WLC:ech
Attachments
ACCEPTED:
/s/ David B. Anderson June 5, 1995
- ------------------------ ---------------------
David B. Anderson Date
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11A
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER SHARE OF
COMMON STOCK AND COMMON STOCK EQUIVALENTS
(In Millions, Except Per Share Amounts)
Year Ended December 31
----------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Average number of shares
of Common Stock outstanding 20.0 19.9 19.6 19.4 19.3
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 .4 .3 .3 * .2
-------- -------- -------- ------- -----
Total 20.4 20.2 19.9 19.4 19.5
======== ======== ======== ======= =====
Net income (loss) $ 100.8 $ 91.5 $ 72.7 $ (16.5) $ 82.7
Deduct - Dividends paid and
accrued on Preferred Stock 13.2 13.3 13.3 13.3 13.3
--------- -------- -------- ------- ------
Net income (loss), as adjusted $ 87.6 $ 78.2 $ 59.4 $ (29.8) $ 69.4
========= ======== ======== ======= ======
Net income (loss) per share $ 4.30 $ 3.88 $ 2.99 $ (1.53) $ 3.56
========= ======== ======== ======== =======
<FN>
* Common share equivalents are not considered in the computation of loss per share.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11B
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER SHARE OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS ASSUMING FULL DILUTION
(PRINCIPALLY CONVERSION OF ALL OUTSTANDING PREFERRED STOCK)
(In Millions, Except Per Share Amounts)
Year Ended December 31
-------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
Average number of shares used to
compute primary earnings per share 20.4 20.2 19.9 19.4 19.5
Common Stock issuable upon assumed
conversion of Preferred Stock 4.0 4.0 * * 4.1
-------- ------- ------- ------- -------
Total 24.4 24.2 19.9 19.4 23.6
======== ======== ======= ======== =======
Net income (loss) as adjusted
per primary computation $ 87.6 $ 78.2 $ 59.4 $ (29.8) $ 69.4
Add - Dividends paid and
accrued on Preferred Stock 13.2 13.3 * * 13.3
--------- -------- ------- -------- -------
Net income (loss), as adjusted $ 100.8 $ 91.5 $ 59.4 $ (29.8) $ 82.7
========= ======== ======= ======== =======
Net income (loss) per share,
assuming full dilution $ 4.13 $ 3.78 $ 2.99 $ (1.53) $ 3.51
========= ======== ======= ======== =======
<FN>
* Conversion of Preferred Stock is excluded from computation of fully diluted
earnings because of antidilutive effects.
</FN>
Additional fully diluted computation (1)
Average number of shares used to
compute primary earnings per share 19.6 19.4
Common stock issuable upon assumed
conversion of Preferred Stock, and
stock option exercises 4.4 4.3
------- -----
24.0 23.7
======= =======
Net income (loss) as adjusted
per primary computation $ 59.4 $ (29.8)
Add - Dividends paid and accrued
on Preferred Stock 13.3 13.3
------- ------
$ 72.7 $ (16.5)
======= =======
Net income (loss) per share,
assuming full dilution $ 3.03 $ (.70)
======= ========
<FN>
(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.
</FN>
</TABLE>
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(In Millions Except For Ratios)
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Earnings available for fixed charges:
Net income $ 100.8 $ 91.5 $ 72.7
Add:
Income taxes 47.6 48.8 51.4
Equity in net earnings of affiliated companies,
net of distributions received 6.5 3.7 8.0
Interest on indebtedness and amortization
of debt discount and expense 170.1 148.2 151.8
Amortization of capitalized interest 1.1 1.1 1.1
Portion of rents representative of
interest factor (deemed to be one-third) 43.9 37.9 31.4
------- ------- -------
Total earnings available for fixed charges $ 370.0 $ 331.2 $ 316.4
======= ======= =======
Preferred dividend requirements $ 13.2 $ 13.3 $ 13.3
Ratio to convert preferred
dividends to pretax basis (A) 169% 171% 197%
------- ------- -------
Preferred dividend factor on pretax basis 22.3 22.7 26.2
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense 170.1 148.2 151.8
Capitalized interest 6.2 3.0 2.7
Portion of rents representative of interest
factor (deemed to be one-third) 43.9 37.9 31.4
------- ------- -------
Combined fixed charges and
preferred stock dividends $ 242.5 $ 211.8 $ 212.1
======== ======== ========
Ratio of earnings to combined fixed charges
and preferred stock dividends (B) 1.53x 1.56x 1.49x
<FN>
(A) To adjust preferred dividends to a pretax basis, income before income
taxes and equity in net earnings of affiliated companies is divided
by income before equity in net earnings of affiliated companies.
(B) The ratios of earnings to combined fixed charges and preferred stock
dividends represent the number of times "fixed charges and preferred
stock dividends" were covered by "earnings." "Fixed charges and
preferred stock dividends" consist of interest on outstanding debt
and capitalized interest, one-third (the proportion deemed
representative of the interest factor) of rentals, amortization of
debt discount and expense, and dividends on preferred stock adjusted
to a pretax basis. "Earnings" consist of consolidated net income
before income taxes and fixed charges, less equity in net earnings of
affiliated companies, net of distributions received.
</FN>
</TABLE>
<PAGE>
EXHIBIT 13
GATX Review of Financial Operations
- -------------------------------------------------------------------------------
Reports of GATX Management and of Ernst & Young LLP,
Independent Auditors 32
Management Discussion and Analysis: 1995 Compared to 1994
(Continued on pages 41, 43 and 45) 33
Financial Data of Business Segments 36
Statements of Consolidated Income and Reinvested Earnings 40
Consolidated Balance Sheets 42
Statements of Consolidated Cash Flows 44
Notes to Consolidated Financial Statements 47
Quarterly Results of Operations (Unaudited) and 63
Common and Preferred Stock Information
Selected Financial Data 64
Management Discussion and Analysis: 1994 Compared to 1993 66
- -------------------------------------------------------------------------------
Business Segments
The following summary describes GATX's current business segments:
Railcar Leasing and Management represents General American Transportation
Corporation and its foreign subsidiaries and affiliates (Transportation), which
lease and manage tank cars and other specialized railcars.
Terminals and Pipelines represents GATX Terminals Corporation and its domestic
and foreign subsidiaries and affiliates (Terminals), which own and operate tank
storage terminals, pipelines and related facilities.
Financial Services represents GATX Capital Corporation and its subsidiaries and
joint ventures, which arrange and service the financing of equipment and other
capital assets on a worldwide basis.
Great Lakes Shipping represents American Steamship Company (ASC), which operates
self-unloading vessels on the Great Lakes.
Logistics and Warehousing represents GATX Logistics, Inc. (Logistics), which
provides distribution and logistics support services and warehousing facilities
throughout North America.
- 31 -
<PAGE>
Report of GATX Management
To Our Shareholders:
The management of GATX Corporation has prepared the accompanying consolidated
financial statements and related information included in this 1995 Annual Report
to Shareholders and has the primary responsibility for the integrity of this
information. The financial statements have been prepared in conformity with
generally accepted accounting principles and necessarily include certain amounts
which are based on estimates and informed judgments of management.
The financial statements have been audited by the company's independent
auditors, whose report thereon appears on this page. Their role is to form an
independent opinion as to the fairness with which such statements present the
financial position of the company and the results of its operations.
GATX maintains a system of internal accounting controls which is designed to
provide reasonable assurance as to the reliability of its financial records and
the protection of its shareholders' assets. The concept of reasonable assurance
is based on the recognition that the cost of a system of internal control should
not exceed the related benefits. Management believes the company's system
provides this appropriate balance in all material respects.
GATX's system of internal controls is further augmented by an audit committee
composed of directors who are not officers or employees of GATX, which meets
regularly throughout the year with management, the independent auditors and the
internal auditors; an internal audit program that includes prompt, responsive
action by management; and the annual audit of the company's financial statements
by independent auditors.
/s/ James J. Glasser
- -------------------------
James J. Glasser
Chairman of the Board
/s/ Ronald H. Zech
- ------------------------
Ronald H. Zech
President and
Chief Executive Officer
/s/ David M. Edwards
- -------------------------
David M. Edwards
Vice President Finance
and Chief Financial Officer
/s/ Ralph L. O'Hara
- ----------------------------
Ralph L. O'Hara
Controller and
Chief Accounting Officer
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Shareholders and
Board of Directors of
GATX Corporation:
We have audited the accompanying consolidated balance sheets of GATX Corporation
and subsidiaries as of December 31, 1995 and 1994, and the related statements of
consolidated income and reinvested earnings and consolidated cash flows for each
of the three years in the period ended December 31, 1995. 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 referred to above present fairly, in
all material respects, the consolidated financial position of GATX Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Chicago, Illinois ERNST & YOUNG LLP
January 23, 1996
- 32 -
<PAGE>
Management Discussion and Analysis
1995 Compared to 1994
GATX reported record net income of $101 million or $4.30 per common share for
the year ended December 31, 1995 compared to $91 million or $3.88 per common
share for 1994. On a fully diluted basis, earnings per share were $4.13 compared
to $3.78 in the prior year. This improvement was principally due to record
earnings at Transportation, Financial Services and American Steamship and
improved earnings at Logistics. Terminals' net income decreased slightly from
1994's record level. GATX's return on common equity for 1995 was 16.7% compared
to 17.0% in 1994. The comparative performance for 1994 versus 1993 is discussed
in the prior year's management discussion on pages 66 and 67 of this report.
RAILCAR LEASING AND MANAGEMENT Transportation's gross income of $361 million
increased $39 million from 1994. Rental revenues increased 12% due to the
increase in the number of railcars on lease, higher average rental rates and new
operations in Mexico. At the end of 1995, Transportation had 61,400 railcars on
lease in the United States versus 56,500 a year ago. Domestic fleet utilization
of 95% at the end of the year was slightly higher than the prior year due to the
continued high demand for tank cars. Over 6,200 new and used railcars were added
to the domestic fleet in 1995, which is 1,400 more than were added in 1994. In
addition, 1,200 cars were leased in from the Mexican National Railroad. Fleet
additions in 1996 are expected to be at lower levels than the exceptionally high
level of railcars added in 1995.
Net income of $63 million increased 14% over 1994 reflecting the higher
revenues, the increase in income generated from invested funds due to higher
interest rates, and higher equity earnings from Transportation's Canadian
affiliate. Operating margins improved slightly as the growth in revenues
exceeded the increase in fleet repair costs and SG&A expense. Pressure on
operating margins is expected to continue as higher standards of repair without
compensating revenue increases characterize the industry today. Ownership costs,
consisting of lease rental expense, depreciation and interest, increased 21%
from last year due to the increased fleet size, investments in GATX service
centers, and the new operations in Mexico.
Fleet repair costs increased 11% as a result of the increased fleet size and
number of cars repaired, primarily at Transportation's service centers.
Transportation's commitment to provide its customers with well maintained
railcars, coupled with stricter maintenance standards in the industry and
mandated inspection programs, will continue to increase repair costs. During the
year, Transportation completed the major upgrade program for its four domestic
service centers. This three year project was designed to control costs by
improving the efficiency and productivity of the repair process and reducing the
time a car is out of service. The number of cars repaired at GATX service
centers increased 15% from last year. Average throughput days for a railcar in
the repair shop has been reduced by almost 30% as a result of this project, to
approximately 32 days at year end. SG&A increased 18% primarily as a result of
increased employee costs, new operations in Mexico, and higher legal and
consulting expenses.
TERMINALS AND PIPELINES Terminals' gross income of $313 million increased 3%
over 1994 reflecting incremental revenues from newly-acquired terminals and
strong petroleum activity in the first half of 1995, especially in the Los
Angeles market. However, revenues in the latter part of the year were less than
in 1994 as a result of lower worldwide petroleum storage demand, significantly
lower utilization of tanks in the Northeast due to reduced buildup of heating
oil inventories, and lower demand and price competition in Los Angeles. Revenues
from chemical markets remained strong. Revenues at the two pipelines serving the
Las Vegas and Orlando markets continue to increase as demand for clean products
remains strong. The non-strategic Wyco pipeline was sold early in 1995. Capacity
utilization at Terminals' wholly-owned facilities was 85% at the end of 1995
compared to 94% a year earlier, reflecting the effects of lower industry-wide
petroleum inventory levels and tanks out of service for repairs and upgrades.
Throughput was 655 million barrels compared to 671 million barrels the year
before. Incremental throughput from newly-acquired terminals was offset by the
absence of throughput at Wyco. Lower overall throughput reflected mild weather
in early 1995, lower blending activity, refinery turnarounds, tanks out of
service, and a contract termination with a large customer.
-33-
<PAGE>
Terminals' net income of $31 million decreased $1 million from 1994. Higher
revenues, slightly improved operating margins and increased earnings from
foreign affiliates were offset by higher SG&A and interest expenses. Operating
costs in 1995 approximated 1994 levels. Interest expense grew 17% as additional
debt was incurred to finance acquisitions as well as maintenance, regulatory and
environmental expenditures. Environmental and maintenance spending continue to
grow in keeping with GATX's commitment to improve terminalling assets and to
operate its facilities in an environmentally responsible manner. SG&A expenses
increased 19% due to improvements in information systems, additional personnel,
training, and moving and relocation costs. Overall, the continuing long-term
focus on improving physical assets, information systems and people may constrain
near-term earnings. Equity in net earnings of affiliates of $15 million grew $3
million over 1994 due to strong chemical demand in Europe and Singapore. Also
contributing to the increase in equity earnings were results from the Olympic
Pipeline Company in which a 25% interest was acquired in the third quarter of
1995.
Terminals' business environment at year end was characterized by continuing low
distillate storage demand, historically low petroleum industry inventory levels,
lower pricing due to increased competition and low refinery margins. This
environment is expected to continue into 1996. Terminals plans to selectively
acquire and construct facilities both domestically and overseas.
FINANCIAL SERVICES Financial Services' gross income of $218 million increased
$11 million from 1994. The increase was principally due to higher asset
remarketing income, largely from the remarketing of rail equipment from both
owned and managed portfolios which generated increased disposition gains and fee
income. Fee income increased $9 million. Pretax disposition gains were $33
million compared to $21 million in 1994. These gains do not occur evenly period
to period. Lease income decreased $4 million due to the return of four aircraft
at lease termination in early 1995 and the sale of an interest in two aircraft
which were on lease; these were partially offset by revenues generated as a
result of the acquisition in November of Sun Financial, a technology focused
finance company, and the impact of overall increased lease volume. Interest
income decreased $4 million primarily as the result of prepayment premiums
received in 1994.
Net income of $33 million increased $8 million from 1994 due to the increased
revenues and higher joint venture income, partially offset by increased interest
and SG&A expenses. Equity earnings increased $6 million primarily due to
improved earnings at an international aircraft joint venture, higher income from
rail and technology joint ventures, and a gain from the sale of a real estate
investment. Interest expense exceeded 1994 by $6 million due to the increase in
average debt balances between years and higher interest rates. SG&A increased $4
million primarily due to higher employee costs, legal expenses and incremental
costs from Sun Financial. The provision for possible losses of $18 million
decreased $1 million from 1994. The loss reserve at the end of 1995 was $92
million, or 6.5% of net investments. During the year, the carrying value of
certain older widebody aircraft was reduced to reflect current market values.
Aircraft demand has strengthened as the oversupply of aircraft has been reduced
and the recovery of the airline industry continues.
Growth at Financial Services is expected to continue as a result of the recent
acquisition of Sun Financial and a sustained high level of portfolio
investments.
-34-
<PAGE>
GREAT LAKES SHIPPING American Steamship Company's gross income of $83 million
increased $1 million over 1994 as higher per ton rates were partially offset by
fewer tons transported. Tonnage carried in 1995 was 25.5 million tons compared
to 26.3 million tons in 1994. Customer demand remained strong throughout the
1995 season. Favorable weather conditions contributed to an early start to the
navigation season in the spring of 1995 but were offset by substantially colder
temperatures and early ice formation in late 1995.
Net income of $7 million increased 25% from 1994 as a result of the higher
revenue, increased income on invested funds, and an increased contribution
margin due to efficient vessel operations and cost controls. Contribution per
ton was 7% greater than the prior year as operating expenses were reduced due to
lower insurance and vessel repair costs. Also, ASC's training programs for
vessel personnel and preventive maintenance programs contributed to reduced
costs. These savings were partially offset by additional operational expenses,
principally tugs, incurred late in the year due to the adverse weather
conditions. ASC continues to focus on managing existing capacity and controlling
costs.
The environment on the Great Lakes remains competitive with supply and demand
for vessel capacity in balance. Overall, ASC transported an estimated 23% of the
total U.S. flag Great Lakes tonnage in 1995, down slightly from 1994. U.S. flag
tonnage increased to 105 million tons in 1995, an increase of 3 million tons.
Iron ore cargoes continued to be in demand even though raw steel production
decreased to 89% of capacity late in the year compared to 93% a year earlier.
Lake Erie coal loadings were among the lowest on record, but limestone tonnage
increased.
LOGISTICS AND WAREHOUSING GATX Logistics' gross income of $259 million increased
$15 million over 1994 as a result of new customers, higher volumes from existing
customers and some rate increases. Total warehousing square footage of 24.4
million square feet increased 5% over 1994. Space utilization at year end was
97% compared to 92% at the end of 1994. The reduction in empty space is due to
new business, the closing of one warehouse, and the subleasing of space in three
warehouses.
Net income in 1995 of $.5 million was $1 million higher than in 1994 due to
improved margins and lower amortized costs, partially offset by higher SG&A
costs related to increased employee costs. Margins improved due to new business,
price increases, volume levels and reduced empty space cost.
Revenues and margins are expected to continue to grow as Logistics continues to
replace low margin public business with more profitable contract business. In
addition, there is a continued emphasis on key customer relationships to expand
business with existing customers. However, this strategy is evolutionary and may
take several years to significantly improve earnings.
