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, 1997
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
Series A Chicago Stock Exchange
$2.50 Cumulative Convertible Preferred Stock, New York Stock Exchange
Series B 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 6, 1998, 24,558,983 common shares were outstanding, and the
aggregate market value of the common shares (based upon the March 6, 1998
closing price of these shares on the New York Stock Exchange) of GATX
Corporation held by nonaffiliates was approximately $1,846.5 million.
Documents Incorporated by Reference
Portions of the GATX Annual Report to Shareholders for the year ended
December 31, 1997 are incorporated by reference into Parts I and II. Portions of
GATX's proxy statement dated March 17, 1998 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, 1997 on
page 29 and pages 34 through 37, 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, 1997, its
North American fleet consisted of approximately 81,100 railcars, including
62,900 tank cars and 18,200 specialized freight cars, including conventional and
Airslide(TM) covered hopper cars. In addition to roughly 70,700 railcars in the
United States, Transportation has approximately 9,200 railcars in its Canadian
fleet and 1,200 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 car types comprising Transportation's North
American fleet.
Year Ended December 31,
-------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Tank cars 62,900 60,400 53,900 50,700 48,000
Freight, covered hopper,
and plastic pellet cars 18,200 17,100 11,000 9,100 7,800
------ ------ ------ ------ ------
North American fleet 81,100 77,500 64,900 59,800 55,800
====== ====== ====== ====== ======
In addition to the North American fleet, Transportation's investments in
affiliates result in ownership interests in other fleets. During 1997
Transportation purchased a 40% interest in KVG Kesselwagen Vermietgesellschaft
mbH ("KVG"), a German and Austrian-based tank car and specialty railcar leasing
company that owns and operates approximately 9,400 railcars in Europe, to
complement its existing 12 1/2% interest in European-based AAE Cargo.
Transportation's customers use its railcars to ship over 700 different
commodities, primarily chemicals, petroleum, and food products. For 1997,
approximately 51% of railcar leasing revenue was attributable to shipments of
chemical products, 20% to petroleum products, and 16% 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 4% of total
railcar leasing revenue.
Transportation typically leases new railcars to its customers for a term of five
years or longer, whereas renewals or leases of existing 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, 1997 was approximately 96%.
Under its full service leases, Transportation maintains and services its
railcars, pays ad valorem taxes, and provides many ancillary services. Through
its GATX Conductor web site, for example, Transportation provides customers with
timely analysis and performance statistics about 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 facility. To supplement the eight major service centers,
Transportation utilizes a fleet of mobile trucks and 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.
-1-
<PAGE>
Of the approximately 218,000 tank cars owned and leased in the United States at
December 31, 1997, Transportation had approximately 57,000. Principal
competitive factors include price, service and availability.
Financial Services
GATX Financial Services, through its principal subsidiary, GATX Capital,
provides asset-based financing, sells and services technology equipment,
structures transactions for investment by other lessors, and manages lease
portfolios for third parties. Asset-based financing is provided primarily to the
aircraft, rail, technology, and marine industries. These financings, which are
held within GATX Capital's own portfolio and through partnerships with
coinvestors, are structured as leases and secured loans, and frequently include
interests in the asset's residual value. Centron and Sun Financial, two of GATX
Capital's subsidiaries, sell, service, and finance information technology
equipment. For its transaction structuring and portfolio management services,
Capital receives fees at the time the transaction is completed, an asset is
remarketed, and/or on an ongoing basis.
GATX Capital competes with captive leasing companies, leasing subsidiaries of
commercial banks, independent leasing companies, lease brokers, investment
bankers, and financing arms of equipment manufacturers. In addition to its San
Francisco home office, Capital has 4 domestic and 11 foreign offices.
At December 31, 1997, GATX Capital's asset concentrations within its $2.2
billion portfolio were:
Aircraft 26%
Rail 25%
Technology 16%
Marine 8%
Other 25%
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 23 terminals in 10 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, 1997, Terminals had a total storage capacity of 68 million
barrels. This includes 48 million barrels of bulk liquid storage capacity in the
United States, 8 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 averaged 91% during 1997; throughput, or deliveries to customers, for
the year was 639 million barrels.
In 1997, a strategic decision was made to sell or close the Staten Island
terminal and the seven storage facilities which make up GATX Terminals Limited
in the United Kingdom. The decision included analyses of the related customer
base, industry served, and profitability outlook related to each facility. The
Staten Island terminal serves the petroleum market while the United Kingdom
facilities serve both the petroleum and chemical markets in approximately the
same proportion. Other smaller facilities are also being evaluated for possible
sale or closure.
For 1997, 54% of Terminals' revenue was derived from petroleum storage, 23% from
chemical storage, 22% 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 450 customers, including major oil and chemical companies
as well as trading firms and larger independent refiners. No single customer
accounts for more than 6% of Terminals' revenue. Customer service contracts are
both short term and long term.
Terminals along with two Dutch companies, Pakhoed N.V. and Van Ommeren N.V., are
the three major international public terminaling companies. Pakhoed carries out
its operations under the name Paktank. (On March 2, 1998, Pakhoed and Van
Ommeren announced a proposed merger (VOPAK), subject to approval by the European
Commission.) The domestic public terminaling industry consists of Terminals,
Paktank Corporation, International-Matex Tank Terminals (a joint venture in
which Van Ommeren participates), 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.
-2-
<PAGE>
Logistics and Warehousing
GATX Logistics, Inc. is one of the largest third-party providers of distribution
and logistics support services and warehousing facilities in the United States.
Headquartered in Jacksonville, Florida, GATX Logistics operates 106 facilities
covering approximately 21 million square feet of warehousing space in North
America with utilization of 95% at the end of 1997. Value- adding services are
strategically the most important benefit GATX Logistics provides. Examples of
these services are integrated logistics solutions, information management,
just-in-time delivery systems, packaging, sub-assembly, freight management and
returns management.
GATX Logistics continued implementing its strategy of providing integrated
logistics solutions to an expanding customer base while steadily reducing its
role in lower margin, public warehousing business. As a result, during 1997 the
value of certain past acquisitions involved in public warehousing was written
down to better reflect the economics of that industry sector.
GATX Logistics serves over 400 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 1997 was 37% automotive
/ industrial equipment, 14% consumer products, 14% grocery, 10% electronics and
computers, 8% consumer durables, 4% chemical, 4% industrial products, and 9%
other. No single customer accounts for more than 11% 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 1997, ASC carried 26.4 million tons of cargo. ASC primarily transported iron
ore, coal, and limestone aggregate. Other commodities transported include sand,
salt, potash, gypsum, grain, marble chips and slag. ASC's revenue source by
industry served during 1997 was 46% steel, 24% construction, 23% power
generation, and 7% other. No single customer accounts for more than 24% of ASC's
revenue.
ASC competes with three other U.S. flag Great Lakes commercial fleets, which
include U.S.S. Great Lakes Fleet, Inc., Oglebay Norton Company, and Interlake
Steamship, and with 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.
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 20%
are hourly employees covered by union contracts.
Environmental Matters
- ---------------------
-3-
<PAGE>
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
potentially the 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 12 sites under the requirements of the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund) and the National Resource Damage Assessment. Under these Statutes
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
instances, 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 environmental costs 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 1997 was $75 million and reflects
GATX's best estimate of the cost to remediate known environmental conditions.
Additions to the reserve were $11 million in 1997 and $12 million in 1996.
Expenditures charged to the reserve amounted to $14 million and $18 million in
1997 and 1996, respectively.
In 1997, GATX made capital expenditures of $13 million for environmental and
regulatory compliance compared to $17 million in 1996. These projects included
marine vapor recovery systems, 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 $14 million in 1998. GATX anticipates it
will make annual expenditures at approximately the same level over each of the
next three years.
-4-
<PAGE>
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, 1997 on page
67, 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
- --------------------------
A Final Judgment has been entered by the U.S. District Court for the Northern
District of Illinois in favor of General American Transportation Corporation in
the previously reported 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. A Petition for Writ of Certiorari filed on behalf
of Cryo-Trans, Incorporated was denied by the United States Supreme Court.
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 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 under authority of Supplemental Type
Certificates issued by the FAA pursuant to a design approved by the FAA at the
time the modifications were made, and which are subject to the Airworthiness
Directive (the "STCs"). The three Evergreen aircraft were flown as part of its
fleet for more than five years, and the seven other Affected 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 its three
aircraft. In an initial disclosure statement dated October 29, 1996, and served
on Airlog and Capital pursuant to applicable discovery rules, Evergreen alleged
damages which it 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
issue shares in an initial public offering with a value of as much as $1.8
billion; (iii) lost flight revenues and profits amounting to approximately $25.8
million; (iv) lost business opportunities and profits attributable to
Evergreen's diminished 747 fleet capacity (which Evergreen did not quantify, but
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. In its November 7, 1997 Subsequent Case Management Statement, Evergreen
claims that it seeks recovery for out-of-pocket losses, lost revenues, lost
profits, lost business opportunities, maintenance work, repair costs and capital
losses in an amount that exceeds $145 million.
Airlog and Capital filed a motion seeking partial summary judgment as to four of
Evergreen's counterclaims. Airlog and Capital 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, seeking 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. On June 5, 1997, the Court ruled
on the Motion For Partial Summary Judgment. The Court granted the motion as to
Evergreen's counterclaim that alleged Airlog breached its warranty under the
Purchase Agreement pursuant to which Airlog sold one of the converted aircraft
to Evergreen, and denied the motion as to Evergreen's counterclaim that Airlog
breached its warranty under the Modification Agreements pursuant to which Airlog
manufactured and installed freighter conversion kits with respect to two other
aircraft owned by Evergreen. The Court ruled that the Purchase Agreement was a
contract for the sale of goods and that claims thereunder were barred by the
four year statute of limitations under the California Commercial Code (the
"Code"). The Court ruled that the Modification Agreements were contracts of
services not governed by the Code, and that any applicable statute of
limitations did not begin to run until Evergreen had, or should have had,
knowledge of the alleged breach. The Court also denied the motion with respect
to Evergreen's counterclaim in which it alleged that Airlog negligently
misrepresented certain facts which purportedly induced Evergreen to enter into
the Purchase and Modification Agreements. The Court's ruling bars Evergreen from
recovering under its claim for breach of warranty under the Purchase Agreement,
and permits Evergreen (subject to reconsideration or appeal) to proceed with its
claim for breach of warranty under the Modification Agreements and its claim of
negligent misrepresentation. The ruling does not represent a decision that
Evergreen is entitled to prevail on those claims. Airlog and Capital have other
defenses to those claims which they are vigorously asserting.
-5-
<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 Affected 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. AIA filed a Joint Case Management Statement and
Proposed Order specifying the damages it has allegedly suffered as a result of
the application of the Airworthiness Directive to the two Affected Aircraft it
owns. In that pleading, AIA alleges that it sustained damages of $43,787,954
through May 31, 1997, and further alleges that it continues to accrue loss of
use damages of at least $1,800,000 per month until the aircraft are operational.
On June 4, 1997, Tower Air, Inc. ("Tower") filed an action in the Supreme Court
of the State of New York, County of New York (Index No. 97/602851) against
Capital, Airlog, an officer of Capital and others with respect to one Affected
Aircraft it leased and subsequently purchased from a trust for the benefit of an
affiliate of Airlog in December 1994. This action asserts causes of action in
fraud and deceit, negligent misrepresentation, breach of contract, negligence
and seeks damages in excess of $25 million together with interest, costs,
attorneys' fees and punitive damages.
General Electric Capital Corporation and a subsidiary thereof (collectively,
"GECC"), Airlog, GATX Corporation and Capital entered into a Tolling Agreement
dated December 17, 1996 and amended in April 1997 and January 1998. The Tolling
Agreement relates to certain causes of action under a number of legal theories
arising out of the modification of three Affected Aircraft from passenger to
freighter configuration. These aircraft were modified by subcontractors of
Airlog in 1991 with GECC's knowledge and consent. Under the Tolling Agreement,
as amended, the parties have agreed that any defenses of expiration of the
statute of limitations or statue of repose or laches applicable to the causes of
action asserted by GECC are tolled up to and including July 6, 1998.
On February 25, 1998 The Bank of New York ("BNY") filed an action, as beneficial
owner of an Affected Aircraft, in the United States District Court for the
Northern District of California (No. C98-0385 WHO). This aircraft was originally
converted by Airlog for Evergreen. This action seeks declaratory relief and
asserts claims for breach of contract, intentional misrepresentation,
nondisclosure of known facts, negligence, negligent misrepresentation and unfair
competition. The suit alleges damages of a minimum of $262,000 per month in lost
rent and storage costs, unspecified maintenance and related expenses, diminution
in the value of its aircraft by well in excess of $10 million plus the costs of
aircraft inspection and modifications to comply with the Airworthiness
Directive, "Anticipated to be in the millions of dollars." Claims for interest,
injunctive relief, restitution and attorneys' fees are also included.
Airlog and Capital have filed an action in the United States District Court for
the Northern District of California against Pemco Aeroplex, Inc. (C97-2484WHO),
a contractor for Airlog which obtained the STCs and modified certain of the
Affected Aircraft. The Complaint in this action alleges causes of action for
fraudulent and negligent misrepresentation, breach of contract, professional
negligence, implied and equitable indemnity and contribution. This action seeks
a judgment awarding the plaintiffs any and all damages, costs and expenses in
connection with the resolution of the concerns of the FAA as expressed in the
Airworthiness Directive or relating to it, repairing the Affected Aircraft,
defending against the litigation involving the plaintiffs arising from the
Affected Aircraft, paying any judgments against plaintiffs that may be entered
in said litigation and attorneys' fees incurred by the plaintiffs in connection
with defending said litigation.
On December 18, 1997, Airlog filed a claim under the Federal Tort Claims Act
against the FAA for negligence in connection with the FAA's participation in the
design and manufacture of the Affected Aircraft in the amount of $6,204,065.
This amount represents, as at December 18, 1997, the expenses incurred by Airlog
in responding to the Airworthiness Directive and legal fees and costs incurred
in defending the litigation described above. Airlog reserved its right to
increase the amount of its claim in the future. On January 29, 1998, the FAA
rejected Airlog's claim. While disappointing, the FAA's rejection of Airlog's
claim was a procedural requirement to initiating litigation against the Agency.
Under the applicable statute Airlog has six months in which to file an action
against the FAA.
On February 10, 1998, the FAA issued a letter to Airlog that approves a number
of Airlog generated Service Bulletins which, when collectively performed on an
Affected Aircraft, permit an operator of such aircraft to achieve revenue
service, but at payloads less than the original certified payload.
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 remaining concerns
raised in the Airworthiness Directive. While the results of any litigation are
impossible to predict with certainty, the Company believes that each of the
foregoing claims are without merit, and that Capital and Airlog have adequate
defenses thereto.
Various lawsuits have been filed in the Superior Court for the State of
California, County of San Bernardino, and served upon
-6-
<PAGE>
GATX 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. All of those suits have all been resolved except for:
Aguilar, et al, v. Calnev Pipe Line Company, et al, filed February 1990 in the
County of Los Angeles (No. 0751026); Pearson v. Calnev Pipe Line Company, et al,
filed May 1990 in the County of San Bernardino (No. 256206); Davis v. Calnev
Pipe Line Company, et al, filed May 1990 (No. 256207). 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 results of operations is remote.
-7-
<PAGE>
In September 1997, judgment was entered against General American Transportation
Corporation ("GATC"), its wholly owned subsidiary, GATX Terminals Corporation
("GTC") and seven other defendants not related to GATX for compensatory damages
of approximately $1.9 million plus interest from the date of the incident to
twenty individuals in a class action law suit filed in the Civil District Court
for the Parish of Orleans, LA, In Re New Orleans Train Car Leakage Fire Incident
(No. 87-16374). The judgment allocated responsibility for twenty percent of the
compensatory damages to GATC and ten percent to GTC. The judgment also provided
for punitive damages of $3.4 billion in the aggregate against five of the nine
named defendants, including $190 million against GTC. The litigation arose out
of an incident which began on September 9, 1987, when butadiene leaked from a
tank car owned by GATC and caught fire. The incident resulted in no deaths or
significant injuries and only minimal property damage, but caused the overnight
evacuation of a number of residents from the immediate area.
On October 31, 1997, the Louisiana Supreme Court ruled that the trial Court
erred in rendering a judgment awarding damages prior to rendering a judgment
adjudicating all liability issues in the case. Accordingly, it vacated the trial
Court's September 1997 judgment which had awarded both compensatory and punitive
damages, and remanded the case back to the trial Court for further proceedings
not inconsistent with its ruling. The plaintiffs have filed a motion asking that
the trial Court refrain from signing a judgment until all remaining 8,000 claims
are tried. The defendants have filed motions asking the Court (1) to enter a
judgment on liability as to compensatory damages and as to the conduct of the
defendants giving rise to punitive damages, and (2) to vacate the verdict
awarding punitive damages. If a judgment is entered as suggested by the
defendants, the Company will be in a position to seek appropriate judicial
review of the liability determinations made to date and of the finding as to the
conduct on which punitive damages were based. The Company will evaluate any
further ruling of the trial Court, and if appropriate ask the Court for post
judgment relief. If necessary, the Company will appeal any judgment against it.
Although more than 8,000 claims have been made, the Company believes that the
damages, if any, that may be awarded to the remaining claimants should average
substantially less than those awarded to the initial twenty plaintiffs. The
Company also believes that the award of compensatory damages to the twenty
plaintiffs was excessive, and that the punitive damages judgment as to GTC was
unwarranted and excessive.
GATX and its subsidiaries are engaged in various matters of litigation including
but not limited to those matters described above, 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.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None.
-8-
<PAGE>
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, President and Chief Executive 1996 54
Officer
David M. Edwards Vice President, Finance and 1994 46
Chief Financial Officer
David B. Anderson Vice President, Corporate Development, 1995 56
General Counsel and Secretary
William L. Chambers Vice President, Human Resources 1993 60
Gail L. Duddy Vice President, Compensation and 1997 45
Benefits
Ralph L. O'Hara Controller and Chief Accounting Officer 1986 53
Brian A. Kenney Vice President and Treasurer 1997 38
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, 1997 on page 61, which is
incorporated herein by reference (page reference is to the Annual Report to
Shareholders).
Item 6. Selected Financial Data
- --------------------------------
Information required by this item is contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1997, on pages 62 and 63, which
is incorporated herein by reference (page references are to the Annual Report to
Shareholders).
-9-
<PAGE>
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, 1997, the management discussion and analysis of 1997 compared
to 1996 on pages 31, 32, 33, 39, 41, 43 and 44, the financial data of business
segments on pages 34 through 37, and the management discussion and analysis of
1996 compared to 1995 on pages 64, 65, and 66, 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,
1997, which is incorporated herein by reference (page references are to the
Annual Report to Shareholders):
Statements of Consolidated Operations and Reinvested Earnings -- Years ended
December 31, 1997, 1996 and 1995 on page 38.
Consolidated Balance Sheets -- December 31, 1997 and 1996, on page 40.
Statements of Consolidated Cash Flows -- Years ended December 31, 1997, 1996
and 1995, on page 42.
