-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oU7H4U2q4FKZzi7Ru9pce0+ZRlncplT+YQPqcl6LnF8hWrPSSqNfy/oxu/t75kMT XCKBhoLyYk3vI9RvjzImBg== 0000950131-95-000606.txt : 19950615 0000950131-95-000606.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950131-95-000606 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950316 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 002-26520 FILM NUMBER: 95521099 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 1994 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 (FEE REQUIRED) For the year ended December 31, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [_] SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to Commission file number: 2-26520 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 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 with respect to certain long-term debt of the registrant. UNION TANK CAR COMPANY FORM 10-K Year Ended December 31, 1994 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 8 Financial Statements and Supplementary Data.................... 14 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................... 38 Part III. Item 10 Directors and Executive Officers of the Registrant............. 38 Item 11 Executive Compensation......................................... 40 Item 12 Security Ownership of Certain Beneficial Owners and Management. 41 Item 13 Certain Relationships and Related Transactions................. 41 Part IV. Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 42 Signatures ............................................................... 43
-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 Corporation, an indirect 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 United States, Canadian and Mexican 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, 1994, the Company's fleet was comprised of approximately 52,090 tank cars and 13,300 railway cars of other types. Approximately 20,580 cars were added to the lease fleet during the ten years ended December 31, 1994. These cars accounted for approximately 37% of total railcar lease revenues during 1994. Most of the Company's cars were built by the Company or to its specifications and the balance were purchased from other sources. The Company added approximately 2,880 new cars to its lease fleet during 1994, including approximately 2,170 tank cars with an average capacity of approximately 24,250 gallons, and approximately 2,630 new cars during 1993, including approximately 2,290 tank cars with an average capacity of approximately 23,560 gallons. During 1994 the Company sold or retired approximately 1,860 cars, including approximately 1,100 tank cars with an average capacity of approximately 14,720 gallons, and during 1993 the Company sold or retired approximately 1,310 cars, including approximately 850 tank cars with an average capacity of approximately 14,940 gallons. 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, coal and sulphur industries. -2- 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 only manufactures a car following the receipt of a firm order for the lease or sale of such car. During 1994, 1993 and 1992, the Company manufactured approximately 2,950, 2,450 and 2,260 tank cars, respectively, of which approximately one-fifth were sold to third parties. 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 1994 for newly-manufactured cars was approximately seven years. The average term of leases entered into during 1994 for other cars 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 insure optimum utilization of the U.S., Canadian and Mexican 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 has generally followed the practice of financing additions to its fleet by borrowing 75% to 80% of the funds required through the issuance of equipment obligations. The Company's long-term equipment obligations are generally payable over a period of fifteen to twenty years, which is considerably less than the estimated useful life of the equipment. In 1994, the Company entered into two separate sale-leaseback transactions pursuant to which it sold and leased back (under operating leases) an aggregate of approximately 2,200 railcars. In 1992, the Company entered into ten separate sale-leaseback transactions pursuant to which it sold and leased back (under operating leases) an aggregate of approximately 2,100 railcars. The average term of the Company's leases (as lessor) is substantially less than the average maturity of the equipment obligations and the average terms of the operating leases (as lessee); however, the aggregate rentals to be received in the future under existing leases are substantial and exceed the total of the