CORPORATE AND OTHER Corporate and Other net expense of $33 million was $8
million more than in 1994 primarily as the result of increased interest expense
due to higher interest rates.
The management discussion and analysis of the financial statements is continued
on pages 41, 43 and 45.
- 35 -
<PAGE>
FINANCIAL DATA OF BUSINESS SEGMENTS
- --------------------------------------------------------------------------------
GATX provides services to a variety of capital goods markets through five
principal business segments. The financial data which are presented on this and
the following three pages depict the profitability, financial position, and cash
flow of each of GATX's business segments.
The presentation of segment profitability includes the direct costs incurred at
the segment's operating level plus expenses allocated by the parent company.
Allocated expenses represent costs which these operations would have incurred
otherwise, but do not include general corporate expense or interest on debt of
the parent company. Interest costs associated with segment indebtedness are
included in the determination of profitability of each segment since interest
expense directly influences any investment decision and the evaluation of
subsequent operational performance. Interest expense by segment has been shown
separately on page 39 to enable the reader to ascertain segment profitability
before deducting interest expense.
<TABLE>
<CAPTION>
SEGMENT PROFITABILITY (IN MILLIONS):
GROSS INCOME 1995 1994 1993 1992 1991
- -------------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 360.9 $ 322.1 $ 302.2 $ 289.3 $ 285.3
Terminals and Pipelines 313.4 303.1 281.1 266.5 249.7
Financial Services 217.9 206.8 204.0 177.7 205.6
Great Lakes Shipping 83.5 82.4 80.6 78.7 76.0
Logistics and Warehousing 259.4 244.2 224.4 212.2 174.0
-------- -------- -------- -------- --------
Subtotal 1,235.1 1,158.6 1,092.3 1,024.4 990.6
Corporate and Other (1.7) (3.6) (5.4) (5.3) (1.5)
-------- -------- -------- -------- --------
Consolidated $1,233.4 $1,155.0 $1,086.9 $1,019.1 $ 989.1
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
INCOME BEFORE INCOME TAXES, EQUITY
IN NET EARNINGS OF AFFILIATED
COMPANIES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 1995 1994 1993 1992 1991
- ------------------------------------ --------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 90.7 $ 79.6 $ 74.4 $ 68.4 $ 73.6
Terminals and Pipelines 30.3 33.2 30.2 19.8 14.9
Financial Services 36.7 34.4 34.5 (38.9) 35.6
Great Lakes Shipping 10.8 8.8 10.2 9.3 8.6
Logistics and Warehousing 3.2 1.6 2.5 3.8 .5
-------- -------- ------- ------- -------
Subtotal 171.7 157.6 151.8 62.4 133.2
Corporate and Other:
Selling, general and
administrative expense (20.4) (18.3) (22.9) (18.9) (14.4)
Interest expense (31.8) (17.2) (18.4) (23.4) (24.8)
Other, net (2.5) (4.3) (6.1) (5.2) (1.9)
-------- -------- ------- -------- -------
Subtotal (54.7) (39.8) (47.4) (47.5) (41.1)
-------- -------- -------- -------- -------
Consolidated $ 117.0 $ 117.8 $ 104.4 $ 14.9 $ 92.1
======== ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
EQUITY IN NET EARNINGS
OF AFFILIATED COMPANIES 1995 1994 1993 1992 1991
- ------------------------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 5.4 $ 4.7 $ 4.5 $ 4.5 $ 4.5
Terminals and Pipelines 14.7 12.2 10.1 11.8 10.2
Financial Services 11.3 5.6 5.1 7.7 9.5
-------- ------- -------- ------- --------
Consolidated $ 31.4 $ 22.5 $ 19.7 $ 24.0 $ 24.2
======== ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 1995 1994 1993(A) 1992(B) 1991
- ------------------------------ -------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 62.9 $ 55.1 $ 47.6 $ 49.4 $ 55.2
Terminals and Pipelines 31.0 31.9 26.5 23.4 19.0
Financial Services 32.6 24.9 21.5 (16.7) 28.5
Great Lakes Shipping 7.0 5.6 6.8 6.2 6.3
Logistics and Warehousing .5 (.5) .1 .9 (.7)
-------- ------- -------- ------- --------
Subtotal 134.0 117.0 102.5 63.2 108.3
Corporate and Other (33.2) (25.5) (29.8) (33.9) (25.6)
-------- ------- -------- -------- --------
Consolidated $ 100.8 $ 91.5 $ 72.7 $ 29.3 $ 82.7
======== ======= ======== ======== ========
<FN>
(A) Income includes a $7.3 million charge for the cumulative increase in
deferred income taxes as a result of the 1993 federal tax rate change
(See following table for breakdown by segment).
(B) Income was reduced further by $45.8 million for the cumulative effect of
accounting changes resulting in a net loss of $16.5 million.
</FN>
</TABLE>
- 36 -
<PAGE>
FINANCIAL DATA OF BUSINESS SEGMENTS (CONTINUED)
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX RATE CHANGE IN 1993
The following table shows the effect of the federal tax legislation enacted in
1993 which increased the federal income tax rate from 34% to 35% retroactively
to January 1, 1993.
<TABLE>
<CAPTION>
Income (Loss)
Net Before Tax Net
Income Tax Rate Rate Income
(Loss) Change Change (A) (Loss)
-------- ------------ ----------- -------
In Millions, Except Per Share Data 1994 1993
-------- ---------------------------------
<S> <C> <C> <C> <C>
Railcar Leasing and Management $ 55.1 $ 51.9 $ (4.3) $ 47.6
Terminals and Pipelines 31.9 28.8 (2.3) 26.5
Financial Services 24.9 23.1 (1.6) 21.5
Great Lakes Shipping 5.6 6.8 - 6.8
Logistics and Warehousing (.5) .1 - .1
------ ------ ------- ------
Subtotal 117.0 110.7 (8.2) 102.5
------ ------ ------- ------
Corporate and Other (25.5) (30.7) .9 (29.8)
------ ------ ------- ------
Consolidated $ 91.5 $ 80.0 $ (7.3) $ 72.7
====== ====== ======= ======
Income (Loss) Per Common Share $ 3.88 $ 3.36 $ (.37) $ 2.99
====== ====== ======== ======
<FN>
(A) Effect of 1993 tax rate change on pre-1993 deferred taxes.
</FN>
</TABLE>
The financial position data below present the identifiable asset base of each of
GATX's business segments and the degree to which such assets have been financed
with external sources of capital. GATX utilizes additional assets, such as
railcars, aircraft and warehouses, which are financed through off-balance sheet
operating leases and therefore are not included in identifiable assets;
similarly, the corresponding financings are not included in long-term debt.
FINANCIAL POSITION (IN MILLIONS):
<TABLE>
<CAPTION>
IDENTIFIABLE
ASSETS 1995 1994 1993 1992 1991
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $2,041.9 $1,882.8 $1,701.0 $1,694.7 $1,678.3
Terminals and Pipelines 1,101.5 1,022.5 872.5 816.2 781.7
Financial Services 1,503.3 1,255.8 1,240.1 1,320.0 1,366.0
Great Lakes Shipping 187.2 189.8 194.5 204.8 199.8
Logistics and Warehousing 171.6 172.6 172.8 165.2 189.0
-------- -------- -------- -------- --------
Subtotal 5,005.5 4,523.5 4,180.9 4,200.9 4,214.8
-------- -------- -------- -------- --------
Corporate and Other 21.9 20.9 25.0 27.3 32.7
Intersegment Amounts (984.5) (893.7) (813.8) (801.9) (733.3)
-------- -------- -------- -------- --------
Consolidated $4,042.9 $3,650.7 $3,392.1 $3,426.3 $3,514.2
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM DEBT
AND CAPITAL LEASE OBLIGATIONS 1995 1994 1993 1992 1991
- ------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 979.2 $ 874.9 $ 744.8 $ 744.1 $ 829.3
Terminals and Pipelines 560.7 506.8 422.8 389.0 392.3
Financial Services 888.9 688.3 715.3 728.4 689.2
Great Lakes Shipping 113.2 117.7 122.6 127.1 131.6
Logistics and Warehousing 2.4 13.1 17.1 10.3 29.9
-------- -------- -------- -------- --------
Subtotal 2,544.4 2,200.8 2,022.6 1,998.9 2,072.3
Intersegment Amounts (451.9) (395.7) (308.8) (274.3) (273.8)
-------- -------- -------- -------- --------
Consolidated $2,092.5 $1,805.1 $1,713.8 $1,724.6 $1,798.5
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DEFERRED INCOME
TAXES (BENEFIT) 1995 1994 1993 1992 1991
- ------------------ -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 192.8 $ 188.3 $ 181.0 $ 175.1 $ 235.6
Terminals and Pipelines 90.4 85.2 87.0 76.8 70.5
Financial Services 9.7 (.1) (7.1) (7.8) 10.1
Great Lakes Shipping 9.7 8.2 6.8 4.5 (2.6)
Logistics and Warehousing .5 .9 .8 (.1) -
-------- -------- ------ -------- --------
Subtotal 303.1 282.5 268.5 248.5 313.6
Corporate and Other (38.3) (25.0) (20.3) (14.4) (10.0)
-------- -------- -------- -------- --------
Consolidated $ 264.8 $ 257.5 $ 248.2 $ 234.1 $ 303.6
======== ======== ======== ======== ========
</TABLE>
- 37 -
<PAGE>
FINANCIAL DATA OF BUSINESS SEGMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Major components of GATX's cash flow are shown in the following tabular data.
GATX's cash flow from operations and portfolio proceeds has been strong over the
five-year period as a result of the long-lived asset base on which GATX has
built its service-oriented businesses. Portfolio proceeds represent the proceeds
from dispositions and the return of principal on Financial Services'
investments. Net cash provided by operating activities includes net income as
adjusted for non-cash items which principally consists of the provisions for
depreciation and amortization, for deferred income taxes, and for possible
losses.
ITEMS AFFECTING CASH FLOW (IN MILLIONS):
<TABLE>
<CAPTION>
CASH FROM OPERATIONS
AND PORTFOLIO PROCEEDS 1995 1994 1993 1992 1991
- ----------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities $ 205.1 $ 265.4 $ 229.6 $ 211.3 $ 202.4
Portfolio proceeds 282.0 212.3 243.4 155.0 207.0
-------- -------- -------- -------- --------
Consolidated $ 487.1 $ 477.7 $ 473.0 $ 366.3 $ 409.4
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
NET CASH PROVIDED
BY OPERATING ACTIVITIES 1995 1994 1993 1992 1991
- ----------------------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 141.5 $ 118.0 $ 136.5 $ 108.7 $ 114.1
Terminals and Pipelines 70.6 83.5 71.2 82.4 64.2
Financial Services 8.5 67.7 33.0 45.8 52.3
Great Lakes Shipping 18.1 8.2 11.4 17.6 11.7
Logistics and Warehousing 14.3 9.5 4.9 14.5 6.7
-------- -------- -------- -------- --------
Subtotal 253.0 286.9 257.0 269.0 249.0
Corporate and Other (47.9) (21.5) (27.4) (57.7) (46.6)
-------- -------- -------- -------- --------
Consolidated $ 205.1 $ 265.4 $ 229.6 $ 211.3 $ 202.4
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PROVISION FOR
DEPRECIATION AND AMORTIZATION 1995 1994 1993 1992 1991
- ----------------------------- -------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 76.1 $ 68.3 $ 63.9 $ 62.6 $ 62.2
Terminals and Pipelines 45.3 43.5 41.0 38.6 35.8
Financial Services 32.0 35.1 29.5 21.1 15.5
Great Lakes Shipping 6.2 6.0 5.6 5.6 5.6
Logistics and Warehousing 11.1 11.5 10.2 10.1 8.2
-------- -------- -------- -------- --------
Subtotal 170.7 164.4 150.2 138.0 127.3
Corporate and Other .9 .7 .5 .3 .4
-------- -------- -------- -------- --------
Consolidated $ 171.6 $ 165.1 $ 150.7 $ 138.3 $ 127.7
======== ======== ======== ======== ========
</TABLE>
-38-
<PAGE>
FINANCIAL DATA OF BUSINESS SEGMENTS (CONTINUED)
- -----------------------------------------------
<TABLE>
<CAPTION>
CAPITAL ADDITIONS AND
PORTFOLIO INVESTMENTS 1995 1994 1993 1992 1991
- ---------------------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 392.6 $ 285.4 $ 195.3 $ 116.6 $ 102.4
Terminals and Pipelines 148.6 154.4 77.8 76.2 85.1
Financial Services 388.5 279.2 302.1 178.0 367.9
Great Lakes Shipping .7 .7 .1 .6 2.5
Logistics and Warehousing 6.4 8.1 14.1 16.0 53.0
-------- -------- -------- -------- --------
Subtotal 936.8 727.8 589.4 387.4 610.9
Corporate and Other .9 .5 7.0 .1 .1
-------- -------- -------- -------- --------
Consolidated $ 937.7 $ 728.3 $ 596.4 $ 387.5 $ 611.0
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
INTEREST EXPENSE 1995 1994 1993 1992 1991
- -------------------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 92.2 $ 70.0 $ 69.6 $ 87.3 $ 92.3
Terminals and Pipelines 46.4 39.7 39.0 40.3 38.9
Financial Services 68.4 62.7 65.4 71.9 71.4
Great Lakes Shipping 7.8 8.1 9.2 9.5 9.9
Logistics and Warehousing .8 1.0 .7 1.7 2.1
-------- -------- -------- -------- --------
Subtotal 215.6 181.5 183.9 210.7 214.6
Corporate and Other 31.8 17.2 18.4 23.4 24.8
Intersegment Amounts (77.3) (50.5) (50.5) (58.0) (57.5)
-------- -------- -------- -------- --------
Consolidated $ 170.1 $ 148.2 $ 151.8 $ 176.1 $ 181.9
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATION MATURITIES 1996 1997 1998 1999 2000
- --------------------------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 59.4 $ 60.9 $ 18.5 $ 54.3 $ 95.0
Terminals and Pipelines 13.3 12.0 71.0 39.0 17.6
Financial Services 156.5 144.0 110.6 100.7 93.3
Great Lakes Shipping 5.1 6.3 5.2 5.7 5.7
Logistics and Warehousing .5 .5 .2 .1 .1
-------- -------- -------- ------- --------
Consolidated $ 234.8 $ 223.7 $ 205.5 $ 199.8 $ 211.7
======== ======== ======== ======== ========
</TABLE>
- 39 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED INCOME AND REINVESTED EARNINGS
- -----------------------------------------------------------
GATX Corporation and Subsidiaries
In Millions Except Per Share Data/Year Ended December 31 1995 1994 1993
- -------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Gross Income $1,233.4 $1,155.0 $1,086.9
Costs and Expenses
Operating expenses 612.8 579.5 527.6
Interest 170.1 148.2 151.8
Provision for depreciation
and amortization 171.6 165.1 150.7
Provision for possible losses 18.4 19.2 29.6
Selling, general and administrative 143.5 125.2 122.8
-------- -------- --------
1,116.4 1,037.2 982.5
-------- -------- --------
Income Before Income Taxes and Equity
in Net Earnings of Affiliated Companies 117.0 117.8 104.4
Income Taxes 47.6 48.8 51.4
-------- -------- ------
Income Before Equity in Net
Earnings of Affiliated Companies 69.4 69.0 53.0
Equity in Net Earnings
of Affiliated Companies 31.4 22.5 19.7
-------- -------- --------
Net Income 100.8 91.5 72.7
Reinvested earnings at beginning of year 353.5 305.1 273.1
Dividends declared on
Common and Preferred Stock (45.3) (43.1) (40.7)
-------- -------- --------
Reinvested Earnings at End of Year $ 409.0 $ 353.5 $ 305.1
======== ======== ========
Per Share Data
Net income $ 4.30 $ 3.88 $ 2.99
Net income, assuming full dilution 4.13 3.78 2.99
Dividends declared per common share 1.60 1.50 1.40
Dividends declared per $2.50 Cumulative
Preferred share 2.50 2.50 2.50
Dividends declared per $3.875
Cumulative Preferred share 3.875 3.875 3.875
Average number of common shares and
common share equivalents (in thousands) 20,359 20,153 19,894
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
- 40 -
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF INCOME
1995 COMPARED TO 1994
Gross Income of $1.2 billion exceeded 1994 by $78 million, or 7%, as a result of
a larger active railcar fleet, incremental revenues from recently acquired
terminals, and increased logistics revenue. Further, portfolio disposition gains
increased $12 million over 1994.
Operating Expenses of $613 million increased $33 million. Transportation's
operating expenses increased $19 million over 1994 as a result of increased
operating lease expense and increased fleet repair costs due to the expanded
fleet size. Transportation continues to utilize sale leasebacks to finance the
majority of its railcar additions. The leaseback is recorded as an operating
lease which removes the asset and related liability from the balance sheet; the
payments under the operating lease are recorded as operating lease expense.
Logistics' expenses were $10 million over last year due to the costs of
servicing new customers.
Interest Expense increased $22 million from the prior year as the result of
higher average debt balances to fund the growth of the business and higher
interest rates. This increase in interest rates had a minimal effect on results
as assets are either match funded or offer repricing opportunities as lease
contracts are renewed.
The company continues to utilize interest rate swaps to better match the
duration of the debt portfolio to the terms of the railcar leases and floating
rate assets. The effect of the swaps was to reduce interest expense in 1995 and
1994.
Depreciation and Amortization Expense increased $6 million from 1994 primarily
due to Transportation's increased fleet size and updated service centers.
The Provision for Possible Losses of $18 million, which is largely attributable
to Financial Services, was slightly less than the prior year's provision based
on the current estimate of reserve needs.