Notes to Consolidated Financial Statements on pages 46 through 60.
Quarterly results of operations are contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1997 on page 61, 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 17, 1998, which sections are
incorporated herein by reference. Information regarding officers is included at
the end of Part I.
Item 11. Executive Compensation
- --------------------------------
Information required by this item regarding executive compensation is contained
in sections entitled "Compensation of Directors" and "Compensation of Executive
Officers" in the GATX Proxy Statement dated March 17, 1998, 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 17, 1998, which sections are incorporated herein by
reference.
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, 1997, are filed in
response to Item 8:
-10-
<PAGE>
Statements of Consolidated Operations and Reinvested
Earnings -- Years ended December 31, 1997, 1996 and
1995
Consolidated Balance Sheets -- December 31, 1997 and 1996
Statements of Consolidated Cash Flows -- Years ended
December 31, 1997, 1996 and 1995
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) Report on Form 8-K
GATX filed a report on Form 8-K on December 8, 1997, under Item
5., Other Events.
(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.
-11-
<PAGE>
Exhibit
Number Exhibit Description Page
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, incorporated
by reference to GATX's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, file number 1-2328.
10B. GATX Corporation 1995 Long Term Incentive Compensation Plan,
incorporated by reference to GATX's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1995, file
number 1-2328. First Amendment of said Plan effective as of
January 31, 1997 submitted to the SEC on Form 10-K for the
fiscal year ended December 31, 1996, file number 1-2328.
Second Amendment of said Plan effective as of December 5, 1997
submitted to the SEC along with the electronic transmission of
this Annual Report on Form 10-K.
10C. GATX Corporation Deferred Fee Plan for Directors, as Amended
and Restated as of October 25, 1996, incorporated by reference
to GATX's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, file number 1-2328.
10D. 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.
10E. 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.
10F. 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.
10G. 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.
-12-
<PAGE>
Exhibit
Number Exhibit Description Page
10H. 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.
10I. 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.
10J. Directors' Deferred Stock Plan approved on July 26,1996,
effective as of April 26, 1996, 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.
10K. 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, 1998,
submitted to the SEC along with the electronic submission of
this Report on Form 10-K.
10L. 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.
10M. 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.
10N. 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. 23
11B. Statement regarding computation of per share earnings
(assuming dilution) 24
12. Statement regarding computation of ratios of earnings
to combined fixed charges and preferred stock dividends. 25
-13-
<PAGE>
Exhibit
Number Exhibit Description Page
13. Annual Report to Shareholders for the year ended December 31,
1997, pages 29 - 70, with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, 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. 26
23. Consent of Independent Auditors. 27
24. Powers of Attorney with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, 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, 1997, file number 1-2328. Submitted to
the SEC along with the electronic submission of this Report on
Form 10-K.
99A. Undertakings to the GATX Corporation Salaried Employees
Retirement Savings Plan, incorporated by reference to GATX's
Annual Report on Form 10-K for the fiscal year ended December
31, 1982, file number 1-2328.
99B. Undertakings to the GATX Corporation 1995 Long Term Incentive
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.
99D. Undertakings to the Centron DPL Company, Inc. Profit Sharing
Plan Plan incorporated by reference to the Form S-8
Registration Statement filed with the SEC on December 23, 1997,
Registration No.33-43113.
-14-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders
and Board of Directors
GATX Corporation
We have audited the consolidated financial statements and related schedules of
GATX Corporation and subsidiaries listed in Item 14 (a)(1) and (2) of the Annual
Report on Form 10-K of GATX Corporation for the year ended December 31, 1997.
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, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement 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 27, 1998
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GATX CORPORATION
(Registrant)
/s/Ronald H. Zech
-----------------
Ronald H. Zech
Chairman, President and
Chief Executive Officer
March 19, 1998
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
-----------------
Ronald H. Zech Chairman, President and
March 19, 1998 Chief Executive Officer
/s/David M. Edwards
-------------------
David M. Edwards Vice President Finance and
March 19, 1998 Chief Financial Officer
/s/Ralph L. O'Hara
------------------
Ralph L. O'Hara Controller and
March 19, 1998 Chief Accounting Officer
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, 1998
-16-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
GATX CORPORATION
(PARENT COMPANY)
STATEMENTS OF OPERATIONS
(In Millions)
Year Ended December 31
------------------------------------------
1997 1996 1995
----- ------ -----
<S> <C> <C> <C>
Gross income (loss) $ 1.4 $ (1.3) $ (1.0)
Costs and expenses
Interest 31.7 30.6 31.7
Provision for depreciation 1.0 1.0 .8
Selling, general and administrative 21.2 16.0 20.4
------- ------- --------
53.9 47.6 52.9
------- ------- --------
Loss before income taxes and share of net (loss)
income of subsidiaries (52.5) (48.9) (53.9)
Income tax benefit (18.2) (17.7) (21.3)
------- ------- --------
Loss before share of net (loss) income
of subsidiaries (34.3) (31.2) (32.6)
Share of net (loss) income of subsidiaries (16.6) 133.9 133.4
------- ------- -------
Net (loss) income $(50.9) $102.7 $100.8
====== ====== ======
</TABLE>
-18-
<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
---------------------------------------------
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (50.9) $ 102.7 $ 100.8
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Provision for depreciation 1.0 1.0 .8
Deferred income tax benefit (7.9) (6.8) (10.8)
Share of net (loss) income of subsidiaries
less dividends received 112.6 (60.3) (61.0)
Other (includes working capital) (3.5) (23.5) (4.3)
-------- -------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 51.3 13.1 25.5
INVESTING ACTIVITIES
Additions to operating lease assets and facilities - (1.8) (.9)
-------- -------- --------
NET CASH USED IN
INVESTING ACTIVITIES - (1.8) (.9)
FINANCING ACTIVITIES
Issuance of Common Stock under
employee benefit programs and other 12.4 3.1 5.5
Cash dividends to shareholders (49.4) (48.0) (45.3)
Advances (to) from subsidiaries (13.4) 33.4 14.5
-------- -------- --------
NET CASH USED IN
FINANCING ACTIVITIES (50.4) (11.5) (25.3)
-------- -------- --------
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS $ .9 $ (.2) $ (.7)
========= ========= ==========
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONT'D)
GATX CORPORATION
(PARENT COMPANY)
BALANCE SHEETS
(In Millions)
ASSETS
December 31
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash and cash equivalents $ 1.1 $ .2
Operating lease assets and facilities 11.0 10.9
Less - Allowance for depreciation (4.4) (3.4)
---------- ---------
6.6 7.5
Investment in subsidiaries 1,141.4 1,283.3
Other assets 13.9 22.0
TOTAL ASSETS $ 1,163.0 $ 1,313.0
========== ==========
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDERS' EQUITY
December 31
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Accounts payable and accrued expenses $ 10.2 $ 16.6
Due to subsidiaries 478.7 492.1
Other deferred items 18.7 29.4
---------- ----------
Total liabilities and deferred items 507.6 538.1
Shareholders' equity:
Preferred Stock - 3.4
Common Stock 17.0 14.4
Additional capital 339.7 329.0
Reinvested earnings 363.4 463.7
Cumulative unrealized equity adjustments (17.9) 11.4
---------- ----------
702.2 821.9
Less - Cost of shares in treasury (46.8) (47.0)
---------- ----------
Total shareholders' equity 655.4 774.9
---------- ----------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDERS' EQUITY $ 1,163.0 $ 1,313.0
========== ==========
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
GATX CORPORATION AND SUBSIDIARIES
(In Millions)
- --------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. 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, 1997:
Allowance for possible
losses - Note A $ 121.1 $ 11.1 $ 3.3 (B) $ (7.0) (C) $ 128.5
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
<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 (LOSS) INCOME PER SHARE OF
COMMON STOCK
(In Millions, Except Per Share Amounts)
Year Ended December 31
---------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average number of shares
of Common Stock outstanding 22.5 20.2 20.0 19.9 19.6
Net (loss) income $ (50.9) $ 102.7 $ 100.8 $ 91.5 $ 72.7
Deduct - Dividends paid and
accrued on Preferred Stock 6.7 13.2 13.2 13.3 13.3
-------- --------- --------- -------- --------
Net (loss) income, as adjusted $ (57.6) $ 89.5 $ 87.6 $ 78.2 $ 59.4
======== ========= ========= ======== ========
Net (loss) income per share $ (2.55) $ 4.43 $ 4.38 $ 3.94 $ 3.03
======== ========= ========= ======== ========
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11B
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET (LOSS) INCOME PER SHARE OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS ASSUMING DILUTION
(PRINCIPALLY CONVERSION OF ALL OUTSTANDING PREFERRED STOCK)
(In Millions, Except Per Share Amounts)
Year Ended December 31
-------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average number of shares used to
compute basic earnings per share 22.5 20.2 20.0 19.9 19.6
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 *
Common Stock issuable upon assumed
conversion of Preferred Stock * 4.0 4.0 4.0 *
------- ------- ------- ------ ------
Total 22.5 24.5 24.4 24.2 19.6
======= ======= ======= ====== ======
Net (loss) income as adjusted
per basic computation $(57.6) $ 89.5 $ 87.6 $ 78.2 $ 59.4
Add - Dividends paid and
accrued on Preferred Stock * 13.2 13.2 13.3 *
------ ------- ------- ------ ------
Net (loss) income, as adjusted $(57.6) $ 102.7 $ 100.8 $ 91.5 $ 59.4
====== ======= ======= ====== ======
Net (loss) income per share,
assuming dilution $(2.55) $ 4.20 $ 4.14 $ 3.79 $ 3.03
====== ======= ======= ====== ======
<FN>
* Exercise of options and conversion of Preferred Stock is excluded from
computation of diluted earnings because of antidilutive effects.
</FN>
Additional diluted computation (1)
Average number of shares used to
compute basic earnings per share 22.5 19.6
Common stock issuable upon assumed
conversion of Preferred Stock, and
stock option exercises 2.3 4.3
------- ------
24.8 23.9
====== ======
Net (loss) income as adjusted
per basic computation $ (57.6) $ 59.4
Add - Dividends paid and accrued
on Preferred Stock 6.7 13.3
------- ------
$ (50.9) $ 72.7
======= ======
Net (loss) income per share,
assuming dilution $ (2.05) $ 3.04
======= ======
<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)
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Net (loss) income $ (50.9) $ 102.7 $ 100.8 $ 91.5 $ 72.7
Add:
Income taxes (benefit) expense (5.5) 54.4 47.6 48.8 51.4
Equity in net earnings of affiliated companies,
net of distributions received 40.7 8.0 6.5 3.7 8.0
Interest on indebtedness and amortization
of debt discount and expense 222.4 202.8 170.1 148.2 151.8
Amortization of capitalized interest 1.4 3.7 1.1 1.1 1.1
Portion of rents representative of
interest factor (deemed to be one-third) 62.2 56.7 43.9 37.9 31.4
-------- -------- -------- -------- --------
Total earnings available for fixed charges $ 270.3 $ 428.3 $ 370.0 $ 331.2 $ 316.4
======== ======== ======== ======== ========
Preferred dividend requirements $ 6.7 $ 13.2 $ 13.2 $ 13.3 $ 13.3
Ratio to convert preferred
dividends to pretax basis (A) 107% 173% 169% 171% 197%
-------- -------- -------- -------- --------
Preferred dividend factor on pretax basis 7.2 22.8 22.3 22.7 26.2
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense 222.4 202.8 170.1 148.2 151.8
Capitalized interest 2.5 6.8 6.2 3.0 2.7
Portion of rents representative of interest
factor (deemed to be one-third) 62.2 56.7 43.9 37.9 31.4
-------- -------- -------- -------- --------
Combined fixed charges and
preferred stock dividends $ 294.3 $ 289.1 $ 242.5 $ 211.8 $ 212.1
======== ======== ======== ======== ========
Ratio of earnings to combined fixed charges
and preferred stock dividends (B) .92x (C) 1.48x 1.53x 1.56x 1.49x
<FN>
(A) To adjust preferred dividends to a pretax basis, (loss) income before
income taxes and equity in net earnings of affiliated companies is
divided by (loss) 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 (loss) income before income taxes and fixed
charges, less equity in net earnings of affiliated companies, net of
distributions received.
(C) In 1997, net loss included restructuring charges of $162.8 million.
Excluding the charges, the "ratio of earnings to combined fixed charges
and preferred stock dividends" was 1.66x. See Note P - Restructuring
Charges on page 60 of the Company's 1997 Annual Report to Shareholders.
</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 4 domestic
subsidiaries, 4 foreign subsidiaries and interests in 2 foreign affiliates,
Business Segment--Railcar Leasing and Management
GATX Financial Services, Inc. (Delaware) -- 64 domestic subsidiaries (which
includes GATX Capital Corporation), 13 foreign subsidiaries, interests in
6 domestic affiliates and 5 foreign affiliates, Business Segment--
Financial Services
GATX Terminals Corporation (Delaware)--3 domestic subsidiaries, 3 foreign
subsidiaries, an interest in 1 domestic affiliate and 13 foreign
affiliates, Business Segment--Terminals and Pipelines
GATX Logistics, Inc. (Florida) --7 domestic subsidiaries and 2 foreign
subsidiaries and an interest in 1 foreign affiliate, 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 on Form S-8 filed July 20, 1995; (vi) Registration
Statement No. 33-06315 on Form S-8 filed June 19, 1996; and (vii) Registration
Statement No. 33-43113 on Form S-8 filed December 23, 1997 of GATX Corporation,
of our report dated January 27, 1998 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,
1997.
ERNST & YOUNG LLP
Chicago, Illinois
March 16, 1998
-27-
<PAGE>
EXHIBITS FILED WITH DOCUMENT
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 on Form 10-K for the
fiscal year ended December 31, 1996, file number 1-2328.
Second Amendment of said Plan effective as of December 5, 1997
submitted to the SEC along with the electronic transmission of
this Annual Report on Form 10-K.
10K. 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, 1998,
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
(assuming 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,
1997, pages 29 - 70, with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, 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, 1997, 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, 1997, file number 1-2328. Submitted to
the SEC along with the electronic submission of this Report on
Form 10-K.
Second 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, the Plan has been amended by the Board of Directors of GATX
Corporation on December 5, 1997.
Consistent with such resolutions the Plan is hereby amended as follows:
1. Paragraph VIII-1 thereof is deleted in its entirety, and is
substituted in its place:
Special Acceleration. Notwithstanding any other provisions of
the Plan, a Special Acceleration of awards outstanding under
the Plan shall occur with the effect set forth in paragraph
VIII-2 at any time when there is a change in the beneficial
ownership of the Company's voting stock or a change in the
composition of the Company's Board of Directors which occurs
as follows:
(1) any "person" [as such term is used in Section 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")] other than:
(A) a trustee or other fiduciary of securities
held under an employee benefit plan of the
Company;
(B) a corporation owned, directly or indirectly,
by the stockholders of the Company in
substantially the same proportions as their
ownership of the Company; or
(C) any person in which the Executive has a
substantial equity interest;
is or becomes a beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or
indirectly, of stock of the Company representing 20%
or more of the total voting power of the Company's
then outstanding stock;
(2) a tender offer is made for the stock of the Company
by a person other than a person described in
subparagraph (1)(A), (B) or (C) and one of the
following occurs:
(A) the person making the offer owns or has
accepted for payment stock of the Company
representing 20% or more of the total voting
power of the Company's stock; or
(B) three business days before the offer is to
terminate (unless the offer is withdrawn
first) such person could own, by the terms
of the offer plus any shares owned by such
person, stock representing 50% or more of
the total voting power of the Company's
outstanding stock when the offer terminates;
(3) during any period of two consecutive years there
shall cease to be a majority of the Company's Board
of Directors comprised as follows: individuals who at
the beginning of such period constitute the Board of
Directors and any new director(s) whose election by
the Board of Directors or nomination for election by
the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning
of the period or whose election or nomination for
election was previously so approved; or
(4) the stockholders of the Company approve a merger or
consolidation of the Company with any other company
other than:
(A) such a merger or consolidation which would
result in the Company's voting stock
outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into
voting stock of the surviving entity) more
than 70% of the combined voting power of the
Company's or such surviving entity's
outstanding voting stock immediately after
such merger or consolidation; or
(B) such a merger or consolidation which would
result in the directors of the Company who
were directors immediately prior thereto
continuing to constitute at least 50% of the
directors of the surviving entity
immediately after such merger or
consolidation.
For purposes of this paragraph (4), "surviving
entity" shall mean only an entity in which all of the
Company's stockholders become stockholders by the
terms of such merger or consolidation, and the phrase
"directors of the Company who were directors
immediately prior thereto" shall not include:
(A) any director of the Company who was
designated by a person who has entered into
an agreement with the Company to effect a
transaction described in this paragraph or
in paragraph (2) above; or
(B) any director who was not a director at the
beginning of the 24-consecutive-month period
preceding the date of such merger or
consolidation;
unless his election by the Board of Directors or
nomination for election by the Company's
stockholders, was approved by a vote of at least
two-thirds (2/3) of the directors then still in
office who were directors before the beginning of
such period.
With respect to any Participant with whom the Company has
entered into an Agreement for Continued Employment Following a
Change of Control of Disposition of a Subsidiary, a Special
Acceleration of awards outstanding under the Plan with the
effect set forth in paragraph VIII-2 as to such Participant
shall occur if such Participant's employment is terminated or
constructively terminated, and as a result thereof such
Participant becomes entitled to termination payments under
such agreement.
2. The first sentence of Paragraph II - 4 is hereby deleted
thereof in its entirety the following is inserted in its
place:
Each Incentive Stock Option granted to a Participant shall
terminate on the earlier of (a) the tenth anniversary of the
Option Date or, (b) subject to the provisions of the following
sentence, three (3) months (or such other period of time as
may be determined by the Committee in its discretion) after
the date the Participant's employment by the Company and its
subsidiaries is terminated for any reason.
3. The first sentence of Paragraph III - 4 is deleted in its
entirety, and the following is inserted in its place:
Each Non-Qualified Stock Option granted to a Participant shall
terminate on the earlier of (a) the tenth anniversary of the
Option Date or, (b) subject to the provisions of the following
sentence, three months (or such other period of time as may be
determined by the Committee in its discretion) after the date
the Participant's employment by the Company and its
subsidiaries is terminated for any reason.
4. The first sentence of Paragraph IV - 5 is deleted in its
entirety, and the following is inserted in its place:
Each Stock Appreciation Right granted to a Participant shall
terminate on the earlier of (a) the tenth anniversary of the
Option Date or, (b) subject to the provisions of the following
sentence, three months (or such other period of time as may be
determined by the Committee in its discretion) after the date
the Participant's employment by the Company and its
subsidiaries is terminated for any reason.
