CHICAGO, April 24 /PRNewswire Interactive News Release/ --
GATX Corporation (NYSE: GMT) today announced its 2001 first quarter results.
For the quarter, GATX reported consolidated net income of $170.7 million, or
$3.45 per fully diluted share. The results include $159.3 million of
after-tax gains recognized to date on the sale of GATX Terminals Corporation's
domestic and European operations, net of certain charges due to the closing of
other business development activities previously incorporated within the
Integrated Solutions Group, and $20.2 million of after-tax charges due to the
closing of GATX Rail's East Chicago repair facility and other non-recurring
items.
Excluding the net gain from the sale of GATX Terminals and the
nonrecurring charges, first quarter consolidated income totaled $31.6 million
or $.63 per fully diluted share compared to net income of $40.6 million or
$.82 per fully diluted share in the prior year period. Income per share is
summarized in the attached appendix. All comments from here forward in this
press release regarding first quarter results and the 2001 outlook pertain to
normalized operations excluding the Terminals-related gain and non-recurring
charges.
Ronald H. Zech, chairman of GATX Corporation, stated, "The first quarter
was one of both substantial progress on our strategic initiatives and
challenges in certain markets. On the strategic front, we completed the sale
of GATX Terminals' domestic and European operations as planned. The proceeds
from the sale greatly enhance our capital structure and set the stage for
redeployment of this capital into our higher-return finance and leasing
businesses. We also closed three other significant transactions during the
quarter: the purchase of a 50% interest in Pembroke Group, a large aircraft
leasing entity with over $850 million in assets; the purchase of a rail
operation in Poland incorporating nearly 12,000 railcars; and the acquisition
of a $370 million technology equipment portfolio from El Camino Resources.
These transactions highlight our strategy of leveraging our partnering skills,
asset knowledge and structuring expertise. Lastly, during the first quarter
we signed a new labor agreement with our U.S. rail maintenance center
employees, ending a lengthy labor dispute and positioning the company for more
efficient performance in the years ahead.
"While the strategic steps point to positive long-term success for GATX,
increasing economic weakness and issues within certain markets present
significant near-term challenges. In particular, the North American rail
market continued to weaken in the first quarter. Major customers,
particularly in the chemical industry, are experiencing difficult conditions
in their respective markets. Higher natural gas prices, which dramatically
increase raw material costs and decrease production expectations for chemical
companies, are ultimately resulting in tempered demand for railcars. Each of
these factors had a negative impact on GATX Rail's first quarter results as
comparable income of $12.1 million was down from $13.4 million in the prior
quarter and $18.5 million in the year ago period. Notwithstanding the fact
that due to the labor dispute we incurred approximately $2.0 million of
incremental after-tax maintenance expense in each of the past two quarters,
the financial results reflect difficult market conditions that are expected to
have a negative impact on GATX Rail's financial results versus 2000.
"GATX Capital's first quarter pre-tax spread, remarketing income, and
warrant income each increased over the prior year period. However, these
increases were more than offset by our decision to increase the loss allowance
primarily to reflect exposure to the telecommunications and steel markets. As
a result, Financial Services' net income totaled $11.5 million in the first
quarter compared to $22.9 million in the prior year period. While the telecom
and steel portfolios represent a small portion of GATX Capital's net
investments and only 2.5% and 1.0% of GATX's overall asset base, we believe it
is prudent to allocate additional reserves to cover potential losses given the
weakness in these industries. As a result of the increased loss provision and
general economic weakness, we currently estimate that GATX Capital's net
income will not meet 2000 levels.
