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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 2-26520
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UNION TANK CAR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-3104688
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
225 West Washington Street, Chicago, Illinois 60606
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(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 372-9500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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There is no voting stock held by non-affiliates of the registrant. This report
is being filed by the registrant as a result of undertakings made pursuant to
Section 15(d) of the Securities Exchange Act of 1934 with respect to certain
long-term debt of the registrant.
Included in this filing are 10 pages, sequentially numbered in the bottom center
of each page.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. Financial Information
Item 1.
Condensed consolidated statement of income -
three months ended March 31, 1994 and 1993 3
Condensed consolidated balance sheet -
March 31, 1994 and December 31, 1993 4
Condensed consolidated statement of cash flows -
three months ended March 31, 1994 and 1993 5
Notes to condensed consolidated financial
statements 6 - 7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 8
Part II. Other Information
Item 1.
Legal Proceedings 9
Item 6.
Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1994 1993
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<S> <C> <C>
Revenues
Services (leasing and other) $109,865 $103,851
Net sales 24,142 18,203
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134,007 122,054
Other income 3,254 4,491
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137,261 126,545
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Costs and expenses
Cost of services 57,308 54,606
Cost of sales 19,247 15,998
General and administrative 13,404 13,523
Interest 23,981 24,263
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113,940 108,390
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Income before income taxes and cumulative effect
of a change in accounting principle 23,321 18,155
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Provision for income taxes
Current 4,566 3,739
Deferred 4,974 4,182
Deferred investment tax credits (651) (643)
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8,889 7,278
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Income before cumulative effect of a change in
accounting principle 14,432 10,877
Cumulative effect of a change in accounting principle
related to accounting for income taxes - 80,000
-------- --------
Net income $ 14,432 $ 90,877
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
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<S> <C> <C>
Cash and cash equivalents $ 40,677 $ 34,013
Accounts receivable 62,179 61,501
Inventories 59,816 50,424
Due from affiliate 1,992 2,076
Prepaid expenses and deferred charges 9,019 8,041
Advances to parent company,
principally at LIBOR plus 1% 267,115 202,255
Railcar lease fleet, net 1,522,284 1,523,843
Fixed assets, net 124,619 104,973
Investment in direct financing lease 37,972 39,736
Other assets 26,816 28,005
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$2,152,489 $2,054,867
========== ==========
LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY
Accounts payable $ 13,983 $ 16,404
Accrued liabilities 129,192 121,400
Borrowed debt 1,039,405 951,031
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1,182,580 1,088,835
Deferred items
Income taxes 452,292 451,812
Investment tax credits 27,555 28,590
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479,847 480,402
Stockholder's equity
Common stock and additional capital 111,341 111,341
Retained earnings 378,721 374,289
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Total stockholder's equity 490,062 485,630
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$2,152,489 $2,054,867
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1994 1993
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,432 $ 90,877
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 25,635 25,482
Cumulative effect of a change in accounting principle - (80,000)
Other non-cash income and expenses (251) 38
Changes in assets and liabilities
Accounts receivable (2,255) (16,831)
Inventories (9,620) 8
Prepaid expenses and deferred charges (984) (482)
Accounts payable and accrued expenses 5,471 13,248
Deferred taxes 4,323 3,539
Other - 57
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Net cash provided by operating activities 36,751 35,936
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Cash flows from investing activities:
Proceeds from disposals of railcars and other fixed assets 5,201 2,311
(Increase) decrease in advance to parent (56,184) 44,882
Construction and purchase of railcars and other fixed assets (61,956) (34,675)
Collection of demand note and long-term receivables 1,265 294
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Net cash (used in) provided by investing activities (111,674) 12,812
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Cash flows from financing activities:
Net commercial paper borrowings 1,448 13,945
Proceeds on issuance of long-term debt 100,000 -
Principal payments of long-term debt (8,478) (9,825)
Repayment of advance from affiliate - (4,516)
Cash dividends (10,000) (63,000)
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Net cash provided by (used in) financing activities 82,970 (63,396)
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Effect of exchange rates on cash (1,383) 182
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Net increase (decrease) in cash 6,664 (14,466)
Cash and cash equivalents at beginning of year 34,013 18,682
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Cash and cash equivalents at end of period $ 40,677 $ 4,216
========= ========
Cash paid during the period for:
Interest (net of amount capitalized) $ 11,802 $ 13,645
Income taxes 7,122 6,012
</TABLE>
See notes to condensed consolidated financial statements.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
1. Union Tank Car Company (the Company) is a wholly-owned subsidiary of Marmon
Industrial Corporation (Marmon Industrial). Marmon Industrial is a wholly-
owned indirect subsidiary of Marmon Holdings, Inc. (Marmon Holdings),
substantially all of the stock of which is owned, directly or indirectly, by
trusts for the benefit of certain members of the Pritzker family. As used
herein, "Pritzker family" refers to the lineal descendants of Nicholas J.