Selling, General and Administrative Expenses were $18 million higher than in
1994 due to increased employee costs, information systems costs, and consulting
expenses. In addition, expenses increased related to new railcar operations in
Mexico and the newly-acquired Sun Financial.
Income Tax Expense of $48 million decreased $1 million from 1994. The effective
tax rate for both years was 41%. The effective tax rate exceeded the 35%
statutory rate because of state taxes, foreign income, minority interest and
nondeductible items.
Equity in Net Earnings of Affiliated Companies of $31 million increased $9
million from 1994. Equity earnings at Financial Services exceeded the prior year
by $6 million due to a gain from the sale of a real estate investment, improved
earnings at an international aircraft joint venture and higher income from the
rail and technology asset joint ventures. Equity earnings also increased at
Terminals' European and Singapore terminals and Transportation's Canadian
railcar joint venture. Terminals' newly-acquired 25% interest in the Olympic
Pipeline Company also contributed to the increase.
Consolidated Net Income of $101 million increased $9 million from 1994.
Consolidated results represent the second consecutive year of record earnings
for GATX Corporation. This was the result of record earnings at Transportation,
Financial Services and American Steamship and modest improvement at Logistics,
partially offset by decreases at Terminals and Corporate.
- 41 -
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ------------------------------
GATX Corporation and Subsidiaries
In Millions/December 31 1995 1994
- ---------------------------------- --------- --------
<S> <C> <C>
Assets
Cash and Cash Equivalents $ 34.8 $ 27.3
Receivables
Trade accounts 115.4 101.6
Finance leases 673.8 533.4
Secured loans 239.9 231.2
Less - Allowance for possible losses (100.0) (89.6)
--------- --------
929.1 776.6
Property, Plant and Equipment
Railcars and support facilities 1,945.1 1,857.4
Tank storage terminals and pipelines 1,242.3 1,171.8
Great Lakes vessels 204.1 203.4
Operating lease investments and other 510.7 412.3
--------- --------
3,902.2 3,644.9
Less - Allowance for depreciation (1,533.1) (1,452.6)
--------- --------
2,369.1 2,192.3
Investments in Affiliated Companies 408.7 365.3
Other Assets 301.2 289.2
--------- --------
$ 4,042.9 $3,650.7
========= ========
Liabilities, Deferred Items and Shareholders' Equity
Accounts Payable $ 233.3 $ 269.5
Accrued Expenses 48.2 49.6
Debt
Short-term debt 330.2 268.2
Long-term debt 1,850.9 1,549.7
Capital lease obligations 241.6 255.4
--------- --------
2,422.7 2,073.3
Deferred Income Taxes 264.8 257.5
Other Deferred Items 356.1 338.4
--------- --------
Total Liabilities and Deferred Items 3,325.1 2,988.3
Shareholders' Equity
Preferred Stock 3.4 3.4
Common Stock 14.3 14.2
Additional capital 324.8 318.1
Reinvested earnings 409.0 353.5
Cumulative foreign currency
translation adjustment 13.4 20.3
--------- --------
764.9 709.5
Less - Cost of common shares in treasury (47.1) (47.1)
--------- --------
Total Shareholders' Equity 717.8 662.4
--------- --------
$ 4,042.9 $3,650.7
========= ========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
- 42 -
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF BALANCE SHEETS
1995 COMPARED TO 1994
Total Assets of $4.0 billion increased $392 million as the high level of capital
additions, portfolio investments and investments in affiliates more than offset
the depreciation of capitalized assets and the normal runoff of the portfolio.
GATX also utilizes additional assets, such as railcars, aircraft and warehouses,
which are obtained through off-balance sheet operating leases and therefore are
not included on the balance sheet.
Total Receivables increased $152 million from the prior year end. Trade
receivables increased $14 million primarily as a result of the higher level of
revenues. Finance leases increased $140 million as lease additions and the
consolidation of newly-acquired Sun Financial's leases exceeded the runoff of
the portfolio. The allowance for possible losses increased $10 million as a
result of an $18 million addition to the loss reserve at Financial Services in
1995, which was partially offset by $8 million of writedowns net of recoveries.
The allowance for losses remained largely unchanged at the other subsidiaries.
Property, Plant and Equipment increased $177 million primarily due to increased
investment in railcar and terminal assets and increased operating lease and
other investments at Financial Services. Transportation invested $350 million in
new and used railcars, $17 million in new operations in Mexico, and $15 million
in facility improvements, which were partially offset by the $250 million of
railcar sale leasebacks. As these leasebacks qualified as operating leases, the
assets were removed from the balance sheet. Terminals invested $129 million for
tank construction, facility improvements and expansion, and the acquisition of
terminal facilities.
Investments in Affiliated Companies increased $43 million. New investments of
$50 million included an additional investment in a European rail joint venture
and the purchase of a 25% equity interest in the Olympic Pipeline Company.
Equity income of $31 million was more than offset by cash distributions received
of $38 million, primarily from air and rail joint ventures.
Accounts Payable decreased $36 million. The 1994 payable balance included a $48
million deposit which was refunded in early 1995 as the result of a lessee's
exercise of its option to return four DC-10 aircraft.
Total Debt increased $349 million to fund a portion of the significant volume of
capital additions and portfolio investments made during the year. In addition,
the consolidation of Sun Financial added $144 million of debt to the balance
sheet.
Consolidated Equity increased $55 million, reflecting net income of $101
million, partially offset by the declaration of $45 million of common and
preferred stock dividends. The cumulative foreign currency translation
adjustment decreased $7 million as a result of the strengthening of the dollar
against most major currencies. The balance of the change is attributable to
proceeds from stock option exercises.
- 43 -
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
- -------------------------------------
GATX Corporation and Subsidiaries
In Millions/Year Ended December 31 1995 1994 1993
- ----------------------------------- --------- -------- --------
<S> <C> <C> <C>
Operating Activities
Net income $ 100.8 $ 91.5 $ 72.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Realized gain on disposition of leased
equipment (33.3) (21.7) (45.7)
Provision for depreciation and amortization 171.6 165.1 150.7
Provision for possible losses 18.4 19.2 29.6
Deferred income taxes 16.2 9.4 11.7
Net change in trade receivables, inventories,
accounts payable and accrued expenses (68.9) 64.6 15.9
Other .3 (62.7) (5.3)
------- ------- --------
Net cash provided by operating activities 205.1 265.4 229.6
Investing Activities
Additions to property, plant and equipment (521.5) (435.0) (292.9)
Additions to equipment on lease, net of
nonrecourse financing (256.1) (161.3) (216.0)
Secured loans extended (84.1) (101.5) (39.4)
Investments in affiliated companies (49.7) (29.5) (43.3)
Progress payments and other (26.3) (1.0) (4.8)
--------- ------- -------
Capital additions and portfolio investments (937.7) (728.3) (596.4)
Portfolio proceeds:
From disposition of leased equipment 139.4 65.4 102.2
From return of investment 142.6 146.9 141.2
-------- ------- --------
Total portfolio proceeds 282.0 212.3 243.4
Proceeds from other asset dispositions 318.5 148.5 243.4
-------- ------- --------
Net cash used in investing activities (337.2) (367.5) (109.6)
Financing Activities
Proceeds from issuance of long-term debt 399.5 239.0 199.3
Repayment of long-term debt (219.6) (127.0) (160.1)
Net increase (decrease) in short-term debt 13.3 42.1 (105.3)
Repayment of capital lease obligations (13.8) (12.4) (14.6)
Issuance of common stock under employee
benefit programs 5.5 4.6 4.7
Cash dividends (45.3) (43.1) (40.7)
------- ------- --------
Net cash provided by (used in) financing
activities 139.6 103.2 (116.7)
------- ------- --------
Net Increase In Cash and Cash Equivalents $ 7.5 $ 1.1 $ 3.3
======= ======= =========
See Notes to Consolidated Financial Statements.
</TABLE>
- 44 -
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF CASH FLOWS
1995 COMPARED TO 1994
GATX generates significant cash from its operating activities and proceeds from
its investment portfolio which are used to service debt, to pay dividends and to
fund capital additions and portfolio investments. Most of the capital
requirements represent additions to the railcar fleet, terminal and pipeline
facilities, capital equipment investment portfolio, and joint ventures, and are
considered discretionary capital expenditures. As a result, the level of capital
spending can be adjusted as conditions in the economy or GATX's businesses
warrant.
Cash Provided by Operating Activities generated $205 million of cash flow in
1995, a $60 million decrease from 1994. Net income adjusted for noncash items
generated $274 million of cash, an increase of $10 million over 1994 primarily
due to increased net income. Changes in working capital and other generated $70
million less cash in 1995 largely due to a $48 million refund of a deposit in
the first quarter of 1995 as the result of a lessee's exercise of its option to
return four DC-10 aircraft.
Cash Used in Investing Activities decreased $30 million from the prior year.
Capital additions totaled $938 million, an increase of $209 million from 1994.
Transportation invested $365 million in its domestic railcar fleet and
facilities versus $282 million in 1994; $28 million also was invested in
international operations in Mexico and Europe this year versus $3 million in the
prior year. During the year, Transportation completed a major upgrade program
for its four strategically located domestic service centers. Terminals' capital
spending of $149 million was $6 million lower than in 1994 when six additional
terminal facilities were acquired. Spending in 1995 included the expansion or
upgrading of several existing terminal facilities, including the expansion of an
existing pipeline in Central Florida, and the acquisition of an interest in a
pipeline in the Northwest. Portfolio investments at Financial Services of $388
million were $109 million higher than in 1994 primarily due to higher spending
on the air and rail portfolios and the acquisition of Sun Financial, a
technology-focused finance company. Logistics' spending of $6 million was down
$2 million from a year ago.
Proceeds of $282 million were generated from the portfolio compared to $212
million in 1994. Proceeds from the disposition of leased equipment, primarily
aircraft and rail assets, increased $74 million from the previous year. Proceeds
from the return of investment decreased $4 million from 1994.
Proceeds from other asset dispositions of $319 million increased $170 million
from 1994 due to increased sale leaseback activity. In 1995, General American
Transportation Corporation (GATC) completed $250 million of sale leasebacks of
railcars at Transportation. Financial Services generated $47 million from the
sale leaseback of an aircraft which was acquired during the year. In 1994, net
proceeds of $130 million were received from the sale leaseback of railcars. GATX
has used sale leasebacks as a cost effective method of financing assets given
GATX's alternative minimum tax position.
Cash Provided by Financing Activities increased $36 million compared to 1994.
GATX finances its capital additions and portfolio investments through cash
generated from operations and portfolio proceeds supplemented by debt financings
and sale leasebacks. During the year $400 million of long-term debt was issued
and $220 million of long-term obligations were repaid.
Short-term debt increased by $13 million.
Cash dividends increased $2 million in 1995 due to an increase in the common
stock dividend from $1.50 per share in 1994 to $1.60 per share in 1995. This was
the tenth consecutive year GATX increased its dividend. The dividend was further
increased to $1.72 in January 1996.
Liquidity and Capital Resources GATC, GATX Capital, GATX Terminals and GATX
Logistics have revolving credit facilities. GATC and GATX Capital also have
commercial paper programs and uncommitted money market lines which are used to
fund operating needs. In 1995, GATC amended its credit facility to extend until
2000 while GATX Capital's amended three-year revolver now expires in 1998. Under
the covenants of the commercial paper programs and rating agency guidelines,
GATC and GATX Capital individually must keep unused revolver capacity at least
equal to the amount of commercial paper and money market lines outstanding. At
December 31, 1995, GATX and its subsidiaries had available unused committed
lines of credit amounting to $376 million.
In December 1995, a $650 million GATC shelf registration for pass through trust
certificates and debt securities became effective; none had been issued at year
end. In January 1996, a shelf registration for $300 million for GATX Capital
became effective. At year end, GATX has $496 million of commitments to provide
financing to customers or to acquire assets, $317 million of which is scheduled
to fund in 1996.
-45-
<PAGE>
At December 31, 1995, approximately $629 million of net assets of subsidiaries
have certain restrictions which limit the ability to transfer assets to GATX
parent in the form of loans, advances or dividends. The majority of the
restricted net assets relate to the revolving credit agreement of GATC and the
various loan agreements of GATX Capital and GATX Logistics. Such restrictions
are not expected to have an adverse impact on the ability of GATX to meet its
cash obligations.
Environmental Matters Certain operations of GATX's subsidiaries (collectively
GATX) present potential environmental risks principally through the
transportation or storage of various commodities. Recognizing that some risk to
the environment is intrinsic to its operations, GATX is committed to protecting
the environment as well as complying with applicable environmental protection
laws and regulations. GATX, as well as its competitors, is subject to extensive
regulation under federal, state and local environmental laws which have the
effect of increasing the costs and liabilities associated with the conduct of
its operations. In addition, GATX's foreign operations are subject to
environmental laws in effect in each respective jurisdiction.
GATX's policy is to monitor and actively address environmental concerns in a
responsible manner. GATX has received notices from the U.S. Environmental
Protection Agency (EPA) that it is a potentially responsible party (PRP) for
study and clean-up costs at 11 sites under the requirements of the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund). Under Superfund and comparable state laws, GATX may be required to
share in the cost to clean-up various contaminated sites identified by the EPA
and other agencies. In all but one instance, GATX is one of a number of
financially responsible PRPs and has been identified as contributing only a
small percentage of the contamination at each of the sites. Due to various
factors such as the required level of remediation and participation in clean-up
efforts by others, GATX's total clean-up costs at these sites cannot be
predicted with certainty; however, GATX's best estimates for remediation and
restoration of these sites have been determined and are included in its
environmental reserves.
Future costs of environmental compliance are indeterminable due to unknowns such
as the magnitude of possible contamination, the timing and extent of the
corrective actions that may be required, the determination of the company's
liability in proportion to other responsible parties, and the extent to which
such costs are recoverable from third parties including insurers. Also, GATX may
incur additional costs relating to facilities and sites where past operations
followed practices and procedures that were considered acceptable at the time
but in the future may require investigation and/or remedial work to ensure
adequate protection to the environment under current or future standards. If
future laws and regulations contain more stringent requirements than presently
anticipated, expenditures may be higher than the estimates, forecasts, and
assessments of potential environmental costs provided below. However, these
costs are expected to be at least equal to the current level of expenditures. In
addition, GATX has provided indemnities for environmental issues to the buyers
of three divested companies for which GATX believes it has adequate reserves.
GATX's environmental reserve at the end of 1995 was $94 million and reflects
GATX's best estimate of the cost to remediate its environmental conditions.
Additions to the reserve were $14 million in 1995 and $27 million in 1994; 1994
included $13 million recorded in conjunction with terminal acquisitions.
Expenditures charged to the reserve amounted to $16 million and $12 million in
1995 and 1994, respectively.
In 1995, GATX made capital expenditures of $18 million for environmental and
regulatory compliance compared to $15 million in 1994. These projects included
marine vapor recovery, discharge prevention compliance, waste water systems,
impervious dikes, tank modifications for emissions control, and tank car
cleaning systems. Environmental projects authorized or currently under
consideration would require capital expenditures of approximately $28 million in
1996. GATX anticipates it will make annual expenditures at a similar level over
the next five years.
- 46 -
<PAGE>
GATX Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial data of business segments for 1995, 1994, and 1993 on pages 36 through
39 are an integral part of the consolidated financial statements of GATX
Corporation and subsidiaries.
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of GATX and its consolidated subsidiaries are
discussed below.
Consolidation - The consolidated financial statements include the accounts of
GATX and its majority-owned subsidiaries. Investments in 20 to 50 percent-owned
companies and joint ventures are accounted for under the equity method and are
shown as investments in affiliated companies. Less than 20 percent-owned
affiliated companies are recorded using the cost method.
Cash Equivalents - GATX considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. The carrying
amounts reported in the balance sheet for cash and cash equivalents approximate
the fair value of those assets.
Property, Plant and Equipment - Property, plant and equipment are stated
principally at cost. Assets acquired under capital leases are included in
property, plant and equipment and the related obligations are recorded as
liabilities. Provisions for depreciation include the amortization of the cost of
capital leases and are computed by the straight-line method which results in
equal annual depreciation charges over the estimated useful lives of the assets.
The estimated useful lives of depreciable assets are as follows:
Railcars 20-33 years
Buildings, leasehold improvements,
storage tanks, and pipelines 5-40 years
Great Lakes vessels 30-40 years
Machinery and related equipment 3-25 years
Operating lease investments 3-38 years
Goodwill - GATX has classified the cost in excess of the fair value of net
assets acquired as goodwill. Goodwill, which is included in other assets, is
being amortized on a straight-line basis over 10 to 40 years. GATX continually
evaluates the existence of goodwill impairment on the basis of whether the
goodwill is recoverable from projected undiscounted net cash flows of the
related business. Goodwill, net of accumulated amortization of $25.3 million and
$21.3 million, was $136.0 million and $133.8 million as of December 31, 1995 and
1994, respectively. Amortization expense was $4.2 million in 1995 and $4.1
million in 1994 and 1993.
Income Taxes - United States income taxes have not been provided on the
undistributed earnings of foreign subsidiaries and affiliates which GATX intends
to permanently reinvest in these foreign operations. The cumulative amount of
such earnings was $156.0 million at December 31, 1995.
GATX participates in a Capital Construction Fund agreement with the United
States Maritime Administration. Contributions to the Fund reduce taxable income
and the tax basis of the related vessels. Deferred taxes are not required to be
provided for such contributions and, consequently, income taxes in future years
will increase if not offset by additional deposits. Based on current statutory
rates, such income tax liability would be $3.5 million at December 31, 1995.
Other Deferred Items - Other deferred items include the accrual for
postretirement benefits other than pensions; environmental, general liability
and workers' compensation reserves; and other deferred credits.
