<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
[ X ] OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
[ ] OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 2-26520
------------------------------
UNION TANK CAR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-3104688
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
225 West Washington Street, Chicago, Illinois 60606
---------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 372-9500
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
---------------- ----------------
There is no voting stock held by non-affiliates of the registrant. This report
is being filed by the registrant as a result of undertakings made pursuant to
Section 15(d) of the Securities Exchange Act of 1934 with respect to certain
long-term debt of the registrant.
Included in this filing are 10 pages, sequentially numbered in the bottom center
of each page.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
----
Part I. Financial Information
Item 1.
Condensed consolidated statement of income -
three and nine month periods ended
September 30, 1994 and 1993 3
Condensed consolidated balance sheet -
September 30, 1994 and December 31, 1993 4
Condensed consolidated statement of cash flows -
nine months ended September 30, 1994 and 1993 5
Notes to condensed consolidated financial
statements 6 - 7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 1.
Legal Proceedings 9
Item 6.
Exhibits and Reports on Form 8-K 9
Signatures 10
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Services (leasing and other) $109,293 $107,047 $330,755 $322,552
Net sales 42,422 16,058 99,734 50,966
-------- -------- -------- --------
151,715 123,105 430,489 373,518
Other income 4,713 4,829 11,691 13,860
-------- -------- -------- --------
156,428 127,934 442,180 387,378
-------- -------- -------- --------
Costs and expenses
Cost of services 58,537 54,977 172,571 166,764
Cost of sales 37,357 12,650 84,466 41,741
General and administrative 13,131 13,341 40,207 40,566
Interest 22,140 24,470 70,007 72,693
-------- -------- -------- --------
131,165 105,438 367,251 321,764
-------- -------- -------- --------
Income before income taxes
and cumulative effect of a
change in accounting principle 25,263 22,496 74,929 65,614
-------- -------- -------- --------
Provision for income taxes
Current 10,603 791 20,579 10,711
Deferred 375 14,265 10,927 23,030
Deferred investment tax credits (740) (748) (2,034) (2,086)
-------- -------- -------- --------
10,238 14,308 29,472 31,655
-------- -------- -------- --------
Income before cumulative effect of
a change in accounting principle 15,025 8,188 45,457 33,959
Cumulative effect of a change in
accounting principle related to
accounting for income taxes - - - 80,000
-------- -------- -------- --------
Net income $ 15,025 $ 8,188 $ 45,457 $113,959
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 20,348 $ 34,013
Accounts receivable 87,570 61,501
Inventories 60,160 50,424
Due from affiliate - 2,076
Prepaid expenses and deferred charges 6,905 8,041
Advances to parent company,
principally at LIBOR plus 1% 111,349 202,255
Railcar lease fleet, net 1,567,853 1,523,843
Fixed assets, net 127,189 104,973
Investment in direct financing lease 38,965 39,736
Other assets 27,601 28,005
---------- ----------
$2,047,940 $2,054,867
========== ==========
LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY
Accounts payable $ 12,771 $ 16,404
Accrued liabilities 138,083 121,400
Borrowed debt 909,322 951,031
---------- ----------
1,060,176 1,088,835
Deferred items
Income taxes 461,283 451,812
Investment tax credits 26,394 28,590
---------- ----------
487,677 480,402
Stockholder's equity
Common stock and additional capital 111,341 111,341
Retained earnings 388,746 374,289
---------- ----------
Total stockholder's equity 500,087 485,630
---------- ----------
$2,047,940 $2,054,867
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1994 1993
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 45,457 $ 113,959
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 77,270 75,082
Cumulative effect of a change in accounting principle - (80,000)
Other non-cash income and expenses 934 (246)
Changes in assets and liabilities:
Accounts receivable (29,317) (3,198)
Inventories (10,125) (5,947)
Prepaid expenses and deferred charges 1,135 51
Accounts payable and accrued expenses 13,144 13,124
Deferred taxes 8,893 20,944
--------- ---------
Net cash provided by operating activities 107,391 133,769
--------- ---------
Cash flows from investing activities:
Proceeds from disposals of railcars and other fixed assets 14,009 10,695
Decrease in advance to parent 93,757 20,603
Increase in other assets and investments - (341)
Construction and purchase of railcars and other fixed assets (160,640) (113,510)
Advance to affiliate 1,988 2,063
Collection of demand note and long-term receivables 1,451 201
--------- ---------
Net cash used in investing activities (49,435) (80,289)
--------- ---------
Cash flows from financing activities:
Net commercial paper (repayments) borrowings (52,409) 9,474
Proceeds on issuance of long-term debt 100,000 100,000
Principal payments of long-term debt (87,780) (54,992)
Repayment of advance from affiliate - (17,708)
Cash dividends (31,000) (79,000)
--------- ---------
Net cash used in financing activities (71,189) (42,226)
--------- ---------
Effect of exchange rates on cash and cash equivalents (432) (843)
--------- ---------
Net (decrease) increase in cash and cash equivalents (13,665) 10,411
Cash and cash equivalents at beginning of year 34,013 18,682
--------- ---------
Cash and cash equivalents at end of period $ 20,348 $ 29,093
========= =========
Cash paid during the period for:
Interest (net of amount capitalized) $ 59,726 $ 59,032
Income taxes 22,450 12,554
</TABLE>
See notes to condensed consolidated financial statements.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
1. Union Tank Car Company (the Company) is a wholly-owned subsidiary of Marmon
Industrial Corporation (Marmon Industrial). Marmon Industrial is a wholly-
owned indirect subsidiary of Marmon Holdings, Inc. (Marmon Holdings),
substantially all of the stock of which is owned, directly or indirectly, by
trusts for the benefit of certain members of the Pritzker family. As used
herein, "Pritzker family" refers to the lineal descendants of Nicholas J.
Pritzker, deceased.
2. The accompanying unaudited condensed consolidated financial statements
include all adjustments, consisting of normal recurring accruals, which the
Company considers necessary for a fair presentation. These interim
financial statements do not include all disclosures normally provided in
annual financial statements. Accordingly, they should be read in
conjunction with the consolidated financial statements and notes thereto in
the Company's 1993 Annual Report on Form 10-K.
The 1994 interim results presented herein are not necessarily indicative of
the results of operations for the full year 1994.
3. As more fully described in the Company's 1993 Annual Report on Form 10-K,
under an arrangement with Marmon Industrial, the Company is included in the
consolidated federal income tax return of Marmon Holdings. As a member of
a consolidated federal income tax group, the Company is contingently liable
for the federal income taxes of the other members of the group.
4. The Company and its subsidiaries have been named as defendants in a number
of lawsuits, and certain claims are pending. The Company has accrued what
it reasonably expects to pay in resolution of these matters and, in the
opinion of management, their ultimate resolution will not have a material
effect on the Company's consolidated financial position or results of
operations.
5. Foreign currency translation adjustments and transaction gains and losses
are assumed by the Company's parent. For the nine months ended September
30, 1994 and 1993, Marmon Industrial absorbed losses of $235 and $80,
respectively.
6. During the second quarter of 1994, the Company repaid all outstanding
commercial paper (through reductions in advances to parent) and suspended
its commercial paper program effective May 23, 1994. On May 26, 1994, the
Company terminated the revolving credit agreement which had served as a
liquidity back-up to the commercial paper program.
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<PAGE>
7. Summarized Financial Information of Procor Limited
Summarized consolidated financial information for the Company's wholly-owned
subsidiary, Procor Limited, is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
Balance Sheet:
<S> <C> <C>
Railcar lease fleet, net $250,292 $257,333
All other assets 149,570 145,022
Borrowed debt 154,114 160,736
All other liabilities 160,050 163,222
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
------- ------- ------- -------
Statement of Income:
Services and net sales $29,984 $27,142 $82,674 $87,207
Gross profit 10,894 10,851 28,555 29,564
Net income 3,144 3,401 8,183 7,951
</TABLE>
8. In March, 1994, the Company issued $100,000 in long-term equipment trust
certificates to finance additions to its railcar fleet. Principal will be
due annually through 2009, beginning February, 1995. Interest is due semi-
annually through 2009, effective as of August, 1994. The certificates bear
interest at a rate of 6.6% per annum. Maturities of this debt obligation
are as follows: $6,666 in each of the years 1995 through 1999 and $66,670
thereafter.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
3rd Quarter 1994 versus 1993
- ----------------------------
Service revenues increased $2.2 million primarily due to the effect of cars
added to the railcar lease fleet. Gross margins remained relatively unchanged
from the comparable period in 1993.