/s/ William L. Chambers
---------------------------
William L. Chambers
Vice President, Human Resources
Exhibit 10K
The following Agreement for Continued Employment Following Change of Control or
Disposition of a Subsidiary dated as of January 1, 1998 has been entered into
between GATX Corporation and the following executive officers:
Ronald H. Zech, Chairman and CEO
David Edwards, Vice President Finance and CFO
David Anderson , Vice President Corporate Development, Secretary and
General Counsel
William Chambers, Vice President Human Resources
Brian A. Kenney, Vice President and Treasurer
AGREEMENT FOR CONTINUED EMPLOYMENT FOLLOWING CHANGE
OF CONTROL OR DISPOSITION OF A SUBSIDIARY
This Agreement is made and entered into by and between GATX Corporation
("GATX") and , (the "Executive") on the Execution Date shown below, to be
effective as of January 1, 1998.
WITNESSETH
----------
WHEREAS, GATX and the Executive desire to enter into this Agreement in
order to provide GATX and its consolidated subsidiaries stability of management
following a Change of Control or Disposition (as those terms are defined herein)
of GATX or one of its consolidated subsidiaries, to provide for the continued
employment of the Executive for a period for two years following the occurrence
of either such event, and to set forth the terms and conditions of such
continued employment and the obligations of the parties in the event of
termination thereof.
NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:
1. Definitions.
a. "Cause" means a willful and material breach of this Agreement
which has resulted or is likely to result in a material
detriment to the financial condition, business or prospects of
GATX.
b. "Change of Control" means a change in the beneficial ownership
of GATX's voting stock or a change in the composition of
GATX's Board of Directors which occurs as follows:
(1) any "person" (as such term is used in Section 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) other than:
(A) a trustee or other fiduciary of securities
held under an employee benefit plan of GATX;
(B) a corporation owned, directly or indirectly,
by the stockholders of the GATX in
substantially the same proportions as their
ownership of GATX; or
(C) any person in which the Executive has a
substantial equity interest;
is or becomes a beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or
indirectly, of stock of GATX representing 20% or more
of the total voting power of GATX's then outstanding
stock;
(2) a tender offer is made for the stock of GATX by a
person other than a person described in subparagraph
(1)(A), (B) or (C), and one of the following occurs:
<PAGE>
(A) the person making the offer owns or has
accepted for payment stock of GATX
representing 20% or more of the total voting
power of GATX's stock; or
(B) three business days before the offer is to
terminate (unless the offer is withdrawn
first) such person could own, by the terms
of the offer plus any shares owned by such
person, stock representing 50% or more of
the total voting power of GATX's outstanding
stock when the offer terminates;
(3) during any period of two consecutive years there
shall cease to be a majority of GATX's Board of
Directors comprised as follows: individuals who at
the beginning of such period constitute the Board of
Directors and any new director(s) whose election by
the Board of Directors or nomination for election by
GATX's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of
the period or whose election or nomination for
election was previously so approved; or
(4) the stockholders of GATX approve a merger or
consolidation of GATX with any other company other
than:
(A) such a merger or consolidation which would
result in GATX's voting stock outstanding
immediately prior thereto continuing to
represent (either by remaining outstanding
or by being converted into voting stock of
the surviving entity) more than 70% of the
combined voting power of GATX's or such
surviving entity's outstanding voting stock
immediately after such merger or
consolidation; or
(B) such a merger or consolidation which would
result in the directors of GATX who were
directors immediately prior thereto
continuing to constitute at least 50% of the
directors of the surviving entity
immediately after such merger or
consolidation.
For purposes of this paragraph (4), "surviving
entity" shall mean only an entity in which all of
GATX's stockholders become stockholders by the terms
of such merger or consolidation, and the phrase
"directors of GATX who were directors immediately
prior thereto" shall not include:
(A) any director of GATX who was designated by a
person who has entered into an agreement
with GATX to effect a transaction described
in this paragraph or in paragraph (2) above;
or
(B) any director who was not a director at the
beginning of the 24-consecutive-month period
preceding the date of such merger or
consolidation;
unless his election by the Board of Directors or
nomination for election by GATX's stockholders, was
approved by a vote of at least two-thirds (2/3) of
the directors then still in office who were directors
before the beginning of such period.
(5) A determination by the Board of Directors that the
cumulative effect on GATX of the sale or other
disposition, either in a single transaction, or a
series of related transactions, of all of the common
stock or substantially all of the assets of one or
more Company Units warrants the conclusion that a
"Change of Control" has occurred for purposes of this
Agreement.
c. "Company" includes GATX, its consolidated subsidiaries, any
former subsidiary of GATX by which the Executive was primarily
employed on the day prior to the Triggering Event and any
successor to GATX or such subsidiary by purchase of assets or
otherwise.
d. "Company Unit" means any corporation included within the term
"Company."
e. "Constructive Termination" or "Constructively Terminates"
means the effecting of any of the following actions by the
Company following which the Executive terminates the
Executive's employment by the Company:
-2-
<PAGE>
(1) a significant reduction in the nature or scope of the
Executive's authority, duties, functions or
responsibilities or a material change in the location
at which they are to be performed or the imposition
of unreasonable travel requirements;
(2) a reduction in the Executive's compensation from that
provided to the Executive immediately prior to the
Triggering Event;
(3) a diminution in the Executive's eligibility to
participate in bonus, stock option, incentive award
and other benefit plans from the level at which the
Executive was participating therein immediately prior
to the Triggering Event;
(4) a diminution in employee benefits (including, but not
limited to medical, dental, life insurance and
disability plans) and other Perquisites applicable to
the Executive, from the level of benefits and other
Perquisites to which the Executive was entitled
immediately prior to the Triggering Event;
(5) a reasonable determination by the Executive that, as
a result of a change in circumstances affecting the
Company or its management, the Executive is unable to
exercise effectively the authorities, duties,
functions and responsibilities consistent with those
attributable to the Executive's position immediately
prior to the Triggering Event; and
(6) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to
perform this Agreement as contemplated in paragraph
15 below.
f. "Disposition" of a Company Unit means any transaction
including sale, consolidation, merger or spin-off of any
Company Unit, following which GATX no longer owns fifty
percent (50%) or more of the voting stock of such Company Unit
or the sale of all or substantially all of the assets of such
Company Unit.
g. "Employment Period" means the two (2) year period commencing
on the day of a Triggering Event and ending two years
following such day.
h. "Perquisites" includes not only those incidental emoluments of
office commonly included within the term, such as a company
assigned car, club membership and financial planning
assistance, but also the benefits under corporate employee
benefit plans such as the GATX medical, life insurance and
Pension Plan (as defined herein) and other plans and
agreements relating thereto.
i. "Total Disability" means any disability that (1) entitles the
Executive to disability income benefits under the GATX
Corporation Long Term Disability Income Plan as in effect on
the day prior to the Triggering Event and (2) prevents the
Executive, for the duration of the Employment Period, from
engaging in the same or comparable type of employment as that
in which the Executive was engaged on the day prior to the
Triggering Event.
j. "Triggering Event" means the first to occur of a Change of
Control or the Disposition of the Company Unit by which the
Executive was primarily employed on the day prior to such
Disposition.
2. Employment. This agreement shall have no effect on, nor shall any of
its provisions apply to, the Executive's employment or termination
thereof that occurs prior to the occurrence of a Triggering Event.
However, if the Executive is employed by the Company on the day prior
to the Triggering Event, the Company shall continue to employ the
Executive and the Executive shall remain in the employ of the Company
for the duration of the Employment Period. Provided, however, subject
only to the provisions of paragraphs five (5) and six (6) below, the
Company may, at any time, terminate the employment of the Executive at
will.
3. Performance of Duties. During the Executive's employment by the
Company, the Executive shall devote his or her best efforts and full
business time exclusively to the business affairs and interests of the
Company and shall faithfully and efficiently perform such duties,
consistent with the status of the Executive's position, as may be
assigned to the Executive from time to time by the Chief Executive
Officer of the Company or the Chief Executive Officer's delegate.
-3-
<PAGE>
4. Compensation. During the Executive's employment by the Company, he
or she shall receive a salary in such amount as may be established from
time to time by the Company Unit by which the Executive is primarily
employed and shall be entitled to participate, in accordance with the
Company's policy and consistent with the Executive's position and
salary, in all plans and all Perquisites applicable generally to other
executives of the Company Unit.
5. Termination Payments. If the Company terminates or Constructively
Terminates the Executive's employment at any time during the Employment
Period for any reason other than Cause or Total Disability, the Company
shall promptly pay or cause to be paid to the Executive in a lump sum
an amount equal to:
a. The sum of (i) two times the Executive's annual salary before
deductions and deferrals at the level thereof as of the day
prior to the Triggering Event, plus (ii) one times the bonus
that would have been payable to the Executive (for the year in
which such termination or Constructive Termination occurs)
under the GATX Management Incentive Plan (the "MIP") as in
effect on the day prior to the Triggering Event, equal in
amount to the product of (A) the Executive's annual salary as
in effect immediately prior to the Triggering Event and (B)
the Executive's Target Bonus (as that term is defined in the
MIP); minus
b. Any amounts paid to the Executive in accordance with the
Company's severance pay policies.
In addition to the amount set forth above, the Company shall:
(1) Permit the Executive to continue the Executive's
participation (or provide equivalent coverage) in the
Company Unit's medical, dental, disability and life
insurance programs provided under GATX's benefit
plans as in effect on the day prior to the Triggering
Event until the earlier to occur of (a) the second
anniversary of the date as of which the Executive's
employment is terminated or Constructively Terminated
or (b) the date on which the Executive becomes
eligible for coverage under any other employee
benefit plans providing substantially equivalent
benefits at substantially equivalent levels;
(2) Reimburse the Executive (to a maximum of five
thousand dollars ($5,000) per year) for financial and
estate planning and tax return preparation for the
two (2) years immediately following the Executive's
termination or Constructive Termination of employment
in accordance with GATX's executive financial
planning program in effect on the day prior to a
Triggering Event;
(3) Reimburse the Executive (to a maximum of thirty
thousand dollars ($30,000)) for the cost of
outplacement services, plus up to one thousand
dollars ($1,000) of expenses incurred in seeking or
obtaining new employment.
Notwithstanding any provision of this Agreement to the contrary, in no
event shall an Executive be entitled to termination payments under this
paragraph 5 by reason of the Disposition of the Company Unit in which
the Executive was primarily employed immediately prior to such
Disposition if the Executive continues in employment with the successor
or purchaser of such Company Unit during the two-year period following
the Disposition.
6. Retirement Income Benefits. In addition to the foregoing, if the
Executive survives for two (2) years following such termination or
Constructive Termination of employment:
a. The Company shall pay or cause to be paid to the Executive (or
in the event of the Executive's death following the expiration
of such two (2) year period to the Executive's surviving
spouse) a Retirement Income Benefit (as hereinafter defined)
calculated and paid as follows:
(1) The Retirement Income Benefit shall be an amount
equal to the difference, if any, between (A) the
monthly benefit the Executive (or, in the event of
the Executive's death, the Executive's surviving
spouse) would have received as a monthly pension
benefit under the GATX Corporation Non-Contributory
Pension Plan for Salaried Employees (the "Salaried
Pension Plan"), the GATX Corporation Excess Benefit
Plan, the GATX Corporation Supplemental Benefit Plan
and any other written agreement between the Executive
and the Company regarding the Executive's retirement,
all as in effect on the day prior to the Triggering
Event, (hereinafter collectively, the "Pension Plan")
assuming the Executive's employment had terminated
two (2)
-4-
<PAGE>
years after the date of the Executive's termination
or Constructive Termination of employment, and
accordingly the Executive had accumulated two
additional years of service credit under the Pension
Plan at a level of compensation calculated in
accordance with the immediately following sentence
and (B) the amount, if any, the Executive (or, in the
event of the Executive's death, the Executive's
surviving spouse) actually receives as a monthly
benefit under the Pension Plan. For purposes of
subparagraph (A) of this paragraph, the Executive's
compensation for each of the two additional years of
assumed service credit shall be equal to the level of
the Executive's compensation as in effect immediately
prior to the Triggering Event, plus an amount equal
to the average of the Covered Bonuses (as defined in
Section 2.13 of the Salaried Pension Plan) paid to
the Executive during the five (5) calendar year
period immediately preceding the Triggering Event.
(2) Payment of the Retirement Income Benefit shall be
made in the same manner, simultaneously with and in
the same form as payments are, or would have been,
made to the Executive (or in the event of the
Executive's death to the Executive's surviving
spouse) under the Pension Plan, but shall commence no
sooner than two (2) years following the Executives'
termination or Constructive Termination of
employment. Any election available to and validly
executed by the Executive under the Pension Plan as
to either an optional form of payment or as to the
date on which benefits are to commence, shall be
applicable to the Retirement Income Benefit and shall
be utilized in calculating the amount of the
Retirement Income Benefit.
b. The Company shall permit the Executive to participate in (or
shall provide equivalent coverage) on the same basis as other
Company employees who have terminated their employment at
approximately the same age and after a substantially
equivalent number of years of service in the GATX Corporation
Medical Plan and the GATX Corporation Life Insurance Plan,
both as in effect on the day prior to the Triggering Event.
Such benefits shall be paid at the same time, under the same
conditions and to the same extent as if the Executive's
employment had continued for two (2) years after the
termination or Constructive Termination of the Executive's
employment.
Notwithstanding the foregoing, if the Executive would
otherwise be entitled to receive a Retirement Income Benefit hereunder
but dies prior to the expiration of a two (2) year period following
termination or Constructive Termination of the Executive's employment
and leaves a surviving spouse, such surviving spouse shall be entitled
to receive such payments and Perquisites as would be applicable to such
surviving spouse under this Agreement, the Pension Plan and all other
GATX employee benefit plans and policies in effect on the day prior to
the Triggering Event, calculated and payable in the same manner as if
the Executive had been employed by the Company on the Executive's date
of death.
7. Payment in Lieu. Except with respect to (a) compensation applicable
to the Executive's employment prior to the termination or Constructive
Termination thereof, (b) amounts payable under the severance pay
policies described in paragraph 5(b) above, and (c) such compensation
as may be payable or rights as may be exercisable on termination of
employment under the GATX Salaried Employees Retirement Savings Plan,
the GATX Corporation 1995 Long Term Incentive Compensation Plan or
other similar programs, all as in effect on the day prior to the
Triggering Event, the amounts payable to the Executive under this
Agreement shall be in lieu of any other amount payable to the Executive
by the Company by reason of the Executive's termination or Constructive
Termination of employment.
8. Confidentiality. During and after the Executive's employment, the
Executive will not divulge or appropriate to the Executive's own use or
to the use of others any secret or confidential information or
knowledge pertaining to the business of the Company or any of its
subsidiaries or affiliates obtained by the Executive during such
employment.
9. Nonalienation. The interests of the Executive under the Agreement
are not subject to the claims of the Executive's creditors and may not
otherwise be voluntarily or involuntarily assigned, alienated or
encumbered.
10. Tax Penalties. If any amount payable to the Executive by the
Company, whether under this Agreement or otherwise (a "Payment"), is
subject to any tax under section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any similar federal or state law (an
"Excise Tax"), the Company shall pay to the Executive an additional
amount (the "Make-Whole Amount") which is equal to (i) the amount of
the Excise Tax,
-5-
<PAGE>
plus (ii) the aggregate amount of any interest, penalties, fines or
additions to any tax which are imposed in connection with the
imposition of such Excise Tax, plus (iii) all income, excise and other
applicable taxes imposed on the Executive under the laws of any
Federal, state or local government or taxing authority by reason of the
payments required under clause (i) and clause (ii) and this clause
(iii).
a. For purposes of determining the Make-Whole Amount, the
Executive shall be deemed to be taxed at the highest marginal
rate under all applicable local, state, federal and foreign
income tax laws for the year in which the Make-Whole Amount is
paid. The Make-Whole Amount payable with respect to an Excise
Tax shall be paid by the Company coincident with the Payment
with respect to which such Excise Tax relates.
b. All calculations under this paragraph 10 shall be made
initially by the Company and the Company shall provide prompt
written notice thereof to the Executive to enable the
Executive to timely file all applicable tax returns. Upon
request of the Executive, the Company shall provide the
Executive with sufficient tax and compensation data to enable
the Executive or his tax advisor to independently make the
calculations described in subparagraph (a) above and the
Company shall reimburse the Executive for reasonable fees and
expenses incurred for any such verification.
c. If the Executive gives written notice to the Company of any
objection to the results of the Company's calculations within
60 days of the Executive's receipt of written notice thereof,
the dispute shall be referred for determination to tax counsel
selected by the independent auditors of the Company ("Tax
Counsel"). The Company shall pay all fees and expenses of such
Tax Counsel. Pending such determination by Tax Counsel, the
Company shall pay the Executive the Make-Whole Amount as
determined by it in good faith. The Company shall pay the
Executive any additional amount determined by Tax Counsel to
be due under this paragraph 10 (together with interest thereon
at a rate equal to 120% of the Federal short-term rate
determined under section 1274(d) of the Code) promptly after
such determination.
d. The determination by Tax Counsel shall be conclusive and
binding upon all parties unless the Internal Revenue Service,
a court of competent jurisdiction, or such other duly
empowered governmental body or agency (a "Taxing Authority")
determines that the Executive owes a greater or lesser amount
of Excise Tax with respect to any Payment than the amount
determined by Tax Counsel.
e. If a Taxing Authority makes a claim against the Executive
which, if successful, would require the Company to make a
payment under this paragraph 10, the Executive agrees to
contest the claim on request of the Company subject to the
following conditions:
(1) The Executive shall notify the Company of any such
claim within 10 days of becoming aware thereof. In
the event that the Company desires the claim to be
contested, it shall promptly (but in no event more
than 30 days after the notice from the Executive or
such shorter time as the Taxing Authority may specify
for responding to such claim) request the Executive
to contest the claim. The Executive shall not make
any payment of any tax which is the subject of the
claim before the Executive has given the notice or
during the 30-day period thereafter, unless the
Executive receives written instructions from the
Company to make such payment together with an advance
of funds sufficient to make the requested payment
plus any amounts payable under this paragraph 10
determined as if such advance were an Excise Tax, in
which case the Executive will act promptly in
accordance with such instructions.
(2) If the Company so requests, the Executive will
contest the claim by either paying the tax claimed
and suing for a refund in the appropriate court or
contesting the claim in the United States Tax Court
or other appropriate court, as directed by the
Company; provided, however, that any request by the
Company for the Executive to pay the tax shall be
accompanied by an advance from the Company to the
Executive of funds sufficient to make the requested
payment plus any amounts payable under this paragraph
10 determined as if such advance were an Excise Tax.