"At the onset of this year, we indicated that 2001 would be a year of
significant transition for GATX as we complete the sale of GATX Terminals and
begin the process of redeploying the sale proceeds into our finance and
leasing businesses. In 2000, our consolidated income per share, excluding a
litigation reserve, was $3.37 per share and our goal has been to grow earnings
from this base in 2001. We will clearly not meet this goal based on a number
of factors including general economic weakness, a difficult rail market,
increased year over year loss provisions, and expected near-term earnings
dilution resulting from the sale of GATX Terminals. In addition, the current
economic environment is presenting increased opportunities for investments in
traditional assets such as aircraft and international rail, and we may shift a
greater percentage of our planned investment volume toward these types of
assets. These investments offer attractive long-term returns, but are not as
accretive in the short-term as technology or venture investments."
Mr. Zech concluded, "Although our preference is to provide our
shareholders with a clear picture of our expected operating performance in
2001, providing an accurate forecast in this environment is very difficult
given the number and variety of factors that will likely impact our business.
We will provide up-to-date guidance as certain markets issues and investment
opportunities are clarified. GATX has experienced every possible economic
scenario in its 100+ years of operation -- and our long-term view and focus on
returns have always served the company well. With leading positions in
attractive markets, a solid capital structure, enhanced liquidity, and a
heightened focus on our core operations, GATX is well positioned for the
future."
FINANCIAL SERVICES
Financial Services, comprised principally of GATX Capital, posted net
income in the first quarter of $11.5 million compared to $22.9 million in the
prior year period. Increases in pre-tax spread, remarketing gains, and
warrant income were offset by an increased loss provision. Investment volume
for the quarter totaled $755 million compared to $326 million in the prior
year period. The two main drivers behind the volume increase include
approximately $370 million attributable to the acquisition of a portfolio of
technology equipment, and continued new investment in the aircraft portfolio.
Pre-tax spread totaled $46.9 million in the first quarter compared to
$36.6 million in the prior year period. Annualized pre-tax spread in the
quarter was 5.0% of average net investments compared to 5.1% in the year ago
period and 3.9% in the fourth quarter of 2000. The increase in pre-tax spread
was driven by continued growth in GATX Capital's total net investment balance.
Remarketing gains, including gains from the sale of owned assets and
residual sharing fees, totaled $14.4 million in the quarter compared to
$9.5 million in the prior year period. Remarketing gains in the quarter
reflect secondary market activity primarily in the owned and managed aircraft
portfolio.
Although equity markets remained volatile throughout the first quarter,
warrant income for the quarter totaled $15.3 million compared to $14.0 million
in the prior year period. Unrealized gains totaled $23 million at the close
of the quarter compared to $46 million at year end. The change in the
unrealized value reflects both the income realized during the first quarter
and market-driven fluctuations in the remaining public warrant and stock
positions.
In the first quarter, GATX Capital's loss provision totaled $21.3 million
and the quarter-end allowance for losses totaled 5.8% of reservable assets,
compared to 5.3% in the prior year period and 5.9% at the end of the fourth
quarter of 2000. Net charge-offs during the quarter totaled $12.2 million, or
.31% of average net investment compared to .19% in the prior year period and
.70% in the fourth quarter of 2000.
GATX RAIL
GATX Rail reported a net loss of $4.1 million in the first quarter,
including a $16.2 million after-tax charge related to the closing of GATX
Rail's East Chicago repair facility and other non-recurring items. Excluding
these non-recurring items, GATX Rail's income was $12.1 million compared to
$18.5 million in the prior year period and $13.4 million in the fourth quarter
of 2000. In both the first quarter of 2001 and the fourth quarter of 2000,
GATX Rail incurred approximately $2.0 million of incremental after-tax
maintenance expense as a result of the labor dispute.
Railcar utilization was 92% at the end of the first quarter, down slightly
from 93% at year end and 94% in the prior year period. The utilization in the
first quarter reflects the fact that overall railcar demand, both for new and
used cars, remains soft.
In early 2000, GATX Rail began reducing new car orders, a process that
continued through the balance of the year and into the first quarter of 2001.
GATX Rail's North American fleet totaled 91,500 cars at the end of the first
quarter, up from 90,400 in the prior year period but virtually unchanged from
year end. GATX Rail's new car order activity is currently limited to specific
customer orders or select car types.
