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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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
March 31, 2001 1-2328
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GATX Corporation
Incorporated in the IRS Employer Identification No.
State of New York 36-1124040
500 West Monroe Street
Chicago, IL 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 48,460,630 shares of common stock outstanding as of April
30, 2001.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31
-------------------------------------
2001 2000
--------------- --------------
GROSS INCOME
Lease, interest and financing services $ 356.3 $ 290.2
Other expense (.3) (1.2)
--------- -----------
REVENUES 356.0 289.0
Share of affiliates' earnings 14.9 20.0
--------- -----------
TOTAL GROSS INCOME 370.9 309.0
OWNERSHIP COSTS
Depreciation and amortization 103.1 79.4
Interest, net 61.0 54.0
Operating lease expense 48.3 40.2
--------- -----------
TOTAL OWNERSHIP COSTS 212.4 173.6
OTHER COSTS AND EXPENSES
Operating expenses 63.1 30.8
Selling, general and administrative 57.3 41.1
Provision for possible losses 21.3 2.0
Fair value adjustments for derivatives 1.1 -
--------- -----------
TOTAL OTHER COSTS AND EXPENSES 142.8 73.9
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 15.7 61.5
INCOME TAXES 11.3 23.9
--------- -----------
INCOME FROM CONTINUING OPERATIONS 4.4 37.6
DISCONTINUED OPERATIONS
Operating results, net of income taxes 2.4 3.0
Gain on sale of portion of segment, net of income taxes 163.9 -
--------- -----------
TOTAL DISCONTINUED OPERATIONS 166.3 3.0
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NET INCOME $ 170.7 $ 40.6
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THREE MONTHS ENDED
MARCH 31
-------------------------------------
2001 2000
--------------- --------------
PER SHARE DATA
Basic:
Income from continuing operations $ .09 $ .78
Income from discontinued operations 3.44 .06
--------------- --------------
Total $ 3.53 $ .84
Diluted:
Income from continuing operations $ .09 $ .76
Income from discontinued operations 3.36 .06
--------------- --------------
Total $ 3.45 $ .82
Dividends declared per common share $ .31 $ .30
(1) The consolidated balance sheet at December 31, 2000 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, 2001 are not necessarily indicative of the results that may
be achieved for the entire year ending December 31, 2001. Certain amounts
in the 2000 financial statements have been reclassified to conform to the
current presentation.
(2) Discontinued operations - Operating results for the former Integrated
Solutions Group segment are shown net of taxes of $1.4 million and $2.1
million, respectively, for the two periods displayed. Gain on sale of
portion of segment primarily reflects the sale of substantially all of the
company's interest in GATX Terminals Corporation and its subsidiary
companies and is stated net of income taxes of $195.7 million.
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GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
MARCH 31 2001 DECEMBER 31 2000
----------------- ------------------
(Unaudited)
ASSETS
Cash and Cash Equivalents $ 627.2 $ 173.6
Receivables
Trade accounts 50.6 93.7
Finance leases 1,009.0 878.3
Secured loans 666.7 634.1
Less - allowance for possible losses (108.7) (95.2)
----------------- ------------------
1,617.6 1,510.9
Operating Lease Assets and Facilities
Railcars and service facilities 2,728.0 2,695.3
Operating lease investments and other 1,967.4 1,490.4
Less - allowance for depreciation (1,855.3) (1,531.6)
----------------- -----------------
2,840.1 2,654.1
Investments in Affiliated Companies 1,040.8 951.2
Other Assets 416.7 343.0
Net Assets of Discontinued Operations 163.5 630.9
----------------- -----------------
$ 6,705.9 $ 6,263.7
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MARCH 31
2001 DECEMBER 31 2000
------------------ ------------------
(Unaudited)
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDERS' EQUITY
Accounts Payable $ 300.6 $ 317.3
Accrued Expenses 324.1 141.7
Debt
Short-term 601.7 557.2
Long-term:
Recourse 2,907.2 3,093.9
Nonrecourse 689.9 494.2
