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, 1996
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. x/
-----
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
---- ----
As of March 7, 1997, 20,342,269 common shares were outstanding, and the
aggregate market value of the common shares (based upon the March 7, 1997
closing price of these shares on the New York Stock Exchange) of GATX
Corporation held by nonaffiliates was approximately $1,014.6 million.
Documents Incorporated by Reference
Portions of the GATX Annual Report to Shareholders for the year ended
December 31, 1996 are incorporated by reference into Parts I and II. Portions of
GATX's proxy statement dated March 14, 1997 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; provide
equipment and capital asset financing and related services; own and operate tank
storage terminals, pipelines and related facilities; 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, 1996 on
page 33 and pages 38 through 41, 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, 1996, its
North American fleet consisted of approximately 77,500 railcars, including
60,400 tank cars and 17,100 specialized freight cars, primarily Airslide(TM)
covered hopper cars and plastic pellet cars. In addition to roughly 66,900
railcars in the United States, Transportation has approximately 9,000 railcars
in its Canadian fleet and 1,600 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 16 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; 1996
additions include 8,700 cars from Transportation's acquisition of the remaining
interest in its Canadian subsidiary, CGTX, Inc.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Tank car fleet capacity
(in millions of gallons) 1,353 1,176 1,090 1,024 993
Number of railcars added to
North American fleet 13,200 6,200 4,900 3,000 1,600
</TABLE>
Transportation's customers use its railcars to ship over 700 different
commodities, primarily chemicals, petroleum, and food products. For 1996,
approximately 53% of railcar leasing revenue was attributable to shipments of
chemical products, 23% to petroleum products, and 18% to food 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 3% of total
railcar leasing revenue.
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<PAGE>
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 railcars as of
December 31, 1996 was approximately 95%.
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, Transportation 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, three
Canadian and one Mexican service center, and 37 mobile trucks in 26 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, Procor Limited, and many smaller
companies. Of the approximately 215,000 tank cars owned and leased in the United
States at December 31, 1996, Transportation had approximately 54,200. Principal
competitive factors include price, service and availability.
FINANCIAL SERVICES
GATX Financial Services, through its principal subsidiary, GATX Capital
Corporation, provides asset-based financing of transportation, information
technology 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 home office,
GATX Capital has two domestic and eleven foreign offices.
The financial services industry is both crowded and efficient. GATX Capital is
one of the larger non-bank financial services companies. GATX Capital competes
with captive leasing companies, leasing subsidiaries of commercial banks,
independent leasing companies, lease brokers, investment bankers, and also with
the manufacturers of equipment. Financial services companies compete on the
basis of service, effective rates and transaction structuring skills.
GATX Capital participates in selected areas where it thinks 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, rail and information technology. At December 31, 1996,
GATX Capital had approximately 700 financing contracts with 600 customers,
aggregating $1.8 billion of investments before reserves. Of this amount, 33%
consisted of investments associated with commercial jet aircraft, 20% railroad
equipment, 12% warehouse and production equipment, 12% information technology
equipment, 11% marine equipment, and 12% other.
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<PAGE>
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 26 terminals in 11 states, and seven 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, 1996, Terminals had a total storage capacity of 73 million
barrels. This includes 54 million barrels of bulk liquid storage capacity in the
United States, 7 million barrels in the United Kingdom, and an equity interest
in another 12 million barrels of storage capacity in Europe, Mexico 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 89% at the end of 1996; throughput for the year was 705 million
barrels.
For 1996, 54% of Terminals' revenue was derived from petroleum storage, 25% from
chemical storage, 20% from pipelines, and 1% from other products. Demand for
Terminals' facilities depends 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.
Terminals serves over 350 customers, including major oil and chemical companies
as well as trading firms and larger independent refiners. No single customer
accounts for more than 4% 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 terminaling companies. The domestic public
terminaling industry consists of Terminals, Paktank Corporation,
International-Matex Tank Terminals, and many smaller independent terminaling
companies. In addition to public terminaling companies, oil and chemical
companies also have significant storage capacity and compete with Terminals in a
number of markets. 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.
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 106
facilities covering approximately 22 million square feet of warehousing space in
North America with utilization of 91% at the end of 1996. Value-adding services
are strategically the most important benefit GATX Logistics provides. Examples
of these services are logistics planning, information management, just-in-time
delivery systems, packaging, sub-assembly, freight management and returns
management.
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<PAGE>
GATX Logistics serves about 600 customers, many of which are Fortune 1000
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 1996 was 19% motor
vehicle, 15% grocery, 13% farm and construction equipment, 12% consumer
products, 10% major appliances, 9% apparel and retail, 9% electronics, 4%
chemical, and 9% other. No single customer accounts for more than 10% of
Logistics' revenue.
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 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. 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 1996, ASC carried 24.6 million tons of cargo. ASC primarily transported iron
ore, limestone and coal aggregates. Other commodities transported include sand,
salt, potash, gypsum, grain, marble chips and slag. ASC's revenue source by
industry served during 1996 was 53% steel, 21% construction, 19% power
generation, and 7% other. No single customer accounts for more than 28% 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 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, and has one regional office.
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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 6,000 active employees, of whom 21%
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 1996 was $88 million and reflects
GATX's best estimate of the cost to remediate known environmental conditions.
Additions to the reserve were $12 million in 1996 and $14 million in 1995.
Expenditures charged to the reserve amounted to $18 million and $16 million in
1996 and 1995, respectively.
In 1996, GATX made capital expenditures of $17 million for environmental and
regulatory compliance compared to $18 million in 1995. 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 $20 million in
1997. GATX anticipates it will make annual expenditures at a similar level over
each of 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, 1996 on page
71, GATX Location of Operations (page reference is to the Annual Report to
Shareholders). The major portion of Terminals' land is owned; the balance,
including some of its dock facilities, is leased. Most of the warehouses
operated by GATX Logistics are leased; the others are managed for third parties.
Item 3. Legal Proceedings
- --------------------------
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. GATC was also permanently enjoined from any further infringement
of the patent. The Federal Circuit Court of Appeals has reversed the judgment
against GATC, and the appellant has filed a motion for an appeal to the United
States Supreme Court. Even in the event of an adverse decision on appeal to the
Supreme Court and reinstatement of the original judgment against GATC, GATX does
not believe the costs associated with the disposition of the affected cars will
have a material adverse effect on GATX.
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<PAGE>
On July 11, 1996, GATX/Airlog Company ("Airlog"), a California general
partnership of which a subsidiary of GATX Capital Corporation (a wholly-owned
subsidiary of GATX Corporation) ("Capital") is a partner, and Capital filed a
complaint for Declaratory Judgment against Evergreen International Airlines,
Inc., ("Evergreen") in the United States District Court for the Northern
District of California (No. C96-2494) seeking a declaration that neither Capital
nor Airlog has any liability to Evergreen as a result of the issuance of
Airworthiness Directive 96-01-03 (the "Airworthiness Directive") by the Federal
Aviation Administration (the "FAA") in January of 1996. The effect of the
Airworthiness Directive is to reduce significantly the amount of freight that
three of Evergreen's B747 aircraft may carry.
Between 1988 and 1990, these three aircraft, along with a fourth no longer owned
by Evergreen, were modified from passenger to freight configuration by
subcontractors of Airlog, with Evergreen's knowledge and consent, pursuant to
contracts between Airlog and Evergreen or one of its affiliates. These four
aircraft are part of a group of ten B747 aircraft (the "Affected Aircraft") that
were modified by subcontractors of Airlog pursuant to a design approved by the
FAA at the time the modifications were made, and which are subject to the
Airworthiness Directive. The three Evergreen aircraft were flown as part of its
fleet for more than five years, and the seven other modified aircraft were flown
by Evergreen and the three other operators for significant periods. Capital
guaranteed certain of Airlog's obligations to Evergreen. Capital did not issue
guarantees with respect to Airlog's obligations to any of Airlog's other
customers for the affected aircraft.
Evergreen filed an answer and counterclaim on August 1, 1996, asserting that
Airlog and Capital are liable to it under a number of legal theories in
connection with the application of the Airworthiness Directive to the three
aircraft. In an initial disclosure statement dated October 29, 1996, and served
on Airlog and Capital pursuant to applicable discovery rules, Evergreen alleges
to have suffered damages which it has calculated as follows: (i) out-of-service
costs amounting to approximately $16.2 million as of October 15, 1996; (ii)
denial of access to then currently favorable capital markets, resulting in an
alleged inability to issues shares in an initial public offering with a value of
as much as $1.8 billion; (iii) lost flight revenues and profits amounting to
approximately $25.8 million; (iv) lost business opportunities and profits
attributable to Evergreen's diminished 747 fleet capacity (which Evergreen did
not quantify, but has indicated is subject to further calculation); and
maintenance costs in responding to the Airworthiness Directive (and to related
airworthiness directives issued by the FAA) of approximately $1.6 million as of
March 1996. The counterclaim also seeks exemplary and punitive damages in an
unspecified amount. Airlog and Capital have filed a motion seeking partial
summary judgment as to four of Evergreen's counterclaims. Airlog and Capital
have alleged that three counterclaims, each for breach of warranty are barred by
the California Commercial Code's four-year statute of repose, and that a fourth
counterclaim, which seeks recovery for negligent misrepresentation is barred by
the "economic loss doctrine" which prevents contracting parties from attempting
to use tort law to avoid liability limitations they agreed to in their
contracts.
Capital learned that on December 18, 1996, General Electric Capital Corporation
and a subsidiary (collectively, "GECC") filed a Complaint in the Superior Court
for the county of San Francisco (Case No. 983351) against Airlog and Capital
among others. The Complaint asserts causes of action under a number of legal
theories arising out of the modification of three B747 aircraft from passenger
to freighter configuration. These aircraft were modified by subcontractors of
Airlog in 1991 with GECC's knowledge and consent, and are three of the ten
Affected Aircraft. The Complaint seeks direct and consequential damages which it
alleges may be in excess of $50 to $75 million, a declaration requiring
defendants promptly to repair the aircraft and punitive damages. To the best of
the Company's knowledge, no Summons has been served on any of the defendants in
this action.
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<PAGE>
On January 31, 1997, American International Airways, Inc. ("AIA") filed a
complaint in the United States District Court for the Northern District of
California (C97-0378) against Airlog, Capital, Airlog Management Corp., and
others asserting that Airlog and Capital are liable to it under a number of
legal theories in connection with the application of the Airworthiness Directive
to two aircraft owned by AIA. These aircraft were modified by subcontractors of
Airlog in 1992 and 1994 with AIA's knowledge and consent, and are two of the ten
Affected Aircraft. The Complaint seeks damages (to be trebled under one count of
the complaint) of an unspecified amount relating to lost revenues, lost profits,
denied access to capital markets, repair costs, disruption of its business plan,
lost business opportunities, maintenance and engineering costs, and other
additional consequential, direct, incidental and related damages. The Complaint
asks in the alternative for a recision of AIA's agreements with Airlog and a
return of amounts paid, and for injunctive relief directing that Airlog, and
certain individual defendants, properly staff and manage the correction of the
alleged deficiencies that caused the FAA to issue the Airworthiness Directive.
Consistent with its ongoing product support, Airlog continues to pursue, with
the apparent cooperation of each of the four operators of the Affected Aircraft,
including Evergreen, GECC and AIA, solutions to the FAA's concerns raised in the
Airworthiness Directive. While the results of any litigation are impossible to
predict with certainty, GATX believes that each of the foregoing claims are
without merit, and that Capital and Airlog have adequate defenses thereto.
In November of 1995, the New Jersey Department of Environmental Protection (the
"DEP") served GATX Terminals Corporation with a Notice of Violation alleging
that during 1994 and 1995 the marine vapor recovery units at its Carteret, New
Jersey facility produced emissions of carbon monoxide in excess of limits
allowed by operating permits for those units. The violation was the result of a
design flaw in the vapor recovery equipment, which was promptly corrected.
Terminals and the DEP are currently negotiating a resolution of the violation,
which could result in the assessment of a monetary penalty against Terminals in
excess of $100,000.
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) and dismissed April 1996; Terry, et al, v.
Southern Pacific, et al, filed December 1989 (No. 253604) and dismissed March
1996; Charles, et al, v. Calnev Pipe Line, Inc., et al, filed May 1990 (No.
256269) and settled March 1996; Mary Washington v. Southern Pacific, et al,
filed May 1990 (No. 256346) and settled March 1995; Stewart, et al, v. Southern
Pacific Railroad Co., et al, filed May 1990 (No. 256464) and settled May 1994 ;
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) and dismissed June 1995; Irby, et al, v.
Southern Pacific, et al, (No. 255715) filed April 1990 and settled May 1994;
Reese, et al, v. Southern Pacific, et al (No. 256434) filed May 1990 and settled
May 1994; Nancy Washington, et al, v. Southern Pacific, et al, (No. 256435)
filed May 1990 and settled April 1994. As Terminals' insurance carriers have
assumed the defense of these lawsuits without a reservation of rights and have
paid all of the settlements entered into between the parties to date, GATX
believes that the likelihood of a material adverse effect on GATX's consolidated
financial position or operations is remote.
-8-
<PAGE>
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
Ronald H. Zech Chairman and Chief Executive Officer 1996 53
David M. Edwards Vice President, Finance and 1994 45
Chief Financial Officer
David B. Anderson Vice President, Corporate Development, 1995 55
General Counsel and Secretary
William L. Chambers Vice President, Human Resources 1993 59
Gail L. Duddy Vice President, Compensation and 1997 44
Benefits
Ralph L. O'Hara Controller 1986 52
Brian A. Kenney Vice President and Treasurer 1997 37
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 and on April 26, 1996, Chairman. 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. Ms. Duddy joined GATX in 1992 as Director of Compensation and in
1995 also assumed responsibility for the benefits function. Prior to coming to
GATX, Ms. Duddy served as a Senior Compensation Consultant at William M. Mercer,
Inc. Mr. Kenney was Managing Director, Corporate Finance and Banking, for AMR
Corporation from 1990-1995.
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, 1996 on page 65, which is
incorporated herein by reference (page reference is to the Annual Report to
Shareholders).
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<PAGE>
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, 1996, on pages 66 and 67, 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, 1996, the management discussion and analysis of 1996 compared
to 1995 on pages 35, 36, 37, 43, 45, 47 and 48, the financial data of business
segments on pages 38 through 41, and the management discussion and analysis of
1995 compared to 1994 on pages 68, 69, and 70, 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,
1996, 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, 1996, 1995 and 1994 on page 42.
Consolidated Balance Sheets -- December 31, 1996 and 1995, on page 44.
Statements of Consolidated Cash Flows -- Years ended December 31, 1996,
1995 and 1994, on page 46.
Notes to Consolidated Financial Statements on pages 50 through 64.
Quarterly results of operations are contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1996 on page 65, 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.
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 14, 1997, which sections are
incorporated herein by reference. Information regarding officers is included at
the end of Part I.
-10-
<PAGE>
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 14, 1997, 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 14, 1997, which sections are incorporated herein by
reference. There are no persons known to the Company who beneficially owned as
of March 12, 1997 more than 5% of the Company's $3.875 Cumulative Convertible
Preferred Stock ("CCP Stock").
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, 1996, are filed in
response to Item 8:
Statements of Consolidated Income and Reinvested Earnings
-- Years ended December 31, 1996, 1995 and 1994
Consolidated Balance Sheets -- December 31, 1996 and 1995
Statements of Consolidated Cash Flows -- Years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
2. -Financial Statement Schedules: Page
Schedule I Condensed Financial
Information of Registrant.......18
Schedule II Valuation and Qualifying Accounts...22
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.
b) Current Report on Form 8-K dated January 24, 1997 with respect to
certain litigation filed against GATX/Airlog, a California
general partnership of which GATX Capital Corporation is a
partner, and GATX Capital Corporation.
