-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q2tM/owLIXK9sQ/SX+ih9WlipVC2/0/txhhdkgrRhpdhwjwV9lJ97i9jn7iDM1KT Gv/nMDhcUaPUEhFqK3hKlQ== 0000950131-00-001728.txt : 20000314 0000950131-00-001728.hdr.sgml : 20000314 ACCESSION NUMBER: 0000950131-00-001728 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION TANK CAR CO CENTRAL INDEX KEY: 0000100923 STANDARD INDUSTRIAL CLASSIFICATION: RAILROAD EQUIPMENT [3743] IRS NUMBER: 363104688 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-05666 FILM NUMBER: 567843 BUSINESS ADDRESS: STREET 1: 225 W WASHINGTON ST CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3123729500 MAIL ADDRESS: STREET 1: 225 W. WASHINGTON STREET CITY: CHICAGO STATE: IL ZIP: 60606 10-K 1 FORM 10-K 1999 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [X] SECURITIES EXCHANGE ACT OF 1934 For the year ended December 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 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 W. Washington Street, Chicago, Illinois 60606 ------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312) 372-9500 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered ------------------- ---------------------- None - Securities registered pursuant to Section 12(g) of the Act: Title of Each Class ------------------- 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 ((S) 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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. [ ]. There is no voting stock held by non-affiliates of the registrant. This Annual 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. UNION TANK CAR COMPANY FORM 10-K Year Ended December 31, 1999 CONTENTS
Section Page - ------- ---- Part I. Item 1 Business........................................................... 2 Item 2 Properties......................................................... 9 Item 3 Legal Proceedings.................................................. 10 Item 4 Submission of Matters to a Vote of Security Holders................ 10 Part II. Item 5 Market for Registrant's Common Equity and Related Stockholder Matters................................... 11 Item 6 Selected Financial Data............................................ 11 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 11 Item 7A Disclosures about Market Risk...................................... 15 Item 8 Financial Statements and Supplementary Data........................ 15 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................................... 36 Part III. Item 10 Directors and Executive Officers of the Registrant................. 36 Item 11 Executive Compensation............................................. 38 Item 12 Security Ownership of Certain Beneficial Owners and Management..... 39 Item 13 Certain Relationships and Related Transactions..................... 39 Part IV. Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 40 Signatures...................................................................... 41
-1- PART I ITEM 1. BUSINESS General UNION TANK CAR COMPANY (with its wholly-owned subsidiaries herein collectively referred to, unless the context otherwise requires, as the "Company") was organized under the laws of Delaware on September 23, 1980 and is the successor to a business which was originally incorporated in New Jersey in 1891. The Company is a wholly-owned subsidiary of Marmon Industrial LLC, a wholly-owned subsidiary of Marmon Holdings, Inc. ("Holdings"). Substantially all of the stock of Holdings 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. Railcar Leasing, Services and Sales The principal activity of the Company is the leasing of railway tank cars and other railcars to North American manufacturers and other shippers of chemical products, including liquid fertilizers, petroleum products, including liquefied petroleum gas, food products and bulk plastics. The Company owns and operates one of the largest fleets of privately-owned railway tank cars in the world. As of December 31, 1999, the Company's fleet was comprised of 62,207 tank cars and 15,971 railway cars of other types. A total of 30,704 cars were added to the lease fleet during the ten years ended December 31, 1999. These cars accounted for approximately 42% of total railcar lease revenues during 1999. Most of the Company's cars were built by the Company or to its specifications and the balance was purchased from other sources. Management estimates that tank cars carrying chemicals and acids account for the greatest portion of total leasing revenues, followed in order by compressed gases (particularly liquefied petroleum gas and anhydrous ammonia), refined petroleum products (such as gasoline, fuel oils and asphalt), food products and liquid fertilizers. A significant portion of the revenues from the Company's non-tank car fleet derives from hopper cars carrying bulk plastics. The remaining non-tank car revenues are attributable to cars which serve the lumber, dry bulk chemical and coal industries. The Company builds tank cars primarily for use in its leasing business. In addition, the Company builds cars for sale to others. Generally, the Company manufactures a car following the receipt of a firm order for the lease or sale of such car. -2- Substantially all of the Company's cars are leased directly to several hundred manufacturers and other shippers under leases covering from one to several thousand cars and for periods ranging from one to twenty years. The average term of leases entered into during 1999 for newly-manufactured railcars was approximately seven years. The average term of leases entered into during 1999 for used tank cars and other railcars was approximately four years. Under the terms of most leases, the Company agrees to provide a full range of services, including car repair and maintenance. The Company supplies relatively few cars directly to railroads. The Company markets its cars through regional sales offices located throughout the United States and Canada and through a sales agent in Mexico. To ensure optimum utilization of the North American lease fleets, the Company maintains fleet data processing systems which contain information relative to each car, including its mechanical specifications, maintenance and repair data and lease terms. The Company employs a variety of methods to meet its railcar financing needs. During 1999, the Company entered into a sale-leaseback transaction for $13.2 million, and issued $70.0 million of unsecured medium term notes and $100.0 million of senior secured notes. The Company expects that future railcar financing needs will be met primarily with a combination of secured and unsecured borrowings and sale-leaseback transactions. Approximately 25% of the Company-owned fleet of railcars is pledged to secure equipment obligations and secured notes. The remaining cars are free of liens. The Company maintains repair facilities located at strategic points throughout the United States and Canada. In addition to the work performed by the Company, certain maintenance and repair work is performed for the Company's account by railroads when railroad inspection determines the need for such work under the interchange rules of the Association of American Railroads ("AAR"). The Company is not a common carrier and is not subject to regulation or supervision as such. The Company's railcars are subject to regulations governing construction, safety and maintenance promulgated by the Department of Transportation and various other government agencies and by the AAR. These regulations have required and may in the future require the Company to make significant modifications to certain of its cars from time to time. The Company's facilities for manufacturing and assembling tank cars are located in East Chicago, Indiana; Oakville, Ontario, Canada; and Sheldon, Texas. The Company also operates the largest network of shops in North America for repairing and servicing railcars, as well as a fleet of specially equipped trucks to perform repairs at customer plant sites. The principal shops are located in Valdosta, Georgia; Muscatine, Iowa; El Dorado, Kansas; Ville Platte, Louisiana; Marion, Ohio; Altoona, Pennsylvania; Cleveland, Longview and Sheldon, Texas; Evanston, Wyoming; Edmonton, Alberta; Sarnia and Oakville, Ontario; Montreal, Quebec; and Regina, Saskatchewan. -3- Other Activities The Company is engaged in several other activities, as described below. Sulphur Processing A subsidiary of the Company provides sulphur producers in Canada with various services, including the processing of liquefied sulphur into crystalline slates and granules and the storage and shipping of the product. The subsidiary also designs, manufactures and sells sulphur processing plants worldwide. The subsidiary is also engaged in the manufacturing and distribution of sulphur bentonite products and micronutrients to the agricultural industry. Fasteners The Company's fastener business, which is conducted through several wholly-owned subsidiaries, consists of manufacturing and distributing a wide range of fasteners worldwide to the construction industry and manufacturers of furniture, household appliances, industrial and agricultural equipment. Containment Vessel Head Manufacturing A subsidiary of the Company manufactures and distributes metal containment vessel heads, primarily made of steel, to the metal containment vessel construction industry. Liquefied Petroleum Gas Storage A subsidiary of the Company operates several underground liquefied petroleum gas storage caverns in Canada as a service to producers and sellers of liquefied petroleum gas. Other Railway Equipment and Services A subsidiary of the Company manufactures mobile railcar moving vehicles for in-plant and yard switching. Other subsidiaries provide contract switching services to companies with on-site rail yards. Other Services A subsidiary of the Company buys, manages, hires, and maintains intermodal tank containers for the transport of liquids and gas. -4- Segment Information The principal activity of the Company's primary industry segment is railcar leasing, services and sales. Other activities of the Company, as described above, plus corporate headquarters items, are shown as All Other in the following table:
Consolidated Railcar All Other Totals ---------- ----------- ------------- (Dollars in Millions) 1999 ---- Revenues from external customers $ 767.7 $ 196.4 $ 964.1 Interest income 1.0 12.7 13.7 Interest expense 72.6 0.5 73.1 Depreciation and amortization 118.3 12.3 130.6 Income before income taxes 163.0 19.1 182.1 Segment assets 2,079.6 317.7 2,397.3 Expenditures for long-lived assets 205.0 8.2 213.2 1998 ---- Revenues from external customers $ 715.3 $ 161.3 $ 876.6 Interest income 0.1 13.2 13.3 Interest expense 70.5 0.6 71.1 Depreciation and amortization 113.3 8.7 122.0 Income before income taxes 175.3 25.6 200.9 Segment assets 1,992.5 219.7 2,212.2 Expenditures for long-lived assets 254.3 4.7 259.0 1997 ---- Revenues from external customers $ 710.0 $ 132.4 $ 842.4 Interest income 0.2 13.0 13.2 Interest expense 74.7 0.7 75.4 Depreciation and amortization 107.9 5.8 113.7 Income before income taxes 142.4 16.0 158.4 Segment assets 1,897.9 331.8 2,229.7 Expenditures for long-lived assets 253.6 7.7 261.3
-5- Geographic Information The following table presents geographic information for the Company. Revenues are attributed to countries based on the location of customers. Long-lived Revenues Assets ---------- ------------ (Dollars in Millions) 1999 ---- United States $ 788.5 $ 1,365.8 Canada 153.8 530.7 Other countries 21.8 33.1 ---------- ------------ Consolidated total $ 964.1 $ 1,929.6 ========== ============ 1998 ---- United States $ 676.6 $ 1,312.9 Canada 167.8 491.0 Other countries 32.2 34.6 ---------- ------------ Consolidated total $ 876.6 $ 1,838.5 ========== ============ 1997 ---- United States $ 653.5 $ 1,256.1 Canada 171.1 502.6 Other countries 17.8 35.5 ---------- ------------ Consolidated total $ 842.4 $ 1,794.2 ========== ============ Major Customers Revenues from any one customer did not exceed 10% of consolidated or industry segment revenues. Raw Materials The Company purchases raw materials from a variety of suppliers, with no one supplier being significant. In the opinion of management, the Company will have adequate availability of raw materials in the future. -6- Foreign Operations The Company does not believe that there are other than normal business risks attendant to its foreign operations. Competition All the activities of the Company are in competition with similar activities carried on by other companies. In particular, there are several companies engaged in the business of leasing tank cars in the United States and Canada. The principal competitors are General American Transportation Corporation (including its Canadian affiliate, Canadian General Transit Company, Limited), General Electric Railcar Services Corporation, and ACF Industries, Incorporated. The principal competitive factors are price, service and product design. The Company's integration of its North American engineering, manufacturing, repair and leasing activities has enhanced its ability to provide competitive products and services to its customers. Railcar Supply and Demand The demand for tank cars and bulk plastic hopper cars is generally met with a combination of the industry's existing fleet and new car additions. The industry's generally high overall utilization of the tank car and bulk plastic covered hopper car fleets is evidence of an appropriate level and mix of equipment to meet existing car demands. New railcars are needed to satisfy growth, specialized requirements, or the desire of certain customers to utilize newer equipment. Since railcars are generally built to customer order, the supply of new railcars generally stays in reasonable balance with demand. The major underlying factors affecting demand for new railcars are: (a) the rate of growth of the overall economy, (b) growth of certain industry segments, manufacturers, or shippers, particularly involving significant new or expanded production operations, and (c) replacement of aged, obsolete, or worn out railcars. Manufacturing Backlog The Company builds tank cars primarily for use in its leasing business and the number of cars added in any one year is a small percentage of the Company's lease fleet. Additionally, for tank cars built for sale to customers, the Company delivers against orders within a relatively brief period of time. Therefore, backlog is not material to the Company's business or an understanding thereof. Employees As of December 31, 1999, the Company had approximately 4,910 employees. -7- Environmental Matters The Company believes that all of its facilities are in substantial compliance with applicable laws and regulations relating to environmental protection. Over the past several years, the Company has attempted to identify and remediate potential problem areas. In 1999, the Company spent approximately $6.6 million on remediation and related matters, compared with $5.7 million and $7.8 million in 1998 and 1997, respectively. The Company expects to spend approximately $7.0 million in 2000 on similar activities. The Company has been designated as a Potentially Responsible Party ("PRP") by the EPA at two sites: Auto Ion Chemical Company, Kalamazoo, Michigan and Whitehouse Waste Oil Pits Site, Jacksonville, Florida. Costs incurred to date have not been material, either individually or in the aggregate. Because of the level of the Company's involvement at these sites, management believes that future costs related to these sites will not be material, either individually or in the aggregate. The Company has not entered into any cost sharing arrangements with other PRP's that make it reasonably possible the Company will incur material costs beyond its pro rata share. Further, management does not believe that any problems or uncertainties as to the financial liabilities of other PRP's make it reasonably possible the Company will incur material costs beyond its pro rata share at these sites. The Company's accruals for these sites are based on the amount it reasonably expects to pay with respect to the sites. Management believes that amounts accrued for remedial activities and environmental liabilities (which in the aggregate are not material) are adequate. -8- ITEM 2. PROPERTIES In the opinion of management, the Company's properties are in good condition, substantially utilized and adequate to meet the Company's current and reasonably anticipated future needs. The Company estimates that its plant facilities were utilized during the year at an average of approximately 80% of productive capacity for railcar manufacturing, 75% for railcar servicing and repair, 75% for sulphur processing, 85% for fastener production, 65% for containment vessel head manufacturing, 95% for liquefied petroleum gas storage, and 60% for railcar moving vehicles manufacturing. Railcars The Company owns approximately 86% of its total lease fleet of 78,178 railcars, of which 62,207 are tank cars and 15,971 are other railway freight cars. Of the approximately 67,060 owned cars, 50,053 are free of liens. Cars which are not owned are leased from others under long-term net leases. Railcar Manufacturing and Assembling Facilities The facilities for the manufacturing and assembling of railcars are located at East Chicago, Indiana; Oakville, Ontario, Canada; and Sheldon, Texas, together occupying approximately 170 acres. Car Servicing and Repair Shops The Company operates a network of shops for repairing and servicing railcars. The principal shops owned by the Company are located at Valdosta, Georgia; Muscatine, Iowa; El Dorado, Kansas; Ville Platte, Louisiana; Marion, Ohio; Altoona, Pennsylvania; Cleveland, Longview, and Sheldon, Texas; Evanston, Wyoming; Edmonton, Alberta; Sarnia and Oakville, Ontario; Montreal, Quebec; and Regina, Saskatchewan. Several other repair shops and small repair points are strategically located throughout the United States and Canada. Sulphur Processing A subsidiary of the Company owns facilities in Canada which process liquefied sulphur into crystalline slates and granules and handle the formed product. The Company also owns facilities in North America for the manufacture and distribution of sulphur bentonite products and micronutrients. Fasteners The Company owns (either directly or through its subsidiaries) fastener manufacturing facilities in Ashland, Ohio; Milton, Ontario; Montreal, Quebec; and Gaffney, South Carolina. In addition, the Company leases several small plants in the United States, Canada, China, and Sweden. Containment Vessel Head Manufacturing Facilities A subsidiary of the Company owns a metal containment vessel head manufacturing facility in Sheldon, Texas. Liquefied Petroleum Gas Storage Facilities A subsidiary of the Company owns several underground liquefied petroleum gas storage caverns in Canada. -9- Other Railway Equipment Facilities A subsidiary of the Company owns a mobile railcar moving vehicle manufacturing facility in LaGrange, Georgia. Other Properties The Company and its subsidiaries maintain numerous sales and business offices and warehouses, most of which are leased, throughout North America and Europe. ITEM 3. LEGAL PROCEEDINGS 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 to resolve such claims, including legal fees, and, in the opinion of management, the ultimate resolution of these matters will not have a material effect on the Company's consolidated financial position, results of operations or liquidity. See discussion of Environmental Matters in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. -10- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Not applicable. ITEM 6. SELECTED FINANCIAL DATA
For the year ended December 31, --------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 ----------- ------------ ------------- ------------- ------------ (Dollars in Thousands) Services and net sales $ 964,109 $ 876,643 $ 842,354 $ 680,642 $ 725,712 Net income 116,557 127,421 101,250 102,583 84,465 Ratio of earnings to fixed charges 2.96 x 3.23 x 2.74 x 2.84 x 2.41 x At year end: Total assets $ 2,397,319 $ 2,212,175 $ 2,229,664 $ 2,006,820 $ 2,003,346 Long-term obligations 941,551 821,470 858,656 528,344 732,207
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements - -------------------------- This annual report on Form 10-K for the year ended December 31, 1999 contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth herein. 1999 versus 1998 Results of Operations - --------------------- Service revenues increased $44.7 million primarily due to the effects of railcars added to the lease fleet and the acquisition in the fourth quarter of 1998 of a company which provides contract switching services, partly offset by weaker sulphur processing activities. Sales revenues increased $42.7 million primarily due to increased sales of railcars and sales of mobile railcar moving vehicles by a company which was acquired in the fourth quarter of 1998. General and administrative expenses increased $11.1 million primarily due to the acquisition of businesses in the fourth quarter of 1998. Gross margin percentages decreased from the comparable period in 1998 primarily due to increased railcar maintenance expenses and weaker demand for sulphur products. -11- Financial Condition - ------------------- Operating activities provided $288.7 million of cash in 1999. These funds, along with the proceeds from the issuance of debt and sale-leaseback transaction, were used to provide for railcar additions, advance funds to parent, pay dividends to the Company's stockholder, service borrowed debt obligations, and fund the acquisition of businesses. It is the Company's policy to pay to its stockholder a quarterly dividend equal to 70% of net income. To the extent that the Company generates cash in excess of its operating needs, such funds are advanced to its parent and bear interest at commercial rates. Conversely, when the Company requires additional funds to support its operations, prior advances are repaid by its parent. No restrictions exist regarding the amount of dividends which may be paid or advances which may be made by the Company to its parent. In 1999, the Company spent $213.2 million for the construction and purchase of railcars and other fixed assets and $11.8 million for the purchase of assets engaged in managing intermodal tank containers, and other assets. Of the capital expenditures for construction and purchase of railcars and other fixed assets over the past five years, approximately 89% have been for railcars. Since all material capital expenditures for railcars are incurred subsequent to receipt of firm customer orders, such expenditures are discretionary to the Company based on its desire to invest in those particular railcars. In 1999, the Company issued $70.0 million in unsecured medium term notes, $100.0 million in senior secured notes, and entered into a sale-leaseback transaction for $13.2 million. Other financing activities of the Company included $62.9 million for principal repayments on borrowed debt and $82.0 million for cash dividends. Net cash provided by financing activities was $43.6 million. Management expects that the future cash to be provided by operating activities, long-term financings, and repayment 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. The following table presents the scheduled cash inflows and outflows over the next five years based on leases and indebtedness outstanding as of December 31, 1999:
2000 2001 2002 2003 2004 ----------- ------------ ------------ ------------ ----------- (Dollars in Millions) Cash Inflows - ------------ Minimum future lease rentals $ 419.1 $ 336.5 $ 262.3 $ 191.4 $ 125.9 Cash Outflows - ------------- Minimum future lease payments 55.5 59.7 57.1 57.7 60.7 Principal amount of obligations 42.5 77.8 76.2 47.3 79.9 ----------- ------------ ------------ ------------ ----------- Excess (Deficit) of inflows over outflows $ 321.1 $ 199.0 $ 129.0 $ 86.4 $ ( 14.7) =========== ============ ============ ============ ===========
The minimum future lease rentals above relate to leases in effect at December 31, 1999. Based upon its historical experience, the Company expects that the railcars (other than those which are retired in the ordinary course of business) will be re-leased at the expiration of such leases. The rentals under such future leases cannot be ascertained and are not reflected above. -12- The Company has consistently maintained high fleet utilization. Although the Company's lease fleet utilization decreased during 1999, utilization has averaged 98% during the last five years. Utilization rates of the Company's existing railcars are driven by the long-term requirements of manufacturers and shippers of chemical products, petroleum products, food products, and bulk plastics, and the suitability of the Company's fleet to meet such demand. The potential impact of short-term fluctuations in demand is tempered by the longer-term nature of the leases, which average four years for existing equipment and longer for new equipment. The Company has not experienced any significant impact of inflation and changing prices on its financial position or results of operations over the last several years. 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 $9.1 million and $3.4 million at December 31, 1999 and 1998, respectively. New Accounting Pronouncements - ----------------------------- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", which the Company is required to adopt effective January 1, 2001. This Statement will require the Company to recognize all derivatives on the balance sheet at fair value. The Company does not believe the effect of adoption will have a material impact on the Company's financial statements. 1998 versus 1997 Results of Operations - --------------------- Services revenues increased $19.9 million, primarily due to the effect of railcars added to the lease fleet in 1997 and 1998. Net sales revenues increased $14.4 million. The increase primarily resulted from the Company's sulphur service processing operations with the remaining increase primarily due to increased fastener sales, partially offset by lower sales of covered hopper railcars. Gain on sale of assets increased due to the sale of certain future income rights retained as a condition of the May 1996 sale of a storage facility used in the liquefied petroleum gas storage operations. Gross margin percentages increased from the comparable period in 1997 due to decreased railcar maintenance expenses, and improved sale margins for tank cars, sulphur products and fasteners. -13- Financial Condition - ------------------- Operating activities provided $256.0 million of cash in 1998. These funds, along with the issuance of unsecured debt and the sale-leaseback transaction, were used to provide financing for railcar additions, service borrowed debt obligations, advance funds to parent and pay dividends to the Company's stockholder. It is the Company's policy to pay to its stockholder a quarterly dividend equal to 70% of net income. To the extent that the Company generates cash in excess of its operating needs, such funds are advanced to its parent and bear interest at commercial rates. Conversely, when the Company requires additional funds to support its operations, prior advances are repaid by its parent. No restrictions exist regarding the amount of dividends which may be paid or advances which may be made by the Company to its parent. In 1998, the Company spent $259.0 million for the construction and purchase of railcars and other fixed assets and $22.7 million for the purchase of assets engaged in the manufacturing and distribution of sulphur bentonite and micronutrients, and other assets. Of the capital expenditures for construction and purchase of railcars and other fixed assets over the past five years, approximately 90% have been for railcars. Since all material capital expenditures for railcars are incurred subsequent to receipt of firm customer orders, such expenditures are discretionary to the Company based on its desire to invest in those particular railcars. In 1998, the Company issued $80.0 million in unsecured notes and entered into a sale-leaseback transaction for $130.0 million. Other financing activities of the Company included $188.8 million for principal repayments on borrowed debt and $48.0 million for cash dividends. Net cash used in financing activities was $26.2 million. Year 2000 Readiness Disclosure - ------------------------------ In prior years, the Company discussed the nature and progress of its plans to become Year 2000 ready. In late 1999, the Company completed its remediation and testing of systems. As a result of those planning and implementation efforts, the Company experienced no significant disruptions in mission critical information technology and non-information technology systems and believes those systems successfully responded to the Year 2000 date change. The Company incurred approximately $5.5 million in cumulative costs of projects dedicated solely to the Year 2000 remediation. The Company is not aware of any material problems resulting from Year 2000 issues, either with its products, its internal systems, or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. -14- ITEM 7A. DISCLOSURES ABOUT MARKET RISK The market risk inherent in the Company's financial instruments is the potential loss in fair value arising from adverse changes in interest rates. Under its current policies, the Company does not use interest rate derivative instruments to manage exposure to interest rate changes. The following table provides information about the Company's debt obligations that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted-average interest rates by expected maturity dates and estimated fair value of the Company's debt obligations.
Fair Value 2000 2001 2002 2003 2004 Thereafter Total 12-31-99 ------- ------- ------- ------- ------- ------------ ------- ----------- (Dollars in Millions) Fixed rate debt $ 42.3 $ 77.8 $ 75.9 $ 47.1 $ 79.9 $ 660.3 $ 983.3 $ 1,010.6 Average interest rate 8.76% 7.73% 7.28% 8.30% 7.44% 6.98% 7.32%
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements
Page ---- Report of Independent Auditors........................................... 16 Financial Statements Consolidated statement of income for each of the three years in the period ended December 31, 1999..................................... 17 Consolidated balance sheet - December 31, 1999 and 1998.................. 18 Consolidated statement of stockholder's equity for each of the three years in the period ended December 31, 1999............................ 19 Consolidated statement of cash flows for each of the three years in the period ended December 31, 1999............................ 20 Notes to consolidated financial statements............................... 21
-15- REPORT OF INDEPENDENT AUDITORS TO UNION TANK CAR COMPANY We have audited the accompanying consolidated balance sheet of Union Tank Car Company and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, stockholder's equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 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 Union Tank Car Company and subsidiaries at December31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Chicago, Illinois March 8, 2000 -16- UNION TANK CAR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (Dollars in Thousands) For the Year Ended December 31, ----------------------------------------- 1999 1998 1997 --------- --------- --------- Revenues Services (leasing and other) $ 624,818 $ 580,092 $ 560,174 Net sales 339,291 296,551 282,180 --------- --------- --------- 964,109 876,643 842,354 Interest income 13,665 13,255 13,234 (Loss) Gain on sale of assets (1,659) 6,383 102 Other income 12,190 10,338 5,165 --------- --------- --------- 988,305 906,619 860,855 Costs and expenses Cost of services 364,383 320,280 318,294 Cost of sales 293,976 250,720 251,008 General and administrative 74,703 63,610 57,828 Interest expense 73,117 71,131 75,356 --------- --------- --------- 806,179 705,741 702,486 --------- --------- --------- Income before income taxes 182,126 200,878 158,369 Provision for income taxes Current 41,800 60,867 51,727 Deferred income taxes and investment tax credits 23,769 12,590 5,392 --------- --------- --------- 65,569 73,457 57,119 --------- --------- --------- Net income $ 116,557 $ 127,421 $ 101,250 ========= ========= ========= Ratio of earnings to fixed charges 2.96 x 3.23 x 2.74 x ========= ========= ========= See Notes to Consolidated Financial Statements. -17- UNION TANK CAR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollars in Thousands) December 31, ------------------------ 1999 1998 ----------- ----------- Assets - ------ Cash and cash equivalents $ 50,607 $ 58,423 Accounts receivable, primarily due within one year, less allowance for doubtful accounts of $3,952 in 1999 and $4,121 in 1998 76,160 82,729 Inventories 85,165 90,123 Prepaid expenses and deferred charges 9,635 11,411 Advances to parent company, principally at LIBOR plus 1% 246,168 130,940 Railcar lease fleet, net 1,653,495 1,575,014 Fixed assets, net 189,803 177,055 Investment in direct financing lease 34,012 32,629 Other assets 52,274 53,851 ----------- ----------- Total assets $ 2,397,319 $ 2,212,175 =========== =========== Liabilities, Deferred Items and Stockholder's Equity - ---------------------------------------------------- Accounts payable $ 24,361 $ 20,082 Accrued rent 70,173 62,056 Accrued liabilities 185,286 190,841 Borrowed debt 984,067 868,421 ----------- ----------- 1,263,887 1,141,400 Deferred items Deferred income taxes and investment tax credits 465,793 437,693 Stockholder's equity Common stock, no par value; 1,000 shares authorized and issued 106,689 106,689 Additional capital 6,346 6,346 Retained earnings 554,604 520,047 ----------- ----------- Total stockholder's equity 667,639 633,082 Total liabilities, deferred items and ----------- ----------- stockholder's equity $ 2,397,319 $ 2,212,175 =========== =========== See Notes to Consolidated Financial Statements. -18- UNION TANK CAR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY Years Ended December 31, 1999, 1998 and 1997 (Dollars in Thousands)
Common Additional Retained Stock Capital Earnings Total ----- ------- -------- ----- Balance at December 31, 1996 $ 106,689 $ 6,346 $ 450,715 $ 563,750 Net income - - 101,250 101,250 Cash dividends - - (70,000) (70,000) --------- ------- --------- --------- Balance at December 31, 1997 106,689 6,346 481,965 595,000 Net income - - 127,421 127,421 Cash dividends - - (48,000) (48,000) Non-cash dividends - - (41,339) (41,339) --------- ------- --------- --------- Balance at December 31, 1998 106,689 6,346 520,047 633,082 Net income - - 116,557 116,557 Cash dividends - - (82,000) (82,000) --------- ------- --------- --------- Balance at December 31, 1999 $ 106,689 $ 6,346 $ 554,604 $ 667,639 ========= ======= ========= =========
See Notes to Consolidated Financial Statements. 19 UNION TANK CAR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands)
For the Year Ended December 31, ------------------------------------------- 1999 1998 1997 --------- --------- --------- Cash flows from operating activities: Net income $ 116,557 $ 127,421 $ 101,250 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 130,611 121,998 113,663 Gain on disposition of railcars and other fixed assets (3,895) (5,699) (4,951) Deferred taxes 23,769 12,590 5,392 Other non-cash income and expenses 493 799 1,863 Changes in operating assets and liabilities 21,176 (1,062) 134 --------- --------- --------- Net cash provided by operating activities 288,711 256,047 217,351 Cash flows from investing activities: Construction and purchase of railcars and other fixed assets (213,246) (259,007) (261,306) Increase in advance to parent (126,314) (520) (57,105) (Increase) Decrease in other assets and investments (3,646) 7,679 12,849 Proceeds from disposals of railcars and other fixed assets 11,618 9,814 9,767 Purchases of businesses, net of cash acquired (11,764) (22,731) (10,642) --------- --------- --------- Net cash used in investing activities (343,352) (264,765) (306,437) Cash flows from financing activities: Proceeds from issuance of borrowed debt 175,234 80,550 400,000 Proceeds from sale-leaseback transactions 13,200 130,018 - Principal payments of borrowed debt (62,855) (188,771) (210,143) Cash dividends (82,000) (48,000) (70,000) --------- --------- --------- Net cash provided by (used in) financing activities 43,579 (26,203) 119,857 Effect of exchange rates on cash and cash equivalents 3,246 (6,365) (2,977) --------- --------- --------- Net (decrease) increase in cash and cash equivalents (7,816) (41,286) 27,794 Cash and cash equivalents at beginning of year 58,423 99,709 71,915 --------- --------- --------- Cash and cash equivalents at end of year $ 50,607 $ 58,423 $ 99,709 ========= ========= =========
See Notes to Consolidated Financial Statements -20- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands) 1. Ownership UNION TANK CAR COMPANY (with its wholly-owned subsidiaries herein collectively referred to, unless the context otherwise requires, as the "Company") is a wholly-owned subsidiary of Marmon Industrial LLC ("MIC") and a subsidiary of Marmon Holdings, Inc. ("Holdings"). Substantially all of the stock of Holdings 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. Summary of Accounting Principles and Practices Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and all subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents Cash and cash equivalents includes all highly liquid debt instruments purchased with an original maturity of three months or less. Lessor Accounting Operating Leases - Most of the Company's railcar leases are classified as operating leases. Aggregate rentals from operating leases are reported as revenue ratably over the life of the lease. Expenses, including depreciation and maintenance, are charged as incurred. Direct Financing Leases - Some of the Company's railcar and other rental equipment leases are classified as direct financing leases. Gross investment in leases (minimum lease payments plus estimated residual values) less the cost of the equipment is designated as unearned income. This unearned income is recognized over the life of the lease based upon the "constant yield method" or similar methods which generally result in an approximate level rate of return on the investment. Revenue Recognition Revenue from sales of products is generally recognized upon shipment to customers. Depreciation and Fixed Assets Accounting Railcars and fixed assets are recorded at cost less accumulated depreciation. These assets are depreciated to salvage value over their estimated useful lives on the straight-line method. The estimated useful lives are principally: railcars, 25-30 years; buildings and improvements, 20-30 years; and machinery and equipment, 3-20 years. -21- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The cost of major conversions and betterments are capitalized and depreciated over their estimated useful lives or, if shorter, the remaining useful lives of the related assets. Maintenance and repairs are charged to expense when incurred. Gains or losses on disposals are included in other income, except for those related to railcar disposals which are included in cost of services. Deferred Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Deferred Investment Tax Credits United States investment tax credits (as generated through 1986 and to the extent not transferred to lessees) and Canadian investment tax credits result in a reduction of current or deferred income taxes and are due primarily to investments in certain new railcars. Investment tax credits retained are deferred and amortized over the estimated useful lives of the related assets. Foreign Currency Translation All assets and liabilities are translated at exchange rates in effect at the date of translation. Average exchange rates are used for revenues, costs and expenses and income taxes. Translation adjustments and transaction gains and losses are assumed by the Company's parent. For the years ended December 31, 1999, 1998 and 1997, MIC absorbed a loss of $585, a gain of $1,968, and a gain of $504, respectively. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. Fair Value of Financial Instruments All book value amounts for financial instruments approximate the instruments' fair value except for the borrowed debt discussed in Note 7. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. -22- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Railcar Lease Data Railcars are leased directly to several hundred shippers, located throughout North America. The Company leases to a wide variety of customers, and no customer accounted for more than 10% of consolidated lease revenues. Each lease involves one to several thousand cars, normally for periods ranging from one to twenty years. The average term of leases entered into during 1999 for newly-manufactured cars was approximately seven years. The average term of leases entered into during 1999 for used tank cars and other railcars was approximately four years. Under the terms of most of the leases, the Company agrees to provide a full range of services including car repair and maintenance. Minimum future lease rentals to be received on the railcar lease fleet (including railcars leased from others) were as follows as of December 31, 1999:
Direct Financing Operating Leases Leases Total --------- ----------- ----------- 2000 $ 3,932 $ 415,150 $ 419,082 2001 2,138 334,395 336,533 2002 - 262,327 262,327 2003 - 191,362 191,362 2004 - 125,880 125,880 2005 and thereafter - 296,041 296,041 --------- ----------- ----------- Totals $ 6,070 $ 1,625,155 $ 1,631,225 ========= =========== ===========
The investment in railcars on direct financing leases is recoverable from future lease payments and estimated residual values. Details of this investment, which is classified in the accompanying consolidated balance sheet under railcar lease fleet, are as follows:
December 31, ------------------------- 1999 1998 -------- -------- Minimum future lease rentals $ 6,070 $ 9,261 Estimated residual values 8,238 7,785 -------- -------- Gross investment 14,308 17,046 Less unearned income (181) (1,598) -------- -------- Net investment $ 14,127 $ 15,448 ======== ======== Classified as Railcar lease fleet (cost) $ 27,459 $ 25,951 Less accumulated depreciation (13,332) (10,503) -------- -------- $ 14,127 $ 15,448 ======== ========
-23- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Railcar Lease Fleet and Fixed Assets
December 31, ---------------------------- 1999 1998 ----------- ----------- Railcar lease fleet Gross cost $ 2,935,954 $ 2,769,163 Less accumulated depreciation (1,282,459) (1,194,149) ----------- ----------- $ 1,653,495 $ 1,575,014 =========== =========== Fixed assets, at cost Land $ 8,196 $ 7,882 Buildings and improvements 121,859 118,740 Machinery and equipment 297,318 265,306 ----------- ----------- 427,373 391,928 Less accumulated depreciation (237,570) (214,873) ----------- ----------- $ 189,803 $ 177,055 =========== ===========
5. Investment in Direct Financing Lease In 1987, one of the Company's Canadian subsidiaries entered into a Canadian dollar denominated lease of a passenger airplane to a scheduled commercial air carrier for an 18 year period. Minimum future rentals to be received on the lease are as follows at December 31, 1999: 2000 $ 5,802 2001 5,802 2002 5,802 2003 5,802 2004 5,802 2005 5,802 -------- Total $ 34,812 ======== -24- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The investment is recoverable from future lease payments and estimated residual value, as follows:
December 31, -------------------------- 1999 1998 --------- -------- Minimum future lease rentals $ 34,812 $ 36,859 Estimated residual value 16,436 15,533 --------- -------- Gross investment 51,248 52,392 Less unearned income (17,236) (19,763) --------- -------- Net investment $ 34,012 $ 32,629 ========= ========
6. Lease Commitments The Company as lessee has entered into long-term leases for certain railcars and various manufacturing, office and warehouse facilities. The railcar lease fleet includes the following capitalized leases: December 31, ------------------------- 1999 1998 -------- -------- Capitalized lease cost $ 16,384 $ 16,415 Less accumulated depreciation (9,494) (8,980) -------- -------- $ 6,890 $ 7,435 ======== ======== In 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. In 1998, the Company entered into a sale-leaseback transaction with a trust for the benefit of an institutional investor pursuant to which it sold and leased back an aggregate of $130,018 in railcars. The Company has an option to purchase all or a portion of the railcars at a fixed purchase price on (i) January 2, 2009, (ii) March 30, 2014 (the base term lease expiration date) and (iii) March 30, 2021 (the end of the optional lease renewal term). The exercise price of the fixed price purchase options is equal to the projected future fair market value of the subject railcars, as determined by an independent appraiser. -25- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) At December 31, 1999, future minimum rental commitments for all noncancelable leases are as follows:
Operating Leases --------------------------------------------- Capitalized Sale- Other Total Leases Leaseback Operating Operating ----------- --------- --------- --------- 2000 $ 91 $ 52,645 $ 2,763 $ 55,408 2001 84 57,130 2,472 59,602 2002 - 55,360 1,726 57,086 2003 - 56,030 1,628 57,658 2004 - 59,170 1,482 60,652 2005 and thereafter - 519,280 19,855 539,135 --------- --------- --------- --------- 175 $ 799,615 $ 29,926 $ 829,541 ========= ========= ========= Less amount representing interest (32) --------- Present value of minimum lease payments 143 Less current portion (69) --------- Long-term obligation at December 31, 1999 $ 74 =========
Minimum future sublease revenue to be received under existing capitalized and sale-leaseback leases as of December 31, 1999 is presented below. Future sublease revenue under other existing operating leases is not material and is primarily included in other income. The Company expects that the subleased railcars will be re-leased at the expiration of such leases. The rentals under such future subleases cannot be ascertained and therefore are not reflected in this table.
