<PAGE>
1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[ ] SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number: 2-26520
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 W. Washington Street, Chicago, Illinois 60606
- - ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 372-9500
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
None -
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
-------------------
None
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 .
--------- ---------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S) 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ].
There is no voting stock held by non-affiliates of the registrant. This Annual
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.
<PAGE>
UNION TANK CAR COMPANY
FORM 10-K
Year Ended December 31, 1995
CONTENTS
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
Part I.
Item 1 Business.................................................... 2
Item 2 Properties.................................................. 9
Item 3 Legal Proceedings........................................... 10
Item 4 Submission of Matters to a Vote of Security Holders......... 10
Part II.
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 11
Item 6 Selected Financial Data..................................... 11
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 11
Item 8 Financial Statements and Supplementary Data................. 14
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 36
Part III.
Item 10 Directors and Executive Officers of the Registrant.......... 36
Item 11 Executive Compensation...................................... 38
Item 12 Security Ownership of Certain Beneficial Owners and
Management................................................ 39
Item 13 Certain Relationships and Related Transactions.............. 39
Part IV.
Item 14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K.................................................. 40
Signatures................................................................ 41
</TABLE>
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<PAGE>
PART I
ITEM 1. BUSINESS
General
UNION TANK CAR COMPANY (with its wholly-owned subsidiaries herein collectively
referred to, unless the context otherwise requires, as the "Company") was
organized under the laws of Delaware on September 23, 1980 and is the successor
to a business which was originally incorporated in New Jersey in 1891. The
Company is a wholly-owned subsidiary of Marmon Industrial Corporation, a wholly-
owned subsidiary of Marmon Holdings, Inc. ("Holdings"). Substantially all of
the stock of Holdings 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.
Railcar Leasing, Services and Sales
The principal activity of the Company is the leasing of railway tank cars and
other railcars to United States, Canadian and Mexican manufacturers and other
shippers of chemical products, including liquid fertilizers, petroleum products,
including liquefied petroleum gas, food products and bulk plastics. The Company
owns and operates one of the largest fleets of privately-owned railway tank cars
in the world.
As of December 31, 1995, the Company's fleet was comprised of 53,669 tank cars
and 13,943 railway cars of other types. A total of 21,554 cars were added to
the lease fleet during the ten years ended December 31, 1995. These cars
accounted for approximately 37% of total railcar lease revenues during 1995.
Most of the Company's cars were built by the Company or to its specifications
and the balance were purchased from other sources.
Management estimates that tank cars carrying chemicals and acids account for the
greatest portion of total leasing revenues, followed in order by compressed
gases (particularly liquefied petroleum gas and anhydrous ammonia), refined
petroleum products (such as gasoline, fuel oils and asphalt), food products and
liquid fertilizers.
A significant portion of the revenues from the Company's non-tank car fleet
derives from hopper cars carrying bulk plastics. The remaining non-tank car
revenues are attributable to cars which serve the lumber, dry bulk chemical,
coal and sulphur industries.
The Company builds tank cars primarily for use in its leasing business. In
addition, the Company builds cars for sale to others. Generally, the Company
only manufactures a car following the receipt of a firm order for the lease or
sale of such car.
Substantially all of the Company's cars are leased directly to several hundred
manufacturers and other shippers under leases covering from one to several
thousand cars and for periods ranging from one to twenty years. The average
term of leases entered into during 1995 for newly-manufactured cars was
approximately nine years. The average term of leases entered into during 1995
for other cars was approximately four years. Under the terms of most leases the
Company agrees to provide a full range of services, including car repair and
maintenance. The Company supplies relatively few cars directly to railroads.
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<PAGE>
The Company markets its cars through regional sales offices located throughout
the United States and Canada and through a sales agent in Mexico. To insure
optimum utilization of the U.S., Canadian and Mexican lease fleets, the Company
maintains fleet data processing systems which contain information relative to
each car, including its mechanical specifications, maintenance and repair data
and lease terms.
The Company has generally followed the practice of financing additions to its
fleet by borrowing 75% of the funds required through the issuance of equipment
obligations. The Company's long-term equipment obligations are generally payable
over a period of fifteen to twenty years, which is considerably less than the
estimated useful life of the equipment. In 1995, the Company entered into a
sale-leaseback transaction pursuant to which it sold and leased back (under an
operating lease) an aggregate of approximately 2,057 railcars. In 1994, the
Company entered into two separate sale-leaseback transactions pursuant to which
it sold and leased back (under operating leases) an aggregate of approximately
2,197 railcars. The average term of the Company's leases (as lessor) is
substantially less than the average maturity of the equipment obligations and
the average terms of the operating leases (as lessee); however, the aggregate
rentals to be received in the future under existing leases are substantial.
Under the terms of the operating leases the Company assumes responsibility for
repairs and taxes.
The following table sets forth the minimum rentals to be received, the debt
maturities under outstanding equipment obligations, the minimum lease payments
due (as lessee) under all operating leases and the cost of the fleet. The table
excludes outstanding commercial paper, which, prior to the suspension of the
program effective May 23, 1994, was used as interim financing for additions to
the Company's railcar fleet. The figures shown are the minimum future rentals
under leases in effect at the dates indicated. Based upon its historical
experience, the Company expects that the cars (other than those which are
retired in the ordinary course of business) will be re-leased at the expiration
of such leases. The rentals under such future leases and related interest and
other expenses to be incurred in the future cannot be ascertained and therefore
are not reflected in this table.
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<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Total minimum future rentals
to be received (as lessor) $1,363.7 $1,258.5 $1,215.8 $1,190.3 $1,211.6
Principal amount of equipment
obligations (1) 774.8 855.3 869.0 846.0 925.5
Total minimum future lease
payments for noncancellable
operating leases (as lessee) 590.2 426.7 253.0 262.4 26.2
Minimum future rentals to be
received within one year
(as lessor) 361.7 339.7 327.9 321.0 316.4
Principal amount of equipment
obligations due within one
year, net of amounts held
for sinking fund purposes 66.8 73.1 80.7 71.4 71.2
Minimum future lease payments
for noncancellable operating
leases due within one year
(as lessee) 25.4 13.4 13.5 8.6 3.2
Gross cost of fleet 2,425.0 2,368.6 2,392.7 2,283.8 2,403.8
Depreciated cost of fleet 1,430.2 1,452.0 1,523.8 1,477.4 1,619.2
For the year ended:
Railcar rentals, including
direct financing leases 428.4 409.2 397.8 388.1 372.6
</TABLE>
(1) Includes $143.0 million principal amount of unsecured senior notes issued
by the Company in 1990, the proceeds of which were used to retire certain
higher coupon railcar obligations.
Approximately 46% of the Company-owned fleet of railcars is pledged to secure
equipment obligations. The remaining cars are free of liens.
The Company maintains repair facilities located at strategic points throughout
the United States and Canada. In addition to the work performed by the Company,
certain maintenance and repair work is performed for the Company's account by
railroads when railroad inspection determines the need for such work under the
code of the Association of American Railroads ("AAR").
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<PAGE>
The Company is not a common carrier and is not subject to regulation or
supervision as such. The Company's railcars are subject to regulations governing
construction, safety and maintenance promulgated by the Department of
Transportation and various other government agencies and by the AAR. These
regulations have required and may in the future require the Company to make
significant modifications to certain of its cars from time to time.
The Company's facilities for manufacturing and assembling tank cars are located
in East Chicago, Indiana; Oakville, Ontario, Canada; and Sheldon, Texas. The
Company also operates the largest network of shops in North America for
repairing and servicing railcars, as well as a fleet of specially equipped
trucks to perform repairs at customer plant sites. The principal shops are
located in Valdosta, Georgia; Muscatine, Iowa; El Dorado, Kansas; Ville Platte,
Louisiana; Marion, Ohio; Altoona, Pennsylvania; Cleveland, Longview and Sheldon,
Texas; Edmonton, Alberta; Sarnia and Oakville, Ontario; Montreal, Quebec; and
Regina, Saskatchewan.
See Note 21 to the consolidated financial statements included in Item 8 of this
Form 10-K for information concerning the contemplated acquisition of Hawker
Canada Holdings, Inc.
Other Activities
The Company is engaged in several other activities, as described below.
Sulphur Processing
A subsidiary of the Company provides sulphur producers in Canada and the
Netherlands with various services, including the processing of liquefied sulphur
into crystalline slates and granules and the storage and shipping of the
product. The subsidiary also designs, manufactures and sells sulphur processing
plants worldwide.