-11-
<PAGE>
c) 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; Sixth Amendment to said Plan effective
January 31, 1997, submitted to the SEC along with the
electronic transmission of this Annual Report on Form 10-K.
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. First Amendment of said Plan effective as of
January 31, 1997 submitted to the SEC along with the
electronic transmission of this Annual Report on Form 10-K.
10C. Management Incentive Plan dated January 1, 1997, file number
1-2328. Submitted to the SEC along with the electronic
submission of this Report on Form 10-K.
10D. GATX Corporation Deferred Fee Plan for Directors, as Amended
and Restated as of October 25, 1996, file number 1-2328.
Submitted to the SEC along with the electronic submission of
this Report on Form 10-K.
10E. 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.
10F. 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
10G. 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.
10H. 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.
10I. 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.
10J. 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.
10K. Director's Deferred Stock Plan approved on July 26,1996,
effective as of April 26, 1996 1992, Summary of Plan
incorporated by reference to GATX's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1996, file
number 1-2328.
10L. 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.
10M. 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. Incorporated by reference to
GATX's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, file number 1-2328.
-13-
<PAGE>
Exhibit
Number Exhibit Description Page
10N. 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.
10O. 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.
10P. Letter Agreement dated May 31, 1995 between David B. Anderson
and GATX. Incorporated by reference to GATX's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, file
number 1-2328.
10Q. 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,
1996, pages 33-73, with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1996, 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, 1996, 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.
-14-
<PAGE>
Exhibit
Number Exhibit Description Page
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
Plan for the fiscal year ended December 31, 1995, file number
1-2328, incorporated by reference to GATX's Annual Report on
Form 10-K for the year ended December 31, 1995.
99C. Undertakings to the GATX Logistics Inc. 401(k) Cash
Accumulation Plan incorporated by reference to the
Form S-8 Registration Statement filed with the SEC on
June 19,1996, Registration No.33-06315.
-15-
<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, 1996.
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, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, 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 28, 1997
-16-
<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 By: /s/David B. Anderson
-------------------- -----------------------
Ronald H. Zech David B. Anderson
Chairman and (Attorney in Fact)
Chief Executive Officer March 19, 1997
March 19, 1997
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.
/s/Ronald H. Zech By /s/David B. Anderson
------------------------- ------------------------
Ronald H. Zech Chairman and David B. Anderson,
March 19, 1997 Chief Executive Officer (Attorney in Fact)
March 19, 1997
/s/David M. Edwards
------------------------
David M. Edwards Vice President Finance and
March 19, 1997 Chief Financial Officer
/s/Ralph L. O'Hara
--------------------------
Ralph L. O'Hara Controller and
March 19, 1997 Principal Accounting Officer
Franklin A. Cole Director
James M. Denny Director By /s/David B. Anderson
----------------------
Richard Fairbanks 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 19, 1997
-17-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
GATX CORPORATION
(PARENT COMPANY)
STATEMENTS OF INCOME
(In Millions)
Year Ended December 31
-------------------------
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Gross loss .............................. $ (1.3) $ (1.0) $ (3.2)
Costs and expenses
Interest ........................... 30.6 31.7 17.2
Provision for depreciation ......... 1.0 .8 .7
Selling, general and administrative 16.0 20.4 18.3
------ ------ ------
47.6 52.9 36.2
------ ------ ------
Loss before income taxes and share of net
income of subsidiaries ............. (48.9) (53.9) (39.4)
Income taxes (credit) ................... (17.7) (21.3) (14.2)
------ ------ ------
Loss before share of net income
of subsidiaries .................... (31.2) (32.6) (25.2)
Share of net income of subsidiaries ..... 133.9 133.4 116.7
------ ------ ------
Net income .............................. $ 102.7 $ 100.8 $ 91.5
====== ====== ======
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONT'D)
GATX CORPORATION
(PARENT COMPANY)
BALANCE SHEETS
(In Millions)
ASSETS
December 31
---------------------
1996 1995
-------- --------
<S> <C> <C>
Cash and cash equivalents ........... $ .2 $ .4
Operating lease assets and facilities 10.9 9.2
Less - Allowance for depreciation ... (3.4) (2.4)
-------- --------
7.5 6.8
Investment in subsidiaries .......... 1,283.3 1,223.1
Other assets ........................ 22.0 12.9
TOTAL ASSETS ........................ $ 1,313.0 $ 1,243.2
======== ========
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDERS' EQUITY
December 31
--------------------
1996 1995
------- -------
<S> <C> <C>
Accounts payable and accrued expenses ................. $ 16.6 $ 24.9
Due to subsidiaries ................................... 492.1 458.6
Other deferred items .................................. 29.4 41.9
-------- --------
Total liabilities and deferred items ............. 538.1 525.4
Shareholders' equity:
Preferred Stock .................................. 3.4 3.4
Common Stock ..................................... 14.4 14.3
Additional capital ............................... 329.0 324.8
Reinvested earnings .............................. 463.7 409.0
Cumulative foreign currency translation adjustment 11.4 13.4
-------- --------
821.9 764.9
Less - Cost of shares in treasury ................ (47.0) (47.1)
-------- --------
Total shareholders' equity ....................... 774.9 717.8
-------- --------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDERS' EQUITY ......................... $ 1,313.0 $ 1,243.2
======== ========
</TABLE>
-20-
<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
-------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ....................................... $ 102.7 $ 100.8 $ 91.5
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for depreciation .............. 1.0 .8 .7
Deferred income taxes (credit) .......... (6.8) (10.8) (5.8)
Share of net income of subsidiaries
less dividends received ............. (60.3) (61.0) (49.0)
Other (includes working capital) ................. (23.5) (4.3) 9.3
------ ------ ------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ............................. 13.1 25.5 46.7
INVESTING ACTIVITIES
Additions to operating lease assets and facilities (1.8) (.9) (.5)
------ ------ ------
NET CASH USED IN
INVESTING ACTIVITIES ............................. (1.8) (.9) (.5)
FINANCING ACTIVITIES
Issuance of Common Stock under
employee benefit programs .................... 3.1 5.5 4.6
Cash dividends to shareholders ................... (48.0) (45.3) (43.1)
Advances (to) from subsidiaries .................. 33.4 14.5 (6.7)
------ ------ ------
NET CASH USED IN
FINANCING ACTIVITIES ............................. (11.5) (25.3) (45.2)
NET (DECREASE) INCREASE
IN CASH AND CASH EQUIVALENTS ..................... $ (.2) $ (.7) $ 1.0
====== ===== ======
</TABLE>
-21-
<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, 1996:
Allowance for possible
losses - Note A $ 100.0 $ 12.5 $ 15.5 (B) $ (6.9) (C) $ 121.1
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
<FN>
Note A - Deducted from asset accounts.
Note B - Represents principally recovery of amounts previously written off.
Note C - Represents principally reductions in asset values charged off
or transferred to claims and uncollectible amounts.
</FN>
</TABLE>
-22-
<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
---------------------------------------------
1996 1995 1994 1993 1992
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average number of shares
of Common Stock outstanding 20.2 20.0 19.9 19.6 19.4
Shares issuable upon assumed exercise
of stock options, reduced by the
number of shares which could have
been purchased with the proceeds
from exercise of such options .3 .4 .3 .3 *
------- ------- ------ ------ ------
Total 20.5 20.4 20.2 19.9 19.4
======= ======= ====== ====== ======
Net income (loss) $ 102.7 $ 100.8 $ 91.5 $ 72.7 $ (16.5)
Deduct - Dividends paid and
accrued on Preferred Stock 13.2 13.2 13.3 13.3 13.3
------- ------- ------ ------ ------
Net income (loss), as adjusted $ 89.5 $ 87.6 $ 78.2 $ 59.4 $ (29.8)
======= ======= ====== ====== ======
Net income (loss) per share $ 4.37$ 4.30$ 3.88$ 2.99$ (1.53)
======= ======= ====== ====== ======
<FN>
* Common share equivalents are not considered in the computation of loss per share.
</FN>
</TABLE>
-23-
<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
-----------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Average number of shares used to
compute primary earnings per share 20.5 20.4 20.2 19.9 19.4
Common Stock issuable upon assumed
conversion of Preferred Stock 4.0 4.0 4.0 * *
------- ------- ------ ------ ------
Total 24.5 24.4 24.2 19.9 19.4
======= ======= ====== ====== ======
Net income (loss) as adjusted
per primary computation $ 89.5 $ 87.6 $ 78.2 $ 59.4 $ (29.8)
Add - Dividends paid and
accrued on Preferred Stock 13.2 13.2 13.3 * *
------- ------- ------ ------ ------
Net income (loss), as adjusted $ 102.7 $ 100.8 $ 91.5 $ 59.4 $ (29.8)
======= ======= ====== ====== ======
Net income (loss) per share,
assuming full dilution $ 4.19$ 4.13$ 3.78$ 2.99$ (1.53)
======= ======= ====== ====== ======
<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>
-24-
<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)
1996 1995 1994
-------- -------- ------
<S> <C> <C> <C>
Earnings available for fixed charges:
Net income $ 102.7 $ 100.8 $ 91.5
Add:
Income taxes 54.4 47.6 48.8
Equity in net earnings of affiliated companies,
net of distributions received 8.0 6.5 3.7
Interest on indebtedness and amortization
of debt discount and expense 202.8 170.1 148.2
Amortization of capitalized interest 3.7 1.1 1.1
Portion of rents representative of
interest factor (deemed to be one-third) 56.7 43.9 37.9
------ ------ ------
Total earnings available for fixed charges $ 428.3 $ 370.0 $ 331.2
====== ====== ======
Preferred dividend requirements $ 13.2 $ 13.2 $ 13.3
Ratio to convert preferred
dividends to pretax basis (A) 173% 169% 171%
------ ------ ------
Preferred dividend factor on pretax basis 22.8 22.3 22.7
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense 202.8 170.1 148.2
Capitalized interest 6.8 6.2 3.0
Portion of rents representative of interest
factor (deemed to be one-third) 56.7 43.9 37.9
------ ------ ------
Combined fixed charges and
preferred stock dividends $ 289.1 $ 242.5 $ 211.8
====== ====== ======
Ratio of earnings to combined fixed charges
and preferred stock dividends (B) 1.48X 1.53x 1.56x
<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>
-25-
<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, four foreign subsidiaries and an interest in one foreign
affiliate, Business Segment--Railcar Leasing and Management
GATX Financial Services, Inc. (Delaware)--56 domestic subsidiaries (which
includes GATX Capital Corporation), 12 foreign subsidiaries and six
domestic affiliates, Business Segment--Financial Services
GATX Terminals Corporation (Delaware)--three domestic subsidiaries, three
foreign subsidiaries, one domestic affiliate, and interests in 13 foreign
affiliates, Business Segment--Terminals and Pipelines
GATX Logistics, Inc. (Florida)--9 domestic subsidiaries and two foreign
subsidiaries, Business Segment--Logistics and Warehousing
American Steamship Company (New York)--12 domestic subsidiaries,
Business Segment--Great Lakes Shipping
-26-
<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; (v) Registration
Statement No. 33-61183 filed on July 20, 1995; and (vi) Registration Statement
No. 33-06315 on Form S-8 filed June 19, 1996 of GATX Corporation, of our report
dated January 28, 1997 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, 1996.
ERNST & YOUNG LLP
Chicago, Illinois
March 14, 1997
-27-
<PAGE>
EXHIBIT FILED WITH DOCUMENT
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; Sixth Amendment to said Plan effective
January 31, 1997, submitted to the SEC along with the
electronic transmission of this Annual Report on Form 10-K.
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. First Amendment of said Plan effective as of
January 31, 1997 submitted to the SEC along with the
electronic transmission of this Annual Report on Form 10-K.
10C. Management Incentive Plan dated January 1, 1997, file number
1-2328. Submitted to the SEC along with the electronic
submission of this Report on Form 10-K.
10D. GATX Corporation Deferred Fee Plan for Directors, as Amended
and Restated as of October 25, 1996, file number 1-2328.
Submitted to the SEC along with the electronic submission of
this 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,
1996, pages 33-73, with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1996, 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, 1996, 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.
SIXTH AMENDMENT OF
GATX CORPORATION 1995
LONG TERM INCENTIVE COMPENSATION PLAN
WHEREAS, GATX Corporation (the "Company") maintains the GATX
Corporation 1985 Long Term Incentive Compensation Plan (the 1985 "Plan"); and
WHEREAS, amendment of the Plan to permit deferred delivery of
option shares is now desirable;
NOW, THEREFORE, IT IS RESOLVED that, pursuant to paragraph I-5 of the
1985 Plan, the Plan be, and it hereby is, amended, effective with respect to
awards made on or after the date of adoption of the 1985 Plan in the following
particulars:
1. By substituting the following for the second and third sentences of
paragraph III.2 of the 1985 Plan:
"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
exercise (or by such other method as may be satisfactory to
the Committee). 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 to the Participant until
such shares are purchased upon exercise of the option and, if
delivery of the shares is deferred in accordance with
paragraph III.3(ii), not until the end of the deferral
period."
2. By adding the following at the end of paragraph III.3 of the 1985
Plan:
"Shares of Common Stock purchased pursuant to the exercise of
a Non-Qualified Stock Option shall be transferred to the
person entitled thereto (i) as soon as practicable after the
exercise; or (ii) at the end of such period of deferral as may
be specified or permitted by the Committee; provided that, if
transfer of shares is made pursuant to this clause (ii), the
Committee may, but shall not be required to, provide that the
person entitled to such deferred delivery will earn the right
to deferred delivery of additional shares of Company Stock
reflecting the value of dividends on the shares during
<PAGE>
the deferral period, or will receive dividend equivalents with
respect to such deferred shares in cash, with the cash amount
either paid currently or deferred with interest."
<PAGE>
FIRST AMENDMENT OF
GATX CORPORATION 1995
LONG TERM INCENTIVE COMPENSATION PLAN
WHEREAS, GATX Corporation (the "Company") maintains the GATX
Corporation 1995 Long Term Incentive Compensation Plan (the "1995 Plan"); and
WHEREAS, amendment of the Plan to permit deferred delivery
of option shares is now desirable;
NOW, THEREFORE, IT IS RESOLVED that, pursuant to paragraph I-5 of the
Plan, the Plan be, and it hereby is, amended, effective with respect to awards
made on or after the date of the adoption of the 1995 Plan, in the following
particulars:
1) By substituting the following for the second and third
sentences of paragraph III.2 of the Plan:
"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
exercise (or by such other method as may be satisfactory to
the Committee). 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 to the Participant until
such shares are purchased upon exercise of the option and, if
delivery of the shares is deferred in accordance with
paragraph III.3(ii), not until the end of the deferral
period."
2) By adding the following at the end of paragraph III.3 of the
Plan:
"Shares of Common Stock purchased pursuant to the exercise of
a Non-Qualified Stock Option shall be transferred to the
person entitled thereto (i) as
P:\WDOCS\TAXDEF95.AMDJanuary 20, 1997 (10:49am)
<PAGE>
soon as practicable after the exercise; or (ii) at the end of
such period of deferral as may be specified or permitted by
the Committee; provided that, if transfer of shares is made
pursuant to this clause (ii), the Committee may, but shall not
be required to, provide that the person entitled to such
deferred delivery will earn the right to deferred delivery of
additional shares of Company Stock reflecting the value of
dividends on the shares during the deferral period, or will
receive dividend equivalents with respect to such deferred
shares in cash, with the cash amount either paid currently or
deferred with interest."
