-----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, IcFPj8mebnB/4iwoWmg5DiW/wLSes8JWQ/keguXE8izT2j43C47S4TKWgyU2IoMs k9ugI/FR4PTTKH8CsUr77A== 0000950149-00-001110.txt : 20000515 0000950149-00-001110.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950149-00-001110 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 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: SEC FILE NUMBER: 001-08319 FILM NUMBER: 628973 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 FORM 10-Q FOR PERIOD ENDED 3-31-2000 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 March 31, 2000 1-8319 [GATX LOGO] GATX CAPITAL CORPORATION Incorporated in the IRS Employer Identification Number State of Delaware 94-1661392 Four Embarcadero Center San Francisco, CA 94111 (415) 955-3200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] All Common Stock of Registrant is held by GATX Financial Services, Inc. (a wholly-owned subsidiary of GATX Corporation). As of May 10, 2000, 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. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GATX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS)
Three Months Ended March 31, ------------------------- 2000 999 --------- ---------- (Unaudited) REVENUES: Lease income $ 107,477 $ 72,744 Equity earnings from investment in joint ventures 18,878 13,448 Other 15,533 5,697 Interest 10,443 8,380 Gain on sale of assets 9,286 18,132 Fees 4,727 8,788 ---------- ---------- 166,344 127,189 ---------- ---------- EXPENSES: Operating leases 62,007 39,548 Interest 38,161 27,957 Selling, general & administrative 25,799 21,774 Provision for losses on investments 2,000 2,749 Other 1,186 1,151 ---------- ---------- 129,153 93,179 ---------- ---------- Income from continuing operations before income taxes 37,191 34,010 Provision for income taxes 14,430 13,750 ---------- ---------- INCOME FROM CONTINUING OPERATIONS 22,761 20,260 DISCONTINUED OPERATIONS: Loss from discontinued operations (net of $873 tax benefit) - (2,315) ---------- --------- NET INCOME $ 22,761 $ 17,945 ========== =========
1 3 GATX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
March 31, December 31, 2000 1999 ------------ ------------ (Unaudited) ASSETS: Cash and cash equivalents $ 61,647 $ 45,817 Investments: Direct financing leases 494,360 477,739 Leveraged leases 193,484 170,066 Operating lease equipment- net of depreciation 1,023,137 960,123 Secured loans 426,224 358,001 Investment in joint ventures 717,361 667,648 Assets held for sale or lease 31,944 36,993 Other investments 203,045 197,096 Investment in future residuals 13,048 14,538 Allowance for losses on investments (106,465) (109,771) ----------- ----------- Total investments 2,996,138 2,772,433 ----------- ----------- Due from Parent 67,976 46,705 Other assets 84,040 76,736 ----------- ----------- TOTAL ASSETS $ 3,209,801 $ 2,941,691 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY: Accrued interest $ 38,141 $ 17,366 Accounts payable and other liabilities 114,084 147,797 Debt financing: Commercial paper and bankers' acceptances 264,959 128,927 Notes payable 5,635 5,454 Obligations under capital leases 9,163 7,253 Senior term notes 1,620,000 1,625,000 ----------- ----------- Total debt financing 1,899,757 1,766,634 ----------- ----------- Nonrecourse obligations 468,365 397,849 Deferred income 12,908 10,714 Deferred income taxes 191,647 143,560 Stockholder's equity: Convertible preferred stock, par value $1, and additional paid-in capital 125,000 125,000 Common stock, par value $1, and additional paid-in capital 28,960 28,960 Accumulated other comprehensive income 41,454 27,661 Retained earnings 289,485 276,150 ----------- ----------- Total stockholder's equity 484,899 457,771 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 3,209,801 $ 2,941,691 =========== ===========
2 4 GATX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Three Months Ended March 31, ------------------------- 2000 1999 --------- --------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 22,761 $ 17,945 Reconciliation of net income to net cash flows provided by operating activities: Provision for losses on investments 2,000 2,749 Depreciation expense 52,294 29,235 Provision for deferred income taxes 39,887 7,729 Gain on sale of assets (9,286) (18,132) Joint venture income, net of cash dividends (12,413) (8,100) Changes in assets and liabilities: Other assets (7,645) 12,693 Due from Parent (21,271) 3,999 Accrued interest, accounts payable and other liabilities (13,688) (23,965) Deferred income 2,194 8,981 Other - net (6,748) 3,887 ---------- --------- Net cash flows provided by operating activities 48,085 37,021 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in leased equipment, net of nonrecourse borrowings for leveraged leases (155,944) (88,643) Loans extended to borrowers (113,942) (74,638) Other investments (55,795) (51,793) ---------- --------- Total investments (325,681) (215,074) ---------- --------- Lease rents received, net of earned income and leveraged lease nonrecourse debt service 33,519 54,070 Loan principal received 41,645 13,529 Proceeds from sale of assets 12,026 71,880 Joint venture investment recovery 12,023 1,901 ---------- --------- Recovery of investments 99,213 141,380 ---------- --------- Net cash flows used in investing activities (226,468) (73,694) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of senior term notes - 100,000 Proceeds from nonrecourse obligations 121,657 19,828 Proceeds from capital lease obligation 1,910 - Repayment of senior term notes (5,000) (30,000) Repayment of capital lease obligations - (51) Repayment of nonrecourse obligations (51,141) (38,458) Net increase (decrease) in short-term borrowings 136,213 (4,833) Dividends paid to stockholder (9,426) (8,500) ---------- --------- Net cash flows provided by financing activities 194,213 37,986 ---------- --------- Net increase in cash and cash equivalents 15,830 1,313 Cash and cash equivalents at beginning of period 45,817 67,975 ---------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 61,647 $ 69,288 ========== =========