If directed by the Company in writing the Executive
will take all action necessary to compromise or
settle the claim, but in no event will the Executive
compromise or settle the claim or cease to contest
the claim without the written consent of the Company;
provided, however, that the Executive may take any
such action if the Executive waives in writing his
right to a payment under this paragraph 10 for any
amounts payable in connection with such claim. The
Executive
-6-
<PAGE>
agrees to cooperate in good faith with the Company in
contesting the claim and to comply with any
reasonable request from the Company concerning the
contest of the claim, including the pursuit of
administrative remedies, the appropriate forum for
any judicial proceedings, and the legal basis for
contesting the claim. Upon request of the Company,
the Executive shall take appropriate appeals of any
judgment or decision that would require the Company
to make a payment under this paragraph 10. Provided
that the Executive is in compliance with the
provisions of this section, the Company shall be
liable for and indemnify the Executive against any
loss in connection with, and all costs and expenses,
including attorneys' fees, which may be incurred as a
result of, contesting the claim, and shall provide to
the Executive within 30 days after each written
request therefor by the Executive cash advances or
reimbursement for all such costs and expenses
actually incurred or reasonably expected to be
incurred by the Executive as a result of contesting
the claim.
f. Should a Tax Authority finally determine that an additional
Excise Tax is owed, then the Company shall pay an additional
Make-Whole Amount to the Executive in a manner consistent with
this paragraph 10 with respect to any additional Excise Tax
and any assessed interest, fines, or penalties. If any Excise
Tax as calculated by the Company or Tax Counsel, as the case
may be, is finally determined by a Tax Authority to exceed the
amount required to be paid under applicable law, then the
Executive shall repay such excess to the Company within 30
days of such determination; provided that such repayment shall
be reduced by the amount of any taxes paid by the Executive on
such excess which is not offset by the tax benefit
attributable to the repayment.
11. No Cumulation or Duplication of Benefits. The obligations of the
Company to make payments or provide benefits hereunder are the joint
and several obligations of the Company and the Company Units.
Accordingly, if following the termination or Constructive Termination
of the Executive's employment the Executive receives any form of
compensation payments or benefits from the Company or any Company Unit
or from a successor thereto or affiliate thereof, the amount of any
such compensation or payment together with the fair market value of any
such benefits shall be deducted from any obligation of the Company or
applicable Company Unit to make payments or provide benefits to the
Executive under or by reason of this Agreement.
12. Reduction of Payments. Notwithstanding anything contained herein to
the contrary, any amounts payable hereunder shall be reduced by such
amount as may be necessary to make this agreement not unlawful under
federal law.
13. Amendment. This Agreement may be amended by written agreement of
the parties without the consent of any other person and no person,
other than the parties hereto, shall have any rights under or interest
in this Agreement or the subject matter hereof.
14. Extension. The Board of Directors of GATX may, at any time prior to
the expiration or termination of this Agreement, extend the term of
this Agreement for a period of up to two (2) years from the date on
which the extension is approved, without any further action on the part
of the Executive.
15. Successors. This Agreement shall be binding upon, and inure to the
benefit of, the heirs, executors and legal representatives of the
Executive and the successors and assigns of the Company and upon any
person acquiring, whether by merger, consolidation, purchase of assets
or otherwise, all or substantially all of the assets and business of
any Company Unit. The Company agrees that it will not effect the sale
or other disposition of all or substantially all of its assets unless
either (a) the person or entity acquiring the assets or a substantial
portion of the assets shall expressly assume by an instrument in
writing all duties and obligations of the Company under this Agreement
or (b) the Company shall provide through the establishment of a
separate reserve for the payment in full of all amounts that are or may
be reasonably expected to become payable to the Executive under this
Agreement.
16. Nonwaiver. The waiver by either party of a breach of this Agreement
shall not be construed as a waiver of any subsequent breach.
17. Resolution of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the alleged breach thereof, shall be
settled by arbitration in the City of Chicago, Illinois in accordance
with the laws of the State of Illinois by three arbitrators, one of
whom shall be appointed by the Company or any successor thereto, one by
the Executive and the third by the other two. If the other two
arbitrators cannot agree on the appointment of
-7-
<PAGE>
a third arbitrator, or if either party fails within thirty (30) days
after receipt of written demand to appoint an arbitrator, then such
arbitrator shall be appointed by the Dean of the Business School of the
University of Chicago or his delegate. The arbitration shall be
conducted in accordance with the rules of the American Arbitration
Association, except with respect to the selection of arbitrators, which
shall be as provided in this paragraph 17. Judgment upon the award
rendered by the arbitrators may be entered in any court having
jurisdiction thereof. In the event that it shall be necessary or
desirable for the Executive to retain legal counsel and/or incur other
costs and expenses in connection with the enforcement of any and all of
his rights under this Agreement, the Executive shall be entitled to
recover from the Company reasonable attorney's fees and costs and
expenses incurred by the Executive in connection with the enforcement
of said rights. Payments shall be made to the Executive by the Company
at the time these attorney's fees and costs and expenses are incurred
by the Executive. If, however, the arbitrators should later determine
that under the circumstances it was unjust for the Company to have made
any of these payments of attorney's fees and costs and expenses to the
Executive, the Executive shall repay any such payments to the Company
in accordance with the order of the arbitrators. Any award of the
arbitrators shall include interest at a rate or rates considered just
under the circumstances by the arbitrators.
18. Termination of Agreement. This agreement shall terminate on
December 31, 2000, provided, however, if prior to such date, but after
January 1, 1999, there shall occur either (a) a Change of Control or
(b) a Disposition of a Company Unit by which the Executive is primarily
employed on the day prior to such Disposition, this agreement shall
remain in effect until two years following the date of the first to
occur of such Change of Control or Disposition.
Termination of this Agreement shall not affect any rights that shall
have accrued to the Executive under this Agreement prior to the
termination date.
IN WITNESS WHEREOF, the Executive has hereunto set his hand, and GATX
has caused these presents to be executed in its name and on its behalf, and its
corporate seal to be hereunto affixed and attested by its Assistant Secretary.
-------------------------------
Executive
GATX CORPORATION
By_____________________________
Its Chairman of the Board
---------------------------------
Execution Date
ATTEST:
- --------------------------------
Its Assistant Secretary
-8-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11A
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET (LOSS) INCOME PER SHARE OF
COMMON STOCK
(In Millions, Except Per Share Amounts)
Year Ended December 31
---------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average number of shares
of Common Stock outstanding 22.5 20.2 20.0 19.9 19.6
Net (loss) income $ (50.9) $ 102.7 $ 100.8 $ 91.5 $ 72.7
Deduct - Dividends paid and
accrued on Preferred Stock 6.7 13.2 13.2 13.3 13.3
-------- --------- --------- -------- --------
Net (loss) income, as adjusted $ (57.6) $ 89.5 $ 87.6 $ 78.2 $ 59.4
======== ========= ========= ======== ========
Net (loss) income per share $ (2.55) $ 4.43 $ 4.38 $ 3.94 $ 3.03
======== ========= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 11B
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET (LOSS) INCOME PER SHARE OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS ASSUMING DILUTION
(PRINCIPALLY CONVERSION OF ALL OUTSTANDING PREFERRED STOCK)
(In Millions, Except Per Share Amounts)
Year Ended December 31
-------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average number of shares used to
compute basic earnings per share 22.5 20.2 20.0 19.9 19.6
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 *
Common Stock issuable upon assumed
conversion of Preferred Stock * 4.0 4.0 4.0 *
------- ------- ------- ------ ------
Total 22.5 24.5 24.4 24.2 19.6
======= ======= ======= ====== ======
Net (loss) income as adjusted
per basic computation $(57.6) $ 89.5 $ 87.6 $ 78.2 $ 59.4
Add - Dividends paid and
accrued on Preferred Stock * 13.2 13.2 13.3 *
------ ------- ------- ------ ------
Net (loss) income, as adjusted $(57.6) $ 102.7 $ 100.8 $ 91.5 $ 59.4
====== ======= ======= ====== ======
Net (loss) income per share,
assuming dilution $(2.55) $ 4.20 $ 4.14 $ 3.79 $ 3.03
====== ======= ======= ====== ======
<FN>
* Exercise of options and conversion of Preferred Stock is excluded from
computation of diluted earnings because of antidilutive effects.
</FN>
Additional diluted computation (1)
Average number of shares used to
compute basic earnings per share 22.5 19.6
Common stock issuable upon assumed
conversion of Preferred Stock, and
stock option exercises 2.3 4.3
------- ------
24.8 23.9
====== ======
Net (loss) income as adjusted
per basic computation $ (57.6) $ 59.4
Add - Dividends paid and accrued
on Preferred Stock 6.7 13.3
------- ------
$ (50.9) $ 72.7
======= ======
Net (loss) income per share,
assuming dilution $ (2.05) $ 3.04
======= ======
<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)
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Net (loss) income $ (50.9) $ 102.7 $ 100.8 $ 91.5 $ 72.7
Add:
Income taxes (benefit) expense (5.5) 54.4 47.6 48.8 51.4
Equity in net earnings of affiliated companies,
net of distributions received 40.7 8.0 6.5 3.7 8.0
Interest on indebtedness and amortization
of debt discount and expense 222.4 202.8 170.1 148.2 151.8
Amortization of capitalized interest 1.4 3.7 1.1 1.1 1.1
Portion of rents representative of
interest factor (deemed to be one-third) 62.2 56.7 43.9 37.9 31.4
-------- -------- -------- -------- --------
Total earnings available for fixed charges $ 270.3 $ 428.3 $ 370.0 $ 331.2 $ 316.4
======== ======== ======== ======== ========
Preferred dividend requirements $ 6.7 $ 13.2 $ 13.2 $ 13.3 $ 13.3
Ratio to convert preferred
dividends to pretax basis (A) 107% 173% 169% 171% 197%
-------- -------- -------- -------- --------
Preferred dividend factor on pretax basis 7.2 22.8 22.3 22.7 26.2
Fixed charges:
Interest on indebtedness and amortization
of debt discount and expense 222.4 202.8 170.1 148.2 151.8
Capitalized interest 2.5 6.8 6.2 3.0 2.7
Portion of rents representative of interest
factor (deemed to be one-third) 62.2 56.7 43.9 37.9 31.4
-------- -------- -------- -------- --------
Combined fixed charges and
preferred stock dividends $ 294.3 $ 289.1 $ 242.5 $ 211.8 $ 212.1
======== ======== ======== ======== ========
Ratio of earnings to combined fixed charges
and preferred stock dividends (B) .92x (C) 1.48x 1.53x 1.56x 1.49x
<FN>
(A) To adjust preferred dividends to a pretax basis, (loss) income before
income taxes and equity in net earnings of affiliated companies is
divided by (loss) 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 (loss) income before income taxes and fixed
charges, less equity in net earnings of affiliated companies, net of
distributions received.
(C) In 1997, net loss included restructuring charges of $162.8 million.
Excluding the charges, the "ratio of earnings to combined fixed charges
and preferred stock dividends" was 1.66x. See Note P - Restructuring
Charges on page 60 of the Company's 1997 Annual Report to Shareholders.
</FN>
</TABLE>
GATX REVIEW OF FINANCIAL OPERATIONS
GATX Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Reports of GATX Management and of Ernst & Young LLP, Independent Auditors.....30
Management Discussion and Analysis: 1997 Compared to 1996 (Continued on pages
39, 41 and 43)................................................................31
Financial Data of Business Segments...........................................34
Statements of Consolidated Operations and Reinvested Earnings.................38
Consolidated Balance Sheets...................................................40
Statements of Consolidated Cash Flows.........................................42
Notes to Consolidated Financial Statements....................................46
Quarterly Results of Operations (Unaudited) and Common and Preferred Stock
Information...................................................................61
Selected Financial Data.......................................................62
Management Discussion and Analysis: 1996 Compared to 1995.....................64
- --------------------------------------------------------------------------------
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.
<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 1997 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, President and
Chief Executive Officer
David M. Edwards
Vice President Finance
and Chief Financial Officer
Ralph L. O'Hara
Controller and
Chief Accounting Officer
- --------------------------------------------------------------------------------
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, 1997 and 1996, and the related statements of
consolidated operations and reinvested earnings and consolidated cash flows for
each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 27, 1998
<PAGE>
Management Discussion and Analysis
1997 Compared to 1996
GATX Corporation and Subsidiaries
GATX reported a net loss of $51 million or $2.55 per share, on a diluted basis,
for the year ended December 31, 1997 compared to net income of $103 million or
$4.20 per share for 1996. The basic per share loss was $2.55 compared to per
share earnings of $4.43 in the prior year.
During 1997, strategic decisions resulted in a $163 million after-tax
restructuring charge related to the Terminals and Pipelines and the Logistics
and Warehousing segments. The changed market environment which Terminals serves
required aggressive action to revitalize operations and includes the sale or
closure of the Staten Island terminal as well as seven terminals in the United
Kingdom. Additionally, adjustments were made to the carrying costs of other
smaller facilities. The after-tax restructuring charge attributable to Terminals
was $124 million. Logistics continued to implement its strategy of providing
integrated logistics solutions while reducing its role in the lower margin,
public warehousing business. To better reflect the economics of this strategic
direction, a $39 million after-tax charge was taken to write-down the carrying
value of goodwill relating to certain past warehousing acquisitions.
Before the effects of the $163 million after-tax charge, income was $112
million, with earnings per share on a diluted and basic basis of $4.51 and $4.67
respectively. These operating earnings reached a record level with four of
GATX's five subsidiaries achieving record results. On the $112 million of total
earnings, GATX achieved a return on equity of 14.0%, up slightly from 13.8% in
1996.
(In Millions) - - - - - -(Loss) Income- - - - - -
1997 1996
---- ----
Income before restructuring $111.9 $102.7
Restructuring:
Terminals (123.8) --
Logistics (39.0) --
- --------------------------------------------------------------------------------
(162.8) --
Net (Loss) Income $(50.9) $102.7
================================================================================
The comparative performance for 1996 versus 1995 is discussed in the prior
year's management discussion on pages 64-66 of this report.
Railcar Leasing and Management Transportation's gross income of $477 million
increased by $49 million from 1996. The full year effect of the mid-1996
acquisition of the remaining 55% interest in CGTX accounted for $28 million of
the revenue increase with the balance attributable to a larger U.S. fleet and
improved rental rates. Prior to GATX acquiring the remaining interest, CGTX had
been accounted for as an affiliate. Railcar additions continued to be strong in
1997 with 4,800 cars added to the North American fleet, reaching a total of
78,000 cars on lease. With a total fleet of 81,100 cars, utilization ended the
year at 96%, up from 95% at the end of 1996. Fleet additions in 1998 are
expected to remain strong. In addition to the North American fleet, during 1997
Transportation purchased a 40% interest in KVG Kesselwagen Vermietgesellschaft
mbH ("KVG"), a German and Austrian-based tank car and specialty railcar leasing
company that owns and manages approximately 9,400 railcars in Europe.
Record net income of $74 million increased by 10% over 1996 reflecting the
higher revenues and the full year impact of CGTX, partially offset by higher
repair costs and other operating and asset ownership expenses. Operating margins
improved by 14% as the growth in revenues exceeded the increase in fleet repair
costs and SG&A expenses.
Repair costs increased 7% due to the larger fleet size but decreased as a
percentage of revenue from 1996 due in part to the mix of cars and the types of
repairs completed. Throughput days, the time it takes a railcar to be repaired
through the Transportation repair network, remained at the 1996 average of 32
days. 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 1996 due to the aforementioned change in
accounting for CGTX.
<PAGE>
Financial Services Gross income of $584 million for 1997 increased sharply from
1996 driven by higher technology equipment sales, lease income, and gains on
sale of assets. Of the $247 million or 73% overall increase from last year, $171
million was attributable to technology equipment sales. A full year of
technology equipment sales was recorded in 1997 whereas 1996 included only two
months; Capital acquired the remaining 50% of Centron that it did not already
own in October 1996. Lease income grew by $50 million, in large part due to
increased volume at Sun Financial, another Capital technology subsidiary, as
well as Centron. Gains on sales of assets for 1997 were at a record level of $69
million, or $33 million more than last year. Because the timing of such sales is
dependent on changing market conditions, gains on sales of assets do not occur
evenly from period to period. It is presently expected that gains for 1998 will
not occur at 1997's record level, with other sources of gross income continuing
to grow.
Net income for 1997 was a record $54 million, a 17% improvement over last year's
results, with gains on sale of assets generating much of the increase. Centron
and Sun Financial revenues were substantially offset by asset ownership and
human resource costs necessary to grow these technology businesses. Record
investment volume of $866 million, including over $200 million for Sun
Financial, led to depreciation expense increasing by $36 million and interest
expense increasing by $11 million. Included in the investment volume was the
$368 million Pitney Bowes transaction, the largest in GATX Capital's history.
SG&A, which for the first time in 1997 included a full year of Centron's
results, also increased due to higher incentive compensation, transaction costs,
and administrative expenses.
The provision for possible losses of $11 million decreased $2 million from 1996.
The allowance for possible losses increased to $122 million, representing 5.8%
of net investments, as compared to 6.6% at the end of last year.
Equity earnings increased by $3 million to $17 million despite Centron no longer
being accounted for as a joint venture for 1997. During 1997, Capital recorded
equity earnings from three new joint ventures, including two aircraft
partnerships and the newly-formed joint venture with Pitney Bowes. Equity
earnings also increased at Locomotive Leasing Partners, a joint venture
established in 1996 with the Electro-Motive Division of General Motors.
Capital continued to manage and change its portfolio mix during 1997, with
aircraft now representing a proportionally smaller part of total assets while
the rail and technology sectors grew. Strategic aircraft sales, the Pitney Bowes
transaction (primarily rail assets), and substantial Sun Financial (technology)
investment volume were the drivers of the change in asset concentrations.
Terminals and Pipelines Terminals' gross income for 1997 of $293 million was 2%
less than 1996 primarily due to the continued softness in both the domestic and
international petroleum markets. In general, the petroleum market was
characterized by competitive pricing pressures as refineries continued to
produce on a just-in-time basis thereby reducing the demand for storage. Gross
income related to services provided to the chemical market remained steady with
1996 while pipeline revenues improved slightly. Terminals' pipelines serve the
growing Nevada and Florida markets. While throughput of petroleum products
remained strong, rates further declined from the 1996 levels. Throughput for
1997, defined as barrels delivered to customers, of 639 million barrels at
wholly-owned locations remained steady with 1996. Average storage utilization
for the year was 91%, an improvement from 86% last year.
Terminals' net loss for 1997 was $116 million, including the effects of a $124
million after-tax restructuring charge. On an operating basis, Terminals' 1997
income of $8 million declined from last year's $13 million. The difficult
petroleum market conditions resulted in a 4% decrease in operating margin from
last year. Overall operating costs and SG&A expenses decreased by 1% from 1996.
Fixed asset ownership costs, which include interest and depreciation, increased
to 38% of revenue from 35% last year primarily due to the full year impact of
significant facility and infrastructure investments made in 1996. Equity in
earnings from affiliates of $13 million increased by $1 million from 1996
reflecting improved results primarily from European chemical markets. Asian
results approximated last year, with improvement in the chemical market offset
by foreign exchange rate variances.
<PAGE>
During the fourth quarter of 1997, Terminals recorded an after-tax provision of
$124 million reflecting the results of a strategic review. Initial steps were
taken to sell or close certain locations including the Staten Island terminal
and seven storage facilities which make up GATX Terminals Limited in the United
Kingdom. Additionally, adjustments were made to the carrying cost of certain
other locations where conditions indicated that asset values were impaired.
Logistics and Warehousing Logistics' gross income of $256 million decreased 4%
due to the impact of lost business and slower production periods by certain
customers. New customers and increased business with existing customers somewhat
offset this decrease. Total warehouse capacity at year-end of 21.4 million
square feet was in-line with last year.
Space utilization of 95% improved by 4% from last year.
