<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, 1996
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 1-5666
-----------------------------
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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<PAGE>
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, 1996 and 1995 3
Condensed consolidated balance sheet -
September 30, 1996 and December 31, 1995 4
Condensed consolidated statement of cash flows -
nine months ended September 30, 1996 and 1995 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,
-------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Revenues
Services (leasing and other) $131,382 $121,754 $392,397 $351,467
Net sales 41,846 82,607 101,922 186,194
-------- -------- -------- --------
173,228 204,361 494,319 537,661
Other income 5,931 3,636 25,030 13,893
-------- -------- -------- --------
179,159 207,997 519,349 551,554
Costs and expenses
Cost of services 72,799 68,496 218,622 190,640
Cost of sales 34,764 72,159 81,573 161,831
General and administrative 13,775 13,794 40,591 41,900
Interest 17,911 20,216 54,589 61,945
-------- -------- -------- --------
139,249 174,665 395,375 456,316
-------- -------- -------- --------
Income before income taxes 39,910 33,332 123,974 95,238
Provision for income taxes
Current 14,612 12,425 40,170 32,759
Deferred income taxes
and investment tax credits 755 1,259 7,077 3,650
-------- -------- -------- --------
15,367 13,684 47,247 36,409
-------- -------- -------- --------
Net income $ 24,543 $ 19,648 $ 76,727 $ 58,829
======== ======== ======== ========
</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,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 58,200 $ 28,781
Accounts receivable 77,672 71,065
Inventories 69,931 68,477
Due from affiliate - 12,828
Prepaid expenses and deferred charges 9,778 6,479
Advances to parent company,
principally at LIBOR plus 1% 136,463 171,161
Railcar lease fleet, net 1,438,162 1,430,196
Fixed assets, net 146,758 148,985
Investment in aircraft direct financing lease 37,651 37,898
Other assets 24,785 27,476
---------- ----------
$1,999,400 $2,003,346
========== ==========
</TABLE>
LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Accounts payable $ 19,433 $ 31,795
Accrued liabilities 172,297 148,388
Borrowed debt 755,220 801,585
---------- ----------
946,950 981,768
Deferred income taxes
and investment tax credits 498,250 491,105
Stockholder's equity
Common stock and additional capital 111,341 111,341
Retained earnings 442,859 419,132
---------- ----------
Total stockholder's equity 554,200 530,473
---------- ----------
$1,999,400 $2,003,346
========== ==========
</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,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 76,727 $ 58,829
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 80,190 78,695
Gain on disposition of railcars and other fixed assets (13,363) (1,892)
Other non-cash income and expenses 816 1,148
Changes in assets and liabilities:
Accounts receivable (7,490) (25,090)
Inventories (1,962) (14,249)
Prepaid expenses and deferred charges (3,299) 414
Accounts payable and accrued expenses 7,578 33,091
Deferred taxes 7,077 3,650
--------- ---------
Net cash provided by operating activities 146,274 134,596
Cash flows from investing activities:
Construction and purchase of railcars and other fixed assets (232,376) (155,323)
Decrease (increase) in advance to parent 34,439 (14,527)
Proceeds from disposals of railcars and other fixed assets 22,011 5,750
Repayments from affiliate 12,828 713
Decrease in other assets 3,308 14,773
--------- ---------
Net cash used in investing activities (159,790) (148,614)
Cash flows from financing activities:
Proceeds from sale-leaseback transactions 142,382 100,822
Proceeds from issuance of borrowed debt 14,231 26,063
Principal payments of borrowed debt (60,716) (54,211)
Cash dividends (53,000) (41,000)
--------- ---------
Net cash provided by financing activities 42,897 31,674
Effect of exchange rates on cash and cash equivalents 38 1,492
--------- ---------
Net increase in cash and cash equivalents 29,419 19,148
Cash and cash equivalents at beginning of year 28,781 15,303
--------- ---------
Cash and cash equivalents at end of period $ 58,200 $ 34,451
========= =========
Cash paid during the period for:
Interest (net of amount capitalized) $ 47,650 $ 52,385
Income taxes 39,000 30,981
</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
1995 Annual Report on Form 10-K/A.
The 1996 interim results presented herein are not necessarily indicative of
the results of operations for the full year 1996.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
3. As more fully described in the Company's 1995 Annual Report on Form 10-K/A,
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,
1996 and 1995, Marmon Industrial absorbed a loss of $56 and a gain of
$1,690, 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
$7,853 at September 30, 1996, and $5,400 at December 31, 1995.
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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,
1996 1995
------------- ------------
<S> <C> <C>
Balance Sheet:
Railcar lease fleet, net $219,136 $229,132
All other assets 181,399 177,505
Borrowed debt 139,149 150,665
All other liabilities 150,298 158,356
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
------- ------ ------ -------
<C> <C> <C> <C>
Statement of Income:
Services and net sales $28,844 $33,923 $95,421 $95,494
Gross profit 9,633 11,905 30,579 31,749
Net income 4,949 4,445 13,292 11,142
</TABLE>
8. In May and June 1996, 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 $142,382 in railcars. The Company
has an option to purchase all or a portion of the railcars at a fixed
purchase price on (i) July 2, 2006, (ii) July 2, 2012 (the base term lease
expiration date) and (iii) July 2, 2018.