-47-
<PAGE>
Off-Balance Sheet Financial Instruments - GATX uses interest rate and currency
swaps, forwards and similar contracts to set interest and exchange rates on
existing or anticipated transactions. These instruments qualify for hedge
accounting. Fair values of GATX's off-balance sheet financial instruments
(futures, swaps, forwards, options, guarantees, and lending and purchase
commitments) are based on current market prices, settlement values or fees
currently charged to enter into similar agreements. The fair values of the hedge
contracts are not recognized in the financial statements. Net amounts paid or
received on such contracts are recognized over the term of the contract as an
adjustment to interest expense or the basis of the hedged financial instrument.
Environmental Liabilities - Expenditures that relate to current or future
operations are expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and which do not contribute
to current or future revenue generation, are charged to environmental reserves.
Reserves are recorded in accordance with accounting guidelines to cover work at
identified sites when GATX's liability for environmental clean-up is both
probable and a minimum estimate of associated costs can be made; adjustments to
initial estimates are recorded as necessary.
Revenue Recognition - The majority of GATX's gross income is derived from the
rentals of railcars, commercial aircraft, Great Lakes vessels, and terminalling,
warehousing and logistics services. In addition, income is derived from finance
leases, asset remarketing, secured loans and other services.
Foreign Currency Translation - The assets and liabilities of GATX operations
located outside the United States are translated at exchange rates in effect at
year end, and income statements are translated at the average exchange rates for
the year. Gains or losses resulting from the translation of foreign currency
financial statements are deferred and recorded as a separate component of
consolidated shareholders' equity. Incremental unrealized translation gains
(losses) recorded in the cumulative foreign currency adjustment account were
$(6.9) million, $18.3 million, and $(5.4) million, during 1995, 1994 and 1993,
respectively.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as revenues and expenses during the reporting
period. Actual amounts when ultimately realized could differ from those
estimates.
Earnings Per Share - Primary earnings per share are based on the weighted
average number of common shares and common share equivalents outstanding. Net
income is adjusted for the preferred stock dividends. The common share
equivalents represent the dilutive shares issuable upon exercise of employee
stock options. Fully diluted earnings per share are based on the weighted
average number of common shares outstanding, including shares issuable upon
exercise of employee stock options, and assume all preferred stock has been
converted into common shares if the effect of such conversion is not
antidilutive.
Reclassifications - Certain amounts in the 1994 and 1993 financial statements
have been reclassified to conform to the 1995 presentation.
NOTE B - ACCOUNTING FOR LEASES
The following information pertains to GATX as a lessor:
Finance Leases - The components of the investment in finance leases were (in
millions):
December 31 1995 1994
- ------------ -------- --------
Minimum future lease receivables $ 671.6 $ 558.4
Estimated residual values 269.2 266.1
------- -------
940.8 824.5
Less - Unearned income (267.0) (291.1)
------- -------
Investment in finance leases $ 673.8 $ 533.4
======= =======
-48-
<PAGE>
Operating Leases - The majority of railcar and tankage assets and certain other
equipment leases included in property, plant and equipment are accounted for as
operating leases.
Minimum Future Receipts - Minimum future lease receipts from finance leases and
minimum future rental receipts from noncancelable operating leases by year at
December 31, 1995 were (in millions):
Finance Leases Operating Leases Total
--------------- ------------------- ---------
1996 $154.7 $ 539.2 $ 693.9
1997 120.8 399.1 519.9
1998 89.5 299.5 389.0
1999 69.2 216.9 286.1
2000 62.0 181.4 243.4
Years thereafter 175.4 392.7 568.1
------ -------- --------
$671.6 $2,028.8 $2,700.4
====== ======== ========
The following information pertains to GATX as a lessee:
Capital Leases - Certain assets classified as property, plant and equipment and
finance leases which have been financed under capital leases were (in millions):
December 31 1995 1994
- ------------- ------- --------
Railcars $ 152.8 $ 153.1
Great Lakes vessels 159.5 159.5
------- -------
312.3 312.6
Less - Allowance for depreciation (152.0) (141.1)
------- -------
160.3 171.5
Finance leases 15.9 18.9
------- -------
$ 176.2 $ 190.4
======= =======
Operating Leases - GATX has financed railcars, aircraft and warehouses through
sale leasebacks which are accounted for as operating leases. In addition, GATX
leases certain other assets and office facilities. Total rental expense, net of
sublease income, for the years ended December 31, 1995, 1994 and 1993 was $131.6
million, $113.7 million, and $94.1 million, respectively. Sublease income was
$8.2 million, $6.8 million, and $6.3 million in 1995, 1994 and 1993,
respectively.
Future Minimum Rental Payments - Future minimum rental payments due under
noncancelable leases at December 31, 1995 were (in millions):
Capital Leases Operating Leases
---------------- ------------------
1996 $ 33.9 $ 130.4
1997 32.9 127.3
1998 31.9 115.4
1999 31.9 101.4
2000 31.4 99.1
Years thereafter 246.7 1,284.4
------ --------
408.7 $1,858.0
------ ========
Less - Amounts representing interest (167.1)
Present value of future ------
minimum capital lease payments $241.6
======
The above capital lease amounts and certain operating leases do not include the
costs of licenses, taxes, insurance, and maintenance which GATX is required to
pay. Future minimum operating lease payments have not been reduced by aggregate
future noncancelable sublease rentals of $17.9 million. Interest expense on the
above capital leases was $20.1 million in 1995, $21.2 million in 1994, and $23.6
million in 1993.
- 49 -
<PAGE>
NOTE C - 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. As of December 31, 1995, secured loan principal due by year was as
follows (in millions):
Loan
Principal
------------
1996 $ 39.8
1997 28.4
1998 23.2
1999 21.9
2000 7.5
Years thereafter 119.1
------
$239.9
======
NOTE D - INVESTMENTS IN AFFILIATED COMPANIES
GATX has investments in 20 to 50 percent-owned companies and joint ventures
which are accounted for using the equity method. These investments are in
businesses similar to GATX's principal subsidiaries; they include Canadian and
European railcar leasing, foreign and domestic tank storage terminals and
pipelines, and aircraft and information technology joint ventures. Distributions
received from such affiliates were $37.9 million, $26.2 million, and $27.7
million, in 1995, 1994 and 1993, respectively.
Summarized operating results for all affiliated companies in their entirety were
(in millions):
For the Year 1995 1994 1993
- ------------ ------- -------- ---------
Revenues $ 526.8 $ 489.2 $ 400.9
Net income 78.8 60.9 42.9
Summarized balance sheet data for all affiliated companies in their entirety
were (in millions):
December 31 1995 1994
- ------------ -------- --------
Total assets $2,178.0 $2,031.0
Long-term liabilities 790.1 780.7
Other liabilities 294.5 214.8
-------- --------
Shareholders' equity $1,093.4 $1,035.5
======== ========
- 50 -
<PAGE>
NOTE E - FOREIGN OPERATIONS
GATX has a number of investments in subsidiaries and affiliated companies which
are located in or derive income from, foreign countries. Foreign entities
contribute significantly to equity in net earnings of affiliated companies. The
foreign identifiable assets are primarily investments in affiliated companies;
and a United Kingdom terminalling operation, a Mexican railcar operation, and
foreign lease and loan investments which are fully consolidated.
GROSS INCOME (IN MILLIONS) 1995 1994 1993
- --------------------------- -------- -------- --------
Foreign $ 71.5 $ 63.7 $ 65.4
United States 1,161.9 1,091.3 1,021.5
-------- -------- --------
$1,233.4 $1,155.0 $1,086.9
======== ======== ========
INCOME BEFORE INCOME TAXES AND
EQUITY IN NET EARNINGS OF AFFILIATED
COMPANIES (IN MILLIONS) 1995 1994 1993
- ------------------------ -------- -------- --------
Foreign $ 3.3 $ 4.6 $ 6.0
United States 113.7 113.2 98.4
-------- ------- --------
$ 117.0 $ 117.8 $ 104.4
======== ======== ========
EQUITY IN NET EARNINGS OF
AFFILIATED COMPANIES (IN MILLIONS) 1995 1994 1993
- ---------------------------------- ------- -------- --------
Foreign $ 26.6 $ 21.2 $ 18.1
United States 4.8 1.3 1.6
------- -------- --------
$ 31.4 $ 22.5 $ 19.7
======= ======== ========
IDENTIFIABLE ASSETS (IN MILLIONS) 1995 1994 1993
- --------------------------------- -------- -------- --------
Foreign $ 516.8 $ 479.6 $ 419.4
United States 3,526.1 3,171.1 2,972.7
-------- -------- --------
$4,042.9 $3,650.7 $3,392.1
======== ======== ========
Foreign cash flows generated are used to meet local operating needs and for
reinvestment. The translation of the foreign balance sheets into U.S. dollars
results in an increase or decrease to the unrealized foreign currency
translation account.
NOTE F - SHORT-TERM DEBT AND LINES OF CREDIT
Short-term debt and its weighted average interest rate as of year end were (in
millions):
December 31 1995 1994
- ------------ ------------------ ------------------
Amount Rate Amount Rate
--------- ------ ------- --------
Commercial paper $175.2 6.14% $184.8 6.12%
Other short-term borrowings 155.0 6.49 83.4 6.03
------ ------
$330.2 $268.2
====== ======
-51-
<PAGE>
Under a revolving credit agreement with a group of banks, General American
Transportation Corporation (GATC) may borrow up to $250.0 million. The revolving
credit agreement contains various restrictive covenants which include, among
other things, minimum net worth, restrictions on additional indebtedness, and
requirements to maintain certain financial ratios for GATC. Under the agreement,
GATC met its requirement to maintain a minimum net worth of $573.4 million at
December 31, 1995. While at year end no borrowings were outstanding under the
agreement, the available line of credit was reduced by $44.6 million of
commercial paper outstanding. GATC had borrowings of $62.9 million under
unsecured money market lines at December 31, 1995. Also, GATX Terminals has a
revolving credit agreement of (pound)28.0 million of which (pound)4.0 million
was available at year end.
GATX Capital has commitments under its credit agreements with a group of banks
for revolving credit loans totaling $282.5 million of which $137.6 million was
available at December 31, 1995. The amount available was reduced by $144.9
million of outstanding commercial paper and bankers' acceptances. The credit
agreement contains various covenants which include, among other things, minimum
net worth, restrictions on dividends, and requirements to maintain certain
financial ratios for GATX Capital. At December 31, 1995, such covenants limited
GATX Capital's ability to transfer net assets to GATX to no more than $107.4
million.
Interest expense on short-term debt was $19.4 million in 1995, $13.2 million in
1994, and $10.9 million in 1993.
NOTE G- LONG-TERM DEBT
Long-term debt consisted of (in millions):
Final December 31
Interest Rates Maturity 1995 1994
-------------- -------- ------- ------
Variable rate:
Term notes 6.1125%-8.5% 1997-2018 $ 40.5 $ 81.0
Nonrecourse obligations 7.125-10.0 2000-2002 52.6 48.8
------ ------
93.1 129.8
Fixed rate:
Term notes 5.16%-10.80% 1996-2012 1,526.5 1,321.9
Nonrecourse obligations 5.10-11.08 1996-2013 140.8 6.5
Industrial revenue bonds 6.625-7.3 2019-2024 87.9 87.9
Title XI bonds 7.1 1998 2.6 3.6
------- ------
1,757.8 1,419.9
------- -------
$1,850.9 $1,549.7
======== ========
Maturities of GATX's long-term debt as of December 31, 1995 for each of the
years 1996 through 2000 were (in millions):
Long-Term Debt
--------------
1996 $220.3
1997 208.9
1998 190.4
1999 183.3
2000 194.8
-52-
<PAGE>
At December 31, 1995, certain technology assets, facilities, aircraft, vessels
and warehouse equipment with a net carrying value of $244.0 million were pledged
as collateral for $198.4 million of notes and bonds.
Interest cost incurred on long-term debt, net of capitalized interest, was
$130.6 million in 1995, $113.8 million in 1994, and $117.3 million in 1993.
Interest cost capitalized as part of the cost of construction of major assets
was $6.2 million in 1995, $3.0 million in 1994, and $2.7 million in 1993. Losses
of $.3 million and $.5 million were recorded on the early retirement of debt in
1994 and 1993, respectively.
At December 31, 1995, certain debt agreements of subsidiaries restrict the
ability of the subsidiaries to transfer net assets to the parent company in the
form of loans, advances or dividends. Such restrictions affect $628.8 million of
the $1,225.0 million of total subsidiary net assets. The majority of these
restrictions relate to the revolving credit agreement of GATC and certain loan
agreements of GATX Capital and GATX Logistics.
NOTE H - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, GATX enters into various types of
transactions that involve financial instruments with off-balance sheet risk
which are used to manage financial market risk, including interest rate and
foreign exchange risk.
At December 31, 1995 GATX had the following off-balance sheet financial
instruments (in millions):
Notional Pay Receive
Interest Rate Swaps Amount Rate/Index Rate/Index Maturity
- ------------------- -------- ------------- ------------ ----------
GATX pays fixed,
receives floating $ 805.5 4.7-7.585% LIBOR 1996-2001
GATX pays floating,
receives fixed 1,045.0 LIBOR 4.74-7.646% 1996-2006
Currency Forwards and Swaps Deliver Purchase Maturity
- --------------------------- --------- ------------ ---------
Singapore dollar forwards $ 7.1 10.0 Singapore 1996
Canadian dollar swaps 31.2 42.3 Canadian 2001-2003
GATX had the following interest rate hedge activity (in millions):
Pay Pay
Interest Rate Swaps Fixed Floating
- ------------------- -------- ----------
Balance at January 1, 1994 $ 400.0 $ 680.0
Additions 200.0 100.0
Maturities (100.0) -
------- -------
Balance at December 31, 1994 500.0 780.0
Additions 405.5 290.0
Maturities (100.0) (25.0)
-------- --------
Balance at December 31, 1995 $ 805.5 $1,045.0
======= =========
-53-
<PAGE>
GATX manages its assets and liabilities using interest rate swaps and on
occasion uses interest rate forwards for anticipated transactions. At GATC,
interest rate swaps are utilized to better match the duration of its debt
portfolio to the duration of its railcar leases. Railcar assets are financed
with long-term fixed rate debt or through sale leasebacks. However, the railcar
assets are placed on lease with average new lease terms of 5 years; the average
renewal term is 3 years. Rents are fixed over these lease terms. Interest rate
swaps effectively convert GATC's long-term fixed rate debt to fixed rate debt
with maturities of 3 months to 3 years. Through the swap program, railcar lease
rates are expected to better reflect GATC's interest costs. Also, GATX Capital
uses interest rate swaps in addition to commercial paper and floating rate
medium-term notes to match fund its floating rate lease and loan portfolio with
floating rate borrowings. At GATX Terminals Limited, an interest rate swap is
used to fix the interest rate on a portion of its floating rate debt.
In its swaps, GATX agrees to exchange, at specific intervals, the difference
between fixed and floating rate interest amounts calculated on an agreed upon
notional principal amount. The swaps have in effect converted $239.5 million of
long-term fixed rate debt into floating rate debt and $805.5 million of
long-term fixed rate debt into 1-3 year fixed rate debt.
The net amount payable or receivable from the interest rate swap agreements is
accrued as an adjustment to interest expense. The fair value of its interest
rate swap agreements is an estimate of the amount the company would receive or
pay to terminate the swap agreement; at December 31, 1995, GATX would receive
$28.2 million if the swaps were terminated. At December 31, 1994, GATX would
have paid $55.7 million if the swaps were terminated at that time.
In conjunction with the financing of the purchase of an interest in a joint
venture, GATX Terminals has a forward contract to deliver 10.0 million Singapore
dollars in exchange for $7.1 million. The gain or loss from the final settlement
will be used to offset any gain or loss from the underlying transaction. In
addition, currency swaps were entered into at GATX Capital to lock in the
conversion rate for 42.3 million Canadian dollars on the eventual cash flows on
a Canadian dollar denominated investment.
In the event that a counterparty fails to meet the terms of the interest rate
swap agreement or a foreign exchange contract, GATX's exposure is limited to the
interest rate or currency differential. GATX manages the credit risk of
counterparties by dealing only with institutions that the company considers
financially sound and by avoiding concentrations of risk with a single
counterparty. GATX considers the risk of nonperformance to be remote.
- 54 -
<PAGE>
NOTE I - FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values of
GATX's financial instruments that are recorded on the balance sheet. SFAS No.
107, Disclosures about Fair Value of Financial Instruments, defines the fair
value of a financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties.
<TABLE>
<CAPTION>
December 31 1995 1994
- ------------- ------------------- ---------------------
Carrying Fair Carrying Fair
(In Millions): Amount Value Amount Value
- --------------- -------- ------ --------- --------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 34.8 $ 34.8 $ 27.3 $ 27.3
Trade accounts receivables 115.4 115.4 101.6 101.6
Secured loans 239.9 252.4 231.2 221.2
Liabilities:
Accounts payable - trade 233.3 233.3 269.5 269.5
Short-term debt 330.2 330.2 268.2 268.2
Long-term debt - variable 93.1 93.1 129.8 129.8
Long-term debt - fixed 1,757.8 1,923.7 1,419.9 1,439.9
</TABLE>
The carrying amounts shown in the table are included in the balance sheet under
the indicated captions.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and cash equivalents, trade receivables, trade payables and short-term debt
are carried at cost which approximates fair value because of the short maturity
of those instruments.
Secured loan investments are stated at the principal amount outstanding plus
accrued interest. The loans are collateralized by equipment, golf courses or
real estate. The fair value of variable rate loans is assumed to be equal to
their recorded amounts. The fair value of fixed rate loans is estimated using
discounted cash flow analyses, at interest rates currently offered for loans
with similar terms to borrowers of similar credit quality.
The carrying amounts of variable rate long-term debt reported in the balance
sheet approximate fair value. The fair value of fixed rate long-term debt was
estimated by performing a discounted cash flow calculation using the note term
and market interest rate for each note based on GATX's current incremental
borrowing rates for similar borrowing arrangements.
