-- Company reconfirms previous 2001 income outlook
CHICAGO, Oct. 23 /PRNewswire/ -- GATX Corporation (NYSE: GMT) today
announced its 2001 third quarter results, reporting a third quarter net loss
of $7.3 million or $.15 per diluted share. Excluding telecommunications-
related charges and a one-time reserve benefit, GATX had third quarter income
of $18.9 million, or $.39 per diluted share. This compares to income of
$45.1 million or $.93 per diluted share in the prior year period.
As part of a previously disclosed plan to aggressively address its
telecommunications exposure in 2001, GATX reported $56 million of pre-tax
write-downs and expenses in its telecommunications portfolio in the third
quarter. This leaves the company with approximately $70 million
(approximately 1% of assets) of telecommunications exposure at quarter end.
Based on the write-downs taken to date and existing reserve levels, the
company expects that further telecommunications-related charges will be
minimal.
During the third quarter, GATX also settled the last of its Airlog cases,
resulting in a $13.1 million pre-tax benefit reflecting a reversal of the
litigation reserve. This one-time benefit and the telecommunications-related
charges have been excluded from the $.39 per diluted share income calculation.
For the nine months ending September 30, 2001, GATX reported net income of
$185.0 million or $3.75 per diluted share. Excluding the net gain from the
GATX Terminals sale, telecommunications-related charges and other one-time
items, GATX had nine-month income of $97.5 million or $1.97 per diluted share.
This compares to $127.2 million or $2.61 per diluted share in the prior year
period.
All comments from here forward in this press release regarding
consolidated and business unit results for the third quarter, year to date and
the 2001 full year outlook exclude the net gain from the sale of GATX
Terminals, telecommunications-related charges, and other one-time items.
Ronald H. Zech, chairman and president of GATX, stated, "The third quarter
clearly presented all companies, including GATX, with unprecedented operating
challenges. GATX remains focused on its strategy of managing its business
appropriately in the face of economic uncertainty, while selectively pursuing
attractive investment opportunities.
"We remain optimistic that GATX can achieve its full year net income
expectation of approximately $2.20 per diluted share. At GATX Rail,
cost-reduction efforts are supporting results despite continued weakness in
the rail sector, and we have increased our 2001 income expectation at GATX
Rail from the $40 million range to approximately $45 million. At GATX
Capital, solid remarketing income, fee income, and pre-tax spread is being
partially offset by increased loss provisions. However, we continue to expect
GATX Capital's income for the full year to be within our previously
anticipated range of $65-$70 million.
"Throughout past economic cycles and market shocks, our portfolio of high
quality, long-lived assets has proven to be an excellent source of cash flow
and attractive returns. Although our decision to use the GATX Terminals' sale
proceeds to reduce leverage and strengthen the balance sheet has suppressed
near-term earnings, we will enter 2002 focused on our core markets and poised
to capitalize on the opportunities that arise during periods of uncertainty."
FINANCIAL SERVICES
Financial Services, comprised principally of GATX Capital, had third
quarter income of $15.0 million compared to $26.1 million in the prior year
period. For the nine-month period, Financial Services had income of
$66.2 million compared to $70.1 million in the prior year period.
Investment volume totaled $379 million during the third quarter compared
to $292 million in the prior year period. For the first nine months of 2001,
investment volume totaled $1.5 billion compared to $1.0 billion in the prior
year period. The increased year-to-date volume reflects normal investment
volume plus select portfolio acquisitions earlier in the year, primarily in
technology and air assets.
For the third quarter, pre-tax spread totaled $36.4 million compared to
$36.8 million in the prior year period. For the nine-month period, pre-tax
spread totaled $129.9 million compared to $115.6 million in the prior year
period. Annualized pre-tax spread in the third quarter was 3.7% of average
net investments compared to 4.5% in the prior year period and 4.7% in the 2001
second quarter. While lease and interest income continued to grow
year-over-year, a key component of pre-tax spread, joint venture income,
declined year-over-year. This decline is primarily attributable to the fact
that the company, in conjunction with its partners, recognized increased loss
provisions and impairments within its telecommunication partnerships. This
had a $15 million negative impact on pre-tax spread in the third quarter.
