<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 March 31, 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.
-1-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
----
Part I. Financial Information
<TABLE>
<CAPTION>
Item 1.
<S> <C>
Condensed consolidated statement of income -
three months ended March 31, 1996 and 1995 3
Condensed consolidated balance sheet -
March 31, 1996 and December 31, 1995 4
Condensed consolidated statement of cash flows -
three months ended March 31, 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
</TABLE>
-2-
<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
March 31,
--------------------
1996 1995
-------- ----------
<S> <C> <C>
Revenues
Services (leasing and other) $125,820 $111,992
Net sales 22,867 53,950
-------- --------
148,687 165,942
Other income 4,327 5,529
-------- --------
153,014 171,471
Costs and expenses
Cost of services 68,855 59,679
Cost of sales 16,372 46,310
General and administrative 13,254 13,802
Interest 18,600 21,117
-------- --------
117,081 140,908
-------- --------
Income before income taxes 35,933 30,563
Provision for income taxes
Current 12,024 8,008
Deferred income taxes
and investment tax credits 1,266 3,491
-------- --------
13,290 11,499
-------- --------
Net income $ 22,643 $ 19,064
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 31,805 $ 28,781
Accounts receivable 67,813 71,065
Inventories 70,548 68,477
Due from affiliate 12,880 12,828
Prepaid expenses and deferred charges 8,844 6,479
Advances to parent company,
principally at LIBOR plus 1% 106,548 171,161
Railcar lease fleet, net 1,490,018 1,430,196
Fixed assets, net 146,851 148,985
Investment in aircraft direct financing lease 37,954 37,898
Other assets 30,462 27,476
---------- ----------
$2,003,723 $2,003,346
========== ==========
</TABLE>
LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Accounts payable $ 24,149 $ 31,795
Accrued liabilities 156,284 148,388
Borrowed debt 792,438 801,585
---------- ----------
972,871 981,768
Deferred income taxes
and investment tax credits 492,736 491,105
Stockholder's equity
Common stock and additional capital 111,341 111,341
Retained earnings 426,775 419,132
---------- ----------
Total stockholder's equity 538,116 530,473
---------- ----------
$2,003,723 $2,003,346
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 22,643 $ 19,064
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 26,324 25,518
Other non-cash income and expenses (1,289) 125
Changes in assets and liabilities:
Accounts receivable (3,681) (8,164)
Inventories (2,081) 3,029
Prepaid expenses and deferred charges (2,415) (1,573)
Accounts payable and accrued expenses 4,266 16,411
Deferred taxes 1,266 3,491
-------- --------
Net cash provided by operating activities 45,033 57,901
Cash flows from investing activities:
Construction and purchase of railcars and other fixed assets (86,383) (50,180)
Decrease in advance to parent 63,679 5,209
Proceeds from disposals of railcars and other fixed assets 4,738 1,631
Decrease in other assets 372 14,365
-------- --------
Net cash used in investing activities (17,594) (28,975)
Cash flows from financing activities:
Principal payments of borrowed debt (9,528) (9,943)
Cash dividend (15,000) (13,000)
-------- --------
Net cash used in financing activities (24,528) (22,943)
Effect of exchange rates on cash and cash equivalents 113 66
-------- --------
Net increase in cash and cash equivalents 3,024 6,049
Cash and cash equivalents at beginning of year 28,781 15,303
-------- --------
Cash and cash equivalents at end of period $ 31,805 $ 21,352
======== ========
Cash paid during the period for:
Interest (net of amount capitalized) $ 10,408 $ 10,908
Income taxes 13,526 7,896
</TABLE>
See notes to condensed consolidated financial statements.
-5-
<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.
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,
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,
1996 and 1995, Marmon Industrial absorbed gains of $36 and $260,
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
$5,400 at both March 31, 1996, and December 31, 1995.
-6-
<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>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Balance Sheet:
Railcar lease fleet, net $227,592 $229,132
All other assets 179,295 177,505
Borrowed debt 150,377 150,665
All other liabilities 154,569 158,356
Three Months Ended
March 31,
-----------------------
1996 1995
--------- ------------
Statement of Income:
Services and net sales $ 34,881 $ 30,179
Gross profit 10,663 9,688
Net income 3,893 3,374
</TABLE>
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
1st Quarter 1996 versus 1995
Service revenues increased $13.8 million. Slightly more than half of the
increase resulted from expansion of the Company's sulphur service operations in
the third quarter of 1995. The remaining increase was primarily due to the
effect of cars added to the lease fleet. Gross margin percentages decreased
slightly from the comparable period in 1995.
Sales revenues decreased $31.1 million primarily due to decreased railcar sales
of $29.3 million.
Other income decreased slightly primarily due to decreased interest income
resulting from lower average outstanding balances on advances to the company's
parent, as well as lower market interest rates.
Financial Condition
1996 versus 1995
Operating activities provided $45.0 million of cash. These funds, along with the
collection of funds advanced to parent, were used to provide financing for
railcar additions, service borrowed debt obligations and pay a dividend 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.
Change in Accounting Principle
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." The adoption of this new standard did not have a material
impact on the Company's financial position, results of operations or cash flow.
-8-
<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,
1995 for a description of certain environmental matters.
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 for the year ended December 31, 1995,
regarding the lawsuit which was filed on March 4, 1996, by GATX
Corporation and its subsidiaries, General American Transportation
Company ("GATC") and 314072 Canada Inc., against Hawker Siddeley Canada
Inc. ("Hawker Siddeley"), Hawker Canada Holdings Inc. ("Hawker
Holdings"), Procor Limited ("Procor") (a wholly-owned subsidiary of the
Company), Marmon Holdings, Inc., and others, in the Province of
Ontario, Canada in the Ontario Court of Justice (General Division).
Judgment was given on April 26, 1996. The judgment determined that
Hawker Siddeley is not entitled to dispose of its interest in CGTX Inc.
pursuant to the agreement entered into on February 19, 1996 (whereby
Procor agreed to make a takeover bid for all of the outstanding shares
of Hawker Holdings immediately following the completion of a corporate
reorganization by Hawker Siddeley pursuant to which Hawker Siddeley
would transfer its 55% ownership in CGTX Inc. to Hawker Holdings)
without the consent of GATC or without complying with the right of
first refusal in favor of GATC in the Hawker Siddeley/GATC shareholders
agreement. Procor and Hawker Siddeley are considering the judgment in
order to determine whether or not an appeal should be commenced.
Item 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the quarter ended March 31,
1996.
-9-
<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: May 3, 1996 /s/ R.C. Gluth
-------------------------------------
R.C. Gluth
Executive Vice President and Director
(principal financial officer and
principal accounting officer)
-10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>This schedule contains summary financial information extracted from
the March 31, 1996 condensed consolidated balance sheet, condensed consolidated
statement of income for the three months ended March 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 31,805
<SECURITIES> 0
<RECEIVABLES> 71,364
<ALLOWANCES> 3,551
<INVENTORY> 70,548
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,834,345
<DEPRECIATION> 1,197,476
<TOTAL-ASSETS> 2,003,723
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 792,438
<COMMON> 106,689
0
0
<OTHER-SE> 431,427
<TOTAL-LIABILITY-AND-EQUITY> 2,003,723
<SALES> 22,867
<TOTAL-REVENUES> 153,014<F2>
<CGS> 16,372
<TOTAL-COSTS> 85,227
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,600
<INCOME-PRETAX> 35,933
<INCOME-TAX> 13,290
<INCOME-CONTINUING> 22,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,643
<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>