Pritzker, deceased.
2. The accompanying unaudited condensed consolidated financial statements
include all adjustments, consisting of normal recurring accruals, which the
Company considers necessary for a fair presentation. These interim
financial statements do not include all disclosures normally provided in
annual financial statements. Accordingly, they should be read in
conjunction with the consolidated financial statements and notes thereto in
the Company's 1993 Annual Report on Form 10-K.
The foregoing 1994 interim results are not necessarily indicative of the
results of operations for the full year 1994.
3. As more fully described in the Company's 1993 Annual Report on Form 10-K,
under an arrangement with Marmon Industrial, the Company is included in the
consolidated federal income tax return of Marmon Holdings. As a member of
a consolidated federal income tax group, the Company is contingently liable
for the federal income taxes of the other members of the group.
4. The Company and its subsidiaries have been named as defendants in a number
of lawsuits, and certain claims are pending. The Company has accrued what
it reasonably expects to pay in resolution of these matters and, in the
opinion of management, their ultimate resolution will not have a material
effect on the Company's consolidated financial position or results of
operations.
5. Foreign currency translation adjustments and transaction gains and losses
are assumed by the Company's parent. For the three months ended March 31,
1994 and 1993, Marmon Industrial absorbed a loss of $74 and a gain of $25,
respectively.
6. At March 31, 1994 the Company had outstanding $54,000 face value of
commercial paper with a discount of $143 and an average effective interest
yield of 3.77%. Commercial paper maturities range from one to three months
from the date of issuance. The commercial paper is included in borrowed
debt. During the second quarter of 1994 the Company will repay all
outstanding commercial paper (through reductions in advances to parent) and
will suspend its commercial paper program effective May 23, 1994. On May
26, 1994, the Company will terminate the revolving credit agreement which
has served as a liquidity back-up to the commercial paper program.
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7. Summarized Financial Information of Procor Limited
Summarized consolidated financial information for the Company's wholly-owned
subsidiary, Procor Limited, is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
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<S> <C> <C>
Balance Sheet:
Railcar lease fleet, net $244,377 $257,333
All other assets 142,448 145,022
Borrowed debt 155,603 160,736
All other liabilities 154,455 163,222
Three Months Ended
March 31,
----------------------
1994 1993
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Statement of Income:
Services and net sales $ 25,393 $ 28,932
Gross profit 7,536 8,625
Net income 1,729 1,673
</TABLE>
8. In March, 1994, the Company issued $100,000 in long-term equipment trust
certificates to finance additions to its railcar fleet. Principal will be
due annually through 2009, beginning February, 1995. Interest will be due
semi-annually through 2009, beginning August, 1994. The certificates bear
interest at a rate of 6.6% per annum. Maturities of this debt obligation
are as follows: $6,666 in each of the years 1995 through 1999 and $66,670
thereafter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- - ---------------------
1st Quarter 1994 versus 1993
- - ----------------------------
Service revenues increased $6.0 million primarily due to the effect of cars
added to the railcar lease fleet and increased repair and lining revenues.
Gross margin percentages remained relatively unchanged from the comparable
period in 1993.
In January, 1994, the Company purchased certain assets used in the manufacture
of heads for metal containers. Sales revenues increased primarily due to
manufactured head sales of $2.7 million as well as increased hopper car sales of
$2.9 million.
Other income decreased primarily due to reduced interest income resulting from
lower average outstanding balances on advances to the Company's parent.
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Financial Condition
- - -------------------
1994 versus 1993
- - ----------------
Operating activities provided $36.8 million of cash. These funds, along with
the issuance of long-term debt net of amounts advanced to parent, were used to
provide financing for railcar additions, service long-term debt obligations and
pay a dividend to the Company's stockholder.
In March, 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%.
Management expects future cash from operating activities 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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to "Business - Environmental Matters" in the
Company's Annual Report on Form 10-K for the year ended December 31,
1993 for a description of certain environmental matters.
With respect to the administrative order issued by the U.S.
Environmental Protection Agency in August, 1992, alleging violations of
the Clean Water Act and the terms of three industrial wastewater
discharge permits held by the Company at its East Chicago, Indiana
facility, the Company has complied with the terms of the new
administrative order and the new administrative order has terminated.
Item 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the three months ended March 31,
1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION TANK CAR COMPANY
REGISTRANT
Dated: May 4, 1994 /s/ R.C. Gluth
--------------------------------------
R.C. Gluth
Executive Vice President and Director
(principal financial officer and
principal accounting officer)
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