Logistics' net loss for 1997 was $38 million, including the effects of a $39
million after-tax charge related to the write-down of goodwill relating to
certain past acquisitions involved in public warehousing to better reflect the
economics of that sector of the industry. On an operating basis, Logistics' 1997
income of $1.4 million grew from last year's $.9 million. Operating margins for
1997 improved to 10.0% from 9.6% in 1996 due to replacing some of the lost
public warehousing business with more profitable contract logistics business,
productivity improvements, and reduced empty space.
Logistics is proceeding with its strategy of providing integrated logistics
solutions to an expanding customer base and steadily reducing its role in the
lower margin, public warehousing business. Logistics also continues to win new
contracts, implement strong cost controls, and achieve growth with existing
customers.
Great Lakes Shipping Gross income in 1997 was $91 million, a 7% improvement from
1996 due to increased tonnage carried and residual sharing fees earned by
partnering with GATX Capital in a third-party vessel financing and remarketing.
Tonnage carried in 1997 totaled 26.4 million tons, a 7% increase from the 24.6
million tons carried in 1996 primarily derived from coal cargoes. Strong
customer demand, favorable weather conditions, and high water levels all
contributed to the solid performance.
Record income of $9.4 million increased by $2.6 million or 38% from 1996. The
residual sharing fees contributed $1.3 million with the balance primarily due to
the margin on the increased tonnage carried. Contribution margin per ton was 4%
greater than the prior year due to a change in mix of commodities carried as
well as operating efficiencies.
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, similar to 1996. U.S. flag tonnage was
118 million tons, an increase of 8 million tons from 1996. Iron ore cargoes,
which supply the steel industry, represented 41% of ASC's tonnage, 5% less than
last year. Domestic raw steel production was approximately 90% in 1997, up 2%
from last year. Coal cargoes represented 28% of ASC's tonnage, up from 21% last
year as a result of new business.
Corporate and Other Corporate and Other net expense of $35 million increased by
$4 million from 1996 primarily due to the reversal in 1996 of a legal reserve
following the successful defense of litigation against GATX.
Forward-Looking Statements Certain statements in the Management's Discussion and
Analysis constitute forward-looking statements made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995. This
information may involve risks and uncertainties that could cause actual results
to differ materially from the forward-looking statements. 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. These risks and uncertainties include, but are not limited to,
unanticipated changes in the markets served by GATX such as aircraft, petroleum,
chemical, rail, technology, and steel industries.
<PAGE>
Financial Data of Business Segments
- --------------------------------------------------------------------------------
GATX provides services to a variety of capital asset 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 37 to enable the determination of segment profitability
before deducting such costs.
<TABLE>
<CAPTION>
SEGMENT PROFITABILITY (IN MILLIONS)
Gross Income 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $ 476.9 $ 427.9 $ 360.9 $ 322.1 $ 302.2
Financial Services 584.4 337.3 217.9 206.8 204.0
Terminals and Pipelines 292.8 297.6 313.4 303.1 281.1
Logistics and Warehousing 256.3 267.4 272.4 244.2 224.4
Great Lakes Shipping 91.4 85.2 83.5 82.4 80.6
- -------------------------------------------------------------------------------------------
Subtotal 1,701.8 1,415.4 1,248.1 1,158.6 1,092.3
Corporate and Other .1 (1.0) (1.7) (3.6) (5.4)
- -------------------------------------------------------------------------------------------
Consolidated $1,701.9 $1,414.4 $1,246.4 $1,155.0 $1,086.9
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
(Loss) Income Before Income Taxes
and Equity in Net Earnings of
Affiliated Companies 1997 (A)1996 1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $ 116.8 $ 103.8 $ 90.7 $ 79.6 $ 74.4
Financial Services 62.3 56.1 36.7 34.4 34.5
Terminals and Pipelines (192.7) 3.0 30.3 33.2 30.2
Logistics and Warehousing (34.7) 3.8 3.2 1.6 2.5
Great Lakes Shipping 14.6 10.5 10.8 8.8 10.2
- -------------------------------------------------------------------------------------------
Subtotal (33.7) 177.2 171.7 157.6 151.8
Corporate and Other:
Selling, general and
administrative expense (21.2) (16.0) (20.4) (18.3) (22.9)
Interest expense (31.7) (30.6) (31.8) (17.2) (18.4)
Other, net (.7) (1.9) (2.5) (4.3) (6.1)
- -------------------------------------------------------------------------------------------
Subtotal (53.6) (48.5) (54.7) (39.8) (47.4)
- -------------------------------------------------------------------------------------------
Consolidated $ (87.3) $ 128.7 $ 117.0 $ 117.8 $ 104.4
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Equity in Net Earnings of
Affiliated Companies 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $ .9 $ 2.9 $ 5.4 $ 4.7 $ 4.5
Financial Services 17.0 13.6 11.3 5.6 5.1
Terminals and Pipelines 13.1 11.9 14.7 12.2 10.1
Logistics and Warehousing (.1) -- -- -- --
- ------------------------------------------------------------------------------------------
Consolidated $ 30.9 $ 28.4 $ 31.4 $ 22.5 $ 19.7
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Net (Loss) Income 1997(B) 1996 1995 1994 1993(C)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $ 74.4 $ 67.7 $ 62.9 $ 55.1 $ 47.6
Financial Services 53.6 45.9 32.6 24.9 21.5
Terminals and Pipelines (115.6) 12.6 31.0 31.9 26.5
Logistics and Warehousing (37.6) .9 .5 (.5) .1
Great Lakes Shipping 9.4 6.8 7.0 5.6 6.8
- ---------------------------------------------------------------------------------------------
Subtotal (15.8) 133.9 134.0 117.0 102.5
Corporate and Other (35.1) (31.2) (33.2) (25.5) (29.8)
- ---------------------------------------------------------------------------------------------
Consolidated $ (50.9) $ 102.7 $ 100.8 $ 91.5 $ 72.7
=============================================================================================
<FN>
(A)Pretax income includes a $224.8 million charge for restructuring with $185.8
million related to Terminals and Pipelines and $39.0 pertaining to Logistics and
Warehousing.
(B)The after-tax impact related to the restructuring provision is
$162.8 million with $123.8 included in Terminals and Pipelines and $39.0
pertaining to Logistics and Warehousing.
(C)Income shown includes a $7.3 million
charge for the cumulative increase in deferred income taxes as a result of the
1993 federal tax rate change.
</FN>
</TABLE>
<PAGE>
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 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $2,376.2 $2,387.1 $2,041.9 $1,882.8 $1,701.0
Financial Services 2,275.8 1,808.9 1,503.3 1,255.8 1,240.1
Terminals and Pipelines 936.7 1,193.5 1,101.5 1,022.5 872.5
Logistics and Warehousing 112.1 161.8 171.6 172.6 172.8
Great Lakes Shipping 178.0 179.6 187.2 189.8 194.5
- ------------------------------------------------------------------------------------------------------
Subtotal 5,878.8 5,730.9 5,005.5 4,523.5 4,180.9
Corporate and Other 22.8 30.7 21.9 20.9 25.0
Intersegment Amounts (953.8) (1,011.4) (984.5) (893.7) (813.8)
- ------------------------------------------------------------------------------------------------------
Consolidated $4,947.8 $4,750.2 $4,042.9 $3,650.7 $3,392.1
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Long-Term Debt and
Capital Lease Obligations 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $1,054.9 $1,169.9 $ 979.2 $ 874.9 $ 744.8
Financial Services 1,495.2 1,216.1 888.9 688.3 715.3
Terminals and Pipelines 619.8 649.1 560.7 506.8 422.8
Logistics and Warehousing 1.8 1.9 2.4 13.1 17.1
Great Lakes Shipping 101.7 108.0 113.2 117.7 122.6
- ------------------------------------------------------------------------------------------------------
Subtotal 3,273.4 3,145.0 2,544.4 2,200.8 2,022.6
Intersegment Amounts (454.0) (480.9) (451.9) (395.7) (308.8)
- ------------------------------------------------------------------------------------------------------
Consolidated $2,819.4 $2,664.1 $2,092.5 $1,805.1 $1,713.8
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Deferred Income Taxes (Benefit) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $ 274.3 $ 257.9 $ 192.8 $ 188.3 $ 181.0
Financial Services 13.2 17.8 9.7 (.1) (7.1)
Terminals and Pipelines 48.6 96.1 90.4 85.2 87.0
Logistics and Warehousing 3.4 2.1 .5 .9 .8
Great Lakes Shipping 13.4 11.3 9.7 8.2 6.8
- -------------------------------------------------------------------------------------------------------
Subtotal 352.9 385.2 303.1 282.5 268.5
Corporate and Other (55.3) (46.0) (38.3) (25.0) (20.3)
- -------------------------------------------------------------------------------------------------------
Consolidated $ 297.6 $ 339.2 $ 264.8 $ 257.5 $ 248.2
=======================================================================================================
</TABLE>
<PAGE>
Major components of GATX's cash flow are shown in the following tabular data.
GATX's cash flow from operations and portfolio proceeds has grown strongly 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 (loss) as adjusted
for non-cash items which principally consist of the provisions for depreciation
and amortization, deferred income taxes, and possible losses.
<TABLE>
<CAPTION>
ITEMS AFFECTING CASH FLOW (IN MILLIONS)
Cash From Operations and Portfolio Proceeds 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities $291.4 $297.5 $205.1 $265.4 $229.6
Portfolio proceeds 458.7 354.8 282.0 212.3 243.4
- ------------------------------------------------------------------------------------------------------
Consolidated $750.1 $652.3 $487.1 $477.7 $473.0
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Net Cash Provided by Operating Activities 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $176.8 $177.4 $141.5 $118.0 $136.5
Financial Services 57.4 102.2 8.5 67.7 33.0
Terminals and Pipelines 69.3 54.0 70.6 83.5 71.2
Logistics and Warehousing 11.9 17.2 14.3 9.5 4.9
Great Lakes Shipping 21.5 8.9 18.1 8.2 11.4
- --------------------------------------------------------------------------------------------------------
Subtotal 336.9 359.7 253.0 286.9 257.0
Corporate and Other (45.5) (62.2) (47.9) (21.5) (27.4)
- --------------------------------------------------------------------------------------------------------
Consolidated $291.4 $297.5 $205.1 $265.4 $229.6
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Provision for Depreciation and Amortization 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $ 98.0 $ 86.8 $ 76.1 $ 68.3 $ 63.9
Financial Services 81.7 45.3 32.0 35.1 29.5
Terminals and Pipelines 54.7 51.9 45.3 43.5 41.0
Logistics and Warehousing 10.5 11.1 11.1 11.5 10.2
Great Lakes Shipping 6.4 6.3 6.2 6.0 5.6
Subtotal 251.3 201.4 170.7 164.4 150.2
Corporate and Other 1.0 1.0 .9 .7 .5
- -------------------------------------------------------------------------------------------------------
Consolidated $252.3 $202.4 $171.6 $165.1 $150.7
========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Additions and Portfolio Investments 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $ 336.9 $ 386.8 $392.6 $285.4 $195.3
Financial Services 866.3 659.3 388.5 279.2 302.1
Terminals and Pipelines 68.0 129.5 148.6 154.4 77.8
Logistics and Warehousing 4.2 6.6 6.4 8.1 14.1
Great Lakes Shipping .2 .8 .7 .7 .1
- -------------------------------------------------------------------------------------------------------
Subtotal 1,275.6 1,183.0 936.8 727.8 589.4
Corporate and Other -- 1.8 .9 .5 7.0
- -------------------------------------------------------------------------------------------------------
Consolidated $1,275.6 $1,184.8 $937.7 $728.3 $596.4
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Interest Expense 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $ 103.7 $ 99.4 $ 86.1 $ 68.2 $ 67.4
Financial Services 96.8 86.1 68.4 62.7 65.4
Terminals and Pipelines 57.2 53.5 46.4 39.7 39.0
Logistics and Warehousing .2 .3 .8 1.0 .7
Great Lakes Shipping 7.1 7.5 7.8 8.1 9.2
- ---------------------------------------------------------------------------------------------------------
Subtotal 265.0 246.8 209.5 179.7 181.7
Corporate and Other 31.7 30.6 31.8 17.2 18.4
Intersegment Amounts (74.3) (74.6) (71.2) (48.7) (48.3)
- ---------------------------------------------------------------------------------------------------------
Consolidated $ 222.4 $ 202.8 $170.1 $148.2 $151.8
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Long-Term Debt and Capital Lease
Obligation Maturities 1998 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Railcar Leasing and Management $ 81.4 $ 86.0 $105.3 $ 99.0 $166.5
Financial Services 216.1 188.3 372.7 122.7 95.3
Terminals and Pipelines 9.3 12.3 7.3 7.3 7.3
Logistics and Warehousing .3 .2 .2 .1 .1
Great Lakes Shipping 5.2 5.7 5.7 5.6 6.2
- ------------------------------------------------------------------------------------------------------
Consolidated $ 312.3 $ 292.5 $491.2 $234.7 $275.4
========================================================================================================
</TABLE>
<PAGE>
STATEMENTS OF CONSOLIDATED OPERATIONS AND REINVESTED EARNINGS
<TABLE>
<CAPTION>
In Millions Except Per Share Data/Year Ended December 31 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross Income $1,701.9 $1,414.4 $1,246.4
Costs and Expenses
Operating expenses 840.3 689.2 625.8
Interest 222.4 202.8 170.1
Provision for depreciation and amortization 252.3 202.4 171.6
Provision for possible losses 11.1 12.5 18.4
Selling, general and administrative 238.3 178.8 143.5
Provision for restructuring 224.8 - -
- ------------------------------------------------------------------------------------------------------
1,789.2 1,285.7 1,129.4
- ------------------------------------------------------------------------------------------------------
(Loss) Income Before Income Taxes and Equity in
Net Earnings of Affiliated Companies (87.3) 128.7 117.0
Income Taxes (Benefit) (5.5) 54.4 47.6
- ------------------------------------------------------------------------------------------------------
(Loss) Income Before Equity in Net Earnings of
Affiliated Companies (81.8) 74.3 69.4
Equity in Net Earnings of Affiliated Companies 30.9 28.4 31.4
- ------------------------------------------------------------------------------------------------------
Net (Loss) Income (50.9) 102.7 100.8
Reinvested earnings at beginning of year 463.7 409.0 353.5
Dividends paid on Common and Preferred Stock (49.4) (48.0) (45.3)
- -----------------------------------------------------------------------------------------------------
Reinvested Earnings at End of Year $ 363.4 $ 463.7 $ 409.0
======================================================================================================
Per Share Data
Basic:
Net (loss) income $ (2.55) $ 4.43 $ 4.38
Average number of common shares (in thousands) 22,542 20,189 20,002
Diluted:
Net (loss) income (2.55) 4.20 4.14
Average number of common shares and common
share equivalents (in thousands) 22,542 24,462 24,365
Dividends paid:
Common 1.84 1.72 1.60
$3.875 Cumulative Preferred 1.9375 3.875 3.875
=======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATIONS
1997 COMPARED TO 1996
Overview The comparison of 1997 versus 1996 gross income and expenses is heavily
influenced by the effects of two acquisitions made in 1996: Centron and CGTX. In
late 1996, GATX Capital acquired the remaining 50% of Centron (a technology
equipment and service company) that it did not already own. In mid-1996, General
American Transportation acquired the remaining 55% of CGTX (a Canadian railcar
company). Because GATX previously held non-controlling interests in Centron and
CGTX, their results were accounted for as equity in earnings of affiliates; they
are now fully consolidated.
Gross Income of $1.7 billion in 1997 increased $288 million or 20% over last
year. Capital recorded a full year of Centron's technology equipment sales,
accounting for a $171 million increase over 1996. Lease income and asset
remarketing income also increased significantly for Capital, by $50 million and
$26 million, respectively. Transportation's revenues increased as the result of
recording a full year of CGTX revenues and growing the active U.S. fleet.
Logistics' and Terminals' revenues were somewhat lower, with both facing highly
price competitive markets.
Operating Expenses of $840 million were $151 million higher than last year, with
Centron's cost of equipment sales accounting for $137 million of the increase.
Most of the remaining increase is attributable to additional sale-leaseback
financing at Transportation. To the extent that such financing is used instead
of traditional debt financing, operating lease expense, a component of operating
expenses, will increase instead of depreciation and interest expense. Logistics'
and Terminals' operating expenses contracted in response to their reduced
revenues.
Interest Expense of $222 million increased $20 million, with over half of the
increase at GATX Capital. A record level of portfolio investments led to
increased debt balances at Capital, though there was a small benefit from lower
average interest rates than last year. Transportation financed its expanding
fleet in 1997 with both sale-leasebacks and debt; the debt-financed portion was
the primary cause for a $6 million increase in interest expense. Terminals'
interest expense was higher due to the full year impact of facility and
infrastructure investments made in 1996.
Depreciation and Amortization Expense grew by $50 million over 1996. The larger
asset bases at GATX Capital, Transportation and Terminals resulted in increases
of $36 million, $11 million, and $3 million, respectively.
The Provision for Possible Losses of $11 million, which is largely attributable
to GATX Capital, was slightly less than the prior year based on the current
assessment of reserve needs.
Selling, General and Administrative Expenses were $60 million higher than last
year, with Centron and CGTX being consolidated for a full year in 1997. In
addition, GATX Capital incurred higher human resource, transaction, and
information systems expenses. In 1996, Corporate's SG&A was reduced by $4
million for a reserve reversal following a successful litigation defense.
Provision for Restructuring In the fourth quarter of 1997, GATX recorded a $225
million pretax restructuring charge with $186 million related to GATX Terminals
and $39 million associated with GATX Logistics. On an after-tax basis, the
charge was $163 million.
An Income Tax Benefit of $5 million was reported as a result of a $62 million
tax benefit related to Terminals' restructuring charge. Excluding the impact of
the restructuring charge, the income tax expense would be $57 million
representing an effective tax rate of 41%, somewhat lower than last year's 42%.
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 $31 million increased $3
million over 1996 despite the absence of Centron and CGTX. GATX Capital's rail
partnerships yielded higher earnings. In addition, Capital recorded equity
income in 1997 from three new joint ventures.
Consolidated Earnings of $112 million before restructuring charges increased $9
million from last year, achieved on the strength of record earnings at GATX
Capital, Transportation, ASC, and GATX Logistics, offset in part by a decline of
$4 million at Terminals. Including after-tax restructuring charges of $163
million, the consolidated net loss was $51 million.