P:\WDOCS\TAXDEF95.AMDJanuary 20, 1997 (10:49am)
<PAGE>
January 1, 1997
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, 1997 (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
1997 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
1997 MANAGEMENT INCENTIVE PLAN
PERFORMANCE
EVALUATION
EVALUATION CRITERIA PERCENTAGE
Performance was truly outstanding; consistently exceeded 150%
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 but not 50%
all job requirements were met and important goals
were not attained during the performance period.
Performance was not acceptable; few job
requirements 0% were met or goals 0%
attained during the performance period.
<PAGE>
EXHIBIT V
Exhibit intentionally omitted.
<PAGE>
GATX Corporation
Deferred Fee Plan
As Amended and Restated
As of October 25, 1996
1. Purpose
The purpose of the Deterred Fee Plan (the "Plan") is to provide
non-officer directors of GATX Corporation (the "Company") an
opportunity to receive that portion of their annual retainer and
meeting attendance fees paid in cash on a deferred basis.
2. Definitions
Unless the context otherwise requires, the following words as used
herein shall have the following meanings:
(a) "Board" -- The Board of Directors of the Company.
(b) "Directors' Fees" -- The annual retainer and Board and
committee meeting attendance fees paid to each non-officer
director, a portion of which is to be paid in cash (the "Cash
Portion"), and a portion of which is to be credited to an
account established for each Director in units equal to the
number of shares of GATX Corporation Common Stock which may be
purchased with the amount so credited.
(c) "Participant" -- An eligible member of the Board who elects to
participate in the Plan.
(d) "Deferred Fee" -- That part of the Cash Portion of the
Directors' Fees elected to be deferred hereunder.
3. Eligibility
Each non-officer member of the Board shall be eligible to participate
in the Plan.
4. Election of Deferred Compensation
Each eligible person elected as a director during a calendar year, may,
prior to the beginning of the next calendar quarter, elect to defer all
or any part of the Cash Portion of his or her Directors' Fees.
Currently eligible directors may elect prior to the end of any calendar
year to participate in the Plan with respect to Directors' Fees to be
paid in the subsequent calendar year. Once a Participant has made an
election to participate in the Plan, such participation shall continue
from year to year thereafter until withdrawn or
p:\wdocs\resateddeferfee.pln\March 7, 1997
<PAGE>
changed by submitting a completed election form before the beginning of
any succeeding calendar year. Elections shall be irrevocable during
each calendar year.
5. Manner of Electing Deferral
A Participant may elect to defer all or any part of the Cash Portion of
Directors' Fees by giving written notice to the Secretary of the
Company on the form of election attached hereto as Exhibit A. Such
notice shall include:
(1) the percentage of the Cash Portion of the Directors' Fees to
be deferred,
(2) an election to receive a cash payment of the deferred fee
either as a lump-sum or in annual installments (not to
exceed ten), and
(3) the date of the lump-sum payment or the first installment
payment (which may be January 15 of the year following the year
in which continuous service as a director terminates or January
15 of a stated year preceding the Participant's 71st birthday).
6. Deferred Fee Account
A Deferred Fee Account shall be maintained for each Participant
("Participant's Account"). Cash and interest thereon shall be credited
to a Participant's Account as set forth in the following paragraph.
Until payment of the Deferred Fees are made to the Participant in
accordance with Section 7, all amounts credited to a Participant's
Account shall accrue interest at a rate equal to the twenty-year US
Government Bond rate in effect on the 15th day of January, April, July
and October of each year. Interest shall be compounded monthly. As
promptly as practicable following the close of each calendar year, a
statement will be sent to each Participant reflecting the balance in
the Participant's Account as of the end of such year.
7. Payment of Deferred Fees
Each Participant shall be entitled to receive a cash payment equal in
amount to the Deferred Fees credited to such Participant's Account
(less taxes, if any, required to be withheld by the Federal or any
state or local government and paid over to such government for the
Participant) in accordance with such Participant's election(s) with
respect to date and manner of payment.
If an election is made to receive payments in annual installments, the
amount of the first payment shall be a fraction of the balance in the
Participant's Account as of the day preceding such payment, the
numerator of which shall be one and the denominator of
p:\wdocs\resateddeferfee.pln\March 7, 1997
<PAGE>
which shall be the total number of installments elected. The amount of
each subsequent payment shall be a fraction of the balance of the
Deferred Fees credited to the Participant's Account as of the day
preceding each subsequent payment, the numerator of which shall be one
and the denominator of which shall be the total number of installments
elected minus the number of installments previously paid. No withdrawal
may be made from a Participant's Account except as provided in this
Section 7.
In the event of a Participant's death, the Participant's designated
beneficiary shall continue to receive payment according to the
Participant's election(s). In the absence of a designated beneficiary,
the balance credited to the Participant's Account shall be determined
as of the date of death, and an amount equal to such balance shall be
paid in a single payment to the Participant's estate as soon as
reasonably possible thereafter.
A Participant who has elected installment payments and who is eligible
to receive such payments, or a Participant's beneficiary, may apply to
the Secretary of the Company for acceleration of the payments based on
hardship and demonstrated need. The Board of Directors of the Company
or a designated Committee thereof, shall consider the merits of each
such application and determine if the facts warrant permitting such an
acceleration. Any such determination of the Board or Committee shall be
final and binding on both parties.
8. Change of Control
Notwithstanding any other provision of the Plan or of Election Forms
executed by Participants hereunder, the full unpaid balance credited to
the Participant's Account shall be paid in a single payment to the
Participant or the Participant's beneficiary or estate, as applicable,
as promptly as practicable following the occurrence of both (a) a
change in control of GATX Corporation (as defined below) and (b) the
Participant's termination of service on the Board of Directors of GATX
Corporation.
For purposes of this Deferred Fee Plan, the term "change in control"
shall mean the occurrence of any of the following events:
(a) Receipt by GATX Corporation of a Schedule l3D report confirming
that a person or group owns beneficially 20 percent or more of
the stock of GATX Corporation.
(b) Any purchase under a non-GATX Corporation tender or exchange
offer for stock of GATX Corporation following which the offeror
owns beneficially 20 percent or more of such stock.
(c) Shareholder approval of any merger in which GATX Corporation is
not the surviving corporation or survives only as a subsidiary
of another corporation, consolidations or sales of all, or
substantially all, of GATX Corporation's assets.
p:\wdocs\resateddeferfee.pln\March 7, 1997
<PAGE>
(d) A change in the majority of the Board of Directors of GATX
Corporation not recommended by the incumbent directors.
9. Participant's Rights Unsecured
No fund is to be created to meet payment obligations under this Plan,
and the right of a Participant to receive any unpaid portion of any
amounts credited to the Participant's Account shall be an unsecured
claim against the general assets of the Company.
10. Non-assignability
The right of a Participant to receive any unpaid portion of any amounts
credited to his or her account shall not be assigned, transferred,
pledged or encumbered or be subject in any manner to alienation or
anticipation, except that a Participant may designate, on forms
provided by the Company, a beneficiary to receive unpaid installments
in the event of such Participant 's death.
11. Administration
The administrator of this Plan shall be the Secretary of the Company,
who shall have authority to adopt rules and regulations for carrying
out the Plan and to interpret and implement the provisions hereof.
12. Amendment and Termination
This Plan may at any time be amended, modified or terminated by the
Board. No amendment, modification or termination shall, without the
consent of a Participant, adversely affect such Participant's rights
with respect to amounts credited to the Participant's Account.
13. Effective Date
The Plan, as amended, will become effective on the day, month and year
first above written, and will continue in effect until terminated by
the Board.
GATX Corporation
By: /S/ William L. Chambers
----------------------------
Vice President - Human Resources
p:\wdocs\resateddeferfee.pln\March 7, 1997
<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
---------------------------------------------
1996 1995 1994 1993 1992
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average number of shares
of Common Stock outstanding 20.2 20.0 19.9 19.6 19.4
Shares issuable upon assumed exercise
of stock options, reduced by the
number of shares which could have
been purchased with the proceeds
from exercise of such options .3 .4 .3 .3 *
------- ------- ------ ------ ------
Total 20.5 20.4 20.2 19.9 19.4
======= ======= ====== ====== ======
Net income (loss) $ 102.7 $ 100.8 $ 91.5 $ 72.7 $ (16.5)
Deduct - Dividends paid and
accrued on Preferred Stock 13.2 13.2 13.3 13.3 13.3
------- ------- ------ ------ ------
Net income (loss), as adjusted $ 89.5 $ 87.6 $ 78.2 $ 59.4 $ (29.8)
======= ======= ====== ====== ======
Net income (loss) per share $ 4.37$ 4.30$ 3.88$ 2.99$ (1.53)
======= ======= ====== ====== ======
<FN>
* Common share equivalents are not considered in the computation of loss per share.
</FN>
</TABLE>
<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
-----------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Average number of shares used to
compute primary earnings per share 20.5 20.4 20.2 19.9 19.4
Common Stock issuable upon assumed
conversion of Preferred Stock 4.0 4.0 4.0 * *
------- ------- ------ ------ ------
Total 24.5 24.4 24.2 19.9 19.4
======= ======= ====== ====== ======
Net income (loss) as adjusted
per primary computation $ 89.5 $ 87.6 $ 78.2 $ 59.4 $ (29.8)
Add - Dividends paid and
accrued on Preferred Stock 13.2 13.2 13.3 * *
------- ------- ------ ------ ------
Net income (loss), as adjusted $ 102.7 $ 100.8 $ 91.5 $ 59.4 $ (29.8)
======= ======= ====== ====== ======
Net income (loss) per share,
assuming full dilution $ 4.19$ 4.13$ 3.78$ 2.99$ (1.53)
======= ======= ====== ====== ======
<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>
<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)
1996 1995 1994
-------- -------- ------
<S> <C> <C> <C>
Earnings available for fixed charges:
Net income $ 102.7 $ 100.8 $ 91.5
Add:
Income taxes 54.4 47.6 48.8
Equity in net earnings of affiliated companies,
net of distributions received 8.0 6.5 3.7
Interest on indebtedness and amortization
of debt discount and expense 202.8 170.1 148.2
Amortization of capitalized interest 3.7 1.1 1.1
Portion of rents representative of
interest factor (deemed to be one-third) 56.7 43.9 37.9
------ ------ ------
Total earnings available for fixed charges $ 428.3 $ 370.0 $ 331.2
====== ====== ======
Preferred dividend requirements $ 13.2 $ 13.2 $ 13.3
Ratio to convert preferred
dividends to pretax basis (A) 173% 169% 171%
------ ------ ------
Preferred dividend factor on pretax basis 22.8 22.3 22.7
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense 202.8 170.1 148.2
Capitalized interest 6.8 6.2 3.0
Portion of rents representative of interest
factor (deemed to be one-third) 56.7 43.9 37.9
------ ------ ------
Combined fixed charges and
preferred stock dividends $ 289.1 $ 242.5 $ 211.8
====== ====== ======
Ratio of earnings to combined fixed charges
and preferred stock dividends (B) 1.48X 1.53x 1.56x
<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>
GATX Review of Financial Operations
- -------------------------------------------------------------------------------
Reports of GATX Management and of Ernst & Young LLP,
Independent Auditors 34
Management Discussion and Analysis: 1996 Compared to 1995
(Continued on pages 43, 45 and 47) 35
Financial Data of Business Segments 38
Statements of Consolidated Income and Reinvested Earnings 42
Consolidated Balance Sheets 44
Statements of Consolidated Cash Flows 46
Notes to Consolidated Financial Statements 50
Quarterly Results of Operations (Unaudited) and 65
Common and Preferred Stock Information
Selected Financial Data 66
Management Discussion and Analysis: 1995 Compared to 1994 68
- -------------------------------------------------------------------------------
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.
Financial Services represents GATX Capital Corporation and its subsidiaries and
joint ventures (Capital), which arrange and service the financing of equipment
and other capital assets on a worldwide basis.
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.
Logistics and Warehousing represents GATX Logistics, Inc. (Logistics), which
provides distribution and logistics support services and warehousing facilities
throughout North America.
Great Lakes Shipping represents American Steamship Company (ASC), which operates
self-unloading vessels on the Great Lakes.
-33-
<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 1996 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.
Ronald H. Zech
Chairman and Chief
Executive Officer
David M. Edwards
Vice President Finance
and Chief Financial Officer
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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 28, 1997
- 34 -
<PAGE>
Management Discussion and Analysis
1996 Compared to 1995
GATX reported record net income of $103 million or $4.37 per common share for
the year ended December 31, 1996 compared to $101 million or $4.30 per common
share for 1995. On a fully diluted basis, earnings per share were $4.19 compared
to $4.13 in the prior year. This improvement was principally due to record
earnings at Transportation and Capital. However, Terminals' net income decreased
substantially from the prior year. ASC and Logistics' earnings were relatively
flat with 1995. GATX's return on common equity for 1996 was 15.4% compared to
16.7% in 1995. The comparative performance for 1995 versus 1994 is discussed in
the prior year's management discussion on pages 68, 69 and 70 of this report.
RAILCAR LEASING AND MANAGEMENT Transportation's gross income of $428 million
increased $67 million from 1995. The mid-1996 acquisition of the remaining 55%
interest in CGTX, Transportation's Canadian railcar affiliate, accounted for $27
million of the increase; previously the 45% interest had been accounted for as
an equity investment. The remainder of the revenue increase is due to the full
year effect of a record number of railcar additions in 1995, another strong year
of fleet additions in 1996, and an increase in average rental rates. In addition
to the 8,700 cars at CGTX, over 4,400 cars were added in 1996. At the end of
1996, Transportation had 73,200 railcars on lease in North America. With a total
fleet of 77,500 cars, utilization ended the year at 95%, up from 94% utilization
at the end of 1995. Fleet additions in 1997 are expected to remain strong.
Net income of $68 million increased 8% over 1995, reflecting the higher revenues
and the impact of CGTX partially offset by higher repair costs and other
operating and ownership expenses. Operating margins improved slightly as growth
in revenues exceeded the increase in fleet repair costs and SG&A expenses.
Repair costs increased 10% due to the expanded fleet size, but decreased as a
percentage of revenue from 1995, in part due to the efficiencies from the major
service center upgrade program completed last year. The percentage of cars
repaired at Transportation's service centers increased to 71% from 65% last
year, indicating a decreased dependence on outside contract repair shops.
Throughput days, the time it takes a railcar to be repaired through the
Transportation service center network, declined from an average of 38 days in
1995 to 32 days in 1996. Asset ownership costs, consisting of operating lease
rents, depreciation, and interest expense, increased as a result of the growing
fleet. Equity in earnings of affiliates declined from 1995 due to the
aforementioned change in accounting for CGTX.
FINANCIAL SERVICES Capital's gross income of $337 million was $119 million or
55% higher than 1995. All major revenue categories, including lease and interest
income, gains on sales of assets, and fees were higher. In addition, equipment
sales added $36 million to gross income. Equipment sales represents a new
revenue category arising from the October 1996 acquisition of Centron, a
technology equipment supplier. Lease income grew to $196 million in 1996
compared to $140 million in 1995 due to the full year effect of the October 1995
acquisition of Sun Financial and new volume. Gains on sales of assets were $36
million, a small increase from last year. Fee income was a record $32 million,
$13 million higher than the prior period due to a high level of residual sharing
on managed asset sales. Fee income includes residual sharing, portfolio
management, and transaction arrangement income. Gains on sales of assets and
transaction based fees do not occur evenly from period to period.
