<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
* ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934..................For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-44946
RAILCAR TRUST NO. 1992-1
(Exact name of Registrant as specified in its charter)
Delaware 36-3822700
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
c/o Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, Delaware 19890
(Address of principal executive offices and ZIP code)
Registrant's telephone number, including area code: (302) 651-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
----------------
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
-------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I .................................................................................................... 1
ITEM 1. Business of the Company ....................................................................... 1
ITEM 2. Properties .................................................................................... 4
ITEM 3. Legal Proceedings.............................................................................. 4
ITEM 4. Submission of Matters to a Vote of Security Holders ........................................... 4
PART II ................................................................................................... 4
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters ......................... 4
ITEM 6. Selected Consolidated Financial Data .......................................................... 5
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ......... 6
ITEM 8. Financial Statements and Supplementary Data ................................................... 8
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Statement Disclosure. 8
PART III .................................................................................................. 8
ITEM 10. Directors and Executive Officers of the Registrant ............................................ 8
ITEM 11. Executive Compensation ........................................................................ 8
ITEM 12. Security Ownership of Certain Beneficial Owners and Management ................................ 9
ITEM 13. Certain Relationships and Related Transactions ................................................ 9
PART IV.................................................................................................... 10
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .............................. 10
</TABLE>
-i-
<PAGE>
PART I
ITEM 1. Business of the Company
Railcar Trust No. 1992-1 (the "Trust") is engaged in railcar leasing. The Trust
was organized in connection with the transactions described below (collectively,
the "Railcar Transaction").
Organization of the Trust
In June 1992, Itel Rail Corporation and certain of its affiliates ("Rail")
completed a transaction with General Electric Capital Corporation and certain of
its affiliates ("GECC") pursuant to which Rail and Railcar Services Corporation,
a Delaware special purpose corporation (the "SPC"), contributed substantially
all of their owned railcars, subject to approximately $170 million of existing
indebtedness ("Assumed Indebtedness"), to the Trust. Certain contracts
(including current end-user leases) relating to such railcars and cash in an
amount necessary to fund payments on the Assumed Indebtedness prior to the first
rental payment date under the Leases (as defined below) were also contributed to
the Trust.
Contribution to the Partnership
The Trust in turn contributed all of the railcars, subject to the Assumed
Indebtedness and together with the aforementioned contracts, to Railcar
Associates, L.P. (the "Partnership"). GE Railcar Associates, Inc.
("Associates") and GE Railcar Leasing Associates, Inc. ("GE Leasing"), each an
indirect wholly owned subsidiary of General Electric Corporation, also
contributed certain railcars, together with certain contracts relating to such
railcars, to the Partnership. The Trust is a 64.00% general partner and a
34.99% limited partner in the Partnership. Associates is a 1% general partner
and the managing general partner of the Partnership. GE Leasing is a 0.01%
limited partner in the Partnership.
In connection with the Railcar Transaction, the Partnership assumed the Assumed
Indebtedness, which is secured by certain of the railcars, and agreed to pay all
amounts owing thereunder as they become due. The Assumed Indebtedness is being
serviced out of rental receipts by the Partnership pursuant to certain leases
(the "Leases") of all of the contributed railcars between the Partnership and GE
Capital Railcar Associates, Inc. ("Lessee"). The Partnership invests any
available cash, pending application to the Assumed Indebtedness, at a fixed rate
of return with GECC. The parties agreed that the Trust and not the Partnership
would bear the economic impact of the Assumed Indebtedness and that payments in
respect of the Assumed Indebtedness would be made from amounts that would
otherwise have been distributed to the Trust. To this end, Partnership
distributions to the partners other than the Trust are proportionately increased
in respect of amounts paid on the Assumed Indebtedness.
1
<PAGE>
The Leases
The Leases between the Partnership and the Lessee are for a twelve-year (12)
term expiring in 2004. Pursuant thereto, the Lessee pays to the Partnership
fixed annual rental payments in the approximate amount of $153 million ("Basic
Rent"). The Leases include the grant to the Lessee of an assignable fixed price
purchase option at the end of the term of the Leases for all, but not less than
all, of the railcars for approximately $500 million. The Leases are net leases
under which the Lessee is responsible for maintenance and other expenses of the
railcars and all obligations of the Lessee are unconditionally guaranteed by
GECC. The Lessee has an annual obligation to make certain contingent payments
to the Partnership in addition to the Basic Rent as determined pursuant to the
Leases ("Additional Rent").
