-----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, HquAORAiuTLJbQS73/K4LMYfxPVwud4fG/lsAgCyhTHON/CMCl4Jo1ISbXuLR3Pj e7r7z8mdwL+RL0QhSOt9Zg== 0000950137-01-502859.txt : 20010813 0000950137-01-502859.hdr.sgml : 20010813 ACCESSION NUMBER: 0000950137-01-502859 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GATX FINANCIAL 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: 1703962 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 CAPITAL CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: GATX LEASING CORP DATE OF NAME CHANGE: 19900405 10-Q 1 c64319e10-q.txt QUARTERLY REPORT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2001 Commission File Number 1-8319 ------------------------------------ GATX FINANCIAL CORPORATION (FORMERLY GATX CAPITAL CORPORATION) Incorporated in the State of Delaware IRS Employer Identification No. 94-1661392 500 West Monroe Street Chicago, IL 60661-3676 (312) 621-6200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Registrant had 1,031,250 shares of $1 par value common stock outstanding (all owned by GATX Corporation) as of August 10, 2001. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GATX FINANCIAL CORPORATION AND SUBSIDIARIES (FORMERLY GATX CAPITAL CORPORATION) CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN MILLIONS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ---------------------------- ------------------------------- 2001 2000 2001 2000 ------------ ----------- ------------ -------------- GROSS INCOME Revenues $ 405.6 $ 297.7 $ 766.8 $ 591.4 Share of affiliates' earnings 15.0 26.1 29.9 46.1 ------------ ----------- ------------ -------------- TOTAL GROSS INCOME 420.6 323.8 796.7 637.5 OWNERSHIP COSTS Depreciation and amortization 107.2 76.5 209.4 154.8 Interest, net 65.8 57.9 128.1 112.4 Operating lease expense 47.3 42.4 94.4 82.1 ------------ ----------- ------------ -------------- TOTAL OWNERSHIP COSTS 220.3 176.8 431.9 349.3 OTHER COSTS AND EXPENSES Operating expenses 41.9 32.9 103.0 61.9 Selling, general and administrative 60.6 44.6 114.1 83.4 Provision for possible losses 16.2 2.0 37.5 4.0 Asset impairment charges 30.6 -- 30.6 -- Fair value adjustments for derivatives (.7) -- .4 -- ------------ ----------- ------------ -------------- TOTAL OTHER COSTS AND EXPENSES 148.6 79.5 285.6 149.3 INCOME FROM CONTINUING OPERATIONS BEFORE 51.7 67.5 79.2 138.9 INCOME TAXES INCOME TAXES 20.1 26.4 31.5 53.3 ------------ ----------- ------------ -------------- INCOME FROM CONTINUING OPERATIONS 31.6 41.1 47.7 85.6 DISCONTINUED OPERATIONS Operating results, net of income taxes (.4) 7.7 2.7 13.5 Gain on sale of portion of segment, net of income taxes -- -- 171.4 -- ------------ ----------- ------------ -------------- TOTAL DISCONTINUED OPERATIONS (.4) 7.7 174.1 13.5 ------------ ----------- ------------ -------------- NET INCOME $ 31.2 $ 48.8 $ 221.8 $ 99.1 ============ =========== ============ ==============
(1) The consolidated financial statements are unaudited and are restated to reflect the merger of GATX Rail Corporation into GATX Capital Corporation. The consolidated financial statements were derived from the financial statements of GATX Rail Corporation and GATX Capital Corporation and include all adjustments and reclassifications which management considers necessary for a fair statement of the consolidated results of operations and financial position for all periods presented. Operating results for the six months ended June 30, 2001 are not necessarily indicative of the results that may be achieved for the entire year ending December 31, 2001. (2) Discontinued operations - Operating results for GATX Terminals Corporation are shown net of taxes of $.9 million, $4.2 million, $2.7 million and $7.4 million, respectively, for the four periods displayed. Gain on sale of portion of segment reflects the sale of substantially all of the company's interest in GATX Terminals Corporation and its subsidiary companies and is stated net of income taxes of $199.8 million. 1 3 GATX FINANCIAL CORPORATION AND SUBSIDIARIES (FORMERLY GATX CAPITAL CORPORATION) CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN MILLIONS)
JUNE 30 DECEMBER 31 2001 2000 ---------------- ----------------- ASSETS Cash and Cash Equivalents $ 363.1 $ 173.8 Receivables Trade accounts 48.2 63.5 Finance leases 996.5 861.9 Secured Loans 613.3 538.0 Less - allowance for possible losses (105.2) (94.0) ---------------- ----------------- 1,552.8 1,369.4 Operating Lease Assets and Facilities Railcar and service facilities 2,585.9 2,695.3 Operating lease investments and other 1,673.8 1,756.1 Less - allowance for depreciation (1,781.2) (1,901.2) ---------------- ----------------- 2,478.5 2,550.2 Due from GATX Corporation 484.5 504.7 Investments in Affiliated Companies 1,130.6 950.7 Other Assets 437.4 403.7 Net Assets of Discontinued Operations 37.3 610.8 ---------------- ----------------- $ 6,484.2 $ 6,563.3 ================ =================
2 4
JUNE 30 DECEMBER 31 2001 2000 ---------------- ----------------- LIABILITIES, DEFERRED ITEMS AND SHAREHOLDER'S EQUITY Accounts Payable $ 237.5 $ 263.4 Accrued Expenses 275.2 132.2 Debt Short-term 184.9 557.5 Long-term: Recourse 2,955.6 3,093.9 Nonrecourse 639.0 494.2 Capital lease obligations 70.5 79.0 ---------------- ----------------- 3,850.0 4,224.6 Deferred Income Taxes 381.2 462.8 Other Deferred Items 302.3 228.2 ---------------- ----------------- Total Liabilities and Deferred Items 5,046.2 5,311.2 Shareholder's Equity Preferred Stock 125.0 125.0 Common stock - par value $1 per share, 1,031,250 shares authorized, issued and outstanding (owned by GATX Corporation) 1.0 1.0 Additional capital 447.9 397.9 Reinvested earnings 908.6 762.5 Accumulated other comprehensive loss (44.5) (34.3) ---------------- ----------------- Total Shareholder's Equity 1,438.0 1,252.1 ---------------- ----------------- $ 6,484.2 $ 6,563.3 ================ =================
3 5 GATX FINANCIAL CORPORATION AND SUBSIDIARIES (FORMERLY GATX CAPITAL CORPORATION) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN MILLIONS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 --------------------------- ----------------------------- 2001 2000 2001 2000 ------------ ----------- ------------ -------------- OPERATING ACTIVITIES Income from continuing operations $ 31.6 $ 41.1 $ 47.7 $ 85.6 Adjustments to reconcile income from continuing operations to net cash provided by continuing operations: Realized gains on remarketing of leased equipment (41.1) (9.1) (49.6) (18.8) Depreciation and amortization 107.2 76.5 209.4 154.8 Provision for possible losses 16.2 2.0 37.5 4.0 Asset impairment charges 30.6 -- 30.6 -- Deferred income taxes 3.4 9.2 (16.0) 38.3 Other, including working capital 1.8 (15.2) (72.8) (54.0) ------------ ----------- ------------ -------------- Net cash provided by continuing operations 149.7 104.5 186.8 209.9 INVESTING ACTIVITIES Additions to equipment on lease, net of nonrecourse financing for leveraged leases (135.9) (145.0) (401.9) (275.5) Additions to operating lease assets and facilities (62.1) (135.7) (100.2) (291.6) Secured loans extended (122.9) (102.6) (203.4) (216.5) Investments in affiliated companies (79.3) (71.9) (220.4) (121.4) Other investments and progress payments (16.0) (96.3) (129.6) (104.1) ------------ ----------- ------------ -------------- Portfolio investments and capital additions (416.2) (551.5) (1,055.5) (1,009.1) Portfolio proceeds 276.7 120.4 525.1 219.6 Proceeds from other asset sales 191.4 288.4 196.4 292.8 ------------ ----------- ------------ -------------- Net cash provided by (used in) investing activities of continuing operations 51.9 (142.7) (334.0) (496.7) FINANCING ACTIVITIES Proceeds from issuance of long-term debt 330.0 659.0 392.0 780.6 Repayment of long-term debt (347.9) (546.8) (652.0) (603.6) Net (decrease) increase in short-term debt (417.2) (126.7) (372.6) 203.7 Repayment of capital lease obligations (1.9) (2.0) (8.5) (6.5) Other receipts/advances -- -- -- 7.3 Equity contribution from GATX Corporation -- 35.0 50.0 35.0 Increase (decrease) in amount due to GATX Corporation 19.9 (.5) 20.2 (44.6) Cash dividends to GATX Corporation (17.3) (18.6) (75.3) (40.2) ------------ ----------- ------------ -------------- Net cash (used in) provided by financing activities of continuing operations (434.4) (.6) (646.2) 331.7 NET TRANSFERS FROM (TO) DISCONTINUED OPERATIONS -- 10.4 (6.1) (46.0) ------------ ----------- ------------ -------------- NET DECREASE IN CASH AND CASH EQUIVALENTS FROM (232.8) (28.4) (799.5) (1.1) CONTINUING OPERATIONS PROCEEDS FROM SALE OF PORTION OF SEGMENT 115.7 -- 1,137.0 -- TAXES PAID ON GAIN FROM SALE OF SEGMENT (148.2) -- (148.2) -- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS -- .4 (13.2) 5.6 ------------ ----------- ------------ -------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $ (265.3) $ (28.0) $ 176.1 $ 4.5 ============ =========== ============ ==============
4 6 GATX FINANCIAL CORPORATION AND SUBSIDIARIES (FORMERLY GATX CAPITAL CORPORATION) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (IN MILLIONS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ------------------------------- ----------------------------- 2001 2000 2001 2000 --------------- ------------ -------------- ------------ Net income $ 31.2 $ 48.8 $ 221.8 $ 99.1 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment 20.8 (7.5) 10.2 (20.2) Unrealized (loss) gain on securities, net of reclassification adjustments (a) (6.7) (6.3) (20.4) 9.4 Unrealized (loss) gain on derivatives (4.6) - .1 - --------------- ------------ -------------- ------------ Other comprehensive income (loss) 9.5 (13.8) (10.1) (10.8) --------------- ------------ -------------- ------------ COMPREHENSIVE INCOME $ 40.7 $ 35.0 $ 211.7 $ 88.3 =============== ============ ============== ============ (a) Reclassification adjustments: Unrealized gain (loss) on securities $ .8 $ (1.1) $ (3.6) $ 23.1 Less - reclassification adjustment for gains realized included in net income (7.5) (5.2) (16.8) (13.7) --------------- ------------ -------------- ------------ Net unrealized (loss) gain on securities $ (6.7) $ (6.3) $ (20.4) $ 9.4 =============== ============ ============== ============
5 7 GATX FINANCIAL CORPORATION AND SUBSIDIARIES (FORMERLY GATX CAPITAL CORPORATION) FINANCIAL DATA OF BUSINESS SEGMENTS FOR CONTINUING OPERATIONS (UNAUDITED) (IN MILLIONS)
GATX CAPITAL GATX RAIL OTHER TOTAL --------------- --------------- ------------ -------------- THREE MONTHS ENDED JUNE 30, 2001 PROFITABILITY Revenues $ 246.9 $ 151.6 $ 7.1 $ 405.6 Share of affiliates' earnings 13.6 1.4 - 15.0 --------------- --------------- ------------ -------------- Total gross income 260.5 153.0 7.1 420.6 Depreciation and amortization 81.8 25.0 .4 107.2 Interest expense (income) 54.0 12.8 (1.0) 65.8 Income from continuing operations before taxes 23.8 19.2 8.7 51.7 Income from continuing operations 14.3 11.5 5.8 31.6 FINANCIAL POSITION Investments in affiliated companies 1,044.9 85.7 - 1,130.6 Identifiable assets 4,164.7 1,613.8 668.4 6,446.9 ITEMS AFFECTING CASH FLOW Net cash provided by (used in) continuing operations 132.9 17.8 (1.0) 149.7 Portfolio investments and capital additions 349.2 67.0 - 416.2 THREE MONTHS ENDED JUNE 30, 2000 PROFITABILITY Revenues $ 147.5 $ 144.3 $ 5.9 $ 297.7 Share of affiliates' earnings 25.3 .8 - 26.1 --------------- --------------- ------------ -------------- Total gross income 172.8 145.1 5.9 323.8 Depreciation and amortization 51.8 24.5 .2 76.5 Interest expense 41.4 13.8 2.7 57.9 Income from continuing operations before taxes 33.6 29.0 4.9 67.5 Income from continuing operations 20.8 17.9 2.4 41.1 FINANCIAL POSITION AT DECEMBER 31, 2000 Investments in affiliated companies 866.8 83.9 - 950.7 Identifiable assets 3,815.9 1,669.6 467.0 5,952.5 ITEMS AFFECTING CASH FLOW Net cash provided by (used in) continuing operations 67.8 45.9 (9.2) 104.5 Portfolio investments and capital additions 408.2 143.3 - 551.5
6 8 GATX FINANCIAL CORPORATION AND SUBSIDIARIES (FORMERLY GATX CAPITAL CORPORATION) FINANCIAL DATA OF BUSINESS SEGMENTS FOR CONTINUING OPERATIONS (UNAUDITED) (IN MILLIONS)
GATX CAPITAL GATX RAIL OTHER TOTAL --------------- --------------- ------------ -------------- SIX MONTHS ENDED JUNE 30, 2001 PROFITABILITY Revenues $ 457.6 $ 294.4 $ 14.8 $ 766.8 Share of affiliates' earnings 27.6 2.3 - 29.9 --------------- --------------- ------------ -------------- Total gross income 485.2 296.7 14.8 796.7 Depreciation and amortization 159.4 49.4 .6 209.4 Interest expense (income) 109.6 25.7 (7.2) 128.1 Income from continuing operations before taxes 42.7 14.2 22.3 79.2 Income from continuing operations 25.8 7.4 14.5 47.7 FINANCIAL POSITION Investments in affiliated companies 1,044.9 85.7 - 1,130.6 Identifiable assets 4,164.7 1,613.8 668.4 6,446.9 ITEMS AFFECTING CASH FLOW Net cash provided by continuing operations 122.8 57.4 6.6 186.8 Portfolio investments and capital additions 865.5 190.0 - 1,055.5 SIX MONTHS ENDED JUNE 30, 2000 PROFITABILITY Revenues $ 293.5 $ 284.5 $ 13.4 $ 591.4 Share of affiliates' earnings 44.2 1.9 - 46.1 --------------- --------------- ------------ -------------- Total gross income 337.7 286.4 13.4 637.5 Depreciation and amortization 104.1 50.3 .4 154.8 Interest expense 79.6 28.5 4.3 112.4 Income from continuing operations before taxes 70.8 58.3 9.8 138.9 Income from continuing operations 42.8 36.4 6.4 85.6 FINANCIAL POSITION AT DECEMBER 31, 2000 Investments in affiliated companies 866.8 83.9 - 950.7 Identifiable assets 3,815.9 1,669.6 467.0 5,952.5 ITEMS AFFECTING CASH FLOW Net cash provided by (used in) continuing operations 115.5 99.2 (4.8) 209.9 Portfolio investments and capital additions 734.4 274.7 - 1,009.1
7 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF FIRST SIX MONTHS OF 2001 TO FIRST SIX MONTHS OF 2000 GATX Financial Corporation, formerly GATX Capital Corporation, is a wholly-owned subsidiary of GATX Corporation. Subsequent to June 30, 2001, GATX Corporation completed a realignment of the legal structure of its subsidiary companies. The new structure combined GATX Corporation's two principal subsidiaries, GATX Rail Corporation and GATX Capital Corporation, into a single legal entity, GATX Financial Corporation. GATX Rail and GATX Capital now operate as divisions of GATX Financial Corporation. These divisions are GATX Financial Corporation's reportable segments. GATX Corporation expects that this new single entity structure will result in greater scale and liquidity in the capital markets and lower relative funding costs. GATX Terminals Corporation (Terminals), which specializes in the storage and distribution of bulk petroleum and chemical products, is no longer considered to be a continuing operation and its financial data has been segregated as discontinued operations for all periods presented. During the first six months of 2001, GATX completed the sale of the majority of Terminals' domestic operations to Kinder Morgan Energy Partners, L.P. The sale included substantially all of the domestic terminaling operations, Central Florida Pipeline Company, and Calnev Pipeline Company. During the six-month period, GATX also sold substantially all of Terminals' European operations, part of its Asian operations and its distillate and blending distribution affiliate. GATX Financial Corporation's (GFC) net income for the first six months of 2001 was $221.8 million, a $122.7 million increase from the $99.1million reported for the same period in 2000. Earnings for the six-month period included a $171.4 million after-tax gain related to the partial sale of the discontinued Terminals segment, $18.3 million of after-tax asset impairment charges and $16.2 million of after-tax expense for nonrecurring items. GFC's gross income from continuing operations of $796.7 million was $159.2 million higher than the prior year. Income from continuing operations for the first six months of 2001 was $47.7 million compared to $85.6 million for the first six months of 2000 with the decrease largely due to the nonrecurring items and asset impairment charges. GATX CAPITAL (CAPITAL) Capital's gross income of $485.2 million increased $147.5 million from the prior year period principally due to an increase in lease income