- 55 -
<PAGE>
NOTE J - PENSION BENEFITS
GATX and its subsidiaries, exclusive of GATX Logistics, maintain several
noncontributory defined benefit pension plans (the "pension plans") covering
substantially all employees. Benefits payable under the pension plans are based
on years of service and/or final average salary. The funding policy for the
pension plans is based on an actuarially determined cost method allowable under
Internal Revenue Service regulations.
The net periodic pension cost for the pension plans was determined based on the
funds' status at the beginning of the year. Significant assumptions used in
determining pension cost for 1993 through 1995 were:
1995-1994 1993
--------- -------
Discount rate 7.75% 8.5%
Expected long-term rate of return on assets 8.75% 9.0%
Rate of increase in compensation levels 5.5% 6.0%
<TABLE>
<CAPTION>
The components of net periodic pension cost were (in millions):
For the Year 1995 1994 1993
- ------------- ------- ------- ------
<S> <C> <C> <C>
Service cost of benefits
earned during the period $ 6.0 $ 5.6 $ 5.0
Interest cost on projected
benefit obligation 19.9 19.4 19.2
Actual (gain) loss on plan assets (49.7) 1.6 (26.4)
Net amortization and deferral 28.6 (22.5) 7.2
------ ------ ------
Net periodic pension cost $ 4.8 $ 4.1 $ 5.0
====== ====== ======
</TABLE>
The projected benefit obligation was determined based on the funded status at
year end. Significant assumptions used in determining the projected benefit
obligations were:
1995-1993
---------
Discount rate 7.75%
Rate of increase in compensation levels 5.5%
The funded status of the defined benefit plans and the amounts recognized in
GATX's consolidated balance sheet were (in millions):
December 31 1995 1994
- ----------- ------- ------
Actuarial present value of benefit obligation:
Accumulated benefit obligation
- vested $226.8 $224.7
- nonvested 6.9 6.9
------ ------
233.7 231.6
Effects of projected future compensation levels 35.5 32.3
------ ------
Projected benefit obligation 269.2 263.9
Plan assets at fair market value,
primarily listed stocks and bonds 271.6 237.9
------ ------
Projected benefit obligation
(less than) in excess of plan assets $ (2.4) $ 26.0
====== ======
Reconciliation of funded status to recorded amounts:
Net pension liability included in balance sheet $ (2.9) $ (.2)
Unrecognized net asset from transition
to new pension accounting standard (.4) (.5)
Unrecognized net (gain) loss (3.5) 21.8
Unrecognized prior service cost 4.4 4.9
------ ------
Projected benefit obligation
(less than) in excess of plan assets $ (2.4) $ 26.0
====== ======
-56-
<PAGE>
GATX makes contributions to its defined benefit pension plans in addition to the
multiemployer pension plans of various unions. Further, GATX and its
subsidiaries maintain several 401(k) retirement plans which are available to
substantially all salaried and certain other employee groups. GATX may
contribute to the plans as defined by their respective terms. The contributions
to such plans were (in millions):
For the Year 1995 1994 1993
- ------------- ----- ------- ------
Contributions to GATX's pension plans $ 4.4 $ 7.9 $ 7.4
Contributions to
multiemployer pension plans 1.9 2.1 1.8
Contributions to 401(k) plans 3.2 2.9 2.8
NOTE K - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
GATX provides health care, life insurance and other benefits for certain retired
employees who meet established criteria. Most domestic employees are eligible
for health care and life insurance benefits if they retire from GATX with
immediate pension benefits under the GATX pension plan. The plans are either
contributory or non-contributory, depending on various factors.
Net periodic postretirement benefit cost included the following components (in
millions):
For the Year 1995 1994 1993
- ------------ ------ ------ ------
Current service cost $ .5 $ .5 $ .5
Interest cost on accumulated
postretirement benefit obligation 5.4 6.3 7.3
Net amortization and deferral (.4) (.1) -
------ ------ -----
Net periodic postretirement benefit cost $ 5.5 $ 6.7 $ 7.8
====== ====== =====
Discount rate 7.75% 7.75% 8.5%
====== ====== =====
The following table sets forth the amounts recognized in GATX's consolidated
balance sheet (in millions):
December 31 1995 1994
- ------------ ------ ------
Accumulated postretirement benefit obligation:
Retirees $ 62.5 $ 71.7
Fully eligible active plan participants 3.3 3.3
Other active plan participants 6.1 5.8
------ ------
Total accumulated
postretirement benefits obligation 71.9 80.8
Unrecognized gain 11.6 .8
------ ------
Accrued postretirement benefit liability $ 83.5 $ 81.6
====== ======
The accrued postretirement benefit liability was determined using an assumed
discount rate of 7.75% for 1995 and 1994.
For measurement purposes, blended rates ranging from 9% decreasing to 5% over
the next two years and remaining at that level thereafter were used for the
increase in the per capita cost of covered health care benefits. The health care
cost trend rate assumption has a significant effect on the amount of the
obligation and periodic cost reported. An increase in the assumed health care
cost trend rates by 1% would increase the accumulated postretirement benefit
obligation by $4.1 million and would increase aggregate service and interest
cost components of net periodic postretirement benefit cost by $.6 million per
year.
- 57 -
<PAGE>
NOTE L - INCOME TAXES
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.
Significant components of GATX's deferred tax liabilities and assets were (in
millions):
December 31 1995 1994
- ------------- ------ ------
Deferred tax liabilities:
Book/tax basis differences due to depreciation $312.8 $307.8
Leveraged leases 61.1 73.9
Lease accounting (other than leveraged) 46.8 25.5
Other 38.3 50.5
----- ------
Total deferred tax liabilities 459.0 457.7
Deferred tax assets:
Alternative minimum tax credit 61.2 58.6
Accruals not currently deductible for tax purposes 56.7 54.8
Allowance for possible losses 36.3 32.2
Postretirement benefits other than pensions 28.8 28.2
Other 11.2 26.4
----- ------
Total deferred tax assets 194.2 200.2
------ ------
Net deferred tax liabilities $264.8 $257.5
====== ======
At December 31, 1995, GATX had an alternative minimum tax credit of $61.2
million that can be carried forward indefinitely to reduce future regular tax
liabilities.
-58-
<PAGE>
GATX and its United States subsidiaries file a consolidated federal income tax
return. Amounts shown as Current - Federal represent taxes payable as determined
by the Alternative Minimum Tax. Income taxes consisted of (in millions):
For the Year 1995 1994 1993
- ------------- ------- ------- -------
Current -
Domestic:
Federal $ 27.9 $ 35.9 $ 35.9
State and local 4.6 2.5 1.6
------- ------- -------
32.5 38.4 37.5
Foreign (1.1) 1.0 2.2
------- ------- -------
31.4 39.4 39.7
------- ------- -------
Deferred -
Domestic:
Federal 10.3 3.1 6.9
State and local 3.0 4.3 4.7
------- ------- -------
13.3 7.4 11.6
Foreign 2.9 2.0 .1
------- ------- -------
16.2 9.4 11.7
------- ------- -------
Income tax expense $ 47.6 $ 48.8 $ 51.4
======= ======= =======
Income taxes paid $ 33.9 $ 42.1 $ 40.9
======= ======= =======
The reasons for the difference between GATX's effective income tax rate and the
federal statutory income tax rate were:
For the Year 1995 1994 1993
- ------------- ------- ------- -----
Federal statutory income tax rate 35.0% 35.0% 35.0%
Add (deduct) effect of:
Corporate owned life insurance (4.5) (3.2) (3.6)
State income taxes 4.1 3.8 3.9
Minority interest 2.1 .8 .9
Foreign income 1.3 1.9 1.4
Goodwill amortization 1.1 1.3 1.1
Purchase accounting adjustments - .3 2.1
Tax rate increase on deferred taxes - - 7.0
Other 1.6 1.5 1.4
------ ------ -----
Effective income tax rate 40.7% 41.4% 49.2%
====== ====== =====
- 59 -
<PAGE>
NOTE M - SHAREHOLDERS' EQUITY
GATX's Certificate of Incorporation has authorized 60,000,000 shares of common
stock at a par value of $.625 per share and 5,000,000 shares of preferred stock
at $1.00 per share. Shares of preferred stock issued and outstanding consist of
Series A and B $2.50 Cumulative Convertible Preferred Stock and $3.875
Cumulative Convertible
Preferred Stock.
Holders of both series of $2.50 Cumulative Convertible Preferred Stock are
entitled to receive a cumulative annual cash dividend of $2.50 per share. Each
share of such preferred stock may be called for redemption by GATX at $63 per
share, has a liquidating value of $60 per share, and may be converted into 2.5
shares of common stock.
Holders of $3.875 Cumulative Convertible Preferred Stock are entitled to receive
a cumulative annual cash dividend of $3.875 per share. Each share of such
preferred stock may be converted at the option of the holder at any time, unless
previously redeemed, into 1.1494 shares of common stock. The shares became
redeemable at GATX's option on and after August 1, 1992, initially at a
redemption price of $52.7125 per share and thereafter at prices declining to $50
per share on and after August 1, 1999, plus dividends accrued and unpaid at the
redemption date. The liquidating value is $50 per share plus accrued and unpaid
dividends.
At December 31, 1995, 6,807,637 shares of common stock were reserved for:
Shares
---------
Conversion of outstanding preferred stock 3,997,920
Incentive compensation programs 2,790,867
Employee service awards 18,850
---------
6,807,637
=========
Holders of $2.50 and $3.875 Cumulative Convertible Preferred Stock and Common
Stock are entitled to one vote for each share held. Except in certain instances,
all such classes vote together as a single class.
Transactions in preferred stock, common stock, treasury shares, and additional
capital are shown in the following table:
<TABLE>
<CAPTION>
Capital Transactions Preferred Cost of Common Shares Additional
(in Thousands, Except Number of Shares) Stock Issued Common Stock Issued in Treasury (Deduction) Capital
----------------- -------------------- ------------------------ ----------
Shares Amount Shares Amount Shares Amount Amount
-------- ------ -------- ------ ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 3,441,763 $3,442 22,288,897 $13,930 (2,790,954) $ (47,082) $306,866
Add (deduct):
Conversion of preferred stock
into common stock (1,212) (1) 3,029 2 (1)
Common stock issued under option,
incentive and service award plans 199,425 125 5,564
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 3,440,551 3,441 22,491,351 14,057 (2,790,954) (47,082) 312,429
Add (deduct):
Conversion of preferred stock
into common stock (2,716) (3) 6,789 4 (1)
Common stock issued under option,
incentive and service award plans 187,450 117 5,634
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 3,437,835 3,438 22,685,590 14,178 (2,790,954) (47,082) 318,062
Add (deduct):
Conversion of preferred stock
into common stock (6,815) (7) 11,467 7
Common stock issued under option,
incentive and service award plans 199,350 125 6,769
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 3,431,020 $3,431 22,896,407 $14,310 (2,790,954) $(47,082) $324,831
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-60-
<PAGE>
NOTE N - INCENTIVE COMPENSATION PLANS
The 1995 Plan
The GATX Corporation 1995 Long Term Incentive Compensation Plan (the 1995 Plan)
contains provisions for the granting of non-qualified stock options, incentive
stock options, stock appreciation rights (SARs), cash and common stock
individual performance units (IPUs), restricted stock rights, restricted common
stock and performance awards. An aggregate of 1,500,000 shares of common stock
may be issued under the 1995 Plan. As of December 31, 1995, 1,365,392 shares are
available for issuance under the 1995 Plan.
Non-qualified stock options and incentive stock options may be granted for the
purchase of common stock for periods not longer than ten years from the date of
grant. The exercise price will be not less than the higher of market value at
date of grant or par value of the common stock. All options become exercisable
commencing on a date no earlier than one year from the date of grant.
SARs can be issued in conjunction with non-qualified or incentive stock options
and entitle the holder to receive the difference between the option price and
fair market value of the common stock at time of exercise, either in shares of
common stock, cash, or a combination of the two at GATX's discretion. Exercise
of SARs results in cancellation of the underlying options. During 1995, no SARs
were issued and none were outstanding.
IPUs may be granted to key employees and, if predetermined performance goals are
met, will be redeemed in cash and common stock, as applicable, with the
redemption value determined in part by the fair market value of the common stock
as of the date of redemption and in part by the extent to which pre-established
performance goals have been achieved. A total of 10,316 IPUs were granted during
1995 and 31,627 IPUs in total were outstanding at the end of the year. In 1995,
no shares of common stock or cash were paid to the participants in redemption of
previously issued IPUs.
Restricted stock rights may be granted to key employees entitling them to
receive a specified number of shares of restricted common stock. The recipients
of restricted common stock are entitled to all dividends and voting rights, but
the shares are not transferable prior to the expiration of a "restriction
period" as determined at the discretion of the Compensation Committee of the
Board of Directors. Performance Awards are granted to employees who have been
granted restricted stock rights or restricted common stock, but these Awards may
not exceed the market value of the restricted common stock when restrictions
lapse. The Performance Awards provide cash payments if certain criteria and
earnings goals are met over a predetermined period. During 1995, no grants or
payments were made.
The 1985 Plan
Stock options are outstanding under the GATX Corporation 1985 Long Term
Incentive Compensation Plan (the 1985 Plan), as amended, but no additional
options, stock or awards may be issued thereunder. At December 31, 1995, 176,412
shares of common stock were reserved for grants previously made under the 1985
Plan.
- 61-
<PAGE>
Data with respect to both plans are set forth below:
Number of
Shares Under
Stock Option Plans Price Per Share
------------------- -----------------
Outstanding at 1,316,675 $14.53-$41.8125
January 1, 1995
Granted 316,000 47.5625-50.5625
Exercised or issued (198,950) 14.53-41.8125
Canceled (8,250) 41.8125
----------
Outstanding at
December 31, 1995 1,425,475 $16.34-$50.5625
==========
Outstanding at December 31, 1995 by year granted:
1986-1987 35,000 $16.345-$19.47
1988 60,500 25.655
1989 97,050 29.9375
1990 93,750 19.94
1991 160,400 26.13-28.1875
1992 159,075 25.50
1993 222,300 37.6875
1994 281,400 41.8125
1995 316,000 47.5625-50.5625
---------
1,425,475 $16.345-$50.5625
Options exercisable at
December 31, 1995 1,109,475
---------
Options available
for future grant at
December 31, 1995 1,365,392
=========
NOTE O - COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT
RISK
GATX's revenues are derived from a wide range of industries and companies.
However, approximately 50% of total consolidated revenues are generated from the
transportation or storage of products for the chemical and petroleum industries.
In addition, approximately 15% of GATX's assets consist of commercial aircraft
operated by various domestic and international airlines.
Under its lease agreements, GATX retains legal ownership of the asset except
where such assets have been financed by sale leasebacks. With loan financings,
the loan is collateralized by the equipment. GATX performs credit evaluations
prior to approval of a lease or loan contract. Subsequently, the
creditworthiness of the customer and the value of the collateral are monitored
on an ongoing basis. GATX maintains an allowance for possible losses and other
reserves to provide for potential losses which could arise should customers
become unable to discharge their obligations to GATX and to provide for
permanent declines in investment value.
At December 31, 1995, GATX had commitments of $325 million to acquire additional
portfolio equipment, to lend funds, or to purchase residuals from lessors. The
commitments include orders and options by aircraft joint ventures for eleven new
aircraft to be purchased in 1997-1999. In addition, GATX has issued $147.9
million of residual and rental guarantees. GATX also has firm commitments to
acquire railcars and to upgrade terminal and repair facilities totaling $171
million.
GATX and its subsidiaries are engaged in various matters of litigation and have
a number of unresolved claims pending, including proceedings under governmental
laws and regulations related to environmental matters. While the amounts claimed
are substantial and the ultimate liability with respect to such litigation and
claims cannot be determined at this time, it is the opinion of management that
such liability, to be paid by GATX, is not likely to be material to GATX's
consolidated financial position or results of operations.
- 62 -
<PAGE>
GATX Corporation and Subsidiaries
Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
Operating Net Net Income
In Millions, Gross Expenses and Net Income Per Share, Assuming
Except Per Share Data Income Depreciation Income Per Share(A) Full Dilution (A)
- --------------------- -------- ------------- ------- ------------ ---------------------
<S> <C> <C> <C> <C> <C>
1995
First Quarter $ 288.2 $176.8 $ 25.7 $1.11 $1.06
Second Quarter 314.2 193.2 29.9 1.31 1.23
Third Quarter 311.7 199.9 26.5 1.13 1.08
Fourth Quarter 319.3 210.3 18.7 .75 .75(B)
-------- ------ ------
Total $1,233.4 $780.2 $100.8 $4.30 $4.13
======== ====== ======
1994
First Quarter $ 260.7 $165.5 $ 20.2 $ .84 $ .84
Second Quarter 284.4 185.0 20.9 .87 .87
Third Quarter 298.9 191.2 25.3 1.09 1.04
Fourth Quarter 311.0 198.4 25.1 1.08 1.04
-------- ------ ------
Total $1,155.0 $740.1 $ 91.5 $3.88 $3.78
======== ====== ======
<FN>
(A) Quarterly results may not be additive, as per share amounts are computed
independently for each quarter and the full year based on the respective
weighted average common shares and common stock equivalents outstanding.
(B) Conversion of preferred stock excluded from computation of fully diluted
earnings because of antidilutive effect.
</FN>
</TABLE>
Common and Preferred Stock Information
- ---------------------------------------
GATX common shares are listed on the New York, Chicago and London Stock
Exchanges under ticker symbol GMT. Shares of $2.50 Cumulative Convertible
Preferred Stock and $3.875 Cumulative Convertible Preferred Stock are listed on
the New York and Chicago Stock Exchanges.
