10-K405 1 10K MAIN SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K X ANNUAL 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 Year Ended Commission File Number December 31, 1994 I-8319 GATX CAPITAL CORPORATION Incorporated in the IRS Employer Identification Number State of Delaware 94-1661392 Four Embarcadero Center San Francisco, CA 94111 (415) 955-3200 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ----- All Common Stock of Registrant is held by GATX Financial Services, Inc. (a wholly-owned subsidiary of GATX Corporation). As of March 17, 1995, Registrant has outstanding 1,031,250 shares of $1 par value Common Stock. THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. DOCUMENTS INCORPORATED BY REFERENCE Document Part of Form 10-K ------------ ----------------------- Annual Report to Stockholder for Part II Items 6,7 & 8 Fiscal Year Ended December 31, 1994 (the "Annual Report") Registration Statement on Form S-1 Part IV Item 14(a)3 filed with the Commission on December 23, 1981 (file No. 2-75467) Amendment No. 1 to Form S-1 filed Part IV Item 14(a)3 with the Commission on February 23, 1982 Amendment No. 2 to Form S-1 filed Part IV Item 14(a)3 with the Commission on March 2, 1982 Form 10-K for the Year Ended Part IV Item 14(a)3 December 31, 1982 filed with the Commission on March 28, 1983 Form 10-K for the Year Ended Part IV Item 14(a)3 December 31, 1985 filed with the Commission on March 24, 1986 Form 10-K for the Year Ended Part IV Item 14(a)3 December 31, 1989 filed with the Commission on March 30, 1990 Form 10-K for the Year Ended Part IV Item 14(a)3 December 31, 1990 filed with the Commission on March 30, 1991 Form 10-K for the Year Ende Part IV Item 14(a)3 December 31, 1992 filed with the Commission on March 31, 1993 PART I Item 1. Business --------------------- The principal business of GATX Capital Corporation and subsidiaries (the "Company") is to provide and arrange equipment leases and other loan financing. The Company also manages a portfolio of leased equipment for its own account and the account of others. GATX Capital Corporation is a wholly- owned subsidiary of GATX Corporation. Item 2. Properties ---------------------- The Company leases all of its office space and owns no materially important physical properties other than those related directly to its investment portfolio. The Company's principal offices are rented under a twelve year lease expiring in 2003. Item 3. Legal Proceedings --------------------------------- There are no legal proceedings pending to which the Company is a party, other than routine litigation in the normal course of business of the Company. The Company believes that the outcome of any lawsuit or claim which is pending or threatened will not have a material adverse effect on its financial condition or operations. Item 4. Submission of Matters to a Vote of Security Holders ------------------------------------------------------------------------- Omitted under provisions of the reduced disclosure format. PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder ----------------------------------------------------------------------------- Matters -------- Not applicable. All common stock of the Registrant is held by GATX Corporation. Information regarding dividends is shown on the consolidated statements of income and reinvested earnings included in Item 8. Item 6. Selected Financial Data --------------------------------------- Omitted under provisions of the reduced disclosure format. Item 7. Management's Discussion and Analysis of Financial Condition and ----------------------------------------------------------------------------- Results of Operations --------------------- Incorporate herein by reference to the Annual Report, pages 19, 21, 22 and 25, included as Exhibit 13 of this document. Item 8. Financial Statements and Supplementary Data ----------------------------------------------------- The following consolidated financial statements of GATX Capital Corporation, included in the 1994 Annual Report (Exhibit 13), are incorporated herein by reference (page references are to the Annual Report): Consolidated Statements of Income and Reinvested Earnings Years Ended December 31, 1994, 1993 and 1992 Page 20 Consolidated Balance Sheets As of December 31, 1994 and 1993 Page 23 Consolidated Statements of Cash Flows Years Ended December 31, 1994, 1993 and 1992 Page 24 Notes to Consolidated Financial Statements Pages 26-33 Item 9. Changes in and Disagreements with Accountants on Accounting and ----------------------------------------------------------------------------- Financial Disclosure --------------------- None. PART III Item 10(a). Directors of the Registrant ---------------------------------------------- Name Office Held Since Age ------- -------------- -------- ------- James J. Glasser Chairman of the Board 1971 60 Joseph C. Lane President and Director 1994 41 Alan C. Coe Executive Vice President and Director 1994 43 Jesse V. Crews Executive Vice President and Director 1994 42 David M. Edwards Director 1990 43 Frederick L. Hatton Executive Vice President and Director 1984 52 Ronald H. Zech Director 1984 51 Item 10(b). Executive Officers of the Registrant Name Office Held Since Age ------- -------------- -------- ------- Joseph C. Lane President, Director, and Chief Executive Officer 1994 41 Frederick L. Hatton Executive Vice President and Director 1984 52 Alan C. Coe Executive Vice President and Director 1994 43 Jesse V. Crews Executive Vice President and Director 1994 42 Michael E. Cromar Vice President and Chief Financial Officer 1994 47 Cal C. Harling Senior Vice President 1994 46 Robert J. Sammis Senior Vice President 1993 48 Thomas C. Nord Vice President, General Counsel, and Secretary 1980 54 George R. Prince Vice President and Treasurer 1983 50 Curt F. Glenn Principal Accounting Officer, 1992 40 Vice President and Controller Valerie C. Williams Vice President - Human Resources 1989 50 JOSEPH C. LANE, President, Director and Chief Executive Officer since 1994. Mr. Lane joined the Company in 1979 as a Financial Analyst and has served as District Manager, Regional Manager, Vice President, Senior Vice President and Executive Vice President. Mr. Lane was formerly Vice President - Corporate Finance for Rotan Mosle Investment Bankers (two years) and a member of the Yale University Development Faculty (three years). Mr. Lane currently serves as a Director of the Equipment Leasing Association Board. He received a BA from Yale University in 1975. FREDERICK L. HATTON, Executive Vice President and Director since 1984. Mr. Hatton joined the Company in 1983 as Senior Vice President and President of GATX Air. He is currently responsible for GATX Airlog. Prior to 1983, he served as Vice President-Marketing for two years, and Executive Vice President for four years with International Air Service Company (IASCO). Prior to IASCO, Mr. Hatton served in a number of managerial capacities for Flying Tiger Lines. He received a BS from Yale University in 1964, an MS in aerospace management from the University of Southern California in 1971, and an MBA from the Wharton School in 1972. Mr. Hatton served as a U.S. Marine Corps fighter pilot from 1964 to 1970 including a tour in Vietnam. ALAN C. COE, Executive Vice President and Director since 1994. Mr. Coe joined the Company in 1977 as a Financial Analyst and has held a variety of positions both domestically and internationally. Prior to 1977, Mr. Coe served as an officer in the United States Air Force (four years) and as Vice President - Corporate Finance - with Rotan Mosle in Houston, Texas (three years). Mr. Coe received a BA from Southern Methodist University in 1973 and his MBA from Golden Gate University in 1976. JESSE V. CREWS, Executive Vice President and Director since 1994. Mr. Crews joined the Company in 1977 as a Financial Analyst and had a variety of positions, including Regional Manager of the Singapore (two years) and New Orleans/Houston (five years) offices before returning to San Francisco in 1985. He has been broadly responsible for the development of new business investment opportunities for the Company's own portfolio since 1986 and as head of the Corporate Finance Group from 1990 to 1994. Mr. Crews received a BA from Yale and an MBA from the University of Virginia. MICHAEL E. CROMAR, Vice President and Chief Financial Officer since October 1994. Prior to joining GATX, Mr. Cromar was Vice President, Treasurer and Chief Financial Officer at The Harper Group, Inc., a San Francisco based international logistics services company (two years). Previously, he served S.A. Louis-Dreyfus & Cie., principally as Senior Vice President, Finance and Information, for Gearbulk Ltd. an industrial bulk shipping joint venture in Bergen, Norway (four years). From 1982 to 1988 (five years) he was corporate controller and a director of information technology for American President Companies, Ltd. From 1975, he held a variety of financial management positions with Natomas Co., an energy resources company. Mr. Cromar began his career with Touche Ross & Co. where he was a Certified Public Accountant. He received a BS degree in Business Administration in 1972 from the University of Utah and was an infantry officer in the U.S. Army, including service in Vietnam. CAL C. HARLING, Senior Vice President since 1994. Mr Harling joined the Company in 1987 as Vice President, Technology Financing. Prior to 1987 Mr. Harling was an independent consultant for two years. Mr. Harling worked for Decimus Corporation, a subsidiary of BankAmerica Corporation, for ten years starting in 1975. While at Decimus Mr. Harling held various positions including Vice President of Vendor Operating Leasing, Vice President of Portfolio Management, and other management positions in systems development. Mr. Harling received a BS from California State University, Sacramento in 1973. ROBERT J. SAMMIS, Senior Vice President - Corporate Development since 1993. Mr. Sammis joined the Company in 1975 as Associate Counsel. He has served as a Senior Vice President in charge of Equipment Management and as Managing Director, International. Mr. Sammis is a Fulbright scholar and, in that capacity, taught law at the University of Los Andes, Bogota, Columbia. Prior to joining the Company, he was with Pillsbury, Madison & Sutro as Associate Counsel. Mr. Sammis received a BA from the University of California and a JD from the University of Michigan. THOMAS C. NORD, Vice President and General Counsel since 1980. Mr. Nord joined the Company as Associate Counsel in 1977 and became Assistant General Counsel in 1978. Prior to 1977, Mr. Nord served as Counsel for Charter New York Leasing, an affiliate of Irving Trust Company (three years), and as an Associate in the New York law firm of Seward and Kissel (five years). Mr. Nord received a BA from Northwestern University in 1962 and a JD from the University of North Carolina in 1969. GEORGE R. PRINCE, Vice President and Treasurer since 1983. Mr. Prince joined the Company in 1981 as Assistant Vice President - Corporate Development. In 1983, he was promoted to Vice President and Treasurer. Prior to 1981, Mr. Prince was Vice President for Continental Bank. Mr. Prince received his BS in 1966 from Cornell University and MBA in 1968 from Michigan State. CURT F. GLENN, Principal Accounting Officer, Vice President and Controller since 1992. Mr. Glenn joined the company in 1980 as Assistant Tax Manager, was appointed Tax Manager in 1985 and elected Vice President in 1989. Prior to joining the Company, Mr. Glenn was a Senior Tax Analyst at GATX Corporation (two years) and a Senior Tax Accountant with Trans Union Corporation (four years). Mr. Glenn received a B.S. in Accounting from DePaul University in 1977. Mr. Glenn is currently Chairman of the Federal Tax Committee of the Equipment Leasing Association of America. VALERIE C. WILLIAMS, Vice President - Human Resources since 1989. Prior to joining GATX, Ms. Williams was President of VC Williams & Associates, a human resources consulting firm; was Director, Corporate Compensation and Incentives at Carson Pirie Scott & Co. and Consultant, Compensation with A.S. Hansen, Inc. Ms. Williams received her MBA from Lake Forest College in 1980. Items 11, 12 & 13 ---------------------- Omitted under provisions of the reduced disclosure format. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K --------------------------------------------------------------------------- (a) 1. Financial statements The following consolidated financial statements of GATX Capital Corporation included in the Annual Report for the year ended December 31, 1994, are incorporated by reference in Item 8. Consolidated Balance Sheets As of December 31, 1994 and 1993 Consolidated Statements of Income and Reinvested Earnings Years Ended December 31, 1994, 1993 and 1992 Consolidated Statements of Cash Flows Years Ended December 31, 1994, 1993 and 1992 Notes to Consolidated Financial Statements 2. Financial statement schedules All financial statement schedules have been omitted because they are not applicable or because required information is provided in the financial statements, including the notes thereto, which are incorporated by reference in Item 8. Item 14.(a) (continued) --------------------------- 3. Exhibits Required by Item 601 of Regulation S-K Exhibit Number ----------- 3(a) Restated Certificate of Incorporation of the Company.(1) 3(b) By-laws of the Company.(2) 4(d) Term Loan Agreement between the Company and a Bank dated as of December 26, 1990.(3) 10(a) Office Leases, Four Embarcadero Center, dated October 1, 1990 and June 1, 1991, between the Company and Four Embarcadero Center Venture.(3) 10(b) Tax Operating Agreement dated January 1, 1983 between GATX Corporation and GATX Leasing Corporation.(4) 10(c) Preferred Stock and Tax Assumption program and Issuance of Common Stock.(5) 10(d) Preferred Stock Redemption Agreement.(6) 10(e) Credit Agreement among the Company, the Subsidiaries listed in Schedule II thereto, the Banks listed on the signature pages thereto, and Chase Manhattan Bank, as agent for the Banks, dated December 14, 1992.(7) 10(f) Credit Agreement among the Company, its two subsidiaries operating in Canada, and the Bank of Montreal, dated December 14, 1992.(7) 10(g) Second Amendment, dated June 14, 1994, to Credit Agreement referred to in 10(f).(8) 10(h) Third Amendment, dated December 1, 1994, to Credit Agreement referred to in 10(f).(8) 10(i) Amendment No. 1, dated December 1, 1994, to Credit Agreement referred to in 10(e).(8) 10(j) First Amendment, dated June 20, 1993, to Credit Agreement referred to in 10(f).(8) 12 Computation of Ratio of Earnings to Fixed Charges.(8) 13 Annual Report to Shareholder, pages 19-34.(8) 23 Consent of Independent Auditors.(8) 27 Financial Data Schedule.(8) 99 Listing of Medium Term Notes.(8) The Registrant agrees to furnish to the Commission upon request a copy of each instrument with respect to issues of long-term debt of the Registrant the authorized principal amount of which does not exceed 10% of the total assets of Registrant. (1) Incorporated by reference to Form 10-K filed with the Commission on March 30, 1990. (2) Incorporated by reference to Registration Statement on Form S-1, as amended, (file number 2-75467) filed with the Commission on December 23, 1981, page II-4. (3) Incorporated by reference to Form 10-K filed with the Commission on March 30, 1991. (4) Incorporated by reference to Form 10-K filed with the Commission on March 28, 1983. (5) Incorporated by reference to Form 10-K filed with the Commission on March 24, 1986. (6) Included in the Restated Certificate of Incorporation incorporated by reference herein. (7) Incorporated by reference to Form 10-K filed with the Commission on March 31, 1993. (8) Submitted to the Securities and Exchange Commission with the electronic filing of this document. Item 14(b). Reports on Form 8-K ----------------------------------------- No reports on Form 8-K have been filed during the last quarter of the period covered by this report. Report of Independent Auditors Board of Directors GATX Capital Corporation We have audited the consolidated financial statements of GATX Capital Corporation (a wholly owned subsidiary of GATX Corporation) and subsidiaries listed in the accompanying index to financial statements (Item 14(a)). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements listed in the accompanying index to financial statements Item 14(a)) present fairly, in all material respects, the consolidated financial position of GATX Capital Corporation and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. In 1992, the Company changed its method of accounting for income taxes and postretirement benefits other than pensions effective January 1, 1992. ERNST & YOUNG LLP San Francisco, California January 24, 1995 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 CAPITAL CORPORATION (Registrant) By /s/ Joseph C. Lane ------------------------------ Joseph C. Lane President, Director, and Chief Executive Officer March 27, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. By /s/ Joseph C. Lane By /s/ Michael E. Cromar ---------------------- --------------------------- Joseph C. Lane Michael E. Cromar President, Director, and Vice President and Chief Executive Officer Chief Financial Officer Dated: March 27, 1995 Dated: March 27, 1995 By /s/ Curt F. Glenn By /s/ David M. Edwards ---------------- --------------------------- Curt F. Glenn David M. Edwards Principal Accounting Officer and Director Vice President & Controller Dated: March 27, 1995 Dated: March 27, 1995 By /s/ Jesse V. Crews By /s/ Alan C. Coe ----------------------- --------------------- Jesse V. Crews Alan C. Coe Executive Vice President Executive Vice President and Director and Director Dated: March 27, 1995 Dated: March 27, 1995 EX-12 2 RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12 ------------
GATX Capital Corporation Ratio of Earnings to Fixed Charges Year Ended December 31, (in thousands) 1994 1993 1992 1991 1990 ------ ------ ------ ------ ------ Fixed Charges: Interest on indebtedness and amortization of debt discount and expense $ 62,744 $ 65,454 $ 71,889 $ 71,374 $ 57,167 Capitalized interest 292 279 731 2,549 7,574 Portion of rents representing interest factor (assumed to approximate 33%) 5,120 3,012 2,440 1,346 1,201 -------- ------ ------ ------- ------ Total fixed charges $ 68,158 $ 68,745 $ 75,060 $ 75,269 $ 65,942 ===== ===== ===== ===== ===== Earnings available for fixed charges: Net income (loss) $ 24,851 $ 21,525 $ (7,197) $ 28,485 $ 31,603 Add (deduct): Income taxes (benefit) 18,785 21,361 (9,849) 22,549 22,693 Cumulative effect of accounting changes - - (9,456) - - Equity in net earnings of joint ventures, net of dividends received 14,322 16,222 40,161 7,109 - Fixed charges (excluding capitalized interest) 67,864 68,466 74,329 72,720 58,368 -------- ------ ------ ------ -------- Total earnings available for fixed charges $ 125,822 $127,574 $ 87,988 $ 130,863 $112,664 ====== ====== ===== ===== ====== Ratio of earnings to fixed charges 1.85 1.86 1.17 1.74 1.71 ====== ====== ===== ===== ======
EX-13 3 ANNUAL REPORT Management's Discussion and Analysis ---------------------------------- Overview -------- GATX Capital Corporation and subsidiaries (the "Company") provide and arrange equipment leases and other loan financing. The Company also manages a portfolio of leased equipment for its own account and the account of others. The compensation for managing these portfolios is heavily dependent upon performance. In 1994, the improvement in the economy, a resurgence in bank earnings, and the resulting oversupply of equity chasing available financings conspired to keep lease rates uncharacteristically low. However, recent increases in interest rates have helped make the lease financing option more attractive to potential lessees. Capital equipment spending in 1995 is improving. Consequently, a better balancing of lessor supply with lessee financing demand should result in more opportunities, as well as better returns, for investors such as GATX Capital. Commercial airlines in the United States posted a collective profit for the first time in many years. Although lower fuel prices were a major contributor to that profit, the industry is also making improvements in cost controls. Aircraft demand in the near-term is expected to remain weak. However, with aircraft production rates lower and more older aircraft being retired than in recent years, oversupply of aircraft is being reduced and lease rates for certain aircraft are firming. The outlook for GATX Rail continues to be quite positive. Utilization rates are approaching 100% for both our railcar and locomotive fleets. We are encouraged by continued traffic growth in the rail sector and, in particular, increased movements of intermodal freight and bulk commodities. The focus of GATX Rail has and will become more global in nature as we pursue opportunities outside of North America, with specific emphasis in Europe. The outlook for Technology Asset Funding is positive. The technology and communications industry is beginning to expand again after reduced spending by equipment users. The cycle of price performance improvement continues to accelerate, and additional services provided by lessors are becoming a more important part of the overall financing package. These trends are expected to continue through the 1990s, and GATX Capital is well positioned to take advantage of them. The success of our strategy in Golf Capital was evident by the record profits in 1994 from this activity. The challenge going forward will be to identify additional golf course management companies with whom we feel confident and see growth opportunities. The prospects for Venture Finance continue to be positive. We expect industry-wide venture capital investment to be in the $2-$3 billion range in 1995. However, we expect some increase in the intensity of competition in 1995 from both existing competitors and new market entrants A pie chart entitled "ASSET CONCENTRATION" appears here depicting the following information:
INDUSTRY % -------- --- Air 43.2% Rail 22.6% Warehouse/Production 7.3% Marine 8.0% Golf 5.1% Real Estate 3.8% Other 10.0%
Page 19 CONSOLIDATED STATEMENTS OF INCOME AND REINVESTED EARNINGS
Year ended December 31, (in thousands) 1994 1993 1992 ------ ----- ----- Earned Income Leases $143,639 $125,457 $115,631 Gain on disposition of equipment 21,444 44,434 22,277 Fees 10,111 8,680 13,964 Interest 27,085 19,666 21,494 Investment in joint ventures 9,242 8,383 12,445 Other 4,511 5,777 4,305 -------- -------- --------- 216,032 212,397 190,116 Expenses Interest 62,744 65,358 71,889 Operating leases 50,621 35,277 21,814 Selling, general and administrative 39,296 37,458 38,466 Provision for losses on investments 19,000 29,000 81,000 Other 735 2,418 3,449 -------- -------- --------- 172,396 169,511 216,618 Income (Loss) Before Income Taxes and Cumulative Effect of Accounting Changes 43,636 42,886 (26,502) Income Taxes Current income tax expense 12,112 14,535 5,911 Deferred income tax expense (benefit) 6,673 6,826 (15,760) -------- -------- --------- 18,785 21,361 (9,849) -------- -------- --------- Income (Loss) Before Cumulative Effect of Accounting Changes 24,851 21,525 (16,653) Cumulative Effect of Accounting Changes _ _ 9,456 -------- -------- --------- Net Income (Loss) 24,851 21,525 (7,197) Reinvested Earnings at Beginning of Year 133,570 123,771 130,968 Dividends Paid to Stockholder (12,385) (11,726) _ -------- -------- --------- Reinvested Earnings at End of Year $146,036 $133,570 $123,771 ======== ========= ========= The accompanying notes are an integral part of these consolidated financial statements.