3 5 GATX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED, IN THOUSANDS)
Three Months Ended March 31 ----------------------- 2000 1999 -------- -------- Net income $ 22,761 $ 17,945 Other comprehensive gain (loss), net of tax: Foreign currency translation adjustment (1,883) 443 Unrealized gain (loss) on securities, net of reclassification adjustments (a) 15,677 (1,453) -------- -------- Other comprehensive gain (loss) 13,794 (1,010) -------- -------- COMPREHENSIVE INCOME $ 36,555 $ 16,935 ======== ======== (a) Reclassification adjustments: Unrealized gain on securities $ 24,192 $ 933 Less - Reclassification adjustment for gains realized included in net income (8,515) (2,386) -------- -------- Net unrealized gain (loss) on securities $ 15,677 $ (1,453) ======== ========
4 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 AND 1999 1. The consolidated balance sheet of GATX Capital Corporation and its subsidiaries (the "Company") at December 31, 1999 was derived from the audited financial statements at that date. All other consolidated financial statements are unaudited and include all adjustments, consisting only of normal recurring items, which management considers necessary for a fair statement of the consolidated results of operations and financial position for and as of the end of the indicated periods. Operating results for the three-month period ended March 31, 2000 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. In one matter, the Company, through an affiliate, is the subject of litigation related to the conversion of certain aircraft from passenger to freighter configuration. While the amounts claimed in this matter and other matters are substantial, and the ultimate liability with respect to such claims cannot be determined at this time, management believes that damages, if any, required to be paid by the Company in the discharge of such liability could be material to the results of operations for a given quarter or year, but are not likely to be material to the Company's consolidated financial position. 4. The Company uses interest rate and currency swap agreements, and forward sale agreements, as hedges that manage the exposure to interest rate, market rate, and currency exchange rate risk on existing and anticipated transactions. To qualify for hedge accounting, the derivative instrument must be identified with and reduce the risk arising from a specific transaction. Interest income or expense on interest rate swaps is accrued and recorded as an adjustment to the interest income or expense related to the hedged item. Realized and unrealized gains on currency swaps are deferred and included in the measurement of the hedged investment over the term of the contract. Fair value changes arising from forward sale agreements are deferred in the investment section of the balance sheet and recognized in other comprehensive income in stockholder's equity in conjunction with the designated hedged item. The 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, is required to be adopted in years beginning after June 15, 2000. The Company is in the process of assessing the impact that adoption of SFAS No. 133 will have on its financial position and results of operations. 5 7 PART I. FINANCIAL INFORMATION, CONTINUED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Overview The Company is a diversified international financial services company. Revenues arise from providing asset-based financing for transportation, industrial and information technology equipment, financing venture-backed and high-technology companies, managing assets for outside parties, and providing transaction structuring, residual guarantees and asset remarketing services. Net income earned during the three months ended March 31, 2000, was $22.8 million, up $4.8 million from the same period last year. Revenues Investment income, which includes lease income, equity earnings from investments in joint ventures, and interest, increased $42.2 million during the three-month period ended March 31, 2000, compared to the same period in 1999. This increase in revenue corresponds to an approximately $803 million increase in investment balances in the first quarter of 2000 compared to the same period last year. In addition, other income of $15.5 million for the first quarter 2000 was $9.8 million greater than during the same period in 1999, primarily due to sales of stocks and warrants received from financing non-public, start-up companies. Asset remarketing income includes gains on the sale of the Company's investment assets, fees for providing remarketing services to third parties, and proceeds from the sale of non-owned assets in which the Company has a residual share. Fee income from asset remarketing services is generally performance-based, and although not necessarily consistent from year to year, represents a core component of the Company's business and a historically significant component of total income. Asset remarketing income totaled $9.5 million for the first quarter of 2000 compared to $23.3 million for the same period in 1999. Gains on sales of Company investment assets were $9.3 million and $18.1 million for first quarter of 2000 and 1999, respectively. Residual sharing fees were $0.2 million and $5.2 million for the first quarter of 2000 and 1999, respectively. The Company sold its technology equipment sales and service business segment in June 1999; accordingly, the Company reclassified all of the segment's revenue and expenses to income from discontinued operations for the first quarter of 1999. Expenses Operating lease expense includes depreciation of operating lease equipment and rent expense on off-balance sheet financing. Operating lease expense was $62.0 million during the first quarter of 2000 compared to $39.5 million during the same period last year, primarily due to an approximately $438 million increase in operating lease balances in the first quarter of 2000 compared to the same period last year. The $10.2 million increase in interest expense corresponds to a $622 million increase in debt balances in the first quarter of 2000 compared to the same period last year. Selling, general and administrative expenses were $4.0 million higher in the first quarter of 2000 than the first quarter of 1999 due to higher human resources and other administrative expenses associated with an overall increase in business activity. 6 8 CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES The Company generates cash from operations and investment portfolios, 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 streams. During the three months ended March 31, 2000, the Company used cash, $136 million of it from short-term borrowings, to fund $326 million of new investments and to repay $5 million of senior term notes. At March 31, 2000, the Company had borrowing capacity consisting of $1,015 million remaining under its Series G shelf registration, $45 million of unused capacity under its commercial paper and bankers' acceptances credit agreements, and $35 million remaining under a stand-alone bank facility maintained by one of the Company's subsidiaries. A $561 million increase in quarterly average total debt financing in 2000 compared to the first quarter of 1999, partially offset by an increase in equity, caused the Company's debt to equity ratio to increase to 3.9:1 at March 31, 2000 compared to 3.2:1 at March 31, 1999. At March 31, 2000, the Company could borrow an additional $929 million and still meet the 4.5:1 leverage ratio defined in its bank credit agreements. In 1999, the Company maintained the proceeds from the sale of certain assets in a trust with a qualified intermediary pending the identification and acquisition of qualified replacement assets in order to affect a like-kind exchange for federal income tax purposes. The amounts in trust were classified as cash and cash equivalents in the accompanying balance sheet. The amount in trust at March 31, 1999 was $29.2 million. The Company's capital structure includes both fixed and floating rate debt. The Company ensures a stable margin over its cost of funds by managing the relationship of its fixed and floating rate investments to its fixed and floating rate borrowings. At March 31, 2000, the Company had approved unfunded transactions totaling approximately $2.1 billion, approximately $538 million of which is expected to fund during the remainder of 2000. Once approved for funding, a transaction may not be completed for various reasons, or the investment may be shared with partners or sold. YEAR 2000 DISCLOSURE Throughout 1999 the Company addressed what is commonly referred to as the Year 2000 problem. As expected, the Company did not experience any significant Year 2000 problems and does not believe it has any continued exposure to Year 2000 issues. 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. 7 9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27. Financial Data Schedule (b) The Company filed no reports on Form 8-K during the three months ended March 31, 2000. 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/ Curt F. Glenn --------------------------------------- Curt F. Glenn Senior Vice President and Chief Financial Officer /s/ Delphine M. Regalia --------------------------------------- Delphine M. Regalia Principal Accounting Officer and Controller May 12, 2000 8 10 EXHIBIT INDEX Item No. Description ------ ------------- 27. Financial Data Schedule
9 EX-27 2 FINANCIAL DATA SCHEDULE
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. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 61,647 0 1,114,068 106,465 31,944 0 1,023,137 0 3,209,801 0 2,097,528 0 1,027 1,031 482,841 3,209,801 0 166,344 0 0 88,992 2,000 38,161 37,191 14,430 22,761 0 0 0 22,761 0 0 CONSISTS OF DIRECT FINANCE LEASE RECEIVABLES OF 494,360, LEVERAGED LEASE RECEIVABLES OF 193,434,AND SECURED LOANS OF 426,224. 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 1,620,000, OBLIGATIONS UNDER CAPITAL LEASES OF 9,163, AND NONRECOURSE OBLIGATIONS OF 468,365. PAR VALUE ONLY. CONSISTS OF RETAINED EARNINGS OF 289,485, ADDITIONAL PAID-IN CAPITAL OF 151,902, UNREALIZED GAINS ON MARKETABLE EQUITY SECURITIES, NET OF TAX OF 50,642 AND FOREIGN CURRENCY TRANSLATION ADJUSTMENT OF (9,188). CONSISTS OF OPERATING LEASE EXPENSE OF 62,007, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES OF 25,799, AND OTHER EXPENSES OF 1,186.
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