<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
Form 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended Commission File Number
June 30, 1998 1-2328
------------------
GATX CORPORATION
Incorporated in the IRS Employer Identification No.
State of New York 36-1124040
500 West Monroe Street
Chicago, Illinois 60661-3676
(312) 621-6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Registrant had 49,234,988 shares of common stock outstanding as of July 31,
1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART I-FINANCIAL INFORMATION
GATX CORPORATION AND SUBSIDIARIES
------------------
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
1998 1997 1998 1997
------- ------ ------- ------
<S> <C> <C> <C> <C>
Gross income .................................... $437.6 $434.7 $846.5 $829.3
Costs and expenses
Operating expenses ............................ 210.1 218.4 393.0 401.7
Interest ...................................... 61.1 55.3 119.5 106.8
Provision for depreciation and amortization ... 65.4 62.3 127.4 122.4
Provision for possible losses ................. 5.2 3.9 7.8 6.1
Selling, general and administrative ........... 60.3 56.7 115.8 109.7
------ ------ ------ ------
402.1 396.6 763.5 746.7
------ ------ ------ ------
Income before income taxes and equity
in net earnings of affiliated companies ....... 35.5 38.1 83.0 82.6
Income taxes .................................... 16.1 15.3 36.5 34.5
------ ------ ------ ------
Income before equity in net earnings
of affiliated companies ....................... 19.4 22.8 46.5 48.1
Equity in net earnings of affiliated companies .. 11.4 7.4 21.7 13.3
------ ------ ------ ------
Net income ...................................... $ 30.8 $ 30.2 $ 68.2 $ 61.4
====== ====== ====== ======
Per common share:
Net income, basic ............................. $ .63 $ .63 $ 1.39 $ 1.31
Net income, diluted ........................... .61 .61 1.35 1.24
Dividends declared ............................ .25 .23 .50 .46
</TABLE>
_________
Note - The consolidated balance sheet at December 31, 1997 has been derived
from the audited financial statements at that date. All other consolidated
financial statements are unaudited but include all adjustments, consisting
only of normal recurring items, which management considers necessary for a
fair statement of the consolidated results of operations and financial
position for the respective periods. Operating results for the six months
ended June 30, 1998 are not necessarily indicative of the results that may
be achieved for the entire year ending December 31, 1998.
1
<PAGE> 3
GATX CORPORATION AND SUBSIDIARIES
------------------
CONSOLIDATED BALANCE SHEETS
IN MILLIONS
<TABLE>
<CAPTION>
ASSETS
JUNE 30 DECEMBER 31
1998 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents ................ $ 136.1 $ 77.8
Receivables
Trade accounts ......................... 145.4 161.9
Finance leases ......................... 653.0 877.0
Secured loans .......................... 392.7 180.3
Less - Allowance for possible losses ... (135.9) (128.5)
-------- --------
1,055.2 1,090.7
Operating lease assets and facilities
Railcars and support facilities ........ 2,656.6 2,501.7
Tank storage terminals and pipelines ... 1,141.3 1,128.9
Great Lakes vessels .................... 202.3 199.4
Operating lease investments and other .. 703.9 704.4
-------- --------
4,704.1 4,534.4
Less - Allowance for depreciation ...... (1,896.3) (1,823.9)
-------- --------
2,807.8 2,710.5
Investments in affiliated companies ...... 738.0 707.4
Other assets ............................. 383.4 361.4
-------- --------
TOTAL ASSETS ............................. $5,120.5 $4,947.8
======== ========
</TABLE>
2
<PAGE> 4
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1998 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Accounts payable ............................ $ 311.2 $ 354.7
Accrued expenses ............................ 67.5 58.0
Debt
Short-term debt ........................... 636.5 392.5
Recourse long-term debt ................... 2,177.6 2,277.5
Nonrecourse long-term debt ................ 377.4 329.8
Capital lease obligations ................. 203.8 212.1
-------- --------
3,395.3 3,211.9
Deferred income taxes ....................... 309.9 297.6
Other deferred items ........................ 342.6 370.2
-------- --------
Total liabilities and deferred items ... 4,426.5 4,292.4
Shareholders' equity
Preferred Stock ........................... - -
Common Stock .............................. 17.1 17.0
Additional capital ........................ 344.8 339.7
Reinvested earnings ....................... 407.0 363.4
Accumulated other comprehensive income .... (28.1) (17.9)
-------- --------
740.8 702.2
Less - Cost of common shares in treasury .. (46.8) (46.8)
-------- --------
Total shareholders' equity ............. 694.0 655.4
-------- --------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDERS' EQUITY .................. $5,120.5 $4,947.8
======== ========
</TABLE>
3
<PAGE> 5
GATX CORPORATION AND SUBSIDIARIES
------------------
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998
IN MILLIONS
<TABLE>
<CAPTION>
Accumulated
Other
Common Preferred Additional Reinvested Comprehensive Treasury
Stock Stock Capital Earnings Income (a) Stock Total
----- ----- ------- -------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 1/1/98 $ 17.0 $ - $339.7 $363.4 $(17.9) $(46.8) $655.4
Comprehensive Income:
Net income 68.2 68.2
Other comprehensive income
Foreign currency translation
adjustment (9.6) (9.6)
Unrealized loss on securities,
net of reclassification
adjustments (b) (0.6) (0.6)
------
Comprehensive income 58.0
------
Common stock issued 0.1 5.1 5.2
Dividends declared (24.6) (24.6)
------ ----- ------ ------ ------ ------ ------
Ending Balance 6/30/98 $ 17.1 $ - $344.8 $407.0 $(28.1) $(46.8) $694.0
====== ===== ====== ====== ====== ====== ======
</TABLE>
(a) The beginning balance of accumulated other comprehensive income at
January 1, 1998 included a cumulative foreign currency translation
adjustment of $(22.5) million and unrealized gains on securities of $4.6
million.