Net income was a record $46 million, a 39% increase from last year, due to the
higher revenue, improved earnings from affiliates, and a lower loss provision,
offset in part by
- 35 -
<PAGE>
increased interest, operating and SG&A costs. Equity earnings of $14 million
increased $2 million primarily from the earnings of Locomotive Leasing Partners,
a joint venture established in 1996 with EMD/General Motors. The provision for
possible losses of $13 million decreased $5 million from last year. Capital's
allowance for possible losses of $114 million represents 6.6% of net
investments, compared to 6.5% last year. Interest expense was higher as debt
balances increased to fund the net growth in the portfolio, although average
interest rates were modestly lower than last year. Increased operating costs
include the cost of equipment sales, the counterpart to the new revenue
category, as well as increased depreciation and operating lease expense to
support the larger investment base. Selling, general, and administrative
expenses increased due to the full year effect of the late 1995 Sun Financial
acquisition, the Centron acquisition, and higher human resource costs.
While significant commercial aircraft investments were completed in 1996,
Capital also has managed its portfolio to diversify its asset mix further,
resulting in a relatively lower concentration of aircraft as a percent of total
portfolio investments. Aircraft decreased to 33% of the portfolio from 39% in
1995, while technology, rail, and marine assets all increased.
TERMINALS AND PIPELINES Terminals' gross income for 1996 of $298 million was 5%
less than 1995 resulting from general softness in both the domestic and
international petroleum markets. The petroleum business environment since the
second half of 1995 has been characterized by backwardated markets, historically
low petroleum inventory levels, and lower pricing due to increased competition.
Backwardation indicates that the economics in the petroleum futures market, as
characterized by the spread between spot and future prices, are not providing an
incentive to store product.
While throughput of petroleum products remained strong, rates declined.
Throughput for 1996 of 705 million barrels at wholly-owned locations increased
8% from 655 million barrels last year. Average utilization for the year was 86%,
down from 1995's average of 88%, though 1996 year-end utilization was 89%.
Balanced against the difficult petroleum terminaling markets were continued
strong chemical demand as well as very good pipeline results. Terminals'
pipelines serve the growing Nevada and Florida markets, and those pipelines
continue to be enhanced and expanded.
Terminals' net income of $13 million declined from last year's $31 million. The
difficult petroleum terminaling markets resulted in decreased operating margins
at a number of key locations, including New York Harbor, United Kingdom,
Houston, and Los Angeles. Although Terminals has been able to reduce its overall
cost base, results have been impacted by rationalization costs and consulting
charges. Overall operating costs decreased $5 million or 3% from 1995. Fixed
asset ownership costs, which include depreciation and interest, increased to 34%
of revenue from 29% in 1995 due to significant facility and infrastructure
investments. Terminals' transformation initiatives led to increased expense for
consulting studies and rationalization costs; these initiatives continue to
address on-going cost reduction and productivity enhancements. Equity in
earnings of affiliates of $12 million decreased $3 million from last year
primarily from the effects of lower petroleum storage, particularly in
Singapore, partially offset by higher earnings from a Japanese affiliate which
completed its rebuilding from the 1995 Kobe earthquake.
Going into 1997, Terminals continues to face a difficult petroleum storage
market and is continuing its rationalization process, as well as its evaluation
of its markets and facilities.
- 36 -
<PAGE>
LOGISTICS AND WAREHOUSING Logistics' gross income of $267 million decreased 2%
from 1995 due to the impact of lost business partially offset by increased
business with existing contract customers. Total warehousing capacity at
year-end 1996 of 21.5 million square feet decreased 12% from last year's 24.4
million square feet in part due to the planned effort to eliminate low margin
public business. Space utilization was 91% at year end compared to 97% last
year. Empty space was particularly troublesome in certain East Coast markets.
Net income of $.9 million was $.4 million higher than last year despite the
lower revenues due to an improved margin percentage and lower reserve needs.
Margins for 1996 were 10.5% compared with 10.0% last year, though significant
empty space costs compressed the improvement. In addition, information systems
costs continued to increase to better meet customer needs.
Logistics continues to implement its plan of pursuing contract business and
reducing low margin public business. By emphasizing key customer relationships,
Logistics successfully expanded volume with several important existing
customers. However, this strategy is evolutionary and may take several years to
improve earnings significantly.
GREAT LAKES SHIPPING ASC's gross income in 1996 was $85 million, a 1% increase
from last year. Revenue increased despite lower tonnage carried, as freight
rates per ton increased, both for normal increases as well as the pass-through
of a portion of the increase in sharply higher fuel costs. Tonnage carried in
1996 totaled 24.6 million tons, a 4% decrease from the 25.5 million tons carried
last year. Adverse weather conditions in early 1996 hampered the start of the
navigation season, but all customer needs and requirements were satisfied.
Customer demand remained strong throughout the 1996 season. Iron ore and
limestone tonnage increased while coal tonnage decreased.
Net income of $6.8 million decreased slightly from 1995 primarily due to the
lower tonnage carried, lower interest income on invested funds, and higher fuel
costs, offset in part by favorable operating and claims experience. Contribution
margin per ton was 2% greater than the prior year, reflecting a change in mix of
commodities carried. High fuel costs are expected to persist in 1997, although
certain customer contracts allow for fuel escalation costs above a specified
range to be recouped.
The environment on the Great Lakes remains competitive, with supply and demand
for vessel capacity approximately in balance. ASC carried an estimated 22% of
the total U.S. flag Great Lakes tonnage in 1996, down slightly from last year.
U.S. flag tonnage was 110 million tons, an increase of 5 million tons from 1995.
Iron ore cargoes represented 46% of ASC's tonnage, an increase from 40% last
year. Raw steel production was approximately 88% of capacity in late 1996,
consistent with 1995 utilization.
CORPORATE AND OTHER Corporate and Other net expense of $31 million decreased $2
million from 1995 primarily due to the reversal of a litigation reserve
following the successful defense of previously reported litigation against GATX.
FORWARD-LOOKING STATEMENTS Certain statements in the Management's Discussion and
Analysis constitute forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Although the Company believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, such statements
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected.
- 37 -
<PAGE>
Financial Data of Business Segments
- -------------------------------------------------------------------------------
GATX provides services to a variety of capital goods markets through five
principal business segments. The financial data 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 parent company
interest expense. 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 41 to enable the determination of segment profitability
before deducting such costs.
<TABLE>
<CAPTION>
SEGMENT PROFITABILITY (IN MILLIONS)
Gross Income 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 427.9 $ 360.9 $ 322.1 $ 302.2 $ 289.3
Financial Services 337.3 217.9 206.8 204.0 177.7
Terminals and Pipelines 297.6 313.4 303.1 281.1 266.5
Logistics and Warehousing 267.4 272.4 244.2 224.4 212.2
Great Lakes Shipping 85.2 83.5 82.4 80.6 78.7
- -----------------------------------------------------------------------------------------------
Subtotal 1,415.4 1,248.1 1,158.6 1,092.3 1,024.4
Corporate and Other (1.0) (1.7) (3.6) (5.4) (5.3)
- -----------------------------------------------------------------------------------------------
Consolidated $ 1,414.4 $ 1,246.4 $ 1,155.0 $ 1,086.9 $ 1,019.1
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Income Before Income Taxes, Equity
in Net Earnings of Affiliated
Companies and Cumulative
Effect of Accounting Changes 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 103.8 $ 90.7 $ 79.6 $ 74.4 $ 68.4
Financial Services 56.1 36.7 34.4 34.5 (38.9)
Terminals and Pipelines 3.0 30.3 33.2 30.2 19.8
Logistics and Warehousing 3.8 3.2 1.6 2.5 3.8
Great Lakes Shipping 10.5 10.8 8.8 10.2 9.3
- -----------------------------------------------------------------------------------------------
Subtotal 177.2 171.7 157.6 151.8 62.4
Corporate and Other:
Selling, general and
administrative expense (16.0) (20.4) (18.3) (22.9) (18.9)
Interest expense (30.6) (31.8) (17.2) (18.4) (23.4)
Other, net (1.9) (2.5) (4.3) (6.1) (5.2)
- -----------------------------------------------------------------------------------------------
Subtotal (48.5) (54.7) (39.8) (47.4) (47.5)
- -----------------------------------------------------------------------------------------------
Consolidated $ 128.7 $ 117.0 $ 117.8 $ 104.4 $ 14.9
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Equity in Net Earnings
of Affiliated Companies 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 2.9 $ 5.4 $ 4.7 $ 4.5 $ 4.5
Financial Services 13.6 11.3 5.6 5.1 7.7
Terminals and Pipelines 11.9 14.7 12.2 10.1 11.8
- -----------------------------------------------------------------------------------------------
Consolidated $ 28.4 $ 31.4 $ 22.5 $ 19.7 $ 24.0
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Income Before Cumulative
Effect of Accounting Changes 1996 1995 1994 1993(A) 1992(B)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 67.7 $ 62.9 $ 55.1 $ 47.6 $ 49.4
Financial Services 45.9 32.6 24.9 21.5 (16.7)
Terminals and Pipelines 12.6 31.0 31.9 26.5 23.4
Logistics and Warehousing .9 .5 (.5) .1 .9
Great Lakes Shipping 6.8 7.0 5.6 6.8 6.2
- -----------------------------------------------------------------------------------------------
Subtotal 133.9 134.0 117.0 102.5 63.2
Corporate and Other (31.2) (33.2) (25.5) (29.8) (33.9)
- -----------------------------------------------------------------------------------------------
Consolidated $ 102.7 $ 100.8 $ 91.5 $ 72.7 $ 29.3
- -----------------------------------------------------------------------------------------------
<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.
(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>
- 38 -
<PAGE>
Financial Data of Business Segments (Continued)
- -------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
FINANCIAL POSITION (IN MILLIONS)
Identifiable
Assets 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 2,387.1 $ 2,041.9 $ 1,882.8 $ 1,701.0 $ 1,694.7
Financial Services 1,808.9 1,503.3 1,255.8 1,240.1 1,320.0
Terminals and Pipelines 1,193.5 1,101.5 1,022.5 872.5 816.2
Logistics and Warehousing 161.8 171.6 172.6 172.8 165.2
Great Lakes Shipping 179.6 187.2 189.8 194.5 204.8
- ------------------------------------------------------------------------------------------
Subtotal 5,730.9 5,005.5 4,523.5 4,180.9 4,200.9
Corporate and Other 30.7 21.9 20.9 25.0 27.3
Intersegment Amounts (1,011.4) (984.5) (893.7) (813.8) (801.9)
- ------------------------------------------------------------------------------------------
Consolidated $ 4,750.2 $ 4,042.9 $ 3,650.7 $ 3,392.1 $ 3,426.3
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Long-Term Debt
and Capital Lease Obligations 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 1,169.9 $ 979.2 $ 874.9 $ 744.8 $ 744.1
Financial Services 1,216.1 888.9 688.3 715.3 728.4
Terminals and Pipelines 649.1 560.7 506.8 422.8 389.0
Logistics and Warehousing 1.9 2.4 13.1 17.1 10.3
Great Lakes Shipping 108.0 113.2 117.7 122.6 127.1
- ------------------------------------------------------------------------------------------
Subtotal 3,145.0 2,544.4 2,200.8 2,022.6 1,998.9
Intersegment Amounts (480.9) (451.9) (395.7) (308.8) (274.3)
- ------------------------------------------------------------------------------------------
Consolidated $ 2,664.1 $ 2,092.5 $ 1,805.1 $ 1,713.8 $ 1,724.6
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Deferred Income
Taxes (Benefit) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 257.9 $ 192.8 $ 188.3 $ 181.0 $ 175.1
Financial Services 17.8 9.7 (.1) (7.1) (7.8)
Terminals and Pipelines 96.1 90.4 85.2 87.0 76.8
Logistics and Warehousing 2.1 .5 .9 .8 (.1)
Great Lakes Shipping 11.3 9.7 8.2 6.8 4.5
- ------------------------------------------------------------------------------------------
Subtotal 385.2 303.1 282.5 268.5 248.5
Corporate and Other (46.0) (38.3) (25.0) (20.3) (14.4)
- ------------------------------------------------------------------------------------------
Consolidated $ 339.2 $ 264.8 $ 257.5 $ 248.2 $ 234.1
- ------------------------------------------------------------------------------------------
</TABLE>
- 39 -
<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 asset sales 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.