Sale- Capitalized Leaseback Leases Leases ----------- ------------ 2000 $ 2,508 $ 61,254 2001 1,675 54,198 2002 - 46,489 2003 - 34,100 2004 - 23,196 2005 and thereafter - 71,850 ----------- ------------ $ 4,183 $ 291,087 =========== ============
Sublease rentals recorded as revenue for the years ended December 31, 1999, 1998 and 1997 were approximately $80,000, $71,000 and $65,000, respectively. Rentals charged to costs and expenses were $61,531, $57,191, and $48,101 in 1999, 1998, and 1997, respectively. -26- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Borrowed Debt
December 31, ------------------------ 1999 1998 --------- --------- Unsecured notes, due from 2001 - 2009 at 5.78% - 7.45% (average rate 6.86% as of December 31, 1999 and 6.98% as of December 31, 1998) $ 550,000 $ 480,000 Equipment obligations, payable periodically through 2009 at 6.50% - 11.80% (average rate 8.07% as of December 31, 1999 and 8.29% as of December 31, 1998) 308,307 367,627 Senior Secured Notes, 6.79%, due in 2010 100,000 - Other long-term borrowings, payable periodically through June 16, 2014 (average rate of 10.73% as of December 31, 1999 and 12.13% as of December 31, 1998) 25,760 20,794 --------- --------- $ 984,067 $ 868,421 ========= =========
Equipment obligations are secured by railcars with an original cost of $827,357 and $941,550 at December 31, 1999 and 1998, respectively. The above equipment obligations include $136 and $188 of capitalized leases at December 31, 1999 and 1998, respectively. 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 maturities ranging from three to nine years. Interest is payable semiannually on March 1 and September 1, commencing September 1, 1999. 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 is payable semiannually on March 1 and September 1, commencing September 1, 1999. In May 1999, the Company issued $100,000 principal amount of Senior Secured Notes. The notes bear interest at 6.79% per annum and mature on May 1, 2010. Interest on the notes is payable semiannually on May 1 and November 1, commencing November 1, 1999. The notes are secured by railcars with an original cost of $133,347. The Company's Canadian subsidiaries have approximately $12,802 of credit lines available on a no-fee basis. No amounts were outstanding as of December 31, 1999 and 1998. Maturities of debt obligations for the years 2000 - 2004 are $323,736 as follows: $42,516 in 2000, $77,790 in 2001, $76,190 in 2002, $47,315 in 2003 and $79,925 in 2004. -27- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The estimated fair value of borrowed debt is as follows: December 31, ---------------------------- 1999 1998 ----------- --------- Unsecured notes $ 574,789 $ 510,586 Equipment obligations 313,691 399,669 Senior Secured Notes 94,453 - Other long-term borrowings 28,422 26,090 ----------- --------- $ 1,011,355 $ 936,345 =========== ========= The current fair value of the Company's borrowed debt is estimated by discounting the future interest and principal cash flows at the Company's estimated incremental borrowing rate at the respective year-end for debt with similar maturities. 8. Income Taxes The Company is included in the consolidated U.S. federal income tax return of Holdings. Under an arrangement with MIC, federal income taxes, before consideration of investment tax credits, are computed as if the Company files a separate consolidated return. For this computation, the Company generally uses tax accounting methods which minimize the current tax liability (these methods may differ from those used in the consolidated tax return). Tax liabilities are remitted to, and refunds are obtained from, MIC on this basis. If deductions and credits available to Holdings' entire consolidated group exceed those which can be used on the return, allocation of the related benefits between the Company and others will be at the sole discretion of 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 consolidated group. Undistributed earnings of the Company's non-U.S. subsidiaries reflect full provision for non-U.S. income taxes. However, since the earnings are indefinitely reinvested in non-U.S. operations, no provision has been made for taxes that might be payable upon remittance of such earnings nor is it practicable to determine the amount of any such liability. -28- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following summarizes the provision for income taxes:
1999 1998 1997 -------- -------- -------- State Current $ 1,694 $ 2,232 $ 1,221 Deferred 1,014 277 860 Federal Current 22,449 29,760 30,417 Deferred and investment tax credit 27,048 17,587 9,212 Foreign Current 17,657 28,875 20,089 Deferred and investment tax credit (4,293) (5,274) (4,680) --------- --------- --------- Total $ 65,569 $ 73,457 $ 57,119 ========= ========= =========
In 1999, 1998, and 1997, the Company paid foreign withholding taxes of $2,112, $2,594, and $1,481, respectively. Income tax expense is based upon domestic and foreign income before taxes as follows:
1999 1998 1997 --------- --------- --------- Domestic $ 153,029 $ 153,607 $ 125,309 Foreign 29,097 47,271 33,060 --------- --------- --------- Total $ 182,126 $ 200,878 $ 158,369 ========= ========= =========
Income tax effects of significant items which resulted in effective tax rates of 36.0% in 1999, 36.6% in 1998, and 36.1% in 1997 follow:
1999 1998 1997 --------- --------- --------- Federal income taxes at 35% statutory rate $ 63,744 $ 70,307 $ 55,429 Increase (decrease) resulting from: Amortization of investment tax credits (2,013) (2,139) (2,275) State income taxes, net of federal income tax benefit 2,115 1,728 1,654 Excess tax provided on foreign income 2,517 4,408 3,624 Other, net (794) (847) (1,313) --------- --------- --------- Total income taxes $ 65,569 $ 73,457 $ 57,119 ========= ========= =========
The excess tax on foreign income represents differences due to higher foreign tax rates and foreign tax credits not benefited. -29- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of net deferred tax balances are as follows: 1999 1998 ---------- ---------- Excess of tax over book depreciation $ (470,850) $ (442,169) Other (33,506) (34,764) ---------- ---------- Gross liabilities (504,356) (476,933) Expenses per books not yet deductible for tax 29,476 31,326 Other 22,702 23,312 ---------- ---------- Gross assets 52,178 54,638 Deferred investment tax credits (13,615) (15,398) ---------- ---------- Net deferred income tax liability $ (465,793) $ (437,693) ========== ========== The above assets exclude certain state deferred income tax assets related to loss carryforwards (which expire over the next nine years) in the gross amount of $4,000 at December 31, 1999 and $5,200 at December 31, 1998. 9. Contingencies 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 to resolve such claims, 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. As part of its risk management plan, the Company self-insures certain levels of its property damage, general liability and products liability exposures, as well as certain workers' compensation liabilities in states where it is authorized to do so. The Company maintains no property damage insurance on its railcars. The Company has accrued for the estimated costs of reported, as well as incurred but not reported, self-insured claims. The Company reserves the full estimated value of claims. It does not discount its claims liability. The Company has certain environmental matters currently pending, none of which are significant to the Company's results of operations or financial condition, either individually or in the aggregate. See further discussion of such matters under the "Environmental Matters" caption of Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. -30- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Pension Benefits Substantially all of the Company's employees are covered by discretionary contribution or defined benefit retirement plans. Costs of the discretionary contribution pension plans are accrued in amounts determined on the basis of percentages, generally established annually by the Company, of employee compensation of the various units covered by such plans. The contributions are funded as accrued. Discretionary and defined contribution plan expense for 1999, 1998 and 1997 was $9,602, $8,175, and $6,830, respectively. As of December 31, 1999, the Company's defined benefit plans either had their benefits frozen or were terminated. The benefits are based on payment of a specific amount, which varies by plan, for each year of service. The Company's funding policy is to contribute the minimum amount required either by law or union agreement. Contributions are intended to provide not only for benefits attributed to service through the plans' termination dates, but also for those expected to be earned in the future. Benefits are based on both years of service and compensation. Defined benefit pension plan income was $441, $191, and $59 for 1999, 1998, and 1997, respectively. Accrued defined benefit pension liability recognized in the consolidated balance sheet was $897 and $1,610 at December 31, 1999 and 1998, respectively. 11. Retirement Health Care and Life Insurance Benefits The Company provides limited health care and life insurance benefits for certain retired employees. These benefits are subject to deductible and copayment provisions, Medicare supplements and other limitations. At December 31, 1999 and 1998, the liability for postretirement health care and life insurance benefits was $3,920 and $4,003 respectively, and was included in accrued liabilities in the consolidated balance sheet. Expense related to these benefits was $424, $422 and $333 in 1999, 1998, and 1997, respectively. 