(b) Unrealized loss on securities $ (.2)
Less: Reclassification adjustments for gains realized included
in net income (.4)
-----
Net unrealized loss on securities $ (.6)
=====
4
<PAGE> 6
GATX CORPORATION AND SUBSIDIARIES
------------------
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
IN MILLIONS
<TABLE>
<CAPTION>
Accumulated
Other
Common Preferred Additional Reinvested Comprehensive Treasury
Stock Stock Capital Earnings Income (a) Stock Total
----- ----- ------- -------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 1/1/97 $14.4 $ 3.4 $329.0 $463.7 $11.4 $(47.0) $774.9
Comprehensive Income:
Net income 61.4 61.4
Other comprehensive income
Foreign currency transla-
tion adjustment (5.1) (5.1)
Unrealized loss on securi-
ties, net of reclassifica-
tion adjustments (b) (0.4) (0.4)
------
Comprehensive income 55.9
------
Common stock issued .1 5.9 0.2 6.2
Conversion of preferred stock 2.4 (3.4) (2.4) (3.4)
Dividends declared (26.8) (26.8)
----- ----- ------ ------ ----- ------ ------
Ending Balance 6/30/97 $16.9 $ - $332.5 $498.3 $ 5.9 $(46.8) $806.8
===== ===== ====== ====== ===== ====== ======
</TABLE>
(a) The beginning balance of accumulated other comprehensive income at January
1, 1997 included a cumulative foreign currency translation adjustment of
$5.8 million and unrealized gains on securities of $5.6 million.
(b) Unrealized loss on securities $ (.2)
Less: Reclassification adjustments for gains realized included
in net income (.2)
-----
Net unrealized loss on securities $ (.4)
=====
5
<PAGE> 7
GATX CORPORATION AND SUBSIDIARIES
------------------
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JUNE 30, 1998
IN MILLIONS
<TABLE>
<CAPTION>
Accumulated
Other
Common Preferred Additional Reinvested Comprehensive Treasury
Stock Stock Capital Earnings Income (a) Stock Total
----- ----- ------- -------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 4/1/98 $ 17.1 $ - $343.7 $388.5 $(17.9) $(46.8) $684.6
Comprehensive Income:
Net income 30.8 30.8
Other comprehensive income
Foreign currency translation
adjustment (9.2) (9.2)
Unrealized loss on securities,
net of reclassification
adjustments (b) (1.0) (1.0)
------
Comprehensive income 20.6
------
Common stock issued 1.1 1.1
Dividends declared (12.3) (12.3)
------ ----- ------ ------ ------ ------ ------
Ending Balance 6/30/98 $ 17.1 $ - $344.8 $407.0 $(28.1) $(46.8) $694.0
====== ===== ====== ====== ====== ====== ======
</TABLE>
(a) The beginning balance of accumulated other comprehensive income at April
1, 1998 included a cumulative foreign currency translation adjustment of
$(22.9) million and unrealized gains on securities of $5.0 million.
(b) Unrealized loss on securities $ (1.5)
Less: Reclassification adjustments for loss realized included
in net income .5
------
Net unrealized loss on securities $ (1.0)
======
6
<PAGE> 8
GATX CORPORATION AND SUBSIDIARIES
------------------
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JUNE 30, 1997
IN MILLIONS
<TABLE>
<CAPTION>
Accumulated
Other
Common Preferred Additional Reinvested Comprehensive Treasury
Stock Stock Capital Earnings Income (a) Stock Total
----- ----- ------- -------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 4/1/97 $14.5 $ 3.4 $331.9 $482.2 $ 2.7 $(46.8) $787.9
Comprehensive Income:
Net income 30.2 30.2
Other comprehensive income
Foreign currency transla-
tion adjustment 1.7 1.7
Unrealized gain on securi-
ties, net of reclassifica-
tion adjustments (b) 1.5 1.5
------
Comprehensive income 33.4
------
Common stock issued 3.0 3.0
Conversion of preferred stock 2.4 (3.4) (2.4) (3.4)
Dividends declared (14.1) (14.1)
----- ----- ------ ------ ----- ------ ------
Ending Balance 6/30/97 $16.9 $ - $332.5 $498.3 $ 5.9 $(46.8) $806.8
===== ===== ====== ====== ===== ====== ======
</TABLE>
(a) The beginning balance of accumulated other comprehensive income at April 1,
1997 included a cumulative foreign currency translation adjustment of
$(1.0) million and unrealized gains on securities of $3.7 million.
(b) Unrealized gain on securities $ 1.5
Less: Reclassification adjustments for gains realized included
in net income -
-----
Net unrealized gain on securities $ 1.5
=====
7
<PAGE> 9
GATX CORPORATION AND SUBSIDIARIES
------------------
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
IN MILLIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
1998 1997 1998 1997
------- -------- ------- -------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net income $ 30.8 $ 30.2 $ 68.2 $ 61.4
Adjustments to reconcile net income to net
cash provided by operating activities:
Realized gain on disposition of leased
equipment (2.4) (14.4) (28.5) (40.5)
Provision for depreciation and amortization 65.4 62.3 127.4 122.4
Provision for possible losses 5.2 3.9 7.8 6.1
Deferred income taxes 5.9 4.5 15.4 3.1
Net change in trade receivables, inventories,
accounts payable and accrued expenses (8.9) (4.1) (38.4) 14.9
Other (31.3) (17.2) (33.6) (45.1)
------- ------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 64.7 65.2 118.3 122.3
INVESTING ACTIVITIES
- --------------------
Additions to operating lease assets and facilities (120.6) (81.8) (233.1) (177.1)
Portfolio lease investments,
net of nonrecourse financing (65.0) (105.2) (136.0) (156.2)
Secured loans extended (77.3) (12.4) (106.0) (14.9)
Investments in affiliated companies (37.7) (58.1) (54.2) (72.1)
Progress payments and other (11.2) (6.4) (13.5) (24.4)
------- ------- ------- -------
Capital additions and portfolio investments (311.8) (263.9) (542.8) (444.7)
Portfolio proceeds:
From disposition of leased equipment 10.7 40.2 111.1 128.9
From return of investment 123.6 53.9 190.6 126.4
------- ------- ------- -------
Total portfolio proceeds 134.3 94.1 301.7 255.3
Proceeds from other asset dispositions 10.5 1.7 15.7 3.5
------- ------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (167.0) (168.1) (225.4) (185.9)
FINANCING ACTIVITIES
- --------------------
Proceeds from issuance of long-term debt 41.5 43.2 109.8 83.7
Repayment of long-term debt (88.7) (89.2) (183.3) (259.5)
Net increase in short-term debt 192.7 149.9 266.7 259.9
Repayment of capital lease obligations (1.9) (3.2) (8.3) (9.4)
Issuance of Common Stock and other 1.1 (.2) 5.1 2.9
Cash dividends (12.3) (14.2) (24.6) (26.9)
------- ------- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 132.4 86.3 165.4 50.7
------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 30.1 $ (16.6) $ 58.3 $ (12.9)
======= ======= ======= =======
</TABLE>
8
<PAGE> 10
MANAGEMENT'S DISCUSSION OF OPERATIONS
COMPARISON OF FIRST SIX MONTHS OF 1998 TO FIRST SIX MONTHS OF 1997
GENERAL
GATX Corporation's net income for the first six months of 1998 was $68 million
compared to $61 million for the first six months of 1997. Earnings per share
for the period on a diluted basis increased 9% to $1.35 from $1.24 for the prior
year. Results for the first six months of 1998 are at record levels and current
expectations are for the second half of the year to produce similar earnings.
