-----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, MDIwcBZ0eB3eskejriJwwWGL0maoQyXFflxHKeLEOopOAtZ/dnYmXo2UUMWkpVMZ xa6zvMlnvCgce5mIVARU9A== 0000357019-97-000022.txt : 19970813 0000357019-97-000022.hdr.sgml : 19970813 ACCESSION NUMBER: 0000357019-97-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 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: 97657376 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 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 June 30, 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 August 6, 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 Six Months Ended June 30, June 30, 1997 1996 1997 1996 ------- ------- -------- --------- (Unaudited) (Unaudited) REVENUES: Investment and asset management $ 94,508 $76,356 $205,643 $ 141,789 Tech equipment sales and service 54,551 - 93,803 - -------- ------- -------- --------- 149,059 76,356 299,446 141,789 -------- ------- -------- --------- EXPENSES: Interest 22,444 20,374 44,485 39,825 Operating leases 28,522 17,973 55,967 32,619 Cost of technology equipment sales & service 44,571 - 76,534 - Selling, general & administrative 26,532 14,694 52,680 26,778 Provision for losses on investments 3,775 3,501 6,025 6,501 Other 1,307 1,506 3,294 2,288 -------- -------- -------- --------- 127,151 58,048 238,985 108,011 -------- -------- -------- --------- Income before income taxes 21,908 18,308 60,461 33,778 -------- -------- -------- --------- INCOME TAXES: Current income taxes 8,000 6,833 22,084 12,606 Deferred income taxes 873 653 2,403 1,145 -------- -------- -------- --------- 8,873 7,486 24,487 13,751 -------- -------- -------- --------- NET INCOME 13,035 10,822 35,974 20,027 Reinvested earnings at beginning of period 202,712 167,262 185,686 162,400 Dividends paid to stockholder (6,196) (5,587) (12,109) (9,930) -------- -------- -------- --------- REINVESTED EARNINGS AT END OF PERIOD $ 209,551 $ 172,497 $ 209,551 $ 172,497 ========= ========= ========== ========= 1 GATX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) June 30, December 31, 1997 1996 ----------- ----------- (Unaudited) ASSETS: Cash and cash equivalents $ 18,517 $ 18,482 Investments: Direct financing leases 476,869 461,757 Leveraged leases 175,177 257,039 Operating lease equipment- net of depreciation 473,658 429,880 Secured loans 204,068 222,602 Investment in joint ventures 384,309 308,934 Assets held for sale or lease 9,669 12,393 Other investments 50,612 65,506 Investment in future residuals 20,480 21,457 Allowance for losses on investments (121,059) (114,096) ----------- ------------ Total investments 1,673,783 1,665,472 ----------- ------------ Due from GATX Corporation 22,681 45,147 Other assets 136,393 119,528 ----------- ----------- TOTAL ASSETS $ 1,851,374 $ 1,848,629 =========== ============ LIABILITIES AND STOCKHOLDER'S EQUITY: Accrued interest $ 11,662 $ 15,821 Accounts payable and other liabilities 137,695 138,660 Debt financing: Commercial paper and bankers' acceptances 123,897 13,772 Notes Payable 38,608 63,114 Obligations under capital leases 10,182 12,429 Senior term notes 805,600 935,600 ------------ ---------- Total debt financing 978,287 1,024,915 ------------ ---------- Nonrecourse obligations 298,365 268,044 Deferred income 5,935 5,786 Deferred income taxes 54,140 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 and additional paid-in capital 28,960 28,960 Reinvested earnings 209,551 185,686 Foreign currency translation adjustment (3,433) (1,543) Unrealized gain on equity securities 5,212 5,574 ------------- ---------- Total stockholders equity 365,290 343,677 ------------- ---------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,851,374 $ 1,848,629 ============== =========== 2 GATX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Six Months Ended June 30, 1997 1996 ---------- --------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 35,974 $ 20,027 Reconciliation to net cash provided by operating activities: Provision for losses on investments 6,025 6,501 Depreciation expense 35,936 17,526 Provision for deferred income taxes 2,403 1,145 Gain on sale of assets (40,908) (18,102) Changes in assets and liabilities: Due from GATX Corporation 22,466 5,904 Accrued interest, accounts payable and other liabilities (5,124) (7,008) Deferred income 149 1,701 Other - net (17,249) (974) ---------- -------- Net cash flows provided by operating activities 39,672 26,720 ---------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in leased equipment, net of nonrecourse borrowings for leveraged leases (156,225) (196,817) Loans extended to borrowers (14,864) (100,251) Other investments (94,835) (67,645) ---------- --------- Total investments (265,924) (364,713) ---------- --------- Lease rents received, net of earned income and leveraged lease nonrecourse debt service 60,143 55,998 Loan principal received 34,472 18,348 Proceeds from sale of assets 129,075 52,293 Joint venture investment recovery, net of earned income 18,479 2,343 ---------- --------- Recovery of investments 242,169 128,982 ----------- --------- Net cash flows used in investing activities (23,755) (235,731) =========== ========= CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in short-term borrowings 97,619 132,603 