<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, 1997
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.
Included in this filing are 10 pages, sequentially numbered in the bottom center
of each page.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. Financial Information
Item 1.
Condensed consolidated statement of income -
three and six month periods ended
June 30, 1997 and 1996 3
Condensed consolidated balance sheet -
June 30, 1997 and December 31, 1996 4
Condensed consolidated statement of cash flows -
six months ended June 30, 1997 and 1996 5
Notes to condensed consolidated financial statements 6 - 7
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations 8
Part II. Other Information
Item 1.
Legal Proceedings 9
Item 6.
Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Services (leasing and other) $140,412 $135,195 $276,745 $261,015
Net sales 71,496 37,209 121,079 60,076
-------- -------- -------- --------
211,908 172,404 397,824 321,091
Other income 4,538 14,772 9,170 19,099
-------- -------- -------- --------
216,446 187,176 406,994 340,190
Costs and expenses
Cost of services 82,088 76,968 159,298 145,823
Cost of sales 62,698 30,437 105,673 46,809
General and administrative 14,664 13,562 28,629 26,816
Interest 19,400 18,078 38,445 36,678
-------- -------- -------- --------
178,850 139,045 332,045 256,126
-------- -------- -------- --------
Income before income taxes 37,596 48,131 74,949 84,064
Provision for income taxes
Current 12,573 13,534 23,551 25,558
Deferred 621 5,056 3,366 6,322
-------- -------- -------- --------
13,194 18,590 26,917 31,880
-------- -------- -------- --------
Net income $ 24,402 $ 29,541 $ 48,032 $ 52,184
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------------- -----------------
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $ 79,508 $ 71,915
Accounts receivable, primarily due within one year 74,491 74,667
Inventories 65,556 65,756
Prepaid expenses and deferred charges 14,811 13,665
Advances to parent company,
principally at LIBOR plus 1% 149,132 111,169
Railcar lease fleet, net 1,529,194 1,459,800
Fixed assets, net 154,898 147,887
Investment in aircraft direct financing lease 36,822 37,347
Other assets 18,997 24,614
----------------- -----------------
Total assets $2,123,409 $2,006,820
================= =================
Liabilities, Deferred Items and Stockholder's Equity
- ----------------------------------------------------
Accounts payable $ 19,086 $ 30,036
Accrued liabilities 177,905 180,865
Borrowed debt, including $67,094 due within
one year ($210,288 at December 31, 1996) 851,222 738,632
----------------- -----------------
1,048,213 949,533
Deferred income taxes and investment tax credits 496,414 493,537
Stockholder's equity
Common stock and additional capital 113,035 113,035
Retained earnings 465,747 450,715
----------------- -----------------
Total stockholder's equity 578,782 563,750
----------------- -----------------
Total liabilities, deferred items and
stockholder's equity $2,123,409 $2,006,820
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 48,032 $ 52,184
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 55,032 53,579
Deferred taxes 3,366 6,322
Gain on disposition of railcars and other fixed assets (1,081) (12,091)
Other non-cash income and expenses 1,340 890
Changes in assets and liabilities:
Accounts receivable (1,748) (10,165)
Inventories (503) (1,091)
Prepaid expenses and deferred charges (1,191) (3,174)
Accounts payable and accrued expenses (12,574) (7,071)
----------------- -----------------
Net cash provided by operating activities 90,673 79,383
Cash flows from investing activities:
Increase in advance to parent (35,423) (810)
Construction and purchase of railcars and other fixed assets (135,767) (164,067)
Decrease in other assets 5,163 372
Proceeds from disposals of railcars and other fixed assets 3,221 19,376
Decrease in advances to affiliates - 12,828
----------------- -----------------
Net cash used in investing activities (162,806) (132,301)
Cash flows from financing activities:
Proceeds from issuance of borrowed debt 300,000 14,231
Proceeds from sale-leaseback transaction - 142,382
Principal payments of borrowed debt (186,698) (50,785)
Cash dividends (33,000) (36,000)
----------------- -----------------
Net cash provided by financing activities 80,302 69,828
Effect of exchange rates on cash and cash equivalents (576) -
----------------- -----------------
Net increase in cash and cash equivalents 7,593 16,910
Cash and cash equivalents at beginning of year 71,915 28,781
----------------- -----------------
Cash and cash equivalents at end of period $ 79,508 $ 45,691
================= =================
Cash paid during the period for:
Interest (net of amount capitalized) $ 38,445 $ 36,928
Income taxes 27,649 25,329
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
1. UNION TANK CAR COMPANY (the "Company") is a wholly-owned subsidiary of
Marmon Industrial Corporation ("Marmon Industrial"). Marmon Industrial is a
wholly-owned subsidiary of Marmon Holdings, Inc. ("Marmon Holdings"),
substantially all of the stock of which is owned, directly or indirectly, by
trusts for the benefit of certain members of the Pritzker family. As used
herein, "Pritzker family" refers to the lineal descendants of Nicholas J.
