<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
[X] OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
[_] OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5666
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UNION TANK CAR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-3104688
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
225 West Washington Street, Chicago, Illinois 60606
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(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
Page
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Part I. Financial Information
Item 1.
Condensed consolidated statement of income -
three months ended March 31, 1999 and 1998 3
Condensed consolidated balance sheet -
March 31, 1999 and December 31, 1998 4
Condensed consolidated statement of cash flows -
three months ended March 31, 1999 and 1998 5
Notes to condensed consolidated financial statements 6-7
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations 8
Item 3.
Disclosures About Market Risk 9
Part II. Other Information
Item 1.
Legal Proceedings 9
Item 6.
Exhibits and Reports on Form 8-K 9
Signatures 10
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues
Services (leasing and other) $153,319 $142,237
Net sales 73,187 53,377
-------- --------
226,506 195,614
Other income 4,440 10,323
-------- --------
230,946 205,937
Costs and expenses
Cost of services 88,162 78,288
Cost of sales 60,937 44,517
General and administrative 17,736 14,812
Interest 17,045 18,615
-------- --------
183,880 156,232
-------- --------
Income before income taxes 47,066 49,705
Provision for income taxes
Current 13,316 19,222
Deferred 5,299 60
-------- --------
18,615 19,282
-------- --------
Net income $ 28,451 $ 30,423
======== ========
</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>
March 31, December 31,
1999 1998
----------- ------------
Assets
- ------
<S> <C> <C>
Cash and cash equivalents $ 58,930 $ 58,423
Accounts receivable, primarily due within one year 92,330 82,729
Inventories 86,244 90,123
Prepaid expenses and deferred charges 10,377 11,411
Advances to parent company,
principally at LIBOR plus 1% 120,864 130,940
Railcar lease fleet, net 1,599,541 1,575,014
Fixed assets, net 176,976 177,055
Investment in aircraft direct financing lease 32,956 32,629
Other assets 61,286 53,851
---------- ----------
Total assets $2,239,504 $2,212,175
========== ==========
Liabilities, Deferred Items and Stockholder's Equity
- ----------------------------------------------------
Accounts payable $ 21,477 $ 20,082
Accrued liabilities 227,581 252,897
Borrowed debt, including $47,302 due within
one year ($46,951 at December 31, 1998) 904,870 868,421
---------- ----------
1,153,928 1,141,400
Deferred income taxes and investment tax credits 444,043 437,693
Stockholder's equity
Common stock and additional capital 113,035 113,035
Retained earnings 528,498 520,047
---------- ----------
Total stockholder's equity 641,533 633,082
---------- ----------
Total liabilities, deferred items and
stockholder's equity $2,239,504 $2,212,175
========== ==========
</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>
Three Months Ended
March 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 28,451 $ 30,423
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 32,113 30,059
Deferred taxes 5,299 60
Gain on disposition of railcars and other fixed assets (946) (603)
Other non-cash income and expenses 449 314
Changes in assets and liabilities:
Accounts receivable (10,152) 2,586
Inventories 3,387 (3,850)
Prepaid expenses and deferred charges 1,016 603
Accounts payable and accrued expenses (24,577) (8,903)
-------- --------
Net cash provided by operating activities 35,040 50,689
Cash flows from investing activities:
Construction and purchase of railcars and other fixed
assets (65,801) (60,375)
Decrease (increase) in advance to parent 7,720 (5,687)
(Increase) in other assets (8,722) --
Proceeds from disposals of railcars and other fixed assets 2,549 1,585
-------- --------
Net cash used in investing activities (64,254) (64,477)
Cash flows from financing activities:
Proceeds from issuance of borrowed debt 45,000 --
Proceeds from sale-leaseback transaction 13,200 88,570
Principal payments of borrowed debt (9,248) (52,953)
Cash dividend (20,000) (21,000)
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Net cash provided by financing activities 28,952 14,617
Effect of exchange rates on cash and cash equivalents 769 849
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Net increase in cash and cash equivalents 507 1,678
Cash and cash equivalents at beginning of year 58,423 99,709
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Cash and cash equivalents at end of period $ 58,930 $101,387
======== ========
Cash paid during the period for:
Interest (net of amount capitalized) $ 19,958 $ 19,199
Income taxes 17,955 19,646
</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 LLC ("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 1998 Annual Report on Form 10-K.
The 1999 interim results presented herein are not necessarily indicative of
the results of operations for the full year 1999.
3. As more fully described in the Company's 1998 Annual Report on Form 10-K,
under an arrangement with Marmon Industrial, the Company is included in the
consolidated federal income tax return of Marmon Holdings. As a member of a
consolidated federal income tax group, the Company is contingently liable
for the federal income taxes of the other members of the group.
4. The Company and its subsidiaries have been named as defendants in a number
of lawsuits, and certain claims are pending. The Company has accrued what
it reasonably expects to pay in resolution of these matters and, in the
opinion of management, their ultimate resolution will not have a material
effect on the Company's consolidated financial position or results of
operations.
5. Foreign currency translation adjustments and transaction gains and losses
are assumed by the Company's parent. For the three months ended March 31,
1999 and 1998, Marmon Industrial absorbed losses of $252 and $266,
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 $3,365 at December 31, 1998. There were no forward
exchange contracts outstanding at March 31, 1999.
