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UNITED STATES
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 Year Ended Commission File Number
December 31, 1999 1-8319
GATX CAPITAL CORPORATION
Incorporated in the IRS Employer Identification Number
State of Delaware 94-1661392
Four Embarcadero Center
San Francisco, CA 94111
(415) 955-3200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
All Common Stock of Registrant is held by GATX Financial Services, Inc. (A
wholly-owned subsidiary of GATX Corporation).
As of March 30, 2000, Registrant has outstanding 1,031,250 shares of $1 par
value Common Stock.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) and
(b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
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DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
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Annual Report to Stockholder for Part II Items 7 & 8
Fiscal Year ended December 31, 1999
(the "Annual Report")
Registration Statement on Form S-1 Part IV Item 14(a)3
filed with the Commission on
December 23, 1981 (file No. 2-75467)
Amendment No. 1 to Form S-1 filed Part IV Item 14(a)3
with the Commission on
February 23, 1982
Amendment No. 2 to Form S-1 filed Part IV Item 14(a)3
with the Commission on March 2, 1982
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1982 filed with the
Commission on March 28, 1983
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1990 filed with the
Commission on March 30, 1991
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1992 filed with the
Commission on March 31, 1993
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1994 filed with the
Commission on March 27, 1995
Form 10-K for the Year Ended Part IV Item 14(a)3
December 31, 1995 filed with the
Commission on March 28, 1996
Form 10-Q for the Quarter Ended Part IV Item 14(a)3
September 30, 1998 filed with the
Commission on November 16, 1998
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PART I
Item 1. Business
GATX Capital Corporation and its subsidiaries (the "Company") provides
asset-based financing, structures transactions for investment by other lessors,
and manages lease portfolios for third parties. Asset-based financing is
provided primarily to the aircraft, rail, technology, warehouse, production, and
marine industries. These financings, which are held within the Company's 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, the
Company receives fees when the transaction is completed, when an asset is
remarketed, and/or on an ongoing basis.
The Company competes with captive leasing companies, leasing subsidiaries of
commercial banks, independent leasing companies, lease brokers, investment
bankers, and financing arms of equipment manufacturers.
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).
Item 2. Properties
The Company leases all of its office space and owns no materially important
physical properties other than those related directly to its investment
portfolio. The Company's principal offices are rented under a twelve year lease
expiring in 2003.
Item 3. Legal Proceedings
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
the Company, 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 ("STC's") issued by the FAA in
1987 pursuant to a design approved by the FAA. In the AD, the FAA stated that
the STC's 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 the Company 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 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
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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 the Company,
the Company can be held liable if any judgement 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, the Company, Airlog Management Corp., and
others asserting that Airlog and the Company 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 the Company,
Airlog, an officer of the Company 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, the
Company 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, the Company, 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, the Company, 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 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
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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,
the Company believes that each of the foregoing claims brought against it is
without merit, and that the Company and Airlog have adequate defenses thereto.
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Item 4. Submission of Matters to a Vote of Security Holders
Omitted under provisions of the reduced disclosure format.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
Not applicable. All common stock of the Registrant is held by GATX Financial
Services, Inc. (a wholly-owned subsidiary of GATX Corporation). Information
regarding dividends is shown on the consolidated statements of income and
retained earnings which are included in Item 8.
Item 6. Selected Financial Data
Omitted under provisions of the reduced disclosure format.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Incorporated herein by reference to the Annual Report, pages 29-33, included as
Exhibit 13 of this document.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Incorporated herein by reference to the Annual Report, page 32, included as
Exhibit 13 of this document.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements of GATX Capital Corporation,
included in the Annual Report (Exhibit 13), are incorporated herein by reference
(page references are to the Annual Report):
Consolidated Statements of Income for the years ended
December 31, 1999, 1998, and 1997 Page 34
Consolidated Balance Sheets as of December 31, 1999 and 1998 Page 35
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998, and 1997 Page 36
Consolidated Statements of Changes in Stockholder's Equity
As of December 31, 1999, 1998, and 1997 Page 37
Notes to Consolidated Financial Statements Pages 38-53
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
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PART III
Items 10, 11, 12 & 13
Omitted under provisions of the reduced disclosure format.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial statements
The following consolidated financial statements of GATX Capital Corporation that
are included in the Annual Report to Stockholders for the year ended December
31, 1999, are filed in response to Item 8:
Consolidated Statements of Income for the years ended December 31, 1999,
1998, and 1997
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended December 31, 1999,
1998, and 1997
Consolidated Statements of Changes in Stockholder's Equity as of
December 31, 1999, 1998, and 1997
Notes to Consolidated Financial Statements
2. Financial statement schedules
All financial statement schedules have been omitted because they are not
applicable or because required information is provided in the financial
statements, including the notes thereto, which are included in Item 8.
