<PAGE>
1993
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[_] SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 W. Washington Street, Chicago, Illinois 60606
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 372-9500
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
-------------------
None
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 .
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S) 229.405 of this chapter) 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. [ ].
There is no voting stock held by non-affiliates of the registrant. This Annual
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.
<PAGE>
UNION TANK CAR COMPANY
FORM 10-K
Year Ended December 31, 1993
CONTENTS
<TABLE>
<CAPTION>
Section Page
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<S> <C> <C>
Part I.
Item 1 Business....................................................... 2
Item 2 Properties..................................................... 9
Item 3 Legal Proceedings.............................................. 10
Item 4 Submission of Matters to a Vote of Security Holders............ 10
Part II.
Item 5 Market for Registrant's Common Equity and Related Stockholder
Matters....................................................... 11
Item 6 Selected Financial Data........................................ 11
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 11
Item 8 Financial Statements and Supplementary Data.................... 14
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 37
Part III.
Item 10 Directors and Executive Officers of the Registrant............. 37
Item 11 Executive Compensation......................................... 39
Item 12 Security Ownership of Certain Beneficial Owners and Management. 40
Item 13 Certain Relationships and Related Transactions................. 40
Part IV.
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 41
Signatures ............................................................... 42
</TABLE>
-1-
<PAGE>
PART I
ITEM 1. BUSINESS
General
UNION TANK CAR COMPANY, with its wholly-owned subsidiaries (herein collectively
referred to, unless the context otherwise requires, as the "Company") was
organized under the laws of Delaware on September 23, 1980 and is the successor
to a business which was originally incorporated in New Jersey in 1891. The
Company is a wholly-owned subsidiary of Marmon Industrial Corporation, an
indirect wholly-owned subsidiary of Marmon Holdings, Inc. ("Holdings").
Substantially all of the stock of Holdings 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.
Railcar Leasing, Services and Sales
The principal activity of the Company is the leasing of railway tank cars and
other railcars to United States, Canadian and Mexican manufacturers and other
shippers of chemicals products, including liquid fertilizers, petroleum
products, including liquefied petroleum gas, food products and bulk plastics.
The Company owns and operates one of the largest fleets of privately-owned
railway tank cars in the world.
As of December 31, 1993, the Company's fleet was comprised of approximately
51,000 tank cars and 13,500 railway cars of other types. Approximately 22,260
cars were added to the lease fleet during the ten years ended December 31, 1993.
These cars accounted for approximately 38% of total lease revenues during 1993.
Most of the Company's cars were built by the Company or to its specifications
and the balance were purchased from other sources.
The Company added approximately 2,630 new cars to its lease fleet during 1993,
including approximately 2,290 tank cars with an average capacity of
approximately 23,560 gallons, and approximately 2,100 new cars during 1992,
including approximately 1,900 tank cars with an average capacity of
approximately 23,850 gallons. During 1993 the Company sold or retired
approximately 1,310 cars, including approximately 850 tank cars with an average
capacity of approximately 14,940 gallons, and during 1992 the Company sold or
retired approximately 2,660 cars, including approximately 1,200 tank cars with
an average capacity of approximately 13,650 gallons.
Management estimates that tank cars carrying chemicals and acids account for the
greatest portion of total leasing revenues, followed in order by compressed
gases (particularly liquefied petroleum gas and anhydrous ammonia), refined
petroleum products (such as gasoline, fuel oils and asphalt), food products and
liquid fertilizers.
A significant portion of the revenues from the Company's non-tank car fleet
derives from hopper cars carrying bulk plastics. The remaining non-tank car
revenues are attributable to cars which serve the lumber, dry bulk chemical,
coal and sulphur industries.
-2-
<PAGE>
The Company builds tank cars primarily for use in its leasing business. In
addition, the Company builds cars for sale to others. Generally, the Company
only manufactures a car following the receipt of a firm order for the lease or
sale of such car. During 1993, 1992 and 1991, the Company manufactured an
aggregate of approximately 2,450, 2,260 and 2,110 tank cars, respectively, of
which approximately one-third were sold to third parties.
Substantially all of the Company's cars are leased directly to several hundred
manufacturers and other shippers under leases covering from one to several
thousand cars and for periods ranging from one to twenty years. The average
term of leases entered into during 1993 for newly-manufactured cars was
approximately seven years. The average term of leases entered into during 1993
for other cars was approximately four years. Under the terms of most leases the
Company agrees to provide a full range of services, including car repair and
maintenance. The Company supplies relatively few cars directly to railroads.
The Company markets its cars through regional sales offices located throughout
the United States and Canada and through a sales agent in Mexico. To insure
optimum utilization of the U.S., Canadian and Mexican lease fleets, the Company
maintains fleet data processing systems which contain information relative to
each car, including its mechanical specifications, maintenance and repair data
and lease terms.
The Company has generally followed the practice of financing additions to its
fleet by borrowing 75% to 80% of the funds required through the issuance of
equipment obligations. The Company's long-term equipment obligations are
generally payable over a period of fifteen to twenty years, which is
considerably less than the estimated useful life of the equipment. In addition,
in 1992 the Company entered into ten separate sale-leaseback transactions
pursuant to which it sold and leased back (under operating leases) an aggregate
of approximately 2,100 railcars. The average term of the Company's leases (as
lessor) is substantially less than the average maturity of the equipment
obligations and the average terms of the operating leases (as lessee); however,
the aggregate rentals to be received in the future under existing leases are
substantial and exceed the total of the principal payments due under the
equipment obligations and the minimum lease payments due (as lessee) under the
operating leases. The following table sets forth the minimum rentals to be
received in relation to the debt maturities under outstanding equipment
obligations, the minimum lease payments due (as lessee) under all operating
leases and the cost of the fleet. The table excludes outstanding commercial
paper and, for periods prior to January, 1990, excludes reductions in the
Company's advances to its parent, both of which were used as interim financing
for additions to the Company's railcar fleet. The figures shown are the minimum
future rentals under leases in effect at the dates indicated. Based upon its
historical experience, the Company expects that the cars (other than those which
are retired in the ordinary course of business) will be re-leased at the
expiration of such leases. The rentals under such future leases and related
interest and other expenses to be incurred in the future cannot be ascertained
and therefore are not reflected in this table.
-3-
<PAGE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1993 1992 1991 1990 1989
------- -------- -------- -------- --------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Total minimum future rentals
to be received (as lessor) $1,215.8 $1,190.3 $1,211.6 $1,168.3 $1,092.7
Principal amount of equipment
obligations (1) 869.0 846.0 925.5 913.6 864.3
Total minimum future lease
payments for noncancellable
operating leases (as lessee) 270.8 280.7 26.2 36.4 31.7
Minimum future rentals due
within one year (as lessor) 327.9 321.0 316.4 307.5 282.6
Principal amount of equipment
obligations due within one
year, net of amounts held
for sinking fund purposes 80.7 71.4 71.2 65.0 73.0
Minimum future lease payments
for noncancellable operating
leases due within one year
(as lessee) 14.2 9.0 3.2 4.3 4.1
Gross cost of fleet 2,392.7 2,283.8 2,403.8 2,229.9 2,098.4
Depreciated cost of fleet 1,523.8 1,477.4 1,619.2 1,509.2 1,425.1
For the year ended:
Railcar rentals, including
direct financing leases 397.8 388.1 372.6 348.7 330.0
</TABLE>
(1) Includes $143.0 million principal amount of unsecured senior notes issued
by the Company in 1990, the proceeds of which were used to retire certain
higher coupon railcar obligations.
Approximately 62% of the Company-owned fleet of railcars is pledged to secure
equipment obligations. The remaining cars are free of liens.
The Company maintains repair facilities located at strategic points throughout
the United States and Canada. In addition to the work performed by the Company,
certain maintenance and repair work is performed for the Company's account by
railroads, when railroad inspection determines the need for such work under the
code of the Association of American Railroads ("AAR").
-4-
<PAGE>
The Company is not a common carrier and is not subject to regulation or
supervision by the Interstate Commerce Commission. The Company's railcars are
subject to regulations governing construction, safety and maintenance
promulgated by the Department of Transportation ("DOT") and various other
government agencies and by the AAR. These regulations have required and may in
the future require the Company to make significant modifications to certain of
its cars from time to time.
The Company's principal facilities for manufacturing and assembling tank cars
are located in East Chicago, Indiana and Oakville, Ontario, Canada. The Company
also operates a network of shops for repairing and servicing railcars, with the
principal shops located in Valdosta, Georgia; Muscatine, Iowa; El Dorado,
Kansas; Ville Platte, Louisiana; Marion, Ohio; Altoona, Pennsylvania; Cleveland
and Longview, Texas; Edmonton, Alberta; Sarnia and Oakville, Ontario; Montreal,
Quebec; and Regina, Saskatchewan. In addition, on January 13, 1994, the Company
purchased certain assets, located in Sheldon, Texas, that were used in the
repair of railcars and other assets that were in the past used to manufacture
railcars.
Other Activities
The Company is engaged in several other activities, as described below.
Fasteners
The Company's fastener business, which is conducted through several wholly-owned
subsidiaries, consists of manufacturing and distributing a wide range of
fasteners in the United States and Canada to the construction industry and
manufacturers of furniture, household appliances, industrial and agricultural
equipment.
Sulphur Processing
A subsidiary of the Company provides sulphur producers in Canada with various
services, including the processing of liquefied sulphur into crystalline slates
and granules and the storage and shipping of the product. The subsidiary also
designs, manufactures and sells sulphur processing plants worldwide.