The Trust Notes
Upon the closing of the Railcar Transaction, the Trust issued certain 7.75%
trust notes due June 1, 2004 in an aggregate principal amount of $998,430,000
("Trust Notes"). The Trust Notes were issued pursuant to an Indenture between
the Trust and Harris Trust and Savings Bank. The Trust Notes are obligations of
the Trust, secured by the partnership interests in the Partnership owned by the
Trust, subject to certain excepted rights. All payments of the principal,
premium (if any), and interest on the Trust Notes are intended to be made or
funded by the Trust out of distributions made to the Trust by the Partnership of
a portion of Net Cash Flow (as defined in the Partnership Agreement) of the
Partnership, which is derived from the Basic Rent paid by the Lessee to the
Partnership. The Trust Notes are not registered on any exchanges.
The Trust Notes are represented by Trust Notes registered in the name of the
nominee of The Depository Trust Company ("DTC"). The Trust Notes were made
available for purchase in book-entry form in minimum denominations of $1,000 and
integral multiples thereof. The Trust was informed by DTC that DTC's nominee is
Cede & Co. ("Cede"). Except in limited circumstances, no beneficial owner of
the Trust Notes is entitled to receive a certificate representing such person's
interest in the Trust Notes. Cede is the only holder of record of the Trust
Notes.
Ownership of the Trust
Until November 10, 1993, the Trust was a consolidated affiliate of Rail, its
principal beneficiary, which held a 99% interest in the Trust. On November 10,
1993, Rail distributed as a dividend a 30% Trust interest to its parent, Signal
Capital Holdings Corporation ("Signal Capital Holdings"). Signal Capital
Holdings, on the same date, distributed the same 30% Trust interest as a
dividend to its parent, Itel Rail Holdings Corporation ("Itel Rail Holdings").
At such time, Rail continued to hold a 69% Trust interest.
2
<PAGE>
Prior to July 25, 1994, Rail was liquidated and/or merged with and into Signal
Capital Holdings and Signal Capital Holdings, in turn, distributed a 0.5%
interest in the Trust to its parent, Itel Rail Holdings. Such transactions
resulted in Signal Capital Holdings owning a 68.5% Trust interest and Itel Rail
Holdings owning a 30.5% Trust interest. On July 25, 1994, SCAP Associates,
L.L.C., a Delaware limited liability company ("SCAP"), acquired from Itel Rail
Holdings a 30% beneficial interest in the Trust and 100% of the stock of Signal
Capital Holdings. SCAP subsequently acquired Itel Rail Holdings' remaining 0.5%
interest in the Trust.
During October 1994, SCAP and Signal Capital Holdings sold all of their
respective interests in the Trust, constituting 99% of the beneficial interest
in the Trust, to multiple investors. The names of each trustor and their
respective percentage beneficial interests ("Beneficial Interests") in the Trust
are set forth below:
Name of Trustor % Beneficial Interest
--------------- ---------------------
First of St. Louis Leasing Corporation No. 1 5.00000000%
The Fifth Third Leasing Company 3.09670292%
First Security Bank of Idaho, National Association 1.64187774%
First Security Bank of Utah, National Association 1.64187774%
First Security Leasing Company 0.76802089%
MetLife Capital, Limited Partnership 21.56719664%
Nat-Lea, Inc. 1.85802816%
BancBoston Leasing, Inc. 10.87503350%
U.S. Bancorp Leasing & Financial 3.87504300%
First Union Commercial Leasing Group, L.L.C. 12.77921530%
Phoenix Home Life Mutual Insurance Company 7.05927915%
Sun Life Assurance Company of Canada (U.S.) 8.33645448%
BA Leasing & Capital Corporation 20.50127048%
Railcar Services Corporation 1.00000000%
3
<PAGE>
ITEM 2. Properties
See Item 1--Business of the Company and the Consolidated Financial Statements.
All of the Trust's materially important physical properties have been
contributed to the Partnership and, in turn, leased to the Lessee pursuant to
the Leases.
ITEM 3. Legal Proceedings
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Trust is managed pursuant to the Second Amended and Restated Trust Agreement
dated May 1, 1992 ("Trust Agreement"), an Interinvestor Agreement dated October
21, 1994 ("Interinvestor Agreement") and a Tax Matters Agreement dated as of
March 20, 1995. Under the Trust Agreement, a trustee, Wilmington Trust Company
("WTC"), acts as a management functionary. WTC is authorized to act
independently only in the case of certain administrative actions with respect to
the Trust Indenture and the Trust Notes and in certain other cases where it has
express authority to act under the Trust Agreement. In all other cases, WTC may
take action only as it is directed by the holders of a majority of the
Beneficial Interests in the Trust. The Trust Agreement imposes an obligation on
WTC to provide various notices to the trustors upon events of default under the
underlying Partnership and Lease documents. In connection with such defaults,
WTC is required to take such action as it is directed by the holders of a
majority of the Beneficial Interests in the Trust.
