<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 September 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
-----------------------------
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 11 pages, sequentially numbered in the bottom center
of each page.
-1-
<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated statement of income -
three and nine month periods ended
September 30, 2000 and 1999 (Restated) 3
Condensed consolidated balance sheet -
September 30, 2000 and December 31, 1999 (Restated) 4
Condensed consolidated statement of cash flows -
nine months ended September 30, 2000 and 1999 (Restated) 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 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
-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 Nine Months Ended
September 30, September 30,
------------------------- -----------------------------
2000 1999 2000 1999
-------- -------- ---------- ----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues
Services (leasing and other) $168,498 $158,210 $ 494,644 $ 471,375
Net sales 187,591 195,620 585,918 598,755
-------- -------- ---------- ----------
356,089 353,830 1,080,562 1,070,130
Other income 11,374 7,549 27,252 20,445
-------- -------- ---------- ----------
367,463 361,379 1,107,814 1,090,575
Costs and expenses
Cost of services 102,391 93,234 294,519 276,495
Cost of sales 154,534 166,539 485,774 506,526
General and administrative 36,551 33,101 101,264 98,581
Interest 19,302 19,088 55,613 54,523
-------- -------- ---------- ----------
312,778 311,962 937,170 936,125
-------- -------- ---------- ----------
Income before income taxes 54,685 49,417 170,644 154,450
Provision for income taxes
Current 17,059 12,043 58,294 44,534
Deferred 255 6,756 4,127 16,023
-------- -------- ---------- ----------
17,314 18,799 62,421 60,557
-------- -------- ---------- ----------
Net income $ 37,371 $ 30,618 $ 108,223 $ 93,893
======== ======== ========== ==========
</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>
September 30, December 31,
2000 1999
------------------ -------------------
(Restated)
<S> <C> <C>
Assets
------
Cash and cash equivalents $ 69,331 $ 50,936
Accounts receivable, primarily trade due within one year 156,512 131,350
Accounts and notes receivable, affiliates 57,320 9,202
Inventories, net of LIFO of $34,099
($33,481 at December 31, 1999) 178,306 162,218
Prepaid expenses and deferred charges 16,407 9,796
Advances to parent company,
principally at LIBOR plus 1% 255,101 266,722
Railcar lease fleet, net 1,556,428 1,653,495
Fixed assets, net 491,673 229,372
Investment in aircraft direct financing lease 31,130 34,012
Other assets 79,263 78,973
---------- ----------
Total assets $2,891,471 $2,626,076
========== ==========
Liabilities, Deferred Items and Stockholder's Equity
----------------------------------------------------
Accounts payable $ 72,912 $ 74,891
Accrued liabilities, including minority interest 324,673 267,825
Borrowed debt, including $73,893 due within
one year ($44,276 at December 31, 1999) 1,125,911 986,240
---------- ----------
1,523,496 1,328,956
Deferred income taxes and investment tax credits 459,029 457,991
Stockholder's equity
Common stock and additional capital 240,148 203,554
Retained earnings 668,798 635,575
---------- ----------
Total stockholder's equity 908,946 839,129
---------- ----------
Total liabilities, deferred items and
stockholder's equity $2,891,471 $2,626,076
========== ==========
</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>
Nine Months Ended
September 30,
------------------------------
2000 1999
--------- ---------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 108,223 $ 93,893
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 115,029 109,627
Deferred taxes 4,127 16,023
Gain on disposition of railcars and other fixed assets (3,913) (5,164)
Other non-cash income and expenses 3,470 2,530
Changes in assets and liabilities:
Accounts receivable (15,516) (18,621)
Inventories (20,588) 19,660
Prepaid expenses and deferred charges (4,603) 727
Accounts payable and accrued expenses (22,416) (20,787)
--------- ---------
Net cash provided by operating activities 163,813 197,888
Cash flows from investing activities:
Construction and purchase of railcars and other fixed assets (158,570) (158,849)
Decrease (Increase) in advance to parent 57,318 (117,574)
Increase in other assets (4,398) (512)
Purchases of businesses, net of cash acquired (263,700) (11,764)
Proceeds from disposals of railcars and other fixed assets 9,523 10,232
--------- ---------
Net cash used in investing activities (359,827) (278,467)
Cash flows from financing activities:
Proceeds from issuance of borrowed debt 183,576 175,000
Proceeds from sale-leaseback transactions 150,026 13,200
Principal payments of borrowed debt (42,363) (44,846)
Cash dividends (75,000) (59,000)
--------- ---------
Net cash provided by financing activties 216,239 84,354
Effect of exchange rates on cash and cash equivalents (1,830) 2,306
--------- ---------
Net increase in cash and cash equivalents 18,395 6,081
Cash and cash equivalents at beginning of year 50,936 62,367
--------- ---------
Cash and cash equivalents at end of period $ 69,331 $ 68,448
========= =========
Cash paid during the period for:
Interest (net of amount capitalized) $ 60,469 $ 57,068
Income taxes 56,880 50,641
</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 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.