Excluding the telecommunications impact, pre-tax spread as a percentage of net
investments was 5.1% for the third quarter and 4.9% for the nine-month period.
Third quarter remarketing income, comprised of both gains on asset sales
and residual sharing fees, was $20.4 million compared to $20.8 million in the
prior year period. For the nine-month period, remarketing gains totaled
$85.1 million compared to $39.5 million in the prior year period. The
increased year-to-date remarketing income was driven by stable secondary
market conditions in a wide range of asset classes.
Warrant income totaled $7.5 million in the third quarter compared to
$11.8 million in the prior year period. For the nine-month period, warrant
income totaled $35.1 million compared to $34.4 million in the prior year
period. Pre-tax unrealized gains decreased to approximately $4 million at the
end of the third quarter from approximately $13 million at the end of the
second quarter.
Loss provisions totaled $24.4 million in the third quarter compared to
$4.6 million in the prior year period. The substantial increase in loss
provision reflects current economic weakness and the related effect of
increased charge-offs, primarily in telecommunications and the diversified
portfolios. The allowance for loss was 6.2% of reservable assets at the end
of the third quarter compared to a similar level in the prior quarter and 8.3%
in the prior year period.
In addition to the telecommunications asset write-downs, net charge-offs
of reservable assets during the third quarter totaled $23.8 million. Third
quarter net charge-offs and telecommunication write-downs were 1.6% of average
net investments compared to negligible levels in the prior year period and
1.1% in the 2001 second quarter. For the nine-month period, net charge-offs
and telecommunication write-downs totaled $118 million, or 3.1% of average net
investments compared to .4% in the prior year period. The increased loss
levels in 2001 primarily reflect deterioration in the company's
telecommunications portfolio.
GATX RAIL
GATX Rail had income of $11.0 million in the 2001 third quarter compared
to $15.9 million in the prior year period, and $11.5 million in the 2001
second quarter. For the nine-month period, GATX Rail had net income of
$34.6 million compared to $52.3 million in the prior year period.
Utilization of GATX Rail's North American full service fleet was 91% at
the end of the third quarter, consistent with the 2001 second quarter level,
but down from 93% in the prior year period. Chemical companies remain under
profit pressure and North American manufacturing capacity utilization is at a
15-year low. This factor, among others, is negatively influencing demand and
lease rate pricing.
Reflecting limited new car order activity, GATX Rail's full service North
American fleet totaled 91,700 cars at the end of the third quarter,
essentially flat with the prior quarter and 2000 year-end levels. The company
continues to limit new car orders to customer-specific requests, and therefore
third quarter deliveries totaled only 550 cars.
COMPANY DESCRIPTION
GATX Corporation (NYSE: GMT) is a specialized finance and leasing company.
It uniquely combines asset knowledge and services, structuring expertise,
creative partnering and risk capital to provide business solutions to
customers and partners worldwide. GATX specializes in railcar and locomotive
leasing, aircraft operating leasing, information technology leasing, venture
finance and diversified finance.
TELECONFERENCE INFORMATION
GATX Corporation will host a teleconference to discuss third quarter
results. Teleconference details are as follows:
Tuesday, October 23rd
3:00 PM Eastern Time
Domestic Dial-In: 1-888-273-9887
International Dial-In: 1-612-332-0345
Replay: 1-800-475-6701, access # 607158
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, GATX Capital, and GATX Corporation, risks and
uncertainties include, but are not limited to, general economic conditions
and/or the market changes resulting from the events of September 11, 2001,
railcar lease rate and utilization levels, dynamics affecting customers within
the chemical, petroleum and food industries, additional potential write-downs
and/or provisions related to GATX's telecommunications portfolio, and general
market conditions in the air, telecommunications, venture, and other
large-ticket leasing industries.