Sales revenues increased $26.4 million primarily due to increased railcar sales
of $22.4 million and manufactured tank head sales of $2.9 million.
The Company's effective tax rate decreased from the comparable period in 1993
due to the effect of the increase in the federal statutory income tax rate from
34% to 35% retroactive to January 1, 1993, recognized in the third quarter of
1993.
Nine Months 1994 versus 1993
- ----------------------------
Service revenues increased $8.2 million primarily due to the effect of cars
added to the railcar lease fleet offset by lower revenues from sulphur service
operations. Gross margins remained relatively unchanged from the comparable
period in 1993.
Sales revenues increased $48.8 million primarily due to increased railcar sales
of $38.6 million and manufactured tank head sales of $8.5 million.
Other income decreased $2.2 million primarily due to reduced interest income
resulting from lower average outstanding balances on advances to the Company's
parent.
Financial Condition
- -------------------
1994 versus 1993
- ----------------
Operating activities provided $107.4 million of cash. These funds, along with
the issuance of long-term debt and the collection of funds previously advanced
to parent, were used to provide financing for railcar additions, repay
commercial paper obligations, service long-term debt obligations and pay
dividends to the Company's stockholder.
In March, 1994, the Company issued $100.0 million in long-term equipment trust
certificates with an annual interest rate of 6.6% to finance additions to its
railcar fleet.
Management expects future cash to be provided by operating activities, long-term
railcar financings, and collection of funds previously advanced to parent will
be adequate to provide for the continued expansion of the Company's business and
enable it to meet its debt service obligations.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to "Business - Environmental Matters" in the
Company's Annual Report on Form 10-K for the year ended December 31,
1993, and to "Item 1. Legal Proceedings" in the Company's Quarterly
Reports on Form 10-Q for the quarterly periods ended March 31, 1994,
and June 30, 1994, for a description of certain environmental matters.
In connection with the alleged violations of the Clean Water Act at the
Company's East Chicago, Indiana facility, the U. S. Department of
Justice filed a civil action against the Company in August, 1994,
pursuant to Sections 309 (b) and (d) of the Clean Water Act seeking
civil penalties not to exceed $25,000 for each day of violation. The
Company has filed an answer and affirmative defenses to the complaint.
While it is too early to predict the outcome of the case, management of
the Company believes that any costs or penalties will not be material
to the Company.
Item 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the three months ended
September 30, 1994.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION TANK CAR COMPANY
REGISTRANT
Dated: November 1, 1994 /s/ R.C. Gluth
-----------------------------------------
R.C. Gluth
Executive Vice President and Director
(principal financial officer and
principal accounting officer)
- 10 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE SEPTEMBER 30, 1994 CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 20,348
<SECURITIES> 0
<RECEIVABLES> 87,570
<ALLOWANCES> 0
<INVENTORY> 60,160
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,768,835
<DEPRECIATION> 1,073,793
<TOTAL-ASSETS> 2,047,940
<CURRENT-LIABILITIES> 0
<BONDS> 909,322
<COMMON> 106,689
0
0
<OTHER-SE> 393,398
<TOTAL-LIABILITY-AND-EQUITY> 2,047,940
<SALES> 99,734
<TOTAL-REVENUES> 442,180<F2>
<CGS> 84,466
<TOTAL-COSTS> 257,037
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70,007
<INCOME-PRETAX> 74,929
<INCOME-TAX> 29,472
<INCOME-CONTINUING> 45,457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,457
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0
<FN>
<F1> The Company issues financial statements utilizing a non-classified balance
sheet.
<F2> The Company's revenues are derived primarily from railcar leasing.
<F3> The Company is a wholly-owned subsidiary.
</FN>
</TABLE>