<TABLE>
<CAPTION>
ITEMS AFFECTING CASH FLOW (IN MILLIONS)
Cash From Operations
and Portfolio Proceeds 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities $ 297.5 $ 205.1 $ 265.4 $ 229.6 $ 211.3
Portfolio proceeds 354.8 282.0 212.3 243.4 155.0
- --------------------------------------------------------------------------------
Consolidated $ 652.3 $ 487.1 $ 477.7 $ 473.0 $ 366.3
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Net Cash Provided
By Operating Activities 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 177.4 $ 141.5 $ 118.0 $ 136.5 $ 108.7
Financial Services 102.2 8.5 67.7 33.0 45.8
Terminals and Pipelines 54.0 70.6 83.5 71.2 82.4
Logistics and Warehousing 17.2 14.3 9.5 4.9 14.5
Great Lakes Shipping 8.9 18.1 8.2 11.4 17.6
- --------------------------------------------------------------------------------
Subtotal 359.7 253.0 286.9 257.0 269.0
Corporate and Other (62.2) (47.9) (21.5) (27.4) (57.7)
- --------------------------------------------------------------------------------
Consolidated $ 297.5 $ 205.1 $ 265.4 $ 229.6 $ 211.3
- --------------------------------------------------------------------------------
</TABLE>
- 40 -
<PAGE>
<TABLE>
<CAPTION>
Data of Business Segments (Continued)
- --------------------------------------------------------------------------------
Provision For
Depreciation and Amortization 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 86.8 $ 76.1 $ 68.3 $ 63.9 $ 62.6
Financial Services 45.3 32.0 35.1 29.5 21.1
Terminals and Pipelines 51.9 45.3 43.5 41.0 38.6
Logistics and Warehousing 11.1 11.1 11.5 10.2 10.1
Great Lakes Shipping 6.3 6.2 6.0 5.6 5.6
- --------------------------------------------------------------------------------
Subtotal 201.4 170.7 164.4 150.2 138.0
Corporate and Other 1.0 .9 .7 .5 .3
- --------------------------------------------------------------------------------
Consolidated $ 202.4 $ 171.6 $ 165.1 $ 150.7 $ 138.3
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Capital Additions and
Portfolio Investments 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 386.8 $ 392.6 $ 285.4 $ 195.3 $ 116.6
Financial Services 659.3 388.5 279.2 302.1 178.0
Terminals and Pipelines 129.5 148.6 154.4 77.8 76.2
Logistics and Warehousing 6.6 6.4 8.1 14.1 16.0
Great Lakes Shipping .8 .7 .7 .1 .6
- --------------------------------------------------------------------------------
Subtotal 1,183.0 936.8 727.8 589.4 387.4
Corporate and Other 1.8 .9 .5 7.0 .1
- --------------------------------------------------------------------------------
Consolidated $ 1,184.8 $ 937.7 $ 728.3 $ 596.4 $ 387.5
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Interest Expense 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 108.5 $ 92.2 $ 70.0 $ 69.6 $ 87.3
Financial Services 86.1 68.4 62.7 65.4 71.9
Terminals and Pipelines 53.5 46.4 39.7 39.0 40.3
Logistics and Warehousing .3 .8 1.0 .7 1.7
Great Lakes Shipping 7.5 7.8 8.1 9.2 9.5
- --------------------------------------------------------------------------------
Subtotal 255.9 215.6 181.5 183.9 210.7
Corporate and Other 30.6 31.8 17.2 18.4 23.4
Intersegment Amounts (83.7) (77.3) (50.5) (50.5) (58.0)
- --------------------------------------------------------------------------------
Consolidated $ 202.8 $ 170.1 $ 148.2 $ 151.8 $ 176.1
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Long-Term Debt and Capital
Lease Obligation Maturities 1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and
Management $ 62.3 $ 39.9 $ 55.1 $ 95.3 $ 34.2
Financial Services 218.3 162.0 136.7 116.8 105.9
Terminals and Pipelines 13.0 80.0 48.0 23.1 72.3
Logistics and Warehousing .4 .1 .1 .1 .1
Great Lakes Shipping 5.8 5.8 5.7 5.7 5.7
- --------------------------------------------------------------------------------
Consolidated $ 299.8 $ 287.8 $ 245.6 $ 241.0 $ 218.2
- --------------------------------------------------------------------------------
</TABLE>
- 41 -
<PAGE>
<TABLE>
<CAPTION>
Statements of Consolidated Income and Reinvested Earnings
- --------------------------------------------------------------------------------------
GATX Corporation and Subsidiaries
In Millions Except Per Share Data/Year Ended December 31
1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross Income $ 1,414.4 $ 1,246.4 $ 1,155.0
Costs and Expenses
Operating expenses 695.1 625.8 579.5
Interest 202.8 170.1 148.2
Provision for depreciation
and amortization 202.4 171.6 165.1
Provision for possible losses 12.5 18.4 19.2
Selling, general and administrative 172.9 143.5 125.2
----------- ----------- -----------
1,285.7 1,129.4 1,037.2
----------- ----------- -----------
Income Before Income Taxes and Equity
in Net Earnings of Affiliated Companies 128.7 117.0 117.8
Income Taxes 54.4 47.6 48.8
----------- ----------- -----------
Income Before Equity in Net
Earnings of Affiliated Companies 74.3 69.4 69.0
Equity in Net Earnings
of Affiliated Companies 28.4 31.4 22.5
----------- ----------- -----------
Net Income 102.7 100.8 91.5
Reinvested earnings at beginning of year 409.0 353.5 305.1
Dividends declared on
Common and Preferred Stock (48.0) (45.3) (43.1)
----------- ----------- -----------
Reinvested Earnings at End of Year $ 463.7 $ 409.0 $ 353.5
=========== =========== ===========
- ---------------------------------------------------------------------------------------
Per Share Data
Net income $ 4.37 $ 4.30 $ 3.88
Net income, assuming full dilution 4.19 4.13 3.78
Dividends declared per common share 1.72 1.60 1.50
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) 20,483 20,359 20,153
- ----------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
- 42 -
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF INCOME
1996 COMPARED TO 1995
OVERVIEW The comparison of 1996 versus 1995 gross income and expenses is heavily
influenced by the effects of three recent acquisitions: CGTX, Centron, and Sun
Financial. General American Transportation acquired the remaining interest in
CGTX in mid-1996. GATX Capital acquired the remaining interest in Centron in
late 1996 and Sun Financial in late 1995. Because GATX previously held less than
majority interests in CGTX and Centron, their results were accounted for as
equity in earnings of affiliates; they are now fully consolidated.
Gross Income of $1.4 billion increased $168 million or 13% from 1995. Capital's
revenue increased $119 million due to Centron's equipment sales and other
revenue, a full year of Sun Financial results, the increased portfolio size, and
strong fee income. Railcar revenues increased as a result of a larger active
railcar fleet and $27 million of CGTX revenue. Terminaling revenue declined $16
million primarily due to highly competitive petroleum storage pricing.
Operating Expenses of $695 million are 11% higher than last year. Centron's cost
of equipment sales accounted for $33 million of the increase, with most of the
remaining increase attributable to continued sale-leaseback financings at
Transportation and Capital. To the extent that sale-leaseback financing is used
instead of traditional debt financing, operating lease rent expense, a component
of operating expenses, will increase instead of depreciation and interest
expense. Logistics' and Terminals' operating expenses were lower, reflecting
their reduced revenues.
Interest Expense of $203 million increased 19% as the result of higher average
debt balances to fund the growth of the business, somewhat offset by lower
interest rates. Over half of the increase occurred at Capital.
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 both 1996
and 1995.
Depreciation and Amortization Expense increased $31 million due to the increased
asset base. Capital's depreciation increased $13 million due to increased
investment. Transportation's depreciation increased as a result of CGTX and a
larger domestic fleet. A larger asset base at Terminals, including regulatory
and maintenance improvements, added $6 million to depreciation.
The Provision for Possible Losses of $13 million, which is largely attributable
to Capital, was less than the prior year based on the current assessment of
reserve needs.
Selling, General and Administrative Expenses were $29 million higher than last
year, $15 million of which is incremental from the three aforementioned
acquisitions. In addition, expenses increased for human resource costs,
information systems initiatives, consulting, and Terminals' rationalization
costs.
Income Tax Expense of $54 million represents an effective tax rate of 42%,
somewhat higher than last year's 41%. The effective tax rate exceeded the 35%
federal statutory rate because of state taxes, foreign income, and
non-deductible items.
Equity in Net Earnings of Affiliated Companies of $28 million declined $3
million from the prior year. The consolidation of CGTX and Centron during the
year changed the reporting from the equity method for those two operations which
reduced equity earnings by $2 million from 1995. Capital's rail and technology
joint ventures reported increased earnings, offset by lower performance at
Terminals' petroleum joint venture in Singapore.
Consolidated Net Income of $103 million, an increase of $2 million from last
year, was achieved on the strength of record earnings at Capital and
Transportation, offset by a decline at Terminals. These consolidated results
represent the third consecutive year of record earnings for GATX Corporation.
- 43 -
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
GATX Corporation and Subsidiaries
In Millions/December 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and Cash Equivalents $ 46.2 $ 34.8
Receivables
Trade accounts 130.1 117.0
Finance leases 761.3 672.2
Secured loans 222.6 239.9
Less - Allowance for possible losses (121.1) (100.0)
-------- --------
992.9 929.1
Operating Lease Assets and Facilities
Railcars and support facilities 2,436.5 1,945.1
Tank storage terminals and pipelines 1,377.8 1,242.3
Great Lakes vessels 199.3 204.1
Operating lease investments and other 605.6 510.7
-------- --------
4,619.2 3,902.2
Less - Allowance for depreciation (1,772.8) (1,533.1)
-------- --------
2,846.4 2,369.1
Investments in Affiliated Companies 464.2 408.7
Other Assets 400.5 301.2
-------- --------
$ 4,750.2 $ 4,042.9
======== ========
Liabilities, Deferred Items and Shareholders' Equity
Accounts Payable $ 312.6 $ 233.3
Accrued Expenses 51.7 48.2
Debt
Short-term debt 243.8 330.2
Long-term debt 2,436.9 1,850.9
Capital lease obligations 227.2 241.6
-------- --------
2,907.9 2,422.7
Deferred Income Taxes 339.2 264.8
Other Deferred Items 363.9 356.1
-------- --------
Total Liabilities and Deferred Items 3,975.3 3,325.1
Shareholders' Equity
Preferred Stock 3.4 3.4
Common Stock 14.4 14.3
Additional capital 329.0 324.8
Reinvested earnings 463.7 409.0
Cumulative unrealized equity adjustments 11.4 13.4
-------- --------
821.9 764.9
Less - Cost of common shares in treasury (47.0) (47.1)
-------- --------
Total Shareholders' Equity 774.9 717.8
-------- --------
$ 4,750.2 $ 4,042.9
======== ========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
- 44 -
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF BALANCE SHEETS
1996 COMPARED TO 1995
OVERVIEW The comparison of the 1996 balance sheet to 1995 is affected by two
acquisitions. Transportation acquired the remaining interest in CGTX in
mid-1996. GATX Capital acquired the remaining interest in Centron in late 1996.
Because GATX previously held non-controlling interests in CGTX and Centron, they
were previously accounted for as investments in affiliated companies; they are
now fully consolidated.
Total Assets of $4.8 billion increased $707 million. Approximately half of this
increase is due to the consolidation of assets acquired with the CGTX and
Centron acquisitions.
Also, the high level of capital additions and portfolio investments more than
offset the $202 million of depreciation and the normal runoff of the portfolio.
GATX also utilizes over $1 billion of additional assets, such as railcars,
aircraft and warehouses, which are financed through off-balance sheet operating
leases and therefore are not included on the balance sheet.
Total Receivables increased $85 million primarily due to new investment volume
at Capital and trade receivables at CGTX. The allowance for possible losses
increased $21 million primarily due to the $13 million addition to the loss
reserve and $9 million of net recoveries at Capital. The allowance for possible
losses remained largely unchanged at the other subsidiaries.
Operating Lease Assets and Facilities of $2.8 billion increased by $477 million
primarily due to the significant level of capital additions during the year,
including the acquisitions of CGTX and Centron. Offsetting these additions were
depreciation, asset sales and retirements, and sale-leasebacks. Transportation
and Capital sold and leased back $214 million of rail and other investments
during 1996, removing these assets from the balance sheet.
Investments in Affiliated Companies increased $55 million. Additional
investments of $93 million included new aircraft and rail joint ventures at
Capital. Other additions were $28 million of equity in net earnings of
affiliates and $38 million reclassed from other asset accounts to investments in
affiliated companies as joint ventures were formed. Decreases included $53
million when CGTX and Centron became fully consolidated, and $51 million of cash
distributions and foreign currency translation adjustments.
Other Assets increased $99 million in large part due to the Centron and CGTX
acquisitions.
Accounts Payable increased $79 million. Most of the increase is attributable to
the Centron and CGTX acquisitions. Timing of payments for railcars and other
accruals also contributed to the increase.
Total Debt of $2.9 billion increased $485 million to fund a portion of the
significant capital additions and portfolio investments. In addition, the
consolidation of CGTX and Centron resulted in increased debt of $151 million.
Consolidated Equity increased $57 million, reflecting net income of $103 million
partially offset by $48 million of common and preferred stock dividends. All
other changes, including proceeds from stock option exercises, unrealized gains
on stock warrants held, and changes to the cumulative foreign currency
translation adjustment, added $2 million to equity.
- 45 -
<PAGE>
<TABLE>
<CAPTION>
Statements of Consolidated Cash Flows
- ----------------------------------------------------------------------------------
GATX Corporation and Subsidiaries
In Millions/Year Ended December 31 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 102.7 $ 100.8 $ 91.5
Adjustments to reconcile net income to net
cash provided by operating activities:
Realized gain on disposition of leased
equipment (40.9) (33.3) (21.7)
Provision for depreciation and amortization 202.4 171.6 165.1
Provision for possible losses 12.5 18.4 19.2
Deferred income taxes 25.2 16.2 9.4
Net change in trade receivables, inventories,
accounts payable and accrued expenses 30.2 (68.9) 64.6
Other (34.6) .3 (62.7)
- ----------------------------------------------------------------------------------
Net cash provided by operating activities 297.5 205.1 265.4
Investing Activities
Additions to operating lease assets & facilities (436.2) (521.5) (435.0)
Additions to equipment on lease, net of
nonrecourse financing (376.3) (256.1) (161.3)
Secured loans extended (117.1) (84.1) (101.5)
Investments in affiliated companies (92.8) (49.7) (29.5)
Other investments and progress payments (162.4) (26.3) (1.0)
- ----------------------------------------------------------------------------------
Capital additions and portfolio investments (1,184.8) (937.7) (728.3)
Portfolio proceeds:
From disposition of leased equipment 100.7 139.4 65.4
From return of investment 254.1 142.6 146.9
- ----------------------------------------------------------------------------------
Total portfolio proceeds 354.8 282.0 212.3
Proceeds from other asset dispositions 250.3 318.5 148.5
Net cash used in investing activities (579.7) (337.2) (367.5)
Financing Activities
Proceeds from issuance of long-term debt 757.3 399.5 239.0
Repayment of long-term debt (283.3) (219.6) (127.0)
Net (decrease) increase in short-term debt (121.1) 13.3 42.1
Repayment of capital lease obligations (14.4) (13.8) (12.4)
Issuance of common stock under employee
benefit programs 3.1 5.5 4.6
Cash dividends (48.0) (45.3) (43.1)
- ----------------------------------------------------------------------------------
Net cash provided by financing
activities 293.6 139.6 103.2
- ----------------------------------------------------------------------------------
Net Increase In Cash and Cash Equivalents $ 11.4 $ 7.5 $ 1.1
- ----------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
- 46 -
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF CASH FLOWS
1996 COMPARED TO 1995
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. As a result, the level of capital spending and
investments can be adjusted as conditions in the economy or GATX's businesses
warrant.
Cash Provided by Operating Activities generated $298 million of cash flow in
1996, a $93 million increase from 1995. Changes in working capital last year
included a $48 million refund of a deposit as the result of a lessee's exercise
of its option to return four DC-10 aircraft. Changes in working capital this
year included various accruals for payments to be made in early 1997. In
addition, non-cash provisions for depreciation and amortization increased $31
million.
Net Cash Used in Investing Activities increased $243 million from the prior
year. Capital additions and portfolio investments totaled $1.2 billion in 1996,
an increase of $247 million from 1995. Capital's portfolio investments of $659
million were 70% higher than last year, representing strong opportunities in
rail, aircraft, technology, marine, and other portfolio sectors. Significant
portions of the investments in aircraft and rail were made with other partners.
Technology investments included a full year of volume from the late 1995 Sun
Financial acquisition, as well as the fourth quarter 1996 acquisition of the
remaining interest in Centron. Unlike capital additions, which typically
represent assets held for 30 to 50 years, portfolio investments may have a
significantly shorter holding period. Transportation's capital additions for
1996, highlighted by the $84 million acquisition of the remaining interest in
CGTX, also included more than $300 million primarily for expanding the railcar
fleet. Transportation's additions totaled $365 million last year when 6,200 new
and used cars were added to the U.S. fleet versus the 4,300 U.S. cars added this
year. Terminals' capital additions of $130 million, 13% lower than last year,
included the completion of the expansion of the Central Florida pipeline and the
acquisition of a majority interest in a Mexican terminal. Most portfolio
investments and capital additions represent discretionary spending; only a small
percentage of the total amount GATX invests is necessary to maintain existing
assets.
Total portfolio proceeds of $355 million exceeded last year by $73 million.
Proceeds from the sale of leased equipment, primarily rail and aircraft assets,
decreased $39 million from the prior year. Disposition proceeds include both the
return of principal and gains on the transactions. Proceeds from the return of
investment of $254 million increased $112 million from 1995. In 1996, loan
principal received, a component of proceeds from the return of investment, was
$122 million, more than double last year's $58 million.
Proceeds from other asset dispositions of $250 million decreased $68 million
from 1995 due to lower sale-leaseback activity. In 1996, Transportation
completed $150 million of sale-leasebacks of railcars compared to $250 million
in 1995. Capital sold and leased back $64 million of assets in 1996 versus $47
million last year.