The approximate number of holders of record of Common Stock, $2.50 Cumulative
Convertible Preferred Stock and $3.875 Cumulative Convertible Preferred Stock as
of February 29, 1996 was 3,538; 141 and 279, respectively. The following table
shows the reported high and low sales price of GATX common and preferred shares
on the New York Stock Exchange, the principal market for GATX shares, and the
dividends declared per share:
$2.50 Cumulative $3.875 Cumulative
Convertible Convertible
Common Stock Preferred Stock Preferred Stock
---------------- ----------------- ------------------
High Low High Low High Low
------- ------ ------ ------ ------- ------
1995
First Quarter $47.25 $40.375 $120.00 $ 95.00 $55.625 $50.50
Second Quarter 47.125 42.125 125.00 100.00 56.00 52.25
Third Quarter 54.25 47.00 140.00 107.00 63.00 55.50
Fourth Quarter 52.875 47.25 138.00 114.00 61.50 56.00
Annual
Dividends Declared $1.60 $2.50 $3.875
1994
First Quarter $44.625 $39.25 $103.00 $101.00 $56.375 $53.00
Second Quarter 43.00 38.50 103.00 101.00 54.00 50.00
Third Quarter 41.25 38.25 102.00 101.00 53.00 50.00
Fourth Quarter 44.00 38.25 102.00 101.00 54.00 49.875
Annual
Dividends Declared $1.50 $2.50 $3.875
- 63 -
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
- -------------------------
GATX Corporation and Subsidiaries
In Millions, Except Per Share Data 1995 1994 1993 1992 1991 1990
- ----------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Results of Operations
Gross income $1,233.4 $1,155.0 $1,086.9 $1,019.1 $ 989.1 $ 870.4
Costs and expenses 1,116.4 1,037.2 982.5 1,004.2 897.0 766.6
-------- -------- -------- -------- -------- --------
Income before income taxes, equity
in net earnings of affiliated companies
and cumulative effect of accounting changes 117.0 117.8 104.4 14.9 92.1 103.8
Income taxes 47.6 48.8 51.4 9.6 33.6 35.3
-------- -------- -------- -------- -------- --------
Income before equity in net
earnings of affiliated companies and
cumulative effect of accounting changes 69.4 69.0 53.0 5.3 58.5 68.5
Equity in net earnings of affiliated companies 31.4 22.5 19.7 24.0 24.2 14.4
-------- -------- -------- -------- --------- --------
Income before cumulative
effect of accounting changes 100.8 91.5 72.7 29.3 82.7 82.9
Cumulative effect of accounting changes - - - (45.8) - -
-------- -------- -------- -------- -------- --------
Net income (loss) $ 100.8 $ 91.5 $ 72.7 $ (16.5) $ 82.7 $ 82.9
======== ======== ======== ======== ======== ========
Per Share Data
Net income (loss) applicable to
common stock, as adjusted $ 87.6 $ 78.2 $ 59.4 $ (29.8) $ 69.4 $ 69.5
Per share of common stock
and common stock equivalents:
Income before cumulative
effect of accounting changes $ 4.30 $ 3.88 $ 2.99 $ .82 $ 3.56 $ 3.61
Cumulative effect of accounting changes - - - (2.35) - -
-------- -------- -------- -------- -------- --------
Net income (loss) $ 4.30 $ 3.88 $ 2.99 $ (1.53) $ 3.56 $ 3.61
Shares used in computation (in thousands) 20,359 20,153 19,894 19,441 19,506 19,279
Per share assuming conversion, except in 1993
and 1992, of all outstanding preferred stock:
Net income (loss), fully diluted $ 4.13 $ 3.78 $ 2.99 $ (1.53) $ 3.51 $ 3.54
Shares used in computation (in thousands) 24,386 24,216 19,894 19,441 23,561 23,399
Dividends declared per share of common stock $ 1.60 $ 1.50 $ 1.40 $ 1.30 $ 1.20 $ 1.10
</TABLE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA (CONTINUED)
- ------------------------------------
GATX Corporation and Subsidiaries
In Millions, Except Per Share Data 1995 1994 1993 1992 1991 1990
- ----------------------------------- -------- ------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Financial Condition
Total assets $4,042.9 $3,650.7 $3,392.1 $3,426.3 $3,514.2 $3,309.7
Total long-term debt and
capital lease obligations 2,092.5 1,805.1 1,713.8 1,724.6 1,798.5 1,715.1
Shareholders' equity 717.8 662.4 589.9 557.6 614.0 558.4
Common shareholders' equity 551.8 496.1 423.6 391.2 447.6 391.4
Common shareholders' equity per share 26.88 24.30 20.78 19.27 22.27 19.56
</TABLE>
-65-
<PAGE>
Management Discussion and Analysis:
1994 Compared To 1993
The following discussion analyzes GATX's comparative performance for the years
ended December 31, 1994 and 1993. This information should be read in conjunction
with the consolidated financial statements on pages 40, 42 and 44. The
discussion of the comparative results of GATX's operations for the years ended
December 31, 1995 and 1994 is presented in the management discussion and
analysis on pages 33, 34, 35, 41, 43, 45 and 46, and the financial data of
business segments on pages 36 through 39.
GATX reported record net income of $91 million or $3.88 per common share for the
year ended December 31, 1994 compared to $73 million or $2.99 per common share
for 1993. The improvement was the result of strong operating results at GATX's
three principal subsidiaries. Also, net income for 1993 was negatively impacted
by a charge of $7 million or $.37 per common share recorded for the cumulative
increase in deferred income taxes as a result of the federal income tax rate
increase. GATX's return on common equity was 17.0% for 1994 compared to 14.6% in
1993.
Operating results at Transportation improved due to significantly more railcars
on lease. Terminals reported record earnings as the result of increased
utilization and throughput. Net income at Financial Services increased as new
volume and a reduced loss provision more than offset lower disposition gains.
American Steamship's net income decreased due to inclusion in 1993 income of a
gain from the sale of a customer bankruptcy claim. Results were lower at
Logistics due to continuing margin pressures.
To facilitate comparison between years, the segment discussion below addresses
income from operations for 1993 prior to the effect on deferred taxes of the tax
rate change, but includes the effect of the tax rate increase on 1993 earnings.
The impact of the tax rate change by segment is shown in a table on page 37.
RAILCAR LEASING AND MANAGEMENT - Transportation's gross income of $322 million
in 1994 increased $20 million from 1993. Rental revenues increased 7%
attributable to an average of 3,000 additional railcars on lease and slightly
higher average fleet rental rates. The level of fleet additions increased in
response to improved demand for new tank cars. At the end of 1994,
Transportation had 56,500 railcars on lease compared to 51,900 at the end of
1993 and fleet utilization was 95% compared to 93%.
Income from operations of $55 million increased 6% over 1993. Increased rental
income and lower environmental expense were partially offset by increased fleet
repair costs, higher ownership costs and lower investment earnings. Operating
margins were in line with 1993. Fleet repair costs increased 10% over 1993
reflecting the increased number of railcars repaired. Ownership costs,
consisting of rental expense, depreciation and interest, increased 9% primarily
due to the high level of railcar additions.
Transportation invested $264 million in the railcar fleet versus $171 million in
1993; $18 million also was invested in a multi-year program to significantly
upgrade its repair facilities versus $24 million in 1993.
TERMINALS AND PIPELINES - Terminals' record gross income of $303 million in 1994
was the result of strong performance at a number of individual terminal and
pipeline operations. The increase of $22 million or 8% over 1993 was due to high
petroleum demand and improved chemical activity which resulted in both increased
throughput and higher utilization. Capacity utilization at Terminals'
wholly-owned facilities was 94% at the end of 1994 compared to 92% at the end of
1993. Throughput was 671 million barrels, up 6% from 1993, reflecting the
overall improvement in the U.S.
economy.
Terminals' income from operations of $32 million improved from $29 million in
1993. This 11% increase resulted from higher revenues, slightly improved
operating margins and increased earnings by its foreign affiliates which were
partially offset by higher SG&A expenses. Operating margins increased 1% through
revenue improvement while controlling costs.
Operating expenses increased mainly due to higher repair and maintenance
spending, higher environmental costs and other costs as a result of expended
operations. Selling, general and administrative costs increased 26% over 1993 as
a result of the expanded operations and higher training and information systems
costs. Equity in net earnings of the foreign affiliates increased $2 million.
Improved results at certain terminals and favorable foreign exchange rates were
the primary factors.
-66-
<PAGE>
Terminals' capital spending of $154 million increased $77 million from 1993 and
included the acquisition of six additional facilities plus the expansion or
upgrading of several existing terminal facilities.
FINANCIAL SERVICES - Financial Services' gross income of $207 million increased
$3 million from 1993 due to higher lease and interest income, partially offset
by lower disposition gains. The $18 million increase in lease income was
attributable to increased volume and the inclusion of a full year's revenue from
a rail portfolio acquired in mid-1993. Interest income was $7 million greater
than in 1993 primarily due to prepayment premiums on two golf facility loans and
increased interest on variable rate loans. Pretax disposition gains of $21
million were $23 million lower than in 1993 as the prior year included $17
million of proceeds from an insurance settlement related to marine equipment.
Gains in 1994 were generated primarily from the sale of rail equipment.
Income from operations was $25 million in 1994 compared to $23 million in 1993.
The increase in lease income was partially offset by a $15 million increase in
operating lease expense resulting from the incremental lease volume, additional
expenses related to the acquired rail operating lease fleet, and accelerated
aircraft depreciation. In addition, the rail operating lease results continued
to benefit from a strong rail market. The provision for possible losses of $19
million for 1994 decreased $10 million from 1993's provision. The loss reserve
at the end of 1994 was $82 million, or 6.4% of total investments. During 1994,
the carrying value of certain aircraft, primarily wide-body aircraft, was
written down against the reserve to reflect current market conditions for those
aircraft. Equity in earnings of affiliated companies increased $1 million due to
improved earnings at an international aircraft joint venture.
Portfolio additions at Financial Services of $279 million were $23 million less
than the previous year.
GREAT LAKES SHIPPING - American Steamship Company's gross income of $82 million
increased $2 million over 1993, which included a pretax gain of $2 million
generated from the sale of a bankruptcy claim. Tonnage carried in 1994 was 26.3
million tons, an increase of 1.9 million tons over 1993. Tonnage demand
increased as the year progressed in response to high utilization rates in the
steel and auto industries. Poor weather conditions earlier in the year
necessitated late season operations to satisfy customers' winter inventory
requirements. On a per ton basis, freight revenue decreased 4% from the prior
year as a result of competitive rate pressures and a shift in commodity mix.
Excess vessel capacity on the Great Lakes at the start of the 1994 season
resulted in downward competitive pressure on rates.
Income from operations decreased $1 million from 1993 primarily reflecting the
sale of a bankruptcy claim. Contribution margin decreased 9% in 1994 as the
lower revenue per ton was partially offset by lower operating expenses per ton.
LOGISTICS AND WAREHOUSING - GATX Logistics' gross income of $244 million
increased $20 million over 1993 as a result of new customers, higher volume, and
some rate increases. Total warehousing square footage of 23 million square feet
approximated 1993 space. Space utilization at year end was 92% compared to 94%
in 1993 although the decrease was primarily in two regions.
Logistics reported a net loss of $.5 million in 1994 compared to net income of
$.1 million in 1993. Although revenue increased, the costs of implementing new
business, relocating existing customers, and labor inefficiencies offset
contributions from new business, and as a result, operating margins decreased.
Logistics' capital spending of $8 million in 1994 was down $6 million from 1993.
CORPORATE AND OTHER - Corporate and Other net expense of $25 million in 1994 was
$5 million less than the prior year. Results for 1993 included legal expenses
relating to a shareholder suit which were partially offset by a gain on the sale
of an insurance investment.
In 1993, $7 million was expended at Corporate related to the relocation of the
Chicago operations to a new office building.
- 67 -
<PAGE>
<TABLE>
<CAPTION>
GATX LOCATION OF OPERATIONS GATX Corporation and Subsidiaries
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GENERAL AMERICAN HEADQUARTERS LOCATION OF SERVICE MOBILE SERVICE UNITS
TRANSPORTATION Chicago, Illinois FACILITIES Mobile, Alabama
CORPORATION Colton, California
BUSINESS OFFICES MAJOR SERVICE CENTERS Macon, Georgia
Burbank, California Colton, California East Chicago, Indiana
Atlanta, Georgia Waycross, Georgia Good Hope, Louisiana
Chicago, Illinois East Chicago, Indiana Carteret, New Jersey
Hackensack, New Jersey Hearne, Texas Las Cruces, New Mexico
Pittsburgh, Pennsylvania Tierra Blanca, Mexico Albany, New York
Houston, Texas Galena Park, Texas
Mexico City, Mexico MINI SERVICE CENTERS Olympia, Washington
Muscle Shoals, Alabama
White Springs, Florida
Terre Haute, Indiana
Ivorydale, Ohio
Masury, Ohio
Catoosa, Oklahoma
Copper Hill, Tennessee
- -----------------------------------------------------------------------------------------------------------------------------------
GATX TERMINALS HEADQUARTERS PIPELINE TERMINAL INTERNATIONAL TERMINAL LOCATIONS WHOLLY-OWNED
CORPORATION Chicago, Illinois LOCATIONS Avonmouth, United Kingdom
Belfast, United Kingdom
DOMESTIC TERMINAL Calnev Pipe Line Bromsgrove, United Kingdom
LOCATIONS Adelanto, California Eastham, United Kingdom
Carson, California Barstow, California Glasgow, United Kingdom
Los Angeles, California (2) Colton, California Grays, United Kingdom
Richmond, California Las Vegas, Nevada Leith, United Kingdom
San Pedro, California (2) Runcorn, United Kingdom
Orlando, Florida Central Florida Pipeline Joint Venture Locations
Port Everglades, Florida Orlando, Florida Antwerpen/Lillo, Belgium
Tampa, Florida Tampa, Florida Lanshan, China
Argo, Illinois Kawasaki, Japan
Norco, Louisiana Olympic Pipeline Kobe, Japan
Carteret, New Jersey Renton, Washington Yokohama, Japan
Paulsboro, New Jersey Jurong Town, Singapore
Staten Island, New York Pulau Busing,
Portland, Oregon (2) Singapore
Philadelphia, Pennsylvania Barcelona, Spain
Galena Park, Texas Bilbao, Spain
Pasadena, Texas Tarragona, Spain
Seattle, Washington Valencia, Spain Seal
Vancouver, Washington Sands, United Kingdom
Wymondham, United Kingdom
Manchester Jet Line,
United Kingdom
- -----------------------------------------------------------------------------------------------------------------------------------
GATX CAPITAL CORPORATION HEADQUARTERS OFFICES Toronto, Canada
San Francisco, California Tampa, Florida Blagnac, France
Chicago, Illinois Frankfurt, Germany
Morristown, New Jersey Singapore, Republic of
Dallas, Texas Singapore
Sydney, Austrailia
- -----------------------------------------------------------------------------------------------------------------------------------
AMERICAN STEAMSHIP HEADQUARTERS VESSELS M/V Charles E. Wilson
COMPANY Williamsville, New York M/V Indiana Harbor M/V Adam E. Cornelius
M/V Walter J. McCarthy, Jr. M/V American Republic
REGIONAL OFFICE M/V St. Clair M/V Buffalo
Toledo, Ohio M/V American Mariner M/V Sam Laud
M/V H. Lee White Str. John J. Boland
- ----------------------------------------------------------------------------------------------------------------------------------
GATX LOGISTICS, INC. HEADQUARTERS Normal, Illinois- New York, New York- CW
Jacksonville, Florida 4 CW,T Syracuse, New York-
Richmond, Indiana- 8 PW,T,S
104 Facilities with NUMBER OF LOCATIONS AND CW,T Akron, Ohio-PW,T
24.4 Million Square Feet SERVICES OFFERED Lexington, Kentucky- Cleveland, Ohio-CW,T,S
Los Angeles, California- CW,T,S Columbus, Ohio-5 CW,T,S
CW=Contract Warehousing 6 CW,PW,T,S Shreveport, Louisiana- Oklahoma City, Oklahoma-
T=Transportation Stockton, California- CW,T CW,T
PW=Public Warehousing 2 CW,T Baltimore, Maryland- Philadelphia,
S=Sales Walnut, California- 2 CW,T Pennsylvania-2 CW,PW,T,S
2 PW,T Grand Rapids, Michigan- Memphis, Tennessee-2
Denver, Colorado- 2 CW CW,T
CW,T Gulfport, Mississippi- Nashville, Tennessee-CW
Jacksonville, Florida- CW Dallas, Texas-
5 CW,PW,T,S St. Louis, Missouri- 5 CW,PW,T,S
Atlanta, Georgia- PW,T El Paso, Texas-2 CW
19 CW,PW,T,S Greensboro, North Clearfield, Utah-2 PW,T
Chicago, Illinois- Carolina-9 CW,PW,T Seattle, Washington-
8 CW,PW,T,S Winston-Salem, North 2 CW,T
Carolina-4 CW,PW,T,S Toronto, Canada-CW,T
Mexico City, Mexico-PW,T
</TABLE>
- 68 -
<PAGE>
<TABLE>
<CAPTION>
GATX OFFICERS AND DIRECTORS GATX Corporation and Subsidiaries
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GATX OFFICERS GATX BOARD OF DIRECTORS James J. Glasser 3
Chairman of the Board of
James J. Glasser Franklin A. Cole 3,4 the Company
Chairman of the Board Chairman of the Board
Croesus Corporation Miles L. Marsh 1,4
Ronald H. Zech Chairman of the Board and
President and Chief James W. Cozad 2,4 Chief Executive Officer,
Executive Officer Retired: Former Chairman James River Corporation
and Chief Executive
David B. Anderson Officer, Charles Marshall 2,3
Vice President, Whitman Corporation Retired: Former Vice
Corporate Development, Chairman of the Board,
General Counsel and James M. Denny 1,2 American Telephone and
Secretary Managing Director, William Telegraph Company
Blair Capital Partners, LLC
William L. Chambers Michael E. Murphy1,2
Vice President, William C. Foote 1,4 Vice Chairman, Chief
Human Resources President and Chief Administrative Officer,
Executive Officer, USG Sara Lee Corporation
David M. Edwards Corporation
Vice President Finance, Ronald H. Zech
Chief Financial Officer Deborah M. Fretz 1,3 President and Chief
Senior Vice President, Executive Officer of the
Brian A. Kenney Logistics, Sun Company, Company
Treasurer Inc.