Due to the anticipated timing of asset remarketing gains, the third quarter of
1998 is projected to be stronger than the fourth quarter.
Gross income of $847 million increased by $17 million from the prior year
largely driven by the growth of Transportation's railcar fleet and higher rental
rates. Partially offsetting this increase was nonrecurring 1997 revenue at
Terminals related to sold facilities. Capital's gross income was comparable to
the prior year with technology decreases countered by increases in lease and
interest income. Earnings for the first six months of 1998 increased by $7
million over the prior year with strong results at most of GATX's operations.
Results at Terminals through June 1998 increased $8 million due to favorable
petroleum market conditions and higher equity earnings from affiliates, and the
restructuring undertaken in the fourth quarter of 1997. Earnings were up 8% at
Transportation while results at Capital and American Steamship were in line with
the prior year. Logistics reported a decrease of $1 million compared to last
year largely due to the write-off of a customer receivable.
Net cash provided by operating activities for the first six months of 1998 was
$118 million, a $4 million decrease from last year's comparable period, due to
the timing of working capital requirements. All funds received from asset
dispositions, including gains and return of principal, are included in investing
activities as portfolio proceeds.
Capital additions and portfolio investments for the six month period totaled
$543 million, an increase of $98 million from the comparable 1997 period.
Transportation invested $200 million in its railcar fleet and facilities, an
increase of $56 million from the first six months of 1997; the number of new and
existing railcars acquired thus far was 3,100 compared to 2,100 last year.
Terminals' capital additions of $26 million were $5 million less than the prior
year. Portfolio investments at Financial Services for the period of $309
million were $42 million higher than the prior year as investments are
opportunistic in nature and therefore do not fall evenly from period to period.
Full year capital spending is expected to be about $400 million, while portfolio
investments are anticipated to approximate $800 million, both similar to last
year's levels. These projections may change significantly depending on market
conditions and opportunities to acquire portfolios of desirable assets. Capital
additions and portfolio investments will be funded by internally generated cash
flow and GATX's external recourse and nonrecourse financing sources.
At June 30, 1998, GATX, through its subsidiaries, had unused committed lines of
credit of $351 million and C$52 million. Neither General American
Transportation Corporation (GATC) nor GATX Capital issued any recourse
medium-term notes during the first six months; financing needs were met by cash
flow from operations and short-term debt. In May, GATC closed a new $350
million revolving credit facility replacing the former $300 million agreement.
GATC has a $650 million shelf registration, under which $100 million of notes
and $106 million of pass-through certificates have previously been issued. GATX
Capital has a $532 million shelf registration, under which $350 million of
medium-term notes have previously been issued.
9
<PAGE> 11
On June 1, 1998, GATX completed a two-for-one stock split that was effected as
a stock dividend.
Management's discussion includes statements which may 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 the petroleum, chemical, rail, air, and
technology industries.
RESULTS OF OPERATIONS
Following is a discussion of the operating results of GATX's business segments:
RAILCAR LEASING AND MANAGEMENT (TRANSPORTATION)
<TABLE>
<CAPTION>
Six Months Ended
(In Millions) June 30 Change
----------------- -------------
1998 1997
----- -----
<S> <C> <C> <C> <C>
Gross Income $ 253.8 $ 234.9 $ 18.9 8%
Net Income $ 39.5 $ 36.5 $ 3.0 8%
</TABLE>
Transportation's gross income for the first six months of 1998 increased 8% from
the comparable prior year attributable to a larger active fleet and higher
overall lease rates. Approximately 79,700 tank and freight cars were on lease
throughout North America at June 30, 1998, compared to 74,300 railcars a year
ago. With a total North American fleet of 83,000 railcars, utilization ended
the period at 96%, up from 94% a year ago.
Net income increased 8% from the first half of 1997 primarily due to the same
reasons that revenues increased. Net income approximated 16% of gross income, a
slight improvement over the prior year. While all major cost areas rose, as a
percentage of revenue asset ownership and SG&A were generally consistent with
the prior year while repair costs were slightly higher. Because most of the
recent years' U.S. railcar additions have been financed using sale-leasebacks,
those asset ownership costs are included as operating lease expense (a component
of operating expenses), whereas Canadian railcars are financed with debt and,
therefore, those asset ownership costs are recorded as depreciation and interest
expense.
FINANCIAL SERVICES (GATX CAPITAL)
<TABLE>
<CAPTION>
Six Months Ended
(In Millions) June 30 Change
----------------- -------------
1998 1997
----- -----
<S> <C> <C> <C> <C>
Gross Income $287.9 $286.8 $1.1 -
Net Income $ 35.1 $36.0 $(.9) (3)%
</TABLE>
10
<PAGE> 12
Gross income at GATX Capital of $288 million increased slightly from the first
half of 1997, with higher lease and interest income largely offset by decreases
in technology equipment sales and asset remarketing income. While lease and
interest income increased a combined $22 million due to a larger investment
portfolio, technology equipment sales decreased $20 million and asset
remarketing was $3 million lower. The VAR (value added reselling) of technology
equipment is currently facing very competitive market conditions. Asset
remarketing income, which includes both asset disposition gains and residual
sharing fees, was $49 million for the first six months of 1998 compared to $52
million for last year's corresponding period. Asset remarketing does not occur
evenly from period to period. Looking ahead to the remainder of 1998, it is
currently expected that asset remarketing will be higher in the third quarter
than in the fourth quarter. Equity in net earnings of affiliates increased to
$14 million for the six months ended June 30, 1998, from $8 million for the
first half of 1997.
Net income for the first half of 1998 was $35 million, a 3% decrease from last
year's record $36 million. The loss reserve at June 30, 1998, was $126 million
compared to $122 million at December 31, 1997, resulting largely from the
year-to-date provision.