DISCONTINUED OPERATIONS
Discontinued Operations incorporates the company's supply-chain services
operations that were either sold during the first quarter or targeted for sale
in 2001. Substantially all of GATX Terminals' domestic and European terminal
and pipeline operations were sold during the quarter, generating a substantial
after-tax gain of approximately $159.3 million, net of certain charges related
to the closing of other business development activities previously
incorporated within the Integrated Solutions Group. GATX also realized
$4.6 million of income related to the sale of its remaining equity interest in
GATX Logistics. GATX had retained an equity interest in GATX Logistics in
order to capitalize on the potential upside from a subsequent sale of the
company to another entity. For the quarter, GATX Terminals generated
$2.4 million of income reflecting operations in which GATX continued to hold
an ownership interest.
COMPANY DESCRIPTION
GATX Corporation (NYSE: GMT) is a unique finance and leasing company
combining asset knowledge and services, structuring expertise, creative
partnering and risk capital to serve customers and partners worldwide. GATX
Corporation provides leasing and financial services responsive to the
specialized needs of a range of businesses. GATX Corporation specializes in
railcar and locomotive operating leasing, aircraft operating leasing,
information technology leasing, venture finance, and financing solutions for
customers in diverse industrial sectors worldwide.
TELECONFERENCE INFORMATION
GATX Corporation will host a teleconference to discuss first quarter
results. Teleconference details are as follows:
Tuesday, April 24th
3:00 PM Eastern Time
Domestic Dial-In: 1-888-428-4478
International Dial-In: 1-612-332-0819
Call in details and real-time audio access are available at:
http://www.gatx.com . Please access the call 15 minutes prior to the start time.
Following the call, a replay will be available on the same site.
FORWARD-LOOKING STATEMENTS
This press release includes statements that may constitute forward-looking
statements made pursuant to the safe harbor provision of the Private
Securities Litigation Reform Act of 1995. This information may involve risks
and uncertainties that could cause actual results to differ materially from
the forward-looking statements. Although the company believes that the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, such statements are subject to risks and uncertainties
that could cause actual results to differ materially from those projected.
With respect to outlook comments within this release relating to the 2001
performance of GATX Rail Corporation, GATX Capital Corporation, and GATX
Corporation, risks and uncertainties include, but are not limited to, general
economic conditions, railcar lease rate and utilization levels, dynamics
affecting customers within the chemical, petroleum and food industries, and
general market conditions in the air, telecommunications, venture, and other
large-ticket leasing industries.
FOR FURTHER INFORMATION CONTACT:
Analysts and Investors
Robert C. Lyons
GATX Corporation
312-621-6633
Investor, corporate information and press releases may be found at
http://www.gatx.com . A variety of current financial information, historical
financial information, press releases and photographs are available at this
site. GATX press releases may be obtained by accessing PR Newswire's Company
News On-Call's automated fax service at 800-758-5804. The company
identification number for GATX is 105121.