Liquefied Petroleum Gas Storage
A subsidiary of the Company operates several underground liquefied petroleum gas
storage caverns in Canada as a service to producers and sellers of liquefied
petroleum gas.
-5-
<PAGE>
Segment Data
The principal activity of the Company's primary industry segment is railcar
leasing, services and sales.
Information with regard to the Company's industry and geographic segments is as
follows (dollars in millions):
<TABLE>
<CAPTION>
Industry Segments 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Revenues
Railcar leasing, services and sales $ 441.9 $ 550.0 $ 414.8
Other 71.4 76.1 78.5
-------- -------- --------
Total segments 513.3 626.1 493.3
Interest income (principally from
advances to parent) 10.4 15.8 28.1
Corporate/unallocated (.6) (1.2) (.6)
-------- -------- --------
$ 523.1 $ 640.7 $ 520.8
======== ======== ========
Operating income
Railcar leasing, services and sales $ 171.9 $ 168.3 $ 163.9
Other 6.3 4.8 7.8
-------- -------- --------
Total segments 178.2 173.1 171.7
Interest income (principally from
advances to parent) 10.4 15.8 28.1
Interest expense (96.6) (105.4) (117.3)
Corporate/unallocated (1.5) (2.3) (1.2)
-------- -------- --------
$ 90.5 $ 81.2 $ 81.3
======== ======== ========
Assets, at December 31
Railcar leasing, services and sales $1,773.4 $1,696.6 $1,850.2
Other 46.6 48.7 58.4
-------- -------- --------
Total segments 1,820.0 1,745.3 1,908.6
Advances to parent 202.3 283.1 302.2
Corporate/unallocated 32.6 34.9 43.0
-------- -------- --------
$2,054.9 $2,063.3 $2,253.8
======== ======== ========
Capital expenditures
Railcar leasing, services and sales $ 172.9 $ 141.9 $ 220.7
Other 2.9 4.0 5.6
-------- -------- --------
$ 175.8 $ 145.9 $ 226.3
======== ======== ========
Depreciation
Railcar leasing, services and sales $ 95.2 $ 99.4 $ 90.7
Other 4.4 5.6 6.3
-------- -------- --------
$ 99.6 $ 105.0 $ 97.0
======== ======== ========
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Geographic Segments 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Revenues
United States $ 361.5 $ 469.2 $ 311.8
Canada 147.2 151.8 176.0
Mexico 4.6 5.1 5.5
-------- -------- --------
Total segments 513.3 626.1 493.3
Interest income (principally from
advances to parent) 10.4 15.8 28.1
Corporate/unallocated (.6) (1.2) (.6)
-------- -------- --------
$ 523.1 $ 640.7 $ 520.8
======== ======== ========
Operating income
United States $ 130.0 $ 122.3 $ 113.1
Canada 45.7 48.4 55.6
Mexico 2.5 2.4 3.0
-------- -------- --------
Total segments 178.2 173.1 171.7
Interest income (principally from
advances to parent) 10.4 15.8 28.1
Interest expense (96.6) (105.4) (117.3)
Corporate/allocated (1.5) (2.3) (1.2)
-------- -------- --------
$ 90.5 $ 81.2 $ 81.3
======== ======== ========
Assets, at December 31
United States $1,375.6 $1,280.2 $1,376.5
Canada 429.0 448.5 513.2
Mexico 15.4 16.6 18.9
-------- -------- --------
Total segments 1,820.0 1,745.3 1,908.6
Advances to parent 202.3 283.1 302.2
Corporate/unallocated 32.6 34.9 43.0
-------- -------- --------
$2,054.9 $2,063.3 $2,253.8
======== ======== ========
</TABLE>
Intersegment sales are immaterial. Segment operating income includes segment
revenue less operating expenses directly traceable to the segment and an
allocation of common expenses benefiting more than one segment.
Major Customers
Revenues from any one customer did not exceed 4% of consolidated or industry
segment revenues.
Raw Materials
The Company purchases raw materials from a variety of suppliers, with no one
supplier in any industry segment being significant. In the opinion of
management the Company will have adequate availability of applicable raw
materials in the future.
Foreign Operations
The Company does not believe that there are unusual risks attendant to its
foreign operations.
-7-
<PAGE>
Competition
All the activities of the Company are in competition with similar activities
carried on by other companies. In particular, there are several companies
engaged in the business of leasing tank cars in the United States and Canada.
The largest competitor is General American Transportation Corporation (including
its Canadian affiliate, Canadian General Transit Company, Limited). The other
principal competitors in the tank car business are ACF Industries, Incorporated,
and General Electric Railcar Services Corporation. The principal competitive
factors are price, service and product design.
Manufacturing Backlog
The Company builds tank cars primarily for use in its leasing business and the
number of cars added in any one year is a small fraction of the Company's total
fleet. Additionally, for tank cars built for sale to customers, the Company
delivers against orders within a relatively brief period of time. Therefore,
backlog is not material to the Company's business or an understanding thereof.
Employees
As of December 31, 1993, the Company had approximately 3,570 employees.
Environmental Matters
The Company believes that all of its facilities are in substantial compliance
with applicable laws and regulations relating to environmental protection. Over
the past several years the Company has attempted to identify and remediate
potential problem areas. In 1993 the Company spent approximately $4.7 million
on remediation and related matters, compared with $3.7 and $2.8 million in 1992
and 1991, respectively. The Company expects to spend approximately $8 million
in 1994 on similar activities, including approximately $3 million for capital
expenditures. The Company has approximately $2.5 million accrued for
environmental liabilities at December 31, 1993, and management currently
believes this accrual is adequate.
In October, 1990, the Pennsylvania Office of Attorney General and the
Pennsylvania Department of Environmental Resources ("DER") commenced an
investigation of alleged violations of the Pennsylvania Solid Waste Management
Act with respect to the handling of solid and hazardous waste material at the
Company's railcar repair facility in Altoona, Pennsylvania. The Board of
Directors of the Company authorized special counsel to conduct an internal
investigation of the allegations made against the Altoona facility. The Company
is satisfied with current operations at the facility.
The Pennsylvania DER has requested that the Company cooperate voluntarily in a
site assessment of areas of potential environmental contamination at the
facility. The Pennsylvania Attorney General's office has advised the Company's
counsel that it would like to discuss an amicable resolution of the criminal
investigation. The Company is unable to predict whether satisfactory settlement
of the allegations will occur, whether the Pennsylvania authorities will go
forward with their investigations, or whether any civil or criminal proceedings
will be initiated against it.
-8-
<PAGE>
In March, 1993, the EPA filed an administrative complaint alleging the Company
violated certain inspection, recordkeeping, and other requirements of the Toxic
Substances Control Act with respect to electrical transformers containing PCB
fluids at the Company's East Chicago, Indiana facility. The EPA proposed a
penalty of $103,400 with respect to the alleged violations. The Company has
answered the complaint and raised certain defenses. The Company has been
engaged in informal settlement negotiations. The matter is still under
discussion.
In June, 1993, the EPA filed an administrative complaint alleging the Company
violated (S)313 of the Emergency Planning and Community Right-to-Know Act of
1986 by failing to submit Toxic Chemical Release Inventory Reporting Forms
relating to its use of certain chemicals in manufacturing operations at its East
Chicago, Indiana facility during calendar years 1987-1990. The EPA proposed a
civil penalty in the amount of $524,000. The Company has denied the allegations
of the complaint and has requested a formal hearing to contest the EPA's
allegations and the proposed penalty. The Company is engaging in informal
settlement negotiations with the EPA.
In August, 1992, the EPA issued an administrative order alleging that the
Company discharged waste waters containing pollutants in excess of permissible
amounts in violation of the Clean Water Act and the terms of three industrial
waste water discharge permits held by the Company at its East Chicago, Indiana
facility. In July, 1993, the EPA issued a new administrative order which, in
part, extended the pretreatment standards compliance deadline to February, 1994
and set forth a compliance schedule for the completion of a new pretreatment
system at this facility. Other reporting and monitoring requirements of the
prior administrative order were retained. The Company is complying with the
terms of the new administrative order.
The Company has been designated as a Potentially Responsible Party by the EPA at
five sites: American Chemical Services, Inc., Griffith, IN; Auto Ion Chemical
Company, Kalamazoo, MI; Douglassville Disposal Site, Union Township, PA;
Whitehouse Waste Oil Pits Site, Jacksonville, FL; and Grandville Solvents Site,
Grandville, OH. Costs incurred to date have not been material, either
individually or in the aggregate. Because of the Company's minimal involvement
at these sites, management of the Company believes that future costs related to
these sites will not be material, either individually or in the aggregate.
Management of the Company does not anticipate that the resolution of any of the
matters discussed above will have a material adverse affect on the Company's
results of operations, financial condition or business.
ITEM 2. PROPERTIES
In the opinion of management, the Company's properties are substantially
adequate and suitable for their intended use.
Railcars
The Company owns approximately 95 percent of its total lease fleet of 64,500
railcars, of which 51,000 are tank cars and 13,500 are other railway freight
cars. Of the approximately 61,360 owned cars, 23,500 are free of liens. Cars
which are not owned are leased from others under long-term net leases.
-9-
<PAGE>
Car Servicing and Repair Shops
The Company operates a network of shops for repairing and servicing railcars.