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 OPERATIONS (UNAUDITED)
(In Millions, Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30 September30
2001 2000 2001 2000
Gross Income
Revenues $363.9 $347.6 $1,142.5 $953.0
Share of affiliates'
earnings(A) 5.3 16.7 35.2 62.8
Total Gross Income 369.2 364.3 1,177.7 1,015.8
Ownership Costs
Depreciation and
amortization 103.3 81.2 316.2 240.0
Interest, net 63.5 62.7 192.5 176.1
Operating lease expense 51.8 47.6 148.5 130.7
Total Ownership Costs 218.6 191.5 657.2 546.8
Other Costs and Expenses
Operating expenses 54.5 52.9 178.6 135.7
Selling, general
and administrative 55.1 54.6 178.7 146.8
Provision for possible
losses(B) 24.4 4.6 61.9 8.6
Asset impairment
charges(C) 39.3 - 69.9 -
Reversal of litigation
provision (13.1) - (13.1) -
Fair value adjustments
for derivatives 1.9 - 2.3 -
Total Other Costs
and Expenses 162.1 112.1 478.3 291.1
(Loss) Income from
Continuing Operations
before Income Taxes (11.5) 60.7 42.2 177.9
Income Taxes (Benefit) (4.2) 23.1 22.6 70.3
(Loss) Income from
Continuing Operations (7.3) 37.6 19.6 107.6
Discontinued Operations
Operating results,
net of income taxes - 7.5 1.5 14.9
Gain on sale of portion
of segment, net of
income taxes - - 163.9 4.7
Total Discontinued
Operations - 7.5 165.4 19.6
Net (Loss) Income $(7.3) $45.1 $185.0 $127.2
Per Share Data
Basic:
(Loss) Income from
Continuing Operations $(.15) $.79 $ .41 $2.24
Income from
Discontinued
Operations - .16 3.41 .41
Total $(.15) $.95 $3.82 $2.65
Average number of
common shares
(in thousands) 48,615 47,541 48,455 47,855
Diluted:
(Loss) Income from
Continuing Operations $(.15) $.78 $ .40 $2.21
Income from
Discontinued
Operations - .15 3.35 .40
Total $(.15) $.93 $3.75 $2.61
Average number of
common shares and
share equivalents
(in thousands) 48,615 48,673 49,317 48,763
(A) 3Q'01 includes $14.7 million provision and impairments within telecom
affiliates, YTD '01 includes $22.8 million
(B) 3Q'01 includes $4.6 million telecom-related provision, YTD '01
includes $7.71 million
(C) 3Q'01 includes $36.8 million telecom asset impairment charges, YTD '01
includes $67.3 million
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In Millions)
September 30 December 31
2001 2000
Assets
Cash and Cash Equivalents $289.6 $173.6
Receivables
Trade accounts 63.9 93.7
Finance leases 988.9 878.3
Secured loans 607.9 538.0
Less - allowance for possible losses (111.0) (95.2)
1,549.7 1,414.8
Operating Lease Assets and Facilities, net 2,623.9 2,654.1
Investments in Affiliated Companies 1,030.0 951.2
Other Assets 626.3 439.1
Net Assets of Discontinued Operations - 630.9
$6,119.5 $6,263.7
Liabilities, Deferred Items and
Shareholders' Equity
Accounts Payable $270.1 $317.3
Accrued Expenses 179.9 127.4
Debt
Short-term 274.7 557.2
Long-term:
Recourse 2,969.8 3,093.9
Nonrecourse 585.4 494.2
Capital lease obligations 148.1 164.2
3,978.0 4,309.5
Deferred Items, including Income Taxes 775.7 720.0
Total Shareholders' Equity 915.8 789.5
$6,119.5 $6,263.7
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