Proceeds from issuance of long-term debt - 168,000 Proceeds from nonrecourse obligations 83,725 50,949 Repayment of long-term debt (130,000) (105,000) Repayment of nonrecourse obligations (52,869) (27,603) Dividends paid to stockholder (12,109) (9,930) Other financing activities (2,248) (2,987) ----------- --------- Net cash flows (used in) provided by financing activities (15,882) (206,032) ----------- --------- Net increase (decrease) in cash and cash equivalents 35 (2,979) Cash and cash equivalents at beginning of period 18,482 19,905 ----------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,517 $ 16,926 ========== ========== 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements, continued NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 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 six-month period ended June 30, 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 earned during the second quarter and during the six months ended June 30, 1997, exceeded net income earned during the corresponding periods in the prior year by $2.2 million (20%) and $15.9 million (80%), respectively. The increases during both periods are due primarily to higher investment and asset management income related to asset remarketing and fees earned from arranging financing transactions. 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 as a result of increases in asset remarketing income and fees from arranging financing transactions, as well as higher investment balances. Although historically a significant contributor to income, asset remarketing opportunities, which are realized at lease end or in response to specific market conditions, do not occur evenly between periods and the income they generate can fluctuate significantly depending on market conditions. Similarly, transaction fees do not occur evenly between periods. Higher investment balances during 1997, including those funded with off-balance sheet financing and those of Centron (which was acquired in October 1996), also contributed to the increase in investment and asset management revenue, as well as to higher operating lease expense. Technology Equipment Sales and Service - ---------------------------------------- With the October 1996 acquisition of the 50% of Centron, which it did not already own, the Company expanded its 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 from the consolidation of Centron) 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. The allowance for losses increased during the first six months of 1997 as a result of a $6.0 million provision for losses and $1.4 million in recoveries of previously written off investments. There were no significant write-downs during this period. At June 30, 1997, the allowance for losses is 7% of investments, including off-balance sheet assets and after deducting nonleveraged lease nonrecourse debt. 5 LIQUIDITY AND CAPITAL RESOURCES Floating rate debt financing represented 22.7% of the Company's capital structure at June 30, 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 June 30, 1997, the Company had $38.7 million more floating rate debt than floating rate assets. At June 30, 1997, the Company had approved unfunded transactions totaling approximately $135.5 million, including approximately $95.1 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. In addition, certain lease transactions are financed by obtaining nonrecourse loans equal to the present value of some or all of the rental stream. During the six months ended June 30, 1997, the Company used the cash generated from operations, from investing activities and from short-term borrowings to repay $130 million of debt financing. At June 30, 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 commercial paper and bankers' acceptances credit agreements of $146.1 million. Two of the Company's subsidiaries maintain various stand-alone bank facilities which had unused capacity aggregating $52.2 million as of June 30, 1997. 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. 6 PART II. OTHER INFORMATION 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 June 10, 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 August 12, 1997 7 EX-27 2
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 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 18,517 0 856,114 121,059 46,403 0 473,658 0 1,851,374 0 1,114,147 1,031 0 1,027 363,232 1,851,374 93,803 299,446 76,534 0 111,941 6,025 44,485 60,461 24,487 0 0 0 0 35,974 0 0 CONSISTS OF DIRECT FINANCE LEASE RECEIVABLES OF 476,869, LEVERAGED LEASE RECEIVABLES OF 175,177, AND SECURED LOANS OF 204,068. CONSISTS OF ASSETS HELD FOR SALE OR LEASE OF 9,669 AND TECHNOLOGY EQUIPMENT INVENTORY OF 36,734. 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 805,600, OBLIGATIONS UNDER CAPITAL LEASES OF 10,182, AND NONRECOURSE OBLIGATIONS OF 298,365. PAR VALUE ONLY. CONSISTS OF RETAINED EARNINGS OF 209,551, ADDITIONAL PAID-IN CAPITAL OF 151,902, UNREALIZED GAINS ON MARKETABLE EQUITY SECURITIES, NET OF TAX OF 5,212 AND FOREIGN CURRENCY TRANSLATION ADJUSTMENT OF (3,433). CONSISTS OF OPERATING LEASE EXPENSE OF 55,967, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES OF 52,680, AND OTHER EXPENSES OF 3,294.
-----END PRIVACY-ENHANCED MESSAGE-----