On September 1, 2000, the Company acquired Marmon/Keystone Corporation, a
company under common control, through a capital contribution from Marmon
Holdings. Marmon/Keystone Corporation is a leading distributor of carbon
steel, stainless steel, aluminum and nickel tubular products among other
products. The acquisition has been accounted for on an "as if pooled" basis
and, accordingly, the accompanying financial statements include the
financial positions, results of operations, and cash flows of the combined
companies for all periods presented.
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 nine months ended September
30, 2000 and 1999, Marmon Industrial absorbed a gain of $1,097 and a loss
of $470, respectively.
-6-
<PAGE>
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 $8,700 at September 30, 2000 and $9,100 at December 31, 1999.
7. In September 2000, EXSIF Worldwide, Inc. ("EWI"), an indirect majority-
owned subsidiary of the Company, purchased the intermodal tank container
leasing business of Transamerica Leasing, Inc., for approximately $264,000.
In addition to the purchase price paid for the assets acquired, EWI assumed
the seller's operating leases with its customers, agreements under which
the seller managed equipment for or leased equipment from third parties,
and certain of the seller's operating liabilities. The acquisition has been
accounted for using the purchase method and the Company is in the process
of finalizing the purchase price allocation to the assets acquired and
liabilities assumed. No pro forma information is disclosed as the
acquisition is below the required threshold for such disclosure.
In September 2000, EWI issued $180,000 principal amount of Senior Secured
Notes to finance a portion of the purchase price of the acquisition.
Interest on the notes is payable semiannually on April 1 and October 1,
commencing April 1, 2001 at the rate of 7.68% per annum. Principal is
payable annually commencing on October 1, 2001 and continuing until
maturity on October 1, 2015. The notes are secured by tank container assets
with a total purchase price of approximately $240,000. Payment of the notes
has been guaranteed by the Company.
In September 2000, Worldwide Containers, Inc. ("WCI"), a majority-owned
subsidiary of the Company, received a capital contribution from an
affiliate consisting of a $43,400 demand note of an affiliate of the
Company and 20% of the capital stock of Webb Wheel Products, Inc., another
affiliate of the Company, in exchange for approximately 15.1% of the
capital stock of WCI. WCI also received a capital contribution from an
affiliate consisting of a 20% limited partnership interest in Rail Car
Associates Limited Partnership from an affiliate in exchange for
approximately 4.2% of the capital stock of the WCI. These noncash
transactions have been excluded from the consolidated statement of cash
flows.
8. Segment Information
<TABLE>
<CAPTION>
Metal Pipe
& Tube Consolidated
Railcar Distribution All Other Totals
------- ------------ --------- -----------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Three months ended September 30, 2000
-------------------------------------
Revenues from external customers $168.7 $122.9 $ 64.5 $ 356.1
Income before income taxes 40.7 3.6 10.4 54.7
Three months ended September 30, 1999 (Restated)
------------------------------------------------
Revenues from external customers $191.2 $113.9 $ 48.7 $ 353.8
Income before income taxes 38.6 6.1 4.7 49.4
Nine months ended September 30, 2000
------------------------------------
Revenues from external customers $534.3 $376.7 $169.6 $1,080.6
Income before income taxes 131.1 16.9 22.6 170.6
Nine months ended September 30, 1999 (Restated)
-----------------------------------------------
Revenues from external customers $574.6 $346.3 $149.2 $1,070.1
Income before income taxes 119.8 18.0 16.7 154.5
</TABLE>
-7-
<PAGE>
9. Condensed Consolidating Financial Information (dollars in millions):
<TABLE>
<CAPTION>
Union
Tank Car Procor Other
Company Limited Subsidiaries Eliminations Consolidated
-------- ------- ------------ ------------ ------------
September 30, 2000
------------------
Assets
------
<S> <C> <C> <C> <C> <C>
Investment in and advances to subsidiaries $ 871.9 $ -- $ 266.1 $(1,138.0) $ --
Long-lived assets 1,308.1 210.0 640.5 (0.1) 2,158.5
Other assets 179.6 127.7 427.5 (1.8) 733.0
-------- ------ -------- --------- --------
$2,359.6 $337.7 $1,334.1 $(1,139.9) $2,891.5
