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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, 2000
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
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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 11 pages, sequentially numbered in the bottom center
of each page.
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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. Financial Statements
Condensed consolidated statement of income -
three and six month periods ended
June 30, 2000 and 1999 3
Condensed consolidated balance sheet -
June 30, 2000 and December 31, 1999 4
Condensed consolidated statement of cash flows -
six months ended June 30, 2000 and 1999 5
Notes to condensed consolidated financial statements 6 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
Part II. Other Information
Item 1. Legal Proceedings 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
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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,
---------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues
Services (leasing and other) $ 161,012 $ 156,697 $ 322,188 $ 310,016
Net sales 81,236 100,631 148,410 173,818
--------- --------- --------- ---------
242,248 257,328 470,598 483,834
Other income 7,440 6,871 15,317 12,152
--------- --------- --------- ---------
249,688 264,199 485,915 495,986
Costs and expenses
Cost of services 93,480 92,147 188,376 180,309
Cost of sales 68,537 88,454 124,531 150,414
General and administrative 17,513 19,196 34,175 36,750
Interest 18,022 18,328 36,243 35,373
--------- --------- --------- ---------
197,552 218,125 383,325 402,846
--------- --------- --------- ---------
Income before income taxes 52,136 46,074 102,590 93,140
Provision for income taxes
Current 24,151 13,227 34,848 26,543
Deferred (5,341) 3,968 3,872 9,267
--------- --------- --------- ---------
18,810 17,195 38,720 35,810
--------- --------- --------- ---------
Net income $ 33,326 $ 28,879 $ 63,870 $ 57,330
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
Assets
------
Cash and cash equivalents $ 71,326 $ 50,607
Accounts receivable, primarily due within one year 79,725 76,160
Inventories 90,489 85,165
Prepaid expenses and deferred charges 11,263 9,635
Advances to parent company,
principally at LIBOR plus 1% 362,688 246,168
Railcar lease fleet, net 1,540,267 1,653,495
Fixed assets, net 189,997 189,803
Investment in aircraft direct financing lease 32,141 34,012
Other assets 45,321 52,274
----------- ------------
Total assets $2,423,217 $2,397,319
=========== ============
Liabilities, Deferred Items and Stockholder's Equity
----------------------------------------------------
Accounts payable $ 23,199 $ 24,361
Accrued liabilities 255,286 255,459
Borrowed debt, including $36,650 due within
one year ($42,516 at December 31, 1999) 953,808 984,067
----------- ------------
1,232,293 1,263,887
Deferred income taxes and investment tax credits 467,821 465,793
Stockholder's equity
Common stock and additional capital 149,629 113,035
Retained earnings 573,474 554,604
----------- ------------
Total stockholder's equity 723,103 667,639
----------- ------------
Total liabilities, deferred items and
stockholder's equity $2,423,217 $2,397,319
=========== ============
See notes to condensed consolidated financial statements.
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UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 63,870 $ 57,330
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 65,843 64,906
Deferred taxes 3,872 9,267
Gain on disposition of railcars and other fixed assets (2,782) (2,660)
Other non-cash income and expenses 1,029 1,146
Changes in assets and liabilities:
Accounts receivable (454) (22,448)
Inventories (6,732) 3,913
Prepaid expenses and deferred charges (1,670) 728
Accounts payable and accrued expenses (9,817) (8,709)
----------------- -----------------
Net cash provided by operating activities 113,159 103,473
Cash flows from investing activities:
Construction and purchase of railcars and other fixed assets (98,023) (117,209)
Increase in advance to parent (75,833) (85,361)
Increase in other assets (363) (115)
Purchases of businesses, net of cash acquired - (8,729)
Proceeds from disposals of railcars and other fixed assets 7,226 5,092
----------------- -----------------
Net cash used in investing activities (166,993) (206,322)
Cash flows from financing activities:
Proceeds from issuance of borrowed debt 1,044 175,000
Proceeds from sale-leaseback transactions 150,026 13,200
Principal payments of borrowed debt (30,391) (34,420)
Cash dividends (45,000) (40,000)
----------------- -----------------
Net cash provided by financing activities 75,679 113,780
Effect of exchange rates on cash and cash equivalents (1,126) 2,135
----------------- -----------------
Net increase in cash and cash equivalents 20,719 13,066
Cash and cash equivalents at beginning of year 50,607 58,423
----------------- -----------------
Cash and cash equivalents at end of period $ 71,326 $ 71,489
================= =================
Cash paid during the period for:
Interest (net of amount capitalized) $ 37,702 $ 34,861
Income taxes 33,620 31,961
</TABLE>
See notes to condensed consolidated financial statements.