During the fourth quarter of 1998, no material matters with respect to the
business and operation of the Trust came to a vote of trustors pursuant to the
Trust Agreement and the Interinvestor Agreement.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
Neither the Beneficial Interests in the Trust nor the Trust Notes are registered
on any exchange. There is no established public trading market for either the
Beneficial Interests in the Trust or the Trust Notes.
4
<PAGE>
ITEM 6. Selected Consolidated Financial Data
The following selected consolidated financial data is qualified by reference to,
and should be read in conjunction with, the Company's 1998 Consolidated
Financial Statements and notes thereto and the discussion thereof included
elsewhere in this Form 10-K. The selected consolidated financial data as of
December 31, 1998 and 1997 and for the years ended December 31, 1998, 1997 and
1996 has been derived from consolidated financial statements that have been
audited by Ernst & Young LLP, independent auditors, whose report with respect
thereto is included elsewhere in this Form 10-K. The selected consolidated
statements of income data for the years ended December 31, 1995 and 1994 and the
consolidated balance sheet data as of December 31, 1996, 1995 and 1994 have
been derived from audited consolidated financial statements of the Trust not
included in this Form 10-K.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statement of Income Data
(in 000's):
Rental revenue................... $169,285 $153,801 $153,034 $152,457 $ 153,611
Operating income................. 119,255 103,660 102,820 102,203 103,516
Net income....................... 60,374 37,279 29,493 22,090 17,181
Balance Sheet Data (in 000's): As of December 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- --------- --------- --------- ----------
Total assets..................... $790,756 $848,587 $898,113 $950,002 $1,002,845
Current maturities of long-term
debt............................ 101,401 110,999 84,782 79,844 73,663
Long-term debt................... 568,999 670,263 781,119 865,753 945,447
Trust surplus (deficit).......... 106,128 51,022 14,493 (15,000) (37,090)
</TABLE>
5
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Liquidity and Capital Resources
As discussed in Item 1 above, substantially all of the physical property of the
Trust, consisting primarily of railcars, was contributed to the Partnership of
which the Trust is a 98.99% partner. At such time, the Partnership assumed the
Assumed Indebtedness. The Partnership then leased to the Lessee all of the
property contributed by the Trust, along with other railcars it received as a
contribution from its other partners. Financing of the Trust was accomplished
by issuance of $998 million of Trust Notes secured by the Trust's ownership
interest in the Partnership, as more specifically described in Item 1 of this
report. No new borrowings occurred during 1998.
As noted above, fixed rental receipts by the Partnership under the Leases are
used to service the Assumed Indebtedness and other expenses of the Partnership.
Remaining Partnership available cash is distributed to the partners, the Trust's
share of which must be used by the Trust to service the Trust Notes. During
1998, the Trust received rental revenues of $169.3 million pursuant to the
Leases. Total operating expenses of $50.0 million were incurred, resulting in
operating income in the amount of $119.3 million. Payment of interest expense,
net in the amount of $57.9 million and accounting for minority interests in the
Partnership, resulted in net income of $60.4 million at the Trust level.
Debt Maturities and Repayments
Current maturities of long-term debt of $101.4 million at December 31, 1998
represent debt, which is being serviced by cash flow from the Leases.
The Trust generated $117.9 million in cash from operating activities. Those
amounts were used to repay the Assumed Indebtedness and the Trust Notes as
payments became due. Of the net cash from operating activities, $111.0 million
was used in order to reduce borrowings, $1.5 million was distributed to the
minority interests in the Partnership and $5.3 million was distributed on a
prorated basis to the holders of the Beneficial Interest in the Trust as a
distribution of Additional Rent with respect to use and maintenance in 1996 (the
1997 and 1998 Additional Rent payments have not been received, see Note A to the
Consolidated Financial Statements). The principal amount outstanding under the
Assumed Indebtedness was decreased by $19.5 million to a total of $27.9 million
at year-end, and the principal amount outstanding under the Trust Notes was
decreased by $91.3 million to a total amount of $642.5 million at year-end.