Cash Provided by Financing Activities increased $154 million compared to 1995 as
a result of the high level of current year capital additions and portfolio
investments and the lower sale-leaseback activity in 1996. GATX's financing
requirements are met with both debt and sale-leaseback financing, and in 1996
the lower sale-leaseback financings led to a higher proportion of debt
financing. Net debt financing in 1996 was $339 million, or $159 million greater
than last year. A significant portion of debt financing is nonrecourse to the
company.
- 47 -
<PAGE>
Cash dividends increased $3 million in 1996 due to an increase in the common
stock dividend to $1.72 per share from $1.60 per share in 1995. In January 1997,
the Board of Directors approved a 7% increase in the quarterly dividend to $.46
per common share, or $1.84 on an annual basis. This was the twelfth consecutive
year GATX increased its dividend.
LIQUIDITY AND CAPITAL RESOURCES General American Transportation Corporation
(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. The GATC
credit facility expires in 2001 while GATX Capital's revolver expires in 1999.
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 outstanding. At
December 31, 1996, GATX and its subsidiaries had available unused committed
lines of credit amounting to $594 million.
GATC has a $650 million shelf registration for pass through trust certificates
and debt securities of which $207 million had been issued at year end. GATX
Capital has a shelf registration for $300 million of which $268 million has been
issued. At year end, GATX had $426 million of commitments to provide financing
to customers or to acquire assets, $218 million of which is scheduled to fund in
1997.
At December 31, 1996, approximately $748 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
- 48 -
<PAGE>
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 1996 was $88 million and reflects
GATX's best estimate of the cost to remediate known environmental conditions.
Additions to the reserve were $12 million in 1996 and $14 million in 1995.
Expenditures charged to the reserve amounted to $18 million and $16 million in
1996 and 1995, respectively.
In 1996, GATX made capital expenditures of $17 million for environmental and
regulatory compliance compared to $18 million in 1995. 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 planned would require
capital expenditures of approximately $20 million in 1997. GATX anticipates it
will make annual expenditures at approximately the same level over each of the
next five years.
- 49 -
<PAGE>
GATX Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Financial data of business segments for 1996, 1995, and 1994 on pages 38 through
41 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.
OPERATING LEASE ASSETS AND FACILITIES Operating lease assets and facilities are
stated principally at cost. Assets acquired under capital leases are included in
operating lease assets 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 $30.4 million and
$25.3 million, was $167.4 million and $136.0 million as of December 31, 1996 and
1995, respectively. Amortization expense was $5.3 million in 1996 and $4.2
million in 1995.
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 $143.5 million at December 31, 1996.
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 $2.7 million at December 31, 1996.
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.
- 50 -
<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 terminaling,
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. The cumulative foreign currency translation
adjustment recorded in the cumulative unrealized equity adjustments account was
$5.8 million and $13.4 million at the end of 1996 and 1995, respectively.
Incremental unrealized translation gains (losses) were $(7.6) million, $(6.9)
million, and $18.3 million, during 1996, 1995 and 1994, respectively.
INVESTMENTS IN EQUITY SECURITIES Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities," was
adopted in 1996 to account for the fair value of stock warrants and stock held
in Financial Services' venture leasing portfolio. The unrealized gains recorded
in the cumulative unrealized equity adjustments account were $5.6 million for
1996.
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 1995 and 1994 financial statements have
been reclassified to conform to the 1996
- 51 -
<PAGE>
presentation.
NOTE B - ACCOUNTING FOR LEASES
The following information pertains to GATX as a lessor:
FINANCES LEASES The components of the investment in finance leases were (in
millions):
December 31 1996 1995
- -------------------------------------------------------------------------------
Minimum future lease receivables $ 679.4 $ 670.0
Estimated residual values 359.0 269.2
-------- ------
1,038.4 939.2
Less - Unearned income (277.1) (267.0)
-------- ------
Investment in finance leases $ 761.3 $ 672.2
- -------------------------------------------------------------------------------
OPERATING LEASES The majority of railcar and tankage assets and certain other
equipment leases included in operating lease assets and facilities 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, 1996 were (in millions):
Finance Leases Operating Leases Total
- --------------------------------------------------------------------------------
1997 $163.6 $ 619.4 $ 783.0
1998 127.5 455.5 583.0
1999 98.4 335.6 434.0
2000 81.2 220.5 301.7
2001 58.5 130.5 189.0
Years thereafter 150.2 380.0 530.2
------ -------- --------
$679.4 $2,141.5 $2,820.9
- --------------------------------------------------------------------------------
The following information pertains to GATX as a lessee:
CAPITAL LEASES Certain assets classified as operating lease assets and
facilities and finance leases which have been financed under capital leases were
(in millions):
December 31 1996 1995
- --------------------------------------------------------------------------------
Railcars $ 152.2 $ 152.8
Great Lakes vessels 159.5 159.5
------ ------
311.7 312.3
Less - Allowance for depreciation (162.6) (152.0)
------ ------
149.1 160.3
Finance leases 12.4 15.9
------ ------
$ 161.5 $ 176.2
- --------------------------------------------------------------------------------
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, 1996, 1995 and 1994 was $170.2
million, $139.7 million, and $113.7 million, respectively. Sublease income was
$6.9 million, $8.2 million, and $6.8 million in 1996, 1995 and 1994,
respectively.
FUTURE MINIMUM RENTAL PAYMENTS Future minimum rental payments due under
noncancelable leases at December 31, 1996 were (in millions):
Capital Leases Operating Leases
- --------------------------------------------------------------------------------
1997 $ 32.9 $ 162.0
1998 32.0 151.5
1999 32.0 135.0
2000 31.4 122.9
2001 30.7 111.7
Years thereafter 215.8 1,511.5
------ --------
$374.8 $2,194.6
Less - Amounts representing interest (147.6)
Present value of future
minimum capital lease payments $227.2
- --------------------------------------------------------------------------------
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 $15.1 million. Interest expense on the
above capital leases was $19.1 million in 1996, $20.1 million in 1995, and $21.2
million in 1994.
- 52 -
<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, 1996, secured loan principal due by year was as
follows (in millions):
Loan
Principal
- --------------------------------------------------------------------------------
1997 $ 42.7
1998 17.4
1999 19.9
2000 11.9
2001 14.3
Years thereafter 116.4
------
$222.6
- --------------------------------------------------------------------------------
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 domestic and foreign
investments are in businesses similar to those of GATX's principal subsidiaries.
Distributions received from such affiliates were $36.4 million, $37.9 million,
and $26.2 million, in 1996, 1995 and 1994, respectively.
Summarized operating results for all affiliated companies in their entirety were
(in millions):
For the Year 1996 1995 1994
- --------------------------------------------------------------------------------
Revenues $ 360.9 $ 526.8 $ 489.2
Net income 75.6 78.8 60.9
- --------------------------------------------------------------------------------
Summarized balance sheet data for all affiliated companies in their entirety
were (in millions):
December 31 1996 1995
- --------------------------------------------------------------------------------
Total assets $2,229.3 $2,178.0
Long-term liabilities 891.7 790.1
Other liabilities 179.9 294.5
-------- --------
Shareholders' equity $1,157.7 $1,093.4
- --------------------------------------------------------------------------------
- 53 -
<PAGE>
NOTE E - FOREIGN OPERATIONS
GATX has a number of investments in subsidiary 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 represent investments in affiliated companies as
well as fully consolidated assets for a Canadian railcar subsidiary, a United
Kingdom terminaling operation, a Mexican railcar operation, and foreign lease
and loan investments.
Gross Income (In Millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Foreign $ 112.5 $ 71.5 $ 63.7
United States 1,301.9 1,174.9 1,091.3
-------- -------- --------
$ 1,414.4 $ 1,246.4 $ 1,155.0
- --------------------------------------------------------------------------------
Income Before Income Taxes and
Equity in Net Earnings of Affiliated
Companies (In Millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Foreign $ 4.1 $ 3.3 $ 4.6
United States 124.6 113.7 113.2
-------- -------- --------
$ 128.7 $ 117.0 $ 117.8
- --------------------------------------------------------------------------------
Equity in Net Earnings of
Affiliated Companies (In Millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Foreign $ 20.3 $ 26.6 $ 21.2
United States 8.1 4.8 1.3
-------- -------- --------
$ 28.4 $ 31.4 $ 22.5
- --------------------------------------------------------------------------------
Identifiable Assets (In Millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Foreign $ 872.4 $ 516.8 $ 479.6
United States 3,877.8 3,526.1 3,171.1
-------- -------- --------
$ 4,750.2 $ 4,042.9 $ 3,650.7
- --------------------------------------------------------------------------------
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 unrealized foreign currency translation adjustment, a component of
the cumulative unrealized equity adjustments 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 -----1996----- ------1995------
- --------------------------------------------------------------------------------
Amount Rate Amount Rate
- --------------------------------------------------------------------------------
Commercial paper $ 21.0 5.82% $ 175.2 6.14%
Other short-term borrowings 222.8 6.11% 155.0 6.49%
------ -------
$ 243.8 $ 330.2
- --------------------------------------------------------------------------------
Under a revolving credit agreement with a group of banks, GATC may borrow up to
$300.0 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 $590.1 million at December 31, 1996. While at year end no
borrowings were outstanding under the agreement, the available line of credit
was reduced by $10.0 million of commercial paper outstanding. GATC had
borrowings of $96.4 million under unsecured money market lines at December 31,
1996. CGTX, GATC's Canadian subsidiary, had bankers acceptances and other
uncommitted short-term borrowings of $21.1 million Canadian dollars at December
31, 1996. GTL, GATX Terminals' UK subsidiary, has a revolving credit agreement
of (pound)28.0 million of which (pound)1.7 million was available at year end.
Also, GATX Logistics has a $10.0 million revolving credit agreement, all of
which was available at the end of 1996.
-54-
<PAGE>
GATX Capital and its wholly owned subsidiaries, Sun Financial and Centron, have
commitments under its credit agreements with a group of banks for revolving
credit loans totaling $345.5 million of which $290.9 million was available at
December 31, 1996; the commitment was reduced by $54.6 million of outstanding
commercial paper and bankers' acceptances. The primary 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, 1996, such covenants limited GATX Capital's
ability to transfer net assets to GATX to no more than $44.2 million.
Interest expense on short-term debt was $26.2 million in 1996, $19.4 million in
1995, and $13.2 million in 1994.
NOTE G- LONG-TERM DEBT
Long-term debt consisted of (in millions):
Final December 31
Interest Rates Maturity 1996 1995
- --------------------------------------------------------------------------------
Variable rate:
Term notes 5.675%-8.5% 1997-2018 $ 72.1 $ 40.5
Nonrecourse obligations 6.6875%-9.75% 2000-2002 50.2 52.6
----- ------
122.3 93.1
Fixed rate:
Term notes 5.45%-10.875% 1997-2012 1,952.3 1,526.5
Nonrecourse obligations 5.10%-11.08% 1997-2013 272.8 140.8
Industrial revenue bonds 6.625%-7.3% 2019-2024 87.9 87.9
Title XI bonds 7.1% 1998 1.6 2.6
------- -------
2,314.6 1,757.8
------- -------
$2,436.9 $1,850.9
- --------------------------------------------------------------------------------
Maturities of GATX's long-term debt as of December 31, 1996 for each of the
years 1997 through 2001 were (in millions):
Long-Term Debt
- --------------------------------------------------------------------------------
1997 $283.5
1998 272.4
1999 229.1
2000 223.6
2001 200.0
- --------------------------------------------------------------------------------
At December 31, 1996, certain technology assets, facilities, aircraft, vessels
and warehouse equipment with a net carrying value of $356.9 million were pledged
as collateral for $253.8 million of notes and bonds.
Interest cost incurred on long-term debt, net of capitalized interest, was
$157.5 million in 1996, $130.6 million in 1995, and $113.8 million in 1994.
Interest cost capitalized as part of the cost of construction of major assets
was $6.8 million in 1996, $6.2 million in 1995, and $3.0 million in 1994.
At December 31, 1996, 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 $747.9 million of
the $1,285.2 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.
- 55 -
<PAGE>
NOTE H - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, GATX utilizes off-balance sheet financial
instruments to manage financial market risk, including interest rate and foreign
exchange risk.
At December 31, 1996 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 $ 907.9 5.097-8.745% LIBOR 1997-2001
GATX pays floating,
receives fixed 1,137.0 LIBOR 5.27-7.646% 1997-2006
- --------------------------------------------------------------------------------
Currency Forwards and Swaps Receive Deliver Maturity
- --------------------------------------------------------------------------------
Canadian dollar swaps $146.2 C$198.5 2001-2011
- --------------------------------------------------------------------------------
GATX had the following interest rate hedge activity (in millions):
Pay Pay
Interest Rate Swaps Fixed Floating
- --------------------------------------------------------------------------------
Balance at January 1, 1995 $ 500.0 $ 780.0
Additions 405.5 290.0
Maturities (100.0) (25.0)
-------- --------
Balance at December 31, 1995 $ 805.5 $1,045.0
Additions 442.4 137.0
Maturities (340.0) (45.0)
-------- --------
Balance at December 31, 1996 $ 907.9 $1,137.0
- --------------------------------------------------------------------------------
GATX uses interest rate swaps and forwards to manage its assets and liabilities,
to convert floating rate debt to fixed rate debt (or fixed to floating) and to
manage interest rate risk associated with the issuance of debt. 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.
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 $229.1 million of
long-term fixed rate debt into floating rate debt and $907.9 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 those agreements. At December 31, 1996, GATX would have paid
$12.8 million if the swaps
- 56 -
<PAGE>
were terminated; GATX would have received $28.2 million if the swaps were
terminated at December 31, 1995.
GATX has entered into currency swaps to hedge $146.2 million in debt obligations
at its Canadian subsidiaries.
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.
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.
December 31 -------1996------- -------1995-------
- --------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(In Millions): Amount Value Amount Value
- --------------------------------------------------------------------------------
Assets:
Cash and cash equivalents $ 46.2 $ 46.2 $ 34.8 $ 34.8
Trade accounts receivables 130.1 130.1 117.0 117.0
Secured loans 222.6 219.4 239.9 252.4
Liabilities:
Accounts payable - trade 312.6 312.6 233.3 233.3
Short-term debt 243.8 243.8 330.2 330.2
Long-term debt - variable 122.3 122.3 93.1 93.1
Long-term debt - fixed 2,314.6 2,405.7 1,757.8 1,923.7
- --------------------------------------------------------------------------------
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.
