<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
[ X ] OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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
---------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 372-9500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------------- -----------------
There is no voting stock held by non-affiliates of the registrant. This report
is being filed by the registrant as a result of undertakings made pursuant to
Section 15(d) of the Securities Exchange Act of 1934 with respect to certain
long-term debt of the registrant.
Included in this filing are 10 pages, sequentially numbered in the bottom center
of each page.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
----
Part I. Financial Information
Item 1.
Condensed consolidated statement of income -
three and nine month periods ended
September 30, 1995 and 1994 3
Condensed consolidated balance sheet -
September 30, 1995 and December 31, 1994 4
Condensed consolidated statement of cash flows -
nine months ended September 30, 1995 and 1994 5
Notes to condensed consolidated financial
statements 6 - 7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 1.
Legal Proceedings 9
Item 6.
Exhibits and Reports on Form 8-K 9
Signatures 10
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Services (leasing and other) $121,754 $109,293 $351,467 $330,755
Net sales 183,429 42,422 287,016 99,734
-------- -------- -------- --------
305,183 151,715 638,483 430,489
Other income 3,636 4,463 13,893 10,941
-------- -------- -------- --------
308,819 156,178 652,376 441,430
Costs and expenses
Cost of services 68,496 58,287 190,640 171,821
Cost of sales 172,981 37,357 262,653 84,466
General and administrative 13,794 13,131 41,900 40,207
Interest 20,216 22,140 61,945 70,007
-------- -------- -------- --------
275,487 130,915 557,138 366,501
-------- -------- -------- --------
Income before income taxes 33,332 25,263 95,238 74,929
Provision for income taxes
Current 12,425 10,603 32,759 20,579
Deferred 1,873 375 5,584 10,927
Deferred investment tax credits (614) (740) (1,934) (2,034)
-------- -------- -------- --------
13,684 10,238 36,409 29,472
-------- -------- -------- --------
Net income $ 19,648 $ 15,025 $ 58,829 $ 45,457
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 34,451 $ 15,303
Accounts receivable 82,619 61,005
Inventories 77,013 64,644
Due from affiliate 13,038 13,191
Prepaid expenses and deferred charges 6,915 7,423
Advances to parent company,
principally at LIBOR plus 1% 202,736 194,729
Railcar lease fleet, net 1,424,803 1,451,999
Fixed assets, net 146,876 130,895
Investment in direct financing lease 38,610 37,213
Other assets 27,714 41,370
---------- ----------
$2,054,775 $2,017,772
========== ==========
LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY
Accounts payable $ 25,433 $ 16,096
Accrued liabilities 154,829 129,059
Borrowed debt 858,538 882,407
---------- ----------
1,038,800 1,027,562
Deferred items
Income taxes 469,422 459,893
Investment tax credits 23,716 25,309
---------- ----------
493,138 485,202
Stockholder's equity
Common stock and additional capital 111,341 111,341
Retained earnings 411,496 393,667
---------- ----------
Total stockholder's equity 522,837 505,008
---------- ----------
$2,054,775 $2,017,772
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 58,829 $ 45,457
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 78,695 77,270
Other non-cash income and expenses (4,841) 934
Changes in assets and liabilities:
Accounts receivable (25,090) (29,317)
Inventories (14,249) (10,125)
Prepaid expenses and deferred charges 414 1,135
Accounts payable and accrued expenses 37,188 13,144
Deferred taxes 3,650 8,893
--------- ---------
Net cash provided by operating activities 134,596 107,391
Cash flows from investing activities:
Construction and purchase of railcars and other fixed assets (155,323) (160,640)
Proceeds from disposals of railcars and other fixed assets 106,572 14,009
(Increase) decrease in advance to parent (14,527) 93,757
Repayments of advance to affiliate 713 1,988
(Increase) decrease in other assets 14,773 1,451
--------- ---------
Net cash used in investing activities (47,792) (49,435)
Cash flows from financing activities:
Proceeds on issuance of long-term debt 26,063 100,000
Principal payments of long-term debt (54,211) (87,780)
Net commercial paper repayments - (52,409)
Cash dividends (41,000) (31,000)
--------- ---------
Net cash used in financing activities (69,148) (71,189)
Effect of exchange rates on cash and cash equivalents 1,492 (432)
--------- ---------
Net increase (decrease) in cash and cash equivalents 19,148 (13,665)
Cash and cash equivalents at beginning of year 15,303 34,013
--------- ---------
Cash and cash equivalents at end of period $ 34,451 $ 20,348
========= =========
Cash paid during the period for:
Interest (net of amount capitalized) $ 52,585 $ 59,726
Income taxes 30,981 22,450
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
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 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
1994 Annual Report on Form 10-K.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
The 1995 interim results presented herein are not necessarily indicative of
the results of operations for the full year 1995.
3. As more fully described in the Company's 1994 Annual Report on Form 10-K,
under an arrangement with Marmon Industrial, the Company is included in the
consolidated federal income tax return of Marmon Holdings. As a member of a
consolidated federal income tax group, the Company is contingently liable
for the federal income taxes of the other members of the group.
4. The Company and its subsidiaries have been named as defendants in a number
of lawsuits, and certain claims are pending. The Company has accrued what it
reasonably expects to pay in resolution of these matters and, in the opinion
of management, their ultimate resolution will not have a material effect on
the Company's consolidated financial position or results of operations.
5. Foreign currency translation adjustments and transaction gains and losses
are assumed by the Company's parent. For the nine months ended September 30,
1995 and 1994, Marmon Industrial absorbed a gain of $1,690 and loss of $235,
respectively.