TERMINALS AND PIPELINES
<TABLE>
<CAPTION>
Six Months Ended
(In Millions) June 30 Change
----------------- -------------
1998 1997
----- -----
<S> <C> <C> <C> <C>
Gross Income $141.4 $146.2 $(4.8) (3)%
Net Income $ 8.6 $ 1.1 $ 7.5 n/m
</TABLE>
Terminals' gross income for the first six months of 1998 is 3% lower than the
prior year due to nonrecurring 1997 revenue from subsequently sold facilities.
Excluding these items, gross income increased by 4% from 1997 primarily due to
improved petroleum activity. In the petroleum market, an inventory build-up
provided some opportunities for Terminals' storage services. Throughput of
petroleum and chemical products, adjusted for facilities that are being shut
down or sold as a result of the 1997 restructuring plan, was approximately 280
million barrels for the first six months of 1998, up approximately 3% from last
year. Capacity utilization, on the same basis as throughput, was 94% at June
30, 1998, versus 93% a year ago.
Terminals' net income for the first six months of 1998 of $9 million, an
increase of $8 million from last year, was due to improved operating conditions,
one-time transformation costs incurred during the prior year, and the impact of
the restructuring program implemented in the fourth quarter of 1997. Equity
earnings were $6.5 million for the first six months of 1998, up $1.0 million
from the prior year. The increase is primarily due to high repair and
maintenance costs incurred by a domestic affiliate in early 1997 and favorable
European results in the current year.
11
<PAGE> 13
LOGISTICS AND WAREHOUSING
<TABLE>
<CAPTION>
Six Months Ended
(In Millions) June 30 Change
----------------- -------------
1998 1997
----- -----
<S> <C> <C> <C> <C>
Gross Income $129.6 $127.4 $2.2 2%
Net (Loss) Income $ (.8) $ .1 $(.9) n/m
</TABLE>
GATX Logistics' gross income of $130 million increased 2% from the first six
months of 1997. The revenue improvement was primarily attributable to new
business as well as increasing revenues with certain customers.
Logistics reported a net loss of $.8 million compared to net income of $.1
million a year ago. The lower results include a $1.6 million after-tax
receivable write-off associated with a large customer that abruptly ceased
operations during the second quarter, somewhat offset by the benefit of the
restructuring program implemented in the fourth quarter of 1997. Operating
margins, excluding the impact of the receivable write-off, were in line with
the prior year.
GREAT LAKES SHIPPING (AMERICAN STEAMSHIP COMPANY)
<TABLE>
<CAPTION>
Six Months Ended
(In Millions) June 30 Change
----------------- -------------
1998 1997
----- -----
<S> <C> <C> <C> <C>
Gross Income $ 31.2 $ 31.4 $(.2) (1)%
Net Income $ 3.7 $ 3.7 $- -
</TABLE>
American Steamship Company's (ASC) gross income for the first six months of 1998
was comparable to the prior year period, though last year included a $2 million
pretax gain from a third-party vessel financing and remarketing transaction,
that was partnered with GATX Capital. Excluding last year's nonrecurring gain,
gross income increased 6%. Customer demand for ASC's primary cargoes (iron ore,
coal, and limestone) remains strong and weather conditions on the Great Lakes
have been favorable compared to the same period in 1997.
ASC's net income for the first six months of 1998 was $3.7 million, equal to the
prior year period. Excluding last year's nonrecurring gain ($1.3 million after
tax), net income increased 54%. Both tons carried and contribution margin per
ton increased over last year's level.
12
<PAGE> 14
COMPARISON OF SECOND QUARTER 1998 TO
SECOND QUARTER 1997
GENERAL
For the second quarter of 1998 net income was $31 million or $.61 per share, on
a diluted basis, as compared to $30 million or $.61 per share for the second
quarter of 1997.
GROSS INCOME
<TABLE>
<CAPTION>
(In Millions) Three Months Ended
June 30
---------------------
Business Segment 1998 1997 Change
------ ------ ---------------
<S> <C> <C> <C> <C>
Railcar Leasing and Management $128.1 $ 118.7 $9.4 8%
Financial Services 140.0 142.4 (2.4) (2%)
Terminals and Pipelines 71.4 75.7 (4.3) (6%)
Logistics and Warehousing 68.1 65.3 2.8 4%
Great Lakes Shipping 29.3 30.5 (1.2) (4%)
</TABLE>
NET INCOME (LOSS)
<TABLE>
<CAPTION>
(In Millions) Three Months Ended
June 30
---------------------
Business Segment 1998 1997 Change
------ ------ ---------------
<S> <C> <C> <C> <C>
Railcar Leasing and Management $20.1 $18.5 $1.6 9%
Financial Services 13.5 13.1 .4 3%
Terminals and Pipelines 4.3 2.5 1.8 72%
Logistics and Warehousing (1.2) .5 (1.7) n/m
Great Lakes Shipping 3.0 3.3 (.3) (9%)
</TABLE>
Increases and decreases in gross income and net income (loss) between these
quarters for all segments were principally due to the same reasons as discussed
previously in relation to the six-month periods.
13
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
General American Transportation Corporation ("GATC") and GATX Terminals
Corporation ("Terminals"), each subsidiaries of GATX Corporation (" the
Company"), are two of nine defendants in the matter of In re New Orleans Train
Car Leakage Fire Litigation (No. 87-16374, Civil District Court for the Parish
of Orleans), a class action lawsuit arising out of a September 1987 tank car
fire in the City of New Orleans. The Company had previously reported that the
Louisiana Supreme Court had granted a writ vacating a September 21, 1997
judgment which awarded (i) compensatory damages against all nine defendants and
in favor of twenty named plaintiffs and (ii) punitive damages against four
defendants, including Terminals, and in favor of the class of approximately
8,000 claimants. The Supreme Court held that at least with respect to punitive
damages, a judgment could not be entered until all liability issues relating to
all 8,000 class members had been adjudicated.
Once the judgment was vacated, there was no procedural mechanism by which the
trial court or an appellate court could review the jury's finding of liability
for punitive and compensatory damages. Accordingly, the defendants filed a
motion asking that the trial court enter a judgment only on liability, and
without reference to the amount of damages. Such a judgment would permit the
defendants to seek review of the compensatory and punitive liability findings,
but not the amount of damages.
On June 18, 1998, the trial court entered a judgment (a) finding each of the
defendants liable for compensatory damages to the members of the plaintiff class
in the percentages specified in the jury verdict, including twenty percent as to
GATC and ten percent as to Terminals, and (b) finding five of the defendants,
including Terminals, liable for punitive damages. Both findings were without
quantification of damages. The trial court designated the judgment to be final
and appealable. On June 25, 1998, the defendants filed post judgment motions
seeking a new trial or alternatively seeking entry of judgment notwithstanding
the verdict in favor of defendants on the issue of punitive liability.
