-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OppND7XuTQEybuVPMPXpQ7kp/R5MUFcSQ/xmGKGaM3A34cJTg0PwLW+D6CTEBtlN fI64lEhUdbRnnNW9DWEYYA== 0000357019-97-000016.txt : 19970515 0000357019-97-000016.hdr.sgml : 19970515 ACCESSION NUMBER: 0000357019-97-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GATX CAPITAL CORP CENTRAL INDEX KEY: 0000357019 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE LESSORS [6172] IRS NUMBER: 941661392 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08319 FILM NUMBER: 97605228 BUSINESS ADDRESS: STREET 1: FOUR EMBARCADERO CTR SUITE 2200 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4159553200 FORMER COMPANY: FORMER CONFORMED NAME: GATX LEASING CORP DATE OF NAME CHANGE: 19900405 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File Number March 31, 1997 1-8319 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 May 5, 1997, Registrant has outstanding 1,031,250 shares of $1 par value Common Stock. THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. PART I. FINANCIAL INFORMATION Item 1. Financial Statements GATX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND REINVESTED EARNINGS (in thousands) Three Months Ended March 31, 1997 1996 --------- --------- (Unaudited) REVENUES: Investment and asset management $ 111,135 $ 65,433 Technology equipment sales and service 39,252 - ------------ ----------- 150,387 65,433 ------------ ----------- EXPENSES: Interest 22,041 19,451 Operating leases 27,445 14,646 Cost of technology equipment sales and service 31,963 - Selling, general & administrative 26,148 12,084 Provision for losses on investments 2,250 3,000 Other 1,987 782 ------------ ----------- 111,834 49,963 ------------ ----------- Income before income taxes 38,553 15,470 ------------ ----------- INCOME TAXES: Current income taxes 14,084 5,773 Deferred income taxes 1,529 492 ------------ ----------- 15,613 6,265 ------------ ----------- NET INCOME 22,940 9,205 Reinvested earnings at beginning of period 185,686 162,400 Dividends paid to stockholder (5,914) (4,343) ------------ ----------- REINVESTED EARNINGS AT END OF PERIOD $ 202,712 $ 167,262 ============ =========== -1- GATX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) March 31, December 31, 1997 1996 ---------- ---------- (Unaudited) ASSETS: Cash and cash equivalents $ 28,378 $ 18,482 Investments: Direct financing leases 453,645 461,757 Leveraged leases 209,005 257,039 Operating lease equipment- net of depreciation 425,237 429,880 Secured loans 192,961 222,602 Investment in joint ventures 318,985 308,934 Assets held for sale or lease 10,254 12,393 Other investments 67,334 65,506 Investment in future residuals 20,879 21,457 Allowance for losses on investments (117,509) (114,096) ------------ ----------- Total investments 1,580,791 1,665,472 ------------ ----------- Due from GATX Corporation 25,361 45,147 Other assets 130,220 119,528 ------------ ----------- TOTAL ASSETS $ 1,764,750 $ 1,848,629 ============ =========== LIABILITIES AND STOCKHOLDER'S EQUITY: Accrued interest $ 21,776 $ 15,821 Accounts payable and other liabilities 117,234 138,660 Debt financing: Commercial paper and bankers acceptances 28,916 13,772 Notes payable 52,985 63,114 Obligations under capital leases 11,624 12,429 Senior term notes 835,600 935,600 ------------ ----------- Total debt financing 929,125 1,024,915 ------------ ----------- Nonrecourse obligations 281,287 268,044 Deferred income 6,538 5,786 Deferred income taxes 52,317 51,726 Stockholder's equity: Convertible preferred stock, par value $1, 125,000 125,000 and additional paid-in capital Common stock, par value $1, and additional paid-in capital 28,960 28,960 Reinvested earnings 202,712 185,686 Foreign currency translation adjustment (3,919) (1,543) Unrealized gain on equity securities 3,720 5,574 ------------ ----------- Total stockholder's equity 356,473 343,677 ------------ ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,764,750 $ 1,848,629 ============ =========== - 2 - GATX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended March 31, 1997 1996 ---------- --------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 22,940 $ 9,205 Reconciliation to net cash provided by operating activities: Provision for losses on investments 2,250 3,000 Depreciation expense 17,528 8,364 Provision for deferred income taxes 1,529 492 Gain on sale of assets (25,489) (6,773) Changes in assets and liabilities: Due from GATX Corporation 19,786 8,724 Accrued interest, accounts payable and (15,471) (12,917) other liabilities Deferred income 752 270 Other - net (7,450) 5,627 ------------ ---------- Net cash flows provided by operating activities 16,375 15,992 ------------ ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in leased equipment, net of nonrecourse borrowings for leveraged leases (51,045) (72,392) Loans extended to borrowers (2,529) (19,295) Other investments (32,326) (37,233) ------------ ----------- Total investments (85,900) (128,920) ------------ ----------- Lease rents received, net of earned income and leveraged lease nonrecourse debt service 31,483 35,462 Loan principal received 