generated from a larger lease portfolio. The increase in lease income was predominately driven by growth in technology and air assets. During the first six months of 2001, Capital acquired a portfolio of technology leases from El Camino Resources for $372.5 million (which included the assumption of $243.1 of nonrecourse debt), which contributed significantly to the increase in lease income. Share of affiliates' earnings of $27.6 million decreased $16.6 million from last year as higher income from certain air and diversified finance joint ventures was more than offset by decreases in the telecommunications and rail joint ventures. Asset remarketing income includes both gains from the sale of assets from Capital's own portfolio and residual sharing fees from the sale of managed assets. Asset remarketing income of $64.7 million increased $46.0 million from the prior year period largely due to residual sharing fees from managed portfolios and the sale of manufacturing-related equipment and air assets. Gains from the sale of stock derived from warrants received as part of financing and leasing transactions with non-public start-up companies of $27.6 million grew by $5.0 million over the prior year. Asset remarketing income and gains from the sale of stock do not occur evenly from period to period. 8 10 Ownership costs of $293.6 million increased $87.7 million compared with the prior year due to higher depreciation and interest expense. Depreciation and amortization expense of $159.4 million increased $55.3 million from 2000 and reflected the higher level of investment in operating lease assets, specifically technology and air assets. Higher average debt balances associated with funding the investment activity drove interest expense higher by $30.0 million in 2001. Selling, general and administrative expenses increased $24.2 million over the prior year due to higher human resource and administrative expenses associated with an overall increase in business activity, including the expansion of the venture finance platform and increased legal expenses. The provision for possible losses was derived from Capital's estimate of losses based on an assessment of credit, collateral and market risks. The provision for possible losses of $37.4 million increased $33.4 million from 2000 reflecting the deterioration of certain steel, venture and telecommunications investments. The allowance for possible losses increased $12.3 million to $101.7 million and was approximately 6.2% of reservable assets, up slightly from 5.9% at year-end. Reservable assets are defined as direct financing leases, leveraged leases and secured loans. Write-offs totaled $25.1 million for the six-month period and included write-offs of steel, venture and telecommunications investments. Non-performing assets of $116.3 million increased $24.2 million from year-end primarily due to telecommunication and venture finance related assets. Deterioration in the telecommunications portfolio accounted for $30.6 million in asset impairment charges in the first six months of 2001. During the second quarter Capital's exposure in telecommunications was reduced to approximately $125 million, down $50 million from the first quarter. The $50 million reduction was comprised of the $30.6 million write-down and approximately $20 million of principal repayments and amortization. Capital will continue to aggressively reduce the remaining telecommunications exposure through the end of 2001. Net income of $25.8 million decreased $17.0 million from last year principally as a result of an increase to the loss provision, asset impairment charges and higher interest and SG&A expenses associated with increased investment and overall business activity. GATX RAIL (RAIL) Rail's gross income of $296.7 million for the first six months of 2001 increased $10.3 million over the prior year period primarily due to the current year acquisition of Dyrekcja Eksploatacji Cystern (DEC), a Polish tank car fleet and fuel distribution company. Excluding DEC, rental revenue was down slightly compared to last year due to a weaker rail market caused in part by the continued economic downturn. Several industries serviced by Rail, most notably the chemical industry, are experiencing adverse market conditions that have in turn reduced railcar demand. Higher natural gas prices, which increased raw material costs and decreased production expectations for certain chemical companies, negatively impacted railcar demand in the first quarter. Although natural gas prices have decreased from the first quarter, demand for chemical products remains soft, which in turn continues to adversely impact railcar demand. These factors as well as the impact of increased railroad and shipper efficiency are expected to continue affecting car demand and lease rates. Approximately 83,300 railcars were on lease throughout North America at the end of the second quarter, compared to 85,200 a year ago. Rail's North American utilization decreased to 91% as of June 30, 2001 from 93% at the end of prior year period. Demand for new and used railcars remains soft. Correspondingly, Rail's new car orders and fleet additions have been scaled back. Rail's new car order activity was limited to specific customer orders. Rail's North American fleet totaled 91,600 cars at the end of the second quarter, up slightly from 91,500 at the end of the prior year period. 9 11 Ownership costs of $146.6 million increased $6.7 million from last year and include approximately $2 million related to DEC. Although Rail's North American fleet increased slightly from 2000, depreciation and interest expense decreased from last year due to Rail's use of sale-leaseback financing. As a result, operating lease expense increased $10.4 million over the prior year period. Rail's operating costs included $24.4 million of nonrecurring items, $19.7 million of which related to the closing of its East Chicago repair facility. Excluding these nonrecurring charges, operating expenses increased $16.2 million due to higher repair and maintenance expenses attributable to the increased use of third party contract repair shops as a result of a previously reported labor dispute at Rail's domestic service centers and repairs of DEC railcars. SG&A expense increased $7.2 million from the prior year period to $37.0 million due partly to international business development costs. Rail's net income of $7.4 million was $29.0 million lower than the prior year primarily due to closure costs related to its East Chicago repair facility, unfavorable market conditions and other nonrecurring expenses. OTHER All financing activities considered non-operational to GFC have been isolated in the Other segment. Income of $14.8 million increased $1.4 million compared to the prior year period largely due to lower net interest expense that reflects the utilization of the proceeds from the partial sale of Terminals. RESULTS OF DISCONTINUED OPERATIONS The Terminals segment is no longer considered to be a continuing operation and its financial data has been segregated as discontinued operations for all periods presented. In March 2001, GATX sold the majority of Terminals' domestic operations to Kinder Morgan Energy Partners, L.P. The sale included Terminals' domestic terminaling operations, the Central Florida Pipeline Company and Calnev Pipeline Company. GATX also sold substantially all of Terminals' European operations in the first quarter of 2001. In the second quarter, Terminals sold part of its Asian operations and its distillate and blending distribution affiliate. A net after-tax gain of $171.4 million was recognized on the sales of Terminals assets in the first six months of 2001. GATX expects to complete the divestiture of Terminals' remaining assets in 2001. Operating results for the first six months of 2001 were $2.7 million, down $10.8 million from the prior year period. Comparisons between periods were affected by the sale of various assets. Terminals owned 25.1% of the common stock of Olympic Pipeline Company (Olympic). On June 10, 1999, a pipeline rupture and explosion occurred on one of the pipelines owned by Olympic. Several lawsuits have been filed against Olympic and its operator. On September 20, 2000, Terminals sold its entire 25.1% ownership of Olympic's common stock to the Pipelines Business Unit of BP Amoco PLC. CASH FLOW AND LIQUIDITY Net cash provided by continuing operations for the first six months of 2001 was $186.8 million and was $23.1 million lower than the comparable prior year period. Income adjusted for non-cash items generated $259.6 million of cash in the first six months of 2001, a decrease of $4.3 million over the 2000 period, primarily due to increased provision for losses and asset impairment charges. The decrease in other is primarily due to litigation settlements at Capital. All cash received from asset dispositions (excluding the proceeds from the sale of the Terminals segment), including gain and return of principal, is included in investing activities as portfolio proceeds or other asset sales. 10 12 Portfolio proceeds of $525.1 million increased $305.5 million from the comparable 2000 period primarily due to an increase in the remarketing of manufacturing-related equipment and air assets, loan principal received and return of capital distributions from air and telecommunications joint venture investments. Proceeds from other asset sales include $189.2 million from the sale-leaseback of railcars at Rail. Proceeds of $1,137.0 million from the sale of a portion of a segment and the $148.2 million taxes paid were related to the sale of various Terminals assets. Portfolio investments and capital additions for the first six months of 2001 totaled $1,055.5 million, an increase of $46.4 million from the first six months of 2000. Portfolio investments and capital additions at Capital of $865.5 million were $131.1 million higher than the prior year and primarily reflect investments in technology, venture and air assets and joint ventures. During the first six months of 2001, Capital acquired a portfolio of technology leases from El Camino Resources for $372.5 million (which included the assumption of $243.1 of nonrecourse debt). Rail invested $190.0 million in the first six months of 2001, which included approximately $95.8 million for the acquisition of DEC, a Polish tank car fleet and fuel distribution company. Reflective of current market conditions, Rail's investment in its railcar fleet was $177.6 million lower than the prior year period. Railcar additions are not anticipated to exceed prior year activity. Future portfolio investments and capital additions will be dependent on market conditions and opportunities to acquire desirable assets. Internally generated cash flows, proceeds from asset sales, including the sale of Terminals assets, and GFC's external financing sources will be used to fund portfolio investments and capital additions. GFC used $646.2 million in cash from financing activities of continuing operations in the first six months of 2001 primarily to pay down debt. A portion of the proceeds from the sale of Terminals was utilized to repay both short-term and long-term obligations. GFC issued $392.0 million of long-term debt. GFC had available unused committed lines of credit amounting to $810.0 million at June 30, 2001. GFC has a shelf registration for $1.0 billion of which $600 million had been issued through June 30, 2001. OTHER MATTERS Effective January 1, 2001, GATX adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the qualified nature of the hedge, changes in fair value of the derivative will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive loss. The change in fair value of the ineffective portion of a hedge will be immediately recognized in earnings. Capital frequently obtains stock and warrants from non-public, venture capital-backed companies in connection with its financing activities. Under previous accounting guidance, both the stock and warrants were generally accounted for as available-for-sale securities in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, with changes in fair value recorded as unrealized gain or loss in other comprehensive loss in the equity section of the balance sheet. Upon adoption of SFAS No. 133, as amended, these warrants are to be accounted for as derivatives, with prospective changes in fair value recorded in current earnings. Stock will continue to be accounted for in accordance with SFAS No. 115. Apart from warrants, GFC uses interest rate and currency swap agreements, and forward sale agreements, as hedges to manage its exposure to interest rate and currency exchange rate risk on existing and anticipated 11 13 transactions. To qualify for hedge accounting under previous accounting guidance, the derivative instrument must be identified with and reduce the risk arising from a specific transaction. Interest income or expense on interest rate swaps was accrued and recorded as an adjustment to the interest income or expense related to the hedged item. Realized and unrealized gains on currency swaps were deferred and included in the measurement of the hedged investment over the term of the contract. Fair value changes arising from forward sale agreements were deferred in the investment section of the balance sheet and recognized as part of other comprehensive loss in stockholder's equity. The adoption of SFAS No. 133 resulted in $.4 million being recognized as expense in the consolidated statement of income and $.1 million of unrealized gain in other comprehensive loss. In June 2001, the Financial Accounting Standards Board issues SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment testing in accordance with the statements. Other intangible assets will continue to be amortized over their useful lives. GFC will apply the new rules on accounting for goodwill and other intangible assets beginning the first quarter of 2002. Application of the nonamortization provisions of the statement is expected to result in an increase in pretax income from continuing operations of approximately $9.0 million per year. During 2002, GFC will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002, and has not yet determined what the impact, if any, such tests will have on the earnings and financial position of the company. Certain statements in Management's Discussion and Analysis constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. This information may involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to general economic conditions, strength of the railcar market, railcar lease rate and utilization levels, dynamics (including natural gas prices) affecting customers within the chemical, petroleum and food industries and general market conditions in the air, telecommunications, venture and technology industries. 12 14 COMPARISON OF SECOND QUARTER 2001 TO SECOND QUARTER 2000 Second quarter consolidated net income was $31.2 million compared to $48.8 million in the prior year period. For the second quarter 2001 income from continuing operations was $31.6 million as compared to $41.1 million in the prior year period. Except for the nonrecurring charges at Rail and the acquisition of the El Camino Resources portfolio, changes in gross income, expenses and net income between second quarter 2001 and second quarter 2000 for both continuing and discontinued operations, were principally due to the reasons described above in relation to the six-month period. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On May 25, 2001 a suit was filed in Civil District Court for the Parish of Orleans, State of Louisiana, in the matter styled Joseph A. Schnieder, et al. vs. CSX Transportation, Inc., Hercules, Inc., Rhodia, Inc., Oil Mop, L.L.C., The Public Belt Railroad Commission For The City Of New Orleans, GATX Corporation, GATX Capital Corporation, The City of New Orleans, and The Alabama Great Southern Railroad Company, Number 2001-8924. The suit asserts that on May 25, 2000 tank car GATX 16770 leaked the fumes of its cargo, Dimethyl Sulfide, in a residential area in the western part of the City of New Orleans and that the tank car was subsequently taken by defendant New Orleans Public Belt Railroad to another location in the City of New Orleans, where it was later repaired. The plaintiffs are seeking compensation for alleged personal injuries and property damages. During the period from May, 2000 through April, 2001 twenty-two (22) law suits were filed seeking damages in connection with a May 3, 2000 incident in which a Burlington Northern Santa Fe Railway Company (Burlington Northern) train, proceeding through the Louisiana town of New Iberia, derailed several of its cars. One of the derailed cars was a tank car owned by the GATX Rail Division (Rail), with a cargo of Xylene, which overturned in the derailment and ruptured when it was struck by an adjacent car. There was no fire or explosion. Some five hours later, after approximately 500 to 700 gallons of the Xylene had escaped, the rupture in the tank car was plugged. Additionally, hopper cars, not owned by Rail or any of its affiliates, were overturned and the material they contained, Polyvinyl Chloride, was released. The following cases have been filed in the United States District Court for the Western District of Louisiana: David Theriot, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV00-1097), David Theriot, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV01-0861), Janice Olivier, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV00-1561), Ethel Taylor, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV00-1436), Arthur Gregoire, III, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV00-1188), Peggy Jerac, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV00-1155), Kenneth Estilette, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV00-1170), Gloria Berry, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV00-1141), Mary Viltz, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV00-1140), The Burlington Northern and Santa Fe Railway Co. v. General American Transportation Co., et al (No. CV01-0797), Nelson J. Badeaux, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV01-0794), Joseph Rochelle, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV01-0877), Walter Thompson, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV01-0878), John H. Bell, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. CV01-0876). The remainder of the cases are filed in the 16th Judicial District Court for the Parish of Iberia, State of Louisiana as follows: Rebecca Hammons v. The Burlington Northern and Santa Fe Railway Co., et al, (No. 95710), Phillip Walker v. The Burlington Northern and Santa Fe Railway Co., et al (No. 95712), Serella M. Adams, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. 95711), Barry Bennett v. The Burlington Northern and Santa Fe Railway Co., et al (No. 95718), Tiny Vallian, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. 95861), Edward Martin v. The Burlington Northern and Santa Fe Railway Co., et al 13 15 (No. 95665), Janelle Allen, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. 95723), Vernice Johnson, et al v. The Burlington Northern and Santa Fe Railway Co., et al (No. 95617). The suits collectively name about 112 plaintiffs and some assert that a class should be certified. The parent of the Company, GATX Corporation and certain of the Company's predecessors, were not added as defendants until May of 2001; however, discovery and motions with regard to both class certification and remand have been stayed since August of 2000. The federal court has been supervising a mediation process that is ongoing at present. No date is presently set for the next mediation session, but it is anticipated to occur during September or October, 2002. If the mediation is unsuccessful, it is anticipated that litigation will actively proceed and that discovery, the litigating of motions to remand and for class certification and other such activities will commence. GATX Financial Corporation and its subsidiaries are engaged in various other matters of litigation and have a number of unresolved claims pending, including proceedings under governmental laws and regulations related to environmental matters. While the amounts claimed are substantial and the ultimate liability with respect to such litigation and claims cannot be determined at this time, it is the opinion of management that amounts, if any, required to be paid by the GATX Financial Corporation and its subsidiaries in the discharge of such liabilities are not likely to be material to the GATX Financial Corporation's consolidated financial position or results of operations. 14 16 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K PAGE (a) 2 Certificate of Ownership and Merger merging GATX Rail Corporation (a New York corporation) into GATX Capital Corporation (a Delaware corporation) dated July 31, 2001 submitted to the SEC along with the electronic submission of this Quarterly Report on Form 10-Q. 3A. By-laws of GATX Financial Corporation, as amended and restated as of August 7, 2001, submitted to the SEC along with the electronic submission of this Quarterly Report on Form 10-Q. 12 Statement regarding computation of earnings to fixed charges. 16 Any instrument defining the rights of security holders with respect to nonregistered long-term debt not being filed on the basis that the amount of securities authorized does not exceed 10 percent of the total assets of the company and subsidiaries on a consolidated basis will be furnished to the Commission upon request. (b) Form 8-K filed on August 10, 2001 reporting the realignment of GATX subsidiaries and the creation of GATX Financial Corporation SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GATX FINANCIAL CORPORATION (Registrant) /s/ Brian A. Kenney ---------------------------------------- Brian A. Kenney Vice President and Chief Financial Officer (Duly Authorized Officer) Date: August 10, 2001 15 EX-2 3 c64319ex2.txt CERTIFICATE OF OWNERSHIP AND MERGER 1 Exhibit 2 CERTIFICATE OF OWNERSHIP AND MERGER MERGING GATX RAIL CORPORATION (a New York corporation) INTO GATX CAPITAL CORPORATION (a Delaware corporation) * * * * * * * Pursuant to Section 253 of the General Corporation Law of the State of Delaware, GATX Rail Corporation, a corporation organized and existing under the laws of New York (the "Company"), DOES HEREBY CERTIFY: FIRST: That the Company was incorporated on the 2nd day of June, 1975, pursuant to the Business Corporation Law of the State of New York. SECOND: That the Company owns at least ninety percent of the outstanding shares of the stock of GATX Capital Corporation, a corporation incorporated on the 9th day of January, 1968, pursuant to the General Corporation Law of the State of Delaware ("GATX Capital"). THIRD: That the Board of Directors of the Company (the "Board") by the following resolutions of the Board, duly adopted on June 29, 2001 by the unanimous written consent of the members of the Board and filed with the minutes of the Board, determined to merge itself into said GATX Capital: RESOLVED, that GATX Rail Corporation, a New York corporation (the "Company"), shall merge, and it hereby does merge itself into GATX Capital Corporation, a Delaware corporation ("GATX Capital"), with GATX Capital being the surviving corporation in the merger and assuming all of the obligations of the Company (in such capacity, the "Surviving Corporation"). 2 FURTHER RESOLVED, that the merger shall be effective as of the close of business on July 31, 2001. FURTHER RESOLVED, that the terms and conditions of the merger are as follows: (a) from and after the effective time of the merger, all of the estate, property, rights, privileges, powers, and franchises of the Company shall become vested in and be held by the Surviving Corporation as fully and entirely and without change or diminution as the same were before held and enjoyed by the Company, and the Surviving Corporation shall assume all of the obligations of the Company. (b) No pro rata issuance of the shares of stock of GATX Capital which are owned by the Company immediately prior to the effective time of the merger shall be made, and such shares shall be surrendered and extinguished. (c) Each share of Common Stock, $1.00 par value, of the Company which shall be issued and outstanding immediately prior to the effective time of the merger shall be converted into (i) 1,031.25 shares of Common Stock, $1.00 par value, of the Surviving Corporation, and (ii) 1,027.05 shares of Series A Convertible Preferred Stock, $1.00 par value, of the Surviving Corporation; and, from and after the effective time of the merger, the holder of all of said issued and outstanding shares of Common Stock of the Company shall automatically be and become the holders of shares of Common Stock and Series A Convertible Preferred Stock of the Surviving Corporation upon the basis above specified, whether or not certificates representing said shares are then issued and delivered. (d) After the effective time of the merger, each holder of record of any outstanding certificate or certificates theretofore representing Common Stock of the Company may surrender the same to the Surviving Corporation at its office in Chicago, Illinois, and such holder shall be entitled upon such surrender to receive in exchange therefor a certificate or certificates representing shares of Common Stock and Series A Convertible Preferred Stock of the Surviving Corporation upon the basis above specified. Until so surrendered, each outstanding certificate which prior to the effective time of the merger represented one or more shares of Common Stock of the Company shall be deemed for all corporate purposes to evidence ownership of such shares of Common Stock and Series A Convertible Preferred Stock of the Surviving Corporation. 3 (e) From and after the effective time of the merger, the Certificate of Incorporation of the Surviving Corporation and the By-Laws of the Surviving Corporation shall be the Certificate of Incorporation and the By-Laws of GATX Capital as in effect immediately prior to such effective time; provided, however, that the Certificate of Incorporation of the Surviving Corporation, upon the effective time of the merger, shall be amended to read as follows: "1. The name of the Corporation is GATX Financial Corporation. (f) The members of the Board of Directors and officers of the Surviving Corporation shall be the members of the Board of Directors and the corresponding officers of GATX Capital immediately before the effective time of the merger. FURTHER RESOLVED, that the proposed merger shall be submitted to the sole stockholder of the Company for its approval. FURTHER RESOLVED, that, upon receipt of such approval of the sole stockholder of the Company, each of the officers of the Company be and he or she is hereby directed to make and execute a Certificate of Ownership and Merger for filing with the Secretary of State of the State of Delaware and a Certificate of Merger for filing with the State of New York, and to execute and deliver such other documents and to do all other and further acts and things whatsoever which may be necessary or proper to effect said merger. FOURTH: That each of the merger and the foregoing amendment to the Certificate of Incorporation of the Surviving Corporation has been approved by the holder of all the outstanding stock of the Company by written consent, filed with the minutes of the Board. FIFTH: Anything herein or elsewhere to the contrary notwithstanding, this merger may be amended or terminated and abandoned by the Board at any time prior to the time that this merger filed with the Secretary of State becomes effective. 4 IN WITNESS WHEREOF, this Certificate of Merger has been executed by an authorized person this 30th day of July, 2001. GATX RAIL CORPORATION By: /s/ David M. Edwards ---------------------------------- Name: David M. Edwards Title: President EX-3.A 4 c64319ex3-a.txt BY-LAWS 1 GATX FINANCIAL CORPORATION BY-LAWS ARTICLE I MEETINGS OF STOCKHOLDERS SECTION 1. If required by applicable law, annual meetings of the stockholders for the election of directors shall be held at such date, time and place, either within or without the State of Delaware, as may be designated from time to time by resolution of the board of directors, and stated in the notice of the meeting. Meetings of stockholders for any other purpose or purposes may be held at such date, time and place, either within or without the State of Delaware, as may be designated from time to time by resolution of the board of directors and stated in the notice of the meeting. SECTION 2. Whenever stockholders are required or permitted to take any action at a meeting, a notice of the meeting shall be given that shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the certificate of incorporation or these by-laws, the notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the corporation. SECTION 3. The secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, as required by applicable law. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 4. Special meetings of the stockholders for any purpose or purposes may be called by the chair of the board or the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. 2 SECTION 5. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. SECTION 6. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by law, these by-laws or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power, by a majority in voting power thereof, to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 7. When a quorum is present at any meeting, the affirmative vote of the holders of a majority of the then outstanding stock having voting power present in person or represented by proxy and entitled to vote thereon shall decide any question brought before such meeting, unless the question is one upon which by express provision of law or of the certificate of incorporation a different vote is required in which case such express provision shall govern and control the decision of such question. SECTION 8. Except as otherwise provided by or pursuant to the provisions of the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the secretary of the corporation a revocation of the proxy or a new proxy bearing a later date. SECTION 9. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be -2- 3 necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by law, be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the corporation. ARTICLE II DIRECTORS SECTION 1. The board of directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of the board of directors. Except as permitted by applicable law or as provided in Section 2 of this Article, the directors shall be elected at the annual meeting of the stockholders, and each director elected shall hold office until his or her successor is duly elected and qualified, subject to such director's earlier death, resignation, disqualification or removal. Any director may resign at any time upon notice to the corporation. Directors need not be stockholders. SECTION 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the expiration of the term of office of the directors whom they have replaced or until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by law. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. SECTION 3. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by law or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. -3- 4 SECTION 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware as the board of directors may from time to time determine. SECTION 5. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. SECTION 6. Special meetings of the board may be held at any time or place whenever called by the chair of the board or the president on two days' notice to each director; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of at least two directors. SECTION 7. At all meetings of the board, one-half of the number of directors shall constitute a quorum for the transaction of business and the vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by law, these by-laws or the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 8. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. SECTION 9. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. At all meetings of a committee, one-half the number of the members thereof shall constitute a quorum for the transaction of business and the vote of a majority of the member present at a meeting at which there is a quorum shall be the act of the committee, except as otherwise specifically provided by law, these by-laws or the certificate of incorporation. Any such committee to the extent permitted by law and to the extent provided in the resolution, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, that in the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. -4- 5 SECTION 10. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. SECTION 11. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as a director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 12. (a) No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have any financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meetings of the board of directors or a committee thereof which authorizes the contract or transaction, or solely because the director or officers votes are counted for such purpose, if: (1) the material facts as to the director's or officer's interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to the director's or officer's interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved, or ratified, by the board of directors, a committee thereof, or the stockholders. (b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction. SECTION 13. Members of the board of directors, or any committee designated by the board of directors, may participate in a meeting thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. -5- 6 SECTION 14. Meetings of the board of directors shall be presided over by the chair of the board, if any, or in the chair's absence by the vice chair of the board, or in his or her absence by the president, or in their absence by a chair chosen at the meeting. The secretary shall act as secretary of the meeting, but in the secretary's absence, the chair of the meeting may appoint any person to act as secretary of the meeting. ARTICLE III NOTICES SECTION 1. Except as otherwise provided herein or permitted by applicable law, notices to directors and stockholders shall be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the corporation. Notice to directors may be given by telegram, telecopier, telephone or other means of electronic transmission SECTION 2. Any waiver of notice, given by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in a waiver of notice. ARTICLE IV OFFICERS SECTION 1. Except as otherwise permitted by these by-laws, the officers of the corporation shall be chosen by the board of directors and shall be a chair of the board, a president, a vice president, a secretary, and a treasurer. The board of directors may also choose a vice chair (who shall have such duties as may from time to time be assigned by the board and the chief executive officer), additional vice presidents, a controller and one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. The board may delegate to any officer the power to choose and remove subordinate officers, namely, assistant vice presidents, assistant secretaries, assistant treasurers, and agents or employees. SECTION 2. The officers of the corporation shall have such powers and duties in the -6- 7 management of the corporation as may be prescribed in these by-laws or in a resolution of the board of directors and, to the extent not so provided, as generally pertain to their respective offices, subject to control of the board of directors. The board of directors may appoint such other officers as it shall deem necessary who shall hold their offices for such terms and shall have such powers and duties in the management of the corporation as may be prescribed in these by-laws or in a resolution of the board of directors and, to the extent not so provided, as generally pertain to their respective offices, subject to control of the board of directors. The board of directors may designate any officer as chief executive officer of the corporation. SECTION 3. The board of directors, the chair of the board, the vice chair of the board and the president shall each have the power to chose, as officers of the corporation, presidents of any divisions of the corporation. The chair of the board, the vice chair of the board, the president and, for each division of the corporation, the president of such division, shall each have the power to choose such officers of the corporation as any of them shall deem necessary for the operation of divisions of the corporation, with such titles as appropriately reflect the authority and responsibility of such officers within such divisions, including, without limitation, one or more executive vice presidents, senior vice presidents, managing directors, vice presidents and controllers of a division. Such choices shall be evidenced in writing and filed with the minutes of this corporation. Such officers shall hold their offices for such terms as provided by the person appointing them. Such officers shall have such powers and duties in the management of the division of the corporation to which they were appointed as may be prescribed in these by-laws, in a resolution of the board of directors or are assigned to them by any of the officers granted the power to choose such divisional officers and, to the extent not so provided, as generally pertain to their respective office, subject to the control of the board of directors. SECTION 4. The officers of the corporation shall hold office until their successors are elected and qualified or until their earlier resignation or removal. Any officer may resign at any time upon written notice to the corporation. Any officer whether elected, chosen or appointed by the board of directors, chosen by any officer of the corporation in accordance with these by-laws or otherwise may be removed with or without cause at any time by the affirmative vote of a majority of the board of directors, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the corporation. In addition of the foregoing, any officer chosen by an officer of the corporation in accordance with these by-laws may be removed with or without cause at any time by the person appointing such officer, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the corporation. Any vacancy occurring in any office of the corporation may be filled by the board of directors. SECTION 5. In addition to the duties assigned to the chair of the board by these by-laws, the chair of the board shall perform all duties customarily incident to the office of chair of the board and such other duties as may from time to time be assigned to the chair by the board of directors. The chair shall, if present, preside at all meetings of the stockholders and of the board of directors. -7- 8 SECTION 6. The president shall be a United States citizen and, in addition to the powers and duties assigned to the president by these by-laws, shall perform all duties customarily incident to the office of president and such other duties as may from time to time be assigned to the president by the board of directors or the chair of the board. In case of the absence or inability to act of the chair of the board, the president shall perform the duties of the chair of the board and, when so acting, shall have all the powers of and be subject to all the restrictions upon the chair of the board. SECTION 7. In the absence of the president or in the event of the president's inability or refusal to act, the vice president chosen in accordance with Section I of Article IV, (or in the event there be more than one such vice president, the vice presidents in the order designated by the board of directors or in the absence of any designation, then in the order of their years of continuous service in such office) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president, provided, however, no vice president who is not a citizen of the United States shall assume the office of president or chief executive officer or act in the president's or chief executive officer's absence or inability or refusal to act or be empowered to take any action, unless the corporation shall have been advised prior thereto by the Maritime Administration that the assumption of such office by such person or the taking or any such action by such person is not prohibited by statute. The vice presidents shall perform such other duties and have such other powers as the board of directors, the chair of the board, or the president may from time to time prescribe. SECTION 8. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors, the chair of the board or president. The secretary shall have custody of the corporate seal of the corporation and the secretary, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by such officer's signature. SECTION 9. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their years of continuous service in such office), shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. SECTION 10. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to -8- 9 the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors, or a committee thereof. SECTION 11. The treasurer shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers or such disbursements, and shall render to the chair of the board, president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his or her transactions as treasurer and of the financial condition of the corporation. SECTION 12. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their years of continuous service in such office), shall, in the absence of the treasurer or in the event of the treasurer's inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors, the chair of the board, or the president may from time to time prescribe. SECTION 13. Each officer of this corporation, including, without limitation, the president, any vice president, any managing director, and the treasurer, and each equivalent officer of any division of this corporation, but excluding assistant officers, is authorized to execute and deliver for, on behalf of and in the name of the corporation any document or agreement, including without limitation, any contract, bond, conveyance, mortgage, lease, or power of attorney whether under the seal of the corporation or otherwise. ARTICLE V INDEMNIFICATION OF DIRECTORS AND OFFICERS SECTION 1. The corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a "Covered Person") who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the corporation or, while a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 3, the corporation shall be required to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized by the board of directors of the corporation. -9- 10 SECTION 2. The corporation shall pay the expenses (including attorneys' fees) incurred by a Covered Person in defending any proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article V or otherwise. SECTION 3. If a claim for indemnification or advancement of expenses under this Article V is not paid in full within thirty days after a written claim therefor by the Covered Person has been received by the corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law. SECTION 4. The rights conferred on any Covered Person by this Article V shall not be exclusive of any other rights which such Covered Person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these by-laws, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 5. The corporation's obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise. SECTION 6. Any repeal or modification of the foregoing provisions of this Article V shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification. SECTION 7. This Article V shall not limit the right of the corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action. ARTICLE VI CERTIFICATES OF STOCK SECTION 1. Every holder of stock in the corporation shall be entitled to have a certificate, -10- 11 signed by, or in the name of the corporation by, the chair of the board or the vice chair of the board, or the president or a vice president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. Any or all of the signatures on the certificates may be by facsimile. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of the State of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 2. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 3. The corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his or her legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date: (a) in the case of determination -11- 12 of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting; (b) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days from the date upon which the resolution fixing the record date is adopted by the board of directors; and (c) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (x) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (y) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action of the board of directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in accordance with applicable law, or, if prior action by the board of directors is required by law, shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action; and (z) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. SECTION 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII DIVIDENDS SECTION 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. SECTION 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet -12- 13 contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE VIII AMENDMENTS, GENERAL PROVISIONS SECTION 1. These by-laws may be altered, amended or repealed, and new by-laws made, by the board of directors, but the stockholders may make additional by-laws and may alter and repeal any by-laws whether adopted by them or otherwise. SECTION 2. All checks or demands for authority shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. SECTION 3. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SECTION 4. The corporate seal shall have inscribed thereon the name of the corporation, and shall be in such form as may be approved from time to time by the board of directors. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. -13- EX-12 5 c64319ex12.txt STMT RE: COMPUTATION OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12 GATX FINANCIAL CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (UNAUDITED) (IN MILLIONS, EXCEPT FOR RATIOS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 -------------------------------- --------------------------------- 2001 2000 2001 2000 ------------- --------------- -------------- -------------- Earnings available for fixed charges: Income from continuing operations $ 31.6 $ 41.1 $ 47.7 $ 85.6 Add (deduct): Income taxes 20.1 26.4 31.5 53.3 Share of affiliates' earnings, net of distributions received (9.5) (14.3) (19.5) (27.8) Interest on indebtedness and amortization of debt discount and expense 65.8 57.9 128.1 112.4 Portion of rents representative of interest factor (deemed to be one-third) 15.8 14.1 31.5 27.4 ------------- --------------- -------------- -------------- Total earnings available for fixed charges $ 123.8 $ 125.2 $ 219.3 $ 250.9 ============= =============== ============== ============== Fixed Charges: Interest on indebtedness and amortization of debt discount and expense $ 65.8 $ 57.9 $ 128.1 $ 112.4 Capitalized interest (3.5) (2.6) (7.0) (4.9) Portion of rents representative of interest factor (deemed to be one-third) 15.8 14.1 31.5 27.4 ------------- --------------- -------------- -------------- Total fixed charges $ 78.1 $ 69.4 $ 152.6 $ 134.9 ============= =============== ============== ============== Ratio of earnings to fixed charges (a) 1.59x 1.80x 1.44x 1.86x
(a) The ratio of earnings to fixed charges represents the number of times "fixed charges" are covered by "earnings." "Fixed charges" consist of interest on outstanding debt and amortization of debt discount and expense, adjusted for capitalized interest and one-third (the proportion deemed representative of the interest factor) of operating lease expense. "Earnings" consist of consolidated net income before income taxes and fixed charges, less share of affiliates' earnings, net of distributions received. 16 -----END PRIVACY-ENHANCED MESSAGE-----