======== ====== ======== ========= ========
<CAPTION>
Liabilities, Deferred Items and Stockholder's Equity
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total liabilities $1,081.5 $113.1 $ 295.7 $ 33.2 $1,523.5
Deferred income taxes 361.4 74.2 23.4 0.0 459.0
Stockholder's equity 916.7 150.4 1,015.0 (1,173.1) 909.0
-------- ------ -------- --------- --------
$2,359.6 $337.7 $1,334.1 $(1,139.9) $2,891.5
======== ====== ======== ========= ========
<CAPTION>
December 31, 1999 (Restated)
----------------------------
Assets
------
<S> <C> <C> <C> <C> <C>
Investment in and advances to subsidiaries $ 472.0 $ -- $ 116.7 $ (588.7) $ --
Long-lived assets 1,567.1 229.6 199.2 -- 1,995.9
Other assets 251.5 114.9 265.3 (1.5) 630.2
-------- ------ -------- --------- --------
$2,290.6 $344.5 $ 581.2 $ (590.2) $2,626.1
======== ====== ======== ========= ========
<CAPTION>
Liabilities, Deferred Items and Stockholder's Equity
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total liabilities $1,113.2 $112.2 $ 128.0 $ (24.4) $1,329.0
Deferred income taxes 414.0 78.4 (34.6) 0.2 458.0
Stockholder's equity 763.4 153.9 487.8 (566.0) 839.1
-------- ------ -------- --------- --------
$2,290.6 $344.5 $ 581.2 $ (590.2) $2,626.1
======== ====== ======== ========= ========
<CAPTION>
Three Months Ended September 30, 2000
-------------------------------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 139.8 $ 24.7 $ 206.5 $ (14.9) $ 356.1
Total Costs and Expenses 106.9 19.6 187.9 (1.6) 312.8
Net Income 21.5 7.9 8.0 0.0 37.4
<CAPTION>
Three Months Ended September 30, 1999 (Restated)
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 167.2 $ 27.8 $ 172.1 $ (13.3) $ 353.8
Total Costs and Expenses 137.5 22.6 159.6 (7.7) 312.0
Net Income 18.9 3.8 7.5 0.4 30.6
<CAPTION>
Nine Months Ended September 30, 2000
------------------------------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 450.8 $ 82.1 $ 585.4 $ (37.7) $1,080.6
Total Costs and Expenses 350.7 61.8 550.2 (25.5) 937.2
Net Income 65.0 19.4 23.2 0.6 108.2
<CAPTION>
Nine Months Ended September 30, 1999 (Restated)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 502.8 $ 87.3 $ 521.3 $ (41.3) $1,070.1
Total Costs and Expenses 411.5 71.7 490.1 (37.2) 936.1
Net Income 54.9 10.9 26.8 1.3 93.9
</TABLE>
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
---------------------
3rd Quarter 2000 versus 1999
----------------------------
Service revenues increased $10.3 million primarily due to the effects of
railcars added to the lease fleet ($3.7 million) and the intermodal tank
container operations ($5.5 million) acquired in September 2000.
Sales revenues decreased $8.0 million primarily due to reduced sales of railcars
($31.2 million) offset by increased sulphur service processing plant sales
($11.4 million) and increased sales of metal pipe and tubing products ($9.0
million).
Income taxes decreased due to an enacted change in the Canadian tax rates and
its impact on deferred taxes.
Nine Months 2000 versus 1999
----------------------------
Service revenues increased $23.3 million primarily due to the effects of
railcars added to the lease fleet ($9.2 million) and the intermodal tank
container operations ($5.5 million) acquired in September 2000. The remaining
increase came from contract switching services operations ($2.3 million) and
sulphur service processing operations ($3.6 million).
Sales revenues decreased $12.8 million primarily due to reduced sales of
railcars ($56.1 million) offset by increased sulphur service processing plant
sales ($11.2 million) and increased sales of metal pipe and tubing products
($29.6 million).
Financial Condition
-------------------
2000 versus 1999
----------------
Operating activities provided $163.8 million of cash in the first nine 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, pay
dividends to the Company's stockholder, service borrowed debt obligations, and
fund an acquisition.
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.
-9-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At September 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 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the quarter ended September 30,
2000.
-10-
<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: November 14, 2000 /s/ R.C. Gluth
---------------------------------
R.C. Gluth
Executive Vice President,
Director and Treasurer
(principal financial officer
and principal accounting
officer)
-11-