Pursuant to a motion filed on behalf of the plaintiffs, the trial court also
ordered the commencement of trials of the claims of the other members of the
class, and ordered the appointment of a statistician to assist the court in the
selection of the next twenty plaintiffs, for the first of such trials. It is
not clear from the court's order when such trials are to commence, the manner in
which they are to proceed, or what issues are to be tried.
The Company believes that the compensatory damages awarded to the twenty
plaintiffs are excessive, and intends to pursue post-judgment review of the
awards, and, if necessary, appeals of any final judgment. The Company also
believes that the punitive liability judgment against Terminals is unsupported
by law and evidence. Accordingly, Terminals intends to pursue appeals of the
punitive damages liability judgment if it survives post-judgement review. In
addition, the Company believes that the punitive damages awards by the jury are
clearly excessive. If a judgment on the award against Terminals is entered by
the trial court, Terminals will pursue post-judgment review in the trial court,
and if necessary, will appeal that judgment as well.
Although more than 8,000 claims have been made, the Company believes that the
damages, if any, that are awarded to the remaining plaintiffs, whether by the
trial or appellate courts, will, on average, be substantially less than the
damages awarded to the twenty plaintiffs whose cases have been tried.
The Company has previously reported the involvement in litigation of its
wholly-owned subsidiary, GATX Capital Corporation ("Capital"), concerning the
conversion by GATX/Airlog Company ("Airlog") of ten 747 aircraft from passenger
to freighter configuration (the "Affected Aircraft"). Airlog is a California
general partnership of which a subsidiary of Capital is a partner.
14
<PAGE> 16
The litigation arises from the January 1996 issuance by the Federal Aviation
Administration (the "FAA") of Airworthiness Directive 96-01-03 (the
"Airworthiness Directive") which had the effect of significantly reducing the
amount of freight the Affected Aircraft were permitted to carry. As a result of
this reduction, the Affected Aircraft became uneconomic to operate.
On June 15, 1998, General Electric Capital and PALC II, Inc. (collectively
"GECC") filed a complaint in the United States District Court for the Northern
District of California (C98-2387) against Airlog, Capital, and others with
respect to three of the ten Affected Aircraft. These aircraft were modified by
subcontractors of Airlog in 1991 and 1992 with GECC's knowledge and consent. In
the action GECC asserts that the defendants are liable to it under a number of
legal theories in connection with the application of the Airworthiness Directive
to the three aircraft owned by GECC. The complaint seeks unspecified damages (to
be trebled under one count of the complaint), loss of rental income, cost of
repair and loss of value of the aircraft, repair of the aircraft, punitive
damages and costs of suit (including attorneys' fees).
On July 24, 1998 Airlog filed an action in United States District Court for the
Western District of Washington against the United States of America (C98 -
1029). This action is to recover losses suffered by Airlog as a result of the
alleged negligence of the FAA in the development and approval of the design to
convert the Affected Aircraft from passenger to freighter configuration. The
complaint seeks damages in excess of $8.3 million representing the expenses
incurred by Airlog in responding to the Airworthiness Directive and legal fees
and costs incurred by Airlog in defending the litigation described above.
Consistent with its ongoing product support, Airlog has developed a partial
weight restoration solution that allows operators to utilize the Affected
Aircraft subject only to limited constraints proscribed by the FAA. Airlog
continues to pursue, with the apparent cooperation of each of the four
operators of the Affected Aircraft, including Evergreen, Tower, 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 is without
merit, and that Capital and Airlog have adequate defenses thereto.
On May 13, 1997, the New Jersey Department of Environmental Protection (NJDEP)
served Terminals with a Notice of Violation alleging that during 1994 and 1995
marine vapor recovery units produced emissions of carbon monoxide in excess of
limits allowed by operating permits for those units. On May 20, 1998,
Terminals met with the DEP to explain that a substantial number of the reported
exceedances were not actual exceedances but false reports or exceedances made
worse by a defect in the software designed to operate with the monitoring unit.
The Company and NJDEP have entered into negotiations in an attempt to reach
settlement on the fines proposed by the NJDEP with respect to the exceedances.
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 5. Other Information
Pursuant to Section 11 of the Company's By-Laws as amended on July 24, 1998, no
shareholder may propose to nominate persons for election to the Board or bring
other business before shareholders at an annual meeting of the shareholders
unless such shareholder provides notice addressed to the Secretary of the
Company that is received at the Company's principal offices not more than 120 or
less than 90 days prior to the first anniversary date of the immediately
preceding annual meeting and must comply with the other requirements for such
notice in said Section 11. If, however the annual meeting is called for a date
not within 60 days of such anniversary date, the times such notice must be
received are as set forth in said Section 11. A copy of Section 11
15
<PAGE> 17
is in the amended and restated By-Laws of GATX filed with the SEC as Exhibit 3B
to Item 7 of the Current Report on Form 8-K referenced in Item 6 (b) below. For
the GATX Corporation 1999 Annual Meeting of Shareholders, such proposals must be
received by the Company at 500 W. Monroe Street, Chicago, Illinois 60661 between
December 24, 1998 and January 25, 1999 and such notice must otherwise be in
compliance with the requirements therefor of said Section 11.
Item 6. Exhibits and Reports on Form 8-K.
Page
(a) 10 Management Incentive Plan dated January 1, 1998, File Number
1-2328. Submitted to the SEC along with the electronic
submission of this report on Form 10-Q.
11A Statement regarding computation of basic earnings per share. 18
11B Statement regarding computation of diluted earnings per share. 19
27.1 Financial Data Schedule for GATX Corporation for the quarter
ended June 30, 1998. Submitted to the SEC along with the
electronic submission of this Quarterly Report on Form 10-Q.
27.2 Restated Financial Data Schedules for the quarter ended March 31,
1998 to reflect the June 1, 1998, two-for-one stock split.
27.3 Restated Financial Data Schedules for the year-to-date periods in
1997 ended March 31, June 30, September 30, and December 31, to
reflect the June 1, 1998 two-for-one stock split.
27.4 Restated Financial Data schedules for the year-to-date periods in
1996 ended March 31, June 30, September 30, and December 31, to
reflect the June 1, 1998 two-for-one stock split.