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Millions, Except Per Share Amounts)
(unaudited)
Three Months Ended
March 31
2001 2000
Gross Income
Lease, interest and financing services $356.3 $290.2
Other expense (.3) (1.2)
Revenues 356.0 289.0
Share of affiliates' earnings 14.9 20.0
Total Gross Income 370.9 309.0
Ownership Costs
Depreciation and amortization 103.1 79.4
Interest, net 61.0 54.0
Operating lease expense 48.3 40.2
Total Ownership Costs 212.4 173.6
Other Costs and Expenses
Operating expenses 63.1 30.8
Selling, general and administrative 57.3 41.1
Provision for possible losses 21.3 2.0
Fair value adjustments for derivatives 1.1 --
Income from Continuing Operations before
Income Taxes 15.7 61.5
Income Taxes 11.3 23.9
Income from Continuing Operations 4.4 37.6
Discontinued Operations
Operating results, net of income taxes 2.4 3.0
Gain on sale of portion of segment,
net of income taxes 163.9 --
Total Discontinued Operations 166.3 3.0
Net Income $170.7 $40.6
Per Share Data
Basic:
Income from continuing operations $.09 $.78
Income from discontinued operations 3.44 .06
Total $3.53 $.84
Average number of common shares (in thousands) 48,278 48,394
Diluted:
Income from continuing operations $.09 $.76
Income from discontinued operations 3.36 .06
Total $3.45 $.82
Average number of common shares and common
share equivalents (in thousands) 49,417 49,210
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Millions)
(unaudited)
March 31 December 31
2001 2000
Assets
Cash and Cash Equivalents $627.2 $173.6
Receivables
Trade accounts 50.6 93.7
Finance leases 1,009.0 878.3
Secured loans 666.7 634.1
Less - allowance for possible losses (108.7) (95.2)
1,617.6 1,510.9
Operating Lease Assets and Facilities, net 2,840.1 2,654.1
Investments in Affiliated Companies 1,040.8 951.2
Other Assets 416.7 343.0
Net Assets of Discontinued Operations 163.5 630.9
$6,705.9 $6,263.7
Liabilities, Deferred Items and Shareholders' Equity
Accounts Payable $300.6 $317.3
Accrued Expenses 324.1 141.7
Debt
Short-term 601.7 557.2
Long-term:
Recourse 2,907.2 3,093.9
Nonrecourse 689.9 494.2
Capital lease obligations 156.0 164.2
4,354.8 4,309.5
Deferred Items, including Income Taxes 789.1 705.7
Total Shareholders' Equity 937.3 789.5
$6,705.9 $6,263.7
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
(unaudited)
Three Months Ended
March 31
2001 2000
Operating Activities
Income from continuing operations $4.4 $37.6
Adjustments to reconcile income from
continuing operations to net cash
provided by continuing operations:
Realized gains on remarketing of
leased equipment (8.5) (9.7)
Provision for depreciation and amortization 103.1 79.4
Provision for possible losses 21.3 2.0
Deferred income taxes (29.3) 29.0
Other, including working capital and
advances to discontinued operations (69.9) (112.3)
Net cash provided by continuing operations and
advances to discontinued operations 21.1 26.0
Investing Activities
Additions to equipment on lease, net of
nonrecourse financing for leveraged leases (266.0) (155.9)
Additions to operating lease assets
and facilities (39.0) (131.2)
Secured loans extended (80.5) (113.9)
Investments in affiliated companies (141.1) (49.5)
Other investments and progress payments (113.7) (7.8)
Portfolio investments and capital additions (640.3) (458.3)
Portfolio proceeds 248.4 99.2
Proceeds from sale of portion of segment 1,028.4 --
Proceeds from other asset sales 5.0 4.4
Net cash provided by (used in) investing
activities of continuing operations 641.5 (354.7)
Financing Activities
Net (decrease) increase in long-term debt (242.0) 64.8
Net increase in short-term debt 44.5 330.4
Repayment of capital lease obligations (8.2) (6.1)
Issuance (repurchase) of common stock and other 11.7 (26.5)
Cash dividends (15.0) (14.5)
Net cash (used in) provided by financing
