<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 June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
[ ] OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number 1-5666
-----------------------------
UNION TANK CAR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-3104688
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
225 West Washington Street, Chicago, Illinois 60606
---------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 372-9500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------------- ----------------
There is no voting stock held by non-affiliates of the registrant. This report
is being filed by the registrant as a result of undertakings made pursuant to
Section 15(d) of the Securities Exchange Act of 1934 with respect to certain
long-term debt of the registrant.
Included in this filing are 10 pages, sequentially numbered in the bottom center
of each page.
-1-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
----
Part I. Financial Information
Item 1.
Condensed consolidated statement of income -
three and six month periods ended
June 30, 1996 and 1995 3
Condensed consolidated balance sheet -
June 30, 1996 and December 31, 1995 4
Condensed consolidated statement of cash flows -
six months ended June 30, 1996 and 1995 5
Notes to condensed consolidated financial
statements 6 - 7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 1.
Legal Proceedings 9
Item 6.
Exhibits and Reports on Form 8-K 9
Signatures 10
-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 Six Months Ended
June 30, June 30,
--------------------- -------------------------
1996 1995 1996 1995
--------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Revenues
Services (leasing and other) $ 135,195 $ 117,721 $ 261,015 $ 229,713
Net sales 37,209 49,637 60,076 103,587
-------- -------- -------- -------
172,404 167,358 321,091 333,300
Other income 14,772 4,728 19,099 10,257
-------- -------- -------- --------
187,176 172,086 340,190 343,557
Costs and expenses
Cost of services 76,968 62,465 145,823 122,144
Cost of sales 30,437 43,362 46,809 89,672
General and administrative 13,562 14,304 26,816 28,106
Interest 18,078 20,612 36,678 41,729
-------- -------- -------- --------
139,045 140,743 256,126 281,651
-------- -------- -------- --------
Income before income taxes 48,131 31,343 84,064 61,906
Provision for income taxes
Current 13,534 12,326 25,558 20,334
Deferred income taxes
and investment tax credits 5,056 (1,100) 6,322 2,391
-------- -------- -------- --------
18,590 11,226 31,880 22,725
-------- -------- -------- --------
Net income $ 29,541 $ 20,117 $ 52,184 $ 39,181
========= ========== ======== =========
</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>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 45,691 $ 28,781
Accounts receivable 80,645 71,065
Inventories 69,309 68,477
Due from affiliate - 12,828
Prepaid expenses and deferred charges 9,654 6,479
Advances to parent company,
principally at LIBOR plus 1% 171,945 171,161
Railcar lease fleet, net 1,397,626 1,430,196
Fixed assets, net 146,881 148,985
Investment in aircraft direct financing lease 37,700 37,898
Other assets 27,068 27,476
--------- ---------
$1,986,519 $2,003,346
========= =========
</TABLE>
LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Accounts payable $ 19,352 $ 31,795
Accrued liabilities 158,061 148,388
Borrowed debt 765,031 801,585
--------- ---------
942,444 981,768
Deferred income taxes
and investment tax credits 497,418 491,105
Stockholder's equity
Common stock and additional capital 111,341 111,341
Retained earnings 435,316 419,132
--------- ---------
Total stockholder's equity 546,657 530,473
--------- ---------
$1,986,519 $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>
Six Months Ended
June 30,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 52,184 $ 39,181
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 53,579 51,757
Gain on disposition of railcars and other fixed assets (12,091) (622)
Deferred taxes 6,322 2,391
Other non-cash income and expenses 890 767
Changes in assets and liabilities:
Accounts receivable (10,165) (19,264)
Inventories (1,091) (26,955)
Prepaid expenses and deferred charges (3,174) (1,897)
Accounts payable and accrued expenses (7,071) 10,353
-------- --------
Net cash provided by operating activities 79,383 55,711
Cash flows from investing activities:
Construction and purchase of railcars and other fixed assets (164,067) (106,306)
Proceeds from disposals of railcars and other fixed assets 19,376 3,848
Decrease in advances to affiliates 12,828 -
(Increase) decrease in advance to parent (810) 104,485
Decrease in other assets 372 14,136
-------- --------
Net cash (used in) provided by investing activities (132,301) 16,163
Cash flows from financing activities:
Proceeds from sale-leaseback transaction 142,382 -
Proceeds from issuance of borrowed debt 14,231 -
Principal payments of borrowed debt (50,785) (44,667)
Cash dividends (36,000) (27,000)
-------- --------
Net cash provided by (used in) financing activities 69,828 (71,667)
Effect of exchange rates on cash and cash equivalents - 653
-------- --------
Net increase in cash and cash equivalents 16,910 860
Cash and cash equivalents at beginning of year 28,781 15,303
-------- --------
Cash and cash equivalents at end of period $ 45,691 $ 16,163
======== ========
Cash paid during the period for:
Interest (net of amount capitalized) $ 36,928 $ 42,391
Income taxes 25,329 19,423
</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/A.
The 1996 interim results presented herein are not necessarily indicative of
the results of operations for the full year 1996.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
3. As more fully described in the Company's 1995 Annual Report on Form 10-K/A,
under an arrangement with Marmon Industrial, the Company is included in the
consolidated federal income tax return of Marmon Holdings. As a member of a
consolidated federal income tax group, the Company is contingently liable
for the federal income taxes of the other members of the group.
4. The Company and its subsidiaries have been named as defendants in a number
of lawsuits, and certain claims are pending. The Company has accrued what it
reasonably expects to pay in resolution of these matters and, in the opinion
of management, their ultimate resolution will not have a material effect on
the Company's consolidated financial position or results of operations.
5. Foreign currency translation adjustments and transaction gains and losses
are assumed by the Company's parent. For the six months ended June 30, 1996
and 1995, Marmon Industrial absorbed a loss of $61 and a gain of $619,
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
$9,353 at June 30, 1996, and $5,400 at 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>
June 30, December 31,
1996 1995
--------------- ---------------
<S> <C> <C>
Balance Sheet:
Railcar lease fleet, net $ 223,042 $ 229,132
All other assets 182,179 177,505
Borrowed debt 139,735 150,665
All other liabilities 159,514 158,356
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1996 1995 1996 1995
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Statement of Income:
Services and net sales $ 31,696 $ 31,392 $ 66,577 $ 61,571
Gross profit 10,283 10,156 20,946 19,844
Net income 4,450 3,323 8,343 6,697
</TABLE>
8. In June 1996, the Company entered into a sale-leaseback transaction with a
trust for the benefit of an institutional investor pursuant to which it sold
and leased back an aggregate of $142,382 in railcars. The Company has an
option to purchase all or a portion of the railcars at a fixed purchase
price on (i) July 2, 2006, (ii) July 2, 2012 (the base term lease expiration
date) and (iii) July 2, 2018.
9. In June 1996, the Company issued $14,231 in long-term equipment trust
certificates to finance additions to its railcar fleet. The certificates
bear interest at a rate of 7.21% per annum. Interest is due semi-annually
through July 2, 2006, commencing in January, 1997. Principal will be due
July 2, 2006.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
2nd Quarter 1996 versus 1995
- ----------------------------
Service revenues increased $17.5 million. Slightly more than half of the
increase resulted from the effect of cars added to the lease fleet. The
remaining increase was primarily due to increased sulphur service processing
operations. Gross margin percentages decreased from the comparable period in
1995 primarily due to the increase in railcar rental expenses from the sale-
leaseback transactions, which was offset by decreased interest expense.
Sales revenues decreased $12.4 million primarily due to decreased railcar sales.
Other income increased $10.0 million primarily due to a gain on the sale of a
storage facility used in the liquefied petroleum gas storage operations.
Six Months 1996 versus 1995
- ---------------------------
Service revenues increased $31.3 million. More than half of the increase
resulted from increased sulphur service processing operations. The remaining
increase was primarily due to the effect of cars added to the lease fleet.
Sales revenues decreased $43.5 million primarily due to decreased railcar sales.
Interest expense decreased $5.1 million primarily due to lower average balances
of debt outstanding and a lower average interest rate on debt outstanding.
Financial Condition
- -------------------
1996 versus 1995
- ----------------
Operating activities provided $79.4 million of cash. These funds, along with the
proceeds from the sale-leaseback transaction and the issuance of long-term debt,
were used to provide financing for railcar additions, service borrowed debt
obligations and pay dividends to the Company's stockholder.
Management expects future cash to be provided from operating activities, long-
term railcar financings and collection of funds previously advanced to parent
will be adequate to provide for the continued expansion of the Company's
business and enable it to meet its debt service obligations.
-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/A 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/A for the year ended December 31, 1995, and
at "Item 1. Legal Proceedings" in the Company's Quarterly report on
Form 10-Q for the quarter ended March 31, 1996. The Court ruled in
favor of the plaintiffs in the lawsuit which was filed by GATX
Corporation and its subsidiaries, General American Transportation
Company ("GATC") and 314072 Canada Inc., against Hawker Siddeley Canada
Inc., Hawker Canada Holdings, Marmon Holdings, Inc., Procor Limited and
others to enjoin the purchase by Procor Limited of Hawker Siddeley
Canada Inc. As a result of the termination of the proposed purchase,
Procor Limited received certain fees.
Item 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the quarter ended June 30, 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: August 6, 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 June 30,
1996 condensed consolidated balance sheet, condensed consolidated statement of
income for the six months ended June 30, 1996, and the notes thereto, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 45,691
<SECURITIES> 0
<RECEIVABLES> 84,464
<ALLOWANCES> 3,819
<INVENTORY> 69,309
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,750,173
<DEPRECIATION> 1,205,666
<TOTAL-ASSETS> 1,986,519
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 765,031
<COMMON> 106,689
0
0
<OTHER-SE> 439,968
<TOTAL-LIABILITY-AND-EQUITY> 1,986,519
<SALES> 60,076
<TOTAL-REVENUES> 340,190<F2>
<CGS> 46,809
<TOTAL-COSTS> 192,632
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,678
<INCOME-PRETAX> 84,064
<INCOME-TAX> 31,880
<INCOME-CONTINUING> 52,184
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,184
<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>