(b) Form 8-K filed on July 30, 1998 reporting adoption on July 24,
1998 of a shareholder rights plan and an advance notice
amendment to the Company's By-Laws.
16
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GATX CORPORATION
(Registrant)
/s/David M. Edwards
-----------------------------------------------
David M. Edwards
Senior Vice President and Chief Financial Officer
(Duly Authorized Officer)
Date: August 14, 1998
17
<PAGE> 19
EXHIBIT 11A
GATX CORPORATION AND SUBSIDIARIES
------------------
COMPUTATION OF BASIC NET INCOME PER SHARE OF COMMON STOCK
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
-------------- -------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Average number of shares of common stock outstanding .. 49.2 42.8 49.1 41.9
Net income ............................................ $30.8 $30.2 $68.2 $61.4
Deduct - Dividends paid and accrued on
preferred stock .................................... - 3.3 - 6.6
----- ----- ----- -----
Net income, as adjusted ............................... $30.8 $26.9 $68.2 $54.8
===== ===== ===== =====
Basic net income per share ............................ $ .63 $ .63 $1.39 $1.31
===== ===== ===== =====
</TABLE>
Note: 1997 amounts have been restated to reflect Financial Accounting Standards
Board Statement No. 128 (FAS 128), Earnings Per Share, which was required
to be adopted on December 31, 1997.
18
<PAGE> 20
EXHIBIT 11B
GATX CORPORATION AND SUBSIDIARIES
------------------
COMPUTATION OF DILUTED NET INCOME PER SHARE OF COMMON STOCK
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
--------------- ---------------
1998 1997 1998 1997
------ ------ ------ -----
<S> <C> <C> <C> <C>
Average number of shares used to
compute basic earnings per share .................... 49.2 42.8 49.1 41.9
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 ............................ 1.3 .8 1.2 .7
Common stock issuable upon assumed
conversion of preferred stock ....................... .1 6.0 .1 6.8
----- ----- ----- -----
Total shares ............................................ 50.6 49.6 50.4 49.4
===== ===== ===== =====
Net income, as adjusted per basic computation ........... $30.8 $26.9 $68.2 $54.8
Add - Dividends paid and accrued on preferred stock...... - 3.3 - 6.6
----- ----- ----- -----
Net income, as adjusted ................................. $30.8 $30.2 $68.2 $61.4
===== ===== ===== =====
Diluted net income per share ............................ $ .61 $ .61 $1.35 $1.24
===== ===== ===== =====
</TABLE>
Note: See discussion of FAS 128 on Exhibit 11A.
19
<PAGE> 1
EXHIBIT 10
January 1, 1998
GATX CORPORATION
MANAGEMENT INCENTIVE PLAN
1. OBJECTIVE.
This Management Incentive Plan (the "Plan"), which is administered by the
Compensation Committee of the Board of Directors (the "Committee"), is
established for the period January 1 through December 31, 1998 (the "Plan
Year"), to motivate and reward those employees whose activities and
contributions have a significant bearing on the success and profitability of
GATX Corporation and its Subsidiaries (collectively, the "Company").
2. ELIGIBILITY.
Recommendation for participation in the Plan is initiated by the Subsidiary
Presidents or the Vice President of Human Resources, and approved by the Chief
Executive Officer.
3. PARTICIPATION.
Participants under this Plan will be exempt salaried employees with the
Company who are individually authorized to participate (the "Participants").
Each Participant will be notified by the Subsidiary President or Corporate
Department Head of his or her participation and participation level ("Target
Bonus").
4. DEFINITIONS.
For purposes of this Plan, the following terms will have the following
meanings:
A. "Base Salary" will mean (1) the total salary (excluding any incentive
compensation or lump sum payments) paid to a Participant by the Company before
reduction for any contribution authorized under the GATX Corporation Salaried
Employees Retirement Savings Plan, plus (2) any compensation which the
Participant elects to defer under any deferred compensation plan of the Company.
B. "Income Goals" will mean the net income goals established annually by
the Committee for GATX and each subsidiary. See Exhibit II.
C. "Bonus" will mean the amount payable to a Participant under this Plan
for the current Plan Year, calculated in accordance with the provisions of this
Plan, and approved by the Committee.
D. "Target Bonus" will mean the percentage of base salary payable if 100%
of income goals and individual performance goals (if applicable) are attained.
<PAGE> 2
PAGE 2
E. "Profit Attainment Percentage" will mean the quotient of income divided
by income goal expressed as a percentage.
F. "Payout Percentage" will mean the percentage of the Bonus paid for the
Company or Subsidiary performance as determined by the Profit Attainment
Percentage. The relationship between the Profit Attainment Percentage and the
Payout Percentage is approved by the Committee and presented in Exhibit III.
G. "Personal Evaluation Percentage" will mean the percentage of the Bonus
paid for the Participant's individual performance during the Plan Year. See
Exhibit IV.
H. "Threshold" will mean the minimum level of income required for payout
under the Earnings Portion of this Plan. See Exhibit II.
5. COMPONENTS OF THE BONUS.
The Bonus is composed of a GATX Earnings Portion, a Subsidiary Earnings
Portion and a Personal Portion. As soon as practical following the start of
each Plan Year, the Committee will establish Income Goals for the Company.
A. GATX Earnings Portion - The extent to which GATX meets its Income Goal -
determined by reference to the Profit Attainment Percentages (Exhibit III) -
will be the basis for the GATX Earnings Portion of the Bonus for both corporate
and subsidiary participants.
B. Subsidiary Earnings Portion - For subsidiary Participants, the extent to
which each subsidiary meets its Income Goal - determined by reference to the
Profit Attainment Percentages (Exhibit III) - will be the basis for that
subsidiary's Earnings Portion of the Bonus.
For corporate Participants, the Subsidiary Earnings Portion will recognize
the relative proportion of the Income Goals established for each participating
subsidiary. At the start of the Plan Year, each participating subsidiary will
be assigned a weight by the Committee calculated on the basis of its Income Goal
as a percent of the total of the Income Goals of all participating subsidiaries,
with a minimum weight of 5.0% (Exhibit II). The extent to which each subsidiary
meets its Income Goal - determined by reference to the Profit Attainment
Percentages (Exhibit III) - will be the basis for the Subsidiary Earnings
Portion of the Bonus.
C. Personal Portion - The Personal Portion recognizes the level of the
Participant's individual performance (Exhibit IV). The percentage of the Bonus
represented by the Personal Portion may vary depending upon whether or not the
Threshold levels established annually for the GATX Earnings Portion (for
corporate Participants) and the Subsidiary Earnings Portion (for subsidiary
Participants) are met.