6
<PAGE>
Results of Operations
Rental revenues for the years ended December 31, 1998, 1997, and 1996 were
$169.3 million, $153.8 million, and $153.0 million, respectively, reflecting
rent on the Leases. The 1998 revenue included Additional Rent for 1996, 1997,
and 1998 in the amounts of $5.3 million, $7.0 million and $4.0 million,
respectively due to a change in accounting estimate (see Note A to the
Consolidated Financial Statements). Operating income plus depreciation prior to
minority interests and interest expense was $169.0 million, $153.4 million, and
$152.6 million in 1998, 1997, and 1996, respectively. Operating income before
interest expense and minority interests was $119.3 million, $103.7 million, and
$102.8 million in 1998, 1997, and 1996, respectively. With the scheduled
reduction of outstanding debt, interest expense continued to decline; the net
was $57.9 million, $65.5 million, $72.4 million in 1998, 1997, and 1996,
respectively. Net income continued to increase due to the reduction of the
interest expense and the recording of the Additional Rent. Net income was $60.4
million, $37.3 million, and $29.5 million in 1998, 1997, and 1996, respectively.
The Trust does not provide for income taxes, as the liability for such taxes is
that of the holders of Beneficial Interests in the Trust.
Market Risk
The following table provides information about the Trust's debt obligations. As
noted before, the Trust issued 7.75% notes due June 1, 2004 which paid per a set
amortization schedule. The table presents the principal cash flows and related
rates by expected maturity date.
<TABLE>
<CAPTION>
Fair Value
(In Thousands) 1999 2000 2001 2002 2003+ Total 12/31/98
- - ----------------------- -------- ------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Long Term Debt $101,401 $94,588 $134,131 $128,422 $211,858 $670,400 $682,756
including Current
Portion
Fixed Rate 7.75% 7.75% 7.75% 7.75% 7.75%
</TABLE>
7
<PAGE>
Impact of the Year 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Due to the nature of the
Trust, the Year 2000 implications are not material. The railcars owned by the
Trust are leased on a twelve-year contract expiring in 2004. The Trust received
quarterly lease payments totaling $153 million that provided the majority of the
revenue. The Trust was designed to operate solely on the lease payments. The
Trust's exposure to the Year 2000 is the possible impact on any Additional Rent.
Additional Rent can be received by the Trust if income generated by the railcars
exceeds specific contractual parameters. Additional Rent could be reduced or
eliminated if the Year 2000 problems result in a decline in railcar usage.
While it is beyond the ability of the Trust to forecast the effect, the impact
will not affect the Trust's ability to repay its indebtedness.
ITEM 8. Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of this report
starting on page F-1.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Statement Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Not applicable.
ITEM 11. Executive Compensation
Not applicable.
8
<PAGE>
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Following is a list of the persons known to the Registrant to be the beneficial
owner of more than five percent of the Beneficial Interests in the Trust:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Percent of
Title of Class of Beneficial Owner Ownership Class
<S> <C> <C> <C>
Beneficial First of St. Louis Leasing Corporation No. 1 N/A 5.000%
Interest 800 Market Street
St. Louis, MO 63101
Beneficial MetLife Capital, Limited Partnership N/A 21.567%
Interest 334 Madison Avenue
Convent Station, NJ 07961
Beneficial BancBoston Leasing, Inc. N/A 10.875%
Interest 100 Federal Street, Mailstop 01-23-90
Boston, MA 02110
Beneficial First Union Commercial Leasing Group, L.L.C. N/A 12.779%
Interest One First Union Center
Charlotte, NC 28288
Beneficial Phoenix Home Life Mutual Insurance Company N/A 7.059%
Interest One American Row
Hartford, CT 06102-5056
Beneficial Sun Life Assurance Company of Canada (U.S.) N/A 8.336%
Interest One Sun Life Executive Park
Wellesley Hills, MA 02181
Beneficial BA Leasing & Capital Corporation N/A 20.501%
Interest Four Embarcadero Center
San Francisco, CA 94111
</TABLE>
ITEM 13. Certain Relationships and Related Transactions
Not applicable.
9
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) and (2)--The response to this portion of Item 14 is submitted
as a separate section of this report starting on page F-1.
(3) Listing of Exhibits.
Number Description
- - ------ -----------
4.1 Indenture, dated June 1, 1992, between Railcar Trust No. 1992-1 and
Harris Trust and Savings Bank, as Trustee, providing for 7.75% Trust
Notes due 2004.*
4.2 The Partnership is also party to other instruments defining the rights
of holders of long-term debt of the Trust where the total indebtedness
authorized under each agreement does not exceed 10% of the total
assets of the Trust on a consolidated basis. Pursuant to Item
601(b)(4)(iii) of Regulation S-K, the Trust is not filing such
instruments. The Trust hereby undertakes to furnish to the Securities
and Exchange Commission upon request copies of any or all such
instruments.