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3. Exhibits Required by Item 601 of Regulation S-K
Exhibit Number
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3(a) Restated Certificate of Incorporation of the Company.(6)
3(b) By-laws of the Company.(1)
4(d) Term Loan Agreement between the Company and a Bank dated
December 26, 1990.(2)
10(a) Office Leases, Four Embarcadero Center, dated October 1,
1990 and June 1, 1991, between the Company and Four
Embarcadero Center Venture.(2)
10(b) Tax Operating Agreement dated January 1, 1983 between
GATX Corporation and the Company.(3)
10(c) Credit Agreement among the Company, the Banks listed on
Schedule I thereto and Chase Manhattan Bank, as agent
for the Banks, dated July 1, 1998.(8)
10(d) Credit Agreement among the Company, its two subsidiaries
operating in Canada, and the Bank of Montreal, dated
December 14, 1992.(4)
10(e) First Amendment, dated June 20, 1993 to Credit Agreement
referred to in 10(d).(5)
10(f) Second Amendment, dated June 14, 1994, to Credit
Agreement referred to in 10(d).
10(g) Third Amendment, dated December 1, 1994, to Credit
Agreement referred to in 10(d).(5)
12 Ratio of Earnings to Fixed Charges.(7)
13 Annual report to Shareholder, pages 30-63.(7)
23 Consent of Independent Auditors.(7)
27 Financial Data Schedule.(7)
The Registrant agrees to furnish to the Commission upon request a copy of each
instrument with respect to issues of long-term debt of the Registrant the
authorized principal amount of which does not exceed 10% of the total assets of
Registrant.
(1) Incorporated by reference to Registration Statement on
Form S-1, as amended, (file number 2-75467) filed with
the Commission on December 23, 1981, page II-4.
(2) Incorporated by reference to Form 10-K filed with the
Commission on March 30, 1991.
(3) Incorporated by reference to Form 10-K filed with the
Commission on March 28, 1983.
(4) Incorporated by reference to Form 10-K filed with the
Commission on March 31, 1993.
(5) Incorporated by reference to Form 10-K filed with the
Commission on March 27, 1995.
(6) Incorporated by reference to Form 10-K filed with the
Commission on March 28, 1996.
(7) Submitted to the Securities and Exchange Commission with
the electronic filing of this document.
(8) Incorporated by reference to Form 10Q filed with the
Commission on November 16, 1998.
Item 14(b). Reports of Form 8-K
Not Applicable.
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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 CAPITAL CORPORATION
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(Registrant)
By / s/ Jesse V. Crews
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Jesse V. Crews
President, Chief Executive Officer
and Director
March 30, 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.
By / s/ Jesse V. Crews By / s/ Jack F. Jenkins-Stark
- ------------------------ -------------------------------
Jesse V. Crews Jack F. Jenkins-Stark
President, Chief Executive Officer Senior Vice President and
and Director Chief Financial Officer
Dated: March 30, 2000 Dated: March 30, 2000
By / s/ Delphine M. Regalia By / s/ Brian A. Kenney
- ----------------------------- -------------------------
Delphine M. Regalia Brian A. Kenney
Principal Accounting Officer Director
and Controller
Dated: March 30, 2000 Dated: March 30, 2000
By / s/ Kathryn G. Jackson By / s/ Alan C. Coe
- ---------------------------- ---------------------
Kathryn G. Jackson Alan C. Coe
Executive Vice President Executive Vice President
and Director and Director
Dated: March 30, 2000 Dated: March 30, 2000
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REPORT OF INDEPENDENT AUDITORS
Board of Directors
GATX Capital Corporation
We have audited the accompanying consolidated financial statements of GATX
Capital Corporation (a wholly-owned subsidiary of GATX Corporation) and
subsidiaries listed in the accompanying index to financial statements (Item 14
(a)). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 listed in the accompanying
index to financial statements (Item 14 (a)) present fairly, in all material
respects, the consolidated financial position of GATX Capital Corporation and
subsidiaries at December 31, 1999 and 1998 and the consolidated results of their
operations and their 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.
ERNST & YOUNG LLP
San Francisco, California
January 28, 2000