Operating Activities
(Loss) income from continuing
operations $(7.3) $37.6 $19.6 $107.6
Adjustments to reconcile (loss)
income from continuing operations
to net cash provided by
continuing operations:
Realized gains on remarketing
of leased equipment (19.4) (20.2) (69.0) (39.9)
Depreciation and amortization 103.3 81.2 316.2 240.0
Provision for possible losses 24.4 4.6 61.9 8.6
Asset impairment charges 39.3 - 69.9 -
Deferred income taxes 3.5 22.1 113.5 57.1
Reversal of litigation
provision (13.1) - (13.1) -
Other, including working capital (89.7) (14.9) (263.2) (68.7)
Net cash provided by
continuing operations 41.0 110.4 235.8 304.7
Investing Activities
Additions to equipment on lease,
net of nonrecourse financing
for leveraged leases (185.3) (72.6) (587.2) (361.9)
Additions to operating lease
assets and facilities (43.2) (121.0) (144.9) (412.6)
Secured loans extended (50.3) (122.0) (253.7) (338.5)
Investments in affiliated
companies (62.7) (39.8) (283.1) (160.9)
Other investments and progress
payments (80.3) (9.3) (210.0) (113.5)
Portfolio investments and capital
additions (421.8) (364.7) (1,478.9) (1,387.4)
Portfolio proceeds 254.2 172.1 780.0 392.5
Proceeds from other asset sales 6.3 5.0 202.7 297.6
Net cash used in investing
activities of continuing
operations (161.3) (187.6) (496.2) (697.3)
Financing Activities
Proceeds from issuance of
long-term debt 90.8 630.0 482.8 1,410.8
Repayment of long-term debt (135.9) (103.0) (787.8) (711.7)
Net increase (decrease) in
short-term debt 89.8 (436.4) (282.5) (227.6)
Repayment of capital lease
obligations (4.8) (5.3) (16.1) (14.7)
Issuance (repurchase) of common
stock and other 3.5 5.4 17.6 (35.8)
Cash dividends (15.0) (14.3) (45.1) (43.0)
Net cash provided by (used in)
financing activities of
continuing operations 28.4 76.4 (631.1) 378.0
Net Transfers (to) from
Discontinued Operations (21.7) 14.9 (29.3) (43.5)
Net (Decrease) Increase in Cash
and Cash Equivalents from
Continuing Operations (113.6) 14.1 (920.8) (58.1)
Proceeds from Sale of Portion
of Segment 40.9 - 1,185.0 74.7
Taxes Paid on Gain from Sale
of Segment - - (148.2) -
Net Decrease in Cash and Cash
Equivalents from Discontinued
Operations - (.9) (12.6) (1.1)
Net (Decrease) Increase in Cash
and Cash Equivalents $(72.7) $13.2 $103.4 $15.5
GATX CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY DATA (UNAUDITED)
(In Millions, Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
GATX Corporation
Basic net (loss) income per share
(Loss) income from continuing
operations $(.15) $ .79 $.41 $ 2.24
Income from discontinued
operations - .16 3.41 .41
Total $(.15) $ .95 $3.82 $ 2.65
Diluted net (loss) income
per share
(Loss) income from continuing
operations $(.15) $ .78 $.40 $ 2.21
Income from discontinued
operations - .15 3.35 .40
Total $(.15) $ .93 $3.75 $ 2.61
Diluted Income Per Share
Adjusted for Net Terminals Gain,
Airlog, Telecom, and one-time
items $.39 $ .93 $1.97 $ 2.61
Equity 915.8 876.0
Return on Average Equity(a) 5.9% 18.7%
Assets of Continuing Operations 5,946.0 5,436.5
Net Assets of Discontinued