9. In May and June 1996, the Company issued $14,231 in long-term equipment
trust certificates to finance additions to its railcar fleet. The
certificates bear interest at a rate of 7.21% per annum. Interest is due
semi-annually through July 2, 2006, commencing in January, 1997. Principal
will be due July 2, 2006.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
3rd Quarter 1996 versus 1995
- ----------------------------
Service revenues increased $9.6 million. More than half of the increase resulted
from expansion of the Company's sulphur service processing operations with the
remaining increase primarily due to the effect of railcars added to the lease
fleet.
Sales revenues decreased $40.8 million primarily because of a shift in
proportion of new car deliveries from sale to lease.
Other income increased $2.3 million primarily due to the receipt of certain fees
in connection with the termination of an agreement pursuant to which a
subsidiary of the company was to acquire Hawker Siddeley Canada Inc.
Nine Months 1996 versus 1995
- ----------------------------
Service revenues increased $40.9 million. More than half of the increase
resulted from increased sulphur service processing operations with the remaining
increase primarily due to the effect of railcars added to the lease fleet. Gross
margin percentages decreased from the comparable period in 1995 primarily due to
the increase in railcar rental expenses from sale-leaseback transactions, which
was offset by decreased interest expense.
Sales revenues decreased $84.3 million primarily because of a shift in
proportion of new car deliveries from sale to lease.
Other income increased $11.1 million primarily due to a gain on the sale of a
storage facility used in the Company's liquefied petroleum gas storage
operations and the receipt of certain fees in connection with an agreement
pursuant to which a subsidiary of the company was to acquire Hawker Siddeley
Canada Inc.
Interest expense decreased $7.4 million primarily due to lower average balances
of debt outstanding and a lower average interest rate on debt outstanding.
Financial Condition
- -------------------
1996 versus 1995
- ----------------
Operating activities provided $146.3 million of cash. These funds, along with
the proceeds from the sale-leaseback transaction, the issuance of borrowed debt
and the collection of funds advanced to parent were used to provide financing
for railcar additions, service borrowed 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 collection of funds previously advanced to parent
will be adequate to provide for the continued expansion of the Company's
business and enable it to meet its debt service obligations.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to "Business - Environmental Matters" in the
Company's Annual Report on Form 10-K/A for the year ended December 31,
1995 for a description of certain environmental matters.
With respect to the administrative complaint filed in June, 1993, by
the U.S. Environmental Protection Agency alleging the Company violated
Section 313 of the Emergency Planning and Community Right-to-Know Act
of 1986, the matter has been settled by the Company's agreement to pay
a civil penalty of $106 and to complete a supplemental environmental
project relating to the continued implementation of a low VOC water-
based coating.
Reference is made to the "Subsequent Event" reported at Note 21 to the
Company's Consolidated Financial Statements included in the Company's
Annual Report on Form 10-K/A for the year ended December 31, 1995, and
to "Item 1. Legal Proceedings" in the Company's Quarterly report on
Form 10-Q for the quarter ended March 31, 1996. The Court ruled in
favor of the plaintiffs in the lawsuit which was filed by GATX
Corporation and its subsidiaries, General American Transportation
Company ("GATC") and 314072 Canada Inc., against Hawker Siddeley
Canada Inc., Hawker Canada Holdings, Marmon Holdings, Inc., Procor
Limited and others to enjoin the purchase by Procor Limited of Hawker
Siddeley Canada Inc. As a result of the termination of the proposed
purchase, Procor Limited received certain fees.
Item 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the quarter ended September 30,
1996.
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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 4, 1996 /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, 1996 condensed consolidated balance sheet, condensed
consolidated statement of income for the nine months ended September 30, 1996,
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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 58,200
<SECURITIES> 0
<RECEIVABLES> 81,720
<ALLOWANCES> 4,048
<INVENTORY> 69,931
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,814,015
<DEPRECIATION> 1,229,095
<TOTAL-ASSETS> 1,999,400
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 755,220
<COMMON> 106,689
0
0
<OTHER-SE> 447,511
<TOTAL-LIABILITY-AND-EQUITY> 1,999,400
<SALES> 101,922
<TOTAL-REVENUES> 519,349<F2>
<CGS> 81,573
<TOTAL-COSTS> 300,195
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,589
<INCOME-PRETAX> 123,974
<INCOME-TAX> 47,247
<INCOME-CONTINUING> 76,727
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,727
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0
<FN>
<F1> The Company issues financial statements utilizing a non-classified balance
sheet.
<F2> The Company's revenues are derived primarily from railcar leasing.
<F3> The Company is a wholly-owned subsidiary.
</FN>
</TABLE>