Pritzker, deceased.
2. The accompanying unaudited condensed consolidated financial statements
include all adjustments, consisting of normal recurring accruals, which the
Company considers necessary for a fair presentation. These interim financial
statements do not include all disclosures normally provided in annual
financial statements. Accordingly, they should be read in conjunction with
the consolidated financial statements and notes thereto in the Company's
1996 Annual Report on Form 10-K/A.
The 1997 interim results presented herein are not necessarily indicative of
the results of operations for the full year 1997.
3. As more fully described in the Company's 1996 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, 1997
and 1996, Marmon Industrial absorbed losses of $11 and $61, respectively.
6. The Company's Canadian subsidiaries periodically 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 $760 at June 30, 1997. No foreign currency forward contracts
were outstanding at December 31, 1996.
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<PAGE>
7. Summarized Financial Information of Procor Limited
Summarized consolidated financial information for the Company's wholly-owned
subsidiary, Procor Limited, in thousands of U.S. dollars, is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------------- -----------------
<S> <C> <C>
Balance Sheet:
Railcar lease fleet, net $204,253 $213,644
All other assets 192,819 188,175
Borrowed debt 128,698 134,861
All other liabilities 149,016 153,872
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- --------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Statement of Income:
Services and net sales $27,876 $31,696 $50,754 $66,577
Gross profit 10,104 10,283 18,652 20,946
Net income 4,106 4,450 7,234 8,343
</TABLE>
8. In June 1997, the Company issued $150,000 in unsecured notes due June 1,
2009. The notes bear interest at the rate of 7.45% per annum, payable semi-
annually on June 1 and December 1, commencing on December 1, 1997. The notes
are non-redeemable and not subject to a sinking fund. Proceeds from the sale
of the notes are being used for general corporate purposes. These notes were
issued pursuant to a registration statement filed by the Company with the
Securities and Exchange Commission covering an aggregate of $400,000 of debt
securities and pass through certificates which may be issued from time to
time.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
2nd Quarter 1997 versus 1996
- ----------------------------
Service revenues increased $5.2 million primarily due to the effect of railcars
added to the lease fleet.
Sales revenues increased $34.3 million primarily due to increased railcar sales.
Gross margin percentages decreased from the comparable period in 1996 primarily
due to increased railcar rental expenses from previous years' sale-leaseback
transactions and decreased gains on railcar disposals.
Other income decreased $10.2 million primarily due to the 1996 gain on sale of a
storage facility used in the liquefied petroleum gas storage operations.
Six Months 1997 versus 1996
- ---------------------------
Service revenues increased $15.7 million primarily due to the effect of railcars
added to the lease fleet.
Sales revenues increased $61.0 million primarily due to increased railcar sales.
Gross margin percentages decreased from the comparable period in 1996 primarily
due to increased railcar rental expenses from previous years' sale-leaseback
transactions and decreased gains on railcar disposals.
Financial Condition
- -------------------
1997 versus 1996
- ----------------
Operating activities provided $90.7 million of cash. These funds, along with the
issuance of borrowed debt, were used to service borrowed debt obligations,
provide financing for railcar additions, advance funds to parent and pay a
dividend to the Company's stockholder.
Management expects future cash to be provided from operating activities, long-
term railcar financings and collection of funds previously advanced to parent
will be adequate to provide for the continued expansion of the Company's
business and enable it to meet its debt service obligations.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to "Business - Environmental Matters" in the
Company's Annual Report on Form 10-K/A for the year ended December
31, 1996 for a description of certain environmental matters.
Item 6. Exhibits and Reports on Form 8-K
b. Report on Form 8-K
On June 3, 1997, the Company filed a report on Form 8-K disclosing that
on May 28, 1997, the Company had entered into an Underwriting Agreement
with Salomon Brothers Inc and Morgan Stanley & Co. Incorporated
relating to the issuance and sale by the Company of $150,000,000
principal amount 7.45% Notes Due 2009.
-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: July 31, 1997 /s/ R.C. Gluth
----------------------------------------
R.C. Gluth
Executive Vice President and Director
(principal financial officer and
principal accounting officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the June 30, 1997 condensed consolidated balance sheet, condensed consolidated
statement of income for the six months ended June 30, 1997, 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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 79,508
<SECURITIES> 0
<RECEIVABLES> 79,085
<ALLOWANCES> 4,594
<INVENTORY> 65,556
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,976,388
<DEPRECIATION> 1,292,296
<TOTAL-ASSETS> 2,123,409
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 851,222
0
0
<COMMON> 106,689
<OTHER-SE> 472,093
<TOTAL-LIABILITY-AND-EQUITY> 2,123,409
<SALES> 121,079
<TOTAL-REVENUES> 406,994<F2>
<CGS> 105,673
<TOTAL-COSTS> 264,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,445
<INCOME-PRETAX> 74,949
<INCOME-TAX> 26,917
<INCOME-CONTINUING> 48,032
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,032
<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>