Page 20 Management's Discussion and Analysis ----------------------------------- Results of Operations ------------------ Net income of $24.9 million in 1994 exceeded the prior year by $3.4 million. The increase in earned income was primarily generated by increased lease and interest income, offset by lower gains from disposition of equipment. The increase in total expenses resulted from higher operating lease expense, offset by a lower provision for losses and a decrease in tax expense. The increase in net income between 1992 and 1993 was primarily due to the reduction in the provision for losses, coupled with an increase in gains on disposition of equipment. Lease income has been increasing primarily because of the significant amount invested, both on and off the balance sheet, in new operating leases each year. The operating lease portfolio generated $21.8 million more income in 1994 than in 1993. Approximately $7.2 million of this increase was due to an acquisition of a large railcar portfolio which generated a full year's income in 1994 but only six months of income in 1993. Income from finance leases decreased $3.6 million from 1993 to 1994. The decrease is primarily due to the impact of revised residual estimates on older aircraft subject to leveraged leases. Interest income increased in 1994 due to several loan repayments and higher interest rates. Two large golf loans were prepaid in 1994, generating $2.4 million of interest income from prepayment premiums. An additional $3.0 million of interest, which had not been accrued due to its uncertain nature, was realized from a real estate loan and an investment in purchased notes. The effect of higher interest rates on variable rate loans led to a $2.1 million increase in income from 1993. Disposition gains are primarily realized from asset remarketing both at lease end and in response to market opportunities. The amount of income from this activity fluctuates between periods. A stacked bar chart entitled "EARNED INCOME" appears here depicting the components of earned income for the years 1992, 1993, and 1994 as shown on the income statement on page 20. Page 21 Fee income is generated from managing and re-marketing assets on behalf of others, and from providing broker services. The Company's remarketing fees are generally performance-based and can fluctuate significantly depending on market conditions and the timing of lease maturities. The amount of fee income from managing portfolios for others has been increasing each year as the size of managed portfolios expands. Joint venture income in 1992 included a $2.7 million gain on the sale of a real estate investment. Income in 1993 was lower, in part, due to a revision of residual estimates at one of the Company's technology finance joint ventures. Operating Lease expense has been increasing primarily because of growth in the lease portfolio and accelerated depreciation on older wide body aircraft. The increase in depreciation from 1993 to 1994 of $7.2 million included accelerated depreciation on aircraft of $4.2 million. Operating lease rental expense increased $6.5 million in 1994 because of a large sale leaseback of railcars in late 1993. The increase in repairs and maintenance expense of $1.3 million in 1994 reflects the acquisition of that same railcar fleet in mid-1993. Tax expense decreased in 1994 as a result of a lower effective tax rate, 43.0%, compared to the 49.8% effective rate in 1993. The 1993 effective rate included the 3.7% effect of the Federal tax rate increase which occurred that year. The provision for losses on investments in 1992 and 1993 reflected continued concern for the values of certain types of aircraft and real estate. Much of the Company's older, Boeing 747 and McDonnell Douglas DC-10 aircraft and certain real estate investments were written down over the last three years. These factors have resulted in the decline in the allowance for losses, and charges to that allowance as a percentage of investments, as well as a decline in the provision. A bar chart entitled "OPERATING LEASE MARGIN" appears here depicting operating lease expense (as shown on the income statement on page 20) and operating lease income (as shown in the footnote entitled Earned Income from Leases on page 27) for the years 1992, 1993, and 1994. A bar chart entitled "ALLOWANCE FOR LOSSES" appears here depicting the following information:
1994 1993 1992 ---- ---- ---- Allowance for losses as a percentage of total investments 6.40% 6.92% 7.43% Charges to allowance for losses as a percentage of total investments 2.14% 3.47% 3.83%
Page 22 CONSOLIDATED BALANCE SHEETS
As of December 31, (in thousands) 1994 1993 ------ ------ Assets Cash and cash equivalents $ 9,407 $ 12,950 Investments: Direct financing leases 245,441 275,605 Leveraged leases 252,651 224,953 Operating lease equipment - net of depreciation 295,273 254,651 Secured loans 231,225 226,073 Investment in joint ventures 202,367 197,720 Assets held for sale or lease 24,320 56,777 Other investments 20,373 24,298 Investment in future residuals 13,157 14,071 Less: Allowance for losses on investments (82,206) (88,193) -------- --------- Total investments 1,202,601 1,185,955 Due from GATX Corporation 42,515 42,638 Other assets 15,067 15,055 -------- --------- Total Assets $1,269,590 $1,256,598 ========= ========= Liabilities and Stockholder's Equity Accrued interest $ 14,987 $ 14,489 Accounts payable and other liabilities 108,635 43,637 Debt financing: Commercial paper and bankers' acceptances 124,834 104,164 Notes payable 14,021 17,771 Obligations under capital leases 19,431 22,442 Senior term notes 613,600 624,850 -------- --------- Total debt financing 771,886 769,227 Nonrecourse obligations 55,270 68,058 Deferred income 4,185 62,965 Deferred income taxes 15,390 11,053 Stockholder's equity: Convertible preferred stock, par value $1.00 1,027 1,027 Authorized - 4,000,000 shares Issued and outstanding - 1,027,050 shares in both years Common stock, par value $1.00 1,031 1,031 Authorized - 2,000,000 shares Issued and outstanding - 1,031,250 shares in both years Additional paid-in capital - convertible preferred stock 123,973 123,973 - common stock 27,929 27,929 Reinvested earnings 146,036 133,570 Equity adjustment from foreign currency translation (759) (361) -------- --------- Total stockholder's equity 299,237 287,169 -------- --------- Total Liabilities and Stockholder's Equity $1,269,590 $1,256,598 ========= ========= The accompanying notes are an integral part of these consolidated financial statements.
Page 23 CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, (in thousands) 1994 1993 1992 ------ ----- ----- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 24,851 $ 21,525 $ (7,197) Reconciliation to net cash from operating activities: Provision for losses on investments 19,000 29,000 81,000 Depreciation expense 33,341 29,052 17,927 Cumulative effect of accounting changes - - (9,456) Provision for deferred income taxes (benefits) 6,673 6,826 (15,760) Gain on disposition of equipment (21,444) (44,434) (22,277) Joint venture income (9,242) (8,383) (12,445) Changes in assets and liabilities: Accrued interest, accounts payable, and other liabilities 61,836 6,254 253 Due from GATX Corporation 123 (6,984) (4,673) Deferred income (48,072) 1,474 (273) Other - net (6) (6,994) 2,120 ------ ----- ----- Net cash flows from operating activities 67,060 27,336 29,219 ------ ----- ----- CASH FLOWS FROM INVESTING ACTIVITIES Investments in leased equipment, net of nonrecourse borrowings for leveraged leases (161,341) (215,974) (68,091) Loans extended to borrowers (101,500) (39,390) (40,184) Other investments (16,285) (46,199) (68,510) -------- ------- ------- Total investments (279,126) (301,563) (176,785) Lease rents received, net of earned income and leveraged lease nonrecourse debt service 24,234 33,893 6,932 Loan principal received 88,415 53,903 39,029 Proceeds from disposition of equipment 75,697 101,429 52,502 Proceeds from disposition of real estate 10,475 31,963 3,454 Joint venture investment recovery 23,564 24,603 52,606 -------- ------- ------- Recovery of investments 222,385 245,791 154,523 -------- ------- ------- Proceeds from disposition of other assets - 90,604 - -------- ------- ------- Net cash flows (used in) provided by investing activities (56,741) 34,832 (22,262) -------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in short-term borrowings 16,920 (76,156) (44,895) Proceeds from issuance of long-term debt 55,000 120,000 100,000 Repayment of long-term debt (66,250) (91,347) (59,127) Dividends paid to stockholder (12,385) (11,726) - Other financing activities (7,147) (2,816) (6,295) -------- ------- ------- Net cash flows used in financing activities (13,862) (62,045) (10,317) -------- ------- ------- Net (decrease) increase in cash and cash equivalents (3,543) 123 (3,360) Cash and cash equivalents at the beginning of the year 12,950 12,827 16,187 -------- ------- ------- Cash and Cash Equivalents at December 31 $ 9,407 $ 12,950 $ 12,827 ======= ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Income taxes paid $ 15,557 $ 25,707 $ 10,403 Interest paid $ 61,918 $ 65,861 $ 72,653 The accompanying notes are an integral part of these consolidated financial statements.