6. The Company's Canadian subsidiaries enter into foreign currency forward
contracts to hedge against U.S. dollar exposures. Foreign currency forward
contracts, all with initial maturities of less than one year, amounted to
$6,230 at September 30, 1995, and $12,572 at December 31, 1994.
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<PAGE>
7. Summarized Financial Information of Procor Limited
Summarized consolidated financial information for the Company's wholly-owned
subsidiary, Procor Limited, is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Balance Sheet:
Railcar lease fleet, net $237,464 $236,565
All other assets 185,751 153,055
Borrowed debt 156,230 146,180
All other liabilities 167,055 158,760
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
1995 1994 1995 1994
------- ------- -------- --------
<S> <C> <C> <C> <C>
Statement of Income:
Services and net sales $33,923 $29,984 $ 95,494 $ 82,674
Gross profit 11,905 10,894 31,749 28,555
Net income 4,445 3,144 11,142 8,183
</TABLE>
8. On September 20, 1995, the Company entered into a sale-leaseback transaction
with a trust for the benefit of an institutional investor pursuant to which
it sold and leased back an aggregate of 1,623 railcars, including 1,263 tank
cars. The Company recognized sales revenue of $100,822. In connection with
the sale-leaseback transaction, the Company expects to sell and leaseback an
additional 434 railcars, including 329 tank cars, and record additional
revenues of $29,695 in December, 1995. The Company has an option to purchase
all or a portion of the railcars subject to the lease at a fixed purchase
price on January 2, 2006. The lease expires on January 2, 2012.
9. On September 20, 1995, the Company issued $26,063 in long-term equipment
trust certificates and expects to issue an additional $4,173 of long-term
equipment trust certificates in December, 1995, to finance additions to its
railcar fleet. The certificates bear interest at a rate of 6.76% per annum.
Interest is due semi-annually through January, 2006, commencing in January,
1996. Principal will be due January, 2006.
10. On October 2, 1995, the Company repaid, by early redemption, $41,288
principal amount of 13.0% interest rate equipment obligations which were
originally due semi-annually through May, 2000.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
3rd Quarter 1995 versus 1994
- ----------------------------
Service revenues increased $12.5 million primarily due to the effect of cars
added to the railcar lease fleet. Gross margin percentages decreased slightly
from the comparable period in 1994.
Sales revenues included $100.8 million from a sale-leaseback transaction.
Excluding the sale lease-back, net sales revenues increased $40.2 million
primarily due to increased railcar sales of $23.7 million and increased sulphur
operations revenues of $14.7 million. Most of the sulphur operations revenue
increase was attributable to the acquisition in July, 1995, of the operations of
a Canadian full service sulphur marketing company.
Nine Months 1995 versus 1994
- ----------------------------
Service revenues increased $20.7 million primarily due to the effect of cars
added to the railcar lease fleet. Gross margin percentages decreased slightly
from the comparable period in 1994.
Sales revenues increased primarily due to increased railcar sales of $62.0
million (excluding the September, 1995 sale-leaseback), increased sulphur
operations revenues of $18.4 million and increased fastener sales of $4.2
million.
Interest expense declined due to reduced debt outstanding.
Financial Condition
- -------------------
1995 versus 1994
- ----------------
Operating activities provided $134.6 million of cash. These funds, along with
proceeds from the sale-leaseback transaction and the issuance of long-term debt,
were used to provide financing for railcar additions, service long-term debt
obligations and pay dividends to the Company's stockholder.
Management expects future cash to be provided from operating activities, long-
term railcar financings and repayment of amounts previously advanced to the
Company's parent will be adequate to provide for the continued expansion of the
Company's business and enable it to meet its debt service obligations.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to "Business - Environmental Matters" in the
Company's Annual Report on Form 10-K for the year ended December 31,
1994, for a description of certain environmental matters.
In connection with the alleged violations of the Clean Water Act at the
Company's East Chicago, Indiana facility, the Company is engaged in
discussions with the U.S. Department of Justice with respect to a
possible settlement of this matter.
Item 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the quarter ended September 30,
1995.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION TANK CAR COMPANY
REGISTRANT
Dated: November 3, 1995 /s/ R.C. Gluth
-----------------------------------------
R.C. Gluth
Executive Vice President and Director
(principal financial officer and
principal accounting officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the September 30, 1995 condensed consolidated balance sheet, condensed
consolidated statement of income for the nine months ended September 30, 1995,
and the notes thereto, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 34,451
<SECURITIES> 0
<RECEIVABLES> 87,820
<ALLOWANCES> 5,201
<INVENTORY> 77,013
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,729,798
<DEPRECIATION> 1,158,119
<TOTAL-ASSETS> 2,054,775
<CURRENT-LIABILITIES> 0
<BONDS> 858,538
<COMMON> 106,689
0
0
<OTHER-SE> 416,148
<TOTAL-LIABILITY-AND-EQUITY> 2,054,775
<SALES> 287,016<F4>
<TOTAL-REVENUES> 652,376<F2>
<CGS> 262,653
<TOTAL-COSTS> 453,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 799
<INTEREST-EXPENSE> 61,945
<INCOME-PRETAX> 95,238
<INCOME-TAX> 36,409
<INCOME-CONTINUING> 58,829
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,829
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0
<FN>
<F1> The Company issues financial statements utilizing a non-classified balance
sheet.
<F2> The Company's revenues are derived primarily from railcar leasing.
<F3> The Company is a wholly-owned subsidiary.
<F4> Includes $100,822 related to a sale-leaseback transaction.
</FN>
</TABLE>