<PAGE> 3
PAGE 3
6. WEIGHTING OF THE COMPONENTS OF THE BONUS.
As soon as practical following the start of each Plan Year, the Committee
will determine the weight to be allocated to each of the component parts of the
Bonus identified in paragraph 5 hereof. For the current Plan Year, the
component parts of the Bonus for each category of Participant are attached as
Exhibit I.
7. CALCULATION OF THE BONUS.
A. Earnings Portions. Payout Percentages based on actual performance
relative to goals are determined and are multiplied by the weightings on each
component to determine weighted Payout Percentages for the Earnings components
(Exhibit V, Section B). Payout Percentages are determined from the Profit
Attainment Percentages as described in paragraphs 5A and 5B.
B. Personal Portion. The Personal Evaluation Percentage as determined from
the table attached as Exhibit IV is multiplied by the weighting on the Personal
component to determine the weighted Payout Percentage for the Personal
component. (Exhibit V, Section B).
C. The Bonus award will be the sum of the Target Bonus multiplied by the
weighted Payout Percentages on the Earnings Portions and the Personal Portion of
the Bonus, provided that no Bonus payment will be made with respect to the
Earnings Portions unless the Company reaches the Threshold levels as established
by the Committee. (Exhibit II).
D. The Company's Chief Executive Officer or Subsidiary President may
increase or decrease the Bonus to an individual Participant by a maximum of 25%,
based on an assessment of that Participant's overall contribution or performance
related to a special project.
8. ADMINISTRATION OF THE PLAN.
A. Administration.
Administration of the Plan will be the responsibility of the Committee
which may delegate responsibility thereunder to the Vice President of
Compensation and Benefits, Corporate Human Resources Department.
B. New Participants.
Subject to the provisions of the following sentence, new employees who
join the Company during the Plan Year may be authorized to participate in the
Plan on a pro-rata basis with the approval of the Chief Executive Officer.
Participation under this Plan will not be available to any new employee after
October 1st of any Plan Year.
<PAGE> 4
PAGE 4
C. Transfers and Promotions.
If a Participant is transferred or promoted during the Plan Year causing
an adjustment in his Target Bonus, such Participant's bonus will be calculated
on a pro-rata basis to reflect this change.
D. Retirement, Death or Disability.
A Participant who retires, dies, or becomes totally and permanently
disabled, as that term is defined in the GATX Pension Plan for Salaried
Employees, during the Plan Year will be entitled to a pro-rated bonus in
accordance with Paragraph E.
E. Payment of Bonus.
Bonuses will be paid as soon as possible after the completion of the
Company's year-end audit, normally no later than March 1. The Participant does
not have a contractual right to receive the Bonus. Participants become entitled
to receive Bonus payments only after the payments have been approved and
authorized by the Committee.
F. Employment as a Condition Precedent.
No bonus will be paid, except pursuant to the provisions of Paragraph
Dabove, unless the Participant is an employee of the Company at the end of the
Plan Year.
G. No Employment Contract.
Neither the establishment of the Plan nor the authorization to be a
Participant in the Plan will be construed as giving the Participant the right to
be retained in the service of the Company.
H. Modification of Goals.
The Committee may, from time to time during the Plan Year, modify the
Plan as appropriate including (i) Income Goals, (ii) Thresholds, (iii) Payout
Percentages, (iv) assigned weights established for one or more subsidiaries and
(v) weighting of the Components of the Bonus if, in the sole discretion of the
Committee, any part of the Plan ceases to be a reasonable measure of desired
performance. Notwithstanding anything to the contrary contained herein, the
Committee shall have the authority and exclusive discretion to determine whether
income or expenses of an unusual or nonrecurring nature are to be included with
other income of the Company for purposes of determining whether the established
Income Goals have been achieved.
<PAGE> 5
EXHIBIT I
WEIGHTING OF THE COMPONENTS OF THE BONUS
1998 MANAGEMENT INCENTIVE PLAN
________________________________________
<TABLE>
<S> <C> <C>
CHIEF EXECUTIVE OFFICER 100% GATX
and CHAIRMAN OF THE BOARD
CORPORATE DIRECT REPORTS TO CEO 50% GATX
50% Subsidiary or combined subsidiaries
-----------
100%
===========
SUBSIDIARY PRESIDENTS 25% GATX
75% Subsidiary or combined subsidiaries
-----------
100%
===========
OTHER CORPORATE OFFICERS 25% GATX
25% Subsidiary or combined subsidiaries
50% Personal *
-----------
100%
===========
OTHER PARTICIPANTS 10% GATX
40% Subsidiary or combined subsidiaries
50% Personal *
-----------
100%
===========
</TABLE>
* 30% if Threshold not met
<PAGE> 6
EXHIBIT II
EXHIBIT II INTENTIONALLY OMITTED
<PAGE> 7
EXHIBIT III
EXHIBIT III INTENTIONALLY OMITTED
<PAGE> 8
EXHIBIT IV
PERSONAL PERFORMANCE
--------------------------------------------------
1998 GATX MANAGEMENT INCENTIVE PLAN
--------------------------------------------------
EVALUATION EVALUATION
GUIDELINES PERCENTAGE
----------------------------------------- -----------
Performance against goals was truly 150% - 200%
Outstanding; attained difficult and high
Impact goal(s) during the performance
period.
Difficult goals were attained during 100% - 130%
the performance period and acceptable
progress was made toward all others.
Achieved some goals and made 50% - 80%
acceptable progress toward others.
Performance against goals was
satisfactory overall.
* Any whole percentage between 0% and 200%.
<PAGE> 9
EXHIBIT V
---------
EXHIBIT V INTENTIONALLY OMITTED
<PAGE> 1
EXHIBIT 11A
GATX CORPORATION AND SUBSIDIARIES
------------------
COMPUTATION OF BASIC NET INCOME PER SHARE OF COMMON STOCK
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
-------------- -------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Average number of shares of common stock outstanding .. 49.2 42.8 49.1 41.9
Net income ............................................ $30.8 $30.2 $68.2 $61.4
Deduct - Dividends paid and accrued on
preferred stock .................................... - 3.3 - 6.6
----- ----- ----- -----
Net income, as adjusted ............................... $30.8 $26.9 $68.2 $54.8
===== ===== ===== =====
Basic net income per share ............................ $ .63 $ .63 $1.39 $1.31
===== ===== ===== =====
</TABLE>
Note: 1997 amounts have been restated to reflect Financial Accounting Standards
Board Statement No. 128 (FAS 128), Earnings Per Share, which was required
to be adopted on December 31, 1997.