The principal shops owned by the Company are located at Valdosta, Georgia;
Muscatine, Iowa; El Dorado, Kansas; Ville Platte, Louisiana; Marion, Ohio;
Altoona, Pennsylvania; Cleveland, Sheldon and Longview, Texas; Edmonton,
Alberta; and Oakville, Ontario. Several other repair shops and small repair
points are strategically located throughout the United States and Canada.
At any one time, less than 3.0% of the cars in the lease fleet are normally in
the Company's shops for repair and maintenance.
Railcar Manufacturing and Assembling Facilities
The Company's plants for the manufacturing and assembling of tank cars are
located at East Chicago, Indiana and Oakville, Ontario, together occupying
approximately 130 acres.
Liquefied Petroleum Gas Storage Facilities
A subsidiary of the Company owns several underground liquefied petroleum gas
storage caverns in Canada.
Other Properties
In connection with its other business activities, the Company owns (either
directly or through its subsidiaries) fastener manufacturing facilities in
Ashland, Ohio; Milton, Ontario; and Montreal, Quebec. In addition,
subsidiaries of the Company which manufacture fasteners lease several small
plants in the United States and Canada. The Company and its subsidiaries
maintain numerous sales and business offices and warehouses, most of which are
leased, throughout the United States and Canada.
ITEM 3. LEGAL PROCEEDINGS
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 to resolve such claims (including legal fees), and, in
the opinion of management, ultimate resolution of these matters will not have a
material effect on the Company's consolidated financial position or results of
operations. See discussion of Environmental Matters in ITEM 1.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-10-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Services and net sales $ 504,823 $ 618,007 $ 483,416 $ 462,684 $ 477,388
Net income 129,730 48,382 45,024 22,140 62,351
Ratio of earnings to
fixed charges 1.89 1.76 1.69 1.73 2.00
At year end:
Total assets 2,054,867 2,063,267 2,253,760 2,195,171 1,958,406
Long-term obligations 869,440 869,656 1,059,072 1,042,041 832,696
</TABLE>
See Item 7 for a discussion of the increases in 1993 net income and 1992
services and net sales. 1990 net income included a $15.3 million extraordinary
loss on retirement of debt.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1993 versus 1992
Results of Operations
- ---------------------
Service revenues increased $19.4 million primarily due to the effect of cars
added to the railcar lease fleet since 1992 and higher repair revenues offset
slightly by lower revenues from sulphur service operations. Gross profit was
relatively unchanged from 1992.
In June, 1992, the Company entered into ten separate sale-leaseback transactions
in which it sold for $124.9 million an aggregate of 2,073 railcars. Excluding
these 1992 sale-leaseback transactions, net sales revenues in 1993 decreased
approximately $7.7 million due to lower railcar and sulphur plant sales.
Other income decreased $4.4 million due to reduced interest income resulting
from lower interest rates as well as lower average outstanding balance on
advances to the Company's parent.
Interest expense decreased $8.8 million primarily due to a decline in the
average outstanding commercial paper balance as well as a lower average
effective interest rate on debt outstanding.
Provision for income taxes increased due to the effect of the increase in the
federal statutory tax rate.
-11-
<PAGE>
Net income in 1993 included an $80.0 million credit to earnings for the
cumulative effect of a change in accounting principle related to accounting for
income taxes. See further discussion under "Change in Accounting Principles"
below.
Financial Condition
- -------------------
Operating activities provided $183.8 million of cash in 1993. These funds,
along with the commercial paper borrowings, net of amounts advanced to parent,
were used to provide interim financing for railcar additions, service long-term
debt and pay dividends to the Company's stockholder. It is the Company's policy
to pay a quarterly dividend to its stockholder equal to 70% of net income. To
the extent that the Company generates cash in excess of its operating needs,
such funds are advanced to its parent and bear interest at commercial rates.
Conversely, when the Company requires additional funds to support its
operations, prior advances are repaid by its parent. No restrictions exist
regarding the amount of dividends which may be paid or advances which may be
made by the Company to its parent.
Management expects future cash to be provided by operating activities,
commercial paper borrowings and long-term railcar financings will be adequate to
provide for the continued expansion of the Company's business and enable it to
meet its debt service obligations.
The Company also has a $150.0 million liquidity back-up revolving credit
facility supporting the commercial paper programs. However, no borrowings have
occurred under this facility and none are currently anticipated.
In 1993, the Company spent $175.8 million for the construction and purchase of
railcars and other fixed assets. The Company received $15.1 million in proceeds
from disposals of railcars and other fixed assets. The Company also decreased
its advance to its parent company by $89.2 million. Overall, net cash used in
investing activities was $72.8 million.
In May, 1993, the Company issued $100.0 million in long-term equipment trust
pass through certificates to finance additions to its railcar fleet at an annual
interest rate of 6.5%. Other financing activities of the Company included $8.4
million for the repayment of commercial paper obligations, $78.8 million for
principal repayments on debt, $17.7 million to repay an advance to an affiliate
and $90.0 million for dividends. Net cash used in financing activities was
$94.9 million.
As more fully discussed in note 21 to the consolidated financial statements, on
January 13, 1994, the Company acquired certain assets located in Sheldon, Texas
for approximately $24.3 million. In addition, on March 2, 1994, the Company
issued $100.0 million in long-term equipment trust certificates to finance
additions to its railcar fleet at an annual interest rate of 6.6%.
The Company has not experienced any significant impact of inflation and changing
prices on its financial position or results of operations over the last several
years.
1992 versus 1991
Results of Operations
- ---------------------
Revenues from railcar services increased $15.0 million from 1991 primarily due
to the impact of cars added to the railcar lease fleet during 1991 and 1992.
Other service revenues, primarily sulphur processing, decreased $4.8 million.
-12-
<PAGE>
On June 30, 1992, the Company entered into ten separate sale-leaseback
transactions with trusts for the benefit of certain institutional investors
pursuant to which it sold (at approximately book value) an aggregate of 2,073
railcars, including 1,570 tank cars. As a result of these transactions, the
Company recorded sales revenue of $124.9 million. The sale-leaseback
transactions therefore account for the $124.4 million increase in consolidated
net sales revenues in 1992 as compared to 1991.
Other income decreased $14.7 million primarily due to lower interest income
resulting from lower interest rates on advances to the Company's parent.
Income taxes as a percentage of income before taxes decreased due to reduced
effective tax rates on foreign income.
Financial Condition
- -------------------
Operating activities provided $175.6 million of cash. These funds, along with
the commercial paper borrowings, net of amounts advanced to parent, were used to
provide interim financing for railcar additions, service long-term debt and pay
dividends to the Company's stockholder.
As discussed above, the Company entered into ten separate sale-leaseback
transactions that provided aggregate sales revenue of $124.9 million. Net of
$145.9 million spent for the construction and purchase of railcars and other
fixed assets, and $71.1 million provided by other investing activities, net cash
provided by investing activities was $50.1 million.
The Company did not enter into any new railcar debt financing in 1992. The
Company spent $104.3 million for the repayment of commercial paper obligations,
$72.3 million for principal repayments on debt and $33.0 million for dividends.
Changes in Accounting Principles
- --------------------------------
As more fully discussed in note 9 to the consolidated financial statements,
effective January 1, 1993 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." The cumulative effect
of the adoption of this new standard resulted in a $80.0 million credit to
earnings in 1993. The new standard, however, had no effect on the Company's
cash flow.
The Financial Accounting Standards Board has issued SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This statement will have no material
impact on the Company's financial position or results of operations since the
Company's employee benefit programs do not include significant postemployment
benefits.
The Financial Accounting Standards Board has also issued SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." However,
since the Company does not currently have investments in these types of
securities, there will be no impact on the Company's consolidated financial
statements.
Other Matters
- -------------
The Company has certain environmental matters currently outstanding, none of
which are significant to the Company's results of operations or financial
condition, either individually or in the aggregate. See further discussion of
such matters under the "Environmental Matters" caption of Item 1 of this Form
10-K.
-13-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
And Supplemental Schedules
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors.......................................... 15
Financial Statements -
Consolidated statement of income for each of the three years in
the period ended December 31, 1993.................................. 16
Consolidated balance sheet - December 31, 1993 and 1992............... 17
Consolidated statement of stockholder's equity for each of the three
years in the period ended December 31, 1993......................... 18
Consolidated statement of cash flows for each of the three
years in the period ended December 31, 1993......................... 19
Notes to consolidated financial statements............................ 20
Supplemental Schedules -
Schedule V - Property................................................. 43
Schedule VI - Accumulated Depreciation................................ 44
</TABLE>
-14-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO UNION TANK CAR COMPANY
We have audited the accompanying consolidated balance sheet of Union Tank Car
Company and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, stockholder's equity and cash flows for each
of the three years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the Index at Item 14
(a)(2). These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 referred to above present
fairly, in all material respects, the consolidated financial position of Union
Tank Car Company and subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. 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.
As discussed in Note 9 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in the year ended December 31,
1993.
ERNST & YOUNG
Chicago, Illinois
March 9, 1994.