activities of continuing operations (209.0) 348.1
Net increase in cash and cash equivalents from
continuing operations 453.6 19.4
Net (decrease) increase in cash and cash
equivalents from discontinued operations (12.6) 1.8
Net increase in cash and cash equivalents $441.0 $21.2
GATX CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY DATA (UNAUDITED)
(In Millions, Except Earnings Per Share Amounts)
Three Months Ended
March 31
2001 2000
GATX Corporation
Basic Net Income per Share
Income from Continuing operations $.09 $.78
Income from Discontinued operations 3.44 .06
Total $3.53 $.84
Diluted Net Income per Share
Income from continuing operations $.09 $.76
Income from discontinued operations 3.36 .06
Total $3.45 $.82
Revenues $356.0 $289.0
Share of affiliates' earnings 14.9 20.0
Gross Income $370.9 $309.0
Income from Continuing Operations before
Income Taxes 15.7 61.5
Income from Continuing Operations 4.4 37.6
Income from Discontinued Operations 166.3 3.0
Net Income $170.7 $40.6
Equity 937.3 838.3
Return on Average Equity (a) 17.5% 19.1%
Net Assets of Continuing Operations 6,054.5 5,122.5
Net Assets of Discontinued Operations 163.5 761.5
Intersegment and Other Assets 487.9 (59.2)
Total Assets 6,705.9 5,824.8
GATX Rail
Revenues $142.4 $140.2
Share of affiliates' earnings .9 1.1
Gross Income $143.3 141.3
Depreciation and amortization 24.4 25.8
Interest 12.9 14.7
Operating lease expense 35.3 29.3
Income before Income Taxes (5.0) 29.3
Net Income $(4.1) $18.5
Assets 1,758.8 1,788.8
Equity 351.2 336.8
North American Fleet
Fleet Additions 360 2,100
Total Fleet 91,500 90,400
Utilization 92% 94%
GATX CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY DATA (UNAUDITED)
(In Millions, Except Earnings Per Share Amounts)
Three Months Ended
March 31
2001 2000
Financial Services
Revenues $212.9 $150.0
Share of affiliates' earnings 14.0 18.9
Gross Income 226.9 168.9
Depreciation and amortization 77.9 52.5
Interest 55.7 38.2
Operating lease expense 12.7 11.3
Income before Income Taxes 19.1 37.4
Net Income $11.5 $22.9
Net Investments 3,914.6 2,996.1
Other Assets (b) 381.1 337.6
Total Assets 4,295.7 3,333.7
Common Equity 412.1 390.1
GATX Capital only
New Investment Volume 754.6 325.7
Portfolio Pre-Tax Spread (c) 46.9 36.6
Annualized Pre-Tax Spread as % of Average Net
Investments 5.0% 5.1%
Asset remarketing:
Disposition Gains on Owned Assets 8.5 9.3
Residual Sharing Fees 5.9 .2
Warrant Income 15.3 14.0
(a) Based on $31.6 million 1Q01 income; excludes 4Q00 litigation reserve.
(b) Includes marine operating assets
(c) Lease, interest and affiliate income less ownership costs
GATX CORPORATION CONSOLIDATED INCOME SUMMARY (unaudited)
APPENDIX A
Elimination
Other COLI of Net Gain
First East Rail Tax excluding Adjusted First
Quarter Chicago Non- Adjustment the Sale of First Quarter
2001 Closing recurring (a) Logistics Quarter 2000
GATX Rail $(4.1) $12.4 $3.8 $-- $12.1 $18.5
Financial
Services 11.5 11.5 22.9
Corporate &
Other (3.0) 4.0 1.0 (3.8)
Continuing
Operations 4.4 24.6 37.6
ISG - Discontinued Operations
Operations 2.4 2.4 3.0
Gain on
sale of
portion of
segment 163.9 (159.3) 4.6 --
Discontinued
Operations 166.3 7.0 3.0
Total $170.7 $12.4 $3.8 $4.0 $(159.3) $31.6 $40.6
Diluted EPS:
Continuing 0.09 0.49 0.76
Discontinued-
operations 0.05 0.05 0.06
Discontinued-
gain on
sale of
portion of
segment 3.31 0.09 --
Total $3.45 $0.63 $0.82
(a) charge to reflect potential disallowance of tax benefits associated
with the company's corporate owned life insurance (COLI) program
SOURCE GATX Corporation
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Company News On-Call:
http://www.prnewswire.com/comp/105121.html or fax,
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CONTACT:
Analysts and Investors, Robert C. Lyons of
GATX Corporation, 312-621-6633
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