Page 24 Management's Discussion and Analysis ---------------------------------- Cash Flow, Liquidity and Capital Resources -------------------------------------- In 1994, the Company generated cash from operations of $67.1 million and portfolio proceeds of $222.4 million, which were reinvested in $279.1 million of leased equipment, loans and other investments, and used to pay $12.4 million in dividends. Cash from operating activities was higher in 1994 compared to the two prior years primarily due to the change in the Company's lease portfolio mix. The Company has made increasing investments in operating leases, both on and off the balance sheet, over the last three years. Cash from operating leases, net of lease-in expense, represented $15.3 million of the increase in cash from operations. Cash from loan interest increased $7.4 million. The remaining $17.0 million increase between 1994 and 1993 is primarily due to changes in certain assets and liabilities, which can vary between periods depending on timing of fundings, and payments made to GATX Corporation. The increase in accounts payable includes a $48.0 million reclassification from deferred income related to aircraft that the Company must repurchase in January, 1995, as a result of the lessee's exercise of an option to return the aircraft. Cash from investing activities decreased between 1993 and 1994 due to a higher level of investment in new transactions, net of sale leaseback transactions, and less cash recovery of investments. Total 1993 investments included the purchase of a significant rail operating lease fleet which was subsequently sold and leased back from the purchaser, the proceeds of which are shown as proceeds from disposition of other assets. The Company had approved unfunded transactions totalling $191.6 million as of December 31, 1994. Of this amount, $90.2 million is scheduled to be funded in 1995 and the remainder beyond. Recovery of investments decreased between 1994 and 1993 as a result of lower proceeds from disposition of equipment and real estate offset by higher principal repayments on loans. Disposition gains are discussed in the results of operations. Real estate proceeds continue to decline as the Company liquidates its remaining portfolio of owned real estate. Loan principal received in 1994 included prepayments of two golf loans with total principal balances of $41.8 million. Joint venture investment recovery in 1992 included $17.4 million of proceeds from the sale of a real estate joint venture investment. Cash from financing activities is used to fund investments and to pay dividends on the Company's common stock. Historically, dividends have been paid on the Company's common stock at the rate of 50% of net income, which is expected to continue in the future. The Company expects to fund a portion of future growth through issuance of medium-term notes, commercial paper, and bankers' acceptances. The commercial paper and bankers' acceptances are backed by credit agreements from a syndicate of domestic and international commercial banks. The Company had unused capacity under these agreements of $125.2 million at December 31, 1994. In addition, the Company has a $300.0 million shelf registration for Series C medium-term notes, under which $55.0 million had been issued as of December 31, 1994. Total debt financing remained relatively constant between years while stockholder's equity increased $12.1 million. As a result, the Company's debt to equity ratio declined from 2.68:1 in 1993 to 2.58:1 in 1994. The leverage ratio as defined in the Company's credit agreements remains well within the 4:1 limit. The Company ensures a stable margin over its cost of funds by managing the relationship of its fixed and floating rate lease and loan financing to its fixed and floating rate borrowing. In order to meet this objective, derivative financial instruments, primarily interest rate swaps, are often used to modify the interest characteristics of the Company's debt. At December 31, 1994, the Company had $56.3 million more floating rate debt than floating rate assets. The following table provides additional information with respect to the Company's liquidity and financial position:
As of and For the Year Ended December 31, 1994 1993 1992 ------ ----- ----- Ratios: Interest coverage 1.85x 1.86x 1.17x Floating rate exposure to total capitalization 4.91% - - Total debt financing to stockholder's equity 2.58x 2.68x 2.98x
Page 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands) SIGNIFICANT ACCOUNTING POLICIES ---------------------------- Business -------- GATX Capital Corporation and subsidiaries (the "Company") provide and arrange equipment leases and other loan financing. The Company also manages a portfolio of leased equipment for its own account and the account of others. GATX Capital Corporation is a wholly-owned subsidiary of GATX Corporation. Principles of Consolidation ------------------------ The consolidated financial statements include the accounts of the Company after elimination of significant intercompany accounts and transactions. Investments in minority-owned or non-controlled affiliated companies are accounted for using the equity method. Cash and Cash Equivalents ----------------------- The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Deferred Income -------------- Deferred income primarily represents income related to operating leases, where the Company is the lessee, for which the earnings process has not been completed. The income is recognized on a straight-line basis over the lives of the operating leases. The 1993 balance included $48.0 million of proceeds related to an aircraft sale which had been received in advance and deferred pending the outcome of an option to return the aircraft held by the purchaser. During 1994, the purchaser exercised its option to return the aircraft in January, 1995, and the balance was reclassified to accounts payable. Lease and Loan Origination Costs ----------------------------- Initial direct costs for originated direct finance and leveraged leases are capitalized and amortized as an adjustment of yield over the term of the lease. For operating leases, initial direct costs are deferred and amortized on a straight-line basis over the lease term. Loan origination fees are netted with loan costs and are deferred and recognized over the life of the loan as an adjustment to interest income. INVESTMENTS ------------ Direct Financing Leases --------------------- The Company's investment in direct financing leases includes lease contracts receivable plus the estimated residual value of the equipment at the lease termination date, less unearned income. Lease contracts receivable includes the total rent to be received over the life of the lease reduced by rent already collected. Initial unearned income is the amount by which the lease contract receivable plus the estimated residual exceeds the initial investment in the leased equipment at lease inception. The remaining unearned income is amortized to lease income over the lease term in a manner which produces a constant rate of return on the net investment in the lease. The components of the Company's investment in direct financing leases are as follows:
At December 31, 1994 1993 ----- ----- Lease contracts receivable $ 289,565 $ 340,885 Estimated residual value 82,940 90,373 Unearned and deferred income (127,064) (155,653) -------- -------- Net investment $ 245,441 $ 275,605 ======== ========
Leveraged Leases ---------------- Financing leases which are financed principally with nonrecourse borrowings at lease inception, and which meet certain other criteria, are accounted for as leveraged leases. Leveraged lease contracts receivable are stated net of the related nonrecourse debt service, which includes unpaid principal and aggregate remaining interest on such debt. Unearned income represents the excess of anticipated cash flows (including estimated residual values and after taking into account the related debt service) over the Company's investment in the lease. The components of the Company's net investment in leveraged leases are as follows:
At December 31, 1994 1993 ------- ----- Lease contracts receivable $ 547,961 $ 569,669 Nonrecourse debt service (301,259) (333,447) --------- --------- Net receivable 246,702 236,222 Estimated net residual value 157,736 143,309 Unearned income (151,787) (154,578) Investment in leveraged leases 252,651 224,953 Deferred taxes arising from leveraged leases (63,610) (72,578) --------- --------- Net investment $ 189,041 $ 152,375 ======== ========
Page 26 Operating Leases --------------- Leases that do not qualify as direct finance or leveraged leases are accounted for as operating leases. Rental income is reported on a straight-line basis over the term of the lease. Equipment subject to operating leases is stated at cost less accumulated depreciation plus accrued rent and is generally depreciated to its estimated residual value using the straight-line method. Aircraft are depreciated over their useful lives, ranging from 25-30 years, while other equipment is generally depreciated over the term of the lease. Depreciation expense of $33.3 million, $26.0 million, and $16.4 million is included in operating lease expense for 1994, 1993, and 1992, respectively. Major classes of equipment on operating leases are as follows:
At December 31, 1994 1993 ------- ------ Aircraft $ 239,200 $ 189,849 Railroad equipment 69,933 62,181 Other 25,945 22,859 ------- ------ Total cost 335,078 274,889 Accumulated depreciation (47,791) (32,307) ------- ------ Net book value 287,287 242,582 Accrued rent and other 7,986 12,069 ------- ------ Net investment $ 295,273 $ 254,651 ======= =======
Earned Income from Leases ------------------------ The sources of earned income from leases were as follows:
At December 31, 1994 1993 1992 ------ ------ ----- Direct financing leases $ 28,612 $ 32,510 $ 36,529 Leveraged leases 25,894 25,606 25,555 Operating leases 89,133 67,341 53,547 ------ ------ ----- Total Earned Income $143,639 $125,457 $115,631 ======= ======= =======
The tax expense related to leveraged lease income was $9.3 million, $10.0 million, and $9.6 million in 1994, 1993, and 1992, respectively. Secured Loans ------------ Investments in secured loans are stated at the principal amount outstanding plus accrued interest. The loans are collateralized by equipment, golf courses, or real estate. Financing Lease and Operating Lease Receivables and Loan Balance ----------------------------------------------------------- As of December 31, 1994, financing lease receivables (net of nonrecourse debt service related to leveraged leases), minimum future rentals under operating leases and secured loan principal by year due are as follows:
Financing Lease Operating Lease Loan Year due Receivables Receivables Principal ------- ------------- -------------- -------- 1995 $ 90,213 $ 62,299 $ 39,858 1996 82,464 41,727 35,835 1997 58,488 36,817 32,778 1998 46,615 35,118 34,829 1999 48,373 23,709 18,673 After 1999 210,114 43,182 69,252 --------- ---------- ------ Total $536,267 $242,852 $231,225 ======= ======== =======