Ralph L. O'Hara Richard A. Giesen 2,3 1 Member, Audit Committee
Controller Chairman and Chief 2 Member, Compensation
Executive Officer, Committee
GATX SUBSIDIARIES Continental Glass & 3 Member, Nominating
Plastic, Inc. Committee
General American
Transportation Corporation 4 Member, Retirement Funds
D. Ward Fuller, President Review
GATX Terminals Corporation
John F. Chlebowski, Jr.,
President
GATX Capital Corporation
Joseph C. Lane, President
American Steamship Company
Ned A. Smith, President
GATX Logistics, Inc.
Joseph A. Nicosia,
President
</TABLE>
- 69 -
<PAGE>
GATX CORPORATE INFORMATION GATX Corporation and Subsidiaries
- -------------------------------------------------------------------------------
ANNUAL MEETING GATX Corporation welcomes and
Friday, April 26, 1996, 9:00 a.m. encourages questions and comments
GATX Corporation from its shareholders, potential
500 West Monroe Street investors, financial professionals
Chicago, Illinois 60661-3676 and the public at large. To better
serve interested parties, the
FINANCIAL INFORMATION & PRESS RELEASES: following GATX personnel may be
A copy of the company's annual report contacted by telephone, fax and/or
on Form 10-K for 1995 and selected writing. To request published
other information are available financial information and financial
without charge. GATX press releases reports, contact:
may be obtained by automated PR News
Company News On-Call's automated fax GATX CORPORATION
service at (800) 758-5804. The company Investor Relations Department
identification number for GATX is 500 West Monroe Street
105121. GATX maintains an Investor Chicago, Illinois 60661-3676
Relations Internet Home Page with Telephone: (800) 428-8161
Zacks Investor Forum Home Page at Automated request line for materials:
http://iw.zacks.com. A variety of (312) 621-6300
current financial information, Janet Bower, Communications
historical financial information, Coordinator
press releases and photographs are (312) 621-4297 Fax: (312) 621-6698
available at this site. Email: [email protected]
ANALYSTS, INSTITUTIONAL SHAREHOLDERS
INQUIRIES AND FINANCIAL COMMUNITY
INquiries regarding dividend checks, PROFESSIONALS:
the dividend reinvestment plan, stock
certificates, replacement of lost George S. Lowman, Director of
certificates, address changes, account Communications
consolidation, transfer procedures and Telephone: (312) 621-6599
year-end tax information should be Fax: (312) 621-6698
addressed to GATX Corporation's Email: [email protected]
Transfer Agent and Registrar:
Chemical Bank, Stock Transfer QUESTIONS REGARDING SALES, SERVICE OR
Department LEASE INFORMATION:
450 West 33rd Street
New York, New York 10001-2697 General American Transportation
Telephone: (800) 647-4273 Corporation - (312) 621-6564
INFORMATION RELATING TO SHAREHOLDER GATX Terminals Corporation -
OWNERSHIP, DIVIDEND PAYMENTS, OR (312) 621-8032
SHARE TRANSFERS:
Janet M. Dongarra, Assistant GATX Capital Corporation -
Corporate Secretary, Law Department (415) 955-3200
Telephone: (312) 621-6603
American Steamship Company -
(716) 635-0222
GATX Logistics, Inc. -
(904) 396-2517
INDEPENDENT AUDITORS
Ernst & Young LLP
- 70-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of subsidiaries included in GATX's consolidated
financial statements (excluding a number of subsidiaries which, considered in
the aggregate, would not constitute a significant subsidiary), and the state of
incorporation of each:
General American Transportation Corporation (New York)--includes one domestic
subsidiary, three foreign subsidiaries and interests in two foreign
affiliates, Business Segment--Railcar Leasing and Management GATX Terminals
Corporation (Delaware)--three domestic subsidiaries, one foreign subsidiary,
one domestic affiliate, and interests in ten foreign affiliates,
Business Segment--Terminals and Pipelines
GATX Financial Services, Inc. (Delaware)--54 domestic subsidiaries (which
includes GATX Capital Corporation), 12 foreign subsidiaries and eight
domestic affiliates, Business Segment--Financial Services
GATX Logistics, Inc. (Florida)--29 domestic subsidiaries and two foreign
subsidiaries, Business Segment--Logistics and Warehousing
American Steamship Company (New York)--12 domestic subsidiaries, Business
Segment--Great Lakes Shipping
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following: (i) Registration
Statement No. 2-92404 on Form S-8, filed July 26, 1984; (ii) Registration
Statement No. 2-96593 on Form S-8, filed March 22, 1985; (iii) Registration
Statement No. 33-38790 on Form S-8 filed February 1, 1991; (iv) Registration
Statement No. 33-41007 on Form S-8 filed June 7, 1991; and (v) Registration
Statement No. 33-61183 filed on July 20, 1995 of GATX Corporation, of our report
dated January 23, 1996 with respect to the consolidated financial statements and
schedules of GATX Corporation included and/or incorporated by reference in the
Annual Report on Form 10-K for the year ended December 31, 1995.
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1996
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ Franklin A. Cole
---------------------------------
Director
Date: March 22, 1996
-------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ James W. Cozad
---------------------------------
Director
Date: March 22, 1996
-------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal.
/s/ James M. Denny
-------------------------
Director
Date: March 22, 1996
--------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ William C. Foote
--------------------------
Director
Date: March 22, 1996
--------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal.
/s/ Deborah M. Fretz
-----------------------
Director
Date: March 22, 1996
-------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ Richard A. Giesen
------------------------
Director
Date: March 22, 1996
------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ James J. Glasser
---------------------------------
Director
Date: March 22, 1996
-------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ Miles L. Marsh
---------------------
Director
Date: March 22, 1996
--------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal.
/s/ Charles Marshall
-------------------------
Director
Date: March 22, 1996
-----------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation, does
hereby constitute and appoint James J. Glasser, Ronald H. Zech and David B.
Anderson, or any of them, attorneys and agents of the undersigned, with full
power and authority to sign in such director's name, and on behalf of GATX
Corporation, the 1995 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ Michael E. Murphy
--------------------------
Director
Date: March 22, 1996
-------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Consolidated Income Statement of GATX
Corporation and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 35
<SECURITIES> 0
<RECEIVABLES> 1029 <F1>
<ALLOWANCES> 100
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 3902
<DEPRECIATION> 1533
<TOTAL-ASSETS> 4043
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 2093 <F3>
3
0
<COMMON> 14
<OTHER-SE> 701
<TOTAL-LIABILITY-AND-EQUITY> 4043
<SALES> 0
<TOTAL-REVENUES> 1233
<CGS> 0
<TOTAL-COSTS> 613 <F4>
<OTHER-EXPENSES> 172 <F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170
<INCOME-PRETAX> 69 <F6>
<INCOME-TAX> 48
<INCOME-CONTINUING> 101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101
<EPS-PRIMARY> 4.30
<EPS-DILUTED> 4.13
<FN>
<F1> Receivables consists of three components: Trade accounts of 115 million,
Finance leases of 674 million and secured loans of 240 million.
<F2> Not applicable because GATX has an unclassified balance sheet.
<F3> This value consists of two components: long-term debt of 1,851 million and
capital lease obligations of 242 million. Short-term debt not included.
<F4> This value represents operating expenses on the consolidated income
statement.
<F5> This value consists of 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 affiliated companies.
</FN>
</TABLE>
GATX CORPORATION
1995 LONG TERM INCENTIVE COMPENSATION PLAN
I. GENERAL
I. Purpose. The purpose of the 1995 Long Term Incentive Compensation
Plan (the "Plan") is to promote the long term financial interests of the Company
by (i) attracting and retaining executive personnel possessing outstanding
ability; (ii) further motivating such individuals by means of growth-related
incentives to achieve long-range goals; (iii) providing incentive compensation
opportunities, in the form of Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Stock Rights, Restricted Common
Stock, Performance Awards and Individual Performance Units (each as described
below) which are competitive with those of other major corporations; and (iv)
furthering the identity of interests of participating employees with those of
the Company's shareholders through opportunities for increased stock ownership.
2. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall have such powers to administer the Plan as are delegated to it
by the Plan or the Board of Directors, including full authority to: (i)
interpret the Plan; (ii) prescribe, amend and rescind rules and regulations
pertaining to the Plan; (iii) determine the terms and provisions of each Stock
Option and Stock Appreciation Right, and Restricted Common Stock agreement
between the Company and a Participant, and the number of Individual Performance
Units to be granted to a Participant; (iv) establish Company performance goals
for purposes of the Plan; and (v) make all other determinations deemed necessary
or advisable for the administration of the Plan. To the extent necessary to
conform the Plan, and the awards under the Plan, to Rule 16b-3 of the Securities
and Exchange Commission, no member of the Committee shall be eligible, or within
one year prior to appointment to the Committee shall have been eligible, to
participate in the Plan or in any other plan of the Company or any affiliate of
the Company under which stock, stock options or stock appreciation rights may be
granted.
3. Participants. Except as otherwise specifically provided,
Participants in the Plan shall consist of such key employees of the Company and
its subsidiaries as the Committee in its sole discretion may select from time to
time to receive Stock Options, Stock Appreciation Rights, Restricted Stock
Rights, Restricted Common Stock, Performance Awards or Individual Performance
Units. The Committee may delegate to appropriate officers of the Company who are
also directors of the Company authority to determine participation in the Plan
by other than officers of the Company, and the extent of participation by each
non-officer employee of the Company or any subsidiary.
1
<PAGE>
4. Shares. One million five hundred thousand (1,500,000) shares of
Common Stock, together with any shares of Common Stock authorized under the 1985
Long Term Incentive Compensation Plan (the "1985 Plan") which are unissued as of
the date of adoption hereof, and which are not subsequently issued pursuant to
awards under the 1985 Plan that are outstanding on that date, with such
adjustment in such number of shares as may be made pursuant to the last sentence
of this paragraph I-4, shall be available for issue upon the exercise of Stock
Options, Stock Appreciation Rights and Restricted Stock Rights granted under the
Plan, for award in the form of Restricted Common Stock and for redemption of
Individual Performance Units. Such shares may be authorized and unissued shares
or treasury shares (including, in the discretion of the Board of Directors of
the Company, shares purchased in the open market) of Common Stock. If a Stock
Option granted under the Plan expires or is terminated for any reason without
having been exercised in full for Common Stock (including those which terminate
by reason of the exercise of a Stock Appreciation Right in accordance with the
provisions of Part IV below) or if a Restricted Stock Right, Restricted Common
Stock or Individual Performance Unit awarded under the Plan is forfeited for any
reason, the shares not acquired or forfeited shares, as the case may be, shall
(unless the Plan shall have terminated) again become available for purposes of
the Plan. In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, spin-off or other change in
corporate structure or capitalization affecting the Common Stock, appropriate
adjustment shall be made with respect to the number and kind of shares (or other
securities) optioned or awarded or subject to being optioned or awarded under
the Plan and in the sole discretion of the Board of Directors such adjustments
in price and other adjustments as it deems equitable may be made.
5. Amendment. The Board of Directors of the Company may amend the Plan
from time to time, except that without the approval of the holders of a majority
of the outstanding shares of Common Stock entitled to vote at a duly held
meeting of the shareholders, the number of shares of Common Stock which may be
issued under the Plan may not be increased except as provided in paragraph I-4.
No amendment of the Plan, however, may, without the consent of a Participant,
make any changes in any outstanding Stock Options, Stock Appreciation Rights,
Restricted Stock Rights, Restricted Common Stock, Performance Award or
Individual Performance Units theretofore granted the Participant which would
adversely affect the Participant's rights under the Plan.
6. Termination. The Board of Directors of the Company may terminate the
Plan at any time. No Stock Option or Stock Appreciation Right shall be granted
and no Restricted Stock Right, Restricted Common Stock, Performance Award or
Individual Performance Unit shall be awarded after the Plan is terminated for
any reason. However, termination of the Plan shall not affect the validity of
any Stock Option or Stock Appreciation Right theretofore granted under the Plan
or any award of Restricted Stock Rights, Restricted Common Stock, Performance
Award or Individual Performance Units theretofore made under the Plan.
7. No Employment Right. Participation in the Plan does not confer
upon any employee any
2
<PAGE>
right with respect to continued employment by the Company or any subsidiary, or
limit in any way the right of the Company or any subsidiary to terminate an
employee's services, responsibilities, duties and authority to represent the
Company or any subsidiary at any time for any reason.
II. INCENTIVE STOCK OPTIONS
1. Grants. The Committee shall designate the Participants to whom
Incentive Stock Options, as described in the Internal Revenue Code of 1986, as
amended (the "Code"), are to be granted under this Part II and determine the
number of shares to be offered to each of them. Each Incentive Stock Option
shall be evidenced by an agreement between the Participant and the Company. The
aggregate fair market value of shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any individual
during any calendar year under this Plan and each other stock option plan of the
Company and any parent or subsidiary thereof shall not exceed $100,000. Subject
to any adjustment made under the last sentence of paragraph I-4, the aggregate
number of Incentive Stock Options and Non-Qualified Stock Options granted to any
Participant during any calendar year, regardless of when first exercisable,
shall not exceed seventy-five thousand (75,000). For all purposes of the Plan,
the term "fair market value" of a share of Common Stock means the average of the
highest and lowest prices at which a share of Common Stock is traded on the date
as of which the determination is being made as quoted on the New York Stock
Exchange Composite Transactions or other principal market quotation selected by
the Committee or, if Common Stock is not traded on that date, the average of the
highest and lowest prices on the next preceding day on which such stock is
traded.
2. Price. The purchase price of each Incentive Stock Option shall be
determined by the Committee; provided, however, that in no instance shall such
price be less than one hundred percent of the fair market value of a share of
Common Stock on the date the option is granted (the "Option Date") or par value,
whichever is higher. The full purchase price of each share purchased upon the
exercise of any Incentive Stock Option shall be paid in cash or shares of Common
Stock, or both, at the time of such exercise (or by such other method as may be
satisfactory to the Committee) and, as soon as practicable thereafter, a
certificate representing the shares so purchased shall be delivered to the
person entitled thereto. A Participant shall not have any rights of a
shareholder with respect to the shares of Common Stock subject to an option
granted the Participant until such shares are purchased upon exercise of the
option.
3. Exercise. Subject to the following provisions of this paragraph and
the following provisions of paragraph II-4, unless sooner terminated, all
Incentive Stock Options granted to a Participant on an Option Date may be
exercised commencing on a date no earlier than one year from the Option Date as
determined by the Committee. The Committee may, in its discretion, accelerate
the date on which all, or any portion, of the Incentive Stock Options granted to
a Participant may be exercised.
4. Termination. Each Incentive Stock Option granted to a Participant
shall terminate on the earlier of the tenth anniversary of the Option Date or,
subject to the provisions of the following sentence, three months after the date
the Participant's employment by the Company and
3
<PAGE>
its subsidiaries is terminated for any reason. That portion of an Incentive
Stock Option which is exercisable as of the date on which a Participant's
employment is terminated by reason of his death, disability (as determined by
the Committee) or retirement under a Company or subsidiary retirement plan shall
terminate on the earlier of the tenth anniversary of the Option Date on which it
was granted or one year after the date of termination of employment by reason of
death or disability (as determined by the Committee) or five years after the
date of retirement, as the case may be.
5. Transferability. An Incentive Stock Option, by its terms, may not
be transferred by a Participant other than by will or the laws of descent and
distribution and during the lifetime of a Participant shall be exercisable only
by the Participant.
III. NON-QUALIFIED STOCK OPTIONS
1. Grants. The Committee shall designate the Participants to whom
Non-Qualified Stock Options are to be granted under this Part III and determine
the number of shares to be offered to each of them. Each Non-Qualified Stock
Option shall be evidenced by an agreement between the Participant and the
Company. Subject to any adjustment made under the last sentence of paragraph
I-4, the aggregate number of Non-Qualified Stock Options and Incentive Stock
Options granted to any Participant during any calendar year shall not exceed
seventy-five thousand (75,000).
2. Price. The purchase price of each Non-Qualified Stock Option shall
be determined by the Committee; provided, however, that in no instance shall
such price be less than one hundred percent of the fair market value of a share
of Common Stock of the Company on the date the option is granted (the "Option
Date") or par value, whichever is higher. The full purchase price of each share
purchased upon the exercise of any Non-Qualified Stock Option shall be paid in
cash or shares of Common Stock, or both, at the time of such exercise (or by
such other method as may be satisfactory to the Committee) and, as soon as
practicable thereafter, a certificate representing the shares so purchased shall
be delivered to the person entitled thereto. A Participant shall not have any
rights of a shareholder with respect to the shares of Common Stock of the
Company subject to an option granted the Participant until such shares are
purchased upon exercise of the option.
3. Exercise. Subject to the provisions of this paragraph and the
provisions of paragraph III-4, unless sooner terminated, all Non-Qualified Stock
Options granted to a Participant on an Option Date may be exercised commencing
on a date no earlier than one year from the Option Date as determined by the
Committee. The Committee may, in its discretion, accelerate the date on which
all, or any portion, of the Non-Qualified Stock Options granted to a participant
may be exercised.