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<PAGE>
7. Segment Information
<TABLE>
<CAPTION>
Consolidated
Railcar All Other Totals
------- --------- ------
(Dollars in Millions)
<S> <C> <C> <C>
Three months ended March 31, 1999
---------------------------------
Revenues from external customers $ 177.7 $ 48.8 $ 226.5
Income before income taxes 48.4 (1.3) 47.1
Three months ended March 31, 1998
---------------------------------
Revenues from external customers $ 162.8 $ 32.8 $ 195.6
Income before income taxes 45.3 4.4 49.7
</TABLE>
8. 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>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Balance Sheet:
Railcar lease fleet, net $ 163,952 $ 165,270
All other assets 170,370 170,214
Borrowed debt 94,210 94,409
All other liabilities 103,335 109,431
Three Months Ended
March 31,
--------------------------------------
1999 1998
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Statement of Income:
Services and net sales $ 29,913 $ 26,654
Gross profit 8,400 9,201
Net income 3,303 3,554
</TABLE>
9. In January 1999, the Company entered into a sale-leaseback transaction with
a financial institution pursuant to which it sold and leased back an
aggregate of $13,200 in railcars. The Company has an option to purchase all
of the railcars at a fixed purchase price on January 31, 2019.
10. In March 1999, the Company issued $45,000 principal amount of unsecured
Medium-Term Notes. The notes bear interest at rates between 6.00% and 6.35%
with maturity ranging from three to nine years. Interest will be payable
semiannually on March 1 and September 1, commencing September 1, 1999.
11. In April 1999, the Company issued $25,000 principal amount of unsecured
Medium-Term Notes. The notes bear interest at 5.91% with maturity on May 1,
2002. Interest will be payable semiannually on March 1 and September 1,
commencing September 1, 1999.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
1st Quarter 1999 versus 1998
- ----------------------------
Service revenues increased $11.1 million primarily due to the effect of railcars
added to the lease fleet.
Sales revenues increased $19.8 million primarily due to increased sales of
railcars and sales of mobile railcar moving vehicles, a business which was
acquired in the fourth quarter of 1998.
Other income decreased $5.9 million primarily due to the 1998 sale of certain
rights retained as a condition of the May 1996 sale of a storage facility used
in liquefied petroleum gas storage operations.
Financial Condition
- -------------------
1999 versus 1998
- ----------------
Operating activities provided $35.0 million of cash. These funds, along with the
issuance of borrowed debt and the sale-leaseback transaction, were used to
provide financing for railcar additions, service borrowed debt obligations, and
pay a dividend to the Company's stockholder.
Management expects future cash to be provided from operating activities, long-
term 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.
Year 2000
- ---------
Because of the potential importance to the Company of Year 2000 questions, the
Company has established a Year 2000 program to determine the Company's state of
readiness and the costs it anticipates it will have to incur in light of any
possible problems and to remediate any problems discovered. The Company's Year
2000 assessment indicated that the Company's accounting, invoicing, general
business and fleet management systems would be affected by Year 2000 problems.
The Company has begun the necessary corrective work on its coding, invoicing,
general business and fleet management systems that would be affected by Year
2000 problems. The work is approximately 95% complete. The Company's timetable
calls for this work to be substantially completed by May 31, 1999, with testing
of the completed systems to be done by July 31, 1999.
The Company does not believe its main products (i.e., tank cars and other rail
cars) have any material Year 2000 exposures. Similarly, no material problems
have been identified in connection with the Company's production machinery and
equipment.
The Company is using both in-house resources and outside consultants to
implement the necessary changes required by its Year 2000 program. The total
cost of the program is estimated to be $4.8 million, which will be funded from
operating cash flow. Through March 31, 1999, the Company has spent approximately
$3.3 million related to its Year 2000 program, of which $3.1 million has been
expensed and $0.2 million has been capitalized. Of the remaining amount,
approximately $0.3 million is expected to be capitalized with the balance being
expensed.
For further discussion of the Company's Year 2000 program and risks related
thereto, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
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<PAGE>
ITEM 3. DISCLOSURES ABOUT MARKET RISK
At March 31, 1999, there has been no significant change to the Company's
exposure to market risk since December 31, 1998.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Reference is made to "Business - Environmental Matters" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 for a
description of certain environmental matters.
ITEM 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the quarter ended March 31, 1999.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION TANK CAR COMPANY
REGISTRANT
Dated: May 7,1999 /s/ R.C. Gluth
-----------------------------
R.C. Gluth
Executive Vice President,
Director and Treasurer
(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 March 31, 1999 condensed consolidated balance sheet, condensed consolidated
statement of income for the three months ended March 31, 1999, and the notes
thereto, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 58,930
<SECURITIES> 0
<RECEIVABLES> 96,542
<ALLOWANCES> 4,212
<INVENTORY> 86,244
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,212,473
<DEPRECIATION> 1,435,956
<TOTAL-ASSETS> 2,239,504
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 904,870
0
0
<COMMON> 106,689
<OTHER-SE> 534,844
<TOTAL-LIABILITY-AND-EQUITY> 2,239,504
<SALES> 73,187
<TOTAL-REVENUES> 230,946<F2>
<CGS> 60,937
<TOTAL-COSTS> 149,099
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,045
<INCOME-PRETAX> 47,066
<INCOME-TAX> 18,615
<INCOME-CONTINUING> 28,451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,451
<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>