principal payments due under the equipment obligations and the minimum lease payments due (as lessee) under the operating leases. The following table sets forth the minimum rentals to be received in relation to the debt maturities under outstanding equipment obligations, the minimum lease payments due (as lessee) under all operating leases and the cost of the fleet. The table excludes outstanding commercial paper, which, prior to the suspension of the program effective May 23, 1994, was used as interim financing for additions to the Company's railcar fleet. The figures shown are the minimum future rentals under leases in effect at the dates indicated. Based upon its historical experience, the Company expects that the cars (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 and related interest and other expenses to be incurred in the future cannot be ascertained and therefore are not reflected in this table. -3-
December 31, ------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (Dollars in Millions) Total minimum future rentals to be received (as lessor) $1,258.5 $1,215.8 $1,190.3 $1,211.6 $1,168.3 Principal amount of equipment obligations (1) 855.3 869.0 846.0 925.5 913.6 Total minimum future lease payments for noncancellable operating leases (as lessee) 426.7 253.0 262.4 26.2 36.4 Minimum future rentals to be received within one year (as lessor) 339.7 327.9 321.0 316.4 307.5 Principal amount of equipment obligations due within one year, net of amounts held for sinking fund purposes 73.1 80.7 71.4 71.2 65.0 Minimum future lease payments for noncancellable operating leases due within one year (as lessee) 13.4 13.5 8.6 3.2 4.3 Gross cost of fleet 2,368.6 2,392.7 2,283.8 2,403.8 2,229.9 Depreciated cost of fleet 1,452.0 1,523.8 1,477.4 1,619.2 1,509.2 For the year ended: Railcar rentals, including direct financing leases 409.2 397.8 388.1 372.6 348.7
(1) Includes $143.0 million principal amount of unsecured senior notes issued by the Company in 1990, the proceeds of which were used to retire certain higher coupon railcar obligations. Approximately 61% of the Company-owned fleet of railcars are pledged to secure equipment obligations. 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 code of the Association of American Railroads ("AAR"). -4- The Company is not a common carrier and is not subject to regulation or supervision by the Interstate Commerce Commission. The Company's railcars are subject to regulations governing construction, safety and maintenance promulgated by the Department of Transportation ("DOT") 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 a network of shops for repairing and servicing railcars, with the principal shops located in Valdosta, Georgia; Muscatine, Iowa; El Dorado, Kansas; Ville Platte, Louisiana; Marion, Ohio; Altoona, Pennsylvania; Cleveland, Longview and Sheldon, Texas; Edmonton, Alberta; Sarnia and Oakville, Ontario; Montreal, Quebec; and Regina, Saskatchewan. Other Activities The Company is engaged in several other activities, as described below. Fasteners The Company's fastener business, which is conducted through several wholly-owned subsidiaries, consists of manufacturing and distributing a wide range of fasteners in the United States and Canada to the construction industry and manufacturers of furniture, household appliances, industrial and agricultural equipment. 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. 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. -5- Segment Data The principal activity of the Company's primary industry segment is railcar leasing, services and sales. Information with regard to the Company's industry and geographic segments is as follows (dollars in millions):
Industry Segments 1994 1993 1992 -------- -------- -------- Revenues Railcar leasing, services and sales $ 656.5 $ 441.4 $ 549.7 Other 72.2 71.8 76.1 -------- -------- -------- Total segments 728.7 513.2 625.8 Interest income (principally from advances to parent) 10.1 10.4 15.8 Corporate/unallocated (2.0) (1.7) (1.2) -------- -------- -------- $ 736.8 $ 521.9 $ 640.4 ======== ======== ======== Operating income Railcar leasing, services and sales $ 178.2 $ 172.6 $ 168.3 Other 9.0 6.7 4.8 -------- -------- -------- Total segments 187.2 179.3 173.1 Interest income (principally from advances to parent) 10.1 10.4 15.8 Interest expense (91.4) (96.6) (105.4) Corporate/unallocated (2.4) (2.6) (2.3) -------- -------- -------- $ 103.5 $ 90.5 $ 81.2 ======== ======== ======== Assets, at December 31 Railcar leasing, services and sales $1,742.9 $1,773.4 $1,696.6 Other 49.1 46.6 48.7 -------- -------- -------- Total segments 1,792.0 1,820.0 1,745.3 Advances to parent 194.7 202.3 283.1 Corporate/unallocated 31.1 32.6 34.9 -------- -------- -------- $2,017.8 $2,054.9 $2,063.3 ======== ======== ======== Capital expenditures Railcar leasing, services and sales $ 210.8 $ 172.9 $ 141.9 Other 2.4 2.9 4.0 -------- -------- -------- $ 213.2 $ 175.8 $ 145.9 ======== ======== ======== Depreciation Railcar leasing, services and sales $ 100.2 $ 95.2 $ 99.4 Other 3.4 4.4 5.6 -------- -------- -------- $ 103.6 $ 99.6 $ 105.0 ======== ======== ========