Fasteners
The Company's fastener business, which is conducted through several wholly-owned
subsidiaries, consists of manufacturing and distributing a wide range of
fasteners in the United States, Canada and Sweden to the construction industry
and manufacturers of furniture, household appliances, industrial and
agricultural equipment.
Containment Vessel Head Manufacturing
A subsidiary of the Company manufactures and distributes metal containment
vessel heads, primarily made of steel, to the metal containment vessel
construction industry.
Liquefied Petroleum Gas Storage
A subsidiary of the Company operates several underground liquefied petroleum gas
storage caverns in Canada as a service to producers and sellers of liquefied
petroleum gas.
-5-
<PAGE>
Segment Data
The principal activity of the Company's primary industry segment is railcar
leasing, services and sales.
Information with regard to the Company's industry and geographic segments is as
follows:
<TABLE>
<CAPTION>
Industry Segments 1995 1994 1993
---------- ---------- ----------
(Dollars in Millions)
<S> <C> <C> <C>
Revenues
Railcar leasing, services and sales $ 741.3 $ 645.2 $ 441.4
Other 123.4 83.5 71.8
-------- -------- --------
Total segments 864.7 728.7 513.2
Interest income (principally from
advances to parent) 13.3 10.1 10.4
Corporate/unallocated (2.2) (2.0) (1.7)
-------- -------- --------
$ 875.8 $ 736.8 $ 521.9
======== ======== ========
Operating income
Railcar leasing, services and sales $ 191.1 $ 177.0 $ 172.6
Other 9.7 10.2 6.7
-------- -------- --------
Total segments 200.8 187.2 179.3
Interest income (principally from
advances to parent) 13.3 10.1 10.4
Interest expense (81.2) (91.4) (96.6)
Corporate/unallocated (2.4) (2.4) (2.6)
-------- -------- --------
$ 130.5 $ 103.5 $ 90.5
======== ======== ========
Assets, at December 31
Railcar leasing, services and sales $1,723.3 $1,733.3 $1,773.4
Other 77.6 58.7 46.6
-------- -------- --------
Total segments 1,800.9 1,792.0 1,820.0
Advances to parent 171.2 194.7 202.3
Corporate/unallocated 31.2 31.1 32.6
-------- -------- --------
$2,003.3 $2,017.8 $2,054.9
======== ======== ========
Capital expenditures
Railcar leasing, services and sales $ 206.8 $ 186.8 $ 172.9
Other 21.5 26.4 2.9
-------- -------- --------
$ 228.3 $ 213.2 $ 175.8
======== ======== ========
Depreciation
Railcar leasing, services and sales $ 100.1 $ 100.1 $ 95.2
Other 5.1 3.5 4.4
-------- -------- --------
$ 105.2 $ 103.6 $ 99.6
======== ======== ========
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Geographic Segments 1995 1994 1993
---------- ---------- ----------
(Dollars in Millions)
<S> <C> <C> <C>
Revenues
United States $ 669.6 $ 576.8 $ 361.0
Canada 184.3 146.9 147.6
Other 10.8 5.0 4.6
-------- -------- --------
Total segments 864.7 728.7 513.2
Interest income (principally from
advances to parent) 13.3 10.1 10.4
Corporate/unallocated (2.2) (2.0) (1.7)
-------- -------- --------
$ 875.8 $ 736.8 $ 521.9
======== ======== ========
Operating income
United States $ 146.8 $ 139.4 $ 129.8
Canada 51.0 45.2 47.0
Other 3.0 2.6 2.5
-------- -------- --------
Total segments 200.8 187.2 179.3
Interest income (principally from
advances to parent) 13.3 10.1 10.4
Interest expense (81.2) (91.4) (96.6)
Corporate/unallocated (2.4) (2.4) (2.6)
-------- -------- --------
$ 130.5 $ 103.5 $ 90.5
======== ======== ========
Assets, at December 31
United States $1,340.2 $1,376.5 $1,375.6
Canada 431.4 400.8 429.0
Other 29.3 14.7 15.4
-------- -------- --------
Total segments 1,800.9 1,792.0 1,820.0
Advances to parent 171.2 194.7 202.3
Corporate/unallocated 31.2 31.1 32.6
-------- -------- --------
$2,003.3 $2,017.8 $2,054.9
======== ======== ========
</TABLE>
Intersegment sales are immaterial. Segment operating income includes segment
revenue less operating expenses directly traceable to the segment and an
allocation of common expenses benefiting more than one segment.
Major Customers
Revenues from any one customer did not exceed 5% of consolidated or industry
segment revenues.
Raw Materials
The Company purchases raw materials from a variety of suppliers, with no one
supplier in any industry segment being significant. In the opinion of
management the Company will have adequate availability of applicable raw
materials in the future.
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<PAGE>
Foreign Operations
The Company does not believe that there are unusual risks attendant to its
foreign operations.
Competition
All the activities of the Company are in competition with similar activities
carried on by other companies. In particular, there are several companies
engaged in the business of leasing tank cars in the United States and Canada.
The largest competitor is General American Transportation Corporation (including
its Canadian affiliate, Canadian General Transit Company, Limited). The other
principal competitors in the leasing business are ACF Industries, Incorporated,
and General Electric Railcar Services Corporation. The principal competitive
factors are price, service and product design. The Company's integration of its
North American engineering, manufacturing, repair and leasing activities has
enhanced its ability to provide competitive products and services to its
customers.
Manufacturing Backlog
The Company builds tank cars primarily for use in its leasing business and the
number of cars added in any one year is a small percentage of the Company's
lease fleet. Additionally, for tank cars built for sale to customers, the
Company delivers against orders within a relatively brief period of time.
Therefore, backlog is not material to the Company's business or an understanding
thereof.
Employees
As of December 31, 1995, the Company had approximately 3,850 employees.
Environmental Matters
The Company believes that all of its facilities are in substantial compliance
with applicable laws and regulations relating to environmental protection. Over
the past several years the Company has attempted to identify and remediate
potential problem areas. In 1995 the Company spent approximately $4.5 million on
remediation and related matters, compared with $8.5 million and $4.7 million in
1994 and 1993, respectively. The Company expects to spend approximately $8.5
million in 1996 on similar activities, including approximately $6.6 million for
capital expenditures. Management believes that amounts accrued for remedial
activities and environmental liabilities (which in the aggregate are not
material) are adequate.
In October, 1990, the Pennsylvania Office of Attorney General and the
Pennsylvania Department of Environmental Resources ("DER") commenced an
investigation of alleged violations of the Pennsylvania Solid Waste Management
Act with respect to the handling of solid and hazardous waste material at the
Company's railcar repair facility in Altoona, Pennsylvania. The Board of
Directors of the Company authorized special counsel to conduct an internal
investigation of the allegations made against the Altoona facility. The Company
is satisfied with current operations at the facility.
-8-
<PAGE>
At the request of the Pennsylvania DER, the Company has cooperated voluntarily
in a site assessment of areas of potential environmental contamination at the
facility. The Company has submitted its consultant's report to the Pennsylvania
DER for review. The Pennsylvania Attorney General's office and the Company's
counsel are engaged in discussions to resolve the criminal investigation. The
Company is unable to predict at this time whether satisfactory resolution of the
allegations will occur. If there is no satisfactory resolution of the
allegations, it is likely that the Pennsylvania authorities will initiate
criminal proceedings against the Company.
In June, 1993, the U.S. Environmental Protection Agency ("EPA") filed an
administrative complaint alleging the Company violated Section 313 of the
Emergency Planning and Community Right-to-Know Act of 1986 by failing to submit
Toxic Chemical Release Inventory Reporting Forms relating to its use of certain
chemicals in manufacturing operations at its East Chicago, Indiana facility
during calendar years 1987-1990. The EPA proposed a civil penalty in the amount
of $524,000. The Company has denied the allegations of the complaint and has
requested a formal hearing to contest the EPA's allegations and the proposed
penalty. The Company is engaging in informal settlement negotiations with the
EPA.
In August, 1994, the U.S. Department of Justice filed a civil action against the
Company, pursuant to Sections 309(b) and (d) of the Clean Water Act, seeking
civil penalties not to exceed $25,000 for each day of violation. In December,
1995, this matter was settled by the Company's payment of a civil penalty of
$200,000.
The Company has been designated as a Potentially Responsible Party by the EPA at
three sites: Auto Ion Chemical Company, Kalamazoo, Michigan; Douglassville
Disposal Site, Union Township, Pennsylvania; and Whitehouse Waste Oil Pits Site,
Jacksonville, Florida. Costs incurred to date have not been material, either
individually or in the aggregate. Because of the level of the Company's
involvement at these sites, management of the Company believes that future costs
related to these sites will not be material, either individually or in the
aggregate.