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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 1999 Annual Report on Form 10-K.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
The 2000 interim results presented herein are not necessarily indicative of
the results of operations for the full year 2000.
3. As more fully described in the Company's 1999 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 six months ended June 30, 2000
and 1999, Marmon Industrial absorbed gains of $544 and $187, respectively.
6. The Company's foreign 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 $5,660 at June 30, 2000 and $9,100 at December 31, 1999.
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7. Segment Information
<TABLE>
<CAPTION>
Consolidated
Railcar All Other Totals
---------------- ----------------- -----------------
<S> <C> <C> <C>
(Dollars in Millions)
Three months ended June 30, 2000
--------------------------------
Revenues from external customers $ 187.4 $ 54.8 $ 242.2
Income before income taxes 46.9 5.2 52.1
Three months ended June 30, 1999
--------------------------------
Revenues from external customers $ 205.7 $ 51.6 $ 257.3
Income before income taxes 39.4 6.7 46.1
Six months ended June 30, 2000
------------------------------
Revenues from external customers $ 365.6 $ 105.0 $ 470.6
Income before income taxes 90.4 12.2 102.6
Six months ended June 30, 1999
------------------------------
Revenues from external customers $ 383.4 $ 100.4 $ 483.8
Income before income taxes 81.2 11.9 93.1
</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:
June 30, December 31,
2000 1999
------------ ----------------
Balance Sheet:
Railcar lease fleet, net $ 154,598 $ 160,781
All other assets 187,439 183,684
Borrowed debt 67,801 72,738
All other liabilities 126,801 117,849
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Statement of Income:
Services and net sales $ 26,765 $ 29,542 $ 57,475 $ 59,455
Gross profit 9,218 8,867 19,549 17,267
Net income 5,744 3,824 11,455 7,127
</TABLE>
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9. On May 18, 2000, the Company filed a Registration Statement on Form S-3
covering $250,000 aggregate principal amount of debt securities, pass
through certificates, and senior secured notes which may be issued from time
to time.
10. In June 2000, the Company entered into a sale-leaseback transaction with a
financial institution pursuant to which it sold and leased back an aggregate
of $144,687 in railcars. The Company has an option to purchase all of the
railcars at a fixed purchase price on July 15, 2012.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
---------------------
2nd Quarter 2000 versus 1999
----------------------------
Service revenues increased $4.3 million primarily due to the effects of railcars
added to the lease fleet. The remaining increase came from contract switching
services operations and sulphur service processing operations.
Sales revenues decreased $19.4 million primarily due to reduced sales of
railcars.
Six Months 2000 versus 1999
---------------------------
Service revenues increased $12.2 million primarily due to the effects of
railcars added to the lease fleet. The remaining increase came from contract
switching services operations, sulphur service processing operations, and the
intermodal tank containers operations acquired in the second quarter of 1999.
Sales revenues decreased $25.4 million primarily due to reduced sales of
railcars.
Financial Condition
-------------------
2000 versus 1999
----------------
Operating activities provided $113.2 million of cash in the first six months of
2000. These funds, along with the proceeds from the issuance of debt and
sale-leaseback transactions, were used to provide for railcar additions, advance
funds to parent, pay dividends to the Company's stockholder, and service
borrowed debt obligations.
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 continued expansion of the Company's business and
enable it to meet its debt service obligations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At June 30, 2000, there has been no significant change to the Company's exposure
to market risk since December 31, 1999.
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,
1999 for a description of certain environmental matters.
Item 5. Other Information
On July 11, 2000, a majority owned subsidiary (the "Acquirer") of the
Company entered into an agreement to purchase the intermodal tank
container leasing business of Transamerica Leasing, Inc. In addition to
the purchase price to be paid for the assets being acquired, the
Acquirer will assume the seller's operating leases with its customers,
agreements under which the seller manages equipment for or leases
equipment from third parties and certain of the seller's operating
liabilities. The transaction is expected to close during the third
quarter of fiscal 2000. In order to enable the Company to absorb the
business being acquired and maintain its financial strength, Marmon
Industrial, the Company's sole stockholder, intends to contribute
additional capital to the Company.
Item 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the quarter ended June 30, 2000.
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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 4, 2000 /s/ R.C. Gluth
-----------------------
R.C. Gluth
Executive Vice President,
Director and Treasurer
(principal financial officer
and principal accounting
officer)
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