-15-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------
1993 1992 1991
--------- -------- --------
<S> <C> <C> <C>
Revenues
Services (leasing and other) $433,904 $414,502 $404,320
Net sales 70,919 203,505 79,096
-------- -------- --------
504,823 618,007 483,416
Other income 18,272 22,718 37,406
-------- -------- --------
523,095 640,725 520,822
-------- -------- --------
Costs and expenses
Cost of services 226,059 207,983 202,219
Cost of sales 55,341 192,538 67,529
General and administrative 54,629 53,609 52,560
Interest 96,584 105,417 117,263
-------- -------- --------
432,613 559,547 439,571
-------- -------- --------
Income before income taxes
and cumulative effect of a
change in accounting principle 90,482 81,178 81,251
-------- -------- --------
Provision for income taxes
Current 10,151 24,959 21,153
Deferred 33,342 10,843 18,134
Deferred investment tax credits (2,741) (3,006) (3,060)
-------- -------- --------
40,752 32,796 36,227
-------- -------- --------
Income before cumulative effect of
a change in accounting principle 49,730 48,382 45,024
Cumulative effect of a change in
accounting principle related to
accounting for income taxes 80,000 - -
-------- -------- --------
Net income $129,730 $ 48,382 $ 45,024
======== ======== ========
Ratio of earnings to fixed charges 1.89 1.76 1.69
==== ==== ====
</TABLE>
See Notes to Consolidated Financial Statements.
-16-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
December 31,
----------------------
1993 1992
---------- ----------
<S> <C> <C>
Cash and cash equivalents $ 34,013 $ 18,682
Accounts receivable, primarily due within one year,
less allowance for doubtful accounts of $4,911 in
1993 and $5,200 in 1992 61,501 55,233
Inventories 50,424 46,634
Affiliate demand note 2,076 -
Prepaid expenses and deferred charges 8,041 7,957
Advances to parent company,
principally at LIBOR plus 1% 202,255 283,053
Railcar lease fleet, net 1,523,843 1,477,410
Fixed assets, net 104,973 101,289
Investment in direct financing lease 39,736 42,650
Other assets 28,005 30,359
---------- ----------
Total assets $2,054,867 $2,063,267
========== ==========
LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY
Accounts payable $ 16,404 $ 14,614
Accrued liabilities 121,400 107,493
Due to affiliate - 17,708
Borrowed debt 951,031 942,907
---------- ----------
1,088,835 1,082,722
Deferred items
Income taxes 451,812 502,840
Investment tax credits 28,590 31,805
---------- ----------
480,402 534,645
Stockholder's equity
Common stock, no par value; 1,000 shares authorized
and issued 106,689 106,689
Additional capital 4,652 4,652
Retained earnings 374,289 334,559
---------- ----------
Total stockholder's equity 485,630 445,900
---------- ----------
Total liabilities, deferred items and
stockholder's equity $2,054,867 $2,063,267
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
-17-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
Years Ended December 31, 1993, 1992 and 1991
(Dollars in Thousands)
<TABLE>
<CAPTION>
Common Additional Retained
Stock Capital Earnings Total
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1990 $106,689 $4,652 $305,153 $416,494
Net income - - 45,024 45,024
Cash dividends - - (31,000) (31,000)
-------- ---------- -------- --------
Balance at December 31, 1991 106,689 4,652 319,177 430,518
Net income - - 48,382 48,382
Cash dividends - - (33,000) (33,000)
-------- ---------- -------- --------
Balance at December 31, 1992 106,689 4,652 334,559 445,900
Net income - - 129,730 129,730
Cash dividends - - (90,000) (90,000)
-------- ---------- -------- --------
Balance at December 31, 1993 $106,689 $4,652 $374,289 $485,630
======== ========== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-18-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1993 1992 1991
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 129,730 $ 48,382 $ 45,024
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 99,997 106,179 98,178
Cumulative effect of a change in accounting principle (80,000) - -
Other non-cash income and expense 469 (1,714) 1,156
Changes in assets and liabilities
Accounts receivable (7,294) 6,887 (12,046)
Inventories (5,656) 7 3,005
Prepaid expenses and deferred charges (102) 2,085 2,080
Accounts payable and accrued expenses 16,065 6,811 7,590
Deferred taxes 30,601 7,837 15,074
Other - (849) 308
--------- --------- ---------
Net cash provided by operating activities 183,810 175,625 160,369
Cash flows from investing activities:
Proceeds from disposals of railcars and other fixed assets 15,094 133,933 13,583
Proceeds from disposals of box cars - 21,688 -
Decrease in advance to parent 89,228 36,522 60,489
Decrease (increase) in other assets and investments 754 (212) 2,971
Construction and purchase of railcars and
other fixed assets (175,827) (145,878) (226,257)
Loan to affiliate (2,076) - -
Collection of demand note and long-term receivables 17 4,000 4,831
--------- --------- ---------
Net cash provided by (used in) investing activities (72,810) 50,053 (144,383)
--------- --------- ---------
Cash flows from financing activities:
Net commercial paper borrowings (repayments) (8,429) (104,337) 12,200
Net proceeds from issuance of long-term debt 100,000 - 76,857
Principal payments of long-term debt (78,803) (72,260) (65,798)
Repayment of advance from affiliate (17,708) (17,391) (2,253)
Cash dividends (90,000) (33,000) (31,000)
--------- --------- ---------
Net cash used in financing activities (94,940) (226,988) (9,994)
--------- --------- ---------
Effect of exchange rates on cash and cash equivalents (729) (1,943) 846
--------- --------- ---------
Net increase (decrease) in cash 15,331 (3,253) 6,838
Cash and cash equivalents at beginning of year 18,682 21,935 15,097
--------- --------- ---------
Cash and cash equivalents at end of year $ 34,013 $ 18,682 $ 21,935
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
-19-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Ownership
UNION TANK CAR COMPANY, with its wholly-owned subsidiaries (herein collectively
referred to, unless the context otherwise requires, as the "Company") is a
wholly-owned subsidiary of Marmon Industrial Corporation ("MIC") and an indirect
subsidiary of Marmon Holdings, Inc. ("Holdings"). Substantially all of the
stock of Holdings 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. Summary of Accounting Principles and Practices
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Lessor Accounting
Operating Leases - Most of the Company's railcar leases are classified as
operating leases. Aggregate rentals from operating leases are reported as
revenue ratably over the life of the lease. Expenses, including depreciation
and maintenance, are charged against such revenues as incurred.
Direct Financing Leases - Some of the Company's railcar leases and other rental
equipment are classified as direct financing leases. Gross investment in leases
(minimum lease payments plus estimated residual values) less the cost of the
equipment is designated as unearned income. This unearned income is recognized
over the life of the lease based upon the "constant yield method" or similar
methods which generally result in an approximate level rate of return on the
investment.
Depreciation and Fixed Assets Accounting
Railcars and fixed assets are recorded at cost less accumulated depreciation.
These assets are depreciated to salvage value over their estimated useful lives
on the straight-line method. The estimated useful lives are principally:
railcars, 20-30 years; buildings and improvements, 20-30 years; and machinery
and equipment, 4-25 years.
The cost of major conversions and betterments are capitalized and depreciated
over their estimated useful life or, if shorter, the remaining useful life of
the related asset. Maintenance and repairs are charged to expense when
incurred. Gain or loss on disposals is included in other income, except for
railcar disposals which are included in cost of services.
-20-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred Income Taxes
The Company provides deferred taxes for temporary differences between pre-tax
accounting income and taxable income (principally related to railcar
depreciation).
Deferred Investment Tax Credits
United States investment tax credits (as generated through 1986 and to the
extent not transferred to lessees) and Canadian investment tax credits result in
a reduction of current or deferred income taxes and are due primarily to
investments in certain new railcars. Investment tax credits retained are
deferred and amortized over the estimated useful lives of the related assets.
Foreign Currency Translation
All assets and liabilities are translated at exchange rates in effect at the
date of translation. Average exchange rates are used for revenues, costs and
expenses and income taxes.
Translation adjustments and transaction gains and losses are assumed by the
Company's parent. For the years ended December 31, 1993 and 1992, MIC absorbed
gains of $57 and $140, respectively. For the year ended December 31, 1991, MIC
absorbed a loss of $79.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents includes all
highly liquid debt instruments purchased with an original maturity of three
months or less.
Fair Value of Financial Instruments
All book value amounts for financial instruments approximate the instruments'
fair value except for the borrowed debt discussed in Note 8.
Reclassification
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
-21-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Railcar Lease Data
Railcars are leased directly to several hundred shippers, located throughout the
United States, Canada and Mexico. The Company leases to a wide variety of
customers, and no customer accounted for more than 4% of consolidated lease
revenues. The leases involve one to several thousand cars, normally for periods
ranging from one to twenty years. The average term of leases entered into
during 1993 for newly-manufactured cars was approximately seven years. The
average term of leases entered into during 1993 for other cars was approximately
four years. Under the terms of most of the leases the Company agrees to provide
a full range of services including car repair and maintenance.
Minimum future rentals to be received on railcar leases at December 31, 1993,
are as follows:
<TABLE>
<CAPTION>
Direct Operating
Financing Leases Leases Total
---------------- ---------- ----------
<S> <C> <C> <C>
1994 $ 3,453 $ 324,473 $ 327,926
1995 3,524 250,178 253,702
1996 4,068 187,058 191,126
1997 4,068 133,336 137,404
1998 4,068 87,854 91,922
1999 and after 10,690 202,999 213,689
------- ---------- ----------
Totals $29,871 $1,185,898 $1,215,769
======= ========== ==========
</TABLE>
The investment in railcars on direct financing leases is recoverable from future
lease payments and estimated residual values. Details of this investment, which
is classified in the accompanying consolidated balance sheet under railcar lease
fleet, are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1993 1992
--------- ---------
<S> <C> <C>
Minimum future lease rentals $ 29,871 $ 35,097
Estimated residual values 9,147 9,562
-------- --------
Gross investment 39,018 44,659
Less unearned income (12,799) (15,362)
-------- --------
Net investment $ 26,219 $ 29,297
======== ========
Classified as
Railcar lease fleet (cost) $ 32,082 $ 33,805
Less accumulated depreciation (5,863) (4,508)
-------- --------
$ 26,219 $ 29,297
======== ========
</TABLE>
-22-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Railcar Lease Fleet and Fixed Assets
<TABLE>
<CAPTION>
December 31,
------------------------
1993 1992
----------- -----------
<S> <C> <C>
Railcar lease fleet
Gross cost $2,392,731 $2,283,839
Less accumulated depreciation (868,888) (806,429)
---------- ----------
$1,523,843 $1,477,410
========== ==========
Fixed assets, at cost
Land $ 4,486 $ 4,452
Buildings and improvements 74,221 73,329
Machinery and equipment 179,645 175,436
---------- ----------
258,352 253,217
Less accumulated depreciation (153,379) (151,928)
---------- ----------
$ 104,973 $ 101,289
========== ==========
</TABLE>
5. Investment in Direct Financing Lease
In 1987 one of the Company's Canadian subsidiaries entered into a Canadian
dollar denominated lease of a passenger airplane to a scheduled commercial air
carrier for an 18 year period.
Minimum future rentals to be received on the lease as of December 31, 1993 are
as follows (at December 31, 1993 exchange rate):
<TABLE>
<CAPTION>
<S> <C>
1994 $ 4,573
1995 4,573
1996 4,573
1997 4,573
1998 4,573
1999 and after 42,553
-------
Total $65,418
=======
</TABLE>
-23-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The investment is recoverable from future lease payments and estimated residual
value, as follows (at year-end exchange rates):
<TABLE>
<CAPTION>
December 31,
-------------------
1993 1992
-------- --------
<S> <C> <C>
Minimum future lease rentals $ 65,418 $ 73,945
Estimated residual value 17,932 18,692
-------- --------
Gross investment 83,350 92,637
Less unearned income (43,614) (49,987)
-------- --------
Net investment $ 39,736 $ 42,650
======== ========
</TABLE>
6. Lease Commitments
The Company, as lessee, has entered into long-term leases for railcars and
various manufacturing, office and warehouse facilities.
The railcar lease fleet includes the following capitalized leases:
<TABLE>
<CAPTION>
December 31,
-----------------
1993 1992
------- -------
<S> <C> <C>
Capitalized lease cost $15,957 $15,904
Less accumulated depreciation (6,558) (6,025)
------- -------
$ 9,399 $ 9,879
======= =======
</TABLE>
On June 30, 1992, the Company entered into ten separate sale-leaseback
transactions with trusts for the benefit of certain institutional investors
pursuant to which it sold (at approximately book value) and leased back an
aggregate of 2,073 railcars, including 1,570 tank cars. The Company may
reacquire the railcars subject to one or more of the leases by purchasing the
beneficial interests in the related trusts at fair value on January 2, 2009 in
the case of four leases and January 2, 2010 in the case of the other six leases.
Each lease expires on January 2, 2014.
-24-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 1993, future minimum rental commitments for all noncancellable
leases are as follows:
<TABLE>
<CAPTION>
Sale- Other
Capitalized Leaseback Operating
Leases Leases Leases
----------- --------- ---------
<S> <C> <C> <C>
1994 $ 2,998 $ 9,801 $ 4,421
1995 2,998 10,364 3,534
1996 2,998 10,271 2,945
1997 1,541 10,264 2,232
1998 85 10,252 2,186
1999 and after 255 186,095 18,456
------- -------- --------
10,875 $237,047 $ 33,774
======== ========
Less amount representing interest (3,208)
-------
Present value of minimum lease payments 7,667
Less current portion (1,681)
-------
Long-term obligation at December 31, 1993 $ 5,986
=======
</TABLE>
7. Accrued Liabilities
<TABLE>
<CAPTION>
December 31,
-------------------
1993 1992
-------- --------
<S> <C> <C>
Interest $ 17,318 $ 17,692
Insurance 15,250 13,149
Amounts held on customers' accounts 15,225 9,677
Retirement benefits 14,505 14,421
Rent 11,027 5,272
Minority interest in partnership 10,018 9,314
Deferred income 8,164 7,902
Other 29,893 30,066
-------- --------
$121,400 $107,493
======== ========
</TABLE>
-25-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Borrowed Debt
<TABLE>
<CAPTION>
December 31,
------------------
1993 1992
-------- --------
<S> <C> <C>
Equipment obligations, payable periodically
through 2008 at 6.50%-15.55% (average rate
10.01% as of December 31, 1993 and 10.52%
as of December 31, 1992) $725,982 $702,958
Senior notes, 9.75%, due in 1997 143,000 143,000
Other long-term borrowings (average rate
12.20% as of December 31, 1993 and
11.79% as of December 31, 1992) 29,640 36,111
Commercial paper (net of $91 and $162
discount; with average yields of 3.42% and
3.75% as of December 31, 1993 and 1992) 52,409 60,838
-------- --------
$951,031 $942,907
======== ========
</TABLE>
Equipment obligations above include $7,667 and $9,081 of capitalized leases and
are secured by railcars with an original cost of $1,597,476 and $1,497,439 at
December 31, 1993 and 1992, respectively. The senior notes contain certain
provisions regarding asset sales and sale-leaseback restrictions. As of
December 31, 1993, the Company is in compliance with all debt covenants.
In January, 1990, the Company began issuing commercial paper. As a liquidity
back-up to the issuance of commercial paper, the Company and MIC entered into a
revolving credit agreement, as amended, with several banks that provides
aggregate short-term commitments of up to $150 million. Under the credit
agreement, loans with maturities of up to six months may be issued. Under the
terms of the credit agreement the Company must maintain available unused credit
thereunder equal to 100% of the commercial paper outstanding at any time. The
restrictive covenants under the credit agreement require MIC, among other
things, to maintain consolidated net worth at specified minimum levels and
achieve defined levels of cash flow from operations. The Company is not
separately subject to these covenants. The Company's debt under the credit
agreement is guaranteed by MIC but the Company does not guarantee MIC's debt
under the credit agreement. MIC does not guarantee payment of the Company's
commercial paper indebtedness. Interest rates on the commercial paper and on
the debt under the credit agreement are based on rates in effect at the time the
commercial paper is placed or the debt is incurred. Expenses associated with
the credit agreement (approximately $370 in 1993 and $300 in 1992) are included
in interest expense. The credit agreement expires in May, 1995. The Company
has no amounts outstanding under the credit agreement at December 31, 1993. The
Company's Canadian subsidiaries have approximately $13,817 of credit lines
available on a no-charge basis. No amounts were outstanding as of December 31,
1993.
Maturities of debt obligations for the years 1994 - 1998 are $577,690, as
follows: $81,591 in 1994, $125,843 in 1995, $74,570 in 1996, $218,599 in 1997
and $77,087 in 1998.
-26-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The estimated fair value of borrowed debt is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1993 1992
---------- ----------
<S> <C> <C>
Equipment obligations $ 856,341 $ 791,246
Senior notes 163,970 154,577
Other long-term borrowings 40,830 45,279
Commercial paper 52,409 60,838
---------- ----------
$1,113,550 $1,051,940
========== ==========
</TABLE>
The current fair value of the Company's borrowed debt is estimated by
discounting the future interest and principal cash flows at the Company's
estimated incremental borrowing rate at the respective year-end for debt with
similar maturities. The Company currently anticipates holding all borrowed debt
obligations until maturity.
9. Income Taxes
The Company is included in the consolidated U.S. federal income tax return of
Holdings. Under an arrangement with MIC, federal income taxes, before
consideration of investment tax credits, are computed as if the Company files a
separate consolidated return. For this computation, the Company generally uses
tax accounting methods which minimize the current tax liability (these methods
may differ from those used in the consolidated tax return). Tax liabilities are
remitted to, and refunds are obtained from, MIC on this basis. If deductions
and credits available to Holdings' entire consolidated group exceed those which
can be used on the return, allocation of the related benefits between the
Company and others will be at the sole discretion of 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.
Effective January 1, 1993, the Company prospectively adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (SFAS 109) and, accordingly, changed from the deferred method to the
asset and liability approach to accounting for income taxes. The cumulative
effect of this accounting change as of that date is reflected in the
accompanying consolidated statement of income as an $80,000 credit to earnings
for the cumulative effect of a change in accounting principle. This item
represents a non-cash credit to earnings, as it merely reflects the new, lower
net deferred income tax liability calculated under the new accounting method as
compared to the net liability recorded under the former income tax accounting
method. Adoption of the new accounting method did not change the tax
arrangement with MIC, had no effect on income before taxes and cumulative effect
of a change in accounting principle and has no past or future impact on the cash
flows related to income taxes.
-27-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Under the provisions of the Revenue Reconciliation Act of 1993 (enacted on
August 10, 1993) the corporate federal income tax rate increased from 34% to
35%, effective January 1, 1993. The rate change increased the 1993 provision
for income taxes $7,300 due to the effect of the increased tax rate on the net
deferred income tax liability which existed as of the enactment date of the law.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The December 31, 1993
net deferred income tax liability of $451,812 shown in the accompanying
consolidated balance sheet is composed of $492,225 in deferred tax liabilities,
partially offset by $40,413 in deferred tax assets. These deferred income tax
assets and (liabilities) result from the following temporary differences:
<TABLE>
<CAPTION>
<S> <C>
Excess of tax over book depreciation $(456,558)
Other (35,667)
---------
Gross liabilities (492,225)
Expenses per books not yet deductible for tax 27,054
Alternative minimum tax and other tax credits 13,359
---------
Gross assets 40,413
---------
Net liability $(451,812)
=========
</TABLE>
The above assets exclude certain state deferred income tax assets related to
loss carryforwards (which expire over the next fifteen years) in the gross
amount of $14,000. These assets have been assigned a 100% valuation reserve due
to significant uncertainty as to ultimate realizability. There have been no
changes in any asset valuation reserves for the year ended December 31, 1993.
Undistributed earnings of the Company's non-U.S. subsidiaries reflect full
provision for non-U.S. income taxes. However, since the earnings are
indefinitely reinvested in non-U.S. operations, no provision has been made for
taxes that might be payable upon remittance of such earnings nor is it
practicable to determine the amount of any such liability.
-28-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following summarizes the provision for income taxes on income before the
cumulative effect of a change in accounting principle:
<TABLE>
<CAPTION>
Asset and
Liability
Method Deferred Method
---------- ------------------
1993 1992 1991
---------- -------- --------
<S> <C> <C> <C>
State
Current $ 144 $ 154 $ 229
Deferred 2,276 2,451 1,930
Federal
Current (5,524) 9,117 4,047
Deferred 33,886 8,912 15,000
Deferred investment tax credit (1,868) (1,869) (1,998)
Foreign
Current 15,531 15,688 16,877
Deferred (2,820) (520) 1,204
Deferred investment tax credit (873) (1,137) (1,062)
------- ------- -------
Total $40,752 $32,796 $36,227
======= ======= =======
</TABLE>
In 1990 and 1991, the Company provided for U.S. alternative minimum tax, $9,280
and $3,859 of which has been credited to regular income tax liabilities in 1993
and 1992, respectively. In 1993, 1992 and 1991 the Company paid foreign
withholding taxes of $627, $2,651 and $4,606, respectively.
Income tax expense is based upon domestic and foreign income before taxes and
the cumulative effect of a change in accounting principle as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Domestic $64,248 $54,677 $49,608
Foreign 26,234 26,501 31,643
------- ------- -------
Total $90,482 $81,178 $81,251
======= ======= =======
</TABLE>
-29-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income tax effects of significant items which resulted in effective tax rates of
45.0% in 1993, 40.4% in 1992, and 44.6% in 1991 follow:
<TABLE>
<CAPTION>
Asset and
Liability
Method Deferred Method
---------- ------------------
1993 1992 1991
---------- -------- --------
<S> <C> <C> <C>
Federal income taxes at statutory rates of
35% in 1993 and 34% in 1992 and 1991 $31,669 $27,601 $27,625
Increase (decrease) resulting from:
Effect of statutory tax rate increase on
deferred taxes 7,300 - -
Amortization of investment tax credits (2,741) (3,006) (3,167)
State income taxes, net of federal income
tax benefit 1,573 1,719 1,425
Excess tax provided on foreign income 3,529 6,819 10,878
Other, net (578) (337) (534)
------- ------- -------
Total income taxes $40,752 $32,796 $36,227
======= ======= =======
</TABLE>
The excess tax on foreign income represents differences due to higher foreign
tax rates and foreign tax credits not benefitted.
The components of the provision for deferred taxes for the years ended December
31, 1992 and 1991 (calculated under the deferred method) are as follows:
<TABLE>
<CAPTION>
1992 1991
-------- -------
<S> <C> <C>
Excess of tax over book depreciation $ 24,623 $30,662
Gain on fixed assets in excess of book (17,531) (1,545)
Alternative minimum tax 3,859 (9,380)
Foreign tax credits 1,455 (1,112)
All other, net (1,563) (491)
-------- -------
$ 10,843 $18,134
======== =======
</TABLE>
10. Contingencies
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 to resolve such claims, 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.
The Company self-insures certain exposures in its risk management plan. The
Company has accrued for the estimated costs of reported, as well as incurred but
not reported, self-insured claims.
-30-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The company has certain environmental matters currently outstanding, none of
which are significant to the Company's results of operations or financial
condition, either individually or in the aggregate. See further discussion of
such matters under the "Environmental Matters" caption of Item 1 of this Form
10-K.
11. Pension Benefits
Substantially all of the Company's employees are covered by discretionary
contribution or defined benefit retirement plans.
Costs of the discretionary contribution pension plans are accrued in amounts
determined on the basis of percentages, generally established annually by the
Company, of employee compensation of the various units covered by such plans.
The contributions are funded as accrued. Discretionary and defined contribution
plan expense for 1993, 1992 and 1991 was $5,164, $4,963 and $5,200,
respectively.
As of December 31, 1993, the Company's domestic defined benefit plans were
either in the process of being terminated (and their benefits frozen) or were
completely terminated. The benefits are based on payment of a specific amount,
which varies by plan, for each year of service. The Company's funding policy is
to contribute the minimum amount required either by law or union agreement.
Contributions are intended to provide not only for benefits attributed to
service through the plans' termination dates, but also for those expected to be
earned in the future. Certain foreign subsidiaries sponsor unfunded defined
benefit plans which cover substantially all of their regular, full-time
employees. Benefits are based on both years of service and compensation.
Defined benefit pension plan expense was $371, $291 and $462 for 1993, 1992 and
1991, respectively. Accrued defined benefit pension liability recognized in the
consolidated balance sheet was $7,167 and $7,367 at December 31, 1993 and 1992.
12. Retirement Health Care and Life Insurance Benefits
The Company provides limited health care and life insurance benefits for certain
retired employees. These benefits are subject to deductible and copayment
provisions, medicare supplements and other limitations. In 1990, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," and
recorded a liability for the present value of the estimated future costs of
vested health care and life insurance benefits. The new accounting method has
no impact on the Company's cash funding for retiree benefits. At December 31,
1993 and 1992, the liability for postretirement health care and life insurance
benefits was $4,294 and $4,000, respectively, and was included in accrued
liabilities in the consolidated balance sheet.
Expense related to these benefits was $590, $546 and $506 in 1993, 1992 and
1991, respectively.
-31-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Other Income
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Interest income $10,375 $15,803 $28,081
Earned income on direct financing leases 8,037 7,623 8,413
Goodwill amortization (407) (10) (10)
Minority interest in net income (704) (668) (588)
Other 971 (30) 1,510
------- ------- -------
$18,272 $22,718 $37,406
======= ======= =======
</TABLE>
Interest income presented above includes interest earned on advances to MIC as
described in Note 17.
14. Supplementary Profit and Loss Information
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs $95,909 $94,184 $97,790
======= ======= =======
Rents $16,476 $ 4,652 $ 3,405
======= ======= =======
Payroll taxes $ 9,029 $ 9,057 $ 8,709
======= ======= =======
Property taxes $ 5,537 $ 5,210 $ 4,084
======= ======= =======
</TABLE>
Royalties, advertising and research and development costs are less than 1% of
consolidated revenues.
15. Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges represents the number of times that
interest expense, amortization of debt discount and the interest component of
rent expense were covered by income before income taxes and cumulative effect of
a change in accounting principle and such interest, amortization and the
interest component of rentals.
-32-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Summarized Financial Information of Procor Limited
Summarized consolidated financial information for the Company's wholly-owned
subsidiary, Procor Limited, is as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1993 1992
-------- --------
<S> <C> <C>
Balance Sheet:
Railcar lease fleet, net $257,333 $283,693
All other assets 145,022 138,909
Borrowed debt 160,736 160,067
All other liabilities 163,222 192,351
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Statement of Income:
Services and net sales $119,848 $112,983 $126,270
Gross profit 40,446 42,763 46,316
Net income 11,345 11,380 12,543
</TABLE>
Services and net sales in 1993 and 1991 include $16,168 and $13,050,
respectively, representing the sale of railcars to UTLX International, Inc., a
wholly-owned subsidiary of the Company.
17. Related Party Transactions
The following table sets forth the major related party transaction amounts
included in the consolidated financial statements.
<TABLE>
<CAPTION>
Service Interest Management Insurance Interest
Revenues Income Expense Billed Expense
-------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
1993 $1,404 $ 9,786 $4,783 $2,102 $ 300
1992 4,647 14,667 4,658 2,962 2,177
1991 5,075 26,012 4,539 2,219 3,382
</TABLE>
The Company leases 486 box cars under net long-term leases of 15 to 20 years to
WCTU Railway Company, an affiliated company. Revenues from these leases are
classified in the preceding table as service revenues.
The Company from time to time advances funds in excess of its current cash
requirements for domestic operations to MIC or MIC's subsidiaries on an
unsecured demand basis. Such advances, which bear interest principally at LIBOR
plus 1%, amounted to $202,393 and $284,030 at December 31, 1993 and 1992,
respectively.
-33-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Certain of the Company's Canadian operations and its affiliates enter into
intercompany loans utilizing their respective excess cash balances. These
advances between the Company and subsidiaries of MIC amounting to a payable of
$138 and $977 at December 31, 1993 and 1992, respectively, have been included in
Advances to Parent Company.