Management of the Company does not anticipate that the resolution of any of the
matters discussed above will have a material adverse effect on the Company's
results of operations, financial condition or business.
ITEM 2. PROPERTIES
In the opinion of management, the Company's properties are substantially
adequate and suitable for their intended use.
Railcars
The Company owns approximately 89 percent of its total lease fleet of 67,612
railcars, of which 53,669 are tank cars and 13,943 are other railway freight
cars. Of the approximately 60,427 owned cars, 32,833 are free of liens. Cars
which are not owned are leased from others under long-term net leases.
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<PAGE>
Railcar Manufacturing and Assembling Facilities
The facilities for the manufacturing and assembling of railcars are located at
East Chicago, Indiana; Oakville, Ontario, Canada; and Sheldon, Texas, together
occupying approximately 170 acres.
Car Servicing and Repair Shops
The Company operates a network of shops for repairing and servicing railcars.
The principal shops owned by the Company are located at Valdosta, Georgia;
Muscatine, Iowa; El Dorado, Kansas; Ville Platte, Louisiana; Marion, Ohio;
Altoona, Pennsylvania; Cleveland, Longview, and Sheldon, Texas; Edmonton,
Alberta; Sarnia and Oakville, Ontario; Montreal, Quebec; and Regina,
Saskatchewan. Several other repair shops and small repair points are
strategically located throughout the United States and Canada.
Sulphur Processing
A subsidiary of the Company owns facilities in Canada and the Netherlands which
process liquefied sulphur into crystalline slates and granules and handle the
formed product.
Containment Vessel Head Manufacturing Facilities
A subsidiary of the Company owns a metal containment vessel head manufacturing
facility in Sheldon, Texas.
Liquefied Petroleum Gas Storage Facilities
A subsidiary of the Company owns several underground liquefied petroleum gas
storage caverns in Canada.
Other Properties
In connection with its other business activities, the Company owns (either
directly or through its subsidiaries) fastener manufacturing facilities in
Ashland, Ohio; Milton, Ontario; and Montreal, Quebec. In addition, subsidiaries
of the Company which manufacture fasteners lease several small plants in the
United States, Canada and Sweden. The Company and its subsidiaries maintain
numerous sales and business offices and warehouses, most of which are leased,
throughout the United States and Canada.
ITEM 3. LEGAL PROCEEDINGS
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 to resolve such claims, including legal fees, and, in
the opinion of management, ultimate resolution of these matters will not have a
material effect on the Company's consolidated financial position or results of
operations. See discussion of Environmental Matters in Item 1 of this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-10-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Services and net sales $ 856,229 $ 720,864 $ 504,823 $ 618,007 $ 483,416
Net income 84,465 63,378 129,730 48,382 45,024
Ratio of earnings to
fixed charges 2.41 2.05 1.89 1.76 1.69
At year end:
Total assets 2,003,346 2,017,772 2,054,867 2,063,267 2,253,760
Long-term obligations 732,207 807,029 869,440 869,656 1,059,072
</TABLE>
The increases in 1995, 1994 and 1992 services and net sales are primarily the
result of sale-leaseback transactions of $130,517, $125,500 and $124,900,
respectively. The 1993 increase in net income includes an $80,000 credit to
earnings to reflect the adoption of SFAS 109.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1995 versus 1994
Results of Operations
- - ---------------------
Service revenues increased $53.3 million. Slightly more than half of the
increase resulted from expansion of the Company's sulphur service operations.
The remaining increase was primarily due to the effect of cars added to the
railcar lease fleet. Gross profit increased approximately 6% from 1994.
Excluding the effects of sale-leaseback transactions, net sales revenues in 1995
increased $77.1 million, primarily due to increased railcar sales of $62.2
million.
Other income increased $3.6 million, primarily due to interest earned on an
increased average balance advanced to the Company's parent, as well as an
increase in the average interest rate.
Interest expense decreased $10.3 million primarily due to lower average balances
of debt outstanding and a lower average interest rate on debt outstanding.
-11-
<PAGE>
Financial Condition
- - -------------------
Operating activities provided $211.3 million of cash in 1995. These funds,
along with the proceeds from the sale-leaseback transaction, the issuance of
long-term 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. It is the Company's policy to pay
to its stockholder a quarterly dividend equal to 70% of net income. To the
extent that the Company generates cash in excess of its operating needs, such
funds are advanced to its parent and bear interest at commercial rates.
Conversely, when the Company requires additional funds to support its
operations, prior advances are repaid by its parent. No restrictions exist
regarding the amount of dividends which may be paid or advances which may be
made by the Company to its parent.
In 1995, the Company spent $214.5 million for the construction and purchase of
railcars and other fixed assets. The Company received $9.0 million in proceeds
from disposals of railcars and other fixed assets, net of $130.5 million in
proceeds from the sale-leaseback transaction.
In 1995, the Company issued $30.2 million in long-term equipment trust
certificates with an annual interest rate of 6.76% to finance additions to the
railcar lease fleet. Other financing activities of the Company included $114.6
million for principal repayments on borrowed debt and $59.0 million for
dividends. Net cash used in financing activities was $143.4 million.
Management expects that the future cash to be provided by 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.
The Company has not experienced any significant impact of inflation and changing
prices on its financial position or results of operations over the last several
years.
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 $5.4
million and $12.6 million at December 31, 1995 and 1994, respectively.
Change in Accounting Principle
- - ------------------------------
The Financial Accounting Standards Board has issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." Adoption of the new standard in 1996 will not have a material impact on
the Company's financial position, results of operations or cash flow.
Other Matters
- - -------------
The Company has certain environmental matters currently outstanding, none of
which are significant to the Company's results of operations or financial
condition, either individually or in the aggregate. See further discussion of
such matters under the "Environmental Matters" caption of Item 1 of this
Form 10-K.
-12-
<PAGE>
1994 versus 1993
Results of Operations
- - ---------------------
Service revenues increased $12.1 million primarily due to the effect of cars
added to the railcar lease fleet offset by lower revenues from sulphur service
operations. Gross profit was relatively unchanged from 1993.
In December, 1994, the Company entered into two separate sale-leaseback
transactions in which it sold $125.5 million of railcars. Excluding these sale-
leaseback transactions, net sales revenues in 1994 increased $78.5 million
primarily due to increased railcar sales of $62.4 million and manufactured metal
containment vessel head sales of $11.3 million.
Other income decreased $1.1 million primarily due to lower earned income on
direct financing leases.
Interest expense decreased $5.1 million primarily due to a lower average
effective interest rate on debt outstanding, lower average balances of debt
outstanding, as well as the termination of the commercial paper program.
Financial Condition
- - -------------------
Operating activities provided $163.1 million of cash in 1994. These funds,
along with proceeds from the issuance of borrowed debt, proceeds from sale-
leaseback transactions, and the collection of funds advanced to parent, 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. It is the Company's policy to pay to its stockholder a
quarterly dividend equal to 70% of net income. To the extent that the Company
generates cash in excess of its operating needs, such funds are advanced to its
parent and bear interest at commercial rates. Conversely, when the Company
requires additional funds to support its operations, prior advances are repaid
by its parent. No restrictions exist regarding the amount of dividends which
may be paid or advances which may be made by the Company to its parent.
In 1994, the Company spent $189.2 million for the construction and purchase of
railcars and other fixed assets. The Company received $19.8 million in proceeds
from disposals of railcars and other fixed assets, net of the $125.5 million in
proceeds from the sale-leaseback transactions discussed previously.
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 the
railcar lease fleet. Other financing activities of the Company included $52.4
million for the repayment of commercial paper obligations, $110.9 million for
principal repayments on debt and $44.0 million for dividends. Net cash used in
financing activities was $107.3 million.
-13-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors.......................................... 15
Financial Statements -
Consolidated statement of income for each of the three years in
the period ended December 31, 1995.................................. 16
Consolidated balance sheet - December 31, 1995 and 1994............... 17
Consolidated statement of stockholder's equity for each of the three
years in the period ended December 31, 1995......................... 18
Consolidated statement of cash flows for each of the three
years in the period ended December 31, 1995......................... 19
Notes to consolidated financial statements............................ 20
</TABLE>
-14-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO UNION TANK CAR COMPANY
We have audited the accompanying consolidated balance sheet of Union Tank Car
Company and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholder's equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Union
Tank Car Company and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 9 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in the year ended December 31,
1993.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
March 7, 1996
-15-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Services (leasing and other) $499,226 $445,973 $433,904
Net sales 357,003 274,891 70,919
-------- -------- --------
856,229 720,864 504,823
Other income 19,607 15,959 17,033
-------- -------- --------
875,836 736,823 521,856
Costs and expenses
Cost of services 277,720 236,127 224,820
Cost of sales 330,814 251,615 55,341
General and administrative 55,630 54,120 54,629
Interest 81,179 91,442 96,584
-------- -------- --------
745,343 633,304 431,374
-------- -------- --------
Income before income taxes
and cumulative effect of a
change in accounting principle 130,493 103,519 90,482
Provision for income taxes
Current 42,601 28,637 10,151
Deferred 5,973 14,166 33,342
Deferred investment tax credits (2,546) (2,662) (2,741)
-------- -------- --------
46,028 40,141 40,752
-------- -------- --------
Income before cumulative effect of
a change in accounting principle 84,465 63,378 49,730
Cumulative effect of a change in
accounting principle related to
accounting for income taxes - - 80,000
-------- -------- --------
Net income $ 84,465 $ 63,378 $129,730
======== ======== ========
Ratio of earnings to fixed charges 2.41 2.05 1.89
==== ==== ====
</TABLE>
See Notes to Consolidated Financial Statements.
-16-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 28,781 $ 15,303
Accounts receivable, primarily due within one year,
less allowance for doubtful accounts of $3,340 in
1995 and $5,209 in 1994 71,065 61,005
Inventories 68,477 64,644
Due from affiliate 12,828 13,191
Prepaid expenses and deferred charges 6,479 7,423
Advances to parent company,
principally at LIBOR plus 1% 171,161 194,729
Railcar lease fleet, net 1,430,196 1,451,999
Fixed assets, net 148,985 130,895
Investment in direct financing lease 37,898 37,213
Other assets 27,476 41,370
---------- ----------
Total assets $2,003,346 $2,017,772
========== ==========
LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY
Accounts payable $ 36,791 $ 16,096
Accrued liabilities 143,392 129,059
Borrowed debt 801,585 882,407
---------- ----------
981,768 1,027,562
Deferred items
Income taxes 468,170 459,893
Investment tax credits 22,935 25,309
---------- ----------
491,105 485,202
Stockholder's equity
Common stock, no par value; 1,000 shares authorized
and issued 106,689 106,689
Additional capital 4,652 4,652
Retained earnings 419,132 393,667
---------- ----------
Total stockholder's equity 530,473 505,008
---------- ----------
Total liabilities, deferred items and
stockholder's equity $2,003,346 $2,017,772
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
-17-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
Years Ended December 31, 1995, 1994 and 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
Common Additional Retained
Stock Capital Earnings Total
--------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $106,689 $4,652 $334,559 $445,900
Net income - - 129,730 129,730
Cash dividends - - (90,000) (90,000)
--------- ------- -------- --------
Balance at December 31, 1993 106,689 4,652 374,289 485,630
Net income - - 63,378 63,378
Cash dividends - - (44,000) (44,000)
--------- ------- -------- --------
Balance at December 31, 1994 106,689 4,652 393,667 505,008
Net income - - 84,465 84,465
Cash dividends - - (59,000) (59,000)
--------- ------- -------- --------
Balance at December 31, 1995 $106,689 $4,652 $419,132 $530,473
========= ======= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-18-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 84,465 $ 63,378 $ 129,730
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 105,206 103,671 99,997
Cumulative effect of a change
in accounting principle - - (80,000)
Deferred taxes 3,427 11,504 30,601
Other non-cash income and expenses (5,565) (5,462) 469
Changes in operating assets and liabilities 23,796 (10,038) 3,013
--------- --------- ---------
Net cash provided by operating activities 211,329 163,053 183,810
Cash flows from investing activities:
Construction and purchase of railcars and
other fixed assets (214,470) (189,208) (175,827)
Proceeds from disposals of railcars
and other fixed assets 139,481 145,290 15,094
Decrease in advance to parent 18,143 19,507 89,228
Purchases of businesses, net of cash acquired (13,839) (24,000) -
Decrease (increase) in other assets and investments 14,567 (14,940) 754
Repayments from (advances to) affiliate 713 (11,203) (2,076)
Collection of demand note and long-term receivables - 1,451 17
--------- --------- ---------
Net cash used in investing activities (55,405) (73,103) (72,810)
Cash flows from financing activities:
Proceeds from issuance of borrowed debt 30,236 100,000 100,000
Principal payments of borrowed debt (114,614) (110,881) (78,803)
Cash dividends (59,000) (44,000) (90,000)
Repayment of advance from affiliate - - (17,708)
Net commercial paper repayments - (52,409) (8,429)
--------- --------- ---------
Net cash used in financing activities (143,378) (107,290) (94,940)
Effect of exchange rates on cash and cash equivalents 932 (1,370) (729)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 13,478 (18,710) 15,331
Cash and cash equivalents at beginning of year 15,303 34,013 18,682
--------- --------- ---------
Cash and cash equivalents at end of year $ 28,781 $ 15,303 $ 34,013
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
-19-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Ownership
UNION TANK CAR COMPANY (with its wholly-owned subsidiaries herein collectively
referred to, unless the context otherwise requires, as the "Company") is a
wholly-owned subsidiary of Marmon Industrial Corporation ("MIC") and a
subsidiary of Marmon Holdings, Inc. ("Holdings"). Substantially all of the
stock of Holdings 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. Summary of Accounting Principles and Practices
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents includes all highly liquid debt instruments purchased
with an original maturity of three months or less.
Lessor Accounting
Operating Leases - Most of the Company's railcar leases are classified as
operating leases. Aggregate rentals from operating leases are reported as
revenue ratably over the life of the lease. Expenses, including depreciation
and maintenance, are charged against such revenues as incurred.
Direct Financing Leases - Some of the Company's railcar and other rental
equipment leases are classified as direct financing leases. Gross investment in
leases (minimum lease payments plus estimated residual values) less the cost of
the equipment is designated as unearned income. This unearned income is
recognized over the life of the lease based upon the "constant yield method" or
similar methods which generally result in an approximate level rate of return on
the investment.
Depreciation and Fixed Assets Accounting
Railcars and fixed assets are recorded at cost less accumulated depreciation.
These assets are depreciated to salvage value over their estimated useful lives
on the straight-line method. The estimated useful lives are principally:
railcars, 25-30 years; buildings and improvements, 20-30 years; and machinery
and equipment, 3-20 years.
-20-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The cost of major conversions and betterments are capitalized and depreciated
over their estimated useful life or, if shorter, the remaining useful life of
the related asset. Maintenance and repairs are charged to expense when
incurred. Gain or loss on disposals is included in other income, except for
those related to railcar disposals which are included in cost of services.
Deferred Income Taxes
The Company provides deferred taxes for temporary differences between pre-tax
accounting income and taxable income (principally related to railcar
depreciation).
Deferred Investment Tax Credits
United States investment tax credits (as generated through 1986 and to the
extent not transferred to lessees) and Canadian investment tax credits result in
a reduction of current or deferred income taxes and are due primarily to
investments in certain new railcars. Investment tax credits retained are
deferred and amortized over the estimated useful lives of the related assets.
Foreign Currency Translation
All assets and liabilities are translated at exchange rates in effect at the
date of translation. Average exchange rates are used for revenues, costs and
expenses and income taxes.
Translation adjustments and transaction gains and losses are assumed by the
Company's parent. For the years ended December 31, 1995, 1994 and 1993, MIC
absorbed gains of $934, $271 and $57, respectively. Also in 1994, MIC assumed a
loss of $6,102 related to U. S. dollar denominated debt held by a Canadian
subsidiary of the Company.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Fair Value of Financial Instruments
All book value amounts for financial instruments approximate the instruments'
fair value except for the borrowed debt discussed in Note 8.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
-21-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reclassification
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
3. Railcar Lease Data
Railcars are leased directly to several hundred shippers, located throughout the
United States, Canada and Mexico. The Company leases to a wide variety of
customers, and no customer accounted for more than 5% of consolidated lease
revenues. The leases involve one to several thousand cars, normally for periods
ranging from one to twenty years. The average term of leases entered into
during 1995 for newly-manufactured cars was approximately nine years. The
average term of leases entered into during 1995 for other cars was approximately
four years. Under the terms of most of the leases the Company agrees to provide
a full range of services including car repair and maintenance.
Minimum future rentals to be received on railcar leases at December 31, 1995,
are as follows:
<TABLE>
<CAPTION>
Direct
Financing Operating
Leases Leases Total
--------- ---------- -----------
<S> <C> <C> <C>
1996 $ 3,949 $ 357,773 $ 361,722
1997 3,949 284,022 287,971
1998 3,949 218,074 222,023
1999 3,949 160,021 163,970
2000 4,165 99,447 103,612
2001 and after 2,265 222,125 224,390
------- ---------- ----------
Totals $22,226 $1,341,462 $1,363,688
======= ========== ==========
</TABLE>
The investment in railcars on direct financing leases is recoverable from future
lease payments and estimated residual values. Details of this investment, which
is classified in the accompanying consolidated balance sheet under railcar lease
fleet, are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Minimum future lease rentals $22,226 $24,950
Estimated residual values 8,726 8,488
------- -------
Gross investment 30,952 33,438
Less unearned income (7,769) (9,794)
------- -------
Net investment $23,183 $23,644
======= =======
Classified as
Railcar lease fleet (cost) $29,085 $28,292
Less accumulated depreciation (5,902) (4,648)
------- -------
$23,183 $23,644
======= =======
</TABLE>
-22-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Railcar Lease Fleet and Fixed Assets
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Railcar lease fleet
Gross cost $2,424,960 $2,368,592
Less accumulated depreciation (994,764) (916,593)
---------- ----------
$1,430,196 $1,451,999
========== ==========
Fixed assets, at cost
Land $ 7,192 $ 6,603
Buildings and improvements 97,344 90,252
Machinery and equipment 224,616 196,468
---------- ----------
329,152 293,323
Less accumulated depreciation (180,167) (162,428)
---------- ----------
$ 148,985 $ 130,895
========== ==========
</TABLE>
5. Investment in Direct Financing Lease
In 1987 one of the Company's Canadian subsidiaries entered into a Canadian
dollar denominated lease of a passenger airplane to a scheduled commercial air
carrier for an 18 year period.
Minimum future rentals to be received on the lease are as follows (at December
31, 1995 exchange rate of .733):
<TABLE>
<CAPTION>
<S> <C>
1996 $ 4,439
1997 4,439
1998 4,439
1999 4,439
2000 6,146
2001 and after 30,728
-------
Total $54,630
=======
</TABLE>
-23-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The investment is recoverable from future lease payments and estimated residual
value, as follows (at year-end exchange rates of .733 at December 31, 1995, and
.713 at December 31, 1994):
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Minimum future lease rentals $ 54,630 $ 57,457
Estimated residual value 17,409 16,934
-------- --------
Gross investment 72,039 74,391
Less unearned income (34,141) (37,178)
-------- --------
Net investment $ 37,898 $ 37,213
======== ========
</TABLE>
6. Lease Commitments
The Company, as lessee, has entered into long-term leases for railcars and
various manufacturing, office and warehouse facilities.
The railcar lease fleet includes the following capitalized leases:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Capitalized lease cost $16,271 $16,127
Less accumulated depreciation (7,546) (7,034)
------- -------
$ 8,725 $ 9,093
======= =======
</TABLE>
In 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 $130,517 in railcars. The Company has an option to purchase
all or a portion of the railcars at a fixed purchase price on January 2, 2006.
The lease expires on January 2, 2012.
In 1994, the Company entered into two separate sale-leaseback transactions with
trusts for the benefit of certain institutional investors pursuant to which it
sold and leased back an aggregate of $125,500 in railcars. The Company has an
option to purchase all or a portion of the railcars at a fixed purchase price on
January 2, 2005 with respect to certain railcars and January 2, 2006 with
respect to the other railcars. Each lease expires on July 2, 2010.
-24-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 1995, future minimum rental commitments for all noncancellable
leases are as follows:
<TABLE>
<CAPTION>
Operating Leases
-------------------------------
Capitalized Sale- Other Total
Leases Leaseback Operating Operating
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
1996 $ 2,973 $ 22,797 $ 2,646 $ 25,443
1997 1,529 31,523 1,779 33,302
1998 85 31,670 1,766 33,436
1999 85 31,983 1,745 33,728
2000 85 33,514 1,705 35,219
2001 and after 84 427,507 1,552 429,059
------- -------- -------- ---------
$ 4,841 $578,994 $ 11,193 $590,187
======== ======== =========
Less amount representing interest (886)
-------
Present value of minimum lease payments 3,955
Less current portion (2,359)
-------
Long-term obligation at December 31, 1995 $ 1,596
=======
</TABLE>
Minimum future sublease income to be received under existing capitalized and
sale-leaseback leases as of December 31, 1995 is presented below. Future
sublease income under other existing operating leases is not material and is
primarily included in other income. The Company expects that the subleased cars
will be re-leased at the expiration of such subleases. The rentals under such
future subleases cannot be ascertained and therefore are not reflected in this
table.
<TABLE>
<CAPTION>
Sale-
Capitalized Leaseback
Leases Leases
----------- ---------
<S> <C> <C>
1996 $ 2,184 $ 42,251
1997 1,218 35,343
1998 894 32,403
1999 574 27,809
2000 286 19,497
2001 and after 515 66,455
------- --------
$ 5,671 $223,758
======== ========
</TABLE>
Sublease rentals recorded as revenue for the years ended December 31, 1995, 1994
and 1993 were not material to consolidated revenues.
Rentals charged to costs and expenses were $30,065, $17,034, and $16,476 in
1995, 1994, and 1993, respectively.
-25-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Accrued Liabilities
<TABLE>
<CAPTION>
December 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Rent $ 23,651 $ 13,130
Amounts held on customers' accounts 23,454 19,865
Retirement benefits 15,643 16,704
Interest 14,411 15,889
Minority interest in partnership 11,704 10,808
Deferred income 11,195 11,635
Insurance 9,847 8,053
Other 33,487 32,975
-------- --------
$143,392 $129,059
======== ========
</TABLE>
8. Borrowed Debt
<TABLE>
<CAPTION>
December 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Equipment obligations, payable periodically through 2009 at
6.50%-15.55% (average rate 8.97% as of December 31, 1995
and 9.33% as of December 31, 1994) $631,840 $712,345
Senior notes, 9.75%, due in 1997 143,000 143,000
Other long-term borrowings, payable periodically through
December 31, 2005 (average rate of 12.20% as of 26,745 27,062
-------- --------
December 31, 1995 and 1994) $801,585 $882,407
======== ========
</TABLE>
Equipment obligations are secured by railcars with an original cost of
$1,351,084 and $1,641,909 at December 31, 1995 and 1994, respectively. The above
equipment obligations include $3,955 and $5,938 of capitalized leases at
December 31, 1995 and 1994, respectively.
The senior notes contain certain provisions regarding asset sales and sale-
leaseback restrictions. As of December 31, 1995, the Company is in compliance
with all debt covenants.
In 1995, the Company issued $30,236 in long-term equipment trust certificates 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 2, 2006,
commencing in January, 1996. Principal will be due January 2, 2006.
The Company's Canadian subsidiaries have approximately $13,194 of credit lines
available on a no-charge basis. No amounts were outstanding as of December 31,
1995 and 1994.
-26-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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. Expenses associated with the credit agreement
(approximately $84 in 1994 and $370 in 1993) are included in interest expense.
Maturities of debt obligations for the years 1996 - 2000 are $477,639, as
follows: $69,378 in 1996, $211,739 in 1997, $68,333 in 1998, $64,629 in 1999
and $63,560 in 2000.
The estimated fair value of borrowed debt is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Equipment obligations $706,800 $728,314
Senior notes 151,509 147,546
Other long-term borrowings 35,903 32,278
-------- --------
$894,212 $908,138
======== ========
</TABLE>
The current fair value of the Company's borrowed debt is estimated by
discounting the future interest and principal cash flows at the Company's
estimated incremental borrowing rate at the respective year-end for debt with
similar maturities. The Company currently anticipates holding all borrowed debt
obligations until maturity.
9. Income Taxes
The Company is included in the consolidated U.S. federal income tax return of
Holdings. Under an arrangement with MIC, federal income taxes, before
consideration of investment tax credits, are computed as if the Company files a
separate consolidated return. For this computation, the Company generally uses
tax accounting methods which minimize the current tax liability (these methods
may differ from those used in the consolidated tax return). Tax liabilities are
remitted to, and refunds are obtained from, MIC on this basis. If deductions
and credits available to Holdings' entire consolidated group exceed those which
can be used on the return, allocation of the related benefits between the
Company and others will be at the sole discretion of 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 consolidated group.
Undistributed earnings of the Company's non-U.S. subsidiaries reflect full
provision for non-U.S. income taxes. However, since the earnings are
indefinitely reinvested in non-U.S. operations, no provision has been made for
taxes that might be payable upon remittance of such earnings nor is it
practicable to determine the amount of any such liability.
-27-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following summarizes the provision for income taxes on income before the
cumulative effect of a change in accounting principle:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
State
Current $ 455 $ 282 $ 144
Deferred 598 1,424 2,276
Federal
Current 24,288 12,525 (5,524)
Deferred 7,469 14,840 33,886
Deferred investment tax credit (1,763) (1,882) (1,868)
Foreign
Current 17,858 15,830 15,531
Deferred (2,094) (2,098) (2,820)
Deferred investment tax credit (783) (780) (873)
------- ------- -------
Total $46,028 $40,141 $40,752
======= ======= =======
</TABLE>
In 1995, 1994, and 1993 the Company paid foreign withholding taxes of $1,628,
$1,723, and $627, respectively.
Current U.S. income tax provisions were reduced, and deferred tax provisions
increased, by $5,907 in 1994 and $9,280 in 1993 due to utilization of U.S.
alternative minimum tax credits which had been provided for in 1990 and 1991.
Income tax expense is based upon domestic and foreign income before taxes and
the cumulative effect of the change in accounting principle as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Domestic $ 96,844 $ 76,770 $64,248
Foreign 33,649 26,749 26,234
-------- -------- -------
Total $130,493 $103,519 $90,482
======== ======== =======
</TABLE>
-28-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income tax effects of significant items which resulted in effective tax rates of
35.3% in 1995, 38.8% in 1994, and 45.0% in 1993 follow:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Federal income taxes at 35% statutory rate $45,673 $36,232 $31,669
Increase (decrease) resulting from:
Amortization of investment tax credits (2,546) (2,662) (2,741)
State income taxes, net of federal income
tax benefit 894 1,109 1,573
Excess tax provided on foreign income 1,292 4,370 3,529
Effect on deferred taxes of statutory
rate increase from 34% to 35% - - 7,300
Other, net 715 1,092 (578)
------- ------- -------
Total income taxes $46,028 $40,141 $40,752
======= ======= =======
</TABLE>
The excess tax on foreign income represents differences due to higher foreign
tax rates and foreign tax credits not benefitted.
Effective January 1, 1993, the Company prospectively adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (SFAS 109) and changed from the deferred method to the asset and
liability approach to accounting for income taxes. The cumulative effect of
this accounting change as of that date is reflected in the 1993 consolidated
statement of income as an $80,000 credit to earnings for the cumulative effect
of a change in accounting principle.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The December 31, 1995
and 1994 net deferred income tax liabilities of $468,170 and $459,893 shown in
the accompanying consolidated balance sheet are composed of $504,065 and
$493,626 in deferred tax liabilities, partially offset by $35,895 and $33,733 in
deferred tax assets, respectively. These deferred income tax assets and
(liabilities) result from the following temporary differences:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Excess of tax over book depreciation $(471,403) $(462,405)
Other (32,662) (31,221)
--------- ---------
Gross liabilities (504,065) (493,626)
Expenses per books not yet deductible for tax 18,345 17,566
Other tax credits 17,550 16,167
--------- ---------
Gross assets 35,895 33,733
--------- ---------
Net liability $(468,170) $(459,893)
========= =========
</TABLE>
-29-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The above assets exclude certain state deferred income tax assets related to
loss carryforwards (which expire over the next thirteen years) in the gross
amount of $11,000. These assets have been assigned a 100% valuation reserve due
to significant uncertainty as to ultimate realizability. There have been no
changes in any asset valuation reserves for the year ended December 31, 1995.
10. Contingencies
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 to resolve such claims, 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.
The Company self-insures certain exposures in its risk management plan. The
Company has accrued for the estimated costs of reported, as well as incurred but
not reported, self-insured claims.
The Company has certain environmental matters currently outstanding, none of
which are significant to the Company's results of operations or financial
condition, either individually or in the aggregate. See further discussion of
such matters under the "Environmental Matters" caption of Item 1 of this
Form 10-K.
11. Pension Benefits
Substantially all of the Company's employees are covered by discretionary
contribution or defined benefit retirement plans.
Costs of the discretionary contribution pension plans are accrued in amounts
determined on the basis of percentages, generally established annually by the
Company, of employee compensation of the various units covered by such plans.
The contributions are funded as accrued. Discretionary and defined contribution
plan expense for 1995, 1994 and 1993 was $6,202, $5,892 and $5,164,
respectively.
As of December 31, 1995, the Company's domestic defined benefit plans were
either in the process of being terminated (and their benefits frozen) or were
completely terminated. The benefits are based on payment of a specific amount,
which varies by plan, for each year of service. The Company's funding policy is
to contribute the minimum amount required either by law or union agreement.
Contributions are intended to provide not only for benefits attributed to
service through the plans' termination dates, but also for those expected to be
earned in the future. Certain foreign subsidiaries sponsor unfunded defined
benefit plans which cover substantially all of their regular, full-time
employees. Benefits are based on both years of service and compensation.
Defined benefit pension plan expense was $320, $357 and $371 for 1995, 1994 and
1993, respectively. Accrued defined benefit pension liability recognized in the
consolidated balance sheet was $3,297 and $6,556 at December 31, 1995 and 1994,
respectively.
-30-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Retirement Health Care and Life Insurance Benefits
The Company provides limited health care and life insurance benefits for certain
retired employees. These benefits are subject to deductible and copayment
provisions, Medicare supplements and other limitations. At December 31, 1995
and 1994, the liability for postretirement health care and life insurance
benefits was $3,739 and $4,298 respectively, and was included in accrued
liabilities in the consolidated balance sheet.
Expense related to these benefits was $326, $359 and $590 in 1995, 1994 and
1993, respectively.
13. Other Income
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Interest income $13,251 $10,103 $10,375
Earned income on direct financing leases 6,913 7,206 8,037
Goodwill amortization - - (407)
Minority interest in net income (896) (790) (704)
Other 339 (560) (268)
------- ------- -------
$19,607 $15,959 $17,033
======= ======= =======
</TABLE>
Interest income presented above includes interest earned on advances to MIC as
described in Note 16.
14. Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges represents the number of times that
interest expense, amortization of debt discount and the interest component of
rent expense were covered by income before income taxes and cumulative effect of
a change in accounting principle and such interest, amortization and the
interest component of rentals.
-31-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Summarized Financial Information of Procor Limited
Summarized consolidated financial information for the Company's wholly-owned
subsidiary, Procor Limited, is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1995 1994
-------- --------
<S> <C> <C> <C>
Balance Sheet:
Railcar lease fleet, net $229,132 $236,565
All other assets 177,505 153,055
Borrowed debt 150,665 146,180
All other liabilities 158,356 158,760
Years Ended December 31,
------------------------------
1995 1994 1993
-------- -------- ---------
Statement of Income:
Services and net sales $132,861 $114,863 $119,848
Gross profit 41,054 37,735 40,446
Net income 14,878 10,943 11,345
</TABLE>
Services and net sales in 1995 and 1994 includes $24,315 and $10,326,
respectively, representing the sale of railcars to the UTLX International
Division of the Company.
16. Related Party Transactions
The following table sets forth the major related party transaction amounts
included in the consolidated financial statements.
<TABLE>
<CAPTION>
Service Interest Management Insurance
Revenues Income Expense Billed
-------- -------- ---------- ---------
<S> <C> <C> <C> <C>
1995 $2,901 $11,625 $4,378 $2,755
1994 3,324 8,682 4,867 2,896
1993 2,822 9,786 4,783 2,102
</TABLE>
The Company leases 384 box cars under net long-term leases of 15 to 20 years to
WCTU Railway Company, an affiliated company. Revenues from these leases are
classified in the preceding table as service revenues.
-32-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company from time to time advances funds in excess of its current cash
requirements for domestic operations to MIC or MIC's subsidiaries on an
unsecured demand basis. Such advances, which bear interest principally at LIBOR
plus 1%, amounted to $164,521 and $180,057 at December 31, 1995 and 1994,
respectively.
Certain of the Company's Canadian operations and its affiliates enter into
intercompany loans utilizing their respective excess cash balances. These
advances between the Company and subsidiaries of MIC resulted in a receivable of
$6,640 and $14,672 at December 31, 1995 and 1994, respectively, that are
included in Advances to Parent Company.
Management fees are paid to The Marmon Group, Inc. ("Marmon"), a subsidiary of
Holdings and an affiliate of MIC, for certain services provided by Marmon's
officers and employees including services with respect to accounting, tax,
finance, legal and related matters which Marmon provides to certain of Holdings'
divisions, subsidiaries and affiliates. Marmon provides these services to the
Company because it is considered more cost efficient to provide such services in
this manner.
The management fee which Marmon charges to the Company and other entities that
it manages is determined in the following manner. First, budgeted
administrative expenses of Marmon for the twelve month period following the date
of computation (including wages, salaries and related expenses, rent, utilities,
travel expenses and other similar expenses, but excluding extraordinary and non-
recurring items) are multiplied by the average of the following three
percentages (each of which is given equal weight): (1) the percent of the sales
and services revenues of the Company to the total sales and services revenues of
all managed entities, including the Company; (2) the percent of the assets of
the Company to the assets of all managed entities, including the Company; and
(3) the percent of the net income of the Company to the net income of all
managed entities, including the Company. In making this computation, Marmon uses
sales and services revenues and net income from the beginning of the year to the
approximate date of computation and assets at that date.
Marmon's management takes the amount derived from this formula and applies
discretion to determine the final management fee to be charged. The factors
which are considered include matters such as the following: any known operating
problems and risks that require or may require additional time to be devoted to
the Company by Marmon's management; significant expansion programs; significant
contracts; unusual tax or accounting matters; and the experience and length of
service of the Company's management.
Included in the preceding table as insurance billed are $1,071 in 1995, $1,179
in 1994 and $159 in 1993 for insurance premiums for coverage that was insured or
reinsured with an insurance company which the Company has been advised is
controlled by trusts for the benefit of an individual related by marriage to a
member of the Pritzker family.
In 1986, the Company entered into a partnership with an affiliate for the
purpose of purchasing used railcars. The Company's investment as of December
31, 1995 and 1994 was $46,814 and $43,229, respectively, which represents 80%
ownership in this partnership. The minority partner's interest in the
partnership at December 31, 1995 and 1994 is $11,704 and $10,808, respectively,
which is included in accrued liabilities. The minority interest in income,
$896, $790 and $704 for the years ended December 31, 1995, 1994 and 1993,
respectively, is reflected in other income.
-33-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. Derivative Financial Instruments
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
and $12,572 at December 31, 1995 and 1994.
18. Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1995
Net sales and services revenues $165,942 $167,358 $305,183 $217,746
Cost of sales and services 105,989 105,827 241,477 155,241
-------- -------- -------- --------
Gross profit 59,953 61,531 63,706 62,505
Net income $ 19,064 $ 20,117 $ 19,648 $ 25,636
======== ======== ======== ========
1994
Net sales and services revenues $134,007 $144,767 $151,715 $290,375
Cost of sales and services 76,305 84,338 95,644 231,455
-------- -------- -------- --------
Gross profit 57,702 60,429 56,071 58,920
Net income $ 14,432 $ 16,000 $ 15,025 $ 17,921
======== ======== ======== ========
1993
Net sales and services revenues $122,054 $128,359 $123,105 $131,305
Cost of sales and services 70,294 69,964 67,317 72,586
-------- -------- -------- --------
Gross profit 51,760 58,395 55,788 58,719
Income before cumulative effect of
a change in accounting principle 10,877 14,894 8,188 15,771
Net income $ 90,877 $ 14,894 $ 8,188 $ 15,771
======== ======== ======== ========
</TABLE>
In the third and fourth quarters of 1995, included in net sales and services
revenues and cost of sales and services is approximately $100,822 and $29,695,
respectively, related to the sale-leaseback transaction. See Note 6.
In the fourth quarter of 1994, included in net sales and services revenues and
cost of sales and services is approximately $125,500 related to sale-leaseback
transactions. See Note 6.
In the first quarter of 1993, the Company recorded an $80,000 credit to earnings
to reflect the adoption of SFAS 109. In the third quarter of 1993, the Company
recorded a $7,300 charge to earnings to reflect the effect of the statutory tax
rate increase on deferred taxes. See Note 9.
-34-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. Supplementary Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1995 1994 1993
---------- ----------- ---------
<S> <C> <C> <C>
Changes in operating assets and liabilities:
Accounts receivable $ 259 $ (3,859) $(7,294)
Inventories (2,657) (15,399) (5,656)
Prepaid expenses and deferred charges 1,114 171 (102)
Accounts payable and accrued liabilities 25,080 9,049 16,065
------- -------- -------
$23,796 $(10,038) $ 3,013
======= ======== =======
Cash paid during the year for:
Interest (net of amount capitalized) $81,792 $ 91,928 $94,470
Income taxes 41,723 30,880 21,212
</TABLE>
Unrealized foreign currency translation gains and losses, which are non-cash
items, are excluded from the decrease in advance to parent.
20. Industry Segment Information
The Company's industry and geographic data are found under the "Segment Data"
caption of Item 1 of this Form 10-K. The aforementioned data are an integral
part of the Notes to Consolidated Financial Statements.
21. Subsequent Event
On February 19, 1996, Procor Limited ("Procor"), a wholly-owned subsidiary of
the Company, entered into an agreement with Hawker Siddeley Canada Inc. ("Hawker
Siddeley") and Hawker Canada Holdings Inc. ("Hawker Holdings"), a wholly-owned
subsidiary of Hawker Siddeley, 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 will transfer its 55% ownership in CGTX Inc. to Hawker Holdings.
The aggregate cash price is Cdn. $120,000 ($87,960 at the December 31, 1995
exchange rate of .733).
On March 4, 1996, GATX Corporation and its subsidiaries, General American
Transportation Company ("GATC") and 314072 Canada Inc., initiated a lawsuit
against Hawker Siddeley, Hawker Holdings, Procor, Marmon Holdings, Inc., and
others, alleging the proposed corporate reorganization of Hawker Siddeley does
not comply with the terms of a shareholder's agreement between Hawker Siddeley
and GATC relating to their ownership in CGTX Inc. While management believes its
agreement with Hawker Siddeley and Hawker Holdings should be allowed to proceed,
the Company is unable to predict at this time what the results of the lawsuit
will be.
-35-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
First Elected
Name Age Positions or Offices to Position
- - ------------------- --- --------------------------------------- -------------
<S> <C> <C> <C>
Kenneth P. Fischl 46 Manager - Tank Car Marketing
and Administration 1979
Vice President Fleet Management 1981
Vice President 1992
Executive Vice President and
General Manager Tank Car Division 1992
President Tank Car Division 1993
Director 1994
Mark J. Garrette 42 Vice President Tank Car Division 1994
Vice President and Senior Vice President
and Controller, Tank Car Division 1994
Robert C. Gluth 71 Director 1981
Executive Vice President 1981
and served as Treasurer between
February, 1986 and January, 1987
and since October, 1989
Jay A. Pritzker 73 Director 1981
Chairman of the Board 1981
Robert A. Pritzker 69 Director 1981
President 1981
Robert W. Webb 56 General Counsel 1986
Secretary 1986
</TABLE>
-36-
<PAGE>
Kenneth P. Fischl
Mr. Fischl was elected as a Director in March, 1994, and appointed President of
the Tank Car Division in February, 1993. He was appointed a Vice President of
the Company and Executive Vice President and General Manager of the Tank Car
Division in July, 1992. He joined the Company in 1977 as a Market Analyst.
Mr. Fischl was promoted to Manager of Tank Car Marketing and Administration in
1979 and became Vice President of Fleet Management in 1981. He held this
position until assuming his current responsibilities.
Mark J. Garrette
Mr. Garrette was appointed Senior Vice President and Controller of the Tank Car
Division and Vice President of the Company in August, 1994. He joined the Tank
Car Division as Vice President and Assistant Controller in May, 1994. Prior to
joining the Company, Mr. Garrette was a Division Vice President of AVX Corp., a
subsidiary of Kyocera Corp., a manufacturer of electronic components.
Robert C. Gluth
Mr. Gluth is Executive Vice President and a Director of MIC, Vice President,
Treasurer and a Director of Holdings, Executive Vice President and Director of
The Marmon Corporation ("TMC"), and Executive Vice President and a Director of
The Marmon Group, Inc. ("Marmon"). Mr. Gluth is also Treasurer of each of TMC,
MIC and Marmon.
Jay A. Pritzker
Mr. Jay A. Pritzker is Chairman of the Board of each of MIC, Holdings, TMC and
Marmon. Mr. Pritzker is also a partner in the law firm of Pritzker & Pritzker,
and Chairman of the Board of Hyatt Corporation.
Robert A. Pritzker
Mr. Robert A. Pritzker is President and a Director of each of MIC, Holdings, TMC
and Marmon. Mr. Pritzker is also a director of Hyatt Corporation.
Robert W. Webb
Mr. Webb is Secretary and a Vice President of each of MIC, Holdings, TMC and
Marmon.
Messrs. Jay A. Pritzker and Robert A. Pritzker are brothers. There are no other
family relationships among the directors and executive officers of the Company.
Directors and executive officers are elected for a term of one year, or until a
successor is appointed.
-37-
<PAGE>
Other Directorships
Mr. Jay A. Pritzker is a Director of Southern Peru Copper Corporation. Mr.
Robert A. Pritzker is a Director of Southern Peru Copper Corporation and Acxiom
Corporation. Otherwise, none of the members of the Company's Board of Directors
are members of the board of directors of companies with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of that Act or of a company
registered as an investment company under the Investment Company Act of 1940.
ITEM 11. EXECUTIVE COMPENSATION
Kenneth P. Fischl, Vice President; and Mark J. Garrette, Vice President, were
the only executive officers of the Company who in the year ended December 31,
1995, received salary and bonus in excess of $100,000 from the Company and its
subsidiaries for services in all capacities to the Company.
All other officers of the Company received their 1995 compensation from Marmon
and are primarily involved in the management of MIC and Marmon. The Company,
together with the other subsidiaries of MIC, have been required to pay Marmon a
portion of such compensation which is encompassed in the charge for certain
common services provided by Marmon to the Company and such other subsidiaries.
The amount of such charge has been determined pursuant to a formula based upon
the dollar value of revenues, earnings and assets. See Note 16 to the
consolidated financial statements included in Item 8 of this Form 10-K.
Directors of the Company do not receive any compensation in such capacity.
Shown below is the aggregate of all forms of compensation paid by the Company to
Mr. Fischl and Mr. Garrette:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
---------------------------- All Other
Name and Principal Position Year Salary Bonus Compensation*
- - ---------------------------------- ------- -------- ------- ------------
<S> <C> <C> <C> <C>
Kenneth P. Fischl,
Director and Vice President of 1995 $207,400 $55,000 $22,900
the Company and President and 1994 196,400 45,000 20,300
General Manager of the Tank Car 1993 183,200 37,000 17,800
Division
Mark J. Garrette,
Vice President of the Company and 1995 149,000 18,000 6,500
Senior Vice President of the Tank
Car Division
</TABLE>
* Represents the aggregate amounts of Company contributions to defined
contribution plans on behalf of each of the named individuals.
-38-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
MIC, a Delaware corporation having its principal executive offices at 225 West
Washington Street, Chicago, Illinois, owns 1,000 shares, or 100% of the
Company's issued and outstanding common stock. MIC is a subsidiary of Holdings.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Note 16 to the consolidated financial statements included in Item 8 of this
Form 10-K for a description of certain related party transactions.
-39-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
a) 1. Financial Statements -
Consolidated statement of income for each of the three years
in the period ended December 31, 1995...................... 16
Consolidated balance sheet - December 31, 1995 and 1994.... 17
Consolidated statement of stockholder's equity for each of
the three years in the period ended December 31, 1995...... 18
Consolidated statement of cash flows for each of the three
years in the period ended December 31, 1995................ 19
Notes to consolidated financial statements.................. 20
2. Index to Exhibits........................................... 42
</TABLE>
b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended
December 31, 1995.
Financial statement schedules are not submitted because they are not
applicable or because the required information is included in the
financial statements or notes thereto.
-40-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Robert C. Gluth
---------------------------
Robert C. Gluth
Executive Vice President
Dated: March 7, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- - --------------------------- ---------------------------- -------------
<S> <C> <C>
/s/ Jay A. Pritzker Chairman of the Board March 7, 1996
- - --------------------------- and Director
Jay A. Pritzker
/s/ Robert A. Pritzker President and Director March 7, 1996
- - --------------------------- (principal executive officer)
Robert A. Pritzker
/s/ Robert C. Gluth Executive Vice President March 7, 1996
- - --------------------------- and Director and Treasurer
Robert C. Gluth (principal financial officer
and principal accounting
officer)
/s/ Kenneth P. Fischl Director and President, Tank March 7, 1996
- - --------------------------- Car Division
Kenneth P. Fischl
</TABLE>
-41-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
INDEX TO EXHIBITS
ITEM 14 (a)(3)
<TABLE>
<C> <S> <C>
Exhibit 3 Articles of incorporation and by-laws
3(a) Restated Certificate of Incorporation of the Company, as filed
with the Secretary of State of Delaware on September 2, 1982
(which was filed as Exhibit 3(a) to the Annual Report on Form
10-K for the fiscal year ended December 31, 1982, and is
incorporated herein by reference)
3(b) By-Laws of the Company, as adopted November 25, 1987 (which was
filed as Exhibit 3(b) to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1988, and is incorporated herein
by reference)
Exhibit 12 Statements re computation of ratios
The computation of the Ratio of Earnings to Fixed Charges
(summarized in Note 14 to the consolidated financial
statements)................................................... 43
Exhibit 21 Subsidiaries of the registrant................................. 44
Exhibit 27 Financial Data Schedule (submitted with the electronic filing of
this document)
</TABLE>
Instruments defining the rights of holders of long-term debt are not being filed
herewith pursuant to the provisions of paragraph 4(iii) of Item 601(b) of
Regulation S-K. The Company agrees to furnish a copy of any such instrument to
the Commission upon request.
-42-
<PAGE>
Exhibit 12
UNION TANK CAR COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
Line ----------------------------------------------------
Number 1995 1994 1993 1992 1991
------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income Available for
Fixed Charges:
- - --------------------
Income from continuing
operations 1 $ 84,465 $ 63,378 $ 49,730 $ 48,382 $ 45,024
Provision for federal income
taxes and foreign taxes 2 44,975 38,435 38,332 30,191 34,068
Provision for state income
taxes 3 1,053 1,706 2,420 2,605 2,159
Fixed charges (line 8) 4 92,764 98,807 101,973 106,895 118,352
-------- -------- -------- -------- --------
Income available for fixed
charges 5 $223,257 $202,326 $192,455 $188,073 $199,603
======== ======== ======== ======== ========
Fixed Charges:
- - --------------
Interest expenses (including
amortization of debt discount)
as shown on the consolidated
statement of income 6 $ 81,179 $ 91,442 $ 96,584 $105,417 $117,263
Add interest portion of rent
expense 7 11,585 7,365 5,389 1,478 1,089
-------- -------- -------- -------- --------
Total fixed charges 8 $ 92,764 $ 98,807 $101,973 $106,895 $118,352
======== ======== ======== ======== ========
Number of times fixed charges
were earned (line 5/line 8) 2.41 2.05 1.89 1.76 1.69
==== ==== ==== ==== ====
</TABLE>
-43-
<PAGE>
Exhibit 21
UNION TANK CAR COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
as of December 31, 1995
<TABLE>
<CAPTION>
Jurisdiction Under
Which Organized
------------------
<S> <C>
Atlas Bolt & Screw Company Delaware
Atlas Bolt & Screw Company of Canada, Inc. Ontario
The Marmon Group of Canada, Ltd. Canada
Procor Alberta, Inc. Alberta
Procor LPG Storage, Inc. Alberta
Procor Limited Canada
Procor Sulphur Services, Inc. Alberta
Rail Car Associates Limited Partnership Illinois
Railserve, Inc. Canada
Robertson Whitehouse, Inc. Ontario
Trans Union Crane Rental, Inc. Canada
Trans Union Fastener Corporation Delaware
Trans Union Finance (Canada) Limited Ontario
Uni-Form Components, Co. Delaware
Union Tank Car Rail Services Company Delaware
</TABLE>
All subsidiaries listed above are wholly-owned except for Rail Car Associates
Limited Partnership of which the Company is the general partner and has an 80%
ownership interest and are included in the consolidated financial statements
incorporated herein.
-44-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the December 31, 1995 consolidated balance sheet, consolidated statement of
income for the year ended December 31, 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> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 28,781
<SECURITIES> 0
<RECEIVABLES> 74,405
<ALLOWANCES> 3,340
<INVENTORY> 68,477
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,754,112
<DEPRECIATION> 1,174,931
<TOTAL-ASSETS> 2,003,346
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 801,585
<COMMON> 106,689
0
0
<OTHER-SE> 423,784
<TOTAL-LIABILITY-AND-EQUITY> 2,003,346
<SALES> 357,003<F2>
<TOTAL-REVENUES> 875,836<F3>
<CGS> 330,814
<TOTAL-COSTS> 608,534
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,179
<INCOME-PRETAX> 130,493
<INCOME-TAX> 46,028
<INCOME-CONTINUING> 84,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,465
<EPS-PRIMARY> 0<F4>
<EPS-DILUTED> 0
<FN>
<F1> The Company issues financial statements utilizing a non-classified balance
sheet.
<F2> Includes $130,517 related to a sale-leaseback transaction.
<F3> The Company's revenues are derived primarily from railcar leasing.
<F4> The Company is a wholly-owned subsidiary.
</FN>
</TABLE>