-6-
Geographic Segments 1994 1993 1992 -------- -------- -------- Revenues United States $ 576.8 $ 361.0 $ 468.8 Canada 146.9 147.6 151.9 Mexico 5.0 4.6 5.1 -------- -------- -------- Total segments 728.7 513.2 625.8 Interest income (principally from advances to parent) 10.1 10.4 15.8 Corporate/unallocated (2.0) (1.7) (1.2) -------- -------- -------- $ 736.8 $ 521.9 $ 640.4 ======== ======== ======== Operating income United States $ 139.4 $ 129.8 $ 122.3 Canada 45.2 47.0 48.4 Mexico 2.6 2.5 2.4 -------- -------- -------- Total segments 187.2 179.3 173.1 Interest income (principally from advances to parent) 10.1 10.4 15.8 Interest expense (91.4) (96.6) (105.4) Corporate/allocated (2.4) (2.6) (2.3) -------- -------- -------- $ 103.5 $ 90.5 $ 81.2 ======== ======== ======== Assets, at December 31 United States $1,376.5 $1,375.6 $1,280.2 Canada 400.8 429.0 448.5 Mexico 14.7 15.4 16.6 -------- -------- -------- Total segments 1,792.0 1,820.0 1,745.3 Advances to parent 194.7 202.3 283.1 Corporate/unallocated 31.1 32.6 34.9 -------- -------- -------- $2,017.8 $2,054.9 $2,063.3 ======== ======== ========
Intersegment sales are immaterial. Segment operating income includes segment revenue less operating expenses directly traceable to the segment and an allocation of common expenses benefiting more than one segment. Major Customers Revenues from any one customer did not exceed 5% of consolidated or industry segment revenues. Raw Materials The Company purchases raw materials from a variety of suppliers, with no one supplier in any industry segment being significant. In the opinion of management the Company will have adequate availability of applicable raw materials in the future. Foreign Operations The Company does not believe that there are unusual risks attendant to its foreign operations. -7- 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 largest competitor is General American Transportation Corporation (including its Canadian affiliate, Canadian General Transit Company, Limited). The other principal competitors in the tank car business are ACF Industries, Incorporated, and General Electric Railcar Services Corporation. The principal competitive factors are price, service and product design. 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, 1994, the Company had approximately 3,810 employees. 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 1994 the Company spent approximately $8.5 million on remediation and related matters, compared with $4.7 and $3.7 million in 1993 and 1992, respectively. The Company expects to spend approximately $10.2 million in 1995 on similar activities, including approximately $1.4 million for capital expenditures. Management believes that amounts accrued for environmental liabilities (which in the aggregate are not material) are adequate. In October, 1990, the Pennsylvania Office of Attorney General and the Pennsylvania Department of Environmental Resources ("DER") commenced an investigation of alleged violations of the Pennsylvania Solid Waste Management Act with respect to the handling of solid and hazardous waste material at the Company's railcar repair facility in Altoona, Pennsylvania. The Board of Directors of the Company authorized special counsel to conduct an internal investigation of the allegations made against the Altoona facility. The Company is satisfied with current operations at the facility. At the request of the Pennsylvania DER, the Company has cooperated voluntarily in a site assessment of areas of potential environmental contamination at the facility. The Company has submitted its consultant's report to the Pennsylvania DER for review. The Pennsylvania Attorney General's office and the Company's counsel have initiated discussions to resolve the criminal investigation. The Company is unable to predict at this time whether satisfactory resolution of the allegations will occur. If there is no satisfactory resolution of the allegations, it is likely that the Pennsylvania authorities will initiate criminal proceedings against the Company. -8- In March, 1993, the EPA filed an administrative complaint alleging the Company violated certain inspection, recordkeeping, and other requirements of the Toxic Substances Control Act with respect to electrical transformers containing PCB fluids at the Company's East Chicago, Indiana facility. In 1994, this matter was settled by the Company's payment of a nominal penalty and its agreement to phase out the use of PCB fluids over approximately two years. In June, 1993, the EPA filed an administrative complaint alleging the Company violated Section 313 of the Emergency Planning and Community Right-to-Know Act of 1986 by failing to submit Toxic Chemical Release Inventory Reporting Forms relating to its use of certain chemicals in manufacturing operations at its East Chicago, Indiana facility during calendar years 1987-1990. The EPA proposed a civil penalty in the amount of $524,000. The Company has denied the allegations of the complaint and has requested a formal hearing to contest the EPA's allegations and the proposed penalty. The Company is engaging in informal settlement negotiations with the EPA. In August, 1994, the U. S. Department of Justice filed a civil action against the Company, pursuant to Sections 309(b) and (d) of the Clean Water Act seeking civil penalties not to exceed $25,000 for each day of violation. The Company has filed an answer and affirmative defenses to the complaint. While it is too early to predict the outcome of the case, management of the Company believes that any costs or penalties will not be material to the Company. The Company has been designated as a Potentially Responsible Party by the EPA at four sites: Auto Ion Chemical Company, Kalamazoo, Michigan; Douglassville Disposal Site, Union Township, Pennsylvania; Whitehouse Waste Oil Pits Site, Jacksonville, Florida; and Granville Solvents Site, Granville, Ohio. 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 of the Company believes that future costs related to these sites will not be material, either individually or in the aggregate. Management of the Company does not anticipate that the resolution of the matters discussed above will have a material adverse effect on the Company's results of operations, financial condition or business. ITEM 2. PROPERTIES In the opinion of management, the Company's properties are substantially adequate and suitable for their intended use. Railcars The Company owns approximately 92 percent of its total lease fleet of 65,390 railcars, of which 52,090 are tank cars and 13,300 are other railway freight cars. Of the approximately 60,160 owned cars, 23,710 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. -9- 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; 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. At any one time, less than 3% of the cars in the lease fleet are normally in the Company's shops for repair and maintenance. Sulphur Processing A subsidiary of the Company owns a facility in Canada which processes liquefied sulphur into crystalline slates and granules. 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. Other Properties In connection with its other business activities, the Company owns (either directly or through its subsidiaries) fastener manufacturing facilities in Ashland, Ohio; Milton, Ontario; and Montreal, Quebec. In addition, subsidiaries of the Company which manufacture fasteners lease several small plants in the United States and Canada. The Company and its subsidiaries maintain numerous sales and business offices and warehouses, most of which are leased, throughout the United States and Canada. 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, ultimate resolution of these matters will not have a material effect on the Company's consolidated financial position or results of operations. See discussion of Environmental Matters in Item 1 of this Form 10-K. 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
Year Ended December 31, ---------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- (Dollars in Thousands) Services and net sales $ 720,864 $ 504,823 $ 618,007 $ 483,416 $ 462,684 Net income 63,378 129,730 48,382 45,024 22,140 Ratio of earnings to fixed charges 2.05 1.89 1.76 1.69 1.73 At year end: Total assets 2,017,772 2,054,867 2,063,267 2,253,760 2,195,171 Long-term obligations 807,029 869,440 869,656 1,059,072 1,042,041