Capital lease obligations 156.0 164.2
------------------ ------------------
4,354.8 4,309.5
Deferred Income Taxes 472.3 410.8
Other Deferred Items 316.8 294.9
------------------ ------------------
Total Liabilities and Deferred Items 5,768.6 5,474.2
Shareholders' Equity
Preferred stock - -
Common stock 35.3 35.0
Additional capital 377.5 366.1
Reinvested earnings 707.9 552.2
Accumulated other comprehensive loss (54.0) (34.4)
------------------ ------------------
1,066.7 918.9
Less - cost of common shares in treasury (129.4) (129.4)
------------------ ------------------
Total Shareholders' Equity 937.3 789.5
------------------ ------------------
$ 6,705.9 $ 6,263.7
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GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
THREE MONTHS ENDED
MARCH 31
------------------------------
2001 2000
------------- --------------
OPERATING ACTIVITIES
Income from continuing operations $ 4.4 $ 37.6
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Realized gains on remarketing of leased equipment (8.5) (9.7)
Depreciation and amortization 103.1 79.4
Provision for possible losses 21.3 2.0
Deferred income taxes 104.1 29.0
Net change in trade receivables, inventories,
accounts payable and accrued expenses (204.0) (19.2)
Other 8.3 (26.1)
------------- --------------
Net cash provided by continuing operations 28.7 93.0
INVESTING ACTIVITIES
Additions to equipment on lease, net of nonrecourse (266.0) (155.9)
financing for leveraged leases
Additions to operating lease assets and facilities (39.0) (131.2)
Secured loans extended (80.5) (113.9)
Investments in affiliated companies (141.1) (49.5)
Other investments and progress payments (113.7) (7.8)
------------- --------------
Portfolio investments and capital additions (640.3) (458.3)
Portfolio proceeds 248.4 99.2
Proceeds from sale of portion of segment 1,028.4 -
Proceeds from other asset sales 5.0 4.4
------------- --------------
Net cash provided by (used in) investing activities of continuing operations 641.5 (354.7)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 62.0 121.7
Repayment of long-term debt (304.0) (56.9)
Net increase in short-term debt 44.5 330.4
Repayment of capital lease obligations (8.2) (6.1)
Issuance (repurchase) of common stock and other 11.7 (26.5)
Cash dividends (15.0) (14.5)
------------- --------------
Net cash (used in) provided by financing activities of continuing operations (209.0) 348.1
NET TRANSFERS TO DISCONTINUED OPERATIONS (7.6) (67.0)
------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS 453.6 19.4
------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS (12.6) 1.8
------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 441.0 $ 21.2
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GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(IN MILLIONS)
THREE MONTHS ENDED
MARCH 31
------------------------------
2001 2000
------------- ----------------
Net income $ 170.7 $ 40.6
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment (10.6) (12.7)
Unrealized (loss) gain on securities, net of
reclassification adjustments (a) (13.7) 15.7
Unrealized gain on derivatives 4.7 -
------------- ----------------
Other comprehensive (loss) income (19.6) 3.0
------------- ----------------
COMPREHENSIVE INCOME $ 151.1 $ 43.6
============= ================
(a) Reclassification adjustments:
Unrealized (loss) gain on securities $ (4.4) $ 24.2
Less - reclassification adjustment for gains
realized included in net income (9.3) (8.5)
------------- ----------------
Net unrealized (loss) gain on securities $ (13.7) $ 15.7
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GATX CORPORATION AND SUBSIDIARIES
FINANCIAL DATA OF BUSINESS SEGMENTS FOR CONTINUING OPERATIONS
(UNAUDITED)
(IN MILLIONS)
FINANCIAL CORPORATE
SERVICES GATX RAIL AND OTHER INTERSEGMENT TOTAL
-------- --------- --------- ------------ -----
THREE MONTHS ENDED MARCH 31, 2001
PROFITABILITY
Revenues $ 213.7 142.8 .9 (1.4) $ 356.0
Share of affiliates' earnings 14.0 .9 - - 14.9
-------- ------- ------- --------- --------
Gross income 227.7 143.7 .9 (1.4) 370.9
Interest expense 55.7 12.9 (7.0) (.6) 61.0
Depreciation and amortization 77.9 24.4 .5 .3 103.1
Income (loss) from continuing
operations before taxes 19.1 (5.0) 1.7 (.1) 15.7
Income (loss) from continuing
operations 11.5 (4.1) (3.0) - 4.4
FINANCIAL POSITION
Debt 3,334.1 850.2 207.6 (37.1) 4,354.8
Equity 412.1 351.2 179.1 (5.1) 937.3
Investments in affiliated companies 954.6 86.2 - - 1,040.8
Identifiable assets 4,295.7 1,758.8 571.5 (83.6) 6,542.4
ITEMS AFFECTING CASH FLOW
Net cash (used in) provided by
continuing operations (10.1) 39.6 (.8) - 28.7
Portfolio proceeds 248.4 - - - 248.4
-------- ------- ------- --------- --------
Total cash provided 238.3 39.6 (.8) - 277.1
Capital additions and portfolio
investments 517.2 123.0 .1 - 640.3
THREE MONTHS ENDED MARCH 31, 2000
PROFITABILITY
Revenues $ 150.0 $ 140.2 $ .2 $ (1.4) $ 289.0
Share of affiliates' earnings 18.9 1.1 - - 20.0
-------- ------- ------- --------- --------
Gross income 168.9 141.3 .2 (1.4) 309.0
Interest expense 38.2 14.7 1.6 (.5) 54.0
Depreciation and amortization 52.5 25.8 .4 .7 79.4
Income (loss) from continuing
operations before taxes 37.4 29.3 (5.3) .1 61.5
Income (loss) from continuing
operations 22.9 18.5 (3.8) - 37.6
FINANCIAL POSITION AT DECEMBER 31, 2000
Debt 2,938.9 760.3 648.4 (38.1) 4,309.5
Equity 333.4 359.7 101.5 (5.1) 789.5
Investments in affiliated companies 866.8 83.9 .5 - 951.2
Identifiable assets 3,950.7 1,669.6 88.0 (75.5) 5,632.8
ITEMS AFFECTING CASH FLOW
Net cash provided by (used in)
continuing operations 48.4 53.3 (8.7) - 93.0
Portfolio proceeds 99.2 - - - 99.2
-------- ------- ------- --------- --------
Total cash provided (used) 147.6 53.3 (8.7) - 192.2
Capital additions and portfolio
investments 326.6 131.4 .3 - 458.3
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF FIRST THREE MONTHS OF 2001
TO FIRST THREE MONTHS OF 2000
GATX Corporation's net income for the first three months of 2001 was $171
million, a $130 million increase from the $41 million reported for the same
period in 2000. Earnings for the quarter included a $164 million after-tax gain
related to the partial sale of the discontinued Integrated Solutions Group (ISG)
segment as well as $20 million of after-tax expense for nonrecurring items.
Earnings per share on a diluted basis increased $2.63 to $3.45 from $.82 in the
2000 period.
The Integrated Solutions Group segment (ISG) was comprised of GATX Terminals
Corporation (Terminals), GATX Logistics, Inc. (Logistics), and minor business
development efforts. The ISG segment is no longer considered to be an ongoing
operation, and its financial data has been segregated as discontinued operations
for all periods presented. During the first quarter of 2001, GATX completed the
sale of substantially all of Terminals' domestic operations to Kinder Morgan
Energy Partners, L.P. The sale included the bulk of the domestic terminaling
operations, Central Florida Pipeline Company, and Calnev Pipeline Company.
Additionally during the quarter, GATX divested substantially all of Terminals'
European operations. Also, GATX recognized an additional $5 million after-tax
gain related to sale of Logistics.
RESULTS OF CONTINUING OPERATIONS
GATX Corporation's gross income from continuing operations of $371 million was
$62 million higher than the prior year. Net income from continuing operations
for the first three months of 2001 was $4 million compared to $38 million for
the first three months of 2000 with the decrease largely due to the nonrecurring
items. Diluted earnings per share from continuing operations likewise decreased
$.67 to $.09 from $.76 for the prior year period.
FINANCIAL SERVICES
Financial Services' gross income increased $59 million from the prior year
period principally due to increases in lease income generated from a larger
lease portfolio. The increase in lease income was predominately driven by growth
in air and technology assets. During the first quarter of 2001, Financial
Services' acquired a portfolio of technology leases from El Camino Resources for
$373 million (including the assumption of $243 of nonrecourse debt). Share of
affiliates' earnings decreased $5 million from last year as higher income from
air and diversified finance joint ventures was offset by decreases in the
telecommunications and rail joint ventures.
Asset remarketing income includes both gains from the sale of assets from
Financial Services' own portfolio and residual sharing fees from the sale of
managed assets. Asset remarketing income increased $5 million from the prior
year period largely due to residual sharing fees from managed aircraft. Gains
from the sale of stock derived from warrants received as part of financing and
leasing transactions with non-public start-up companies grew by $1 million over
the prior year. Asset remarketing income and gains from the sale of stock do not
occur evenly from period to period.
Ownership costs increased $44 million compared with the prior year due to higher
depreciation and interest expense. Depreciation and amortization expense of $78
million increased $25 million from 2000 and reflected the higher level of
investment in operating lease assets, specifically technology and air assets.
Higher average debt balances associated with funding the investment activity
combined with an increase in interest rates drove interest expense higher by $18
million in 2001. Selling, general and administrative expenses increased $13
million over the prior year due to higher human resource and administrative
expenses associated with an overall increase in business activity, including the
expansion of the venture finance platform and increased legal expenses.
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The provision for possible losses was derived from Financial Services' estimate
of losses based on an assessment of credit, collateral and market risks. The
provision for possible losses for the quarter increased $19 million from 2000
reflecting the deterioration of certain steel and telecommunications
investments. The allowance for possible losses increased $9 million to $99
million and was approximately 5.8% of reservable assets, down from 5.9% at
year-end. Reservable assets are defined as direct financing leases, leveraged
leases and secured loans. Write-offs totaled $12.2 million for the quarter and
included write-offs of steel and telecommunications investments. Non-performing
assets of $145 million increased $53 million from year-end primarily due to
telecommunication and venture finance related assets.
Net income of $12 million decreased $11 million from last year principally as a
result of an increase to the loss provision and higher interest and SG&A
expenses associated with increased investment and overall business activity.
GATX RAIL (RAIL)
Rail's gross income for the first three months of 2001 increased slightly over
the prior year period due to higher other service revenues and disposition
gains. Rental revenue was down slightly compared to last year due to a weaker
rail market caused in part by the continued economic downturn. Several
industries serviced by Rail, specifically the chemical industry, are
experiencing adverse market conditions that have in turn reduced railcar demand.
Higher natural gas prices, which increased raw material costs and decreased
production expectations for certain chemical companies, are resulting in lower
demand for railcars. These factors in addition to the announcement by the
railroads to potentially charge demurrage fees and higher diversion fees is
causing fleet rationalization among Rail's customers. These factors are expected
to continue affecting car demand and lease rates during the remainder of the
year.
Approximately 84,600 railcars were on lease throughout North America at quarter
end, compared to 84,900 a year ago. Rail's utilization decreased to 92% as of
March 31, 2001 from 94% at the end of prior year period, reflecting an increase
in the number of idle railcars. Demand for new and used railcars remains soft.
Railcar producers have substantially reduced production levels as a result of
current market conditions. Correspondingly, Rail's new car orders and fleet
additions have also been scaled back. Rail's new car order activity was limited
to specific customer orders. Rail's North American fleet totaled 91,500 cars at
the end of the first quarter, up from 90,400 in the prior year but comparable to
the year end fleet of 91,600.
Ownership costs of $73 million increased $3 million from last year. Although
Rail's fleet increased from 2000, depreciation and interest expense decreased
slightly from last year due to Rail's use of sale-leaseback financing. As a
result, operating lease expense increased $6 million over the prior year period.
Rail's operating costs included $24 million of nonrecurring items, $20 million
of which related to the closing of its East Chicago repair facility. Excluding
these nonrecurring charges, operating expenses increased $7 million due to
higher repair and maintenance expenses attributable to the increased use of
third party contract repair shops as a result of a previously reported labor
dispute at Rail's domestic service centers. In February 2001, employees at
Rail's domestic service centers approved a new labor contract.
Rail's net loss of $4 million was $23 million lower than the prior year
primarily due to closure costs related to its East Chicago repair facility,
unfavorable market conditions and other nonrecurring expenses.
In March 2001 Rail purchased Dyrekcja Eksploatacji Cystern (DEC), a Polish tank
car fleet and fuel distribution company. DEC assets include 11,500 tank cars and
a maintenance network.
CORPORATE AND OTHER
Corporate and Other net expense was $3 million for the first three months of
2001 compared to $4 million for the prior year period. The decrease in net
expense was largely due lower net interest expense that reflects the utilization
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of the proceeds from the partial sale of ISG partially offset by a $4 million
tax charge related to the company's corporate-owned life insurance program. This
incremental tax charge significantly contributed to the increase in the
effective tax rate as compared to the prior year. The first quarter 2000 net
expense included a favorable settlement of an environmental claim.
RESULTS OF DISCONTINUED OPERATIONS
The ISG segment was comprised of GATX Terminals Corporation (Terminals), GATX
Logistics, Inc. (Logistics), and minor business development efforts. The
Integrated Solutions Group segment is no longer considered to be an ongoing
operation, and its financial data has been segregated as discontinued operations
for all periods presented.
In May 2000, GATX sold 81% of Logistics and the remaining 19% in December 2000.
In March 2001, GATX sold the majority of Terminals' domestic operations to
Kinder Morgan Energy Partners, L.P. The sale included Terminals' domestic
terminaling operations, the Central Florida Pipeline Company and Calnev Pipeline
Company. GATX also sold substantially all of Terminals' European operations in
the first quarter of 2001. Additionally, in the first quarter GATX divested of
various smaller supply chain businesses. A net after-tax gain of approximately
$164 million was recognized on the sales of ISG assets in the first quarter
2001. GATX expects to complete the divestiture of Terminals' remaining assets in
2001.
Operating results for the first three months of 2001 were $2 million, down $1
million from the prior year period. Comparisons between periods were affected by
the sale of various ISG assets. Terminals' operations generated $3 million in
the first quarter 2001, compared to $6 million in the first quarter 2000. All
other ISG operations generated a combined loss of $1 million in the first
quarter 2001, compared to a loss of $3 million in the first quarter 2000.
Terminals owned 25.1% of the common stock of Olympic Pipeline Company (Olympic).
On June 10, 1999, a pipeline rupture and explosion occurred on one of the
pipelines owned by Olympic. Several lawsuits have been filed against Olympic and
its operator. On September 20, 2000, Terminals sold its entire 25.1% ownership
of Olympic's common stock to the Pipelines Business Unit of BP Amoco PLC.
CASH FLOW AND LIQUIDITY
Net cash provided by operating activities for the first three months of 2001 was
$29 million, a $64 million decrease from last year's period reflecting lower
earnings and litigation settlement payments. All cash received from asset
dispositions, including gain and return of principal, is included in investing
activities as portfolio proceeds or other asset sales.
Portfolio proceeds increased $149 million from the comparable 2000 period
primarily due to an increase in the remarketing of aircraft and return of
capital distributions from air joint venture investments. Proceeds of $1.0
billion from the sale of a portion of a segment relates to the sale of various
ISG assets.
Portfolio investments and capital additions for the first three months of 2001
totaled $640 million, an increase of $182 million from the first three months of
2000. Portfolio investments at Financial Services of $511 million were $186
million higher than the prior year and primarily reflect investments in
technology and air assets and joint ventures. During the first quarter of 2001,
Financial Services' acquired a portfolio of technology leases from El Camino
Resources for $373 million (including the assumption of $243 of nonrecourse
debt). Rail invested $123 million, an $8 million decrease from the three-month
period of 2000, including approximately $90 million for the acquisition of DEC,
a Polish tank car fleet and fuel distribution company. Rail's capital additions
excluding the acquisition of DEC were $33 million and $131 million in 2001 and
2000, respectively. Rail's investment in its railcar fleet was approximately $96
million lower in 2001 reflecting the current market conditions. As a result,
railcar additions are not anticipated to exceed prior year activity. Future
portfolio
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investments and capital additions will be dependent on market conditions and
opportunities to acquire desirable assets. Internally generated cash flow,
proceeds from asset sales and GATX's external financing sources will be used to
fund portfolio investments and capital additions.