Investment in Joint Ventures ------------------------- Investments in joint ventures include aircraft, rail, and technology equipment leasing, asset residual guarantee, and cogeneration ventures which are accounted for using the equity method. The extent of the Company's effective ownership interest and/or level of management control dictates the use of the equity method. Under such method, original investments are recorded at cost, adjusted by the Company's share of undistributed earnings or losses of these ventures and reduced by cash distributions. The Company makes certain adjustments to net income as reported by some of the joint ventures prior to the Company's calculation of its share of that net income in order to provide consistency with the Company's accounting policies. Due to the significance of the adjustments made to two of the joint ventures, the combined and condensed operating and balance sheet data have been restated to reflect these adjustments. Pre-tax income, as reported by the joint venture, has been increased by $22.6 million in 1992 to adjust for equipment writedowns recorded as a loss by one joint venture; the Company charged its share of the writedowns to the allowance for losses on investments. Pre-tax income also has been increased by $27.3 million, $20.8 million, and $15.1 million in 1994, 1993 and 1992, respectively, to reverse interest expense recognized on loans to a joint venture from its partners; the Company records these loans as equity contributions. The partner loan balances of $472.2 million, $482.3 million, and $393.6 million at December 31, 1994, 1993 and 1992, respectively, have been reclassified from long-term liabilities to partners' equity. Page 27 Unaudited combined and condensed operating and balance sheet data as adjusted are as follows:
Year Ended December 31, 1994 1993 1992 ------ ------ ----- Revenues $ 282,352 $ 224,179 $ 278,818 Pre-tax income 41,510 17,241 28,951 Total assets 1,257,794 1,161,123 1,055,627 Long-term liabilities 441,625 382,207 358,724 Total liabilities 558,679 481,846 452,410 Equity 699,115 679,277 603,217
Assets Held for Sale or Lease -------------------------- Assets held for sale or lease consist of equipment which has been repossessed or returned by the lessee after normal lease maturity, and real estate upon which the Company foreclosed when the debtors owning the property were unable to discharge their obligations or which has been recorded as an in-substance foreclosure. Upon foreclosure, properties are recorded at the lower of their then carrying amount or fair market value. Generally, depreciation is only recorded on aircraft available for sale or lease which is held for more than six months. The major classes of assets held for sale or lease are as follows:
At December 31, 1994 1993 ----- ------ Real estate $16,945 $28,409 Aircraft 10,057 31,562 Other 3,375 3,605 ----- ------ Total cost 30,377 63,576 Accumulated depreciation (6,057) (6,799) ----- ------ Net investment $24,320 $56,777 ====== =======
Other Investments ---------------- Other investments, as of December 31, 1994, primarily consist of the Company's investment in a residential and commercial real estate development, and progress payments for assets under construction. The components of other investments are as follows:
At December 31, 1994 1993 ----- ------ Real estate development $16,623 $18,990 Progress payments and other 3,750 5,308 ----- ------ Total investment $20,373 $24,298 ======= ======
Investment in Future Residuals ---------------------------- The Company has purchased interests in the residual values of equipment leased by others. Residuals purchased prior to July 1, 1985 are accreted to their estimated future value. For lease residuals purchased after June 30, 1985, the Company does not accrete the carrying value over time; the difference between initial cost and future value is recognized upon disposition. Under certain lease underwriting compensation formulas, the Company earns a fee based on the future residual owned by the equity investor for whom the lease was arranged. With respect to transactions concluded prior to June 18, 1986, fees may be recognized as income at lease inception at the net present value of estimated future cash flows from residual realization. Such stated amounts are accreted in a manner designed to produce a constant rate of return on such net present value. This accretion is also included in fee income. Recognition of all fees from transactions concluded after June 17, 1986 occur upon realization. The components of the Company's recorded investment in future residuals are as follows:
At December 31, 1994 1993 ----- ------ Purchased residuals $ 4,728 $ 6,517 Lease underwriting deferred fees 8,429 7,554 ----- ------ Total investment $13,157 $14,071 ======= ======
ALLOWANCE FOR LOSSES ON INVESTMENTS ------------------------------------ The Company maintains an allowance for losses on investments through periodic provisions. The purpose of the allowance is to provide for credit and collateral losses which are inherent in the investment portfolio. It is the Company's policy to charge off amounts which, in the opinion of management, are not recoverable from obligors or the disposition of collateral. Activity within the allowance for losses on investments account was as follows:
Year ended December 31, 1994 1993 1992 ------ ------ ----- Beginning balance $88,193 $101,323 $ 71,864 Provision 19,000 29,000 81,000 Charges to allowance (27,480) (44,180) (52,222) Recoveries and other 2,493 2,050 681 ------ ------ ----- Balance at end of year $82,206 $ 88,193 $101,323 ====== ====== =======
Page 28 DEBT AND CAPITAL LEASE FINANCING -------------------------------- Short-term Borrowing ------------------- At December 31, 1994, the Company had commitments under its credit agreements with a group of banks for revolving credit loans aggregating up to $250 million. The credit agreements contain various covenants which include, among other factors, minimum net worth, restrictions on dividends and requirements to maintain certain financial ratios. At December 31, 1994, these covenants limited the Company's ability to transfer net assets to its parent to no more than $100.1 million. The revolving commitments are available for borrowing, repaying and reborrowing at any time and contain various pricing options. The Company pays a facility fee on one facility and a commitment fee on the unused commitment of the other facility, but is not obligated to maintain compensating balances. At December 31, 1994 $125.2 million of the commitments in excess of amounts backing commercial paper and bankers' acceptances were available and unused. The Company obtains short-term financing by issuance of commercial paper and bankers' acceptances through its dealers in the United States and Canada, and from notes payable to banks. At December 31, 1994 the majority of such borrowings were backed by or under the principal credit agreements. The weighted average interest rate at the end of the period was 6.23% and 3.86% as of December 31, 1994 and 1993, respectively. Senior Term Notes ---------------- Senior term notes include the following:
Year ended December 31, 1994 1993 ----- ------ Variable rate: Medium-Term Notes due 1995-1999 $ 60,000 $ 30,000 Senior Bank Note due 1995 10,000 10,000 ----- ------ Subtotal - variable rate $ 70,000 $ 40,000 ----- ------ Fixed rate: 5.45% - 10.30% Medium Term Notes due 1995-2004 443,600 474,850 9 3/8% Senior Notes due 1997 50,000 50,000 10% Senior Notes due 1996 50,000 50,000 Other Senior Note 9 3/8% due 1994 _ 10,000 ----- ------ Subtotal - fixed rate 543,600 584,850 ----- ------ Total senior term notes $613,600 $624,850 ======= ========
Interest on variable rate senior term notes is calculated using LIBOR. Nonrecourse Obligations --------------------- Nonrecourse obligations consist primarily of debt collateralized by aircraft and their related lease contracts, and real estate projects. The carrying amount of this collateral at December 31, 1994 was $81.3 million. The nonrecourse obligation associated with one aircraft will become recourse to the Company to the extent of the then remaining debt balance in 2002 when a balloon payment of $7.3 million is due. During 1994, the Company had the following non-cash transactions. Nonrecourse debt of $6.5 million was assumed in exchange for an additional investment in real estate, nonrecourse debt of $8.4 million was settled with a reduction in an investment in aircraft, and nonrecourse debt of $7.3 was assumed by the purchaser of certain real estate. Nonrecourse obligations include the following:
At December 31, 1994 1993 ----- ------ Variable rate: Notes due 2002 $39,378 $42,009 Notes due 1997 _ 8,425 Notes due 2000 3,535 3,785 Other 5,908 6,263 ------- ------- Subtotal - variable rate 48,821 60,482 ------- ------- Fixed rate: 9.25% Note due 1996 _ 7,309 8.25% Note due 1996 6,449 _ Other _ 267 ------- ------- Subtotal - fixed rate 6,449 7,576 ------- ------- Total nonrecourse debt $55,270 $ 68,058 ======= ======
Interest on variable rate nonrecourse obligations is calculated using the Prime rate or LIBOR. Page 29 Obligations Under Capital Lease --------------------------- Obligations under capital lease consist of equipment subject to capital lease financing which has been subleased. Such subleases are classified as direct financing leases having carrying values of $18.9 million and $23.6 million at December 31, 1994 and 1993, respectively. Minimum future lease payments receivable under the subleases aggregate $27.1 million receivable over a period ending in 2003. The obligations under capital leases and the related subleases have the same term and call for fixed rental payments. The Company has purchase and renewal options under the leases which allow it to accommodate similar options exercisable by sublessees. Maturities --------- Maturities of debt financings, obligations under capital leases and nonrecourse obligations are presented in the following table. Imputed interest on capital leases totalled $6.0 million at December 31, 1994. This table assumes that the commercial paper, notes payable and bankers' acceptances are retired by the unused revolving commitments.
Converted Obligations Total Revolving Senior Under Capital Debt Nonrecourse Year due Credit Loans Term Notes Leases Financing Obligations ----------- ---------- ------------ --------- ------------ 1995 $ _ $ 104,000 $ 3,629 $ 107,629 $ 6,214 1996 _ 105,000 3,627 108,627 10,531 1997 138,855 105,000 2,067 245,922 4,171 1998 _ 75,000 1,378 76,378 5,470 1999 _ 83,600 1,477 85,077 4,830 After 1999 _ 141,000 7,253 148,253 24,054 --------- --------- ------- -------- ------- Total $138,855 $613,600 $ 19,431 $771,886 $ 55,270 ======== ======== ======== ======== ========
DERIVATIVE FINANCIAL INSTRUMENTS --------------------------------- The Company has significant amounts of floating rate lease and loan investments, as well as transactions denominated in foreign currencies, giving rise to market risks from changes in interest and foreign exchange rates. Derivative financial instruments are used to reduce those risks. The Company enters into interest rate swap agreements to modify the interest characteristics of its outstanding debt from a fixed to a floating basis. These agreements involve the receipt of fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of the underlying principal amount. The differential to be paid or received is calculated based on the notional amounts and a widely used floating rate index (6 month LIBOR). It is accrued as interest rates change and is recognized as an adjustment to interest expense related to the debt. Interest expense was reduced by $2.2 million, $3.1 million and $0.9 million in 1994, 1993, and 1992, respectively, as a result of interest rate swaps. The related amount payable to or receivable from counterparties is included in accrued interest. The fair values of the swap agreements are not recognized in the financial statements. The total notional principal of all interest rate swaps as of December 31, 1994 was $180.0 million, with termination dates ranging from 1995 to 2003. The Company has also entered into a currency swap agreement to protect itself from the risk that the eventual dollar net cash in-flow from a foreign denominated investment will be adversely affected by changes in exchange rates. The currency swap exchanges a U.S. borrowing of $3.7 million with interest based on LIBOR for a liability of $5.0 million Canadian with interest based on the Bankers' Acceptance rate. OPERATING LEASE OBLIGATIONS --------------------------- The Company is a lessee under certain aircraft, railroad rolling stock, and office leases which are classified as operating leases. Total rental expense was $16.1 million, $9.8 million and $7.7 million in 1994, 1993 and 1992, respectively. The aircraft and rolling stock under these leases have been subleased, generating lease income of $17.4 million, $12.8 million and $4.9 million in 1994, 1993 and 1992, respectively. Future rentals payable by the Company through 2011 and sublease receivables under noncancellable operating leases through 2008 are as follows:
Obligations Under Sublease Year Due Operating Leases Receivables ------- ---------------- ----------- 1995 $ 17,460 $17,902 1996 17,304 13,639 1997 16,837 13,404 1998 16,804 11,601 1999 16,536 11,168 After 1999 135,640 29,447 ------- ------- Total $220,581 $97,161 ======== =======
Page 30 CAPITAL STOCK ------------- As of December 31, 1994 and 1993, all issued common and preferred stock of the Company was held by GATX Corporation. The preferred stock has a conversion price of $100 per share and may be exchanged for common stock on a one-for-one basis. Dividends on preferred stock are payable on a share-for-share basis at the same rate per share as common stock when and as declared by the board of directors. Conversions of preferred stock will commence in the year 2004 unless GATX Corporation continues to extend the initial redemption date. The preferred stock redemption schedule calls for 51,355 shares to be redeemed in each of the first two conversion years, 77,030 shares in each of the subsequent two years, 102,705 shares in each of the following three years and 154,055 shares in each of the succeeding three years. Conversion is conditioned on the Company being in compliance with provisions of all of its debt agreements. INCOME TAXES ------------ GATX Corporation files a consolidated federal income tax return which includes the Company. Under an intercompany tax agreement, the parent reimburses the Company to the extent the Company's operating losses and investment tax credits are utilized in the consolidated federal return. Should the Company generate taxable income, the agreement provides for payment by the Company of any resulting additional federal tax liability incurred by GATX Corporation. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has recorded these differences in its deferred tax accounts, inter-company accounts receivable, and equity accounts. In exchange for cash payments, GATX Corporation has assumed a portion of GATX Capital's deferred tax liability. GATX Corporation re-contributed these amounts through the purchase of Redeemable Preferred Stock over the period from 1975 to 1985. In addition, GATX Capital has an account receivable of $46.1 million from GATX Corporation resulting from the reassumption of a portion of these deferred taxes through December 31, 1994. Offsetting this receivable is $3.5 million due to GATX Corporation which consists of amounts owed for dividends, overhead, and taxes pursuant to the intercompany tax agreement. Significant components of the Company's deferred tax liabilities and assets are as follows:
At December 31, 1994 1993 ----- ------ Deferred tax liabilities Leveraged leases $ 63,610 $ 72,578 Other leases (non-leveraged) 51,158 63,506 Investment in joint ventures 15,505 12,174 Alternative minimum tax adjustment 1,318 _ Other 3,388 _ ----- ------ Total deferred tax liabilities $134,979 $148,258 -------- --------- Deferred tax assets: Allowance for losses on investments $ 32,245 $ 34,594 Loans 2,488 11,119 Other 5,915 12,551 Total deferred tax assets 40,648 58,264 -------- --------- Net deferred tax liabilities $ 94,331 $ 89,994 ======== ======== Tax account balances: Deferred income tax liabilities $ 15,390 $ 11,053 Preferred stock and related additional paid-in capital 125,000 125,000 Due from GATX Corporation (46,059) (46,059) -------- --------- Net deferred tax liabilities $ 94,331 $ 89,994 ======== ========
Income before income taxes from foreign operations was $1.8 million, $3.0 million, and $2.1 million in 1994, 1993 and 1992, respectively. Foreign tax expense was $1.9 million, $2.0 million, and $1.2 million in 1994, 1993, and 1992, respectively. A reconciliation between the federal statutory tax rate and the Company's effective tax rate is shown below:
Year ended December 31, 1994 1993 1992 ------ ------ ----- Federal statutory income tax rate 35.0% 35.0% 34.0% State tax provision, net of federal tax benefit 4.1% 3.9% 4.8% Impact of federal tax rate increase _ 3.7% _ Sale of consolidated subsidiary _ 1.3% _ Other 3.9% 5.9% (1.7)% ------ ------ ----- Effective tax rate 43.0% 49.8% 37.1% ==== === ====
Page 31 FOREIGN OPERATIONS ------------------ In addition to its domestic operations, the Company provides or arranges equipment financing for nonaffiliated entities outside the United States. Selected information related to foreign operations is summarized below:
Year ended December 31, 1994 1993 1992 ------ ------ ----- Earned income: Domest $ 179,709 $ 171,047 $ 151,809 Export 26,436 29,866 28,548 Foreign 10,505 11,851 11,815 Eliminations (618) (367) (2,056) ------ ------ ----- $ 216,032 $ 212,397 $ 190,116 ======== ========= ======== Net income(loss): United States $ 20,596 $ 16,590 $ (10,557) Foreign 4,192 4,929 3,353 Eliminations 63 6 7 ------ ------ ----- $ 24,851 $ 21,525 $ (7,197) ======== ========= ======== Total assets: United States $1,038,762 $1,050,117 $1,143,587 Foreign 236,828 213,169 187,989 Eliminations (6,000) (6,688) (1,107) ------ ------ ----- $1,269,590 $1,256,598 $1,330,469 ======== ========= ========
RETIREMENT BENEFITS ------------------- The Company participates in the GATX Non-Contributory Pension Plan for Salaried Employees (the "Plan"), a defined benefit pension plan with GATX Corporation covering substantially all employees. Pension cost for each GATX subsidiary included in the plan is determined by independent actuaries. However, accumulated plan obligation information, plan assets and the components of net periodic pension costs pertaining to each subsidiary have not been separately determined. Contributions to the Plan made by the Company through GATX Corporation and pension expense allocated to the Company are not material to these financial statements. In addition to pension benefits, the Company provides other postemployment benefits, including limited health care and life insurance benefits, for certain retired employees who meet established criteria. Most domestic employees are eligible if they retire from the Company with immediate pension benefits under the Plan. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK ------------------------------------------------------------- At December 31, 1994, the Company had approximately 650 financing contracts with 450 customers, aggregating $1.3 billion of investments before reserves. Of this amount, 46% consisted of investments associated with commercial jet aircraft, 17% railroad equipment, 8% warehouse and production equipment, 8% marine equipment, 6% golf courses, 4% real estate, and 11% other equipment. The Company's backlog was $191.6 million and $232.8 million, respectively, at December 31, 1994 and 1993. The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and financial guarantees. Such instruments involve, to varying degrees, elements of credit and market risk which are not recognized in the consolidated balance sheets. The contractual amount of the instruments are shown below:
Year ended December 31, 1994 1993 ------- ------- Guarantees $ 99,094 $60,184 Stand-by loan commitments 5,800 12,500
Guarantees are commitments issued by the Company to guarantee the value of an asset at the end of the lease, or to guarantee performance of an affiliate to a third party. These commitments have fixed expiration dates ranging from 1995 to 2015. Since many of the assets on lease are expected to retain their value, the total amount guaranteed does not necessarily represent future cash requirements. Stand-by loan commitments represent an agreement to lend funds to a customer upon the occurrence of certain events as defined in the contract. The commitments expire in 1998. The Company uses essentially the same credit policies in making commitments and conditional obligations as it does for funded transactions. All investments are subject to normal credit policies, collateral requirements and senior management review. For example, lease provisions require lessees to meet certain standards for maintenance and return conditions, and provide for repossession upon default. Loans are generally secured by equipment or real estate, and may involve guarantees or other assets as collateral. All commitments having off-balance-sheet risk are reviewed regularly for potential exposure and a provision for possible loss is made if required. Page 32 FAIR VALUE OF FINANCIAL INSTRUMENTS ----------------------------------- Generally accepted accounting principles require disclosure of the estimated fair value of the Company's financial instruments, excluding lease transactions accounted for under SFAS 13. Fair value is a subjective and imprecise measurement that is based on assumptions and market data. The use of different market assumptions and valuation methodologies may have a material effect on the estimated fair value amounts. Accordingly, management cannot provide assurance that the fair values presented are indicative of the amounts that the Company could realize in a current market exchange. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Short-term Financial Instruments ------------------------------ The carrying amounts included on the balance sheet approximate fair value because of the short maturity of these instruments. This approach applies to cash and cash equivalents, accrued interest, accounts payable, commercial paper, and bankers' acceptances. Secured Loans ------------ The fair values of the fixed rate loans are estimated using discounted cash flow analyses, at interest rates currently offered for loans with similar terms to borrowers of similar credit quality. The fair values of the variable rate secured loans are assumed to be equal to their carrying values. Senior Notes and Nonrecourse Debt ------------------------------ The fair value of fixed rate senior notes and nonrecourse debt was estimated by aggregating the notes and performing discounted cash flow analyses using a weighted average note term and the current market rate for similar types of borrowing arrangements. The fair values of variable rate senior notes and nonrecourse debt are assumed to be equal to their carrying values. Interest Rate Swaps ----------------- The fair value of the interest rate swaps is estimated by discounting the fixed cash flows received under each swap using the rate at which the Company could enter into new swaps of similar remaining maturities. The carrying amount shown on the following table represents the amount of accrued interest payable or receivable at the end of the period. The fair value represents the accrued amount plus the amount that the Company would have to pay or would receive in the current market to unwind the swaps. Other Off-Balance Sheet Financial Instruments ------------------------------------------ It is not practicable to estimate the fair value of the Company's other off-balance sheet financial instruments because there are few active markets for these transactions, and the Company is unable at this time to estimate fair value without incurring excessive costs. Summary of Fair Values -------------------- The following table presents the fair values of only those financial instruments required to be presented by generally accepted accounting principles. Proceeds from senior term notes are invested in a variety of activities, including both financial instruments shown in this table, as well as leases and joint venture investments, for which fair value disclosures are not required. When evaluating the extent to which estimated fair value of borrowings exceeds the related carrying amount, users should consider that the fair value of the fixed rate payment streams for leases would increase as well.