10.1 Participation Agreement, dated December 31, 1991, among General
Electric Railcar Services Corporation, GE Railcar Associates, Inc., GE
Railcar Leasing Associates, Inc., General Electric Capital
Corporation, Itel Rail Funding Corporation, Rex Railways, Inc., and
Railcar Associates, L.P.*
10.2 Second Amended and Restated Trust Agreement, dated May 1, 1992,
between Itel Rail Corporation and Wilmington Trust Company, as
Trustees.**
10.3(a) Amended and Restated Agreement of Limited Partnership of Railcar
Associates, L.P., dated June 1, 1992, among GE Railcar Associates,
Inc., GE Railcar Leasing Associates, Inc., and Railcar Trust No.
1992-1.*
(b) Guaranty, dated June 1 1992, by General Electric Capital Corporation
of certain obligations under the above Agreement of Limited
Partnership.*
10
<PAGE>
10.4(a) Master Lease Agreement, dated June 1, 1992, between Railcar
Associates, L.P. and GE Capital Railcar Associates, Inc.*
(b) Lease Guaranty, dated June 1, 1992, by General Electric Capital
Corporation of the obligations of GE Capital Railcar Associates, Inc.
under the above Master Lease Agreement.*
27 Financial Data Schedule.
(b) Report on Form 8-K.
None
(c) The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) The response to this portion of Item 14 is submitted as a
separate section of this report.
- - -------------------------------------------------------------------------------
* Incorporated by reference to Railcar Trust No. 1992-1's Quarterly Report
on Form 10-Q, for the fiscal quarter ended June 30, 1992.
** Incorporated by reference from Amendment No. 4 to Railcar Trust No. 1992-
1's Registration Statement on Form S-1, Registration Number 33-44946,
filed May 18, 1992, Exhibit 10.5.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
March 29, 1999 RAILCAR TRUST NO. 1992-1
By: /s/ David A. Vanaskey, Jr.
Name: David A. Vanaskey, Jr.
Title: Assistant Vice President
Wilmington Trust Company, Trustee
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - ------------------------------------------------------- ----------------------------------- ---------------------
<S> <C> <C>
/s/ David A. Vanaskey, Jr. Assistant Vice President
- - ------------------------------------------------------- Wilmington Trust Co., Trustee March 29, 1999
David A. Vanaskey, Jr.
/s/ Bruce L. Bisson Vice President
- - ------------------------------------------------------- Wilmington Trust Co., Trustee March 29, 1999
Bruce L. Bisson
</TABLE>
12
<PAGE>
ITEM 8, ITEM 14(a) (1) AND (2), ITEM 14(c), AND ITEM 14(d)
RAILCAR TRUST NO. 1992-1
ANNUAL REPORT ON FORM 10-K
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page(s)
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................................................... F-1
Consolidated Balance Sheets--December 31, 1998 and 1997................................................... F-2
Consolidated Statements of Income for the years ended December 31, 1998, 1997, and 1996................... F-3
Consolidated Statements of Trust Surplus (Deficit) for the years ended December 31, 1998, 1997, and 1996.. F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997, and 1996............... F-5
Notes to the Consolidated Financial Statements............................................................ F-6
Financial Statement Schedule for the years ended December 31, 1998, 1997, and 1996
Schedule I - Condensed Financial Information of Registrant................................................ F-9
</TABLE>
All other schedules are omitted because they are not required or are not
applicable, or the required information is shown in the financial statements or
notes thereto.
13
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Trustees
Railcar Trust No. 1992-1
We have audited the accompanying consolidated balance sheets of Railcar
Trust No. 1992-1 (The Trust) as of December 31, 1998 and 1997, and the related
consolidated statements of income, Trust surplus (deficit), and cash flows for
each of the three years in the period ended December 31, 1998. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Railcar Trust No. 1992-1 at December 31, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Seattle, Washington
March 5, 1999
F-1
<PAGE>
RAILCAR TRUST NO. 1992-1
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
December 31,
1998 1997
------------ ------------
Assets
<S> <C> <C>
Cash and cash equivalents...................................... $ 691 $ 587
Restricted cash................................................ 869 18,888
Rent receivable from GE Capital Railcar Associates, Inc........ 23,753 12,753
Prepaid expenses and other..................................... 725 1,144
-------- --------
Total current assets........................................ 26,038 33,372
Rental equipment............................................... 763,263 813,044
Deferred financing fees........................................ 1,455 2,171
-------- --------
Total assets................................................... $790,756 $848,587
======== ========
Liabilities and Trust Surplus
Accrued interest and other expenses............................ $ 5,347 $ 6,850
Current maturities of long-term debt........................... 101,401 110,999
-------- --------
Total current liabilities................................... 106,748 117,849
Long-term debt:
Trust notes................................................... 543,565 642,351
Secured indebtedness.......................................... 25,434 27,912
-------- --------
Total long-term debt........................................ 568,999 670,263
Minority interest in Partnership............................... 8,881 9,453
Trust surplus:
Capital distributions in excess of contributions.............. (74,623) (69,355)
Cumulative net earnings....................................... 180,751 120,377
-------- --------
Net trust surplus........................................... 106,128 51,022
-------- --------
Total liabilities and trust surplus............................ $790,756 $848,587
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-2
<PAGE>
RAILCAR TRUST NO. 1992-1
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Rental revenue from GE Capital Railcar Associates, Inc........ $169,285 $153,801 $153,034
Operating expenses:
Depreciation............................................ (49,781) (49,781) (49,782)
General, administrative, and other...................... (249) (360) (432)
-------- -------- --------
Total operating expenses.................. (50,030) (50,141) (50,214)
-------- -------- --------
Operating income.............................................. 119,255 103,660 102,820
Interest expense.............................................. (57,908) (65,494) (72,448)
Minority interest............................................. (973) (887) (879)
-------- -------- --------
Net income.................................................... $ 60,374 $ 37,279 $ 29,493
======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-3
<PAGE>
RAILCAR TRUST NO. 1992-1
CONSOLIDATED STATEMENTS OF TRUST SURPLUS (DEFICIT)
(In Thousands)
<TABLE>
<CAPTION>
Capital
distributions Cumulative Net trust
in excess of net surplus
contributions earnings (deficit)
--------------- ------------ -------------
<S> <C> <C> <C>
Balance at January 1, 1996..................... $(68,605) $ 53,605 $(15,000)
Net income..................................... -- 29,493 29,493
-------- -------- --------
Balance at December 31, 1996................... (68,605) 83,098 14,493
Net income..................................... -- 37,279 37,279
Distribution to Holders of Beneficial Interest. (750) -- (750)
-------- -------- --------
Balance at December 31, 1997................... (69,355) 120,377 51,022
Net income..................................... -- 60,374 60,374
Distribution to Holders of Beneficial Interest. (5,268) -- (5,268)
-------- -------- --------
Balance at December 31, 1998................... $(74,623) $180,751 $106,128
======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE>
RAILCAR TRUST NO. 1992-1
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
-------------- ------------- -------------
<S> <C> <C> <C>
Operating activities:
Net income ......................................................... $ 60,374 $ 37,279 $ 29,493
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation..................................................... 49,781 49,781 49,782
Amortized discount on debt and deferred financing fees........... 1,018 1,167 1,325
Minority interest................................................ 973 887 879
Changes in assets and liabilities, net:
Restricted cash................................................ 18,019 (969) 966
Rent receivable from GE Capital Railcar Associates, Inc........ (11,000) 0 0
Other.......................................................... (1,248) (962) (1,015)
--------- -------- --------
Net cash provided by operating activities........................ 117,917 87,183 81,430
Financing activities:
Principal payments on borrowings..................................... (111,000) (84,783) (79,844)
Distributions to beneficiaries....................................... (5,268) (750) 0
Distributions to minority interest................................... (1,545) (1,553) (1,544)
--------- -------- --------
Net cash used in financing activities............................ (117,813) (87,086) (81,388)
--------- -------- --------
Net increase in cash and cash equivalents............................. 104 97 42
Cash and cash equivalents at beginning of the year.................... 587 490 448
--------- -------- --------
Cash and cash equivalents at end of the year ......................... $ 691 $ 587 $ 490
========= ======== ========
Supplemental cash flow information:
Interest paid during the year...................................... $ 58,382 $ 65,586 $ 72,483
========= ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE>
RAILCAR TRUST No. 1992-1
Notes to the Consolidated Financial Statements
Note A Organization and Operations
Railcar Trust No. 1992-1 (the "Trust") holds a majority interest in Railcar
Associates, L.P., a limited partnership (the "Partnership"). The Partnership
leases approximately 59,000 railcars within the United States. GE Capital
Railcar Associates, Inc. (the "Lessee") is the sole lessee of the railcars. The
leases mature in 2004 with quarterly fixed rental payments totaling
approximately $153 million annually. These rental payments are guaranteed by
General Electric Capital Corporation ("GECC"). The Lessee has an option to
purchase all the railcars under lease for approximately $500 million at the end
of the lease. The Lessee is responsible for maintenance, taxes, insurance, and
other expenses involved with operating the railcars.
The Lessee has an annual obligation to make certain contingent rental payments
to the Partnership in addition to the previously described quarterly fixed
rental payments ("Additional Rent"). The Additional Rent calculation is
prepared by the Lessee and is subject to verification by an independent auditor.