<PAGE> 1
EXHIBIT 11B
GATX CORPORATION AND SUBSIDIARIES
------------------
COMPUTATION OF DILUTED NET INCOME PER SHARE OF COMMON STOCK
IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
--------------- ---------------
1998 1997 1998 1997
------ ------ ------ -----
<S> <C> <C> <C> <C>
Average number of shares used to
compute basic earnings per share .................... 49.2 42.8 49.1 41.9
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 ............................ 1.3 .8 1.2 .7
Common stock issuable upon assumed
conversion of preferred stock ....................... .1 6.0 .1 6.8
----- ----- ----- -----
Total shares ............................................ 50.6 49.6 50.4 49.4
===== ===== ===== =====
Net income, as adjusted per basic computation ........... $30.8 $26.9 $68.2 $54.8
Add - Dividends paid and accrued on preferred stock...... - 3.3 - 6.6
----- ----- ----- -----
Net income, as adjusted ................................. $30.8 $30.2 $68.2 $61.4
===== ===== ===== =====
Diluted net income per share ............................ $ .61 $ .61 $1.35 $1.24
===== ===== ===== =====
</TABLE>
Note: See discussion of FAS 128 on Exhibit 11A.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted from the
Consolidated Balance Sheet and Consolidated Income Statement of GATX and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 136
<SECURITIES> 0
<RECEIVABLES> 1191
<ALLOWANCES> 136<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 4704
<DEPRECIATION> 1896
<TOTAL-ASSETS> 5121
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 2759<F3>
0
0
<COMMON> 17
<OTHER-SE> 677
<TOTAL-LIABILITY-AND-EQUITY> 5121
<SALES> 0
<TOTAL-REVENUES> 847
<CGS> 0
<TOTAL-COSTS> 393<F4>
<OTHER-EXPENSES> 127<F5>
<LOSS-PROVISION> 8
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> 83<F6>
<INCOME-TAX> 37
<INCOME-CONTINUING> 68
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.35
<FN>
<F1>Receivables consist of three components: Trade Accounts of 145 million, Finance
Leases of 653 million, and Secured Loans of 393 million.
<F2>Not applicable because GATX has an unclassified balance sheet.
<F3>Bonds consist of three components: Recourse Long-term debt of 2,178 million
Nonrecourse long-term debt of 377 million and Capital lease obligations of 204
million.
<F4>This value represents Operating Expenses on the Consolidated Income Statement.
<F5>This value represents the Provision for Depreciation and Amortization on the
Consolidated Income Statement.
<F6>This value represents Income Before Income Taxes and Equity in Net Earnings of
Affiliates.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedule has been restated (solely for EPS) to
reflect the June 1, 1998, two-for-one stock split.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 106
<SECURITIES> 0
<RECEIVABLES> 1162
<ALLOWANCES> 131
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4601
<DEPRECIATION> 1867
<TOTAL-ASSETS> 4947
<CURRENT-LIABILITIES> 0
<BONDS> 2809
0
0
<COMMON> 17
<OTHER-SE> 668
<TOTAL-LIABILITY-AND-EQUITY> 4947
<SALES> 0
<TOTAL-REVENUES> 409
<CGS> 0
<TOTAL-COSTS> 183
<OTHER-EXPENSES> 62
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> 48
<INCOME-TAX> 20
<INCOME-CONTINUING> 37
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37
<EPS-PRIMARY> .76
<EPS-DILUTED> .74
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedules have been restated (solely for EPS) to
reflect the June 1, 1998, two-for-one stock split.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<CASH> 50 33 72 78
<SECURITIES> 0 0 0 0
<RECEIVABLES> 999 1002 1191 1219
<ALLOWANCES> 124 128 132 128
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 4685 4809 4719 4534
<DEPRECIATION> 1807 1845 1873 1824
<TOTAL-ASSETS> 4710 4830 4936 4948
<CURRENT-LIABILITIES> 0 0 0 0
<BONDS> 2521 2475 2467 2714
3 0 0 0
0 0 0 0
<COMMON> 15 17 17 17
<OTHER-SE> 770 790 811 638
<TOTAL-LIABILITY-AND-EQUITY> 4710 4830 4936 4948
<SALES> 0 0 0 0
<TOTAL-REVENUES> 395 829 1260 1702
<CGS> 0 0 0 0
<TOTAL-COSTS> 183 402 614 840
<OTHER-EXPENSES> 60 122 185 252
<LOSS-PROVISION> 2 6 10 11
<INTEREST-EXPENSE> 52 107 163 222
<INCOME-PRETAX> 45 83 115 (87)
<INCOME-TAX> 19 35 48 (5)
<INCOME-CONTINUING> 31 61 89 (51)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 31 61 89 (51)
<EPS-PRIMARY> .69 1.31 1.88 (1.28)
<EPS-DILUTED> .63 1.24 1.80 (1.28)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedules have been restated (solely for EPS) to
reflect the June 1, 1998, two-for-one stock split.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 31 32 88 46
<SECURITIES> 0 0 0 0
<RECEIVABLES> 1017 1105 1021 1114
<ALLOWANCES> 111 113 117 121
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 4011 4200 4559 4619
<DEPRECIATION> 1557 1582 1748 1773
<TOTAL-ASSETS> 4166 4468 4564 4750
<CURRENT-LIABILITIES> 0 0 0 0
<BONDS> 2162 2208 2346 2664
3 3 3 3
0 0 0 0
<COMMON> 14 14 14 14
<OTHER-SE> 720 733 755 758
<TOTAL-LIABILITY-AND-EQUITY> 4166 4468 4564 4750
<SALES> 0 0 0 0
<TOTAL-REVENUES> 304 641 1009 1414
<CGS> 0 0 0 0
<TOTAL-COSTS> 150 316 487 695
<OTHER-EXPENSES> 44 93 145 202
<LOSS-PROVISION> 0 7 10 11
<INTEREST-EXPENSE> 44 93 148 203
<INCOME-PRETAX> 30 60 104 74
<INCOME-TAX> 12 24 41 54
<INCOME-CONTINUING> 18 50 84 103
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 18 50 84 103
<EPS-PRIMARY> .53 1.09 1.83 2.22
<EPS-DILUTED> .50 1.03 1.71 2.10
</TABLE>
