<PAGE>
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 June 30, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 2-26520
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UNION TANK CAR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-3104688
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
225 West Washington Street, Chicago, Illinois 60606
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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
---------------- ----------------
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
----
Part I. Financial Information
<S> <C>
Item 1.
Condensed consolidated statement of income -
three and six month periods ended
June 30, 1994 and 1993 3
Condensed consolidated balance sheet -
June 30, 1994 and December 31, 1993 4
Condensed consolidated statement of cash flows -
six months ended June 30, 1994 and 1993 5
Notes to condensed consolidated financial
statements 6 - 7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 1.
Legal Proceedings 9
Item 6.
Exhibits and Reports on Form 8-K 9
Signatures 10
</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 Six Months Ended
June 30, June 30,
-------------------- ---------------------
1994 1993 1994 1993
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Revenues
Services (leasing and other) $111,597 $111,654 $221,462 $215,505
Net sales 33,170 16,705 57,312 34,908
-------- -------- -------- --------
144,767 128,359 278,774 250,413
Other income 3,724 4,540 6,978 9,031
-------- -------- -------- --------
148,491 132,899 285,752 259,444
-------- -------- -------- --------
Costs and expenses
Cost of services 56,726 57,181 114,034 111,787
Cost of sales 27,862 13,093 47,109 29,091
General and administrative 13,672 13,702 27,076 27,225
Interest 23,886 23,960 47,867 48,223
-------- -------- -------- --------
122,146 107,936 236,086 216,326
-------- -------- -------- --------
Income before income taxes
and cumulative effect of a
change in accounting principle 26,345 24,963 49,666 43,118
-------- -------- -------- --------
Provision for income taxes
Current 5,410 6,181 9,976 9,920
Deferred 5,578 4,583 10,552 8,765
Deferred investment tax credits (643) (695) (1,294) (1,338)
-------- -------- -------- --------
10,345 10,069 19,234 17,347
-------- -------- -------- --------
Income before cumulative effect of
a change in accounting principle 16,000 14,894 30,432 25,771
Cumulative effect of a change in
accounting principle related to
accounting for income taxes - - - 80,000
-------- -------- -------- --------
Net income $ 16,000 $ 14,894 $ 30,432 $105,771
======== ======== ======== ========
</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>
June 30, December 31,
1994 1993
---------- ------------
<S> <C> <C>
Cash and cash equivalents $ 26,831 $ 34,013
Accounts receivable 68,556 61,501
Inventories 65,363 50,424
Due from affiliate 1,988 2,076
Prepaid expenses and deferred charges 9,705 8,041
Advances to parent company,
principally at LIBOR plus 1% 167,472 202,255
Railcar lease fleet, net 1,537,780 1,523,843
Fixed assets, net 124,218 104,973
Investment in direct financing lease 37,893 39,736
Other assets 26,808 28,005
---------- ----------
$2,066,614 $2,054,867
========== ==========
LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY
Accounts payable $ 14,147 $ 16,404
Accrued liabilities 122,845 121,400
Borrowed debt 949,716 951,031
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1,086,708 1,088,835
Deferred items
Income taxes 457,932 451,812
Investment tax credits 26,912 28,590
---------- ----------
484,844 480,402
Stockholder's equity
Common stock and additional capital 111,341 111,341
Retained earnings 383,721 374,289
---------- ----------
Total stockholder's equity 495,062 485,630
---------- ----------
$2,066,614 $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>
Six Months Ended June 30,
---------------------------
1994 1993
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 30,432 $105,771
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 51,199 50,265
Cumulative effect of a change in accounting principle - (80,000)
Other non-cash income and expenses 110 (669)
Changes in assets and liabilities
Accounts receivable (10,442) (8,869)
Inventories (15,496) (3,460)
Prepaid expenses and deferred charges (1,682) (1,595)
Accounts payable and accrued expenses (488) 3,282
Deferred taxes 9,258 7,427
Other - 71
--------- --------
Net cash provided by operating activities 62,891 72,223
--------- --------
Cash flows from investing activities:
Proceeds from disposals of railcars and other fixed assets 12,590 4,397
Decrease in advance to parent 43,628 3,255
Increase in other assets and investments - (341)
Construction and purchase of rail cars and other fixed assets (108,456) (70,954)
Advance to affiliate - (6,825)
Collection of demand note and long-term receivables 1,267 294
--------- --------
Net cash used in investing activities (50,971) (70,174)
--------- --------
Cash flows from financing activities:
Net commercial paper (repayments) borrowings (52,409) 13,966
Proceeds on issuance of long-term debt 100,000 100,000
Principal payments of long-term debt (44,310) (36,593)
Repayment of advance from affiliate - (17,708)
Cash dividends (21,000) (74,000)
--------- --------
Net cash used in financing activities (17,719) (14,335)
--------- --------
Effect of exchange rates on cash and cash equivalents (1,383) (140)
--------- --------
Net decrease in cash (7,182) (12,426)
Cash and cash equivalents at beginning of year 34,013 18,682
--------- --------
Cash and cash equivalents at end of period $ 26,831 $ 6,256
========= ========
Cash paid during the period for:
Interest (net of amount capitalized) $ 46,093 $ 45,490
Income taxes 13,003 11,594
</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 six months ended June 30, 1994
and 1993, Marmon Industrial absorbed losses of $176 and $59, respectively.