- 57 -
<PAGE>
NOTE J - PENSION BENEFITS
GATX and its subsidiaries, exclusive of GATX Logistics, Sun Financial and
Centron, 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 1994 through 1996 were:
1996-1994
- --------------------------------------------------------------------------------
Discount rate 7.75%
Expected long-term rate of return on assets 8.75%
Rate of increase in compensation levels 5.5%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The components of net periodic pension cost were (in millions):
For the Year 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits
earned during the period $ 6.5 $ 6.0 $ 5.6
Interest cost on projected
benefit obligation 20.3 19.9 19.4
Actual (gain) loss on plan assets (33.3) (49.7) 1.6
Net amortization and deferral 11.2 28.6 (22.5)
----- ------ ------
Net periodic pension cost $ 4.7 $ 4.8 $ 4.1
- --------------------------------------------------------------------------------
</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:
1996-1994
- --------------------------------------------------------------------------------
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 1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Accumulated benefit obligation
- vested $230.2 $226.8
- nonvested 7.2 6.9
------ ------
237.4 233.7
------ ------
Effects of projected future
compensation levels 37.3 35.5
----- ------
Projected benefit obligation 274.7 269.2
Plan assets at fair market value,
primarily listed stocks and bonds 290.7 271.6
----- ------
Projected benefit obligation
(less than) in excess of plan assets $(16.0) $ (2.4)
====== ======
- 58 -
<PAGE>
Reconciliation of funded status to recorded amounts:
Net pension liability included in balance
sheet $ (4.6) $ (2.9)
Unrecognized net asset from transition
to new pension accounting standard (.4) (.4)
Unrecognized net (gain) loss (15.1) (3.5)
Unrecognized prior service cost 4.1 4.4
------ ------
Projected benefit obligation
(less than) in excess of plan assets $(16.0) $ (2.4)
======= ======
- --------------------------------------------------------------------------------
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 1996 1995 1994
- --------------------------------------------------------------------------------
Contributions to GATX's pension plans $ 6.2 $ 4.4 $ 7.9
Contributions to
multiemployer pension plans 2.0 1.9 2.1
Contributions to 401(k) plans 3.6 3.2 2.9
- --------------------------------------------------------------------------------
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 1996 1995 1994
- --------------------------------------------------------------------------------
Current service cost $ .6 $ .5 $ .5
Interest cost on accumulated
postretirement benefit obligation 5.3 5.4 6.3
Net amortization and deferral (.5) (.4) (.1)
----- ----- -----
Net periodic postretirement benefit cost $ 5.4 $ 5.5 $ 6.7
===== ===== =====
Discount rate 7.75% 7.75% 7.75%
- --------------------------------------------------------------------------------
The following table sets forth the amounts recognized in GATX's consolidated
balance sheet (in millions):
December 31 1996 1995
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 60.4 $ 62.5
Fully eligible active plan participants 3.1 3.3
Other active plan participants 6.8 6.1
------ ------
Total accumulated
postretirement benefits obligation 70.3 71.9
Unrecognized gain 13.7 11.6
------ ------
Accrued postretirement benefit liability $ 84.0 $ 83.5
====== ======
- --------------------------------------------------------------------------------
The accrued postretirement benefit liability was determined using an assumed
discount rate of 7.75% for 1996 and 1995.
For measurement purposes, blended rates ranging from 7% decreasing to 5% over
the next year 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.
- 59 -
<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 1996 1995
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Book/tax basis differences due to depreciation $ 378.4 $ 312.8
Leveraged leases 67.7 61.1
Lease accounting (other than leveraged) 45.0 46.8
Other 48.2 38.3
------ ------
Total deferred tax liabilities 539.3 459.0
Deferred tax assets:
Alternative minimum tax credit 58.7 61.2
Accruals not currently deductible for tax purposes 54.2 56.7
Allowance for possible losses 44.8 36.3
Postretirement benefits other than pensions 28.8 28.8
Other 13.6 11.2
------ ------
Total deferred tax assets 200.1 194.2
------ ------
Net deferred tax liabilities $ 339.2 $ 264.8
- --------------------------------------------------------------------------------
At December 31, 1996, GATX had an alternative minimum tax credit of $58.7
million that can be carried forward indefinitely to reduce future regular tax
liabilities.
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 1996 1995 1994
- --------------------------------------------------------------------------------
Current -
Domestic:
Federal $ 24.4 $ 27.9 $ 35.9
State and local 2.4 4.6 2.5
------- ------- -------
26.8 32.5 38.4
Foreign 2.4 (1.1) 1.0
------- ------- -------
29.2 31.4 39.4
------- ------- -------
Deferred -
Domestic:
Federal 18.9 10.3 3.1
State and local 4.9 3.0 4.3
------- ------- -------
23.8 13.3 7.4
Foreign 1.4 2.9 2.0
------- ------- -------
25.2 16.2 9.4
------- ------- -------
Income tax expense $ 54.4 $ 47.6 $ 48.8
======= ======= =======
Income taxes paid $ 33.6 $ 33.9 $ 42.1
- --------------------------------------------------------------------------------
The reasons for the difference between GATX's effective income tax rate and the
federal statutory income tax rate were:
For the Year 1996 1995 1994
- --------------------------------------------------------------------------------
Federal statutory income tax rate 35.0% 35.0% 35.0%
Add (deduct) effect of:
Corporate owned life insurance (2.0) (4.5) (3.2)
State income taxes 3.6 4.1 3.8
Foreign income 1.7 1.3 1.9
Goodwill amortization 1.1 1.1 1.3
Minority interest .3 2.1 .8
Other 2.6 1.6 1.8
---- ---- ----
Effective income tax rate 42.3% 40.7% 41.4%
- --------------------------------------------------------------------------------
- 60 -
<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, 1996, 6,639,271 shares of common stock were reserved for:
Shares
- --------------------------------------------------------------------------------
Conversion of outstanding preferred stock 3,967,133
Incentive compensation programs 2,653,338
Employee service awards 18,800
---------
6,639,271
- --------------------------------------------------------------------------------
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, and treasury shares are shown in
the following table:
<TABLE>
<CAPTION>
Capital Transactions
(in Thousands, Except Number of Shares)
Preferred Stock Common Stock Cost of Common Shares
Shares Par Additional Shares Par Additional in Treasury (Deduction)
------------------------
Issued Value Capital Issued Value Capital Shares Amount
------- ------ ------- ------- ----- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 3,440,551 $ 3,441 $ 162,909 22,491,351 $14,057 $149,520 (2,790,954) $(47,082)
Add (deduct):
Conversion of preferred stock
into common stock (2,716) (3) (267) 6,789 4 266
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 $ 162,642 22,685,590 $14,178 $155,420 (2,790,954) $(47,082)
Add (deduct):
Conversion of preferred stock
into common stock (6,815) (7) (71) 11,467 7 70
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 $ 162,571 22,896,407 $14,310 $162,259 (2,790,954) $(47,082)
Add (deduct):
Conversion of preferred stock
into common stock (12,315) (12) (334) 30,790 19 327
Common stock issued under option,
incentive and service award plans 137,577 86 4,181 915 16
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 3,418,705 $ 3,419 $ 162,237 23,064,774 $14,415 $166,767 (2,790,039) $(47,066)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 61 -
<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, 1996,
986,190 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 1996, 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 11,537 IPUs were granted during
1996 and 31,864 IPUs in total were outstanding at the end of the year. In 1996,
19,752 shares of common stock and $.5 million in 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 1996, no grants or
payments were made.
- 62 -
<PAGE>
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, 1996, 176,142
shares of common stock were reserved for grants previously made under the 1985
Plan.
Data with respect to both plans are set forth below:
- --------------------------------------------------------------------------------
Number of
Shares Under
Stock Option Plans
1996 1995 Price Per Share
- --------------------------------------------------------------------------------
Outstanding at
January 1, 1,425,475 1,316,675 $14.53-$50.5625
Granted 374,200 316,000 46.3125-50.5625
Exercised or issued (117,775) (198,950) 14.5300-41.8125
Canceled (14,750) (8,250) 41.8125-47.5625
- --------------------------------------------------------------------------------
Outstanding at
December 31, 1,667,150 1,425,475 $16.34-$50.6525
- --------------------------------------------------------------------------------
Outstanding at
December 31,
by year granted:
1986-1987 22,000 35,000 $16.345-$19.47
1988 45,000 60,500 25.655
1989 79,800 97,050 29.9375
1990 71,250 93,750 19.94
1991 149,900 160,400 26.13-28.1875
1992 142,500 159,075 25.50
1993 210,600 222,300 37.6875
1994 268,650 281,400 41.8125
1995 306,500 316,000 47.5625-50.5625
1996 370,950 46.3125-49.8125
- --------------------------------------------------------------------------------
Total 1,667,150 1,425,475 $16.345-$50.5625
- --------------------------------------------------------------------------------
Options exercisable at
December 31 1,207,950 1,109,475
- --------------------------------------------------------------------------------
Options available
for future grant at
December 31 986,190 1,365,392
- --------------------------------------------------------------------------------
ACCOUNTING FOR STOCK OPTIONS GATX has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) in
accounting for its employee stock options. Under these guidelines, no
compensation expense is recognized because the exercise price of GATX's employee
stock options equals the market price of the underlying stock on the date of
grant.
Pro forma information regarding net income and earnings per share is required by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), and has been determined as if GATX had accounted for
its employee stock options under the fair value method. The fair value for these
options was estimated at the date of grant using a Black- Scholes option pricing
model with the following assumptions for 1995 and 1996: dividend yield of 3.6%;
volatility factor of the expected market price of GATX's common stock of .15;
expected life of the option of 5 years; and a weighted average risk-free
interest rate for 1995 of 5.9%; and for 1996 of 6.1%.
The Black-Scholes model, one of the most frequently referenced models to value
options, was developed for use in estimating the fair value of traded options
which have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions,
including expected stock price volatility. Because GATX's employee stock options
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
- 63 -
<PAGE>
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option vesting period. The resultant proforma
net income and earnings per share were (in millions except for earnings per
share information):
1996 1995
---- ----
Pro forma net income $101.6 $100.7
Pro forma earnings per share:
Primary $4.31 $4.29
Fully diluted $4.15 $4.13
Because SFAS 123's provisions are prospective (retroactive application is
prohibited), awards granted prior to 1995 are not considered in the above pro
forma amounts. Additionally, because options granted in 1995 and 1996 generally
vest over a three year period, neither the 1995 nor 1996 pro forma amounts
reflect a full annualized effect.
NOTE O - COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT
RISK
GATX's revenues are derived from a wide range of industries and companies.
However, approximately 44% of total consolidated revenues are generated from the
transportation or storage of products for the chemical and petroleum industries.
In addition, approximately 14% 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, 1996, GATX had commitments of $305 million for orders and
options by aircraft joint ventures for 33 new aircraft to be delivered between
1997-2001. In addition, GATX has issued $161 million of residual and rental
guarantees. GATX also has firm commitments to acquire railcars and to upgrade
terminal and repair facilities totaling $121 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
damages, if any, required to be paid by GATX and its subsidiaries in the
discharge of such liability are not likely to be material to GATX's consolidated
financial position or results of operations.
- 64 -
<PAGE>
GATX Corporation and Subsidiaries
Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Net Income
Operating Net Per Share,
In Millions, Gross Expenses and Net Income Assuming
Except Per Share Data Income Depreciation Income Per Share(A) Dilution(A)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
First Quarter $ 303.6 $ 193.3 $ 24.7 $ 1.05 $ 1.01
Second Quarter 337.8 212.6 25.7 1.09 1.05
Third Quarter 367.8 222.8 33.4 1.47 1.37
Fourth Quarter 405.2 263.5 18.9 .76 .76(B)
-------- ------- ------- -------- --------
Total $ 1,414.4 $ 892.2 $ 102.7 $ 4.37 $ 4.19
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995
First Quarter $ 290.8 $ 179.5 $ 25.7 $ 1.11 $ 1.06
Second Quarter 317.1 196.1 29.9 1.31 1.23
Third Quarter 315.5 203.5 26.5 1.13 1.08
Fourth Quarter 323.0 214.1 18.7 .75 .75(B)
-------- ------- ------- -------- --------
Total $ 1,246.4 $ 793.2 $ 100.8 $ 4.30 $ 4.13
- --------------------------------------------------------------------------------
<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 is 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 both series 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 28, 1997 was 3,774, 129 and 237, 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
- --------------------------------------------------------------------------------
1996
First Quarter $ 51.25$ 44.00$ 124.25$ 124.25$ 59.50$ 54.25
Second Quarter 48.37 43.00 116.50 116.25 58.50 53.88
Third Quarter 49.12 43.00 116.50 116.25 59.38 55.25
Fourth Quarter 51.25 46.12 125.50 119.00 59.50 56.25
Annual
Dividends Declared $ 1.72 $ 2.50 $ 3.875
- --------------------------------------------------------------------------------
1995
First Quarter $ 47.25$ 40.37$ 120.00$ 95.00$ 55.62$ 50.50
Second Quarter 47.12 42.12 125.00 100.00 56.00 52.25
Third Quarter 54.25 47.00 140.00 107.00 63.00 55.50
Fourth Quarter 52.87 47.25 138.00 114.00 61.50 56.00
Annual
Dividends Declared $ 1.60 $ 2.50 $ 3.875
- --------------------------------------------------------------------------------
- 65 -
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
- ------------------------------------------------------------------------------------------------------------------------
GATX Corporation and Subsidiaries
In Millions, Except Per Share Data 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of Operations
Gross income ....................................... $ 1,414.4 $ 1,246.4 $ 1,155.0 $ 1,086.9 $ 1,019.1
Costs and expenses ................................. 1,285.7 1,129.4 1,037.2 982.5 1,004.2
---------- ---------- ---------- ---------- ----------
Income before income taxes, equity
in net earnings of affiliated companies
and cumulative effect of accounting changes ..... 128.7 117.0 117.8 104.4 14.9
Income taxes ....................................... 54.4 47.6 48.8 51.4 9.6
---------- ---------- ---------- ---------- ----------
Income before equity in net
earnings of affiliated companies and
cumulative effect of accounting changes ......... 74.3 69.4 69.0 53.0 5.3
Equity in net earnings of affiliated companies ..... 28.4 31.4 22.5 19.7 24.0
---------- ---------- ---------- ---------- ----------
Income before cumulative
effect of accounting changes .................... 102.7 100.8 91.5 72.7 29.3
Cumulative effect of accounting changes ............ -- -- -- -- (45.8)
---------- ---------- ---------- ---------- ----------
Net income (loss) .................................. $ 102.7 $ 100.8 $ 91.5 $ 72.7 $ (16.5)
========== ========== ========== ========== ==========
Per Share Data
Net income (loss) applicable to
common stock, as adjusted ....................... $ 89.5 $ 87.6 $ 78.2 $ 59.4 $ (29.8)
Per share of common stock
and common stock equivalents:
Income before cumulative
effect of accounting changes ............ $ 4.37 $ 4.30 $ 3.88 $ 2.99 $ .82
Cumulative effect of accounting changes ..... -- -- -- -- (2.35)
---------- ---------- ---------- ---------- ----------
Net income (loss) .................................. $ 4.37 $ 4.30 $ 3.88 $ 2.99 $ (1.53)
Shares used in computation (in thousands) ... 20,483 20,359 20,153 19,894 19,441
Pershare assuming conversion, except in 1993 and
1992, of all outstanding
preferred stock:
Net income (loss), fully diluted ................... $ 4.19 $ 4.13 $ 3.78 $ 2.99 $ (1.53)
Shares used in computation (in thousands) ... 24,499 24,386 24,216 19,894 19,441
Dividends declared per share of common stock ....... $ 1.72 $ 1.60 $ 1.50 $ 1.40 $ 1.30
========== ========== ========== ========== ==========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 66 -
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data (Continued)
- ---------------------------------------------------------------------------------------------------
GATX Corporation and Subsidiaries
In Millions, Except Per Share Data 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Financial Condition
Total assets ........................ $ 4,750.2 $ 4,042.9 $ 3,650.7 $ 3,392.1 $ 3,426.3
Total long-term debt and
capital lease obligations ........ 2,664.1 2,092.5 1,805.1 1,713.8 1,724.6
Shareholders' equity ................ 774.9 717.8 662.4 589.9 557.6
Common shareholders' equity ......... 609.2 551.8 496.1 423.6 391.2
Common shareholders' equity per share 29.58 26.88 24.30 20.78 19.27
- ---------------------------------------------------------------------------------------------------
</TABLE>
- 67 -
<PAGE>
Management Discussion and Analysis:
1995 Compared To 1994
The following discussion analyzes GATX's comparative performance for the years
ended December 31, 1995 and 1994. This information should be read in conjunction
with the consolidated financial statements on pages 42, 44 and 46. The
discussion of the comparative results of GATX's operations for the years ended
December 31, 1996 and 1995 is presented in the management discussion and
analysis on pages 35, 36, 37, 43, 45, 47, 48 and 49, and the financial data of
business segments on pages 38 through 41.