Management fees are paid to The Marmon Group, Inc. ("Marmon"), an indirect
subsidiary of Holdings and an affiliate of MIC, for certain services provided by
Marmon's officers and employees including services with respect to accounting,
tax, finance, legal and related matters which Marmon provides to certain of
Holdings' divisions, subsidiaries and affiliates. Marmon provides these
services to the Company because it is considered more cost efficient to provide
such services in this manner.
The management fee which Marmon charges to the Company and other entities that
it manages is determined in the following manner. First, budgeted
administrative expenses of Marmon for the twelve month period following the date
of computation (including wages, salaries and related expenses, rent, utilities,
travel expenses and other similar expenses, but excluding extraordinary and non-
recurring items) are multiplied by the average of the following three
percentages (each of which is given equal weight): (1) the percent of the sales
and services revenues of the Company to the total sales and services revenues of
all managed entities, including the Company; (2) the percent of the assets of
the Company to the assets of all managed entities, including the Company;
and (3) the percent of the net income of the Company to the net income of all
managed entities, including the Company. In making this computation, Marmon
uses sales and services revenues and net income from the beginning of the year
to the approximate date of computation and assets at that date.
Marmon's management takes the amount derived from this formula and applies
discretion to determine the final management fee to be charged. The factors
which are considered include matters such as the following: any known operating
problems and risks that require or may require additional time to be devoted to
the Company by Marmon's management; significant expansion programs; significant
contracts; unusual tax or accounting matters; and the experience and length of
service of the Company's management.
Included in the preceding table as insurance billed are $159 in 1993, $879 in
1992 and $1,064 in 1991 for insurance premiums for coverage that was insured or
reinsured with an insurance company which the Company has been advised is
controlled by trusts for the benefit of an individual related by marriage to a
member of the Pritzker family.
In 1986, the Company entered into a partnership with an affiliate for the
purpose of purchasing used railcars. The Company's investment as of December
31, 1993 and 1992 was $40,070 and $37,254, respectively, which represents 80%
ownership in this partnership. The minority partner's interest in the
partnership at December 31, 1993 and 1992 is $10,018 and $9,314, respectively,
which is included in accrued liabilities. The minority interest in income,
$704, $668 and $588 for the years ended December 31, 1993, 1992 and 1991,
respectively, is reflected in other income.
-34-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1993
Net sales and services revenues $122,054 $128,359 $123,105 $131,305
Cost of sales and services 70,604 70,274 67,627 72,895
-------- -------- -------- --------
Gross profit 51,450 58,085 55,478 58,410
Income before cumulative effect of
a change in accounting principle 10,877 14,894 8,188 15,771
Net income $ 90,877 $ 14,894 $ 8,188 $ 15,771
======== ======== ======== ========
1992
Net sales and service revenues $122,002 $245,845 $116,648 $133,512
Cost of sales and services 67,165 191,290 61,076 80,990
-------- -------- -------- --------
Gross profit 54,837 54,555 55,572 52,522
Net income $ 11,849 $ 11,487 $ 14,997 $ 10,049
======== ======== ======== ========
1991
Net sales and service revenues $121,550 $114,498 $122,124 $125,244
Cost of sales and services 66,877 61,716 65,338 75,817
-------- -------- -------- --------
Gross profit 54,673 52,782 56,786 49,427
Net income $ 14,599 $ 9,390 $ 15,226 $ 5,809
======== ======== ======== ========
</TABLE>
In the first quarter of 1993, the Company recorded an $80,000 credit to earnings
to reflect the adoption of SFAS 109. In the third quarter, the Company recorded
a $7,300 charge to earnings to reflect the effect of the statutory tax rate
increase on deferred taxes. See Note 9.
In the second quarter of 1992, included in net sales and service revenues and
cost of sales and services is $124,886 related to sale-leaseback transactions.
See Note 6.
In the fourth quarter of 1991, the Company recorded a $4,238 charge for the
writedown of the carrying value of box cars leased to an affiliated entity.
The substantial decrease in the fourth quarter of 1992 and 1991 earnings was
primarily attributed
to the Company's inability to benefit from certain foreign tax credits.
Net sales and service revenues in 1991 and 1992 have been restated above to
reflect the reclassification of certain lease revenues to conform with the 1993
presentation.
-35-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. Supplementary Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
1993 1992 1991
------- -------- --------
<S> <C> <C> <C>
Cash paid during the year for:
Interest (net of amount capitalized) $94,470 $107,342 $113,898
Income taxes 21,212 23,984 18,718
</TABLE>
Unrealized foreign currency translation gains and losses, which are non-cash
items, are excluded from the decrease in advance to parent.
20. Industry Segment Information
The Company's industry and geographic data are found under the "Segment Data"
caption of Item 1 of this Form 10-K. The aforementioned data are an integral
part of the Notes to Consolidated Financial Statements.
21. Subsequent Events
On January 13, 1994, the Company purchased certain assets, located in Sheldon,
Texas, that were used in the repair of railcars, assets that were in the past
used to manufacture railcars and other assets used in the manufacture of heads
for metal containers.
On March 2, 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. The certificates bear interest
at a rate of 6.6% per annum. Maturities of this obligation are as follows:
$6,666 in 1995, $6,666 in 1996, $6,666 in 1997, $6,666 in 1998, $6,666 in 1999
and $66,670 thereafter.
-36-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
First Elected
Name Age Positions or Offices to Position
- --------------------- --- --------------------------------------- -------------
<S> <C> <C> <C>
Sidney H. Bonser 69 Director 1969
Senior Vice President 1972
Kenneth P. Fischl 44 Manager - Tank Car Marketing
and Administration 1979
Vice President Fleet Management 1981
Vice President 1992
Executive Vice President and
General Manager Tank Car Division 1992
President Tank Car Division 1993
Stephen G. Dinsmore 63 Group Controller 1976
Senior Vice President Tank Car Division 1976
Vice President 1982
Robert C. Gluth 69 Director 1981
Executive Vice President 1981
and served as Treasurer between
February, 1986 and January, 1987
and since October, 1989
Jay A. Pritzker 71 Director 1981
Chairman of the Board 1981
Robert A. Pritzker 67 Director 1981
President 1981
Robert W. Webb 54 General Counsel 1986
Secretary 1986
</TABLE>
-37-
<PAGE>
Sidney H. Bonser
Mr. Bonser is also Executive Vice President of each of The Marmon Corporation
("TMC"), MIC and The Marmon Group, Inc. ("Marmon"). TMC, MIC and Marmon are
affiliates of the Company.
Kenneth P. Fischl
Mr. Fischl was appointed President of the Tank Car Division in February, 1993.
He was appointed a Vice President of the Company and Executive Vice President
and General Manager of the Tank Car Division in July, 1992. He joined the
Company in 1977 as a Market Analyst. Mr. Fischl was promoted to Manager - Tank
Car Marketing and Administration in 1979 and became Vice President of Fleet
Management in 1981. He held this position until assuming his current
responsibilities.
Stephen G. Dinsmore
Mr. Dinsmore was elected a Vice President of the Company in January, 1982. He
joined the Tank Car Division in 1961 as an Internal Auditor and became an Audit
Supervisor in 1964. He became Assistant Controller in 1966, Vice President-
Controller in 1970 and Senior Vice President of the division in February, 1976.
Robert C. Gluth
Mr. Gluth is Executive Vice President and a Director of MIC, Vice President,
Treasurer and a Director of Holdings, Executive Vice President and Director of
TMC, and Executive Vice President and a Director of Marmon. Mr. Gluth is also
Treasurer of each of TMC, MIC and Marmon.
Jay A. Pritzker
Mr. Jay A. Pritzker is Chairman of the Board of each of MIC, Holdings, TMC and
Marmon. Mr. Pritzker is also a partner in the law firm of Pritzker & Pritzker,
and Chairman of the Board of Hyatt Corporation.
Robert A. Pritzker
Mr. Robert A. Pritzker is President and a Director of each of MIC, Holdings, TMC
and Marmon. Mr. Pritzker is also a director of Hyatt Corporation.
Robert W. Webb
Mr. Webb is Secretary and a Vice President of each of MIC, Holdings, TMC and
Marmon.
Messrs. Jay A. Pritzker and Robert A. Pritzker are brothers. There are no other
family relationships among the directors and executive officers of the Company.
Directors and executive officers are elected for a term of one year, or until a
successor is appointed.
-38-
<PAGE>
Other Directorships
Mr. Robert A. Pritzker and Mr. Gluth are Directors of TIE/communications, Inc.
Other than that, none of the members of the Company's Board of Directors are
members of the board of directors of companies with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of that Act or of a company
registered as an investment company under the Investment Company Act of 1940.
ITEM 11. EXECUTIVE COMPENSATION
Sidney H. Bonser, Senior Vice President; Kenneth P. Fischl, Vice President; and
Stephen G. Dinsmore, Vice President, were the only executive officers of the
Company who in the year ended December 31, 1993, received salary and bonus in
excess of $100,000 from the Company and its subsidiaries for services in all
capacities to the Company.
All other officers of the Company received their 1993 compensation from Marmon
and are primarily involved in the management of MIC and Marmon. The Company,
together with the other subsidiaries of MIC, have been required to pay Marmon a
portion of such compensation which is encompassed in the charge for certain
common services provided by Marmon to the Company and such other subsidiaries.
The amount of such charge has been determined pursuant to a formula based upon
the dollar value of revenues, earnings and assets. See Note 17.
Directors of the Company do not receive any compensation in such capacity.