Cash used in financing activities of continuing operations was $209 million in
the first quarter 2001 compared to cash provided by financing activities of
continuing operations of $348 million in the first quarter 2000. GATX Rail
Corporation (GRC) utilized a portion of the proceeds from the sale of Terminals
to repay $237 million of short-term debt and $126 million of long-term
obligations. GATX Capital Corporation (GCC) issued $62 million of long-term debt
and repaid $178 million of long-term obligations.
GATX, through its subsidiaries, had available unused committed lines of credit
amounting to $798 million at March 31, 2001. GRC has a $650 million shelf
registration for pass-through certificates and debt securities of which $477
million had been issued through March 31, 2001. GCC has a shelf registration for
$1.0 billion of which $600 million had been issued through March 31, 2001.
OTHER MATTERS
Effective January 1, 2001, GATX adopted Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an amendment of FASB Statement No. 133. SFAS No. 133, as
amended, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts. The statement requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the qualified nature of the hedge, changes in fair value of the derivative
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive loss. The change in fair value of the ineffective portion of a
hedge will be immediately recognized in earnings.
Financial Services frequently obtains stock and warrants from non-public,
venture capital-backed companies in connection with its financing activities.
Under previous accounting guidance, both the stock and warrants were generally
accounted for as available-for-sale securities in accordance with SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, with changes
in fair value recorded as unrealized gain or loss in other comprehensive loss in
the equity section of the balance sheet. Upon adoption of SFAS No. 133, as
amended, these warrants are to be accounted for as derivatives, with prospective
changes in fair value recorded in current earnings. Stock will continue to be
accounted for in accordance with SFAS No. 115.
Apart from warrants, the GATX uses interest rate and currency swap agreements,
and forward sale agreements, as hedges to manage its exposure to interest rate
and currency exchange rate risk on existing and anticipated transactions. To
qualify for hedge accounting under previous accounting guidance, the derivative
instrument must be identified with and reduce the risk arising from a specific
transaction. Interest income or expense on interest rate swaps was accrued and
recorded as an adjustment to the interest income or expense related to the
hedged item. Realized and unrealized gains on currency swaps were deferred and
included in the measurement of the hedged investment over the term of the
contract. Fair value changes arising from forward sale agreements were deferred
in the investment section of the balance sheet and recognized as part of other
comprehensive loss in stockholder's equity. The adoption of SFAS No. 133 on
January 1, 2001 resulted in $1 million being recognized as expense in the
statement of income and $5 million of unrealized gain in other comprehensive
loss.
Certain statements in Management's Discussion and Analysis constitute
forward-looking statements made pursuant
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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 those suggested in 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 general economic conditions, strength of the
railcar market, railcar lease rate and utilization levels, dynamics (including
natural gas prices) affecting customers within the chemical, petroleum and food
industries and general market conditions in the air, telecommunications, venture
and technology industries.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GATX and its subsidiaries are engaged in various matters of litigation and have
a number of unresolved claims pending, including proceedings under governmental
laws and regulations related to environmental matters. 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
amounts, if any, required to be paid by GATX and its subsidiaries in the
discharge of such liabilities are not likely to be material to GATX's
consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) GATX's Annual Meeting of Stockholders was held on April 27, 2001.
(b) Matters voted upon at the meeting were:
Number of Shares Voted
-------------------------
For Withheld
---------- ---------
1. Election of Directors.
Rod F. Dammeyer 43,180,955 113,458
James M. Denny 43,176,058 118,355
Richard Fairbanks 43,181,820 112,593
William C. Foote 43,181,712 112,701
Deborah M. Fretz 43,200,820 93,593
Miles L. Marsh 43,180,107 114,306
Michael E. Murphy 43,167,152 127,261
John W. Rogers, Jr. 43,167,786 126,627
Ronald H. Zech 42,816,960 477,453
2. Ratification of appointment of Ernst & 43,243,343 For
Young LLP as independent auditors 36,079 Against
for Fiscal 2001. 14,991 Abstentions
There were no broker non-votes with respect to the election of the directors or
the ratification of appointment of independent auditors.
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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
(b) No reports on Form 8-K were filed since March 30, 2001, the filing date
of the December 31, 2000 Form 10-K.
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/ Brian A. Kenney
-----------------------------------------------
Brian A. Kenney
Vice President and
Chief Financial Officer
(Duly Authorized Officer)
Date: May 3, 2001
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