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. The improvement was principally due to record earnings at
Transportation, Capital 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.
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.
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. Fleet repair costs increased 11% as a result of the increased fleet
size and number of cars repaired, primarily at Transportation's service centers.
Operating margins improved slightly as the growth in revenues exceeded the
increase in fleet repair costs and SG&A expense. 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.
Transportation invested $350 million in the railcar fleet versus $264 million in
1994; $28 million also was invested in operations in Mexico and Europe and $15
million in a multi-year program to significantly upgrade its repair facilities
versus $18 million in 1994.
FINANCIAL SERVICES Capital's 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. 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
- 68 -
<PAGE>
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.
Portfolio investments at Capital 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.
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. 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.
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. SG&A expenses increased 19% due to improvements in
information systems, additional personnel, training, and moving and relocation
costs. 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 invested $149 million compared to $154 million in 1994 for tank
construction, facility improvements and expansion, and the acquisition of
terminal facilities.
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.
Logistics' capital spending of $6 million was down $2 million from a year ago.
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.
- 69 -
<PAGE>
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.
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.
- 70 -
<PAGE>
<TABLE>
<CAPTION>
GATX LOCATION OF OPERATIONS GATX Corporation and Subsidiaries
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GENERAL Headquarters Location of Service Mobile Service Units
AMERICAN Chicago, Illinois Facilities Mobile, Alabama
TRANSPORTATION Colton, California
CORPORATION Business Offices Major Service Centers Macon, Georgia
Glendale, 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 Red Deer Alberta Galena Park, Texas
Mexico City, Mexico Montreal, Quebec Olympia, Washington
Calgary, Alberta Moose Jaw, Saskatchewan Tierra Blanca, Mexico
Toronto, Ontario Red Deer, Alberta
Montreal, Quebec Mini Service Centers Montreal, Quebec
Muscle Shoals, Alabama Moose Jaw, Saskatchewan
White Springs, Florida
Terre Haute, Indiana
Plaquemine, Louisiana
Midland, Michigan
Cincinnati, Ohio
Ivorydale, Ohio
Masury, Ohio
Catoosa, Oklahoma
Copper Hill, Tennessee
Freeport, Texas (2)
- ----------------------------------------------------------------------------------------------------------------------
GATX Headquarters Sydney, Australia Joint Venture Locations
CAPITAL San Francisco, California Toronto, Canada Sydney, Australia
CORPORATION Blagnac, France South Ruislip, United Kingdom
Offices Frankfurt, Germany
Tampa, Florida Singapore, Republic of Singapore
Chicago, Illinois Tokyo, Japan
Eden Prairie, Minnesota
- ----------------------------------------------------------------------------------------------------------------------
GATX Headquarters Pipeline Locations Terminal Joint Venture Locations
TERMINALS Chicago, Illinois Antwerpen/Lillo, Belgium
CORPORATION Calnev Pipe Line Lanshan, China
Domestic Terminal Locations Adelanto, California Kawasaki, Japan
Carson, California Barstow, California Kobe, Japan
Los Angeles, California Colton, California Yokohama, Japan
Richmond, California Las Vegas, Nevada Altamira, Mexico
San Pedro, California Jurong Town, Singapore
Orlando, Florida Central Florida Pipeline Pulau Busing, Singapore
Port Everglades, Florida Orlando, Florida Barcelona, Spain
Tampa, Florida Tampa, Florida Bilbao, Spain
Argo, Illinois Tarragona, Spain
Norco, Louisiana Olympic Pipeline Valencia, Spain
Carteret, New Jersey Renton, Washington Seal Sands, United Kingdom
Paulsboro, New Jersey Wymondham, United Kingdom
Staten Island, New York Manchester Jet Line
Portland, Oregon (2) Manchester, United Kingdom
Philadelphia, Pennsylvania
Galena Park, Texas International Terminal Locations
Pasadena, Texas Wholly-owned
Seattle, Washington Avonmouth, United Kingdom
Vancouver, Washington Belfast, United Kingdom
Eastham, United Kingdom
Glasgow, United Kingdom
Grays, United Kingdom
Leith, United Kingdom
Runcorn, United Kingdom
- ----------------------------------------------------------------------------------------------------------------------
GATX Headquarters Indianapolis, Indiana-CW Cleveland, Ohio-CW,T,S
LOGISTICS, Jacksonville, Florida Lexington, Kentucky-2 CW,T,S Columbus, Ohio-4 CW,T
INC. Shreveport, Louisiana-CW,T Oklahoma City, Oklahoma-CW,T
Number of Locations and Baltimore, Maryland-CW Philadelphia, Pennsylvania-2 CW,PW,
106 Facilities with Services Offered Grand Rapids, Michigan-2 CW,T T,S,SL
21.5 Million Square Feet Los Angeles, California-10 Kalamazoo, Michigan-T Memphis, Tennessee-2 CW,T
CW,PW,T,S,SL Gulfport, Mississippi-CW Dallas, Texas-7 CW,PW,T,S
CW=Contract Warehousing Stockton, California-2 CW,T St. Louis, Missouri-PW,T El Paso, Texas-3 CW
T=Transportation Walnut, California-2 PW,T Greensboro, North Carolina- Fort Worth, Texas-CW
PW=Public Warehousing Denver, Colorado-CW,T 7 CW,PW,T Clearfield, Utah-2 PW,T,SL
S=Sales Jacksonville, Florida- Winston-Salem, North Carolina- Seattle, Washington-3 CW,T
SL=Subleased 3 CW,PW,T,S,SL 4 CW,PW,T,S,SL Racine, Wisconsin-CW
Atlanta, Georgia-13 CW, New York, New York-CW Toronto, Canada-CW,T
PW,T,S Syracuse, New York-8 PW,T,S,SL Mexico City, Mexico-2 PW,T
Chicago, Illinois-9 CW,PW, Akron, Ohio-PW,T
T,S,SL
Normal, Illinois-4 CW,T
Richmond, Indiana-CW,T
- -------------------------------------------------------------------------------------------------------------------
AMERICAN Headquarters Vessels M/V Adam E. Cornelius
STEAMSHIP Williamsville, New York M/V Indiana Harbor M/V American Republic
COMPANY M/V Walter J. McCarthy,Jr. M/V Buffalo
Regional Office M/V St. Clair M/V Sam Laud
Toledo, Ohio M/V American Mariner Str. John J. Boland
M/V H. Lee White
M/V Charles E. Wilson
</TABLE>
- 71 -
<PAGE>
<TABLE>
<CAPTION>
GATX OFFICERS AND DIRECTORS GATX Corporation and Subsidiaries
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GATX OFFICERS GATX BOARD OF DIRECTORS GATX SUBSIDIARIES
Ronald H. Zech Franklin A. Cole 3,4 General American
Chairman and Chief Chairman of the Board Transportation Corporation
Executive Officer Croesus Corporation D. Ward Fuller, President
David B. Anderson James M. Denny 1,2 GATX Capital Corporation
Vice President, Managing Director, William Blair Joseph C. Lane, President
Corporate Development, Capital Partners, LLC
General Counsel and GATX Terminals Corporation
Secretary Richard M. Fairbanks 1,4 John F. Chlebowski, Jr., President
Managing Director of Domestic &
William L. Chambers International Issues, GATX Logistics, Inc.
Vice President, Center for Strategic & Joseph A. Nicosia, President
Human Resources International Studies
American Steamship Company
Gail L. Duddy William C. Foote 1,4 Ned A. Smith, President
Vice President, Compensation Chairman, President and Chief
and Benefits Executive Officer, USG Corporation
David M. Edwards Deborah M. Fretz 3,4
Vice President Finance, Senior Vice President, Logistics, Sun
Chief Financial Officer Company, Inc.
Brian A. Kenney Richard A. Giesen 2,3
Vice President and Treasurer Chairman and Chief Executive Officer,
Continental Glass & Plastic, Inc.
Ralph L. O'Hara
Controller Miles L. Marsh 1,4
Chairman, President and Chief
Executive Officer,
James River Corporation
Charles Marshall 2,3
Retired: Former Vice Chairman of the
Board, American Telephone and
Telegraph Company
Michael E. Murphy 1,2
Vice Chairman and Chief Administrative
Officer, Sara Lee Corporation
Ronald H. Zech
Chairman and Chief Executive Officer,
GATX Corporation
1Member, Audit Committee
2Member, Compensation Committee
3Member, Nominating Committee
4Member, Retirement Funds Review
</TABLE>
- 72 -
<PAGE>
GATX Corporate Information GATX Corporation and Subsidiaries
- --------------------------------------------------------------------------------
ANNUAL MEETING
Friday, April 25, 1997, 9:00 a.m.
GATX Corporation
500 West Monroe Street
Chicago, Illinois 60661-3676
FINANCIAL INFORMATION & PRESS RELEASES: A copy of the company's annual report on
Form 10-K for 1996 and selected other information are available without charge.
Corporate information and press releases may be found at Internet address
http://www.gatx.com.
A variety of current financial information, historical financial information,
press releases and photographs are available at this site. GATX press releases
may be obtained by automated PR News Company News On-Call's automated fax
service at (800)758-5804. The company identification number for GATX is 105121.
INQUIRIES
Inquiries regarding dividend checks, the dividend reinvestment plan, stock
certificates, replacement of lost certificates, address changes, account
consolidation, transfer procedures and year-end tax information should be
addressed to GATX Corporation's Transfer Agent and Registrar:
ChaseMellon Shareholder Services,
Stock Transfer Department
450 West 33rd Street
New York, NY 10001-2697
Telephone: (800) 647-4273
Information relating to shareholder ownership, dividend
payments, or share transfers:
Janet M. Dongarra, Assistant Corporate Secretary
Law Department
Telephone: (312) 621-6603
Email: [email protected]
GATX Corporation welcomes and encourages questions and comments from its
shareholders, potential investors, financial professionals and the public at
large. To better serve interested parties, the following GATX personnel may be
contacted by telephone, fax and/or writing. To request published financial
information and financial reports, contact:
GATX CORPORATION
Investor Relations Department
500 West Monroe Street
Chicago, Illinois 60661-3676
Telephone: (800) 428-8161
Automated request line for materials: (312) 621-6300
Janet Bower, Communications Coordinator
(312) 621-4297 FAX: (312) 621-6698
Email: [email protected]
Analysts, institutional shareholders and financial community professionals:
George S. Lowman, Director of Communications
Telephone: (312) 621-6599
Fax: (312) 621-6698
Email: [email protected]
Questions regarding sales, service or lease information:
General American Transportation Corporation - (312) 621-6564
GATX Capital Corporation -(415) 955-3200
GATX Terminals Corporation -(312) 621-8032
GATX Logistics, Inc. -(904) 396-2517
American Steamship Company -(716) 635-0222
INDEPENDENT AUDITORS
Ernst & Young LLP
- 73 -
<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, four foreign subsidiaries and an interest in one foreign
affiliate, Business Segment--Railcar Leasing and Management
GATX Financial Services, Inc. (Delaware)--56 domestic subsidiaries (which
includes GATX Capital Corporation), 12 foreign subsidiaries and six
domestic affiliates, Business Segment--Financial Services
GATX Terminals Corporation (Delaware)--three domestic subsidiaries, three
foreign subsidiaries, one domestic affiliate, and interests in 13 foreign
affiliates, Business Segment--Terminals and Pipelines
GATX Logistics, Inc. (Florida)--9 domestic subsidiaries and two foreign
subsidiaries, Business Segment--Logistics and Warehousing
American Steamship Company (New York)--12 domestic subsidiaries,
Business Segment--Great Lakes Shipping
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; (v) Registration
Statement No. 33-61183 filed on July 20, 1995; and (vi) Registration Statement
No. 33-06315 on Form S-8 filed June 19, 1996 of GATX Corporation, of our report
dated January 28, 1997 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, 1996.
ERNST & YOUNG LLP
Chicago, Illinois
March 14, 1997
POWER OF ATTORNEY
The undersigned, Ronald H. Zech, the Chairman, President, Chief
Executive Officer and a director of GATX Corporation, a New York corporation,
does hereby constitute and appoint David B. Anderson, David M. Edwards, and
Ronald J. Ciancio, or any of them, attorneys and agents of the undersigned, with
full power and authority to sign in said Ronald H. Zech's name, as Chairman,
President, Chief Executive Officer and director, or as any of them, of and on
behalf of GATX Corporation, the 1996 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/ Ronald H. Zech
----------------------------
Ronald H. Zech
Date: March 7, 1997
-------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation,
does hereby constitute and appoint Ronald H. Zech, David B. Anderson and David
M. Edwards, 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 1996 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: February 25, 1997
----------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation,
does hereby constitute and appoint Ronald H. Zech, David B. Anderson and David
M. Edwards, 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 1996 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: February 26, 1997
----------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation,
does hereby constitute and appoint Ronald H. Zech, David B. Anderson and David
M. Edwards, 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 1996 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 M. Fairbanks
----------------------------
Director
Date: March 4, 1997
----------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation,
does hereby constitute and appoint Ronald H. Zech, David B. Anderson and David
M. Edwards, 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 1996 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: February 27, 1997
----------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation,
does hereby constitute and appoint Ronald H. Zech, David B. Anderson and David
M. Edwards, 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 1996 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: February 25, 1997
----------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation,
does hereby constitute and appoint Ronald H. Zech, David B. Anderson and David
M. Edwards, 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 1996 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: February 25, 1997
----------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation,
does hereby constitute and appoint Ronald H. Zech, David B. Anderson and David
M. Edwards, 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 1996 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: February 24, 1997
----------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation,
does hereby constitute and appoint Ronald H. Zech, David B. Anderson and David
M. Edwards, 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 1996 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: February 25, 1997
----------------------------
<PAGE>
POWER OF ATTORNEY
The undersigned director of GATX Corporation, a New York corporation,
does hereby constitute and appoint Ronald H. Zech, David B. Anderson and David
M. Edwards, 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 1996 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/ Micheal E. Murphy
----------------------------
Director
Date: February 25, 1997
----------------------------
<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 46
<SECURITIES> 0
<RECEIVABLES> 1114 <F1>
<ALLOWANCES> 121
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 4619
<DEPRECIATION> 1773
<TOTAL-ASSETS> 4750
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 2664 <F3>
3
0
<COMMON> 14
<OTHER-SE> 758
<TOTAL-LIABILITY-AND-EQUITY> 4750
<SALES> 0
<TOTAL-REVENUES> 1414
<CGS> 0
<TOTAL-COSTS> 695 <F4>
<OTHER-EXPENSES> 202 <F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203
<INCOME-PRETAX> 74 <F6>
<INCOME-TAX> 54
<INCOME-CONTINUING> 103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103
<EPS-PRIMARY> 4.37
<EPS-DILUTED> 4.19
<FN>
<F1> Receivables consists of three components: Trade accounts of 130 million,
Finance leases of $761 million and secured loans of 223 million.
<F2> Not applicable because GATX has an unclassified balance sheet.
<F3> This value consists of two components: long-term debt of 2,437 million and
capital lease obligations of 227 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 icome before income taxes and equity in net earnings
of affiliated companies.
</FN>
</TABLE>