See Item 7 for a discussion of the increases in 1993 net income and 1994 and 1992 services and net sales. Net income in 1990 included a $15.3 million extraordinary loss on retirement of debt. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1994 versus 1993 Results of Operations - --------------------- Service revenues increased $12.1 million primarily due to the effect of cars added to the railcar lease fleet offset by lower revenues from sulphur service operations. Gross profit was relatively unchanged from 1993. In December, 1994, the Company entered into two separate sale-leaseback transactions in which it sold for $125.5 million an aggregate of 2,197 railcars. Excluding these 1994 sale-leaseback transactions, net sales revenues in 1994 increased $78.5 million primarily due to increased railcar sales of $62.4 million and manufactured metal containment vessel head sales of $11.3 million. Other income decreased $1.1 million primarily due to lower earned income on direct financing leases. Interest expense decreased $5.1 million primarily due to a lower average effective interest rate on debt outstanding, lower average balances of debt outstanding, as well as the termination of the commercial paper program. -11- Financial Condition - ------------------- Operating activities provided $163.1 million of cash in 1994. These funds, along with proceeds from the issuance of long-term debt, proceeds from sale- leaseback transactions, and the collection of funds advanced to parent, were used to provide financing for railcar additions, repay commercial paper obligations, service long-term debt obligations 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 1994, the Company spent $213.2 million for the construction and purchase of railcars and other fixed assets. The Company received $19.8 million in proceeds from disposals of railcars and other fixed assets, net of the $125.5 million in proceeds from the sale-leaseback transactions discussed previously. In March, 1994, the Company issued $100.0 million in long-term equipment trust certificates with an annual interest rate of 6.6% to finance additions to the railcar lease fleet. Other financing activities of the Company included $52.4 million for the repayment of commercial paper obligations, $110.9 million for principal repayments on debt and $44.0 million for dividends. Net cash used in financing activities was $107.3 million. Management expects future cash to be provided by operating activities, long-term railcar financings, and collection of funds previously advanced to parent will be adequate to provide for the continued expansion of the Company's business and enable it to meet its debt service obligations. 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. Change in Accounting Principle - ------------------------------ The Financial Accounting Standards Board has issued SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments." The Company's Canadian subsidiaries enter into foreign currency forward contracts to hedge against U. S. dollar exposures. At December 31, 1994, foreign currency forward contracts, all with initial maturities of less than one year, amounted to $12.6 million. 1993 versus 1992 Results of Operations - --------------------- Service revenues increased $19.4 million primarily due to the effect of cars added to the railcar lease fleet and higher repair revenues offset slightly by lower revenues from sulphur service operations. Gross profit was relatively unchanged from 1992. In June, 1992, the Company entered into ten separate sale-leaseback transactions in which it sold for $124.9 million an aggregate of 2,073 railcars. Excluding these 1992 sale -leaseback transactions, net sales revenues in 1993 decreased approximately $7.7 million due to lower railcar and sulphur plant sales. -12- Other income decreased $5.3 million due to reduced interest income resulting from lower interest rates as well as lower average outstanding balances on advances to the Company's parent. Interest expense decreased $8.8 million primarily due to a decline in the average outstanding commercial paper balance as well as a lower average effective interest rate on debt outstanding. Provision for income taxes increased due to the effect of the increase in federal statutory tax rate. Net income in 1993 included an $80.0 million credit to earnings for the cumulative effect of a change in accounting principle related to accounting for income taxes. See further discussion under "Change in Accounting Principles" below. Financial Condition - ------------------- Operating activities provided $183.8 million of cash in 1993. These funds, along with the commercial paper borrowings, net of amounts advanced to parent, were used to provide interim financing for railcar additions, service long-term debt and pay dividends to the Company's stockholder. In 1993, the Company spent $175.8 million for the construction and purchase of railcars and other fixed assets. The Company received $15.1 million in proceeds from disposals of railcars and other fixed assets. The Company also decreased its advance to its parent company by $89.2 million. Overall, net cash used in investing activities was $72.8 million. In May, 1993, the Company issued $100.0 million in long-term equipment trust pass through certificates to finance additions to its railcar fleet at an annual interest rate of 6.5%. Other financing activities of the Company included $8.4 million for the repayment of commercial paper obligations, $78.8 million for principal repayments on debt, $17.7 million to repay an advance to an affiliate and $90.0 million for dividends. Net cash used in financing activities was $94.9 million. Changes in Accounting Principles - -------------------------------- As more fully discussed in Note 9 to the consolidated financial statements, effective January 1, 1993 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The cumulative effect of the adoption of this new standard resulted in a $80.0 million credit to earnings in 1993. The new standard, however, had no effect on the Company's cash flow. The Financial Accounting Standards Board has issued SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This statement had no impact on the Company's financial position or results of operations because the Company's employee benefit programs do not include significant postemployment benefits. The Financial Accounting Standards Board has issued SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." However, because the Company does not currently have investments in these types of securities, there is no impact on the Company's consolidated financial statements. Other Matters - ------------- The Company has certain environmental matters currently outstanding, 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 this Form 10-K. -13- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements And Supplemental Schedules
Page ---- Report of Independent Auditors.......................................... 15 Financial Statements - Consolidated statement of income for each of the three years in the period ended December 31, 1994.................................. 16 Consolidated balance sheet - December 31, 1994 and 1993............... 17 Consolidated statement of stockholder's equity for each of the three years in the period ended December 31, 1994......................... 18 Consolidated statement of cash flows for each of the three years in the period ended December 31, 1994......................... 19 Notes to consolidated financial statements............................ 20
-14- 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, 1994 and 1993, 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, 1994. 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 generally accepted auditing standards. 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 December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note 9 to the consolidated financial statements, the Company changed its method of accounting for income taxes in the year ended December 31, 1993. ERNST & YOUNG LLP Chicago, Illinois March 8, 1995 -15- UNION TANK CAR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (Dollars in Thousands)
For the Year Ended December 31, ------------------------------------------- 1994 1993 1992 -------- -------- -------- Revenues Services (leasing and other) $445,973 $433,904 $414,502 Net sales 274,891 70,919 203,505 -------- -------- -------- 720,864 504,823 618,007 Other income 15,959 17,033 22,374 -------- -------- -------- 736,823 521,856 640,381 -------- -------- -------- Costs and expenses Cost of services 236,127 224,820 207,639 Cost of sales 251,615 55,341 192,538 General and administrative 54,120 54,629 53,609 Interest 91,442 96,584 105,417 -------- -------- -------- 633,304 431,374 559,203 -------- -------- -------- Income before income taxes and cumulative effect of a change in accounting principle 103,519 90,482 81,178 -------- -------- -------- Provision for income taxes Current 28,637 10,151 24,959 Deferred 14,166 33,342 10,843 Deferred investment tax credits (2,662) (2,741) (3,006) -------- -------- -------- 40,141 40,752 32,796 -------- -------- -------- Income before cumulative effect of a change in accounting principle 63,378 49,730 48,382 Cumulative effect of a change in accounting principle related to accounting for income taxes - 80,000 - -------- -------- -------- Net income $ 63,378 $129,730 $ 48,382 ======== ======== ======== Ratio of earnings to fixed charges 2.05 1.89 1.76 ======== ======== ========
See Notes to Consolidated Financial Statements. -16- UNION TANK CAR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollars in Thousands) ASSETS