33,246 11,328 Proceeds from sale of assets 88,731 24,788 Joint venture investment recovery, net of earned income 1,750 1,337 ------------ ----------- Recovery of investments 155,210 72,915 ------------ ----------- Net cash flows provided by (used in) 69,310 (56,005) investing activities ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in short-term borrowings 17,015 62,207 Proceeds from issuance of long-term debt - 78,500 Proceeds from nonrecourse obligations 39,658 21,616 Repayment of long-term debt (100,000) (105,000) Repayment of nonrecourse obligations (25,742) (14,273) Dividends paid to stockholder (5,914) (4,343) Other financing activities (806) (1,058) ------------ ----------- Net cash flows (used in) provided by (75,789) 37,649 financing activities ------------ ----------- Net increase (decrease) in cash and cash equivalents 9,896 (2,364) Cash and cash equivalents at beginning of period 18,482 19,905 ------------ ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $28,378 $ 17,541 ============ =========== - 3 - PART I. FINANCIAL INFORMATION Item 1. Financial Statements, continued NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 AND 1996 1. The consolidated balance sheet of GATX Capital Corporation and its subsidiaries ("the Company") at December 31, 1996 was derived from the audited financial statements at that date. All other consolidated financial statements are unaudited and include all adjustments, consisting only of normal recurring items, which management considers necessary for a fair statement of the consolidated results of operations and financial position for and as of the end of the indicated periods. Operating results for the three-month period ended March 31,1997 are not necessarily indicative of the results that may be achieved for the entire year. 2. Certain prior year amounts have been reclassified to conform to current presentation. 3. The Company is engaged in various matters of litigation and has unresolved claims pending. While the amounts claimed are substantial and the ultimate liability with respect to such claims cannot be determined at this time, it is the opinion of management that damages, if any, required to be paid by the Company in the discharge of such liability are not likely to be material to the Company's financial position or results of operations. - 4 - PART I. FINANCIAL INFORMATION, continued Item 2. Management's Discussion and Analysis RESULTS OF OPERATIONS Net income for 1997's first quarter exceeded 1996's first quarter by $13.7 million, or 149%, due primarily to higher investment and asset management income related to asset remarketing. Investment and Asset Management - --------------------------------- The Company invests in a wide variety of assets and generates income by financing equipment (through lease, loan and joint venture investments), from the remarketing of assets, and from fees generated by managing the investment portfolios of others and from brokering or arranging financing transactions. Investment and asset management revenue increased $45.7 million over the first quarter of 1996. The primary reason for this increase is income from asset remarketing, which increased $28.7 million. Because asset remarketing opportunities are realized at lease end or in response to specific market conditions, they do not occur evenly between periods and can fluctuate significantly depending on market conditions. Higher investment balances during 1997's first quarter, including those funded with off-balance sheet financing and those of Centron DPL (which was acquired in October 1996), contributed to the remainder of the increase in investment earnings as well as to higher operating lease expense. Technology Equipment Sales and Service - ---------------------------------------- With the October 1996 acquisition of the 50% of Centron DPL which it did not already own, the Company entered the technology equipment sales and service business. Centron is a technology solutions provider that offers products, technical service and financial services required for building corporate information networks. The sales and technical services offered by Centron are included in this segment of the business. Lease and other financing alternatives offered by Centron are included in the investment and asset management business segment. Higher average borrowings (to fund new investments and technology equipment inventory) and the consolidation of Centron DPL resulted in interest expense being higher than last year. Selling, general and administrative costs increased over 1996, due primarily to higher human resource and other administrative costs resulting from increased business activity, including the impact of the acquisition of Centron DPL. The allowance for losses increased during the first three months of 1997 as a result of a $2.3 million provision for losses and $1.1 million in recoveries of previously written off investments. There were no significant write-downs during the first quarter. At March 31, 1997 the allowance for losses is 7.2% of investments, including off-balance sheet assets and after