Carrying Fair At December 31, 1994 Amount Value --------- ------- Assets: Secured loans $231,225 $221,239 Liabilities: Senior term notes 613,600 614,600 Nonrecourse debt 55,270 55,298 Interest rate swaps (76) 10,454 Carrying Fair At December 31, 1993 Amount Value --------- ------- Assets: Secured loans $226,073 $228,300 Liabilities: Senior term notes 624,850 678,700 Nonrecourse debt 68,058 68,882 Interest rate swaps 1,074 (2,346)
Page 33 Report of Independent Auditors Board of Directors GATX Capital Corporation We have audited the accompanying consolidated balance sheets of GATX Capital Corporation (a wholly-owned subsidiary of GATX Corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income and reinvested earnings and consolidated cash flows for each of the three years in the period ended December 31, 1994. These statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of GATX Capital Corporation and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. In 1992, the Company changed its method of accounting for income taxes and postretirement benefits other than pensions effective January 1, 1992. ERNST & YOUNG LLP San Francisco, California January 24, 1995 Page 34 EX-10 4 SECOND AMENDMENT-CREDIT AGREEMENT Second Amendment To Credit Agreement This Second Amendment to Credit Agreement (the "Amendment") dated as of June 14, 1994, by and among GATX Leasing National Ltd., GATX Corporate Leasing, Inc., as Borrowers, GATX Capital Corporation, as Guarantor, and Bank of Montreal, as the Bank; W I T N E S S E T H: WHEREAS, the Borrowers, the Guarantor, and the Bank have heretofore executed and delivered that certain Credit Agreement dated as of December 14, 1992, as amended by the First Amendment thereto dated as of June 20, 1993 (as so amended, the "Credit Agreement"); and WHEREAS, the Borrowers, the Guarantor, and the Bank desire to amend the Credit Agreement to extend its Revolving Credit Termination Date and to reduce the Bank's Revolving Credit Commitment; NOW, THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, the Borrowers, the Guarantor, and the Bank hereby agree as follows: 1. The date "June 15, 1994" in Section 1.1 of the Credit Agreement is hereby deleted and in place thereof is inserted the date "June 9, 1995." 2. Notwithstanding the notice provisions contained in Section 1.5 of the Credit Agreement, the Revolving Credit Commitment shall be reduced to $10,000,000 on the date hereof. 3. Each Borrower and the Guarantor each represents and warrants to the Bank that (a) each of the representations and warranties set forth in Article 3 of the Credit Agreement (or, in the case of each Borrower only, Sections 3.2-3.6 thereof) is true and correct on and as of the date of this Amendment (except for the representations and warranties incorporated herein through Section 3.1 from Sections 7.03 and 7.08(b) of the Parent Credit Agreement and except that any representation or warranty in Article 3 that is expressly stated to have been made as of the specific date need only be true as of such specific date); (b) no Default or Event of Default has occurred and is continuing; and (c) without limiting the effect of the foregoing, each Borrower's and the Guarantor's execution, delivery and performance of this Amendment has been duly authorized, and this Amendment has been executed and delivered by a duly authorized officer of each Borrower and the Guarantor. This Amendment may be executed in any number of separate counterparts and by the different parties hereto on separate counterpart signature pages, each of which shall constitute one and the same instrument. Except as specifically amended and modified hereby, all of the terms and conditions of the Credit Agreement shall remain unchanged and in full force and effect. No reference to this Amendment need be made in any document, all references to the Credit Agreement in any document to be deemed to be references to the Credit Agreement as amended hereby. All capitalized terms used herein without definition shall have the same meaning herein as they have in the Credit Agreement. This Amendment shall become effective upon its execution by the Borrowers, the Guarantor, and the Bank. This Amendment shall be construed and governed by and in accordance with the internal laws of the Province of Ontario and the federal laws of Canada applicable in such Province. Dated as of the date first above written. GATX Leasing National Ltd. By Title: GATX Corporate Leasing, Inc. By Title: GATX Capital Corporation, as Guarantor By Title: Bank of Montreal By Title: EX-10 5 THIRD AMENDMENT-CREDIT AGREEMENT Third Amendment To Credit Agreement This Third Amendment to Credit Agreement (the "Amendment") dated as of December 1, 1994, by and among GATX Leasing National Ltd., GATX Corporate Leasing, Inc., as Borrowers, GATX Capital Corporation, as Guarantor, and Bank of Montreal, as the Bank; W I T N E S S E T H: WHEREAS, the Borrowers, the Guarantor, and the Bank have heretofore executed and delivered that certain Credit Agreement dated as of December 14, 1992, as amended through and including the Second Amendment thereto dated as of June 14, 1994 (as so amended, the "Credit Agreement"); and WHEREAS, the Borrowers, the Guarantor, and the Bank desire to amend the Credit Agreement to revise the commitment fee; NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Borrowers, the Guarantor, and the Bank hereby agree as follows: 1. Section 1.8 of the Credit Agreement is hereby amended in its entirety to read as follows: Section 1.8. Commitment Fee. The Borrowers jointly and severally agree to pay to the Bank in U.S. Dollars, quarterly in arrears on the last day of March, June, September and December of each year, commencing on March 31, 1993, and on the Revolving Credit Termination Date or, if applicable, the Conversion Date, a commitment fee (i) for the period from the Closing Date to but not including December 1, 1994 at the rate of 3/8ths of 1% (0.375%) per annum, and (ii) thereafter at a rate per annum from time to time equal to the rate set forth opposite the then rating of the senior, unsecured long term debt of the Guarantor by S&P and Moody's, respectively, in the schedule below, during all such periods applied to the average daily unused portion of the Revolving Credit Commitment, each change in such rate after December 1, 1994 based on a change in any such rating to be effective on the date of such rating change:
Rating Rate ------ ---- Both ratings are greater than or equal to A- and A3 .1875% The ratings are: equal to BBB+ and Baa1 or equal to A- ( or greater than A-) and Baa1 or equal to BBB+ and A3 (or greater than A3) .2500% The ratings are: equal to BBB+ and Baa2 or equal to BBB and Baa1 .2500% The ratings are: equal to BBB and Baa2 or equal to BBB+ and Baa3 or equal to BBB- and Baa1 .2500% The ratings are: equal to BBB and Baa3 or equal to BBB- and Baa2 .2500% The ratings are equal to BBB- and Baa3 .2500% Either rating is lower than BBB- and Baa3 or not rated by both Moody's and S&P .5000%
To determine usage of the Revolving Credit Commitment through Loans denominated in Canadian Dollars the daily average amount of such Loans shall be determined for each calendar quarter in Canadian Dollars and such amount shall be converted into U.S. Dollars based on the Bank's exchange rate for buying U.S. Dollars with Canadian Dollars on the day such fee is payable. 2. Each Borrower and the Bank acknowledge that the CIBC Agreement referred to in Section 4.5 of the Credit Agreement has been terminated, so that Section 4.5 of the Credit Agreement, and all references thereto in the Credit Agreement, are hereby deleted. 3. Article 6 of the Credit Agreement is hereby amended by inserting therein in proper alphabetical order the following additional definitions: "Moody's" shall mean Moody's Investors Service, Inc. and its successors and assigns provided that if such corporation (or its successors and assigns) shall for any reason no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency approved for purposes hereof by the Bank and the Guarantor. "S&P" shall mean Standard & Poor's Corporation and its successor and assigns, provided that if such corporation (or its successors and assigns) shall for any reason no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency approved for purposes hereof by the Bank and the Guarantor. 4. Each Borrower and the Guarantor each represents and warrants to the Bank that (a) each of the representations and warranties set forth in Article 3 of the Credit Agreement (or, in the case of each Borrower only, Sections 3.2-3.6 thereof) is true and correct on and as of the date of this Amendment (except for the representations and warranties incorporated into the Credit Agreement through Section 3.1 thereof from Sections 7.03 and 7.08(b) of the Parent Credit Agreement and except that any representation or warranty in Article 3 that is expressly stated to have been made as of the specific date need only be true as of such specific date); (b) no Default or Event of Default has occurred and is continuing; and (c) without limiting the effect of the foregoing, each Borrower's and the Guarantor's execution, delivery and performance of this Amendment has been duly authorized, and this Amendment has been executed and delivered by a duly authorized officer of each Borrower and of the Guarantor. This Amendment may be executed in any number of separate counterparts and by the different parties hereto on separate counterpart signature pages, each of which shall constitute one and the same instrument. Except as specifically amended and modified hereby, all of the terms and conditions of the Credit Agreement shall remain unchanged and in full force and effect. No reference to this Amendment need be made in any document, all references to the Credit Agreement in any document to be deemed to be references to the Credit Agreement as amended hereby. All capitalized terms used herein without definition shall have the same meaning herein as they have in the Credit Agreement. This Amendment shall become effective upon its execution by the Borrowers, the Guarantor, and the Bank. This Amendment shall be construed and governed by and in accordance with the internal laws of the Province of Ontario and the federal laws of Canada applicable in such Province. Dated as of the date first above written. GATX Leasing National Ltd. By Title: GATX Corporate Leasing, Inc. By Title: GATX Capital Corporation, as Guarantor By Title: Bank of Montreal By Title: EX-10 6 FIRST AMEND-CREDIT AGREEMENT AMENDMENT NO. 1 AMENDMENT NO. 1 dated as of December 1, 1994 to the CREDIT AGREEMENT dated as of December 14, 1992 among GATX CAPITAL CORPORATION, a Delaware corporation (the "Company"), the Banks signatory thereto and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent. W I T N E S S E T H: WHEREAS, the Company, the Banks and the Agent are parties to the Credit Agreement referred to above (the "Credit Agreement") pursuant to which the Banks have agreed to extend credit to the Company as provided therein. WHEREAS, the Company has requested the Banks and the Agent to amend the Credit Agreement as provided herein. WHEREAS, the Banks and the Agent are agreeable to such amendment on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein it is hereby agreed as follows: 1. Definitions. All the terms defined in the Credit Agreement shall be used herein as defined in the Credit Agreement unless otherwise defined herein or the context otherwise requires. 2. Amendments to the Agreement. (a) Section 1.01 of the Credit Agreement is hereby amended by restating the definition of "Applicable Margin" to read as follows: "'Applicable Margin' shall mean, with respect to Eurodollar Loans, the percentage per annum from time to time equal to that percentage set forth opposite the then current ratings of the senior, unsecured long-term debt of the Company by S&P and Moody's, respectively, in the schedule below, each change in the Applicable Margin based upon any change in any such rating to be effective on and as of the date of such change:
Rating Applicable Margin (%p.a.) ------ ----- Both ratings are greater than or equal to A- and A3 .2625% The ratings are: equal to BBB+ and Baa1 or equal to A- (or greater than A-) and Baa1 or equal to BBB+ and A3 (or greater than A3) .2000% The ratings are: equal to BBB+ and Baa2 or equal to BBB and Baa1 .2500% The ratings are: equal to BBB and Baa2 or equal to BBB+ and Baa3 or equal to BBB- and Baa1 .3750% The ratings are: equal to BBB and Baa3 or equal to BBB- and Baa2 .5000% The ratings are equal to BBB- and Baa3 .6250% Either rating is lower than BBB- and Baa3 or not rated by both Moody's and S&P .7500%"
(b) Section 2.05(a) of the Credit Agreement is hereby amended by restating it to read as follows: "(a) The Company shall pay to the Agent for the account of each Bank a facility fee on the daily average amount of such Bank's Commitment (whether or not utilized), for the period from and including December 1, 1994 to but not including the earlier of the date such Commitment is terminated and the Commitment Termination Date, at a rate per annum from time to time equal to the rate set forth opposite the then rating of the senior, unsecured long-term debt of the Company by S&P and Moody's, respectively, in the schedule below, each change in such rate to be effective based on a change in any such rating to be effective on the date of such change:
Rating Rate (%p.a.) ------ ----- Both ratings are greater than or equal to A- and A3 .1875% The ratings are: equal to BBB+ and Baa1 or equal to A- (or greater than A-) and Baa1 or equal to BBB+ and A3 (or greater than A3) .2500% The ratings are: equal to BBB+ and Baa2 or equal to BBB and Baa1 .2500% The ratings are: equal to BBB and Baa2 or equal to BBB+ and Baa3 or equal to BBB- and Baa1 .2500% The ratings are: equal to BBB and Baa3 or equal to BBB- and Baa2 .2500% The ratings are equal to BBB- and Baa3 .2500% Either rating is lower than BBB- and Baa3 or not rated by both Moody's and S&P .5000%
Accrued facility fees shall be payable on each Quarterly Date and on the earlier of the date the relevant Commitment is terminated and the Commitment Termination Date." (c) The Company, the Banks and the Agent agree that as of the Amendment Closing Date (as hereinafter defined), the Commitment of CIBC Inc. shall be terminated and upon payment by the Company in full of any amounts which may be due to CIBC Inc. under the Credit Agreement and its Notes as of the Amendment Closing Date, CIBC, Inc. shall cease to be a party to the Credit Agreement. 3. Representations and Warranties. In order to induce the Banks and the Agent to make this Amendment, the Company hereby represents that: (a) the execution and delivery of this Amendment and the performance of the Company thereunder and under the Credit Agreement as amended hereby (i) have been duly authorized by all necessary corporate action, will not violate any provision of law, or the Company's charter or by-laws, or result in the breach of or constitute a default, or require a consent, under any indenture or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or their respective property may be bound or affected, and (ii) each of this Amendment and the Credit Agreement as amended and (ii) each of this Amendment and the Credit Agreement as amended hereby constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms; (b) The representations and warranties in Section 7 of the Credit Agreement are true and correct as of the Amendment Closing Date as if they were being made on such date; and (c) no Event of Default or event which with notice or lapse of time, or both, would constitute an Event of Default, has occurred and is continuing on the Amendment Closing Date. 4. Miscellaneous. (a) This Amendment shall be effective as of December 1, 1994 when counterparts of this Amendment shall have been executed by the Company, the Banks and the Agent, and such date shall be the "Amendment Closing Date". (b) Except as specifically amended hereby, all the provisions of the Credit Agreement shall remain unamended and in full force and effect, and the term "Credit Agreement", and words of like import shall be deemed to refer to the Credit Agreement as amended by this Amendment unless otherwise provided herein or the context otherwise requires. Nothing herein shall affect the obligations of the Company under the Credit Agreement with respect to any period prior to the effective date hereof. (c) This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. (d) This Amendment shall be governed by and construed and interpreted in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers as of the day and year first above written. GATX CAPITAL CORPORATION By Name: Title: EX-23 7 CONSENT Exhibit 23 - Consent of Independent Auditors We consent to the incorporation by reference in Registration Statements No. 33- 6910 on Form S-3 filed July 7, 1986 (as amended by Amendment No. 1 filed December 19, 1986, Amendment No. 2 filed January 7, 1987, Amendment No. 3 filed December 23, 1987, and Amendment No. 4 filed August 9, 1989), No. 33-30300 on Form S-3 filed August 2, 1989, No. 33-40327 on Form S-3 filed May 2, 1991, and No. 33-64474 on Form S-3 filed June 17, 1993 of GATX Capital Corporation of our report dated January 24, 1995, with respect to the consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 1994. ERNST & YOUNG LLP San Francisco, California March 24, 1995 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED INCOME STATMENT OF GATX CAPITAL CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 9407 0 729317 82206 24320 0 295,273 0 1,269,590 0 688,301 1,031 0 1,027 297,179 1,269,590 0 216,032 0 0 90,652 19,000 62,744 43,636 18,785 24,851 0 0 0 24,851 0 0 RECEIVABLES CONSISTS OF DIRECT FINANCING LEASES OF $245,441, LEVERAGED LEASES OF $252,651, AND SECURED LOANS OF $231,225. INVENTORY CONSISTS OF ASSETS HELD FOR SALE OR LEASE. THIS IS NOT APPLICABLE BECAUSE GATX CAPITAL CORPORATION DOES NOT HAVE A CLASSIFIED BALANCE SHEET. PP&E CONSISTS OF OPERATING LEASE EQUIPMENT, NET OF DEPRECIATION. ACCUMULATED DEPRECIATION IS NETTED AGAINST THE PP&E BALANCE. SEE FOOTNOTE 4. BONDS CONSIST OF OBLIGATIONS UNDER CAPITAL LEASES OF $19,431, SENIOR-TERM NOTES OF $613,600 AND NONRECOURSE DEBT OF $55,270. SHORT-TERM DEBT IS NOT INCLUDED HERE. TOTAL REVENUE CONSISTS OF EARNED INCOME FROM LEASES OF $143,639, GAIN ON DISPOSITION OF EQUIPMENT OF $21,444, FEES OF $10,111, INTEREST OF $27,085, INVESTMENT IN JOINT VENTURES OF $9,242, AND OTHER OF $4,511. OTHER EXPENSES CONSIST OF OPERATING LEASE EXPENSE OF $50,621, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES OF $39,296, AND OTHER EXPENSE OF $735.
EX-99 9 MEDIUM TERM NOTES Medium Term Notes
FIXED: $2,000,000 02/28/95 10.22 $300,000 03/01/95 9.20 $4,700,000 03/01/95 9.20 $5,000,000 03/01/95 9.20 $6,000,000 03/01/95 9.20 $20,000,000 03/31/95 10.30 $10,000,000 06/30/95 9.65 $1,000,000 11/01/95 9.75 $10,000,000 03/11/96 9.68 $5,000,000 01/30/98 10.00 $2,000,000 02/25/98 9.76 $7,000,000 03/10/98 10.00 $10,000,000 03/16/98 10.00 $2,000,000 03/19/98 10.00 $6,000,000 03/19/98 10.00 $5,000,000 03/20/98 9.93 $10,000,000 04/01/98 10.00 $5,000,000 03/22/99 9.90 $16,000,000 04/15/99 9.90 $32,600,000 05/05/99 9.85 $4,000,000 05/10/00 10.20 $5,000,000 03/21/01 10.00 $5,000,000 03/22/01 10.00 $20,000,000 04/11/01 10.00 $25,000,000 11/20/95 6.32 $30,000,000 03/18/96 5.45 $15,000,000 03/22/96 5.48 $25,000,000 01/15/97 7.90 $10,000,000 05/05/97 8.20 $5,000,000 03/10/98 8.670 $13,000,000 04/30/98 6.120 $5,000,000 05/07/98 6.110 $5,000,000 10/15/98 8.780 $10,000,000 11/15/99 6.375 $17,000,000 07/26/00 6.210 $10,000,000 10/11/00 6.500 $2,000,000 10/30/00 9.280 $6,000,000 11/15/00 9.120 $10,000,000 10/08/01 9.125 $2,000,000 10/08/01 9.050 $15,000,000 01/10/02 9.500 $10,000,000 01/10/02 9.500 $20,000,000 06/03/03 7.200 $5,000,000 04/04/02 7.460 $5,000,000 04/14/04 7.920 $5,000,000 04/14/04 7.920 FLOATING: $5,000,000 07/31/95 $5,000,000 06/30/95 $10,000,000 07/03/95 $20,000,000 04/07/97 $20,000,000 02/16/99
EX-10 10 FIRST AMEND TO CANADIAN CREDIT AGREEMENT First Amendment To Credit Agreement This First Amendment to Credit Agreement (the "Amendment") dated as of June 20, 1993, by and among GATX Leasing National Ltd., GATX Corporate Leasing, Inc., as Borrowers, GATX Capital Corporation, as Guarantor, and Canadian Imperial Bank of Commerce, as the Bank; WITNESSETH: WHEREAS, the Borrowers, the Guarantor, and the Bank have heretofore executed and delivered that certain Credit Agreement dated as of December 14, 1994 (the "Credit Agreement"); and WHEREAS, the Borrowers, the Guarantor, and the Bank desire to amend the Credit Agreement to extend its Revolving Credit Termination Date; NOW, THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, the Borrowers, the Guarantor, and the Bank hereby agree as follows: 1. The date "December 9, 1993" in Section 1.1 of the Credit Agreement is hereby deleted and in place thereof is inserted the date "June 15, 1994." 2. Each Borrower and the Guarantor each represents and warrants to the Bank that (a) each of the representations and warranties set forth in Article 3 of the Credit Agreement (or, in the case of each Borrower, only Sections 3.2-3.6 thereof) is true and correct on and as of the date of this Amendment (except for the representations and warranties incorporated herein through Section 3.1 from Sections 7.03 and 7.08(b) of the Parent Credit Agreement and except that any representation or warranty in Article 3 that is expressly stated to have been made as of the specific date need only be true as of such specific date); (b) no Default or Event of Default has occurred and is continuing; and (c) without limiting the effect of the foregoing, each Borrower's and the Guarantor's execution, delivery and performance of this Amendment has been duly authorized, and this Amendment has been executed and delivered by a duly authorized officer of each Borrower and of the Guarantor. This Amendment may be executed in any number of separate counterparts and by the different parties hereto on separate counterpart signature pages, each of which shall constitute one and the same instrument. Except as specifically amended and modified hereby, all of the terms and conditions of the Credit Agreement shall remain unchanged and in full force and effect. No reference to this Amendment need be made in any document, all references to the Credit in any document to be deemed to be references to the Credit Agreement as amended hereby. All capitalized terms used herein without definition shall have the same meaning herein as they have in the Credit Agreement. This Amendment shall become effective upon its execution by the Borrowers, the Guarantor, and the Bank. This Amendment shall be construed and governed by and in accordance with the laws of the Province of Ontario and the laws of Canada applicable in such Province. Dated as of the date first written above. GATX LEASING NATIONAL, LTD. By: Title: GATX CORPORATE LEASING, INC. By: Title: GATX CAPITAL CORPORATION, as Guarantor By: Title: CANADIAN IMPERIAL BANK OF COMMERCE By: Title: