Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-2328
GATX Corporation
Incorporated in the IRS Employer Identification Number
State of New York 36-1124040
500 West Monroe Street
Chicago, IL 60661-3676
(312) 621-6200
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class or series which registered
- ---------------------------------------------- ------------------------
Common Stock New York Stock Exchange
Chicago Stock Exchange
$2.50 Cumulative Convertible Preferred Stock, New York Stock Exchange
Series A Chicago Stock Exchange
$2.50 Cumulative Convertible Preferred Stock, New York Stock Exchange
Series B Chicago Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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
--- ---
As of March 10, 2000, 48,199,074 common shares were outstanding, and
the aggregate market value of the common shares (based upon the March 14, 2000,
closing price of these shares on the New York Stock Exchange) of GATX
Corporation held by nonaffiliates was approximately $1,500.2 million.
Documents Incorporated by Reference
Portions of the GATX Annual Report to Shareholders for the year ended
December 31, 1999, are incorporated by reference into Parts I and II. Portions
of GATX's proxy statement dated March 17, 2000, are incorporated by reference
into Part III.
2
PART I
Item 1. Business
GATX Corporation is a holding company whose subsidiaries engage in the leasing
and management of railroad tank cars and other specialized railcars; arrange and
service the financing of equipment and other capital assets; and provide
logistics and supply chain services related to chemicals, petroleum, and dry
goods. Information concerning financial data of business segments and the basis
for grouping products or services is contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1999 on pages 29 through 33,
which is incorporated herein by reference (page references are to the Annual
Report to Shareholders).
Industry Segments
GATX Rail
GATX Rail ("Rail"), formerly General American Transportation Corporation, is
headquartered in Chicago, Illinois. Rail is principally engaged in leasing
specialized railcars, primarily tank cars, under full service leases. As of
December 31, 1999, its North American fleet consisted of approximately 87,800
railcars, comprised of 67,900 tank cars and 19,900 specialized freight cars,
including conventional and Airslide(TM) covered hopper cars. In addition to
76,000 railcars in the United States, Rail has 9,200 railcars in its Canadian
fleet and 2,600 railcars in its Mexican fleet. The utilization rate of Rail's
North American railcar fleet as of December 31, 1999, was approximately 95%.
Rail's railcars have a depreciable life of 20 to 33 years and an average age of
approximately 16 years.
In addition to the North American fleet, Rail's investments in affiliated
companies result in ownership interests in two European fleets. Rail owns a 46%
interest in KVG Kesselwagen Vermietgesellschaft mbH, a German and Austrian-based
tank car and specialty railcar leasing company, and an 18.8% interest in AAE
Cargo, headquartered in Switzerland.
Rail's customers use its railcars to ship over 700 different commodities,
primarily chemicals, petroleum, and food products. For 1999, approximately 47%
of railcar leasing revenue was attributable to shipments of chemical products,
31% to food and other products, and 22% to petroleum products. Rail leases
railcars to over 700 customers, including major chemical, oil, food and
agricultural companies. No single customer accounts for more than 3% of total
railcar leasing revenue.
Rail typically leases new railcars to its customers for a term of five years or
longer, whereas renewals or leases of existing cars are typically for periods
ranging from less than a year to seven years with an average lease term of about
three years. Rail purchases most of its new railcars from Trinity Industries,
Inc., a Dallas-based metal products manufacturer. Under its full service leases,
Rail maintains and services its railcars, pays ad valorem taxes, and provides
many ancillary services. Through its Internet website, Rail provides customers
with timely analysis, performance statistics, and mechanical record information
to enhance and maximize the utilization of their leased railcars. Rail also
maintains a network of major service centers consisting of four domestic, four
Canadian and one Mexican facility. To supplement the nine major service centers,
Rail utilizes a fleet of mobile trucks and also utilizes independent third-party
repair shops.
The full-service railcar leasing industry is comprised of Rail, Union Tank Car
Company, General Electric Railcar Services Corporation, and many smaller
companies. As of the end of 1999, Rail had 23% of the 266,000 tank cars owned
and leased in the United States. Principal competitive factors include price,
service and availability.
1
3
Financial Services
Financial Services represents GATX Capital Corporation and its subsidiaries and
affiliates, which arrange and service the financing of equipment and other
capital assets on a worldwide basis, and American Steamship Company, which
operates self-unloading vessels on the Great Lakes. Headquartered in San
Francisco, California, Financial Services provides financing primarily to the
aircraft, rail, technology and marine industries. These financings, which are
held within Financial Services' own portfolio and through partnerships with
coinvestors, are structured as leases and secured loans, and frequently include
interests in the asset's residual value. For its transaction structuring and
portfolio management services, Financial Services receives fees at the time the
transaction is completed, an asset is remarketed, and/or on an ongoing basis. In
the second quarter of 1999, Financial Services sold Centron DPL, Inc. which is
consistent with its strategy to exit the value-added reselling business.
Financial Services primarily competes with captive leasing companies, leasing
subsidiaries of commercial banks, independent leasing companies, lease brokers,
investment bankers, financing arms of equipment manufacturers, and other Great
Lakes commercial fleets. No single customer accounts for more than 5% of
Financial Services' revenues. In addition to its San Francisco home office,
Financial Services has 5 domestic and 11 foreign offices.
Integrated Solutions Group
The Integrated Solutions Group ("ISG") provides logistics and supply chain
services related to chemicals, petroleum, and dry goods. At its terminal
facilities and pipelines, chemical and petroleum products are stored, handled,
blended, and transferred at key points in the bulk liquid distribution chain.
Many of these facilities also are linked with major interstate pipelines. ISG
also has several smaller operating companies providing a variety of logistic
services to the bulk liquid chemical industry. Within the dry goods sector, ISG
is a major third-party provider of distribution and logistics support services
and warehousing facilities in the United States. Examples of services provided
are integrated logistics solutions, just-in-time delivery systems, warehousing,
packaging, sub-assembly, freight management, and returns management.
ISG is headquartered in Chicago, Illinois. Through its operating companies, ISG
owns and operates 15 terminal sites and 57 warehouse facilities throughout North
America and also holds interests in European, Asian, North American, and Latin
American facilities. Additionally, ISG owns or holds interests in four refined
pipeline systems.
ISG serves over 800 customers including major oil and chemical companies, larger
independent refiners, and a broad variety of manufacturing, e-commerce, and
distribution companies. No single customer accounts for more than 5% of ISG's
revenue.
Within the worldwide public petroleum and chemical terminaling industry,
Koninkliijke Vopak ("Vopak") is the largest in terms of capacity followed by
ISG. During 1999, the merger of two Dutch companies, PAKHOED N.V. and Van
Ommeren N.V formed Vopak. Additionally, smaller terminaling companies as well as
oil and chemical companies that have significant storage capacity compete with
ISG in a number of markets. ISG's pipelines compete with rail, trucks, and other
pipelines for movement of liquid petroleum products. In early 2000, ISG
announced that GATX Terminals Corporation ("Terminals") purchased Vopak's 50%
ownership in Gamatex N.V., located in Belgium, and Tankstore Ltd., located in
Singapore. The result gave Terminals 100% ownership in both Gamatex N.V. and
Tankstore Ltd. In turn, Terminals sold to Vopak its 50% ownership interest in
Tees Storage Company Ltd., a terminal facility in Middlesborough, England.
Within the dry goods warehousing, distribution, and logistics services sector,
ISG competes with in-house or private operations, other national operators,
multi-regional and local operators, major trucking companies, and providers of
specialized distribution services.
2
4
Industries from which ISG derived 10% or more of its 1999 revenue include
petroleum (36%), food and grocery (19%), automotive (16%), and chemical (12%).
Trademarks, Patents and Research Activities
Patents, trademarks, licenses, and research and development activities are not
material to these businesses taken as a whole.
Seasonal Nature of Business
Marine shipping operations are seasonal due to the effects of winter weather
conditions on the Great Lakes. However, seasonality is not considered
significant to the operations of GATX and its subsidiaries taken as a whole.
Customer Base
GATX as a whole is not dependent upon a single customer or a few customers.
Employees
GATX and its subsidiaries have approximately 6,300 active employees, of whom 26%
are hourly employees covered by union contracts.
Environmental Matters
Certain operations of GATX's subsidiaries (collectively "GATX") present
potential environmental risks principally through the transportation or storage
of various commodities. Recognizing that some risk to the environment is
intrinsic to its operations, GATX is committed to protecting the environment as
well as complying with applicable environmental protection laws and regulations.
GATX, as well as its competitors, is subject to extensive regulation under
federal, state and local environmental laws which have the effect of increasing
the costs and liabilities associated with the conduct of its operations. In
addition, GATX's foreign operations are subject to environmental laws in effect
in each respective jurisdiction.
GATX's policy is to monitor and actively address environmental concerns in a
responsible manner. GATX has received notices from the U.S. Environmental
Protection Agency ("EPA") that it is a potentially responsible party ("PRP") for
study and clean-up costs at 13 sites under the requirements of the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("Superfund"). Under these Acts and comparable state laws, GATX may be required
to share in the cost to clean-up various contaminated sites identified by the
EPA and other agencies. GATX has also received notice that it is a PRP at one
site to undertake a Natural Resource Damage Assessment. In all instances, GATX
is one of a number of financially responsible PRPs and has been identified as
contributing only a small percentage of the contamination at each of the sites.
Due to various factors such as the required level of remediation or restoration
and participation in clean-up or restoration efforts by others, GATX's total
clean-up costs at these sites cannot be predicted with certainty; however,
GATX's best estimates for remediation and restoration of these sites have been
determined and are included in its environmental reserves.
Future costs of environmental compliance are indeterminable due to unknowns such
as the magnitude of possible contamination, the timing and extent of the
corrective actions that may be required, the determination of the company's
liability in proportion to other responsible parties, and the extent to which
such costs are recoverable from third parties including insurers. Also, GATX may
incur additional costs relating to facilities and sites where past operations
followed practices and procedures that were considered acceptable at the time
but in the future may require investigation and/or remedial work to ensure
adequate protection to the environment under current or future standards. If
future laws and
3
5
regulations contain more stringent requirements than presently anticipated,
expenditures may be higher than the estimates, forecasts, and assessments of
potential environmental costs provided below. However, these costs are expected
to be at least equal to the current level of expenditures. In addition, GATX has
provided indemnities for environmental issues to the buyers of three divested
companies for which GATX believes it has adequate reserves.
GATX's environmental reserve at the end of 1999 was $87 million and reflects
GATX's best estimate of the cost to remediate known environmental conditions.
Additions to the reserve were $12 million in each of 1999 and 1998. Expenditures
charged to the reserve amounted to $8 million and $9 million in 1999 and 1998,
respectively.
In 1999, GATX made capital expenditures of $8 million for environmental and
regulatory compliance compared to $5 million in 1998. These projects included
marine vapor recovery systems, discharge prevention compliance, waste water
systems, impervious dikes, tank modifications for emissions control, and tank
car cleaning systems. Environmental projects authorized or planned would require
capital expenditures of approximately $11 million in 2000. GATX anticipates it
will make annual expenditures at approximately the same level over each of the
next three years.
Item 2. Properties
Information regarding the location and general character of certain properties
of GATX is included in Item 1, Business, of this document and in Exhibit 13,
GATX Annual Report to Shareholders for the year ended December 31, 1999 on page
60, GATX Locations of Operations (page reference is to the Annual Report to
Shareholders). The major portion of land for terminal operations is owned; the
balance, including some of its dock facilities, is leased. Most of the
warehouses operated by the warehousing and logistics operations are leased; the
others are managed for third parties.
Item 3. Legal Proceedings
GATX Capital Corporation ("Capital"), a subsidiary of GATX Corporation ("The
Company"), is a party to actions arising from the issuance by the Federal
Aviation Administration (the "FAA") in January 1996 of Airworthiness Directive
96-01-03 (the "AD"). The AD has the effect of significantly reducing the amount
of freight that ten 747 aircraft may carry. These aircraft (the "Affected
Aircraft") were modified from passenger to freighter configuration by
GATX/Airlog Company ("Airlog"), a California general partnership. A subsidiary
of Capital, GATX Aircraft Corporation, is a partner in Airlog. The modifications
were carried out between 1988 and 1994 by subcontractors of Airlog under
authority of Supplemental Type Certificates ("STCs") issued by the FAA in 1987
pursuant to a design approved by the FAA. In the AD, the FAA stated that the
STCs were issued "in error."
On July 11, 1996, Airlog filed a complaint for Declaratory Judgment against
Evergreen International Airlines, Inc. ("Evergreen") in the United States
District Court for the Northern District of California (No. C96-2494) with
respect to three Affected Aircraft seeking a declaration that neither Airlog nor
the Company has any liability to Evergreen as a result of the issuance of the
AD. Evergreen filed an answer and counterclaim on August 1, 1996, asserting that
Airlog and Capital are liable to it under a number of legal theories in
connection with the application of the AD to its three Affected Aircraft.
Evergreen alleges approximately $160 million in compensatory damages and also
seeks unspecified punitive damages.
On June 5, 1997, the Court ruled on Airlog's previously filed motion for partial
summary judgment against Evergreen. The Court ruled that the Purchase Agreement
covering one Evergreen aircraft was a contract for the sale of goods, and that
claims thereunder were barred by the four-year statute of limitations under the
California Commercial Code (the "Code"); but that the Modification Agreements
covering two aircraft owned by Evergreen were contracts of services not governed
by the Code, and that any applicable statute of limitations did not begin to run
until Evergreen had, or should have had, knowledge of the alleged breach. The
Court also denied Airlog's motion for Summary Judgment with
4
6
respect to Evergreen's counterclaim in which it alleged that Airlog negligently
misrepresented certain facts, which purportedly induced Evergreen to enter into
the Purchase and Modification Agreements. The Court's ruling bars Evergreen from
recovering under its claim for breach of warranty under the Purchase Agreement,
and permits Evergreen to proceed with its claim for breach of warranty under the
Modification Agreements and its claim of negligent misrepresentation.
On October 27, 1999, the Court issued its ruling on Evergreen's previously filed
motion for partial summary judgment regarding two Affected Aircraft. The Court
ruled: (i) the limitation on damages clause in the contracts under which the
Evergreen planes were converted which precludes consequential damages is not
unenforceable, (ii) the contracts included a warranty of the modification design
(iii) certain claims by Evergreen are not barred by the statute of limitations
and (iv) as to one airplane modification, which was guaranteed by Capital,
Capital can be held liable if any judgment were imposed against Airlog. The
Court also ruled that whether any warranty was breached is a triable issue of
fact.
On January 31, 1997, American International Airways, Inc. ("AIA") filed a
complaint in the United States District Court for the Northern District of
California (C97-0378) against Airlog, Capital, Airlog Management Corp., and
others asserting that Airlog and Capital are liable to it under a number of
legal theories in connection with the application of the AD to two Affected
Aircraft owned by AIA. The Complaint seeks damages (to be trebled under one
count of the complaint) of an unspecified amount relating to lost revenues, lost
profits, denied access to capital markets, repair costs, disruption of its
business plan, lost business opportunities, maintenance and engineering costs,
and other additional consequential, direct, incidental and related damages. The
complaint asks in the alternative for a rescission of AIA's agreements with
Airlog, a return of amounts paid, and for injunctive relief directing that
Airlog, and certain individual defendants, properly staff and manage the
correction of the alleged deficiencies that caused the FAA to issue the AD. The
AIA claim was recently assigned to Kalitta Air ("Kalitta Air"). Kalitta Air
alleges $480 million in compensatory damages, trebling of such damages pursuant
to 18 U.S.C. 1964, prejudgment interest and unspecified punitive damages.
On June 4, 1997, Tower Air, Inc. filed an action in the Supreme Court of the
State of New York, County of New York (Index No. 97/602851) against Capital,
Airlog, an officer of Capital and others with respect to one Affected Aircraft
it leased and subsequently purchased from a trust for the benefit of an
affiliate of Airlog in December 1994. This action asserts causes of action in
fraud and deceit, negligent misrepresentation, breach of contract and negligence
and seeks damages in excess of $25 million together with interest, costs,
attorneys' fees, and unspecified punitive damages.
On February 25, 1998, The Bank of New York ("BNY") filed an action, as purported
beneficial owner of an Affected Aircraft, in the United States District Court
for the Northern District of California (No. C98-0385) against Airlog, Capital
and others. This aircraft was originally converted by Airlog for Evergreen. This
action seeks declaratory relief and asserts claims for breach of contract,
intentional misrepresentation, nondisclosure of known facts, negligence,
negligent misrepresentation, and unfair competition. BNY alleges approximately
$19 million in compensatory damages, prejudgment interest and unspecified
punitive damages.
On June 15, 1998, General Electric Capital and PALC II, Inc. (collectively
"GECC") filed a complaint in the United States District Court for the Northern
District of California (C98-2387) against Airlog, Capital, and others with
respect to three Affected Aircraft. These aircraft were modified in 1991 and
1992. In the action GECC asserts that the defendants are liable to it under a
number of legal theories in connection with the application of the AD to the
three aircraft owned by GECC. GECC alleges approximately $100 million in
compensatory damages, trebling of such damages pursuant to 18 U.S.C. 1964,
prejudgment interest and unspecified punitive damages.
Airlog, Capital, and others have filed an action in the United States District
Court for the Northern District of California against Pemco Aeroplex, Inc.
(C97-2484WHO), a contractor for Airlog which obtained the STCs and modified
certain of the Affected Aircraft, alleging causes of action for fraudulent and
negligent misrepresentation, breach of contract, professional negligence,
implied and equitable
5
7
indemnity, and contribution. This action seeks a judgment awarding the
plaintiffs any and all damages, costs and expenses in connection with the
resolution of the concerns of the FAA as expressed in the AD or relating to it,
repairing the Affected Aircraft, defending against the litigation involving the
plaintiffs arising from the Affected Aircraft, paying any judgments against
plaintiffs that may be entered in said litigation and attorneys' fees incurred
by the plaintiffs in connection with defending said litigation. In February
2000, Airlog stipulated to the dismissal of its fraudulent, negligent and
innocent misrepresentation and professional negligence causes of action against
Pemco Aeroplex, Inc.
On July 24, 1998, Airlog filed an action in United States District Court for the
Western District of Washington against the United States of America (C98-1029).
This action is to recover losses suffered by Airlog as a result of the alleged
negligence of the FAA in the development and approval of the design to convert
the Affected Aircraft from passenger to freighter configuration. The complaint
seeks damages in excess of $8.3 million representing the expenses incurred by
Airlog in responding to the AD and legal fees and costs incurred by Airlog in
defending the litigation described above. On August 27, 1999, the Court
dismissed Airlog's action against the United States. This dismissal was based on
the Court's determination that the governmental discretionary function exception
to the Federal Tort Claims Act is applicable to Airlog's claim. Airlog is
appealing that decision to the Circuit Court of Appeals for the Ninth Circuit.
On January 25, 1999, the FAA issued a letter to Airlog stating that satisfactory
accomplishment of a number of Airlog generated Service Bulletins on an Affected
Aircraft would remove the limitations of the AD. On or about February 26, 1999,
the first Affected Aircraft, owned by Evergreen, returned to revenue service.
Actions with respect to nine of the ten Affected Aircraft have been consolidated
for trial in the Federal District Court for the Northern District of California.
On February 1, 2000, the judge assigned to these cases recused himself. The case
has been assigned to a new judge. As a result of this reassignment, the trial of
these cases, which had been set for April 3, 2000, has been removed from the
calendar.
While the results of any litigation are impossible to predict with certainty,
Capital believes that each of the foregoing claims brought against it is without
merit, and that Capital and Airlog have adequate defenses thereto.
GATX Rail Corporation ("GRC") and GATX Terminals Corporation ("Terminals"), each
subsidiaries of GATX, are two of the nine defendants named in In re New Orleans
Tank Car Leakage Fire Litigation, Civil Action No. 87-16374, Civil District
Court for the Parish of Orleans, State of Louisiana (the "Tank Car Litigation").
The litigation arises from the September 1987 leak of butadiene from a tank car
owned by GRC and the subsequent fire. The butadiene was loaded into the tank car
at a facility owned and operated by Terminals. Discovery taken to date has shown
the leak and fire did not cause any deaths or serious personal injuries, but did
result in an approximate thirty-six hour evacuation of persons in the effected
area.
The Tank Car Litigation was certified as a class action in 1993. A trial of the
compensatory damage claim of twenty selected plaintiffs and of the punitive
damage claims of the class was conducted in 1997. In September 1997, the jury
awarded approximately $1,900,000 plus interest as compensatory damages to the
twenty plaintiffs and $3.4 billion as punitive damages in favor of the class
including $190,000,000 against Terminals. GRC is not liable for punitive
damages. In July 1999, the Court conducted a trial on the compensatory claims of
an additional twenty plaintiffs; the jury awarded a total of $344,300 in
compensatory damages.
In October 1999, GRC, Terminals, three other defendants and the Plaintiffs'
Management Committee acting on behalf of the Class executed a settlement
agreement (the "Preliminary Settlement Agreement") which provides for the
release of any and all claims against the five defendants, including GRC or
Terminals arising out of the tank car incident, including all of the claims
asserted by the class. In November 1999, the Court gave preliminary approval to
the settlement and directed that notice of the
6
8
proposed settlement be given to all class members and other interested persons.
The Court also ordered that a final hearing on the settlement will be conducted
on March 22, 2000, (the "Fairness Hearing"). A sixth defendant has entered into
a separate settlement agreement with the class.
At the Fairness Hearing, the Court will consider objections to the settlement
and determine whether the settlement is fair, adequate and reasonable to the
class. Should the settlement be approved, the Tank Car Litigation will be
dismissed with prejudice as to GRC, Terminals and the settling defendants; GRC
and Terminals will be released of any and all claims arising out of or relating
to the tank car incident including all claims of the class and of the class
members for compensatory and punitive damages; and GRC and Terminals will be
indemnified with respect to all such claims.
The Company believes that should the Preliminary Settlement Agreement be
approved, the amounts required to be paid by GRC and Terminals in connection
therewith would not be material to the Company's consolidated financial position
or results of operations. In the event the proposed settlement is not approved,
GRC and Terminals will aggressively defend any future trials and pursue
post-judgment review of the compensatory and punitive awards and, if necessary,
appeal of any final judgment.
GATX and its subsidiaries are engaged in various 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, management believes that damages, if
any, required to be paid by GATX and its subsidiaries 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 GATX's consolidated financial
position.
7
9
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Pursuant to General Instruction G(3), the following information regarding
executive officers is included in Part I in lieu of inclusion in the GATX Proxy
Statement:
OFFICE
HELD
NAME OFFICE HELD SINCE AGE
- ------------------------- ----------------------------------------------------- ------- -------
Ronald H. Zech Chairman, President and Chief Executive Officer 1996 56
David M. Edwards Senior Vice President 1999 48
David B. Anderson Vice President, Corporate Development, General 1995 58
Counsel and Secretary
William L. Chambers Counsel to the Chief Executive Officer 1993 62
Gail L. Duddy Vice President, Human Resources 1999 47
Brian A. Kenney Vice President and Chief Financial Officer 1999 40
Ralph L. O'Hara Controller and Chief Accounting Officer 1986 55
Clifford J. Porzenheim Vice President, Corporate Strategy 1999 36
William J. Hasek Treasurer 1999 43
Officers are elected annually by the Board of Directors. Previously, Mr. Zech
was President of GATX Financial Services from 1985 to 1994. In 1994, Mr. Zech
was elected as President and Chief Operating Officer of GATX. On January 1,
1996, he was elected as Chief Executive Officer and on April 26, 1996, Chairman.
Mr. Edwards was Senior Vice President and Chief Financial Officer of GATX from
1994 to 1999. Mr. Anderson was Vice President, Corporate Development, General
Counsel and Secretary of Inland Steel Industries from 1986 until 1995.
Concurrently, he served as President of Inland Engineered Materials Corporation.
Ms. Duddy joined GATX in 1992 as Director of Compensation and in 1995 also
assumed responsibility for the benefits function. In 1997, Ms. Duddy was elected
Vice President, Compensation, Benefits and Corporate Human Resources. Mr. Kenney
was Vice President, Finance of GATX from 1998 to 1999, Vice President and
Treasurer from 1997 to 1998, and Treasurer from 1995 to 1996. Mr. Porzenheim was
the Director of Corporate Development for GATX from 1996 to 1998. Mr. Porzenheim
was a consultant with the Boston Consulting Group from 1993 to 1996. Mr. Hasek
was the Director of Financial Analysis and Budgeting from 1997 to 1999 and
Manager of Corporate Finance from 1995 to 1997.
8
10
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters
Information required by this item is contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1999, on page 55, which is
incorporated herein by reference (page reference is to the Annual Report to
Shareholders).
Item 6. Selected Financial Data
Information required by this item is contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1999, on pages 56 and 57, which
is incorporated herein by reference (page references are to the Annual Report to
Shareholders).
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information required by this item is contained in Item 1, Business, section of
this document and in Exhibit 13, GATX Annual Report to Shareholders for the year
ended December 31, 1999, the management's discussion and analysis of 1999
compared to 1998 on pages 23-25, 29, 31, and 33-36, the financial data of
business segments on pages 32 and 33, and the management's discussion and
analysis of 1998 compared to 1997 on pages 58 and 59, which is incorporated
herein by reference (page references are to the Annual Report to Shareholders).
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information required by this item is contained in Exhibit 13, GATX Annual Report
to Shareholders for the year ended December 31, 1999, the management's
discussion and analysis of 1999 compared to 1998 on page 34 which is
incorporated by reference herein (page reference is to the Annual Report to
Shareholders).
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements of GATX Corporation, included in
Exhibit 13, GATX Annual Report to Shareholders for the year ended December 31,
1999, which is incorporated herein by reference (page references are to the
Annual Report to Shareholders):
Consolidated Statements of Operations - Years Ended December 31, 1999,
1998 and 1997, on page 28.
Consolidated Balance Sheets - December 31, 1999 and 1998, on page 30.
Consolidated Statements of Cash Flows - Years Ended December 31, 1999,
1998 and 1997, on page 32.
Consolidated Statements of Changes in Shareholders' Equity - December
31, 1999, 1998 and 1997, on page 37.
Consolidated Statements of Comprehensive Income (Loss) - Years Ended
December 31, 1999, 1998 and 1997, on page 37.
Notes to Consolidated Financial Statements on pages 38 through 54.
Consolidated quarterly financial data is contained in Exhibit 13, GATX Annual
Report to Shareholders for the year ended December 31, 1999, on page 55, which
is incorporated herein by reference (page reference is to the Annual Report to
Shareholders).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
9
11
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this item regarding directors is contained in sections
entitled "Nominees For Directors" and "Additional Information Concerning
Nominees" in the GATX Proxy Statement dated March 17, 2000, which sections are
incorporated herein by reference. Information regarding officers is included at
the end of Part I.
Item 11. Executive Compensation
Information required by this item regarding executive compensation is contained
in sections entitled "Compensation of Directors" and "Compensation of Executive
Officers" in the GATX Proxy Statement dated March 17, 2000, which sections are
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item regarding the Company's Common Stock is
contained in sections entitled "Nominees For Directors," "Security Ownership of
Management" and "Beneficial Ownership of Common Stock" in the GATX Proxy
Statement dated March 17, 2000, which sections are incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
None.
10
12
PART IV
Item 14. Financial Statement Schedules, Reports on Form 8-K and Exhibits.
(a) 1. Financial Statements
The following consolidated financial statements of GATX
Corporation included in the Annual Report to Shareholders for the
year ended December 31, 1999, are filed in response to Item 8:
Consolidated Statements of Operations - Years Ended December 31,
1999, 1998 and 1997.
Consolidated Balance Sheets - December 31, 1999 and 1998.
Consolidated Statements of Cash Flows - Years Ended December 31,
1999, 1998 and 1997.
Consolidated Statements of Changes in Shareholders' Equity -
December 31, 1999, 1998 and 1997.
Consolidated Statements of Comprehensive Income (Loss) - Years
Ended December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules: Page
Schedule I Condensed Financial Information of Registrant 17-20
Schedule II Valuation and Qualifying Accounts 21
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and, therefore, have
been omitted.
(b) Report on Form 8-K.
Form 8-K filed on October 5, 1999, reporting an order
for aircraft by a joint venture in which an indirect
wholly owned subsidiary participates.
(c) Exhibit Index
Exhibit
Number Exhibit Description Page
3A. Restated Certificate of Incorporation of GATX Corporation,
as amended, incorporated by reference to GATX's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1991, file number 1-2328. Third Amendment of
said Plan effective as of April 23, 1999, incorporated by
reference to GATX's Proxy Statement dated March 17, 1999.
Fourth Amendment of said Plan effective as of
December 1, 1999, submitted to the SEC on Form S-8, file
number 333-91865.
3B. By-Laws of GATX Corporation, as amended and restated as of
July 29, 1994 on Form 10-K for the fiscal year ended
December 31, 1994, file number 1-2328.
11
13
Exhibit
Number Exhibit Description Page
10A. GATX Corporation 1985 Long Term Incentive Compensation Plan, as
amended, and restated as of April 27, 1990, incorporated by
reference to GATX's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, file No. 1-2328. Amendment to said
Plan effective as of April 1, 1991, incorporated by reference to
GATX's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, file number 1-2328; Sixth Amendment to said
Plan effective January 31,1997, incorporated by reference to
GATX's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, file number 1-2328.
10B. GATX Corporation 1995 Long Term Incentive Compensation Plan,
incorporated by reference to GATX's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1995, file number
1-2328. First Amendment of said Plan effective as of January 31,
1997 submitted to the SEC on Form 10-K for the fiscal year ended
December 31, 1996, file number 1-2328. Second Amendment of said
Plan effective as of December 5, 1997 submitted to the SEC along
with the electronic transmission of this Annual Report on Form
10-K.
10C. GATX Corporation Deferred Fee Plan for Directors, as Amended and
Restated as of July 1, 1998, submitted to the SEC along with the
electronic submission of this Report on Form 10-K.
10D. 1984 Executive Deferred Income Plan Participation Agreement
between GATX Corporation and participating directors and
executive executive officers dated September 1, 1984, as amended,
incorporated by reference to GATX's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991, file number 1-2328.
10E. 1985 Executive Deferred Income Plan Participation Agreement
between GATX Corporation and participating directors and
executive officers dated July 1, 1985, as amended, incorporated
by reference to GATX's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, file number 1-2328.
10F. 1987 Executive Deferred Income Plan Participation Agreement
between GATX Corporation and participating directors and
executive officers dated December 31, 1986, as amended,
incorporated by reference to GATX's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991, file number 1-2328.
10G. Amendment to Executive Deferred Income Plan Participation
Agreements between GATX and certain participating directors and
participating executive officers entered into as of January 1,
1990, incorporated by reference to GATX's Annual Report on Form
10-K for the fiscal year ended December 31, 1989, file number
1-2328.
12
14
Exhibit
Number Exhibit Description Page
10H. Retirement Supplement to Executive Deferred Income Plan
Participation Agreements entered into as of January 23, 1990,
between GATX and certain participating directors incorporated by
reference to GATX's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, file number 1-2328 and between GATX
and certain other participating directors incorporated by
reference to GATX's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, file number 1-2328.