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
In Millions/December 31 1997 1996
=====================================================================================================
<S> <C> <C>
Assets
Cash and Cash Equivalents $ 77.8 $ 46.2
Receivables
Trade accounts 161.9 167.4
Finance leases 877.0 761.3
Secured loans 180.3 222.6
Less-Allowance for possible losses (128.5) (121.1)
- ------------------------------------------------------------------------------------------------------
1,090.7 1,030.2
Operating Lease Assets and Facilities
Railcars and support facilities 2,501.7 2,436.5
Tank storage terminals and pipelines 1,128.9 1,377.8
Great Lakes vessels 199.4 199.3
Operating lease investments and other 704.4 605.6
- -----------------------------------------------------------------------------------------------------
4,534.4 4,619.2
Less-Allowance for depreciation (1,823.9) (1,772.8)
- -----------------------------------------------------------------------------------------------------
2,710.5 2,846.4
Investments in Affiliated Companies 707.4 464.2
Other Assets 361.4 363.2
- -----------------------------------------------------------------------------------------------------
$4,947.8 $ 4,750.2
- -----------------------------------------------------------------------------------------------------
Liabilities, Deferred Items and Shareholders' Equity
Accounts Payable $ 354.7 $ 312.6
Accrued Expenses 58.0 51.7
Debt
Short-term debt 392.5 243.8
Long-term debt 2,607.3 2,436.9
Capital lease obligations 212.1 227.2
- -----------------------------------------------------------------------------------------------------
3,211.9 2,907.9
Deferred Income Taxes 297.6 339.2
Other Deferred Items 370.2 363.9
- -----------------------------------------------------------------------------------------------------
Total Liabilities and Deferred Items 4,292.4 3,975.3
Shareholders' Equity
Preferred Stock -- 3.4
Common Stock 17.0 14.4
Additional capital 339.7 329.0
Reinvested earnings 363.4 463.7
Cumulative unrealized equity adjustments (17.9) 11.4
- ------------------------------------------------------------------------------------------------------
702.2 821.9
Less-Cost of common shares in treasury (46.8) (47.0)
- ------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 655.4 774.9
- ------------------------------------------------------------------------------------------------------
$ 4,947.8 $ 4,750.2
- ------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF BALANCE SHEETS
1997 COMPARED TO 1996
Overview Total assets of almost $5.0 billion increased about $200 million.
Growth from a record level of portfolio investments and capital additions was
partially offset by $252 million of depreciation and amortization, asset
revaluations at Terminals and Logistics, the $167 million sale-leaseback of
railcars at Transportation, and portfolio asset sales at GATX Capital.
In addition to the $5 billion of assets recorded on the balance sheet, GATX
utilizes over $1 billion of assets, such as railcars, aircraft, and warehouses,
that are financed with operating leases and therefore not included on the
balance sheet.
Total Receivables including finance leases and secured loans, increased $68
million primarily due to activity at GATX Capital. Finance leases increased due
to the Pitney Bowes portfolio acquisition, offset in part by significant asset
sales. During 1997, substantial payments and prepayments were received on
Capital's secured loans, whereas little new investment volume was structured as
secured loans.
Operating Lease Assets and Facilities of $2.7 billion decreased by $136 million,
despite the $1.3 billion of portfolio investments and capital additions made in
1997. More than offsetting the additions were depreciation, Terminals' asset
revaluation, Transportation's sale-leaseback, and asset sales.
Investments in Affiliated Companies increased $243 million, as partnerships
continued to be an important part of GATX's growth strategy. Activity in 1997
included GATX Capital contributing $175 million to a joint venture with Pitney
Bowes and Transportation acquiring a 40% interest in KVG, a European railcar
company.
Other Assets of $361 million approximated the level at the end of last year,
with Logistics' $39 million goodwill write-down offset by certain terminal
assets being reclassified to assets held for disposition.
Total Debt of $3.2 billion increased approximately $300 million from the end of
1996. Though capital additions and portfolio investments were at record levels,
the majority were financed with internally-generated cash flow from operations,
portfolio proceeds, and sale-leasebacks.
Consolidated Equity decreased $120 million. Reductions included the $51 million
net loss, $49 million of dividends paid, and a $28 million decrease in the
cumulative foreign currency translation adjustment. The unrealized translation
adjustment resulted from the U.S. dollar strengthening against foreign
currencies. All other changes, including stock option proceeds, added $8 million
to equity.
On January 30, 1998, the GATX Board of Directors approved a two-for-one stock
split effected in the form of a stock dividend for shareholders of record on May
11, 1998. Shareholders of record will receive one additional share in the form
of a stock dividend on June 1, 1998 for each share held. The stock split is
contingent upon a vote by shareholders at the 1998 Annual Meeting to amend the
Company's certificate of incorporation to increase the authorized shares of
Common Stock.
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
In Millions/Year Ended December 31 1997 1996 1995
====================================================================================================
<S> <C> <C> <C>
Operating Activities
Net (loss) income $ (50.9) $ 102.7 $ 100.8
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Realized gain on disposition of leased equipment (74.1) (40.9) (33.3)
Provision for restructuring, net of tax 162.8 - -
Provision for depreciation and amortization 252.3 202.4 171.6
Provision for possible losses 11.1 12.5 18.4
Deferred income taxes 18.0 25.2 16.2
Net change in trade receivables, inventories,
accounts payable and accrued expenses 34.9 30.2 (68.9)
Other (62.7) (34.6) .3
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 291.4 297.5 205.1
Investing Activities
Additions to operating lease assets and facilities (362.0) (436.2) (521.5)
Additions to equipment on lease, net of
nonrecourse financing (536.4) (376.3) (256.1)
Secured loans extended (35.1) (117.1) (84.1)
Investments in affiliated companies (306.1) (92.8) (49.7)
Other investments and progress payments (36.0) (162.4) (26.3)
- -------------------------------------------------------------------------------------------------------
Capital additions and portfolio investments (1,275.6) (1,184.8) (937.7)
Portfolio proceeds:
From disposition of leased equipment 218.5 100.7 139.4
From return of investment 240.2 254.1 142.6
- -------------------------------------------------------------------------------------------------------
Total portfolio proceeds 458.7 354.8 282.0
Proceeds from other asset dispositions 226.9 250.3 318.5
- -------------------------------------------------------------------------------------------------------
Net cash used in investing activities (590.0) (579.7) (337.2)
Financing Activities
Proceeds from issuance of long-term debt 569.9 757.3 399.5
Repayment of long-term debt (395.2) (283.3) (219.6)
Net increase (decrease) in short-term debt 207.8 (121.1) 13.3
Repayment of capital lease obligations (15.3) (14.4) (13.8)
Issuance of common stock under employee
benefit programs and other 12.4 3.1 5.5
Cash dividends (49.4) (48.0) (45.3)
- -------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 330.2 293.6 139.6
Net Increase in Cash and Cash Equivalents $ 31.6 $ 11.4 $ 7.5
- ------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF CASH FLOWS
1997 COMPARED TO 1996
GATX generates significant cash from its operating activities and proceeds from
its investment portfolio which are used to service debt, pay dividends, and fund
capital additions and portfolio investments. Most of the capital requirements
represent additions to the railcar fleet, capital equipment investment
portfolio, joint ventures, and terminal and pipeline facilities, 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 $291 million of cash flow in
1997, a small decrease from 1996. The $163 million after tax restructuring
charge was largely a non-cash provision. To the extent GATX Capital reports
increased gains on asset dispositions or equity in earnings of affiliates, cash
flow from operations will decrease, as all of Capital's disposition proceeds and
cash distributions from affiliates are included in portfolio proceeds.
Capital Additions and Portfolio Investments totaled a record $1.3 billion, an
increase of $91 million from 1996. Capital additions such as railcars, terminal
facilities, and pipelines are typically held over a very long time period,
whereas portfolio investments may have a significantly shorter holding period.
Transportation's capital additions in 1997 were $337 million, including $275
million to add 4,800 railcars throughout North America. Transportation also
acquired a 40% interest in KVG, a German railcar company that leases 9,400
railcars in Europe. In 1996, Transportation purchased the remaining interest in
CGTX for $84 million and added 4,300 cars to the U.S. fleet. Terminals' capital
additions decreased in response to changing market conditions, with investments
in 1997 only about half of last year's $130 million. Last year, Terminals'
expenditures included the completion of the Central Florida Pipeline expansion.
GATX Capital's portfolio investments were over 30% higher than last year,
representing strong market opportunities, particularly in the rail, technology,
and aircraft sectors. Included in the record $866 million of investments was the
largest single transaction Capital has ever completed, a $368 million
acquisition of a portfolio of leases from Pitney Bowes. The Pitney transaction
was structured with some assets, mostly rail, held in Capital's own portfolio
and other assets held in partnership with Pitney. Sun Financial, one of
Capital's technology financing operations, funded $225 million of leases, more
than doubling 1996's volume. Most of Capital's investment in aircraft in 1997
was made through joint ventures.
Total Portfolio Proceeds of $459 million exceeded last year by over $100
million. Proceeds from the disposition of leased equipment, primarily rail and
aircraft assets, were more than double last year's $101 million and included
both the return of principal and the gains on the transactions. Proceeds from
the return of investment of $240 million decreased $14 million from 1996. In
1996, loan principal received, a component of proceeds from the return of
investment, included the repayment of an $81 million loan made earlier in the
year.
Proceeds from Other Asset Dispositions of $227 million in 1997 included
Transportation's receipt of $167 million from the sale-leaseback of railcars.
Asset disposition activity also included Terminals' sale of its Norco,
Louisiana, facility and Transportation's sale and scrapping of over 1,000
railcars. In 1996, Transportation sold and leased back $150 million of railcars
and GATX Capital sold and leased back $64 million of assets.
<PAGE>
Cash Provided by Financing Activities was $330 million for 1997, as the majority
of capital additions and portfolio investments were funded with cash flow from
operations, portfolio proceeds, and sale-leaseback financing. Total net debt
financing in 1997 was $367 million, or $29 million greater than last year. A
significant portion of debt financing is nonrecourse to the company.
Cash dividends of $49 million in 1997 included $42 million of common dividends
and $7 million of preferred dividends. The preferred dividends are half of last
year's due to converting the $3.875 preferred shares to common in mid-1997. The
conversion resulted in about 3.9 million additional common shares. Common
dividends per share were $1.84 in 1997 compared to $1.72 in 1996. In January
1998, the Board of Directors approved a 9% increase in the quarterly dividend to
$.50 per common share, or $2.00 on an annual basis. This was the thirteenth
consecutive year GATX increased its dividend.
Liquidity and Capital Resources General American Transportation Corporation
(GATC), GATX Capital and GATX Terminals 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, 1997, GATX and
its subsidiaries had available unused committed lines of credit amounting to
$447 million.
GATC has a $650 million shelf registration for pass through trust certificates
and debt securities of which $100 million of notes and $236 million of pass
through certificates have been issued at year end. GATX Capital has a shelf
registration for $532 million of which $350 million has been issued. At year
end, GATX had $376 million of commitments to provide financing to customers or
to acquire assets, $279 million of which is scheduled to fund in 1998.
At December 31, 1997, approximately $523 million of subsidiary net assets were
restricted, limiting the ability of the subsidiaries to transfer assets to GATX
parent in the form of loans, advances or dividends. The majority of net asset
restrictions relate to the revolving credit agreement of GATC and the various
loan agreements of GATX Capital. 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 potentially the 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 12 sites under the requirements of the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund) and the National Resource Damage Assessment. Under these Statutes
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
instances, 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.
<PAGE>
Future environmental costs 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 1997 was $75 million and reflects
GATX's best estimate of the cost to remediate known environmental conditions.
Additions to the reserve were $11 million in 1997 and $12 million in 1996.
Expenditures charged to the reserve amounted to $14 million and $18 million in
1997 and 1996, respectively.
In 1997, GATX made capital expenditures of $13 million for environmental and
regulatory compliance compared to $17 million in 1996. These projects included
marine vapor recovery systems, 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 $14 million in 1998. GATX anticipates it
will make annual expenditures at approximately the same level over each of the
next three years.
Impact of Year 2000 GATX utilizes in-house developed software as well as
vendor-produced software. Certain of the computer software GATX uses was written
using two digits rather than four to define the applicable year. This software
is time-sensitive, which could cause a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
GATX has completed an assessment and has begun modifying and replacing its
in-house developed software as well as upgrading its vendor-supported software
so that its computer systems will function properly with respect to dates in the
year 2000 and thereafter. If these steps were not taken, or are not completed
timely, the Year 2000 Issue could have a significant impact on the operations of
the Company.
The project is estimated to be completed during 1999, which is prior to any
anticipated impact on its operating systems. The Company believes that with
modifications to existing software, upgrading vendor-supported software, and
conversions to new software, the Year 2000 Issue should not pose significant
operational problems. The total Year 2000 project cost is estimated to be
immaterial to GATX's results of operations.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial data of business segments for 1997, 1996, and 1995 on pages 34
through 37 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.
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, and in that regard adjusted certain carrying amounts in 1997,
as is explained in Note P. Goodwill, net of accumulated amortization of $28.5
million and $30.4 million, was $118.7 million and $167.4 million as of December
31, 1997 and 1996, respectively. Amortization expense was $6.7 million in 1997,
$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 $169.7 million at December 31, 1997.
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 $2.1 million at December 31, 1997.
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.
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.
<PAGE>
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 reasonably estimable; adjustments to initial estimates are recorded
as further information develops or circumstances change. Revenue Recognition The
majority of GATX's gross income is derived from the rentals of railcars,
commercial aircraft, Great Lakes vessels, and technology equipment as well as
terminaling, warehousing and logistics services. In addition, income is derived
from technology equipment sales, 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
$(22.5) million and $5.8 million at the end of 1997 and 1996, respectively.
Incremental unrealized translation losses were $28.3 million, $7.6 million, and
$6.9 million, during 1997, 1996 and 1995, 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 $4.6 million at the
end of 1997 and $5.6 million at the end of 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 In 1997, GATX adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," which requires the disclosure of
"basic" and "diluted" EPS, superseding prior periods' "primary" and "fully
diluted" EPS, respectively. Basic EPS is calculated as net income (loss)
available to common shareholders, adjusted for preferred dividends, divided by
the weighted average number of common shares outstanding. Diluted EPS is
calculated as net income (loss) divided by the sum of the weighted average
number of common shares outstanding and common stock equivalents. Common stock
equivalents include shares issuable upon exercise of employee stock options
(reduced by the number of shares assumed to be repurchased by the option
proceeds) and also assumes all preferred stock has been converted into common
shares if the effect of such conversion is not antidilutive.
All prior periods have been restated to conform to Statement No. 128. The
restatement of 1996 and 1995 primary EPS to basic EPS resulted in increases of
$.06 and $.08 per share, respectively. The restatement of 1996 and 1995 fully
diluted EPS to diluted EPS resulted in an increase of $.01 per share for each
year.
Reclassifications Certain amounts in the 1996 and 1995 financial statements
have been reclassified to conform to the 1997 presentation.
<PAGE>
NOTE B-ACCOUNTING FOR LEASES
The following information pertains to GATX as a lessor:
Finance Leases GATX's finance leases include direct financing leases and
leveraged leases. Financing leases which are financed principally with
nonrecourse borrowings at lease inception and which meet certain criteria are
accounted for as leveraged leases. Leveraged lease contracts receivable are
stated net of the related nonrecourse debt. The components of the investment in
finance leases were (in millions):
December 31 1997 1996
================================================================================
Net minimum future lease receivables $ 773.6 $ 679.4
Estimated residual values 415.9 359.0
- --------------------------------------------------------------------------------
1,189.5 1,038.4
Less-Unearned income (312.5) (277.1)
- --------------------------------------------------------------------------------
Investment in finance leases $ 877.0 $ 761.3
================================================================================
Operating Leases The majority of railcar and tank storage assets and certain
other equipment leases included in operating lease assets 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, 1997 were (in millions):
================================================================================
Finance Leases Operating Leases Total
================================================================================
1998 $184.9 $ 678.3 $ 863.2
1999 145.0 511.2 656.2
2000 120.4 357.4 477.8
2001 86.9 223.0 309.9
2002 61.2 129.5 190.7
Years thereafter 175.2 329.8 505.0
- --------------------------------------------------------------------------------
$773.6 $2,229.2 $3,002.8
================================================================================
The following information pertains to GATX as a lessee:
Capital Leases Assets classified as operating lease assets and finance leases
which have been financed under capital leases were (in millions):
================================================================================
December 31 1997 1996
================================================================================
Railcars $ 152.0 $ 152.2
Great Lakes vessels 159.5 159.5
- --------------------------------------------------------------------------------
311.5 311.7
Less-Allowance for depreciation (173.5) (162.6)
- --------------------------------------------------------------------------------
138.0 149.1
Finance leases 9.9 12.4
- --------------------------------------------------------------------------------
$ 147.9 $ 161.5
================================================================================
Operating Leases GATX has financed railcars, aircraft, warehouses, and other
assets 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, 1997, 1996 and
1995 was $186.5 million, $170.2 million, and $139.7 million, respectively.
Sublease income was $5.1 million, $6.9 million, and $8.2 million in 1997, 1996,
and 1995, respectively.
<PAGE>
Future Minimum Rental Payments Future minimum rental payments due under
noncancelable leases at December 31, 1997 were (in millions):
================================================================================
Nonrecourse
Operating
Capital Leases Operating Leases Leases
================================================================================
1998 $ 32.1 $ 160.9 $ 8.6
1999 32.0 143.6 10.5
2000 31.5 128.3 14.2
2001 30.7 114.8 14.2
2002 30.3 116.6 11.9
Years thereafter 184.9 1,378.6 207.3
- --------------------------------------------------------------------------------
$341.5 $2,042.8 $266.7
Less--Amounts representing interest (129.4)
- --------------------------------------------------------------------------------
Present value of future
minimum capital lease payments $212.1
================================================================================
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 $6.6 million. Subsequent to the initial
lease term, the majority of railcar operating leases allow GATC to renew the
lease at a fixed rate or purchase the railcar at fair market value. Interest
expense on the above capital leases was $17.6 million in 1997, $19.1 million in
1996, and $20.1 million in 1995.
The amounts shown as nonrecourse operating leases reflect rental payments of a
bankruptcy remote special purpose corporation which is wholly owned by GATC.
These rentals are consolidated for accounting purposes but are not guaranteed by
nor are legal obligations of GATC.
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, 1997, secured loan principal due by year was as
follows (in millions):
Loan
Principal
================================================================================
1998 $ 22.4
1999 19.7
2000 18.4
2001 12.7
2002 18.0
Years thereafter 89.1
- --------------------------------------------------------------------------------
$180.3
================================================================================
NOTE D-INVESTMENTS IN AFFILIATED COMPANIES
GATX has investments in 25 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.
Cash distributions received from affiliates were $71.6 million, $36.4 million,
and $37.9 million, in 1997, 1996, and 1995, respectively. These distributions
reflect both operating results and return of principal.
<PAGE>
For all affiliated companies held at the end of a year, operating results, as
if GATX held 100 percent interest, were (in millions):
For The Year 1997 1996 1995
================================================================================
Revenues $505.7 $360.9 $526.8
Net income 74.4 57.2 78.8
================================================================================
For all affiliated companies held at the end of a year, summarized balance
sheet data, as if GATX held 100 percent interest, were (in millions):
December 31 1997 1996
================================================================================
Total assets $3,199.1 $2,229.3
Long-term liabilities 910.3 891.7
Other liabilities 607.3 179.9
- --------------------------------------------------------------------------------
Shareholders' equity $1,681.5 $1,157.7
================================================================================
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 Mexican
railcar operation, and foreign lease and loan investments.
================================================================================
Gross Income (In Millions) 1997 1996 1995
================================================================================
Foreign $ 188.8 $ 112.5 $ 71.5
United States 1,513.1 1,301.9 1,174.9
- --------------------------------------------------------------------------------
$1,701.9 $1,414.4 $1,246.4
================================================================================
================================================================================
(Loss) Income Before Income Taxes
And Equity In Net Earnings
Of Affiliated Companies (In Millions) 1997 1996 1995
================================================================================
Foreign $ (55.3) $ 4.1 $ 3.3
United States (32.0) 124.6 113.7
- --------------------------------------------------------------------------------
$ (87.3) $ 128.7 $117.0
================================================================================
================================================================================
Equity In Net Earnings Of
Affiliated Companies (In Millions) 1997 1996 1995
================================================================================
Foreign $ 21.6 $ 20.3 $26.6
United States 9.3 8.1 4.8
- --------------------------------------------------------------------------------
$ 30.9 $ 28.4 $31.4
================================================================================
================================================================================
Identifiable Assets (In Millions) 1997 1996 1995
================================================================================
Foreign $ 848.2 $ 872.4 $ 516.8
United States 4,099.6 3,877.8 3,526.1
- --------------------------------------------------------------------------------
$4,947.8 $4,750.2 $4,042.9
================================================================================
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.
<PAGE>
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 - - - -1997- - - - - - - - -1996- - - - -
================================================================================
Amount Rate Amount Rate
- --------------------------------------------------------------------------------
Commercial paper $153.8 6.34% $ 21.0 5.82%
Other short-term borrowings 238.7 6.45% 222.8 6.11%
- --------------------------------------------------------------------------------
$392.5 $243.8
================================================================================
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 these requirements at December 31, 1997.
While at year end no borrowings were outstanding under the agreement, the
available line of credit was reduced by $26.6 million of commercial paper
outstanding. GATC had borrowings of $125.3 million under un-secured money market
lines at December 31, 1997. CGTX, GATC's Canadian subsidiary, had bankers
acceptances and other short-term borrowings of $55.2 million Canadian dollars at
December 31, 1997.
GATX Capital and its wholly owned subsidiaries, Sun Financial and Centron, have
commitments under credit agreements with a group of banks for revolving
credit loans totaling $373.0 million of which $173.4 million was available at
December 31, 1997; the commitment has $199.6 million of outstanding
commercial paper and bankers acceptances. GATX Capital's primary credit
agreement contains various covenants which include, among other things, minimum
net worth, restrictions on dividends, and requirements to maintain certain
financial ratios. At December 31, 1997, such covenants limited GATX Capital's
ability to transfer net assets to GATX to no more than $58.8 million.
Interest expense on short-term debt was $24.0 million in 1997, $26.2 million in
1996, and $19.4 million in 1995.
NOTE G-LONG-TERM DEBT
Long-term debt (in millions) and the range of interest rates as of the end of
1997 were:
- --------------------------------------------------------------------------------
Final December 31 December 31
Interest Rates Maturity 1997 1996
- --------------------------------------------------------------------------------
Variable rate:
Term notes 5.931%-8.625% 1998-2002 $ 67.5 $ 72.1
Nonrecourse obligations 6.6875%-7.5% 2000-2002 44.6 50.2
112.1 122.3
- --------------------------------------------------------------------------------
Fixed rate:
Term notes 5.4%-10.875% 1998-2012 2,043.7 1,952.3
Nonrecourse obligations 5.76%-9.25% 1998-2013 363.6 272.8
Industrial revenue bonds 6.625%-7.3% 2019-2024 87.9 87.9
Title XI bonds -- -- -- 1.6
- --------------------------------------------------------------------------------
2,495.2 2,314.6
- --------------------------------------------------------------------------------
$2,607.3 $2,436.9
================================================================================
Maturities of GATX's long-term debt as of December 31, 1997 for each of the
years 1998 through 2002 were (in millions):
Long-Term Debt
1998 $297.0
1999 276.0
2000 473.7
2001 216.8
2002 256.2
================================================================================
<PAGE>
At December 31, 1997, certain technology assets, facilities, aircraft, vessels
and warehouse equipment with a net carrying value of $449.4 million were pledged
as collateral for $354.5 million of notes and bonds. Interest cost incurred on
long-term debt, net of capitalized interest, was $180.8 million in 1997, $157.5
million in 1996, and $130.6 million in 1995. Interest cost capitalized as part
of the cost of construction of major assets was $2.5 million in 1997, $6.8
million in 1996, and $6.2 million in 1995.
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, 1997 GATX had the following off-balance sheet financial
instruments (in millions):
- --------------------------------------------------------------------------------
Interest Rate Swaps Notional Pay Rate/ Receive Rate/ Maturity
Amount Index Index
- --------------------------------------------------------------------------------
GATX pays fixed,
receives floating $752.6 5.097-7.585% LIBOR 1998-2001
GATX pays floating,
receives fixed 690.0 LIBOR 5.27-7.646% 1998-2006
================================================================================
- --------------------------------------------------------------------------------
Currency Swaps Receive Deliver Maturity
- --------------------------------------------------------------------------------
Canadian dollar swaps $146.2 C$198.5 2001-2011
Deutschemark swap $ 40.5 72.5DM 2002
================================================================================
GATX had the following interest rate hedge activity (in millions):
- --------------------------------------------------------------------------------
Interest Rate Swaps Pay Fixed Pay Floating
- --------------------------------------------------------------------------------
Balance at January 1, 1996 $ 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
Additions 44.7 --
Maturities (200.0) (447.0)
- --------------------------------------------------------------------------------
Balance at December 31, 1997 $ 752.6 $ 690.0
================================================================================
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 anticipated issuance of debt. At
GATC, interest rate swaps are utilized to better match the cash flow
characteristics of its debt portfolio and 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 five years;
the average renewal term is three 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 three months to three years. Through the swap
program, changes in GATC's interest expense are expected to better reflect
changes in railcar lease rates. 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 $752.6 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, 1997, GATX would have
received $14.6 million if the swaps were terminated; GATX would have paid $12.8
million if the swaps were terminated at December 31, 1996.
<PAGE>
GATX has entered into currency swaps to hedge $146.2 million in debt obligations
at its Canadian subsidiaries and $40.5 million in debt obligations at its German
subsidiary. The fair market value of its currency swap agreements is an estimate
of the amount the company would receive or pay to terminate those agreements. At
December 31, 1997, GATX would have received $10.9 million if the swaps were
terminated; GATX would have paid $5.9 million if the swaps were terminated at
December 31, 1996.
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 - - - -1997- - - - - - - -1996- - - -
- --------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(In Millions): Amount Value Amount Value
- --------------------------------------------------------------------------------
Assets:
Cash and cash equivalents $ 77.8 $ 77.8 $ 46.2 $ 46.2
Trade accounts receivables 161.9 161.9 167.4 167.4
Secured loans 180.3 183.6 222.6 219.4
Liabilities:
Accounts payable 354.7 354.7 312.6 312.6
Short-term debt 392.5 392.5 243.8 243.8
Long-term debt-variable 112.1 112.1 122.3 122.3
Long-term debt-fixed 2,495.2 2,592.3 2,314.6 2,405.7
================================================================================
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
For cash and cash equivalents, trade receivables, accounts payable, and
short-term debt, the carrying amount approximates fair value because of the
short maturity of those instruments.
The carrying amount of secured loan investments is stated at the principal
amount outstanding plus accrued interest. 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 analysis, at interest rates
currently offered for loans with similar terms to borrowers of similar credit
quality.
The carrying amount of variable rate long-term debt reported in the balance
sheet approximates 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.
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.
<PAGE>
Significant assumptions used in accounting for the Corporation's defined benefit
plans were:
1997 1996-1995
- --------------------------------------------------------------------------------
Discount rate 7.75% 7.75%
Expected long-term rate of return on assets 8.75% 8.75%
Rate of increase in compensation levels 5.0% 5.5%
================================================================================
Pension expense was determined based on the funds' status at the beginning of
the year. Termination expense was recognized in 1997 as the result of a facility
sale. The components of net pension expense were (in millions):
For The Year 1997 1996 1995
- --------------------------------------------------------------------------------
Service cost of benefits
earned during the period $ 6.6 $ 6.5 $ 6.0
Interest cost on projected
benefit obligation 21.5 20.3 19.9
Actual gain on plan assets (46.8) (33.3) (49.7)
Net amortization and deferral 24.1 11.2 28.6
Net termination expense 2.5 -- --
- --------------------------------------------------------------------------------
Net periodic pension cost $ 7.9 $ 4.7 $ 4.8
================================================================================
The projected benefit obligation was determined based on the funded status at
year end. The funded status of the defined benefit plans and the amounts
recognized in GATX's consolidated balance sheet were (in millions):
December 31 1997 1996
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Accumulated benefit obligation--vested $232.4 $230.2
--nonvested 4.8 7.2
- --------------------------------------------------------------------------------
237.2 237.4
Effects of projected future compensation increases 38.9 37.3
- --------------------------------------------------------------------------------
Projected benefit obligation 276.1 274.7
Plan assets at fair market value,
primarily listed stocks and bonds 299.1 290.7
================================================================================
Plan assets in excess of projected benefit obligation $ 23.0 $ 16.0
Unrecognized net gain from past experience different
from that assumed (25.7) (15.1)
Unrecognized net asset from transition to new
pension accounting standard (.3) (.4)
Unrecognized prior service cost 3.1 4.1
- --------------------------------------------------------------------------------
Net prepaid pension cost included in balance sheet $ .1 $ 4.6
================================================================================
In addition to contributions to its defined benefit pension plans, GATX makes
contributions 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 1997 1996 1995
- --------------------------------------------------------------------------------
Contributions to GATX's pension plans $ 4.4 $ 6.2 $ 4.4
Contributions to multiemployer pension plans 1.8 2.0 1.9
Contributions to 401(k) plans 4.0 3.6 3.2
================================================================================
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. A discount rate
of 7.75% was used to determine the expense (net periodic postretirement benefit
cost) and liability (accrued postretirement benefit liability) for all years
presented below.
<PAGE>
Net periodic postretirement benefit cost, which for 1997 reflects termination
expense for a facility sale, included the following components (in millions):
For The Year 1997 1996 1995
- --------------------------------------------------------------------------------
Current service cost $ .5 $ .6 $ .5
Interest cost on accumulated
postretirement benefit obligation 5.1 5.3 5.4
Net amortization and deferral (.5) (.5) (.4)
Net termination expense 1.1 -- --
- --------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 6.2 $ 5.4 $ 5.5
================================================================================
The accrued postretirement benefit liability, part of Other Deferred Items on
GATX's balance sheet, included the following components (in millions):
December 31 1997 1996
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 59.5 $ 60.4
Fully eligible active plan participants 3.1 3.1
Other active plan participants 6.2 6.8
- --------------------------------------------------------------------------------
Total accumulated postretirement benefits obligation 68.8 70.3
Unrecognized gain 13.2 13.7
- --------------------------------------------------------------------------------
Accrued postretirement benefit liability $ 82.0 $ 84.0
================================================================================
The health care cost trend rate assumption has a significant effect on the
amount of the periodic cost and obligation reported. The trend rate currently
assumed for participants under age 65 is 6.0% in 1997 and thereafter. For
participants age 65 and older, the assumed trend rate is 5.0% in 1997 and after.
An increase in the assumed health care cost trend rates by 1% would increase the
net periodic postretirement benefit cost by $.6 million per year, and the
accumulated postretirement benefit obligation by $4.0 million.
<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 1997 1996
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Book/tax basis differences due to depreciation $343.2 $378.4
Leveraged leases 52.4 67.7
Lease accounting (other than leveraged) 44.6 45.0
Other 52.3 48.2
- --------------------------------------------------------------------------------
Total deferred tax liabilities 492.5 539.3
Deferred tax assets:
Alternative minimum tax credit 54.0 58.7
Accruals not currently deductible for tax purposes 52.5 54.2
Allowance for possible losses 47.7 44.8
Postretirement benefits other than pensions 28.2 28.8
Other 12.5 13.6
- --------------------------------------------------------------------------------
Total deferred tax assets 194.9 200.1
Net deferred tax liabilities $297.6 $339.2
================================================================================
At December 31, 1997, GATX had an alternative minimum tax credit of $54.0
million that can be carried forward indefinitely to reduce future regular tax
liabilities.
<PAGE>
GATX and its United States subsidiaries file a consolidated federal income tax
return. Amounts shown as Current Federal represent taxes payable as determined
by the Alternative Minimum Tax. Included in 1997's total deferred tax credit is
a $56.5 million deferred tax benefit resulting from Terminals' $185.8 million
pretax restructuring charge.
Income taxes consisted of (in millions):
For The Year 1997 1996 1995
- --------------------------------------------------------------------------------
Current-
Domestic:
Federal $ 28.0 $ 24.4 $ 27.9
State and local 1.1 2.4 4.6
- --------------------------------------------------------------------------------
29.1 26.8 32.5
Foreign 3.9 2.4 (1.1)
- --------------------------------------------------------------------------------
33.0 29.2 31.4
Deferred-
Domestic:
Federal (45.6) 18.9 10.3
State and local .4 4.9 3.0
- --------------------------------------------------------------------------------
(45.2) 23.8 13.3
Foreign 6.7 1.4 2.9
- --------------------------------------------------------------------------------
(38.5) 25.2 16.2
Income tax (benefit) expense $ (5.5) $ 54.4 $ 47.6
================================================================================
Income taxes paid $ 35.5 $ 33.6 $ 33.9
The reasons for the difference between GATX's effective income tax rate and the
federal statutory income tax rate were:
For The Year 1997 1997(A) 1996 1995
- --------------------------------------------------------------------------------
Federal statutory income tax rate 35.0% 35.0% 35.0% 35.0%
Add (deduct) effect of:
Corporate owned life insurance 2.6 (1.7) (2.0) (4.5)
State income taxes (5.6) 3.6 3.6 4.1
1997 restructuring charges (19.0) -- -- --
Foreign income (2.4) 1.5 1.7 1.3
Goodwill amortization (2.0) 1.3 1.1 1.1
Minority interest (.4) .3 .3 2.1
Other (1.9) 1.1 2.6 1.6
- --------------------------------------------------------------------------------
Effective income tax rate 6.3% 41.1% 42.3% 40.7%
================================================================================
(A)Before restructuring charges
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.
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.
<PAGE>
A total of 2,463,674 shares of common stock were reserved at December 31, 1997,
for the following:
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------
Conversion of outstanding preferred stock 65,913
Incentive compensation programs 2,379,261
Employee service awards 18,500
- --------------------------------------------------------------------------------
2,463,674
================================================================================
Holders of $2.50 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.
During 1997, GATX called for redemption all the outstanding shares of its $3.875
cumulative convertible preferred stock, each share of which was convertible into
1.1494 shares of common stock. As a result of the redemption, 3.4 million
preferred shares were converted to 3.9 million shares of common.
Transactions in preferred, common, and treasury stock are shown in the following
table:
<TABLE>
<CAPTION>
Capital Transactions
(in Thousands, Except
Number of Shares) Preferred Stock Common Stock Treasury Stock
--------------------------------- ------------------------------ ---------------------
Shares Par Additional Shares Par Additional
Issued Value Capital Issued Value Capital Shares Cost
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 3,437,835 $ 3,438 $ 162,840 22,685,590 $14,178 $155,222 (2,790,954) $(47,082)
Add (deduct):
Conversion of preferred stock
into common stock (6,815) (7) (267) 11,467 7 266
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 $ 162,573 22,896,407 $14,310 $162,257 (2,790,954 $(47,082)
Add (deduct):
Conversion of preferred stock
into common stock (12,315) (12) (322) 30,790 19 315
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 $ 162,251 23,064,774 $14,415 $166,753 (2,790,039) $(47,066)
Add (deduct):
Conversion of preferred stock
into common stock (3,392,340) (3,392) (161,563) 3,901,127 2,438 159,183
Common stock issued under
option, incentive and service
award plans 274,377 171 13,197 20,319 343
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 26,365 $ 27 $ 688 27,240,278 $17,024 $339,133 (2,769,720) $(46,723)
============================================================================================================================
</TABLE>
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, 1997,
692,312 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.
<PAGE>
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 1997, 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 8,382 IPUs were granted during
1997 and 30,235 IPUs in total were outstanding at the end of the year. In 1997,
13,903 shares of common stock and $452,364 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 1997, one grant of
4,000 shares of restricted stock was made.
The 1985 Plan Stock options are outstanding under the GATX Corporation 1985 Long
Term Incentive Compensation Plan (the 1985 Plan), as amended, but no additional
options, stock or awards may be issued thereunder. At December 31, 1997, 176,142
shares of common stock were reserved for grants previously made under the 1985
Plan.
Data with respect to both plans, including the range of exercise prices per
share for 1997 and 1996, are set forth below:
- --------------------------------------------------------------------------------
Number of Shares Under
Stock Option Plans
1997 1996 Price Per Share
- --------------------------------------------------------------------------------
Outstanding at January 1 1,667,150 1,425,475 $16.3450-50.5625
Granted 305,500 374,200 49.8125-66.9375
Exercised (282,475) (117,775) 16.3450-47.8750
Canceled (29,525) (14,750) 41.8125-66.9375
- --------------------------------------------------------------------------------
Outstanding at December 31 1,660,650 1,667,150 $19.47-66.9375
Outstanding at December 31,
by year granted:
1987 -- 22,000 $19.47
1988 20,000 45,000 25.655
1989 51,100 79,800 29.9375
1990 45,500 71,250 19.94
1991 106,650 149,900 26.13-28.1875
1992 101,150 142,500 25.50
1993 164,150 210,600 37.6875
1994 238,200 268,650 41.8125
1995 282,650 306,500 47.5625-50.5625
1996 353,150 370,950 46.3125-49.8125
1997 298,100 -- 54.875-66.9375
- --------------------------------------------------------------------------------
Total 1,660,650 1,667,150 $19.47-66.9375
================================================================================
Options exercisable
at December 31 1,145,433 1,207,950
- --------------------------------------------------------------------------------
Options available for future
grant at December 31 692,312 986,190
================================================================================
<PAGE>
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 1996 and 1997: dividend yield of 3.6%
for 1996 and 2.8% for 1997; volatility factor of the expected market price of
GATX's common stock of .15 for 1996 and .156 for 1997; expected life of the
option of five years for 1996 and four years for 1997; and weighted average
risk-free interest rate of 6.1% for 1996 and 5.9% for 1997.
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.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option vesting period. The resultant pro forma
net (loss) income and (loss) earnings per share were (in millions except for
earnings per share information):
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Pro forma net (loss) income $(52.2) $101.6
Pro forma (loss) earnings per share:
Basic $(2.61) $ 4.38
Diluted $(2.61) $ 4.15
- --------------------------------------------------------------------------------
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 1996 and 1997 generally
are granted late in the year and vest over a three year period, neither the 1996
nor 1997 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.
Approximately 19% of total revenues are generated from the transportation or
storage of products for the chemical industry; for similar services, 18% of
revenues are derived from the petroleum industry. The sale and leasing of
technology equipment represents about 17% of total revenues. GATX also provides
services and products to the chemical, petroleum, and technology markets through
its joint ventures, which are accounted for under the equity method. In
addition, approximately 10% 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.