Shown below is the aggregate of all forms of compensation paid by the Company to
Mr. Bonser, Mr. Fischl and Mr. Dinsmore:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
--------------------- All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) *
- ------------------------------------ ------ ---------- --------- ------------------
<S> <C> <C> <C> <C>
Sidney H. Bonser,
Senior Vice President of the 1993 346,900 86,000 27,900
Company 1992 330,500 86,000 27,500
1991 315,000 86,000 27,000
Kenneth P. Fischl,
Vice President of the Company 1993 183,200 37,000 17,800
and President and General 1992 148,100 24,000 14,900
Manager of the Tank Car Division 1991**
Stephen G. Dinsmore,
Vice President of the Company 1993 154,500 26,500 16,200
and Senior Vice President of 1992 148,100 24,500 15,900
the Tank Car Division 1991 141,100 21,000 15,000
</TABLE>
* Represents the aggregate amounts of Company contributions to defined
contribution plans on behalf of each of the named individuals.
** Prior to 1992, Mr. Fischl was not an executive officer of the Company.
-39-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
MIC, a Delaware corporation having its principal executive offices at 225 West
Washington Street, Chicago, Illinois, owns 1,000 shares, or 100% of the
Company's issued and outstanding common stock. MIC is an indirect subsidiary of
Holdings. Substantially all of the stock of Holdings 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
See "Notes to Consolidated Financial Statements," Note 17.
-40-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
----
a) 1. Financial Statements -
Consolidated statement of income for each of the three years
in the period ended December 31, 1993...................... 16
Consolidated balance sheet - December 31, 1993 and 1992.... 17
Consolidated statement of stockholder's equity for each of
the three years in the period ended December 31, 1993...... 18
Consolidated statement of cash flows for each of the three
years in the period ended December 31, 1993................ 19
Notes to consolidated financial statements.................. 20
2. Financial Statement Schedules -
V - Property.............................................. 43
VI - Accumulated Depreciation.............................. 44
3. Index to Exhibits........................................... 45
b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended December 31,
1993.
All other schedules are not submitted because they are not applicable or
because the required information is included in the financial statements
or notes thereto.
-41-
<PAGE>
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:
UNION TANK CAR COMPANY
(Registrant)
By: /s/ R.C. GLUTH
------------------------
R.C. Gluth
Executive Vice President
Dated: March 9, 1994
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 dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Jay A. Pritzker Chairman of the Board March 9, 1994
- ------------------------- and Director
Jay A. Pritzker
/s/ Robert A. Pritzker President and Director March 9, 1994
- ------------------------- (principal executive officer)
Robert A. Pritzker
/s/ R.C. Gluth Executive Vice President March 9, 1994
- ------------------------- and Director and Treasurer
R.C. Gluth (principal financial officer
and principal accounting
officer)
/s/ Sidney H. Bonser Senior Vice President March 9, 1994
- ------------------------- and Director
Sidney H. Bonser
-42-
<PAGE>
Schedule V
UNION TANK CAR COMPANY AND SUBSIDIARIES
PROPERTY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Other Fixed Assets
--------------------------------------------------------------
Railcar Buildings Machinery Total
Lease and and Other Total
Fleet Land Improvements Equipment Fixed Assets Property
----------- ------- ------------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1990 $2,229,919 $4,076 $68,067 $162,444 $234,587 $2,464,506
Additions at cost 206,660 316 3,647 15,634 19,597 226,257
Retirements, sales and translation (32,745) 112 (84) (2,259) (2,231) (34,976)
---------- ------ ------- -------- -------- ----------
Balance December 31, 1991 2,403,834 4,504 71,630 175,819 251,953 2,655,787
Additions at cost 129,847 209 4,793 11,029 16,031 145,878
Retirements, sales and translation (249,842) (261) (3,094) (11,412) (14,767) (264,609)
---------- ------ ------- -------- -------- ----------
Balance December 31, 1992 2,283,839 4,452 73,329 175,436 253,217 2,537,056
Additions at cost 156,962 110 2,444 16,311 18,865 175,827
Retirements, sales and translation (48,070) (76) (1,552) (12,102) (13,730) (61,800)
---------- ------ ------- -------- -------- ----------
Balance December 31, 1993 $2,392,731 $4,486 $74,221 $179,645 $258,352 $2,651,083
========== ====== ======= ======== ======== ==========
</TABLE>
-43-
<PAGE>
Schedule VI
UNION TANK CAR COMPANY AND SUBSIDIARIES
ACCUMULATED DEPRECIATION
(Dollars in Thousands)
<TABLE>
<CAPTION>
Other Fixed Assets
------------------------------------------------------
Railcar Buildings Machinery Total Total
Lease and and Other Accumulated
Fleet Improvements Equipment Fixed Assets Depreciation
--------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1990 $720,679 $30,889 $104,584 $135,473 $ 856,152
Provision 82,708 2,807 11,498 14,305 97,013
Retirements, sales and translation (18,749) (133) (2,123) (2,256) (21,005)
-------- ------- -------- -------- ----------
Balance December 31, 1991 784,638 33,563 113,959 147,522 932,160
Provision 90,732 2,851 11,382 14,233 104,965
Retirements, sales and translation (68,941) (1,559) (8,268) (9,827) (78,768)
-------- ------- -------- -------- ----------
Balance December 31, 1992 806,429 34,855 117,073 151,928 958,357
Provision 84,972 3,006 10,368 13,374 98,346
Retirements, sales and translation (22,513) (889) (11,034) (11,923) (34,436)
-------- ------- -------- -------- ----------
Balance December 31, 1993 $868,888 $36,972 $116,407 $153,379 $1,022,267
======== ======= ======== ======== ==========
</TABLE>
Railcars and fixed assets are depreciated to estimated salvage value over
their estimated useful lives on the straight line method. For railcars, the
salvage value is the estimated scrap value of their steel content. The
estimated useful lives are principally: railcars, 20-30 years; buildings
and improvements 20-30 years; and machinery and equipment, 4-25 years.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
INDEX TO EXHIBITS
ITEM 14 (a)(3)
Exhibit 3 Articles of incorporation and by-laws
3(a) Restated Certificate of Incorporation of the Company, as
filed with the Secretary of State of Delaware on September
2, 1982 (which was filed as Exhibit 3(a) to the Annual
Report on Form 10-K for the fiscal year ended December 31,
1982, and is incorporated herein by reference)
3(b) By-Laws of the Company, as adopted November 25, 1987
(which was filed as Exhibit 3(b) to the Annual Report on
Form 10-K for the fiscal year ended December 31, 1988, and
is incorporated herein by reference)
Exhibit 12 Statements re computation of ratios
The computation of the Ratio of Earnings to Fixed Charges
(summarized in Note 15 to the consolidated financial
statements)............................................... 46
Exhibit 22 Subsidiaries of the registrant.............................. 47
Instruments defining the rights of holders of long-term debt are not being filed
herewith pursuant to the provisions of paragraph 4(iii) of Item 601(b) of
Regulation S-K. The Company agrees to furnish a copy of any such instrument to
the Commission upon request.
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<PAGE>
Exhibit 12
UNION TANK CAR COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
Line ------------------------------------------------
Number 1993 1992 1991 1990 1989
------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income Available for
Fixed Charges:
- --------------------
Income from continuing
operations 1 $ 49,730 $ 48,382 $ 45,024 $ 40,072 $ 62,351
Provision for federal income
taxes and foreign taxes 2 38,332 30,191 34,068 41,833 36,131
Provision for state income
taxes 3 2,420 2,605 2,159 2,788 2,836
Fixed charges (line 8) 4 101,973 106,895 118,352 116,659 101,311
-------- -------- -------- -------- --------
Income available for fixed
charges 5 $192,455 $188,073 $199,603 $201,352 $202,629
======== ======== ======== ======== ========
Fixed Charges:
- --------------
Interest expenses (including
amortization of debt discount)
as shown on the consolidated
statement of income 6 $ 96,584 $105,417 $117,263 $115,584 $100,119
Add interest portion of rent
expense 7 5,389 1,478 1,089 1,075 1,192
-------- -------- -------- -------- --------
Total fixed charges 8 $101,973 $106,895 $118,352 $116,659 $101,311
======== ======== ======== ======== ========
Number of times fixed charges
were earned (line 5/line 8) 1.89 1.76 1.69 1.73 2.00
======== ======== ======== ======== ========
</TABLE>
-46-
<PAGE>
Exhibit 22
UNION TANK CAR COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1993
Jurisdiction Under
Which Organized
------------------
Union Tank Car Company Delaware
Procor Alberta, Inc. Alberta
Railserve, Inc. Canada
Atlas Bolt & Screw Company Delaware
The Marmon Group of Canada, Ltd. Canada
Atlas Bolt & Screw Company of Canada, Inc. Ontario
Procor Limited Canada
Trans Union Crane Rental, Inc. Canada
Procor LPG Storage, Inc. Alberta
Procor Sulphur Services, Inc. Alberta
Robertson Whitehouse, Inc. Ontario
Trans Union Finance (Canada) Limited Ontario
Rail Car Associates Limited Partnership Illinois
Trans Union Fastener Corporation Delaware
Union Tank Car Rail Services Company Delaware
All subsidiaries listed above are wholly-owned subsidiaries (except for Rail Car
Associates Limited Partnership of which the Company is the general partner and
has an 80% ownership interest) and are included in the consolidated financial
statements incorporated herein.
-47-