Prior to 1998, Additional Rent was recorded when independent verification was
received due to the lack of information available to the lessor. In 1998, in a
change in accounting estimate due to additional information becoming available,
approximately $16.3 million in Additional Rent was recorded related to 1996,
1997 and 1998. Cash of $5.3 million relating to 1996 Additional Rent was
received by the Trust and, including $17 thousand of short-term interest, was
distributed in June 1998 on a prorata basis to the holders of the Beneficial
Interests in the Trust. The 1997 and 1998 estimates of Additional Rent are $7.0
million and $4.0 million respectively. Additional Rent for 1998 has not been
verified by an independent auditor.
The Partnership has the following partners:
<TABLE>
<CAPTION>
Partner Interest (%)
<S> <C>
Railcar Trust No. 1992-1 98.99 %
GE Railcar Associates, Inc. 1.00 %
GE Railcar Leasing Associates, Inc. 0.01 %
</TABLE>
The partners share in profits or losses and distributions in accordance with a
specific formula, as defined in the Amended and Restated Agreement of Limited
Partnership.
Note B Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
financial results of the Trust and the Partnership. All interentity
transactions have been eliminated.
Use of Estimates: The preparation of financial statements requires management to
make estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known, which could impact the amounts
reported and disclosed herein.
F-6
<PAGE>
RAILCAR TRUST No. 1992-1
Notes to the Consolidated Financial Statements
Cash, Cash Equivalents, and Restricted Cash: The Trust considers all highly
liquid investments with an original maturity of three months or less to be cash
equivalents. Due to the short maturity of these instruments, the carrying
amount approximates fair value. Restricted cash balances represent short-term
investments held by GECC. The investments are restricted as to the availability
to the Partnership and are available only to service principal and interest
payments on the Partnership's debt.
Rental Equipment: Rental equipment (railcars) is carried at cost, which is based
upon the historical cost of the contributing partners. Rail cars are
depreciated to the estimated residual value using the straight-line method over
the terms of the leases.
<TABLE>
<CAPTION>
December 31,
1998 1997
------------- --------------
(In Thousands)
<S> <C> <C>
Rail cars (at cost).................... $1,388,582 $1,388,582
Accumulated depreciation............... (625,319) (575,538)
---------- ----------
Net book value......................... $ 763,263 $ 813,044
========== ==========
</TABLE>
Income Taxes: The Trust does not provide for income taxes, as the liability for
such taxes is that of the beneficial owners of the Trust. The net trust deficit
for federal income tax purposes was approximately $316 million at December 31,
1998.
Note C Long-Term Debt
Trust Notes: In June 1992, the Trust issued $998 million of 7.75% Trust Notes
(the "Trust Notes"). The Trust Notes mature through 2004 and are secured by the
Trust's ownership interest in the Partnership. The proceeds from the Trust
Notes, after the payment of certain expenses and the establishment of certain
reserves, were distributed to beneficiaries of the Trust.
Secured Indebtedness: The Partnership has long-term debt, which is secured by
certain of the railcars, and has agreed to pay all amounts owed thereunder as
they become due. This debt has interest rates ranging from 9.95% to 11.1% and
matures at various times through 2003. Some components of the debt have annual
sinking fund requirements. The debt is being serviced out of rental receipts of
the Partnership pursuant to the leases.
The Trust's debt agreements are secured by assets with an aggregate net book
value of approximately $780 million at December 31, 1998.
<TABLE>
<CAPTION>
December 31,
1998 1997
-------------- ---------------
(In Thousands)
<S> <C> <C>
Trust notes............................... $ 642,488 $ 733,806
Secured indebtedness...................... 27,912 47,456
--------- ---------
Total debt............................... 670,400 781,262
Less: Current maturities................. (101,401) (110,999)
--------- ---------
Long-term debt $ 568,999 $ 670,263
========= =========
</TABLE>
F-7
<PAGE>
RAILCAR TRUST No. 1992-1
Notes to the Consolidated Financial Statements
The fair value of the Trust's long-term debt was approximately $683 million at
December 31, 1998 and was estimated using a discounted cash flow analysis based
on the Trust's incremental borrowing rate.