<PAGE>
At December 31, 1997, GATX had commitments of $167 million for orders and
options by aircraft joint ventures for interests in 26 new aircraft to be
delivered between 1998-2001. In addition, GATX has issued $182 million of
residual and rental guarantees. GATX also has firm commitments to acquire
railcars and to upgrade terminal and repair facilities totaling $209 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. Two of GATX's
subsidiaries are involved in litigation arising out of a chemical leak and
resulting tank car fire in New Orleans, Louisiana. In another matter, an
affiliate of a subsidiary of the company is the subject of both litigation and
unasserted claims related to the conversion of certain aircraft from passenger
to freighter configuration. 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.
NOTE P-RESTRUCTURING CHARGES
During 1997 strategic decisions resulted in a $225 million ($163 million
after-tax) restructuring charge related to GATX Terminals and GATX Logistics.
Terminals' portion of the restructuring charge is based on the decision to
close, sell or revalue certain domestic and foreign terminal locations to
reflect permanent changes in market conditions. The charge primarily represents
the write-down of asset values with minor costs related to closure activities.
The charge at GATX Logistics represents the write-down of goodwill to reflect
the impairment of certain acquired facilities. The carrying values of certain
assets at GATX Terminals and GATX Logistics were written down to fair value as
described in Note A.
(In Millions) Pre-tax After-tax
- --------------------------------------------------------------------------------
GATX Terminals $185.8 $123.8
GATX Logistics 39.0 39.0
- --------------------------------------------------------------------------------
Total $224.8 $162.8
- --------------------------------------------------------------------------------
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Net (Loss)
Operating Net (Loss) Income Per
In Millions, Gross Expenses and Net (Loss) Income Share, Assuming
Except Per Share Data Income Depreciation Income Per Share (A) Dilution (A)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
First Quarter $ 394.6 $ 241.8 $ 31.2 $ 1.37 $ 1.27
Second Quarter 434.7 279.0 30.2 1.26 1.22
Third Quarter 430.9 273.2 28.0 1.15 1.12
Fourth Quarter 441.7 291.9 (140.3) (5.74) (5.74)(B)
- ----------------------------------------------------------------------------------------------
Total $1,701.9 $1,085.9 $ (50.9) $(2.55) $(2.55)(B)
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1996
First Quarter $ 303.6 $ 193.3 $ 24.7 $ 1.06 $ 1.01
Second Quarter 337.8 212.6 25.7 1.11 1.05
Third Quarter 367.8 222.8 33.4 1.49 1.37
Fourth Quarter 405.2 263.5 18.9 .77 .77
- --------------------------------------------------------------------------------------------
Total $1,414.4 $ 892.2 $102.7 $ 4.43 $ 4.20
============================================================================================
<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 diluted (loss)
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 are listed on the New
York and Chicago Stock Exchanges. During 1997, all outstanding shares of the
$3.875 cumulative convertible preferred stock were called for redemption. The
approximate number of holders of record of Common Stock and $2.50 Cumulative
Convertible Preferred Stock as of February 27, 1998 was 3,248 and 125,
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
- --------------------------------------------------------------------------------
1997
First Quarter $50.25 $47.625 $125.50 $125.50 $59.75 $56.50
Second Quarter 58.625 48.50 125.50 123.50 68.00 57.06
Third Quarter 67.5625 57.75 167.00 123.50 n/a n/a
Fourth Quarter 72.5625 60.50 180.00 167.00 n/a n/a
- --------------------------------------------------------------------------------
Annual
Dividends Declared $1.84 $2.50 $1.9375
================================================================================
1996
First Quarter $51.25 $44.00 $124.25 $124.25 $59.50 $54.25
Second Quarter 48.375 43.00 116.50 116.25 58.50 53.88
Third Quarter 49.125 43.00 116.50 116.25 59.38 55.25
Fourth Quarter 51.25 46.125 125.50 119.00 59.50 56.25
- --------------------------------------------------------------------------------
Annual
Dividends Declared $1.72 $2.50 $3.875
================================================================================
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
In Millions, Except Per Share Data 1997(A) 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of Operations
Gross income $1,701.9 $1,414.4 $1,246.4 $1,155.0 $1,086.9
Costs and expenses 1,789.2 1,285.7 1,129.4 1,037.2 982.5
- ---------------------------------------------------------------------------------------------------------------
(Loss) income before income taxes
and equity in net earnings of
affiliated companies (87.3) 128.7 117.0 117.8 104.4
Income taxes (benefit) (5.5) 54.4 47.6 48.8 51.4
- ----------------------------------------------------------------------------------------------------------------
Income before equity in net
earnings of affiliated companies (81.8) 74.3 69.4 69.0 53.0
Equity in net earnings of affiliated companies 30.9 28.4 31.4 22.5 19.7
- -----------------------------------------------------------------------------------------------------------------
Net (loss) income $ (50.9) $ 102.7 $ 100.8 $ 91.5 $ 72.7
Per Share Data
Net income (loss) applicable to common
stock, as adjusted $ (57.6) $ 89.5 $ 87.6 $ 78.2 $ 59.4
Per share of common stock and common
stock equivalents:
Net (loss) income $ (2.55) $ 4.43 $ 4.38 $ 3.94 $ 3.03
Shares used in computation (in thousands) 22,542 20,189 20,002 19,843 19,594
Per share assuming conversion, except in 1997
and 1993, of all outstanding preferred stock:
Net (loss) income, diluted $ (2.55) $ 4.20 $ 4.14 $ 3.79 $ 3.03
Shares used in computation (in thousands) 22,542 24,462 24,365 24,166 19,594
Dividends declared per share of common stock $ 1.84 $ 1.72 $ 1.60 $ 1.50 $ 1.40
Financial Condition
Total assets $ 4,947.8 $4,750.2 $4,042.9 $3,650.7 $3,392.1
Total long-term debt and capital
lease obligations 2,819.4 2,664.1 2,092.5 1,805.1 1,713.8
Shareholders' equity 655.4 774.9 717.8 662.4 589.9
Common shareholders' equity 654.7 609.2 551.8 496.1 423.6
Common shareholders' equity per share 26.72 29.58 26.88 24.30 20.78
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A)1997's restructuring charge was $224.8 million on a pre-tax basis, $162.8
million on an after-tax basis.
</FN>
</TABLE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
1996 COMPARED TO 1995
The following discussion analyzes GATX's comparative performance for the years
ended December 31, 1996 and 1995. This information should be read in conjunction
with the consolidated financial statements on pages 38, 40, and 42. The
discussion of comparative results of GATX's operations for the years ended
December 31, 1997 and 1996 is presented in the management discussion and
analysis on pages 31, 32, 33, 39, 41, 43, 44 and 45 and the financial data of
business segments on pages 34 through 37.
GATX reported record net income of $103 million or $4.20 per share, on a diluted
basis, for the year ended December 31, 1996 compared to $101 million or $4.14
per share for 1995. On a basic basis, earnings per share were $4.43 compared to
$4.38 in the prior year. This improvement was principally due to record earnings
at Transportation and Capital. Terminals' net income decreased substantially
from the prior year. However, ASC and Logistics' earnings were relatively flat
with 1995. GATX's return on total equity for 1996 was 13.8% compared to 14.6% in
1995.
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.
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 the prior 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.
<PAGE>
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 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 634 million barrels at wholly-owned locations increased
5% from 602 million barrels last year. Average utilization for the year was 86%,
down from 1995's average of 88%, with 1996 year-end utilization at 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
transformation initiatives; these initiatives continue to address on-going cost
reduction and productivity enhancements. Overall, total operating costs and SG&A
expense decreased $2 million 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. 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.
<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.
Margin for 1996 was 9.6% compared with 9.1% in 1995, though significant empty
space costs compressed the improvement. In addition, information systems costs
continued to increase to better meet customer needs.
Logistics continued 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 the prior 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.
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 reserve following the
successful defense of previously reported litigation against GATX.
<PAGE>
<TABLE>
<CAPTION>
GATX LOCATION OF OPERATIONS
GATX Corporation and Subsidiaries
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GENERAL Headquarters Major Service Centers Mobile Service Units
AMERICAN Chicago, Illinois Colton, California Mobile, Alabama
TRANSPORTATION Waycross, Georgia Colton, California
CORPORATION Business Offices East Chicago, Indiana Macon, Georgia
Valencia, California Hearne, Texas East Chicago, Indiana
Atlanta, Georgia Tierra Blanca, Mexico Good Hope, Louisiana
Chicago, Illinois Red Deer, Alberta Carteret, New Jersey
Hackensack, New Jersey Montreal, Quebec Las Cruces, New Mexico
Philadelphia, Pennsylvania Moose Jaw, Saskatchewan Albany, New York
Pittsburgh, Pennsylvania Galena Park, Texas
Houston, Texas Olympia, Washington
Mexico City, Mexico Mini Service Centers Tierra Blanca, Mexico
Calgary, Alberta Muscle Shoals, Alabama Red Deer, Alberta
Toronto, Ontario White Springs, Florida Montreal, Quebec
Montreal, Quebec Terre Haute, Indiana Moose Jaw, Saskatchewan
Plaquemine, Louisiana
Midland, Michigan Joint Ventures
Ivorydale, Ohio Hamburg, Germany
Masury, Ohio Zug, Switzerland
Catoosa, Oklahoma
Copper Hill, Tennessee
Freeport, Texas (2)
- ----------------------------------------------------------------------------------------------------------------------
GATX Headquarters
CAPITAL San Francisco, California Joint Ventures
CORPORATION Sydney, Australia
Offices San Francisco, California
Burbank, California LaGrange, Illinois
Tampa, Florida Toronto, Ontario
Chicago, Illinois Zug, Switzerland
Eden Prairie, Minnesota Elstree, United Kingdom
Sydney, Australia Woking, United Kingdom
Toronto, Canada
Blagnac, France
Frankfurt, Germany
Singapore, Republic of Singapore
Tokyo, Japan
- ----------------------------------------------------------------------------------------------------------------------
GATX Headquarters International Terminals Pipelines
TERMINALS Chicago, Illinois Avonmouth, United Kingdom Calnev Pipe Line
CORPORATION Belfast, United Kingdom Adelanto, California
Domestic Terminals Eastham, United Kingdom Barstow, California
Carson, California Glasgow, United Kingdom Colton, California
Los Angeles, California Grays, United Kingdom Las Vegas, Nevada
Richmond, California Leith, United Kingdom
San Pedro, California Runcorn, United Kingdom Central Florida Pipeline
Orlando, Florida Orlando, Florida
Port Everglades, Florida Terminal Joint Ventures Tampa, Florida
Tampa, Florida Antwerpen/Lillo, Belgium
Argo, Illinois Lanshan, China Pipeline Joint Ventures
Carteret, New Jersey Kawasaki, Japan Olympic Pipeline
Paulsboro, New Jersey Kobe, Japan Renton, Washington
Staten Island, New York Yokohama, Japan
Portland, Oregon (2) Altamira, Mexico Manchester Jet Line
Philadelphia, Pennsylvania Jurong Town, Singapore Manchester, United Kingdom
Galena Park, Texas Pulau Busing, Singapore
Pasadena, Texas Barcelona, Spain
Seattle, Washington Bilbao, Spain Tarragona, Spain
Vancouver, Washington Valencia, Spain
Seal Sands, United Kingdom
Wymondham, United Kingdom
- -------------------------------------------------------------------------------------------------------------------
GATX Headquarters New York, New York
LOGISTICS, Jacksonville, Florida Syracuse, New York
INC. Akron, Ohio
Locations Cleveland, Ohio
Little Rock, Arkansas Columbus, Ohio
Los Angeles, California Oklahoma City, Oklahoma
Stockton, California Philadelphia, Pennsylvania
Walnut, California Dallas, Texas
Denver, Colorado El Paso, Texas
Danbury, Connecticut Fort Worth, Texas
Jacksonville, Florida Clearfield, Utah
Atlanta, Georgia Chesapeake, Virginia
Chicago, Illinois Seattle, Washington
Normal, Illinois Racine, Wisconsin
Richmond, Indiana Toronto, Canada
Indianapolis, Indiana Mexico City, Mexico
Lexington, Kentucky
Shreveport, Louisiana Joint Venture
Baltimore, Maryland Santiago, Chile
Grand Rapids, Michigan
Kalamazoo, Michigan
Gulfport, Mississippi
St. Louis, Missouri
Greensboro, North Carolina
Winston-Salem, North Carolina
- -------------------------------------------------------------------------------------------------------------------
AMERICAN STEAMSHIP Headquarters
COMPANY Williamsville, New York
Regional Office
Toledo, Ohio
Vessels
M/V Indiana Harbor
M/V Walter J. McCarthy,Jr.
M/V St. Clair
M/V American Mariner
M/V H. Lee White
M/V Charles E. Wilson
M/V Adam E. Cornelius
M/V American Republic
M/V Buffalo
M/V Sam Laud
Str. John J. Boland
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<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 James M. Denny1,2 General American
Chairman, President and Managing Director, William Blair Transportation Corporation
Chief Executive Officer Capital Partners, LLC D. Ward Fuller, President
David B. Anderson Richard M. Fairbanks1,4 GATX Capital Corporation
Vice President, Managing Director of Domestic & Joseph C. Lane, President
Corporate Development, International Issues, Center for
General Counsel and Strategic & International Studies GATX Terminals Corporation
Secretary Anthony J. Andrukaitis, President
William C. Foote3,4
William L. Chambers Chairman, President and Chief GATX Logistics, Inc.
Vice President, Executive Officer, USG Corporation Joseph A. Nicosia, President
Human Resources
Deborah M. Fretz3,4 American Steamship Company
Gail L. Duddy Senior Vice President, Ned A. Smith, President
Vice President, Compensation Lubricants and Logistics,
and Benefits Sun Company, Inc.
David M. Edwards Richard A. Giesen2,3
Vice President Finance, Chairman and Chief
Chief Financial Officer Executive Officer,
Continental Glass & Plastic, Inc.
Brian A. Kenney
Vice President and Treasurer Miles L. Marsh1,4
Chairman, President and Chief
Ralph L. O'Hara Executive Officer,
Controller Fort James Corporation
Charles Marshall2,3
Retired: Former Vice Chairman of
the Board, American Telephone and
Telegraph Company
Michael E. Murphy1,2
Retired: Former Vice Chairman and
Chief Administrative Officer,
Sara Lee Corporation
Ronald H. Zech
Chairman, President and
Chief Executive Officer, GATX
Corporation
1Member, Audit Committee
2Member, Compensation Committee
3Member, Nominating Committee
4Member, Retirement Funds
Review Committee
</TABLE>
<PAGE>
GATX CORPORATE INFORMATION
GATX Corporation and Subsidiaries
ANNUAL MEETING
Friday, April 24, 1998, 9:00 a.m.
GATX Corporation
500 West Monroe Street
Chicago, Illinois 60661-3676
FINANCIAL INFORMATION
AND PRESS RELEASES:
A copy of the company's annual report on Form 10-K for 1997 and selected other
information are available without charge.
Corporate information and press releases may be found at 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 Newswire 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, L.L.C.
Overpeck Centre
8 Challenger Road
Ridgefield Park, NY 07660
Telephone: (800) 851-9677
Internet: http://www.chasemellon.com
Information relating to shareholder ownership, dividend payments, or share
transfers:
Janet M. Dongarra, Assistant Corporate Secretary
Telephone: (312) 621-6603
Fax: (312) 621-6647
Email: [email protected]
<PAGE>
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
Telephone: (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
Email: [email protected]
Robert C. Lyons, Manager Investor and Public Relations
Telephone: (312) 621-6493
Email: [email protected]
Fax: (312) 621-6698
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
<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 4 domestic
subsidiaries, 4 foreign subsidiaries and interests in 2 foreign affiliates,
Business Segment--Railcar Leasing and Management
GATX Financial Services, Inc. (Delaware) -- 64 domestic subsidiaries (which
includes GATX Capital Corporation), 13 foreign subsidiaries, interests in
6 domestic affiliates and 5 foreign affiliates, Business Segment--
Financial Services
GATX Terminals Corporation (Delaware)--3 domestic subsidiaries, 3 foreign
subsidiaries, an interest in 1 domestic affiliate and 13 foreign
affiliates, Business Segment--Terminals and Pipelines
GATX Logistics, Inc. (Florida) --7 domestic subsidiaries and 2 foreign
subsidiaries and an interest in 1 foreign affiliate, 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 on Form S-8 filed July 20, 1995; (vi) Registration
Statement No. 33-06315 on Form S-8 filed June 19, 1996; and (vii) Registration
Statement No. 33-43113 on Form S-8 filed December 23, 1997 of GATX Corporation,
of our report dated January 27, 1998 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,
1997.
ERNST & YOUNG LLP
Chicago, Illinois
March 16, 1998
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 1997 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
----------------------------
Director
Date: February 27, 1998
---------------------
<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 1997 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ James M. Denny
----------------------------
Director
Date: March 6, 1998
------------------
<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 1997 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 Fairbanks
----------------------------
Director
Date: March 2, 1998
-----------------
<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 1997 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ William C. Foote
----------------------------
Director
Date: March 5, 1998
------------------
<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 1997 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ Deborah M. Fretz
----------------------------
Director
Date: March 2, 1998
------------------
<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 1997 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ Richard A. Giesen
----------------------------
Director
Date: March 6, 1998
-----------------
<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 1997 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ Miles L. Marsh
----------------------------
Director
Date: March 2, 1998
-----------------
<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 1997 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 28, 1998
--------------------
<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 1997 Annual Report on Form 10-K under the Securities Exchange
Act of 1934, together with any amendments thereto, hereby ratifying and
confirming all that said attorneys and agents and each of them may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal.
/s/ Michael E. Murphy
----------------------------
Director
Date: February 28, 1998
---------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary finacial 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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 78
<SECURITIES> 0
<RECEIVABLES> 1219 <F1>
<ALLOWANCES> 128
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 4534
<DEPRECIATION> 1824
<TOTAL-ASSETS> 4948
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 2714 <F3>
0
0
<COMMON> 17
<OTHER-SE> 638
<TOTAL-LIABILITY-AND-EQUITY> 4948
<SALES> 0
<TOTAL-REVENUES> 1702
<CGS> 0
<TOTAL-COSTS> 840 <F4>
<OTHER-EXPENSES> 252 <F5>
<LOSS-PROVISION> 11
<INTEREST-EXPENSE> 222
<INCOME-PRETAX> (87) <F6>
<INCOME-TAX> (5)
<INCOME-CONTINUING> (51)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51)
<EPS-PRIMARY> (2.55)
<EPS-DILUTED> (2.55)
<FN>
<F1> Receivable consists of three components: Trade accounts of 162 million,
Finance Leases of 877 million and secured loans of 180 million.
<F2> Not applicable because GATX has an unclassified balance sheet.
<F3> This value consists of two components: long-term debt of 2,607 million and
capital lease obligations of 212 million. Short-term debt not included.
<F4> This value represents operating expenses on the consolidated income
statement.
<F5> This value consists of the provision for depreciation and amortization on
the consolidated income statement.
<F6> This value represents income before income taxes and equity in net earnings
of affiliated companies.
</FN>
</TABLE>