Operations - 670.0
Intersegment and Other Assets 173.5 (123.9)
Total Assets 6,119.5 5,982.6
Return on Average Total Owned
Assets(a) .83% 2.91%
GATX Rail
Revenues $146.9 $144.5 $441.3 $429.0
Share of affiliates' earnings (1.7) .7 .6 2.6
Gross Income 145.2 145.2 441.9 431.6
Depreciation and amortization 25.3 24.2 74.7 74.5
Interest, net 9.8 13.0 35.5 41.5
Operating lease expense 40.9 35.6 112.4 96.7
Operating expenses 33.6 30.9 132.4 89.2
SG&A 17.9 15.9 54.3 45.8
Provision for possible losses - - .2 -
Fair value adjustments for
derivatives .1 - .6 -
Income before Income Taxes 17.6 25.6 31.8 83.9
Income Taxes 6.6 9.7 13.4 31.6
Net Income $11.0 $15.9 $18.4 $52.3
Income Excluding 1Q'01 Charges $11.0 $15.9 $34.6 $52.3
Assets 1,633.1 1,665.6
Equity 360.2 341.9
North American Fleet
Fleet Additions 550 1,100 2,150 5,000
Total Fleet 91,700 92,000 91,700 92,000
Utilization 91% 93% 91% 93%
GATX CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY DATA (UNAUDITED)
(In Millions, Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
Financial Services
Revenues $218.7 $202.9 $704.3 $526.1
Share of affiliates' earnings 7.0 16.0 34.6 60.2
Gross Income 225.7 218.9 738.9 586.3
Depreciation and amortization 77.8 56.2 239.5 162.6
Interest 49.5 47.8 161.1 129.6
Operating lease expense 11.7 12.0 37.0 34.9
Operating expenses 21.2 21.9 45.7 46.1
SG&A 31.8 33.6 111.3 88.9
Provision for possible losses 24.4 4.6 61.7 8.6
Asset impairment charges 39.3 - 69.9 -
Reversal of litigation provision 13.1 - 13.1 -
Fair value adjustment for
derivatives 1.7 - 1.7 -
(Loss) Income before Income
Taxes (18.6) 42.8 24.1 115.6
Income Taxes (Benefit) (7.4) 16.7 9.5 45.5
Net (Loss) Income $(11.2) $26.1 $14.6 $70.1
Income Excluding Telecom
and Airlog $15.0 $26.1 $66.2 $70.1
Net Investments 3,994.0 3,313.8
Other Assets (B) 318.9 457.1
Total Assets 4,312.9 3,770.9
Common Equity 570.6 457.3
GATX Capital only
New Investment Volume $379.0 $291.9 $ 1,494.4 $ 1,024.1
Portfolio Pre-Tax Spread
Finance lease income 30.8 20.5 103.8 59.8
Operating lease income 111.8 92.3 354.4 266.6
Interest income 18.3 17.8 55.7 42.2
Share of affiliates' earnings 7.0 16.0 34.6 60.2
Interest expense (47.5) (45.6) (157.1) (125.3)
Operating lease expense
and depreciation (84.0) (64.2) (261.5) (187.9)
Total Portfolio Pre-Tax Spread 36.4 36.8 129.9 115.6
Annualized Pre-Tax Spread as %
of Average Net Investments 3.7% 4.5% 4.3% 5.1%
Annualized Pre-Tax Spread as %
of Average Net Investments
Excluding Telecommunications
Impact 5.1% 4.5% 4.9% 5.1%
Asset remarketing:
Disposition Gains on Owned
Assets 17.7 19.4 67.2 37.8
Residual Sharing Fees 2.7 1.4 17.9 1.7
Warrant Income 7.5 11.8 35.1 34.4
(A) Excludes 4Q00 litigation and reserve and 1Q01 Terminals' gain
(B) Includes marine operating assets
SOURCE GATX Corporation
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http://www.gatx.com
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CONTACT:
Analysts and Investors, Robert C. Lyons of
GATX Corporation, +1-312-621-6633
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