12. Ratio of Earnings to Fixed Charges The ratio of earnings to fixed charges represents the number of times that interest expense, amortization of debt discount, and the interest component of rent expense were covered by income before income taxes and such interest, amortization, and the interest component of rentals. -31- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Summarized Financial Information of Procor Limited Summarized consolidated financial information for the Company's wholly-owned subsidiary, Procor Limited, is as follows: December 31, ------------------------ 1999 1998 --------- --------- Balance Sheet: Railcar lease fleet, net $ 160,781 $ 165,270 All other assets 183,684 170,214 Borrowed debt 72,738 94,409 All other liabilities 117,849 109,431 Years Ended December 31, ----------------------------------- 1999 1998 1997 --------- --------- --------- Statement of Income: Services and net sales $ 115,693 $ 115,791 $ 111,856 Gross profit 34,753 41,088 39,292 Net income 14,156 21,707 18,377 Services and net sales in 1999, 1998, and 1997 includes $25,530, $23,497, and $18,795, respectively, representing the sale of railcars to Procor Limited's parent. 14. Related Party Transactions The following table sets forth the major related party transaction amounts included in the consolidated financial statements. Interest Management Insurance Income Expense Billed --------- ---------- --------- 1999 $ 9,682 $ 4,153 $ 2,460 1998 9,056 4,435 1,999 1997 9,350 4,415 2,222 -32- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company from time to time advances funds in excess of its current cash requirements for domestic operations to MIC or MIC's subsidiaries on an unsecured demand basis. Such advances, which bear interest principally at LIBOR plus 1%, amounted to $200,994 and $110,481 at December 31, 1999 and 1998, respectively. Certain of the Company's Canadian operations and its affiliates enter into intercompany loans utilizing their respective excess cash balances. These advances between the Company and subsidiaries of MIC resulted in receivables of $45,174 and $20,459 at December 31, 1999 and 1998, respectively, that are included in advances to parent company. An administrative services fee is paid to The Marmon Group, Inc. ("Marmon"), a subsidiary of Holdings and an affiliate of MIC, for certain services provided by Marmon's officers and employees including services with respect to accounting, tax, finance, legal and related matters which Marmon provides to certain of Holdings' divisions, subsidiaries and affiliates. Marmon provides these services to the Company because it is considered more cost efficient to provide such services in this manner. The administrative fee which Marmon charges to the Company and other entities to which it provides services is calculated using activity-based management concepts. The various Marmon departments allocate both time and expenses to the entities for which it provided services for the previous year. Marmon takes the amount derived from this exercise and applies discretion to determine the final administrative services fee to be charged. The factors which are considered include matters such as the following: any known operating problems and risks that require or may require additional time to be devoted to the Company by Marmon; significant expansion programs; significant contracts; unusual tax or accounting matters; and the experience and length of service of the Company's management. Included in the preceding table as insurance billed are $1,158 in 1999, $1,128 in 1998 and $896 in 1997 for insurance premiums for coverage that was insured or reinsured with an insurance company which the Company has been advised is controlled by trusts for the benefit of an individual related by marriage to a member of the Pritzker family. -33- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In 1986, the Company entered into a partnership with an affiliate for the purpose of purchasing used railcars. The Company's investment as of December 31, 1999 and 1998 was $61,189 and $57,614, respectively, which represents 80% ownership in this partnership. The minority partner's interest in the partnership at December 31, 1999 and 1998 is $15,297 and $14,403, respectively, which is included in accrued liabilities. The minority interest in income, $894, $900 and $887 for the years ended December 31, 1999, 1998 and 1997, respectively, is included as a charge against other income. 15. Derivative Financial Instruments 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 $9,100 and $3,365 at December 31, 1999 and 1998, respectively. 16. Quarterly Data (Unaudited)
Three Months Ended ---------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 ---------- ---------- ---------- ---------- 1999 Net sales and services revenues $ 226,506 $ 257,328 $ 239,971 $ 240,304 Cost of sales and services 150,122 180,601 165,893 161,743 ---------- ---------- ---------- ---------- Gross profit 76,384 76,727 74,078 78,561 Net income $ 28,451 $ 28,879 $ 27,570 $ 31,657 ========== ========== ========== ========== 1998 Net sales and services revenues $ 195,614 $ 214,845 $ 219,610 $ 246,574 Cost of sales and services 123,189 141,382 144,289 162,140 ---------- ---------- ---------- ---------- Gross profit 72,425 73,463 75,321 84,434 Net income $ 30,423 $ 27,476 $ 26,927 $ 42,595 ========== ========== ========== ==========
-34- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17. Supplementary Disclosures of Cash Flow Information
For the Year Ended December 31, ---------------------------------------- 1999 1998 1997 ---------- ---------- ---------- Changes in operating assets and liabilities: Accounts receivable $ 9,167 $ 4,128 $ 1,419 Inventories 6,917 (8,991) (5,923) Prepaid expenses and deferred charges 1,929 2,773 (41) Accounts payable and accrued liabilities 3,163 1,028 4,679 ---------- ---------- ---------- $ 21,176 $ (1,062) $ 134 ========== ========== ========== Cash paid during the year for: Interest (net of amount capitalized) $ 73,579 $ 73,140 $ 72,647 Income taxes 52,747 54,855 54,233
Unrealized foreign currency translation gains and losses, which are non-cash items, are excluded from the change in advances to parent. 18. Industry Segment Information The Company's industry and geographic data are found under the "Segment Information" caption of Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The aforementioned data are an integral part of the Notes to Consolidated Financial Statements. -35- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
First Elected Name Age Positions or Offices to Position --------------------------- --- ------------------------------------------ -------------------- Frank D. Lester 59 District Sales Manager 1979 Vice President - Sales 1981 Vice President - Quality 1988 President - Procor Division 1994 Vice President and President - Tank Car Division 1999 Mark J. Garrette 46 Vice President - Tank Car Division 1994 Vice President and Senior Vice President and Controller - Tank Car Division 1994 Kenneth P. Fischl 50 Manager - Tank Car Marketing and Administration 1979 Vice President - Fleet Management 1981 Vice President 1992 Executive Vice President and General Manager - Tank Car Division 1992 President - Tank Car Division 1993 Director 1994 Robert C. Gluth 75 Director 1981 Executive Vice President 1981 and served as Treasurer between February, 1986 and January, 1987 and since October, 1989 Robert A. Pritzker 73 Director 1981 President 1981 Robert W. Webb 60 General Counsel 1986 Secretary 1986
-36- Frank D. Lester Mr. Lester joined the Tank Car Division in 1979 as a district sales manager. In 1981, he was promoted to Vice President - Sales, and in 1988, he was named Vice President - Quality. In 1994, Mr. Lester was promoted to President of Procor Division. In August, 1999, Mr. Lester was named President of the Tank Car Division, replacing Kenneth P. Fischl, and appointed a Vice President of the Company. Mark J. Garrette Mr. Garrette was appointed Senior Vice President and Controller of the Tank Car Division and Vice President of the Company in August, 1994. He joined the Tank Car Division as Vice President and Assistant Controller in May, 1994. Kenneth P. Fischl Mr. Fischl was elected as a Director in March, 1994, and appointed President of the Tank Car Division in February, 1993. He was appointed a Vice President of the Company and Executive Vice President and General Manager of the Tank Car Division in July, 1992. He joined the Company in 1977 as a Market Analyst. Mr. Fischl was promoted to Manager of Tank Car Marketing and Administration in 1979 and became Vice President of Fleet Management in 1981. Mr. Fischl was appointed a Vice President of The Marmon Group, Inc. ("Marmon") in May, 1998. Robert C. Gluth Mr. Gluth is Executive Vice President and a Director of Marmon Industrial LLC ("MIC"), Vice President, Treasurer and a Director of Holdings, Executive Vice President and Director of The Marmon Corporation ("TMC"), and Executive Vice President and a Director of Marmon. Mr.Gluth is also Treasurer of each of TMC, MIC and Marmon. Robert A. Pritzker Mr. Robert A. Pritzker is President and a Director of each of MIC, Holdings, TMC and Marmon. Mr. Pritzker is also a director of Hyatt Corporation. Robert W. Webb Mr. Webb is Secretary and a Vice President of each of MIC, Holdings, TMC and Marmon. There are no family relationships among the directors and executive officers of the Company. Directors and executive officers are elected for a term of one year, or until a successor is appointed. -37- Other Directorships Mr. Robert A. Pritzker is a Director of Southern Peru Copper Corporation and Acxiom Corporation. Otherwise, none of the members of the Company's Board of Directors are members of the board of directors of companies with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the requirements of Section 15(d) of that Act or of a company registered as an investment company under the Investment Company Act of 1940. ITEM 11. EXECUTIVE COMPENSATION Frank D. Lester, Vice President, and Mark J. Garrette, Vice President, were the only executive officers of the Company who in the year ended December 31, 1999, received salary and bonus in excess of $100,000 from the Company and its subsidiaries for services in all capacities to the Company. All other officers of the Company received their 1999 compensation from Marmon and are primarily involved in the management of MIC and Marmon. The Company, together with the other subsidiaries of MIC, have been required to pay Marmon a portion of such compensation which is encompassed in the charge for certain common services provided by Marmon to the Company and such other subsidiaries. The amount of such charge has been determined pursuant to a formula based upon the dollar value of revenues, earnings and assets. See Note 14 to the consolidated financial statements included in Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Directors of the Company do not receive any compensation in such capacity. Shown below is the aggregate of all forms of compensation paid by the Company to Mr. Lester and Mr. Garrette: Summary Compensation Table
Annual Compensation All Other --------------------------------- Name and Principal Position Year Salary Bonus Compensation* - ----------------------------------- ------ -------- --------- ------------- Frank D. Lester Vice President of the Company 1999 $220,200 $ 33,600 $ 15,000 and President of the Tank Car Division Mark J. Garrette, Vice President of the Company 1999 180,300 38,000 21,000 and Senior Vice President of the 1998 171,700 35,000 20,200 Tank Car Division 1997 164,400 32,000 18,300
* Represents the aggregate amounts of Company contributions to defined contribution plans on behalf of each of the named individuals. -38- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT MIC, a Delaware single member limited liability company having its principal executive offices at 225 West Washington Street, Chicago, Illinois, owns 1,000 shares, or 100% of the Company's issued and outstanding common stock. MIC is a subsidiary of Holdings. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See Note 14 to the consolidated financial statements included in Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999 for a description of certain related party transactions. -39- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Page ---- a) 1. Financial Statements - Consolidated statement of income for each of the three years in the period ended December 31, 1999............................ 17 Consolidated balance sheet - December 31, 1999 and 1998.......... 18 Consolidated statement of stockholder's equity for each of the three years in the period ended December 31, 1999............ 19 Consolidated statement of cash flows for each of the three years in the period ended December 31, 1999...................... 20 Notes to consolidated financial statements........................ 21 2. Schedules Financial statement schedules are not submitted because they are not applicable or because the required information is included in the financial statements or notes thereto. 3. Index to Exhibits................................................... 42 b) Reports on Form 8-K There were no reports on Form 8-K filed during the three months ended December 31, 1999. -40- 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: UNION TANK CAR COMPANY (Registrant) By: /s/ Robert C. Gluth ------------------- Robert C. Gluth Executive Vice President, Director and Treasurer Dated: March 8, 2000 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 dates indicated: Signature Title Date --------- ----- ---- /s/ Robert A. Pritzker President and Director March 8, 2000 - --------------------------- Robert A. Pritzker (principal executive officer) /s/ Robert C. Gluth Executive Vice President, March 8, 2000 - --------------------------- Robert C. Gluth Director and Treasurer (principal financial officer and principal accounting officer) /s/ Kenneth P. Fischl Director March 8, 2000 - --------------------------- Kenneth P. Fischl -41- UNION TANK CAR COMPANY AND SUBSIDIARIES INDEX TO EXHIBITS ITEM 14 (a)(3) Exhibit 3 Articles of incorporation and by-laws 3(a) Restated Certificate of Incorporation of the Company, as filed with the Secretary of State of Delaware on September 2, 1982 (which was filed as Exhibit 3(a) to the Annual Report on Form 10-K for the fiscal year ended December 31, 1982, and is incorporated herein by reference) 3(b) By-Laws of the Company, as adopted November 25, 1987 (which was filed as Exhibit 3(b) to the Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and is incorporated herein by reference) Exhibit 12 Statements re computation of ratios The computation of the Ratio of Earnings to Fixed Charges (summarized in Note 12 to the consolidated financial statements).............................................. 43 Exhibit 21 Subsidiaries of the registrant ........................... 44 Exhibit 23 Consent of Ernst & Young LLP, Independent Auditors ........ 45 Exhibit 27 Financial Data Schedule (submitted with the electronic filing of this document) Instruments defining the rights of holders of long-term debt are not being filed herewith pursuant to the provisions of paragraph 4(iii) of Item 601(b) of Regulation S-K. The Company agrees to furnish a copy of any such instrument to the Commission upon request. -42- EX-12 2 COMPUTATION OF RATIO OF EARNINGS Exhibit 12 UNION TANK CAR COMPANY AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Thousands)
For the year ended December 31, Line ------------------------------------------------------------------------ Number 1999 1998 1997 1996 1995 ------ ------------------------------------------------------------------------ Income Available for Fixed Charges: - ---------------------------- Income from continuing operations 1 $ 116,557 $ 127,421 $ 101,250 $ 102,583 $ 84,465 Provision for federal income taxes and foreign taxes 2 62,861 70,948 55,038 58,398 44,975 Provision for state income taxes 3 2,708 2,509 2,081 1,208 1,053 Fixed charges (line 8) 4 92,787 89,966 91,102 88,215 92,764 --------- --------- --------- --------- --------- Income available for fixed charges 5 $ 274,913 $ 290,844 $ 249,471 $ 250,404 $ 223,257 ========= ========= ========= ========= ========= Fixed Charges: - ---------------------------- Interest expenses (including amortization of debt discount) as shown on the consolidated statement of income 6 $ 73,117 $ 71,131 $ 75,356 $ 72,138 $ 81,179 Add interest portion of rent expense 7 19,670 18,835 15,746 16,077 11,585 --------- --------- --------- --------- --------- Total fixed charges 8 $ 92,787 $ 89,966 $ 91,102 $ 88,215 $ 92,764 ========= ========= ========= ========= ========= Number of times fixed charges were earned (line 5/line 8) 2.96 x 3.23 x 2.74 x 2.84 x 2.41 x ========= ========= ========= ========= =========
-43- EX-21 3 SUBSIDIARIES OF THE REGISTRANT Exhibit 21 UNION TANK CAR COMPANY AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT as of December 31, 1999 Jurisdiction Under Which Organized ------------------ Atlas Bolt & Screw Company Delaware Atlas Bolt & Screw Company of Canada (1995) Ltd. Canada Deerwood Fasteners International, Inc. North Carolina Enersul Holdings Inc. Alberta Enersul Inc. Alberta E. S. Investments Inc. Alberta Exsif SAS France The Marmon Group of Canada Ltd. Canada McKenzie Valve & Machining Company Delaware Pan American Screw, Inc. Delaware Procor Alberta Inc. Alberta Procor LPG Storage Inc. Alberta Procor Limited Canada Procor Sulphur Services Inc. Alberta Rail Car Associates Limited Partnership Illinois Railserve, Inc. Delaware Railserve Inc. Canada Robertson Inc. Canada Tiger Industries (1997) Inc. Alberta Tiger-Sunbelt Industries, Inc. Delaware Trackmobile, Inc. Georgia Uni-Form Components Co. Delaware Union Tank Car Rail Services Company Delaware Worldwide Containers, Inc. Delaware All subsidiaries listed above are wholly-owned, except for Rail Car Associates Limited Partnership (the Company is the general partner and has an 80% ownership interest) and Worldwide Containers, Inc. (the Company owns 78.9%), and are included in the consolidated financial statements incorporated herein. -44- EX-23 4 CONSENT OF ERNST & YOUNG LLP Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-45105) of Union Tank Car Company and in the related Prospectus and Prospectus Supplement of our report dated March 8, 2000 with respect to the consolidated financial statements of Union Tank Car Company included in the Annual Report (Form 10-K) for the year ended December 31, 1999. ERNST & YOUNG LLP Chicago, Illinois March 13, 2000 -45- EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1999 CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999, AND THE NOTES THERETO, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1999 DEC-31-1999 50,607 0 80,112 3,952 85,165 0 3,363,327 1,520,029 2,397,319 0 984,067 0 0 106,689 560,950 2,397,319 339,291 988,305 293,976 658,359 0 0 73,117 182,126 65,569 116,557 0 0 0 116,557 0 0 THE COMPANY ISSUES FINANCIAL STATEMENTS UTILIZING A NON-CLASSIFIED BALANCE SHEET. THE COMPANY'S REVENUES ARE DERIVED PRIMARILY FROM RAILCAR LEASING. THE COMPANY IS A WHOLLY-OWNED SUBSIDIARY.
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