6. During the second quarter of 1994, the Company repaid all outstanding
commercial paper (through reductions in advances to parent) and suspended
its commercial paper program effective May 23, 1994. On May 26, 1994, the
Company terminated the revolving credit agreement which had served as a
liquidity back-up to the commercial paper program.
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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>
June 30, December 31,
1994 1993
-------- ------------
Balance Sheet:
<S> <C> <C>
Railcar lease fleet, net $245,688 $257,333
All other assets 139,704 145,022
Borrowed debt 151,602 160,736
All other liabilities 153,732 163,222
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ---------------------
1994 1993 1994 1993
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Statement of Income:
Services and net sales $27,297 $31,133 $52,690 $60,065
Gross profit 10,125 10,088 17,661 18,713
Net income 3,310 2,877 5,039 4,550
</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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- - ---------------------
2nd Quarter 1994 versus 1993
- - ----------------------------
Service revenues remained relatively unchanged from the comparable period in
1993 primarily due to the effect of cars added to the railcar lease fleet offset
by lower revenues from sulphur service operations. Gross margin percentages
remained relatively unchanged from the comparable period in 1993.
Sales revenues increased $16.5 million primarily due to manufactured head sales
of $2.9 million and increased railcar sales of $13.9 million.
Six Months 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 sales partially
offset by lower revenues from sulphur service operations. Gross margin
percentages remained relatively unchanged from the comparable period in 1993.
Sales revenues increased $22.4 million primarily due to manufactured head sales
of $5.6 million and increased railcar sales of $16.3 million.
Other income decreased $2.1 million due to reduced interest income resulting
from lower average outstanding balances on advances to the Company's parent.
Financial Condition
- - -------------------
1994 versus 1993
- - ----------------
Operating activities provided $62.9 million of cash. These funds, along with
the issuance of long-term debt, were used to provide financing for railcar
additions, repay commercial paper obligations, service long-term debt
obligations and pay dividends to the Company's stockholder.
In March, 1994, the Company issued $100.0 million in long-term equipment trust
certificates with an annual interest rate of 6.6% to finance additions to its
railcar fleet.
Management expects future cash 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 and to
"Item 1. Legal Proceedings" in the Company's Quarterly Report on Form 10-
Q for the quarterly period ended March 31, 1994 for a description of
certain environmental matters.
In connection with the Pennsylvania Department of Environmental Resources
("DER") request that the Company cooperate in a site assessment of the
areas of potential environmental contamination at the Company's Altoona,
Pennsylvania facility, the Company has submitted a site assessment plan
to the Pennsylvania DER which has been accepted by the agency, and the
Company is proceeding to implement this plan.
In connection with the alleged violations of the Clean Water Act and the
terms of the three industrial wastewater discharge permits held by the
Company at its East Chicago, Indiana facility, the U.S. Department of
Justice ("DOJ") has notified the Company that it intends to file a
federal civil action against the Company under the Clean Water Act, but
has offered the Company an opportunity to settle this matter before
litigation is commenced. The Company is engaged in settlement
negotiations with the DOJ.
With respect to the sites at which the Company has been designated as a
Potentially Responsible Party by the U.S. Environmental Protection
Agency, management of the Company continues to believe that future costs
related to these sites will not be material to the Company, either
individually or in the aggregate.
Item 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the six months ended June 30, 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: August 2, 1994 /s/ R.C. Gluth
-----------------------------------------
R.C. Gluth
Executive Vice President and Director
(principal financial officer and
principal accounting officer)
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