<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<S> <C>
[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
</TABLE>
<TABLE>
<S> <C>
FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER
MARCH 31, 1999 1-2328
</TABLE>
------------------------
GATX CORPORATION
<TABLE>
<S> <C>
INCORPORATED IN THE IRS EMPLOYER IDENTIFICATION NO.
STATE OF NEW YORK 36-1124040
500 WEST MONROE STREET
CHICAGO, IL 60661-3676
(312) 621-6200
</TABLE>
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 49,460,286 SHARES OF COMMON STOCK OUTSTANDING AS OF APRIL
30, 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
GROSS INCOME $431.2 $413.6
COSTS AND EXPENSES
Operating expenses 201.7 187.6
Interest 55.0 58.4
Provision for depreciation and amortization 68.5 62.0
Provision for possible losses 2.6 2.6
Selling, general and administrative 56.7 55.5
---------------- ----------------
384.5 366.1
---------------- ----------------
INCOME BEFORE INCOME TAXES AND
SHARE OF AFFILIATES' EARNINGS 46.7 47.5
INCOME TAXES 20.4 20.4
---------------- ----------------
INCOME BEFORE SHARE OF
AFFILIATES' EARNINGS 26.3 27.1
SHARE OF AFFILIATES' EARNINGS 12.9 10.3
---------------- ----------------
NET INCOME $ 39.2 $ 37.4
================ ================
PER COMMON SHARE
Basic net income per share $ .79 $ .76
Diluted net income per share $ .78 $ .74
Dividends paid $ .275 $ .25
</TABLE>
Note - The consolidated balance sheet at December 31, 1998 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 three months ended March 31, 1999 are not
necessarily indicative of the results that may be achieved for the entire year
ending December 31, 1999. Certain amounts in 1998 have been reclassified to
conform to the current presentation.
1
<PAGE> 3
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
--------------- ------------------
(Unaudited)
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 94.5 $ 94.5
RECEIVABLES
Trade accounts 141.7 156.2
Finance leases 666.9 676.0
Secured loans 273.3 241.6
Less - Allowance for possible losses (138.5) (135.9)
--------------- ----------------
943.4 937.9
OPERATING LEASE ASSETS AND FACILITIES
Railcars and service facilities 2,656.0 2,567.1
Tank storage terminals and pipelines 1,183.3 1,168.2
Great Lakes vessels 204.6 204.2
Operating lease investments and other 790.5 770.2
--------------- ----------------
4,834.4 4,709.7
Less - Allowance for depreciation (1,957.5) (1,919.6)
--------------- ----------------
2,876.9 2,790.1
INVESTMENTS IN AFFILIATED COMPANIES 784.6 715.3
OTHER ASSETS 386.4 401.5
--------------- ----------------
$ 5,085.8 $4,939.3
=============== ================
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
--------------- ------------------
(Unaudited)
<S> <C> <C>
LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 284.2 $ 353.0
ACCRUED EXPENSES 78.5 54.1
DEBT
Short-term 414.9 299.9
Long-term:
Recourse 2,218.5 2,171.3
Nonrecourse 433.7 451.9
Capital lease obligations 190.9 198.5
------------------ -----------------
3,258.0 3,121.6
DEFERRED INCOME TAXES 324.0 325.1
OTHER DEFERRED ITEMS 382.0 352.6
------------------ -----------------
TOTAL LIABILITIES AND DEFERRED ITEMS 4,326.7 4,206.4
SHAREHOLDERS' EQUITY
Preferred stock -- --
Common stock 34.4 34.3
Additional capital 334.8 331.6
Reinvested earnings 471.6 446.0
Accumulated other comprehensive loss (34.9) (32.2)
------------------ -----------------
805.9 779.7
Less - Cost of common shares in treasury (46.8) (46.8)
------------------ -----------------
TOTAL SHAREHOLDERS' EQUITY 759.1 732.9
------------------ -----------------
$ 5,085.8 $ 4,939.3
================== =================
</TABLE>
3
<PAGE> 5
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 39.2 $ 37.4
Adjustments to reconcile net income
to net cash provided by operating activities:
Realized gains on remarketing of leased equipment (18.2) (26.1)
Provision for depreciation and amortization 68.5 62.0
Provision for possible losses 2.6 2.6
Deferred income taxes 10.0 9.5
Net change in trade receivables, inventories,
accounts payable and accrued expenses (49.0) (29.5)
Other 16.3 17.9
-------------- --------------
Net cash provided by operating activities 69.4 73.8
INVESTING ACTIVITIES
Additions to operating lease assets and facilities (101.5) (112.5)
Portfolio lease investments, net of nonrecourse financing (88.6) (71.0)
Secured loans extended (74.6) (28.7)
Investments in affiliated companies (67.6) (16.5)
Other investments and progress payments (10.0) (2.3)
-------------- --------------
Capital additions and portfolio investments (342.3) (231.0)
Portfolio proceeds:
From remarketing of leased equipment 72.5 100.4
From return of investment 69.5 46.8
-------------- --------------
Total portfolio proceeds 142.0 147.2
Proceeds from other asset sales 43.2 5.2
-------------- --------------
Net cash used in investing activities (157.1) (78.6)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 119.8 68.3
Repayment of long-term debt (129.2) (94.6)
Net increase in short-term debt 115.1 74.0
Repayment of capital lease obligations (7.7) (6.4)
Issuance of common stock and other 3.3 4.0
Cash dividends (13.6) (12.3)
-------------- --------------
Net cash provided by financing activities 87.7 33.0
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ -- $ 28.2
============== ===============
</TABLE>
4
<PAGE> 6
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Net income $ 39.2 $ 37.4
Other comprehensive loss, net of tax:
Foreign currency translation adjustment (1.3) (.4)
Unrealized gain (loss) on securities, net of
reclassification adjustments (a) (1.4) .4
---------- ----------
Other comprehensive loss (2.7) --
---------- ----------
COMPREHENSIVE INCOME $ 36.5 $ 37 .4
========== ==========
(a) Reclassification adjustments:
Unrealized gain on securities $ .9 $ 1.1
Less - Reclassification adjustment for gains
realized included in net income (2.3) (.7)
---------- ----------
Net unrealized (loss) gain on securities $ (1.4) $ 0.4
========== ==========
</TABLE>
5
<PAGE> 7
GATX CORPORATION AND SUBSIDIARIES
FINANCIAL DATA OF BUSINESS SEGMENTS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Railcar Terminals Logistics
Leasing and Financial and and
Management Services Pipelines Warehousing
------------- ------------- ------------- -------------
THREE MONTHS ENDED MARCH 31, 1999
PROFITABILITY
<S> <C> <C> <C> <C>
Gross income (expense) $ 137.6 $ 150.6 $ 71.8 $ 70.1
Interest expense (12.4) (28.5) (12.7) (0.1)
Depreciation and amortization (24.4) (29.9) (11.2) (2.5)
Income (loss) before taxes and
share of affiliates' earnings 27.0 17.4 9.2 .4
Share of affiliates' earnings 0.8 8.3 3.8 --
Net income (loss) 17.5 17.9 8.5 .1
ITEMS AFFECTING CASH FLOW
Net cash provided by (used
in)operating activities 42.1 37.3 (.3) 5.2
Portfolio proceeds -- 142.0 -- --
-------------------------------------------------------------------
Total cash provided (used) 42.1 179.3 (.3) 5.2
Capital additions and portfolio
Investments 102.2 215.1 21.3 1.8
FINANCIAL POSITION
Identifiable assets 1,617.6 2,252.0 985.7 143.8
Debt 779.4 1,667.4 637.0 7.3
Equity 310.0 280.6 117.6 94.7
- ---------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1998
PROFITABILITY
Gross income (expense) $ 130.5 $ 147.9 $ 70.0 $ 61.7
Interest expense (13.5) (29.9) (13.3) --
Depreciation and amortization (24.1) (24.1) (11.1) (2.3)
Income (loss) before taxes and
share of affiliates' earnings 24.8 26.6 1.3 1.1
Share of affiliates' earnings .5 6.3 3.5 --
Net income (loss) 15.9 21.6 4.3 .4
ITEMS AFFECTING CASH FLOW
Net cash provided by (used in)
Operating activities 40.3 28.4 5.6 4.3
Portfolio proceeds -- 147.2 -- --
-------------------------------------------------------------------
Total cash provided (used) 40.3 175.6 5.6 4.3
Capital additions and portfolio
Investments 100.1 118.3 8.3 1.3
FINANCIAL POSITION AT DECEMBER 31, 1998
Identifiable assets 1,539.9 2,207.2 958.4 144.0
Debt 710.4 1,620.9 615.2 7.0
Equity 298.3 272.1 117.8 94.7
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------
Great
Lakes Corporate
Shipping and Other Intersegment Total
------------- ------------- ------------- -------------
THREE MONTHS ENDED MARCH 31, 1999
PROFITABILITY
<S> <C> <C> <C> <C>
Gross income (expense) $ .8 $ 1.2 $ (.9) $ 431.2
Interest expense -- (1.7) .4 (55.0)
Depreciation and amortization -- (.3) (.2) (68.5)
Income (loss) before taxes and
share of affiliates' earnings (.5) (6.8) -- 46.7
Share of affiliates' earnings -- -- -- 12.9
Net income (loss) (.3) (4.5) -- 39.2
ITEMS AFFECTING CASH FLOW
Net cash provided by (used
in)operating activities (5.5) (9.4) -- 69.4
Portfolio proceeds -- -- -- 142.0
-------------------------------------------------------------------
Total cash provided (used) (5.5) (9.4) -- 211.4
Capital additions and portfolio
Investments .4 1.5 -- 342.3
FINANCIAL POSITION
Identifiable assets 166.6 23.9 (103.8) 5,085.8
Debt 94.9 75.9 (3.9) 3,258.0
Equity 32.2 (71.9) (4.1) 759.1
- ---------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1998
PROFITABILITY
Gross income (expense) $ 1.9 $ 1.9 $ (0.3) $ 413.6
Interest expense (.1) (1.9) 0.3 (58.4)
Depreciation and amortization (.1) (.3) -- (62.0)
Income (loss) before taxes and
share of affiliates' earnings .3 (6.6) -- 47.5
Share of affiliates' earnings -- -- -- 10.3
Net income (loss) .2 (5.0) -- 37.4
ITEMS AFFECTING CASH FLOW
Net cash provided by (used in)
Operating activities (2.5) (2.3) -- 73.8
Portfolio proceeds -- -- -- 147.2
-------------------------------------------------------------------
Total cash provided (used) (2.5) (2.3) -- 221.0
Capital additions and portfolio
Investments 2.8 .2 -- 231.0
FINANCIAL POSITION AT DECEMBER 31, 1998
Identifiable assets 169.1 21.6 (100.9) 4,939.3
Debt 96.5 75.5 (3.9) 3,121.6
Equity 32.5 (78.4) (4.1) 732.9
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF FIRST THREE MONTHS OF 1999
TO FIRST THREE MONTHS OF 1998
GATX Corporation's net income for the first quarter of 1999 was $39 million
compared to $37 million for the first quarter 1998. Earnings per share on a
diluted basis increased 5% to $.78 from $.74 for the prior year quarter.
Gross income of $431 million increased by $18 million from the prior year
quarter, while net income was $2 million higher. General American benefited from
more railcars on lease and GATX Capital's gross income increased primarily due
to a higher investment balance. Revenues at Terminals increased due to improved
market conditions and a gain from the sale of rights it owned along the Central
Florida Pipeline, that will be used to increase fiber optic capacity. Gross
income at Logistics increased due to higher volumes with existing customers and
the addition of new customers.
Net cash provided by operating activities for the first quarter of 1999 was $69
million, a $4 million decrease from last year's quarter, due to the timing of
working capital requirements. All cash received from asset dispositions,
including gain and return of principal, are included in investing activities as
portfolio proceeds.
Capital additions and portfolio investments for the quarter totaled $342
million, an increase of $111 million from the first quarter of 1998. General
American invested $102 million, comparable to the first quarter of 1998, in its
railcar fleet, facilities, and international affiliates. Terminals' investment
of $21 million increased $13 million over the prior year quarter primarily due
to investments in joint ventures. Portfolio investments at Financial Services
for the quarter of $215 million were $97 million higher than the prior year and
primarily reflect investments in air, rail and technology assets and
partnerships. Full year capital additions are expected to be approximately $500
million, while portfolio investments are anticipated to approximate $900
million. These projections may change significantly depending on market
conditions and opportunities to acquire portfolios of desirable assets.
Internally generated cash flow and GATX's external recourse and nonrecourse
financing sources will fund capital additions and portfolio investments.
GATX, through its subsidiaries, had unused committed lines of credit of $515
million at March 31, 1999. GATX Capital issued $100 million of medium-term notes
and $20 million in nonrecourse debt during the first quarter. Additional
financing needs were met by cash flow from operations, portfolio proceeds and
short-term debt. General American Transportation Corporation (GATC) has a $650
million shelf registration for pass-through certificates and debt securities of
which $100 million of notes and $106 million of pass-through certificates have
been issued through March 31, 1999. Subsequent to March 31, 1999, GATC issued
$120 million of 10-year term notes. GATX Capital has a shelf registration for
$532 million of which $470 million has been issued. GATC has guaranteed a
two-year credit facility for a Terminals affiliate. Exposure to GATX is
mitigated by, among other things, a third party cross guaranty.
7
<PAGE> 9
On April 26, 1999 the Board of Directors authorized management to repurchase up
to 5 percent of GATX's outstanding common stock. The purchases will be made in
the open market or through privately negotiated transactions and will be
dependent on market conditions and other considerations.
YEAR 2000 READINESS DISCLOSURE
GATX continues to address what is commonly referred to as the Year 2000 problem.
GATX has completed the assessment phase of reviewing its critical information
systems for Year 2000 compliance. Efforts are well underway in both 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. Several remediation
projects and systems replacements are already in place, and efforts are
continuing on others. Most projects should be completed by mid-year 1999.
Additionally, other less critical information systems have been reviewed and
corrective action is being taken where indicated.
GATX also is reviewing its operating assets to determine any exposure to
time-sensitive controls which may be embedded in the equipment. These situations
are being assessed on an ongoing basis and replacement or remediation is in
process where there is indicated need.
GATX is inquiring of both customers and vendors where the company's information
systems interface directly with third parties to ensure that the interfaces and
the third party systems are or will be Year 2000 compliant. Where considered
appropriate, the company is working directly with such third parties to test or
remediate such systems. The company also interacts electronically with certain
external entities but has no means of ensuring that they will be Year 2000
ready. Additionally, GATX has been inquiring of key vendors in an effort to
establish the ability of the provider to deliver product or services on a timely
basis in the year 2000.
GATX believes it has an effective program in place to resolve the Year 2000
issue in a timely manner and to minimize the company's exposure. 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. Based on the progress and results of the Year 2000 project
thus far, GATX believes that the Year 2000 issue should not pose significant
operational problems. However, in the event that the company's efforts have not
addressed all potential systems problems, contingency plans are being developed
to enable business operations to continue. The total Year 2000 project cost is
estimated to not exceed $11 million. These costs have not and are not expected
to have a material adverse impact on the company's financial position, results
of operations or cash flows.
OTHER MATTERS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"),
which is required to be adopted in years beginning after June 15, 1999. GATX,
which utilizes fundamental derivatives to hedge changes in interest rates and
foreign currencies, expects to adopt SFAS No. 133 effective January 1, 2000.
This new accounting standard will require that all derivatives be recorded on
the balance sheet at fair value. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives will either be
offset against the change in the fair value of the hedged assets,
8
<PAGE> 10
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. Management is currently assessing the impact that the
adoption of SFAS No. 133 will have on the company's financial position, results
of operations, and cash flows.
Management's discussion includes statements that 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 (GENERAL AMERICAN)
- --------------------------------------------------------------------------------
General American's gross income for the first three months of 1999 increased 5%
from the comparable prior year period due to a larger active fleet.
Approximately 81,900 tank and freight cars were on lease throughout North
America at March 31, 1999, compared to 78,900 railcars a year ago. With a total
North American fleet of 86,500 railcars, utilization at the end of the period
was 95%, down from 96% a year ago.
Net income increased 10% from the first quarter of 1998 primarily due to a
larger fleet and repair costs in line with the prior year. Net income
approximated 13% of revenue, a slight improvement over the prior year. As a
percentage of gross income, asset ownership costs (depreciation, interest, and
lease expenses) decreased slightly from the prior year while SG&A expenses were
slightly higher.
FINANCIAL SERVICES (GATX CAPITAL)
- --------------------------------------------------------------------------------
Gross income at GATX Capital of $151 million increased $3 million from the prior
year quarter as higher lease and interest income was offset by lower asset
remarketing income. Asset remarketing income includes both gains from asset
sales and residual sharing fees. Pre-tax asset remarketing income of $23 million
was $8 million lower than last year's quarter. Asset remarketing income does not
occur evenly from period to period.
Net income of $18 million decreased $4 million from last year, in part due to
lower asset remarketing income.
TERMINALS AND PIPELINES (TERMINALS)
- --------------------------------------------------------------------------------
Terminals' gross income of $72 million increased $2 million from the prior year
quarter. Comparisons between periods are affected by locations sold after the
first quarter of 1998. Gross income from ongoing operations increased 16% over
the prior year. Improved market conditions
9
<PAGE> 11
and a gain from the sale of rights it owned along the Central Florida Pipeline,
that will be used to increase fiber optic capacity contributed positively to
revenues in 1999. Throughput of petroleum and chemical products was 111 million
barrels for ongoing operations during the first quarter of 1999, down from 118
million barrels for the same quarter last year. Capacity utilization was 94% at
the end of the first quarter compared to 93% in the prior year period.
Terminals' net income of $9 million was $4 million higher than last year's first
quarter primarily due to increased revenues and benefits from the 1997 strategic
realignment.
As part of its 1997 strategic realignment, Terminals divested certain domestic
and foreign terminal locations in the first quarter of 1999. Also in the first
quarter of 1999, Terminals invested in a joint venture distillate blending and
distribution business.
LOGISTICS AND WAREHOUSING (LOGISTICS)
- --------------------------------------------------------------------------------
GATX Logistics' gross income of $70 million was $8 million higher than the first
quarter of 1998. The increase in revenues is primarily attributable to higher
volumes with existing customers and the addition of new customers.
Net income decreased by $.3 million from the prior year quarter in part due to
costs associated with the rollout of a new freight management system.
GREAT LAKES SHIPPING (AMERICAN STEAMSHIP COMPANY)
- --------------------------------------------------------------------------------
American Steamship Company traditionally does not begin operations until late in
the first quarter due to ice on the Great Lakes. The relatively mild winter and
customer demand enabled American Steamship Company to begin the 1998 shipping
season earlier in the first quarter resulting in both higher revenues and
earnings compared to the current period.
CORPORATE AND OTHER
- --------------------------------------------------------------------------------
Corporate and Other net expense of $5 million was comparable to the prior year
period.
10
<PAGE> 12
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 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 fire was caused by a leak of butadiene from a railcar owned
by GATC. The fire resulted in no deaths or significant injuries, and only minor
property damage, but did result in the overnight evacuation of a number of
residents from the surrounding area. Immediately after the fire a number of
lawsuits (representing approximately 8,000 claims) were brought against a number
of defendants, including GATC and its wholly-owned subsidiary Terminals. The
suits were ultimately consolidated into a class action brought in the Civil
District Court in the Parish of Orleans (Trial Court). A trial of the claims of
twenty of the plaintiffs (Phase I) resulted in a jury verdict in September 1997,
which awarded the twenty plaintiffs approximately $1.9 million in compensatory
damages plus interest from the date of the accident. In addition, the jury
awarded punitive damages totaling $3.4 billion against five of the nine
defendants, including $190 million as to Terminals. On October 31, 1997, the
Louisiana Supreme Court held that a judgment incorporating the amount of
punitive damages could not be entered until all liability issues relating to all
8,000 class members have been adjudicated.
On February 24, 1999, the Louisiana Supreme Court, among other things, (a)
granted a writ requiring entry of a judgment on the Phase I compensatory
damages, and (b) authorized the Trial Court to enter a judgment awarding a
specific amount of punitive damages to the twenty Phase I plaintiffs (without
specifying the method of allocation of such damages) in order that there could
be an immediate review of the judgment.
On March 31, 1999, the Trial Court entered a judgment awarding punitive damages
against each of the five punitive defendants, including Terminals in favor of
each of the twenty claimants whose cases were tried in September of 1997. An
aggregate punitive judgment as to Terminals of approximately $472,220 was
allocated among the twenty claimants in proportion to the ratio that each
plaintiff's compensatory award bears to the total compensatory award in the
Phase I trial.
On April 19, 1999, a Motion (and supporting memorandum) for Judgment
Notwithstanding the Verdict, or in the alternative for New Trial and or
Remittitur regarding Punitive Damages was filed with the Trial Court. The Motion
asked for similar relief as to the award of compensatory damages as to both
Terminals and GATC.
The trial to determine the damages, if any, suffered by the second set of twenty
claimants is scheduled to commence on May 24, 1999. Two weeks after the
conclusion of this trial, a random selection of an additional group of twenty
plaintiffs will be made in order that the trial of their damage claims may
commence thereafter.
The Company believes that the compensatory damages awarded to the 20 plaintiffs
in the Phase I trial are excessive, and intends to pursue post-judgment review
of the awards, and if necessary,
11
<PAGE> 13
vigorous appeals of any final judgment. The Company also believes that the
punitive liability judgment is unsupported by law and evidence. Accordingly,
Terminals intends to pursue vigorous appeals of the punitive damages liability
judgment if it survives post-judgment review. In addition, the Company further
believes that the punitive damages awards rendered by the jury are clearly
excessive. If a judgment on the award against Terminals is entered by the trial
court, Terminals intends to pursue post-judgment review in the trial court, and
if necessary, vigorous appeal of 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 that the
damages awarded to the 20 plaintiffs whose claims have been tried.
GATX Terminals Corporation was served with two Complaints and Notice of
Opportunity for a Hearing by the United States Environmental Protection Agency,
Region 6, with respect to alleged violations of the Clean Air Act at each of
Terminals' Pasedena, Texas, and Galena Park, Texas, terminals. The civil
penalties assessed under the Complaints are less than $300,000 in the aggregate.
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.
12
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) GATX's Annual Meeting of Stockholders was held on April 23, 1999.
(b) Matters voted upon at the meeting were:
<TABLE>
<CAPTION>
Number of Shares Voted
----------------------
For Withheld
--- --------
<S> <C> <C>
1. Election of Directors.
James M. Denny 42,143,449 107,273
Richard Fairbanks 42,150,197 100,525
William C. Foote 42,154,169 96,553
Deborah M. Fretz 42,148,401 102,321
Richard A. Giesen 42,147,012 103,710
Miles L. Marsh 42,152,911 97,811
Michael E. Murphy 42,142,881 107,841
John W. Rogers, Jr. 42,145,672 105,050
Ronald H. Zech 42,095,698 155,024
2. Ratification of amendment to GATX Corporation 38,824,987 For
1995 Long Term Incentive Compensation Plan 3,087,380 Against
to provide for non-qualified stock options for 338,551 Abstentions
non-employee directors.
3. Ratification of amendment to GATX Corporation's 33,465,381 For
1995 Long-Term Incentive Compensation Plan to 4,028,892 Against
provide for issuance of 2,000,000 additional 331,143 Abstentions
shares for use under the plan.
4. Ratification of adoption of the 36,223,869 For
GATX Corporation Employee Stock Purchase 1,646,064 Against
Plan. 271,851 Abstentions
5. Ratification of appointment of Ernst & 42,136,158 For
Young LLP as independent auditors 65,361 Against
for Fiscal 1999. 48,002 Abstentions
</TABLE>
There were no broker non-votes with respect to the election of the directors or
the ratification of appointment of independent auditors.
13
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
PAGE
(a) 11A Computation of Basic Net Income Per Share of Common Stock. 15
11B Computation of Diluted Net Income Per Share of Common Stock. 16
27 Financial Data Schedule for GATX Corporation for the quarter
ended March 31, 1999. Submitted to the SEC along with the
electronic submission of this Quarterly Report on Form 10-Q.
(b) No reports on Form 8-K were filed during the reporting period.
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: May 12, 1999
14
<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 Ended
March 31
-------------------------
1999 1998
--------- --------
<S> <C> <C>
Average number of shares of common stock outstanding 49.4 49.0
Net income $ 39.2 $ 37.4
Deduct - Dividends paid and accrued on preferred stock - -
---------- --------
Net income, as adjusted $ 39.2 $ 37.4
========== ========
Basic net income per share $ .79 $ .76
========== ========
</TABLE>
Note: 1998 amounts have been restated to reflect a two-for-one stock split
effected in June 1998.
15
<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 Ended
March 31
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
Average number of shares used to compute basic earnings
per share 49.4 49.0
Shares issuable upon assumed exercise of stock options, reduced by
the number of shares which could have been purchased
with the proceeds from exercise of such options 1.0 1.2
Common stock issuable upon assumed conversion of preferred stock .1 .2
--------- ---------
Total shares 50.5 50.4
========= =========
Net income, as adjusted per basic computation $ 39.2 $ 37.4
Add - Dividends paid and accrued on preferred stock - -
--------- ---------
Net income, as adjusted $ 39.2 $ 37.4
========= =========
Diluted net income per share $ .78 $ .74
========= =========
</TABLE>
Note: 1998 amounts have been restated to reflect a two-for-one stock split
effected in June 1998.
16
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 95
<SECURITIES> 0
<RECEIVABLES> 1,082
<ALLOWANCES> 139<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 4834
<DEPRECIATION> 1958
<TOTAL-ASSETS> 5086
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 2843<F3>
0
0
<COMMON> 34
<OTHER-SE> 725
<TOTAL-LIABILITY-AND-EQUITY> 5086
<SALES> 0
<TOTAL-REVENUES> 431
<CGS> 0
<TOTAL-COSTS> 202<F4>
<OTHER-EXPENSES> 69<F5>
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 47<F6>
<INCOME-TAX> 20
<INCOME-CONTINUING> 39
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39
<EPS-PRIMARY> .79
<EPS-DILUTED> .78
<FN>
<F1>RECEIVABLES CONSIST OF THREE COMPONENTS: TRADE ACCOUNTS OF 142 MILLION,
FINANCE LEASES OF 667 MILLION, AND SECURED LOANS OF 273 MILLION.
<F2>NOT APPLICABLE BECAUSE GATX HAS AN UNCLASSIFIED BALANCE SHEET.
<F3>BONDS CONSIST OF THREE COMPONENTS: RECOURSE LONG-TERM DEBT OF 2,219 MILLION
NONRECOURSE LONG-TERM DEBT OF 434 MILLION AND CAPITAL LEASE OBLIGATIONS OF 191
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 SHARE OF AFFILIATES'
EARNINGS.
</FN>
</TABLE>
