Exhibit 99.2
Pro Forma Financial Information
GATX Financial Corporation (“GFC” or the “Company”) is a wholly owned subsidiary of GATX Corporation (“GATX” or the “Parent Company”). GFC is headquartered in Chicago, Illinois and provides services primarily through three operating segments: GATX Rail (“Rail”), GATX Air (“Air”), and GATX Specialty (“Specialty”). On September 28, 2006 GFC signed a definitive agreement to sell the majority of its aircraft leasing business to Macquarie Aircraft Leasing Limited (“MALL”). Previously, GFC signed definitive agreements for the sale of 22 wholly owned and partnered aircraft along with letters of intent for an additional five partnered aircraft and sold its interest in its Pembroke affiliate. The combination of the pending and completed sales will result in the disposition of substantially all of Air’s operations.
The accompanying unaudited pro forma condensed consolidated financial statements reflect the financial position and results of operations of GFC after giving effect to the completion of all of the previously discussed sales, including the sale of aircraft under letter of intent. However, if any of the contemplated disposition transactions are not completed consistent with these expectations, results will vary. See Note 2 to the pro forma financial statements for additional information concerning the details of the MALL transaction and other Air related dispositions. These pro forma statements have been prepared by the Company based on the assumptions identified in the related footnotes and are shown for comparative purposes only. The unaudited pro forma statements do not purport to represent what the actual consolidated results of operations or consolidated financial position of GFC would have been had the dispositions occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with GFC’s historical consolidated financial statements and accompanying footnotes.
The unaudited pro forma condensed consolidated balance sheet assumes the dispositions occurred on June 30, 2006. The pro forma condensed consolidated income statements for the years ended December 31, 2005, 2004, and 2003 and for the six months ended June 30, 2006 assume the dispositions occurred on January 1 of each respective year.
GATX FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2006
(In Millions)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2006
(In Millions)
Pro-Forma | Pro-Forma | |||||||||||
As Reported | Adjustments | GATX Financial | ||||||||||
Assets | ||||||||||||
Cash and Cash Equivalents | $ | 146.7 | $ | 740.4 | 2(a) | $ | 887.1 | |||||
Restricted Cash | 66.3 | — | 66.3 | |||||||||
Receivables | ||||||||||||
Rent and other receivables | 83.5 | (4.8 | ) | 78.7 | ||||||||
Finance leases | 396.3 | (25.4 | ) | 370.9 | ||||||||
Loans | 24.0 | (0.4 | ) | 23.6 | ||||||||
Less: Allowance for possible losses | (10.7 | ) | — | (10.7 | ) | |||||||
493.1 | (30.6 | ) | 462.5 | |||||||||
Operating Lease Assets, Facilities and Other | ||||||||||||
Rail | 4,126.1 | — | 4,126.1 | |||||||||
Air | 1,345.0 | (1,345.0 | ) | — | ||||||||
Specialty | 93.5 | — | 93.5 | |||||||||
Other | 361.3 | — | 361.3 | |||||||||
Less: Allowance for depreciation | (1,969.0 | ) | 171.6 | (1,797.4 | ) | |||||||
3,956.9 | (1,173.4 | ) | 2,783.5 | |||||||||
Due from GATX Corporation | 388.0 | — | 388.0 | |||||||||
Investments in Affiliated Companies | 663.9 | (351.3 | ) | 312.6 | ||||||||
Goodwill | 91.8 | — | 91.8 | |||||||||
Other Assets | 304.4 | (126.3 | ) | 178.1 | ||||||||
Total Assets | $ | 6,111.1 | $ | (941.2 | ) | $ | 5,169.9 | |||||
Liabilities and Shareholder’s Equity | ||||||||||||
Accounts Payable and Accrued Expenses | $ | 126.2 | $ | (8.7 | ) | $ | 117.5 | |||||
Debt | ||||||||||||
Commercial paper and bank credit facilities | 318.3 | — | 318.3 | |||||||||
Recourse | 2,604.5 | (731.4 | ) | 1,873.1 | ||||||||
Nonrecourse | 34.6 | (29.8 | ) | 4.8 | ||||||||
Capital lease obligations | 57.1 | — | 57.1 | |||||||||
3,014.5 | (761.2 | ) | 2,253.3 | |||||||||
Current Income Taxes | — | 89.0 | 89.0 | |||||||||
Deferred Income Taxes | 721.1 | (54.2 | ) | 666.9 | ||||||||
Other Liabilities | 393.6 | (125.9 | ) | 267.7 | ||||||||
Total Liabilities | 4,255.4 | (861.0 | ) | 3,394.4 | ||||||||
Total Shareholder’s Equity | 1,855.7 | (80.2 | ) | 2(b) | 1,775.5 | |||||||
Total Liabilities and Shareholder’s Equity | $ | 6,111.1 | $ | (941.2 | ) | $ | 5,169.9 | |||||
The accompanying notes are an integral part of the pro forma financial information presented.
GATX FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(In Millions)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(In Millions)
Pro-Forma | Pro-Forma | |||||||||||
As Reported | Adjustments | GATX Financial | ||||||||||
Gross Income | ||||||||||||
Lease income | $ | 468.0 | $ | (64.0 | ) | $ | 404.0 | |||||
Marine operating revenue | 63.3 | — | 63.3 | |||||||||
Interest income on loans | 2.7 | (0.1 | ) | 2.6 | ||||||||
Asset remarketing income | 34.1 | — | 34.1 | |||||||||
Fees | 11.0 | (7.9 | ) | 3.1 | ||||||||
Other income | 44.1 | (0.3 | ) | 43.8 | ||||||||
Revenues | 623.2 | (72.3 | ) | 550.9 | ||||||||
Share of affiliates’ earnings | 54.5 | (18.1 | ) | 36.4 | ||||||||
Total Gross Income | 677.7 | (90.4 | ) | 587.3 | ||||||||
Ownership Costs | ||||||||||||
Depreciation | 98.1 | (22.2 | ) | 75.9 | ||||||||
Interest expense, net | 79.3 | (20.4 | ) | 58.9 | ||||||||
Operating lease expense | 89.0 | (1.1 | ) | 87.9 | ||||||||
Total Ownership Costs | 266.4 | (43.7 | ) | 222.7 | ||||||||
Other Costs and Expenses | ||||||||||||
Maintenance expense | 99.2 | (1.0 | ) | 98.2 | ||||||||
Marine operating expense | 48.8 | — | 48.8 | |||||||||
Selling, general and administrative | 59.2 | (11.3 | ) | 47.9 | ||||||||
Asset impairment charges | 13.9 | (10.7 | ) | 3.2 | ||||||||
Other expenses | 13.9 | (0.8 | ) | 13.1 | ||||||||
Total Other Costs and Expenses | 235.0 | (23.8 | ) | 211.2 | ||||||||
Income from Continuing Operations before Income Taxes | 176.3 | (22.9 | ) | 153.4 | ||||||||
Income Taxes | 57.9 | (8.8 | ) | 49.1 | ||||||||
Income from Continuing Operations | $ | 118.4 | $ | (14.1 | ) | $ | 104.3 | |||||
The accompanying notes are an integral part of the pro forma financial information presented.
GATX FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2005
(In Millions)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2005
(In Millions)
Pro-Forma | Pro-Forma | |||||||||||
As Reported | Adjustments | GATX Financial | ||||||||||
Gross Income | ||||||||||||
Lease income | $ | 878.4 | $ | (117.6 | ) | $ | 760.8 | |||||
Marine operating revenue | 138.3 | — | 138.3 | |||||||||
Interest income on loans | 8.5 | (0.4 | ) | 8.1 | ||||||||
Asset remarketing income | 43.7 | (2.3 | ) | 41.4 | ||||||||
Fees | 17.7 | (12.6 | ) | 5.1 | ||||||||
Other | 100.3 | (0.5 | ) | 99.8 | ||||||||
Revenues | 1,186.9 | (133.4 | ) | 1,053.5 | ||||||||
Share of affiliates’ (losses) earnings | (28.8 | ) | 102.5 | 73.7 | ||||||||
Total Gross Income | 1,158.1 | (30.9 | ) | 1,127.2 | ||||||||
Ownership Costs | ||||||||||||
Depreciation | 202.7 | (59.8 | ) | 142.9 | ||||||||
Interest expense, net | 143.9 | (32.3 | ) | 111.6 | ||||||||
Operating lease expense | 187.0 | (7.0 | ) | 180.0 | ||||||||
Total Ownership Costs | 533.6 | (99.1 | ) | 434.5 | ||||||||
Other Costs and Expenses | ||||||||||||
Maintenance expense | 194.9 | (0.8 | ) | 194.1 | ||||||||
Marine operating expense | 108.9 | — | 108.9 | |||||||||
Selling, general and administrative | 114.4 | (25.9 | ) | 88.5 | ||||||||
Asset impairment charges | 83.4 | (77.2 | ) | 6.2 | ||||||||
Other expenses | 56.1 | (1.0 | ) | 55.1 | ||||||||
Total Other Costs and Expenses | 557.7 | (104.9 | ) | 452.8 | ||||||||
Income from Continuing Operations before Income Taxes | 66.8 | 173.1 | 239.9 | |||||||||
Income Taxes | 21.0 | 68.6 | 89.6 | |||||||||
Income from Continuing Operations | $ | 45.8 | $ | 104.5 | $ | 150.3 | ||||||
The accompanying notes are an integral part of the pro forma financial information presented.
GATX FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2004
(In Millions)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2004
(In Millions)
Pro-Forma | Pro-Forma | |||||||||||
As Reported | Adjustments | GATX Financial | ||||||||||
Gross Income | ||||||||||||
Lease income | $ | 790.3 | $ | (101.0 | ) | $ | 689.3 | |||||
Marine operating revenue | 111.8 | — | 111.8 | |||||||||
Interest income on loans | 17.8 | (0.1 | ) | 17.7 | ||||||||
Asset remarketing income | 36.5 | (5.5 | ) | 31.0 | ||||||||
Fees | 20.9 | (9.3 | ) | 11.6 | ||||||||
Other | 210.5 | (2.6 | ) | 207.9 | ||||||||
Revenues | 1,187.8 | (118.5 | ) | 1,069.3 | ||||||||
Share of affiliates’ earnings | 65.2 | (11.1 | ) | 54.1 | ||||||||
Total Gross Income | 1,253.0 | (129.6 | ) | 1,123.4 | ||||||||
Ownership Costs | ||||||||||||
Depreciation | 194.5 | (59.5 | ) | 135.0 | ||||||||
Interest expense, net | 141.5 | (18.1 | ) | 123.4 | ||||||||
Operating lease expense | 173.6 | (3.8 | ) | 169.8 | ||||||||
Total Ownership Costs | 509.6 | (81.4 | ) | 428.2 | ||||||||
Other Costs and Expenses | ||||||||||||
Maintenance expense | 189.2 | (1.6 | ) | 187.6 | ||||||||
Marine operating expense | 87.7 | — | 87.7 | |||||||||
Selling, general and administrative | 112.0 | (21.5 | ) | 90.5 | ||||||||
Asset impairment charges | 3.4 | (0.4 | ) | 3.0 | ||||||||
Other expenses | 31.2 | (1.8 | ) | 29.4 | ||||||||
Total Other Costs and Expenses | 423.5 | (25.3 | ) | 398.2 | ||||||||
Income from Continuing Operations before Income Taxes | 319.9 | (22.9 | ) | 297.0 | ||||||||
Income Taxes | 115.9 | (9.1 | ) | 106.8 | ||||||||
Income from Continuing Operations | $ | 204.0 | $ | (13.8 | ) | $ | 190.2 | |||||
The accompanying notes are an integral part of the pro forma financial information presented.
GATX FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003
(In Millions)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003
(In Millions)
Pro-Forma | Pro-Forma | |||||||||||
As Reported | Adjustments | GATX Financial | ||||||||||
Gross Income | ||||||||||||
Lease income | $ | 762.2 | $ | (90.8 | ) | $ | 671.4 | |||||
Marine operating revenue | 85.0 | — | 85.0 | |||||||||
Interest income on loans | 41.4 | 0.2 | 41.6 | |||||||||
Asset remarketing income | 37.9 | (0.8 | ) | 37.1 | ||||||||
Fees | 18.0 | (7.4 | ) | 10.6 | ||||||||
Other | 101.0 | (3.3 | ) | 97.7 | ||||||||
Revenues | 1,045.5 | (102.1 | ) | 943.4 | ||||||||
Share of affiliates’ earnings | 66.8 | (17.6 | ) | 49.2 | ||||||||
Total Gross Income | 1,112.3 | (119.7 | ) | 992.6 | ||||||||
Ownership Costs | ||||||||||||
Depreciation | 188.0 | (55.1 | ) | 132.9 | ||||||||
Interest expense, net | 158.5 | (15.0 | ) | 143.5 | ||||||||
Operating lease expense | 176.0 | (3.9 | ) | 172.1 | ||||||||
Total Ownership Costs | 522.5 | (74.0 | ) | 448.5 | ||||||||
Other Costs and Expenses | ||||||||||||
Maintenance expense | 166.0 | (1.5 | ) | 164.5 | ||||||||
Marine operating expense | 68.9 | — | 68.9 | |||||||||
Selling, general and administrative | 141.9 | (18.1 | ) | 123.8 | ||||||||
Asset impairment charges | 24.6 | (2.4 | ) | 22.2 | ||||||||
Other expenses | 47.2 | (8.8 | ) | 38.4 | ||||||||
Total Other Costs and Expenses | 448.6 | (30.8 | ) | 417.8 | ||||||||
Income from Continuing Operations before Income Taxes | 141.2 | (14.9 | ) | 126.3 | ||||||||
Income Taxes | 44.0 | (6.6 | ) | 37.4 | ||||||||
Income from Continuing Operations | $ | 97.2 | $ | (8.3 | ) | $ | 88.9 | |||||
The accompanying notes are an integral part of the pro forma financial information presented.
GATX FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet of GFC as of June 30, 2006 and unaudited pro forma condensed consolidated statements of income of GFC for the six months ended June 30, 2006 and the years ended December 31, 2005, 2004, and 2003 give effect to the disposition of substantially all the assets and liabilities of the Air segment, including the repayment of related external debt. The unaudited pro forma condensed consolidated balance sheet assumes all sales occurred on June 30, 2006 and the unaudited pro forma condensed consolidated statements of income assume all sales occurred on January 1 of each period presented. In the opinion of management, these statements include all material adjustments necessary to reflect, on a pro forma basis, the impact of the sales on the historical financial information of GFC. The unaudited pro forma condensed consolidated financial statements do not necessarily represent what GFC’s financial position or results of operations would have been had the sales occurred on such dates or project GFC’s financial position or results of operations at or for any future date or period. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated statements of GFC.
NOTE 2. Pro Forma Condensed Consolidated Balance Sheet Adjustments
The unaudited pro forma condensed consolidated balance sheet assumes that substantially all of the assets of Air were sold on June 30, 2006. Estimated cash proceeds are based on management’s best estimate of the probable amounts to be realized upon the completion of the MALL transaction and other asset sales. The final determination of proceeds will be dependent on the timing of the sales and resolution of potential purchase price adjustments. As a result, actual amounts will likely vary from these pro forma adjustments.
(a) The estimated net cash proceeds, excluding income taxes, resulting from the sale of Air are shown below (in millions):
MALL | Other | Total | ||||||||||
Estimated cash proceeds | $ | 1,300.9 | $ | 206.4 | $ | 1,507.3 | ||||||
Estimated transaction costs | (5.5 | ) | (0.2 | ) | (5.7 | ) | ||||||
Estimated debt repayments | (709.4 | ) | (51.8 | ) | (761.2 | ) | ||||||
Estimated net proceeds | $ | 586.0 | $ | 154.4 | $ | 740.4 | ||||||
Estimated transaction costs are comprised of direct and indirect expenses expected to be incurred in 2006 as a result of disposing the Air business including commissions, legal, accounting and other disposal expenses. Estimated debt repayments consist of indebtedness directly related to Air assets that management anticipates to pay out of sales proceeds. The total amount of income taxes anticipated to be paid in 2006 upon completion of all sales transactions is estimated to be $89 million, after the utilization of net operating loss and tax credit carry forwards. Actual amounts incurred may differ from these estimates.
(b) The pro forma loss on sale, net of tax is as follows (in millions):
MALL | Other | Total | ||||||||||
Estimated cash proceeds | $ | 1,300.9 | $ | 206.4 | $ | 1,507.3 | ||||||
Estimated transaction costs | (5.5 | ) | (0.2 | ) | (5.7 | ) | ||||||
Net assets of Air as of June 30, 2006 | (1,358.9 | ) | (188.1 | ) | (1,547.0 | ) | ||||||
Pro forma (loss) gain on sale before income taxes | (63.5 | ) | 18.1 | (45.4 | ) | |||||||
Estimated income taxes | 6.0 | 28.8 | 34.8 | |||||||||
Pro forma loss on sale, net of tax | $ | (69.5 | ) | $ | (10.7 | ) | $ | (80.2 | ) | |||
Estimated income taxes, including the pro forma adjustment for income taxes payable on the condensed consolidated balance sheet, are based on management’s best estimate of the total federal, state and foreign income taxes that will be allocated to GFC as a result of the completion of the disposition of Air’s operations. The ultimate amount of income taxes payable will be dependent on a number of factors not yet fully determinable, including the form and structure of each sales transaction and the implementation of potential tax planning strategies. As a result, actual income taxes will likely differ from pro forma amounts.
The actual aggregate loss that GFC will report in 2006 upon completion of the disposition of the Air business, including any loss recognized during the nine month period ended September 30, 2006 as a result of adjusting the carrying value of Air’s assets to fair value less costs to sell and recording a loss on the competed sale of Pembroke, will likely differ from the estimated pro forma loss noted above. Such differences will be attributable to Air’s operating results, differences in carrying values of Air’s assets, investing and financing activities occurring subsequent to June 30, 2006 through the date of sale, and the timing of recognition of certain expenses related to the disposal of the Air business.
NOTE 3. Pro Forma Condensed Consolidated Statements of Income Adjustments
The pro forma condensed consolidated statements of income assume that the sale of Air occurred as of January 1 of each period presented. The statements of income do not include the loss on disposal or costs related to the sale. Additionally, no income has been imputed from the investment of sales proceeds. Actual amounts could vary from these pro forma adjustments.
The pro forma adjustments reflect the activity related to the assets sold or to be sold and debt anticipated to be repaid as part of the disposition transactions. The pro forma adjustment for income taxes is based on an estimate of Air’s relative contribution to GFC’s consolidated tax position. Actual amounts could vary from these pro forma adjustments.