10I. Amendment to Executive Deferred Income Plan Participation
Agreements between GATX and participating executive officers
entered into as of April 23, 1993, incorporated by reference to
GATX's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, file number 1-2328.
10J. Directors' Deferred Stock Plan approved on July 26, 1996,
effective as of April 26, 1996, Summary of Plan incorporated by
reference to GATX's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996, file number 1-2328.
10K. Agreement for Continued Employment Following Change of Control
or Disposition of a Subsidiary between GATX Corporation and
certain executive officers dated as of January 1, 1998,
incorporated by reference to GATX's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, file number 1-2328.
10L. Letter Agreement dated August 17, 1993, between William Chambers
and GATX, incorporated by reference to GATX's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995, file
number 1-2328.
10M. Letter Agreement dated May 31, 1995, between David B. Anderson
and GATX, incorporated by reference to GATX's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, file
number 1-2328.
10N. Arrangements between James J. Glasser and GATX associated
with Mr. Glasser's retirement from GATX as described on page 11
in the Section of the GATX Proxy Statement dated March 13, 1996,
entitled "Termination of Employment and Change of Control
Arrangements" are incorporated herein by reference thereto,
file number 1-2328.
11A. Computation of Basic Net Income (Loss) Per Share. 22
11B. Computation of Diluted Net Income (Loss) Per Share. 23
12. Statement regarding computation of ratios of earnings to combined
fixed charges and preferred stock dividends. 24
13
15
Exhibit
Number Exhibit Description Page
13. Annual Report to Shareholders for the year ended December 31,
1999, pages 21- 62 with respect to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1999, file number 1-2328.
Submitted to the SEC along with the electronic submission of this
Report on Form 10-K.
21. Subsidiaries of the Registrant. 25
23. Consent of Independent Auditors. 26
24. Powers of Attorney with respect to the Annual Report on Form
10-K for the fiscal year ended December 31, 1999, file number
1-2328. Submitted to the SEC along with the electronic submission
of this Report on Form 10-K.
27.1 Financial Data Schedule for GATX Corporation for the fiscal year
ended December 31, 1999, file number 1-2328. Submitted to the SEC
along with the electronic submission of this Report on Form 10-K.
27.2 Restated Financial Data Schedule for GATX Corporation for the
year to date periods ended March 31, 1999, June 30, 1999,
September 30, 1999 and December 31, 1997
27.3 Restated Financial Data Schedule for GATX Corporation for the
year to date periods ended March 31, 1998, June 30, 1998,
September 30, 1998 and December 30, 1998.
99A. Undertakings to the GATX Corporation Salaried Employees
Retirement Savings Plan, incorporated by reference to GATX's
Annual Report on Form 10-K for the fiscal year ended December 31,
1982, file number 1-2328.
99B. Undertakings to the GATX Corporation 1995 Long Term Incentive
Plan for the fiscal year ended December 31, 1995, file number
1-2328, incorporated by reference to GATX's Annual Report on Form
10-K for the year ended December 31, 1995.
99C. Undertakings to the GATX Logistics Inc. 401(k) Cash Accumulation
Plan incorporated by reference to the Form S-8 Registration
Statement filed with the SEC on June 19,1996, Registration
No.33-06315.
99D. Undertakings to the Centron DPL Company, Inc. Profit Sharing Plan
Plan incorporated by reference to the Form S-8 Registration
Statement filed with the SEC on December 23, 1997, Registration
No.33-43113.
14
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GATX CORPORATION
(Registrant)
/s/ Ronald H. Zech
----------------------------
Ronald H. Zech
Chairman, President and
Chief Executive Officer
March 17, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
/s/ Ronald H. Zech
- -----------------------------------
Ronald H. Zech Chairman, President and
March 17, 2000 Chief Executive Officer
/s/ Brian A. Kenney
- -----------------------------------
Brian A. Kenney Vice President and
March 17, 2000 Chief Financial Officer
/s/ Ralph L. O'Hara
- -----------------------------------
Ralph L. O'Hara Controller and
March 17, 2000 Chief Accounting Officer
Rod F. Dammeyer Director By /s/ David B. Anderson
James M. Denny Director ----------------------------------
Richard Fairbanks Director David B. Anderson
William C. Foote Director (Attorney in Fact)
Deborah M. Fretz Director
Richard A. Giesen Director
Miles L. Marsh Director
Michael E. Murphy Director
John W. Rogers, Jr. Director
Date: March 17, 2000
15
17
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
GATX Corporation
We have audited the consolidated financial statements and related schedules of
GATX Corporation and subsidiaries listed in Item 14(a)(1) and (2) of the Annual
Report on Form 10-K of GATX Corporation and subsidiaries for the year ended
December 31, 1999. These financial statements and related schedules are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements and related schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
related schedules are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and related schedules. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of GATX
Corporation and subsidiaries at December 31, 1999 and 1998, and the results of
their operations and cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
January 25, 2000
Chicago, Illinois
16
18
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
GATX CORPORATION
(PARENT COMPANY)
STATEMENTS OF OPERATIONS
(IN MILLIONS)
YEAR ENDED DECEMBER 31
---------------------------
1999 1998 1997
-------- -------- -------
GROSS INCOME $ 1.9 $ 3.2 $ 1.4
COSTS AND EXPENSES
Interest 28.2 28.3 29.4
Provision for depreciation 1.3 1.1 1.0
Selling, general and administrative 17.6 21.4 20.6
-------- -------- -------
47.1 50.8 51.0
-------- -------- -------
LOSS BEFORE INCOME TAXES AND SHARE OF
NET INCOME (LOSS) OF SUBSIDIARIES (45.2) (47.6) (49.6)
INCOME TAX BENEFIT (15.4) (16.4) (17.1)
-------- -------- -------
LOSS BEFORE SHARE OF NET INCOME (LOSS)
OF SUBSIDIARIES (29.8) (31.2) (32.5)
SHARE OF NET INCOME (LOSS) OF SUBSIDIARIES 181.1 163.1 (18.4)
-------- -------- -------
NET INCOME (LOSS) $ 151.3 $ 131.9 $ (50.9)
======== ======== =======
Note: Certain amounts in the 1998 and 1997 financial statements have been
reclassified to conform to the 1999 presentation.
17
19
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONT'D)
GATX CORPORATION
(PARENT COMPANY)
BALANCE SHEETS
(IN MILLIONS)
DECEMBER 31
--------------------
1999 1998
-------- --------
ASSETS
CASH AND CASH EQUIVALENTS $ (1.1) $ .2
OPERATING LEASE ASSETS AND FACILITIES 12.8 11.7
Less - Allowance for depreciation (6.3) (5.4)
-------- --------
6.5 6.3
INVESTMENT IN SUBSIDIARIES 1,326.8 1,216.6
OTHER ASSETS 14.0 13.7
-------- --------
$1,346.2 $1,236.8
======== ========
LIABILITIES, DEFERRED ITEMS AND SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 17.2 $ 10.7
DUE TO SUBSIDIARIES 489.4 483.1
OTHER DEFERRED ITEMS 3.6 10.1
-------- --------
TOTAL LIABILITIES AND DEFERRED ITEMS 510.2 503.9
SHAREHOLDERS' EQUITY
Preferred stock -- --
Common stock 34.5 34.3
Additional capital 338.7 331.6
Reinvested earnings 543.0 446.0
Accumulated other comprehensive income (loss) 1.2 (32.2)
-------- --------
917.4 779.7
Less - Cost of shares in treasury (81.4) (46.8)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 836.0 732.9
-------- --------
$1,346.2 $1,236.8
======== ========
18
20
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONT'D)
GATX CORPORATION
(PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(IN MILLIONS)
YEAR ENDED DECEMBER 31
-----------------------------
1999 1998 1997
------- ------- -------
OPERATING ACTIVITIES
Net income (loss) $ 151.3 $ 131.9 $ (50.9)
Adjustments to reconcile net income/loss to net
cash provided by operating activities:
Depreciation 1.3 1.1 1.0
Deferred income tax benefit (7.4) (8.2) (7.9)
Share of net income (loss) of subsidiaries less
dividends received (74.3) (90.9) 113.7
Other, including working capital 4.2 (.2) (3.5)
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 75.1 33.7 52.4
INVESTING ACTIVITIES
Additions to operating lease assets and facilities (1.1) (.8) --
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (1.1) (.8) --
FINANCING ACTIVITIES
(Repurchase) issuance of common stock and other (27.3) 9.0 12.4
Cash dividends to shareholders (54.3) (49.3) (49.4)
Advances from (to) subsidiaries 6.3 6.5 (14.5)
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (75.3) (33.8) (51.5)
------- ------- -------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS $ (1.3) $ (.9) $ .9
======= ======= =======
19
21
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONT'D)
GATX CORPORATION
(PARENT COMPANY)
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN MILLIONS)
YEAR ENDED DECEMBER 31
----------------------------
1999 1998 1997
------- ------- -------
Net income (loss) $ 151.3 $ 131.9 $ (50.9)
Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss) 5.1 (16.3) (28.3)
Unrealized gain (loss) on securities, net 28.3 2.0 (1.0)
------- ------- -------
Other comprehensive loss 33.4 (14.3) (29.3)
------- ------- -------
COMPREHENSIVE INCOME (LOSS) $ 184.7 $ 117.6 $ (80.2)
======= ======= =======
20
22
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
GATX CORPORATION AND SUBSIDIARIES
(IN MILLIONS)
- ---------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
- ---------------------------------------- ---------------- -------------- -------------------- ----------------- -----------------
Additions
-----------------------------------
DESCRIPTION Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts- Deductions at End of
of Period Expenses Describe Describe Period
- ---------------------------------------- ---------------- -------------- -------------------- ----------------- -----------------
Year ended December 31, 1999:
Allowance for possible
losses - Note A $ 135.9 $ 11.3 $ 3.7 (B) $ (35.2) (C) $ 115.7
Year ended December 31, 1998:
Allowance for possible
losses - Note A $ 128.5 $ 14.7 $ 4.3 (B) $ (11.6) (C) $ 135.9
Year ended December 31, 1997:
Allowance for possible
losses - Note A $ 121.1 $ 11.1 $ 3.3 (B) $ (7.0) (C) $ 128.5
Note A - Deducted from asset accounts.
Note B - Represents principally the recovery of amounts previously written off.
Note C - Represents principally reductions in asset values charged off and
uncollectible amounts.
21