deducting nonleveraged lease nonrecourse debt. LIQUIDITY AND CAPITAL RESOURCES Floating rate debt financing represented 19.9% of the Company's capital structure at March 31, 1997. These borrowings support investments tied to LIBOR and other similar rates. Fluctuations in interest rates may impact earnings, either negatively or positively, depending on the Company's net floating rate asset or debt position. At March 31, 1997, the Company had $43.1 million more floating rate assets than floating rate debt. At March 31, 1997, the Company had approved and unfunded transactions totaling approximately $180.4 million, including approximately $162.5 million expected to fund during the remainder of 1997. Once approved for funding, a transaction may not be completed for various reasons, or the investment may be shared with partners or sold. The Company generates cash from operations and portfolio proceeds and has certain facilities for borrowing. During the first quarter of 1997 the Company used the cash generated from operations and portfolio proceeds to repay over $100 million of debt financing. At March 31, 1997, the Company had a $300 million shelf registration for Series D medium term notes, of which $32 million was available, and had unused capacity under its credit agreements of $274 million. -5- FORWARD LOOKING STATEMENTS Certain statements in the Management's Discussion and Analysis constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties, and could cause actual results to differ materially from those projected. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company has previously reported various lawsuits filed by and against it and GATX/Airlog Company ("Airlog"), a general partnership of which a Company subsidiary is a partner, arising out of the issuance of Airworthiness Directive 96-01-03 by the Federal Aviation Administration in January 1996 (the "Airworthiness Directive"). On January 2, 1997, the Company and Airlog filed a Motion for Partial Summary Judgment with respect to certain of the counterclaims filed by Evergreen International Airlines, Inc. ("Evergreen") in the Declaratory Judgment action brought by the Company and Airlog in the United States District Court for the Northern District of California (No. C96-2494). The Motion for Partial Summary Judgment is brought on the grounds that (1) the contracts at issue in the litigation are governed by the California Commercial Code (the "Code"), (2) Evergreen's contract counterclaims are barred by the four-year statute of repose established by the Code, and (3) Evergreen's negligent misrepresentation counterclaim is barred by the economic loss doctrine under California law. The court has held oral argument on the motion and has taken it under advisement. The previously reported action filed by General Electric Capital Corporation and a subsidiary thereof (hereinafter collectively "GECC"), against the Company, Airlog and certain other companies, has been dismissed, without prejudice. These parties and GATX Corporation entered into a tolling agreement dated December 17, 1996 and amended in April 1997. Under the tolling agreement as amended, the parties thereto have agreed that any defenses of expiration of the statute of limitations or statute of repose or laches applicable to the causes of action asserted by GECC are tolled, up to and including January 8, 1998. PART II. OTHER INFORMATION, continued Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27. Financial Data Schedule (b) The Company filed a current report on Form 8-K on January 23, 1997, under Item 5., Other Events. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GATX CAPITAL CORPORATION /s/ Michael E. Cromar ______________________ Michael E. Cromar Vice President and Chief Financial Officer /s/ Curt F. Glenn ______________________ Curt F. Glenn Principal Accounting Officer, Vice President and Controller May 12, 1997 EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF INCOME AND THE CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 28,378 0 855,611 117,509 43,890 0 425,237 0 1,764,750 0 1,128,511 0 1,027 1,031 354,415 1,764,750 39,252 150,387 31,963 0 55,580 2,250 22,041 38,553 15,613 0 0 0 0 22,940 0 0 CONSISTS OF DIRECT FINANCE LEASE RECEIVABLES OF 453,645, LEVERAGED LEASE RECEIVABLES OF 209,005, AND SECURED LOANS OF 192,961. CONSISTS OF ASSETS HELD FOR SALE OR LEASE OF 10,254 AND TECHNOLOGY EQUIPMENT INVENTORY OF 33,636. CONSISTS OF COST OF EQUIPMENT LEASED TO OTHERS UNDER OPERATING LEASES, NET OF DEPRECIATION. GATX CAPITAL CORPORATION HAS AN UNCLASSIFIED BALANCE SHEET. CONSISTS OF SENIOR TERM NOTES OF 835,600, OBLIGATIONS UNDER CAPITAL LEASES OF 11,624, AND NONRECOURSE OBLIGATIONS OF 281,287. PAR VALUE ONLY. CONSISTS OF RETAINED EARNINGS OF 202,712, ADDITIONAL PAID-IN CAPITAL OF 151,502, UNREALIZED GAINS ON MARKETABLE EQUITY SECURITIES, NET OF TAX OF 3,720 AND FOREIGN CURRENCY TRANSLATION ADJUSTMENT OF (3,919). CONSISTS OF OPERATING LEASE EXPENSE OF 27,445, SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES OF 26,148, AND OTHER EXPENSES OF 1,987.
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