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, 1995 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 20,020,539 shares of common stock outstanding
as of July 31, 1995.
PART I--FINANCIAL INFORMATION
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
In Millions, Except Per Share Amounts
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
--------- -------- ------- -------
Gross income.................... $314.2 $284.4 $602.4 $545.1
Costs and expenses
Operating expenses............. 151.5 145.8 288.7 274.3
Interest...................... 44.0 37.7 82.8 70.8
Provision for depreciation
and amortization.. ......... 42.6 40.6 83.3 78.5
Provision for possible losses 3.1 4.1 9.3 10.1
Selling, general and
administrative............. 36.0 31.1 67.4 59.6
------ ------ ------ ------
277.2 259.3 531.5 493.3
------ ------ ------ ------
Income before income taxes and
equity in net earnings of
affiliated companies....... 37.0 25.1 70.9 51.8
Income taxes.................... 14.5 10.1 29.6 21.0
------ ------ ------ ------
Income before equity in net
earnings of affiliated
companies.................. 22.5 15.0 41.3 30.8
Equity in net earnings
of affiliated companies.... 7.4 5.9 14.3 10.3
------ ------ ------ ------
Net income...................... $ 29.9 $ 20.9 $ 55.6 $ 41.1
====== ====== ====== ======
Per common share:
Net income................... $ 1.31 $ .87 $ 2.42 $ 1.71
Net income, assuming full
dilution................... 1.23 .87 2.29 1.70
Dividends declared........... .40 .375 .80 .75
<FN>
Note - The consolidated balance sheet at December 31, 1994 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, 1995 are not necessarily
indicative of the results that may be achieved for the entire year ending
December 31, 1995.
</FN>
-1-
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
In Millions
ASSETS
June 30 December 31
1995 1994
(Unaudited)
--------- ---------
Cash and cash equivalents......... $ 37.9 $ 27.3
Receivables
Trade accounts.................. 94.8 101.6
Finance leases.................. 530.6 533.4
Secured loans................... 231.8 231.2
Less - Allowance for possible
losses........................ (97.7) (89.6)
-------- -------
759.5 776.6
Property, plant and equipment
Railcars and support
facilities.................... 2,011.5 1,857.4
Tank storage terminals and
pipelines..................... 1,194.5 1,171.8
Great Lakes vessels.............. 204.0 203.4
Operating lease investments and
other.......................... 378.6 412.3
-------- -------
3,788.6 3,644.9
Less-Allowances for depreciation.. (1,492.9) (1,452.6)
-------- -------
2,295.7 2,192.3
Investments in affiliated companies. 372.7 365.3
Other assets........................ 314.2 289.2
-------- -------
TOTAL ASSETS $ 3,780.0 $ 3,650.7
========= ========
-2-
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDERS' EQUITY
June 30 December 31
1995 1994
(Unaudited)
---------- ---------
Accounts payable.................. $ 194.6 $ 269.5
Accrued expenses.................. 53.7 49.6
Debt
Short-term debt.................. 331.6 268.2
Long-term debt................... 1,668.1 1,549.7
Capital lease obligations........ 247.4 255.4
------- -------
2,247.1 2,073.3
Deferred income taxes.............. 254.4 257.5
Other deferred items............... 331.4 338.4
------- -------
Total liabilities and deferred items 3,081.2 2,988.3
Shareholders' equity
Preferred Stock.................. 3.4 3.4
Common Stock..................... 14.2 14.2
Additional capital............... 320.9 318.1
Reinvested earnings.............. 386.6 353.5
Cumulative foreign currency
translation adjustment......... 20.8 20.3
------- -------
745.9 709.5
Less-Cost of common shares in
treasury....................... (47.1) (47.1)
------- -------
Total shareholders' equity 698.8 662.4
------- -------
TOTAL LIABILITIES, DEFERRED ITEMS
AND SHAREHOLDERS' EQUITY $3,780.0 $3,650.7
======== =======
-3-
GATX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
In Millions
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
------- ------ ------- -------
OPERATING ACTIVITIES
Net income $ 29.9 $ 20.9 $ 55.6 $ 41.1
Adjustments to reconcile net income
to net cash provided by operating
activities:
Realized gain on disposition of
leased equipment (14.6) (3.3) (25.9) (8.1)
Provision for depreciation and
amortization 42.6 40.6 83.3 78.5
Provision for possible losses 3.1 4.1 9.3 10.1
Deferred income taxes (credit) 2.2 .5 6.8 2.5
Net change in trade receivables,
inventories, accounts payable and
accrued expenses 2.4 47.8 (61.6) 44.5
Other 3.2 (50.1) (20.0) (57.4)
------- ------ ------- ------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 68.8 60.5 47.5 111.2
INVESTING ACTIVITIES
Additions to property, plant and
equipment (100.2) (76.9) (220.2) (166.6)
Additions to equipment on lease,
net of nonrecourse financing (82.8) (14.2) (124.0) (105.5)
Secured loans extended (41.1) (6.1) (45.6) (45.7)
Investments in affiliated companies (4.2) (.4) (6.2) (.8)
Progress payments and other (11.8) (1.0) (11.8) (1.0)
------- ------- ------- -------
Capital additions (240.1) (98.6) (407.8) (319.6)
Portfolio proceeds:
From disposition of leased equipment 43.3 11.9 112.8 25.1
From return of investment 50.4 27.2 80.4 45.5
------- ------- ------- -------
Total portfolio proceeds 93.7 39.1 193.2 70.6
Proceeds from other asset dispositions 3.5 12.0 17.9 14.7
------- ------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (142.9) (47.5) (196.7) (234.3)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 153.6 92.7 203.6 114.2
Repayment of long-term debt (22.0) (43.8) (78.9) (79.8)
Net (decrease) increase in short-term debt (18.2) (40.8) 63.4 107.6
Repayment of capital lease obligations (2.0) (1.9) (8.0) (6.0)
Issuance of Common Stock under employee
benefit programs 1.1 .2 2.3 3.8
Cash dividends (11.3) (10.8) (22.6) (21.5)
------- ------ ------- ------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 101.2 (4.4) 159.8 118.3
-------- ------- ------ -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 27.1 $ 8.6 $ 10.6 $ (4.8)
======== ======= ======== =======
-4-
MANAGEMENT'S DISCUSSION OF OPERATIONS
COMPARISON OF FIRST SIX MONTHS OF 1995 TO FIRST SIX MONTHS OF 1994
GENERAL
GATX Corporation's net income for the first six months of 1995
was $56 million or $2.42 per common share compared to net income
of $41 million or $1.71 per common share for the first six months
of 1994. On a fully diluted basis, earnings per share was $2.29
for the first six months of 1995 compared to $1.70 for the
comparable period last year. Gross income increased 11% while
net income increased 35% as a result of continuing strong
performance at GATX's largest subsidiaries. GATX's railcar
leasing and management subsidiary (Transportation) continued to
operate at high utilization rates while adding significant
numbers of railcars to its fleet. Results at GATX's terminal and
pipeline subsidiary (Terminals) improved due to very strong
demand at many of its domestic terminals and international joint
ventures; in addition, terminal facilities acquired in late 1994
contributed to the increase in net income. The increase at
Financial Services was principally due to strong disposition
gains, higher fee income and larger joint venture income.
Operating activities provided $47 million of cash flow during the
first six months of 1995, a $64 million decrease from the first
six months of 1994, primarily from the refund of a deposit. Net
income adjusted for non-cash items generated $129 million of
cash, up $5 million from the first six months of last year. The
$18 million increase in realized gains on disposition of leased
equipment effectively decreased cash from operating activities as
the full amount of proceeds was included under investing
activities as portfolio proceeds. Changes in working capital and
other generated $69 million less cash in 1995 largely due to a
$48 million refund of a deposit as the result of the lessee's
exercise of its option to return four DC-10 aircraft.
Proceeds of $193 million were generated from the portfolio
compared to $71 million in the first six months of 1994.
Proceeds from the disposition of leased equipment of $113
million, primarily from the sale of aircraft and rail equipment,
were $88 million more than the prior year. Proceeds of $80
million from the recovery of investment increased $35 million due
to increased loan principal received and the sale of real estate.
Capital additions of $408 million for the first six months of
1995 increased $88 million from the comparable 1994 period.
Portfolio additions at Financial Services of $187 million were
$35 million higher than the first half of 1994. Transportation
invested $158 million in the railcar fleet versus $103 million
for the first six months of last year; in addition, $8 million
was expended on the upgrade to the repair facilities each year.
Terminals' capital spending of $49 million decreased $2 million
from the comparable period of 1994, which included the
acquisition of a terminal facility in the United Kingdom. Full
year 1995 capital spending is forecasted to exceed the $728
million expended in 1994. A portion of the 1995 expenditures may
not be effected depending on market conditions. It is
anticipated that capital expenditures will be funded by both
internally generated funds and GATX's available external
financing sources.
-5-
GATX had available unused committed lines of credit totaling $284
million at June 30, 1995. General American Transportation
Corporation (GATC) has a $650 million shelf registration for pass
through trust certificates and debt securities, under which $275
million of notes and $93 million of pass through trust
certificates have been issued as of quarter end. GATC issued $50
million of ten-year medium-term notes during the quarter. GATX
Capital has a $300 million shelf registration, under which $135
million of medium-term notes have been issued. During the
quarter, GATX Capital issued $80 million of medium-term notes to
fund new business and reduce commercial paper borrowings.
RESULTS OF OPERATIONS
Following is a discussion of the operating results of GATX's
business segments:
RAILCAR LEASING AND MANAGEMENT (TRANSPORTATION)
- -----------------------------------------------------------------
Six Months Ended
(In Millions) June 30
1995 1994 Change
------------------- ------------
Gross Income $175.6 $158.0 $ 17.6 11%
Net Income $ 30.9 $ 26.7 $ 4.2 16%
- -----------------------------------------------------------------
Transportation's gross income for the first half of 1995
increased 11% from the comparable prior year period due to more
than 5,100 additional railcars on lease as a result of the high
level of railcar additions and increased utilization. Also,
lease rates were slightly higher and a parcel of land in Mexico
was sold. Domestic fleet utilization at June 30, 1995 was 95% on
a fleet size of 61,700 compared to 94% on a fleet size of 57,000
a year ago. At quarter end, the active fleet totaled 58,600
railcars compared to 53,450 cars on lease a year ago.
Net income increased 16% from the first half of 1994 reflecting
the higher revenues. In addition, higher income was generated
from invested funds. Operating margins increased slightly as the
growth in revenues exceeded the increase in fleet repair costs.
Fleet repair costs increased 9% due to the increased fleet size
and increased number of cars repaired, primarily at GATX service
centers. Ownership costs, consisting of rental expense,
depreciation and interest, increased 21% due to the increased
fleet size and higher interest rates. SG&A increased 13%
primarily as a result of increased compensation costs and
expenses related to new operations in Mexico.
-6-
TERMINALS AND PIPELINES
- -----------------------------------------------------------------
Six Months Ended
(In Millions) June 30
1995 1994 Change
------------------- -------------
Gross Income $159.4 $143.9 $ 15.5 11%
Net Income $ 16.7 $ 15.1 $ 1.6 11%
- -----------------------------------------------------------------
Terminals' 1995 gross income increased 11% from the first six
months of 1994 reflecting incremental revenues from newly-
acquired terminals and high chemical demand and strong petroleum
activity, especially in the Los Angeles market. Higher revenues
at Terminals' two domestic pipelines were offset by the absence
of revenues at the Wyco pipeline following its sale early this
year. Throughput for the first six months of 1995 was 316
million barrels, 26 million barrels less than in 1994.
Throughput at the Pasadena terminal was down 17 million barrels,
reflecting the mild winter, lower blending activity, refinery
turnarounds and tanks out of service. Capacity utilization at
Terminals' wholly-owned facilities was 88% at the end of the
second quarter of 1995, down two percent from a year ago.
Terminals' net income increased 11% over 1994. Higher revenues
were partially offset by additional operating expenses incurred.
Further, SG&A increased due to management restructuring, salary
progression and the addition of personnel; interest expense grew
from financing last year's acquisitions. Operating margins were
in line with last year. Earnings at the foreign affiliates of $7
million increased $1 million due to strong demand at the European
and Singapore terminals.
FINANCIAL SERVICES
- -----------------------------------------------------------------
Six Months Ended
(In Millions) June 30 Change
1995 1994
------------------- -------------
Gross Income $115.0 $ 98.1 $ 16.9 17%
Net Income $ 21.6 $ 11.5 $ 10.1 88%
- -----------------------------------------------------------------
Financial Services' year-to-date gross income increased $17
million from the first half of 1994. The increase from 1994 was
principally due to higher disposition gains and fee income, both
largely from the remarketing of rail equipment from the company's
owned and managed portfolios, partially offset by lower lease
income. Pretax disposition gains, which do not occur evenly
period to period, were $24 million for the first half of 1995
compared to $7 million for the comparable 1994 period;
disposition gains are not expected to be at as high a level for
the second half of the year.
-7-
Net income of $22 million increased $10 million from the first
half of 1994 due to the increased revenues, partially offset by
increased interest and SG&A expense. The year-to-date loss
provision of $9 million was $1 million lower than the 1994 year-
to-date provision. The loss reserve at June 30, 1995 was $90
million, or 6.5% of total portfolio investments. SG&A increased
as a result of higher compensation and benefits expense and
additional information systems costs. Equity in net earnings of
affiliated companies increased $2 million primarily due to
improved earnings at an international aircraft joint venture.
GREAT LAKES SHIPPING
- -----------------------------------------------------------------
Six Months Ended
(In Millions) June 30
1995 1994 Change
------------------- -------------
Gross Income $ 28.2 $ 25.5 $ 2.7 11%
Net Income $ 2.6 $ 1.5 $ 1.1 73%
- -----------------------------------------------------------------
American Steamship Company's gross income for the first half of
1995 increased $3 million from the prior year period as severe
spring weather conditions delayed the start of the prior year
shipping season. Tonnage carried in the first six months of
1995 was 8.8 million tons compared to 8.2 million tons in the
first six months of 1994.
Net income increased $1 million from the first six months of 1994
reflecting the increase in tonnage carried. Margins increased
slightly from 1994 as severe weather conditions had impeded
efficient vessel operations in the first half of 1994.
LOGISTICS AND WAREHOUSING
- -----------------------------------------------------------------
Six Months Ended
(In Millions) June 30 Change
1995 1994
------------------- -------------
Gross Income $124.2 $121.2 $ 3.0 2%
Net Income $ (.1) $ (.8) $ .7 88%
- -----------------------------------------------------------------
GATX Logistics' gross income of $124 million increased 2% from
the first six months of 1994 due to new customers, higher
volumes from existing customers and some rate increases. The net
loss of $.1 million was $.7 million less than the 1994 comparable
period due to improved margins along with a reduction in empty
space. Margins improved slightly due to sales volume, improved
pricing, and adverse weather conditions in 1994.
-8-
COMPARISON OF SECOND QUARTER 1995 TO
SECOND QUARTER 1994
GENERAL
For the second quarter of 1995 net income was $30 million or
$1.31 per share as compared to $21 million or $.87 per share for
the second quarter of 1994.
GROSS INCOME
- -----------------------------------------------------------------
(In Millions) Three Months Ended
June 30
Business Segment 1995 1994 Change
- ---------------- ------- ------ -------------
Railcar Leasing and
Management $ 90.1 $ 80.0 $10.1 13%
Terminals and Pipelines 78.1 71.6 6.5 9
Financial Services 57.0 47.9 9.1 19
Great Lakes Shipping 26.7 24.7 2.0 8
Logistics and Warehousing 62.0 61.3 .7 1
- -----------------------------------------------------------------
NET INCOME
- -----------------------------------------------------------------
(In Millions) Three Months Ended
June 30
Business Segment 1995 1994 Change
- ---------------- ------- ------ --------------
Railcar Leasing and
Management $ 16.1 $ 13.5 $ 2.6 19%
Terminals and Pipelines 8.3 7.6 .7 9
Financial Services 11.5 5.6 5.9 105
Great Lakes Shipping 2.0 1.1 .9 82
Logistics and Warehousing .2 (.1) .3 300
- -----------------------------------------------------------------
Increases and decreases in gross income and net income between
these quarters for all segments were principally due to the same
reasons as discussed previously in relation to the six-month
periods.
-9-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ---------------------------
On July 14, 1995, a judgment in the amount of $9.7 million was
entered against General American Transportation Corporation by
the U.S. District Court for the Northern District of Illinois in
the matter of General American Transportation Corporation v.
Cryo-Trans, Incorporated (Case No. 91 C 1305), a case involving
an alleged patent infringement by General American Transportation
in the construction and use of its Arcticar cryogenically cooled
railcar.
General American Transportation was also permanently enjoined
from any further infringement of the patent as of August 1, 1995,
subsequently extended to September 1, 1995. Of General American
Transportation's 61,000 railcar fleet, the injunction affects
only 180 railcars, 80 of which are currently on lease and 100 on
order. General American Transportation intends promptly to
appeal the Decision of the District Court and has requested the
District Court to reduce substantially the judgment as entered to
correct an apparent error in the calculation of damages. Even in
the event of an adverse decision on appeal, GATX does not believe
the costs associated with the disposition of the affected cars
will have a material adverse effect on GATX.
General American Transportation brought this action against Cryo-
Trans in 1991 requesting that Cryo-Trans' patent be declared
invalid and General American Transportation's construction of the
Arcticar railcar non-infringing. A trial before a magistrate
was held in 1991 and a ruling in favor of General American
Transportation was issued in 1994. The District Court originally
accepted the magistrate's ruling. The court's decision reverses
the earlier ruling.
-10-
Item 6. Exhibits and Reports on Form 8-K. Page
- ------------------------------------------ ----
(a) 10 Letter Agreement dated August 17, 1993 between
William Chambers and the Corporation, file
number 1-2328. Submitted to the SEC along with
the electronic submission of this Quarterly Report
on Form 10-Q.
11A Statement regarding computation of
earnings per share. 13
11B Statement regarding computation of
earnings per share assuming full
dilution. 14
27 Financial Data Schedule for GATX Corporation
for the quarter ended June 30, 1995. 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.
-11-
SIGNATURES
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
Vice President, Finance and
Chief Financial Officer
(Duly Authorized Officer)
Date: August 11, 1995
-12-
Exhibit 11A
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENT
In Millions, Except Per Share Amounts
Three Months Six Months
Ended June 30 Ended June 30
1995 1994 1995 1994
---- ---- ---- ----
Average number of shares of
Common Stock outstanding...... 20.0 19.9 19.9 19.8
Shares issuable upon assumed exercise of
stock options, reduced by the number of
shares which could have been purchased
with the proceeds from exercise of such
options .3 .3 .3 .3
----- ---- ---- ----
Total.............................. 20.3 20.2 20.2 20.1
===== ==== ==== ====
Net income......................... $ 29.9 $ 20.9 $ 55.6 $ 41.1
Deduct - Dividends paid and accrued
on Preferred Stock............... 3.3 3.3 6.6 6.6
------ ------ ------- ------
Net income, as adjusted............ $ 26.6 $ 17.6 $ 49.0 $ 34.5
====== ====== ====== =======
Net income per share............... $ 1.31 $ .87 $ 2.42 $ 1.71
====== ====== ====== =======
-13-
Exhibit 11B
GATX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENT
ASSUMING FULL DILUTION
In Millions, Except Per Share Amounts
Three Months Six Months
Ended June 30 Ended June 30
1995 1994 1995 1994
----- ---- ----- ----
Average number of shares used to
compute primary earnings per share.. 20.3 20.2 20.2 20.1
Common Stock issuable upon assumed
conversion of Preferred Stock....... 4.1 4.0 4.1 4.1
Total................................. 24.4 24.2 24.3 24.2
===== ==== ===== ======
Net income as adjusted per primary
computation........................ $ 26.6 $ 17.6 $ 49.0 $ 34.5
Add - Dividends paid and accrued on
Preferred Stock.................... 3.3 3.3 6.6 6.6
----- ----- ------ ------
Net income, as adjusted.............. $ 29.9 $ 20.9 $ 55.6 $ 41.1
====== ====== ====== ======
Net income per share, assuming full
dilution........................... $ 1.23 $ .87 $ 2.29 $ 1.70
====== ====== ====== ======
-14-