The aggregate annual maturities of long-term debt (in thousands) as of December
31 are as follows:
<TABLE>
<S> <C>
1999 $101,401
2000 94,588
2001 134,131
2002 128,422
2003 and beyond 211,858
--------
Total debt $670,400
========
</TABLE>
Note D Summary of Quarterly Financial Data (Unaudited)
The following table summarizes the Trust's quarterly consolidated financial
information:
<TABLE>
<CAPTION>
Quarter Ended
March 31, June 30, September 3 December 31,
------------------- ------------------- -------------------- --------------------
(In Thousands) 1998 1997 1998 1997 1998 1997 1998 1997
- - ----------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......... $38,259 $38,259 $43,580 $38,258 $38,188 $39,026 $49,258 $38,258
Operating Income. 25,744 25,750 31,064 25,665 25,636 26,510 36,811 25,735
Net Income....... 10,229 8,466 16,131 8,889 11,262 10,146 22,752 9,778
</TABLE>
Note: Additional Rent was reflected in the above Revenues, Operating Income and
Net Income in the amount of $759 thousand in September 1997 for 1995 Operations;
$5,251 thousand in June 1998 for 1996 Operations and in December 1998 $7,000
thousand for 1997 Operations and $4,000 thousand for 1998 Operations.
F-8
<PAGE>
RAILCAR TRUST NO. 1992-1
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RAILCAR TRUST NO. 1992-1 (PARENT COMPANY)
BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
December 31,
1998 1997
------------ ------------
<S> <C> <C>
Assets
Cash and cash equivalents...................................... $ 663 $ 550
Prepaid expenses and other..................................... 716 881
-------- --------
Total current assets........................................ 1,379 1,431
Investment in Partnership...................................... 749,934 785,969
Deferred financing fees........................................ 1,455 2,171
-------- --------
Total assets................................................... $752,768 $789,571
======== ========
Liabilities and Trust Surplus
Accrued interest............................................... $ 4,152 $ 4,743
Current maturities of Trust notes.............................. 98,923 91,455
-------- --------
Total current liabilities................................... 103,075 96,198
Trust notes.................................................... 543,565 642,351
-------- --------
Total liabilities........................................... 646,640 738,549
Trust surplus:
Capital distributions in excess of contributions.............. (74,623) (69,355)
Cumulative net earnings....................................... 180,751 120,377
-------- --------
Net trust surplus........................................... 106,128 51,022
-------- --------
Total liabilities and trust surplus............................ $752,768 $789,571
======== ========
</TABLE>
F-9
<PAGE>
RAILCAR TRUST NO. 1992-1
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RAILCAR TRUST NO. 1992-1 (PARENT COMPANY)
STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Interest income $ 35 $ 10 $ 22
Expenses:
Interest................................................ (54,710) (60,252) (65,121)
General and administrative.............................. (144) (110) (183)
-------- -------- --------
(54,854) (60,362) (65,304)
-------- -------- --------
Loss from operations before equity in earnings of
Partnership............................................. (54,819) (60,352) (65,282)
Equity in earnings of Partnership........................ 115,193 97,631 94,775
-------- -------- --------
Net income............................................... $ 60,374 $ 37,279 $ 29,493
======== ======== ========
</TABLE>
F-10
<PAGE>
RAILCAR TRUST NO. 1992-1
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RAILCAR TRUST NO. 1992-1 (PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net income...............................................$ 60,374 $ 37,279 $ 29,493
Adjustments to reconcile net income to net cash used
in operating activities:
Equity in earnings of Partnership..................... (115,193) (97,631) (94,775)
Amortized discount on debt and deferred fees.......... 881 1,022 1,177
Accrued interest...................................... (591) (400) (387)
--------- -------- --------
Net cash used in operating activities................. (54,529) (59,730) (64,492)
Investing activities:
Net distributions from Partnership....................... 151,228 122,412 124,361
--------- -------- --------
Net cash provided by investing activities............. 151,228 122,412 124,361
Financing activities:
Principal payments on borrowings......................... (91,318) (61,838) (59,838)
Distribution to beneficiaries............................ (5,268) (750) 0
--------- -------- --------
Net cash used in financing activities................. (96,586) (62,588) (59,838)
--------- -------- --------
Net increase in cash and cash equivalents................... 113 94 31
--------- -------- --------
Cash and equivalents at beginning of year................... 550 456 425
--------- -------- --------
Cash and equivalents at end of year.........................$ 663 $ 550 $ 456
========= ======== ========
</TABLE>
F-11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-01-1998
<CASH> 1,560
<SECURITIES> 0
<RECEIVABLES> 23,753
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,038
<PP&E> 1,388,582
<DEPRECIATION> 625,319
<TOTAL-ASSETS> 790,756
<CURRENT-LIABILITIES> 106,748
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 106,128
<TOTAL-LIABILITY-AND-EQUITY> 790,756
<SALES> 0
<TOTAL-REVENUES> 169,285
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 50,030
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,908
<INCOME-PRETAX> 60,374
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,374
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