4. Termination. Each Non-Qualified Stock Option granted to a
Participant shall terminate on the earlier of the tenth anniversary of the
Option Date or, subject to the provisions of the
4
<PAGE>
following sentence, three months after the date the Participant's employment by
the Company and its subsidiaries is terminated for any reason. That portion of a
Non-Qualified Stock Option which is exercisable as of the date on which a
Participant's employment is terminated by reason of the Participant's death,
disability (as determined by the Committee) or retirement under a Company or
subsidiary retirement plan shall terminate on the earlier of the tenth
anniversary of the Option Date on which it was granted or one year after the
date of termination by reason of death or disability (as determined by the
Committee) or five years after the Participant's retirement, as the case may be.
5. Transferability. A Non-Qualified Stock Option granted to a
Participant may not be transferred by the Participant other than by will or the
laws of descent and distribution and during the lifetime of a Participant shall
be exercisable only by the Participant.
IV. STOCK APPRECIATION RIGHTS
1. Grantees. The Committee shall designate the Participants to whom
Stock Appreciation Rights are to be granted under this Part IV and determine the
number to be granted to each of them. Each Stock Appreciation Right shall be
evidenced by an agreement between the Participant and the Company. If a
Participant to whom a Stock Appreciation Right has been granted is subject to
Sections 16(a) and 16(b) of the Securities Exchange Act of 1934, the Committee
may, at any time, impose such conditions and limitations to the exercise of such
Stock Appreciation Right as the Committee deems necessary or desirable in order
to comply with the requirements of Sections 16(a) and 16(b) and the rules and
regulations issued thereunder, or to obtain exemption therefrom.
2. Grants. Stock Appreciation Rights may be granted in tandem with a
related Stock Option, in which event the Participant may elect to exercise
either the Stock Appreciation Right or the Stock Option but not both, as to any
of the same shares subject to the Stock Option and the Stock Appreciation Right.
A Stock Appreciation Right granted to a Participant may be granted on the Option
Date of such option or in the case of Non-Qualified Stock Options as of that
Option Date or at any time thereafter.
3. Exercise. Subject to the following provisions of this paragraph and
the provisions of paragraph IV-5, unless sooner terminated, all Stock
Appreciation Rights granted to a Participant may be exercised commencing on a
date no earlier than the later of six (6) months from the date of grant or one
year from the Option Date as determined by the Committee; provided, however,
that a Stock Appreciation Right may be exercised only to the extent a related
Stock Option is surrendered. The Committee may, in its discretion, accelerate
the date on which all, or any portion, of the Stock Appreciation Rights granted
to a Participant may be exercised to the date to which a related Stock Option
has been accelerated in accordance with the provisions of either paragraph II-3
or III-3.
4. Payment. A Participant to whom a Stock Appreciation Right has been
granted may elect, during any period that such Stock Appreciation Right is
exercisable and subject to such
5
<PAGE>
limitations as the Committee may have imposed, to receive from the Company in
exchange therefor an amount (net of applicable employee withholding taxes) equal
to the product of (i) the excess, if any, of the fair market value of a share of
Common Stock on the date of the exchange over the option price of the related
Stock Option and (ii) the number of shares of Common Stock covered by the
related Stock Option, or portion thereof, surrendered. Payment of the Company's
obligations arising out of the exchange of a Stock Appreciation Right may be
made in cash, Common Stock (valued at its fair market value at date of exchange)
or partly in each, as the Committee shall decide.
5. Termination. Subject to the following sentence, each Stock
Appreciation Right shall terminate on the earlier of the tenth anniversary of
the Option Date or, subject to the provisions of the following sentence, three
months after the date the Participant's employment by the Company and its
subsidiaries is terminated for any reason. Any Stock Appreciation Right which is
exercisable as of the date on which a Participant's employment is terminated by
reason of the Participant's death, disability (as determined by the Committee)
or retirement under a Company or subsidiary retirement plan shall terminate on
the earlier of the tenth anniversary of the Option Date on which it was granted
or one year after the date of termination by reason of death or disability (as
determined by the Committee) or five years after the Participant's retirement,
as the case may be.
6. Transferability. A Stock Appreciation Right granted to a
Participant may not be transferred by the Participant other than by will or the
laws of descent and distribution and during the lifetime of a Participant shall
be exercisable only by the Participant.
V. RESTRICTED STOCK AWARDS
1. Grants. Grants of Restricted Common Stock or Restricted Stock Rights
may be made from time to time to such officers and key employees of the Company
and its subsidiaries as may be selected by the Committee. On each Common Stock
dividend payment date, each Participant shall be credited with an amount equal
to the dividend paid on that date on a share of Common Stock, multiplied by the
Participant's number of shares of Restricted Common Stock or Restricted Stock
Rights that have not been terminated in accordance with the following provisions
of this Part V. Such amounts together with interest thereon shall be paid to the
Participant at such time or times as the Committee shall decide.
2. Awards. Such grant of Restricted Common Stock or Restricted Stock
Rights shall be contingent upon the Participant's continuing employment with the
Company or its subsidiaries for a period to be specified by the Committee (the
"Performance Period") and shall be subject to such additional terms and
conditions as the Committee in its sole discretion deems appropriate, including,
but not by way of limitation, restrictions on the sale or other disposition of
such shares during the Performance Period or for a period of time thereafter.
The length of Performance Periods may vary among Participants.
At the end of such period of employment by the Company and its
subsidiaries as shall be determined by the Committee (but not less than six
months and not extending beyond the last day
6
<PAGE>
of the Performance Period), the Restricted Stock Right granted to a Participant
shall be automatically exchanged for a number of shares of Restricted Common
Stock equal to the number of Restricted Stock Rights exchanged.
Each stock certificate issued in respect of shares of Restricted Common
Stock shall be registered in the name of the Participant and deposited with the
Company.
Subject to the foregoing restrictions, and unless and until the shares
are forfeited, a Participant shall have all of the rights of a holder of Common
Stock with respect to the shares of Restricted Common Stock awarded the
Participant in accordance with the provisions of this Part V; provided, however,
that as provided in paragraph 1 of this Part V, any dividends paid on a share of
such stock, together with interest thereon, shall be accrued and paid to the
Participant at such time or times as the Committee shall decide.
3. Distribution. The shares of Restricted Common Stock awarded to a
Participant with respect to a Performance Period shall be distributed to the
Participant, free of all restrictions, in such number (usually three) of equal,
or substantially equal, annual installments, measured from the last day of that
Performance Period, as the Committee shall determine.
4. Forfeitures. Except as provided below, or except as otherwise
determined by the Committee, if a Participant's employment with the Company and
its subsidiaries is terminated for any reason, the Participant shall forfeit all
Restricted Stock Rights, any undistributed Restricted Common Stock previously
awarded to the Participant with respect to any Performance Period, any
undistributed dividends accrued for the Participant and any undistributed
dividend equivalents credited to the Participant, together with any interest
accrued thereon. If a Participant's employment with the Company and its
subsidiaries is terminated by reason of a Participant's death, disability (as
determined by the Committee) or retirement under a Company or subsidiary
retirement plan, the Participant or, in the event of the Participant's death,
the person or persons entitled thereto by will or the laws of descent and
distribution, shall be entitled to receive, free of restrictions, a distribution
of the undistributed shares of Restricted Common Stock, if any, previously
awarded to the Participant, all Performance Awards under Part VI for which
Performance Goals have been met and, together with interest thereon, any
undistributed dividends accrued for the Participant and any undistributed
dividend equivalents credited to the Participant.
VI. PERFORMANCE AWARDS
1. Awards. Any Participant designated by the Committee to participate
in Part V of the Plan may be designated as a Participant under this Part VI.
2. Performance Goal. For each Performance Period the Committee may
establish Performance Goals. In establishing any Performance Goal the Committee
may use such measures of the performance of the Company over the Performance
Period as the Committee deems
7
<PAGE>
appropriate. Performance Goals may vary among Participants. For each Performance
Period, the Committee shall also establish appropriate criteria to determine the
basis upon which a Performance Award shall be made under the Plan with respect
to that period.
3. Payment and Amount. If the criteria for payment established by the
Committee relating to a Performance Goal established for any Performance Period
is met, a Participant receiving an installment distribution of Restricted Common
Stock in accordance with the provisions of paragraph V-3 with respect to that
Performance Period, who has also been designated as a Participant under this
Part VI, shall also be paid a Performance Award at the time the distribution is
made to the Participant. The amount of a Participant's Performance Award shall
not in any event exceed the aggregate fair market value of the installment
distribution of shares of Restricted Common Stock.
4. Forfeiture. Except as provided below, and except as otherwise
determined by the Committee, if a Participant's employment with the Company and
its subsidiaries is terminated for any reason prior to the payment of any
portion of a Performance Award, the Participant shall forfeit all rights to
receive any portion of the Performance Award remaining unpaid at such
termination. If a Participant's employment with the Company and its subsidiaries
is terminated by reason of the Participant's death, disability (as determined by
the Committee) or retirement under a Company or subsidiary retirement plan, the
Participant or, in the event of the Participant's death, the person or persons
entitled thereto by will or the laws of descent and distribution, shall be
entitled to receive, free of restrictions, a distribution of all Performance
Awards under Part VI for which Performance Goals have been met.
VII. INDIVIDUAL PERFORMANCE UNITS
1. Grant. For each Performance Period, the Committee may, from time to
time, grant Individual Performance Units to such officers and other key
employees of the Company and its subsidiaries as it may select. The number of
Individual Performance Units granted will be determined by dividing a specified
percentage (as determined by the Committee and not exceeding one hundred percent
(100%)) of the Participant's base salary by the fair market value of the
Company's Common Stock on the date of grant. On each Common Stock dividend
payment date, each Individual Performance Unit (including additional Individual
Performance Units previously credited to it) shall be increased by an amount
equal to the dividend paid on that date on a share of the Company's Common
Stock, reinvested in additional Individual Performance Units in an amount
equivalent to an investment of such dividend in shares of the Company's Common
Stock at its fair market value on such date.
2. Award. Except as provided in paragraph VII-5, awards of Individual
Performance Units shall be contingent upon the Participant's continuing
employment with the Company or its subsidiaries throughout the specified
Performance Period, and shall be subject to such additional
8
<PAGE>
terms and conditions as the Committee in its sole discretion deems appropriate.
The length of Performance Periods may vary among Participants.
3. Performance Goals. For each Performance Period the Committee may
establish Performance Goals which shall be based upon achievement of specific
levels of return on equity. In determining the extent to which a Performance
Goal has been achieved, the Committee shall exclude the effect, if any, on the
Company's income or equity, of changes in generally accepted accounting
principles or Federal income tax laws or regulations, adopted or effective
subsequent to the establishment of such Performance Goal as it deems
appropriate. Performance Goals may vary among Participants.
4. Payment and Amount. If the Performance Goal established by the
Committee for a Performance Period has been achieved, the Company shall redeem
the Individual Performance Units and pay to the Participant an amount (the
"Redemption Amount") equal to not more than three (3) times - depending upon the
extent to which the Performance Goal has been achieved or exceeded - the product
of (i) the number of Individual Performance Units credited to the Participant's
account at the end of a Performance Period (including reinvested dividends), and
(ii) the fair market value of the Company's Common Stock on the date of payment.
Payment of the Redemption Amount to the Participant may, in the discretion of
the Committee, be made in cash and in Common Stock of the Company, and will be
made as soon as practicable following expiration of the applicable Performance
Period and certification by the Committee of the Redemption Amount. The cash
payment shall in no event exceed fifty percent (50%) of the Redemption Amount.
5. Forfeitures. Except as provided below, or except as otherwise
determined by the Committee, if a Participant's employment with the Company and
its subsidiaries is terminated for any reason, the Participant shall forfeit all
unredeemed Individual Performance Units previously granted to the Participant
with respect to any Performance Period and any undistributed dividends allocable
thereto. To the extent the Performance Goals are not achieved, Individual
Performance Units not redeemed shall be forfeited. If, prior to completion of a
Performance Period, a Participant's employment with the Company and its
subsidiaries is terminated by reason of the Participant's death, disability (as
determined by the Committee) or retirement under a Company or subsidiary
retirement plan, the Participant, or in the event of the Participant's death,
the person(s) entitled thereto by will or the laws of descent and distribution,
shall, if the applicable Performance Goal is attained, receive the Redemption
Amount at the time of payment to other Participants. In the event of a
Participant's retirement, the Redemption Amount shall be prorated to the date of
such Participant's retirement. Individual Performance Units shall be forfeited
to the extent not redeemed.
VIII. SPECIAL ACCELERATION IN CERTAIN EVENTS
1. Special Acceleration. Notwithstanding any other provisions of the
Plan, a Special Acceleration of awards outstanding under the Plan shall occur
with the effect set forth in
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paragraph VIII-2 at any time when any one of the following events has
taken place:
(a) The Company receives a report on Schedule 13D reporting the
beneficial ownership by any person (other than a Participant
in the Plan) of 20% or more of the Company's outstanding
Common Stock, except that if such receipt shall occur during a
tender offer or exchange offer by any person other than the
Company or a wholly owned subsidiary of the Company, or a
Participant in the Plan, Special Acceleration shall not take
place until the conclusion of such offer;
(b) If, upon conclusion of a tender or exchange offer, any person
other than the Company or a wholly owned subsidiary of the
Company, or a Participant in the Plan; announces that it has
accepted for purchase a sufficient number of shares of Common
Stock pursuant to such tender offer or exchange offer which
will result in such person becoming directly or indirectly the
beneficial owner of 20% or more of the Company's outstanding
Common Stock;
(c) Holders of the necessary number of shares of Common Stock
authorize or approve any merger in which the Company is not
the surviving corporation or survives only as a subsidiary of
another corporation, or consolidation or sale of all or
substantially all of the assets of the Company; or
(d) During any period of twelve months or less individuals who at
the beginning of such period constituted a majority of the
Board of Directors cease for any reason to constitute a
majority thereof unless the nomination or election of such new
directors was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of such period.
The terms used in this Part VIII and not defined elsewhere in the Plan
shall have the same meaning as such terms have in the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted thereunder.
2. Effect on Outstanding Awards. Upon a Special Acceleration pursuant to
paragraph VIII-I:
(a) All Stock Options then outstanding under Parts II and III
shall immediately become exercisable in full for the remainder
of their terms, provided that no Stock Option may be exercised
by an officer of the Company within six months of its date of
grant; and each optionee shall have the right during a period
of thirty days following a Special Acceleration to have the
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Company purchase any Non-Qualified Stock Options which are
then exercisable and as to which no Stock Appreciation Rights
have been granted at a cash purchase price computed in
accordance with paragraph (e) below and any Incentive Stock
Options which are then exercisable and as to which no Stock
Appreciation Rights have been granted at a cash purchase price
equal to the product of (i) the excess, if any, of the fair
market value of a share of Common Stock computed in accordance
with paragraph II-I over the option price and (ii) the number
of shares of Common Stock covered by the Incentive Stock
Option or portion thereof surrendered, provided that the
Company shall have the right during such period to purchase
any Incentive Stock Option as to which no Stock Appreciation
Rights have been granted at the purchase price computed in
accordance with paragraph (e) below;
(b) All Stock Appreciation Rights outstanding under Part IV shall
immediately become exercisable in full for a period of thirty
days following a Special Acceleration, subject to the
provisions of paragraph IV-5, with payment to be made solely
in cash upon any exercise during such period of a Stock
Appreciation Right granted with respect to a Non-Qualified
Stock Option in an amount computed in accordance with
paragraph (e) below and in cash upon exercise during such
period of a Stock Appreciation Right granted with respect to
an Incentive Stock Option in an amount equal to the product of
(i) the excess, if any, of the fair market value of a share of
Common Stock computed in accordance with paragraph II-I over
the exercise price of the related Stock Option and (ii) the
number of shares of Common Stock covered by the related Stock
Option, provided that the Company shall have the right during
such period to purchase any Stock Appreciation Right granted
with respect to an Incentive Stock Option (and cancel the
related option) at the purchase price computed in accordance
with paragraph (e) below, provided further that no Stock
Appreciation Right may be exercised by an officer within six
months of its date of grant;
(c) All Restricted Stock Rights under Part V outstanding for at
least six months from the date of grant shall immediately be
exchanged for a number of shares of Common Stock equal to the
number of Restricted Stock Rights so exchanged, and all such
shares of Common Stock, all other shares of Common Stock and
all interest, dividends or dividend equivalents then held by
the Company for Participants under Part V and all Performance
Awards under Part VI for which Performance Goals have been met
shall then be immediately distributed to Participants, free of
all restrictions;
(d) The Company shall immediately redeem all Individual
Performance Units granted under Part VII. For purposes of
calculation of the Redemption
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Amount, it shall be assumed that the Performance Goal has been
achieved, and the Fair Market Value of the Company's Common
Stock shall be calculated in accord with paragraph (e) below;
and
(e) Except as otherwise specified in paragraphs (a) and (b) above
the purchase price for a Stock Option or a Stock Appreciation
Right and the amount to be paid upon exercise of a Stock
Appreciation Right shall be an amount equal to the product of
(i) the excess, if any, of the highest of (A) the highest
reported sales price during the sixty days preceding such
exercise, (B) the highest purchase price shown in any Schedule
13D referred to in paragraph VIII-I (a) as paid within the
sixty days prior to the date of such report, (C) the highest
price paid in any tender offer referred to in Paragraph VIII-I
(b) during the sixty days preceding such exercise, or (D) the
fixed formula cash price per share specified in any
transaction referred to in paragraph VIII-I (c) if such price
is determined on the date of such exercise, over the option
price, and (ii) the number of shares of Common Stock covered
by the Stock Option or Stock Appreciation Right, or portions
thereof, surrendered. The fair market value to be used in the
calculation of the Redemption Amount shall be equal to the
average price of the Common Stock during the five business
days preceding the occurrence of a Special Acceleration.
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