December 31, ---------------------- 1994 1993 ---------- ---------- Cash and cash equivalents $ 15,303 $ 34,013 Accounts receivable, primarily due within one year, less allowance for doubtful accounts of $5,209 in 1994 and $4,911 in 1993 61,005 61,501 Inventories 64,644 50,424 Due from affiliate 13,191 2,076 Prepaid expenses and deferred charges 7,423 8,041 Advances to parent company, principally at LIBOR plus 1% 194,729 202,255 Railcar lease fleet, net 1,451,999 1,523,843 Fixed assets, net 130,895 104,973 Investment in direct financing lease 37,213 39,736 Other assets 41,370 28,005 ---------- ---------- Total assets $2,017,772 $2,054,867 ========== ========== LIABILITIES, DEFERRED ITEMS AND STOCKHOLDER'S EQUITY Accounts payable $ 16,096 $ 16,404 Accrued liabilities 129,059 121,400 Borrowed debt 882,407 951,031 ---------- ---------- 1,027,562 1,088,835 Deferred items Income taxes 459,893 451,812 Investment tax credits 25,309 28,590 ---------- ---------- 485,202 480,402 Stockholder's equity Common stock, no par value; 1,000 shares authorized and issued 106,689 106,689 Additional capital 4,652 4,652 Retained earnings 393,667 374,289 ---------- ---------- Total stockholder's equity 505,008 485,630 ---------- ---------- Total liabilities, deferred items and stockholder's equity $2,017,772 $2,054,867 ========== ==========
See Notes to Consolidated Financial Statements. -17- UNION TANK CAR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY Years Ended December 31, 1994, 1993 and 1992 (Dollars in Thousands)
Common Additional Retained Stock Capital Earnings Total -------- ---------- -------- -------- Balance at December 31, 1991 $106,689 $4,652 $319,177 $430,518 Net income - - 48,382 48,382 Cash dividends - - (33,000) (33,000) -------- ---------- -------- -------- Balance at December 31, 1992 106,689 4,652 334,559 445,900 Net income - - 129,730 129,730 Cash dividends - - (90,000) (90,000) -------- ---------- -------- -------- Balance at December 31, 1993 106,689 4,652 374,289 485,630 Net income - - 63,378 63,378 Cash dividends - - (44,000) (44,000) -------- ---------- -------- -------- Balance at December 31, 1994 $106,689 $4,652 $393,667 $505,008 ======== ========== ======== ========
See Notes to Consolidated Financial Statements. -18- UNION TANK CAR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands)
For the Year Ended December 31, ----------------------------------- 1994 1993 1992 ---------- ----------- ---------- Cash flows from operating activities: Net income $ 63,378 $ 129,730 $ 48,382 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 103,671 99,997 106,179 Cumulative effect of a change in accounting principle - (80,000) - Other non-cash income and expense (5,462) 469 (1,714) Changes in assets and liabilities: Accounts receivable (3,859) (7,294) 6,887 Inventories (15,399) (5,656) 7 Prepaid expenses and deferred charges 171 (102) 2,085 Accounts payable and accrued liabilities 9,049 16,065 6,811 Deferred taxes 11,504 30,601 7,837 Other - - (849) --------- --------- --------- Net cash provided by operating activities 163,053 183,810 175,625 Cash flows from investing activities: Proceeds from disposals of railcars and other fixed assets 145,290 15,094 133,933 Proceeds from disposals of box cars - - 21,688 Decrease in advance to parent 19,507 89,228 36,522 (Increase) decrease in other assets and investments (14,940) 754 (212) Construction and purchase of railcars and other fixed assets (213,208) (175,827) (145,878) Due from affiliate (11,203) (2,076) - Collection of demand note and long-term receivables 1,451 17 4,000 --------- --------- --------- Net cash (used in) provided by investing activities (73,103) (72,810) 50,053 --------- --------- --------- Cash flows from financing activities: Net commercial paper repayments (52,409) (8,429) (104,337) Proceeds from issuance of long-term debt 100,000 100,000 - Principal payments of long-term debt (110,881) (78,803) (72,260) Repayment of advance from affiliate - (17,708) (17,391) Cash dividends (44,000) (90,000) (33,000) --------- --------- --------- Net cash used in financing activities (107,290) (94,940) (226,988) --------- --------- --------- Effect of exchange rates on cash and cash equivalents (1,370) (729) (1,943) --------- --------- --------- Net (decrease) increase in cash and cash equivalents (18,710) 15,331 (3,253) Cash and cash equivalents at beginning of year 34,013 18,682 21,935 --------- --------- --------- Cash and cash equivalents at end of year $ 15,303 $ 34,013 $ 18,682 ========= ========= =========
See Notes to Consolidated Financial Statements. -19- 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 Corporation ("MIC") and an indirect 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 against such revenues 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. 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, 20-30 years; buildings and improvements, 20-30 years; and machinery and equipment, 3-20 years. The cost of major conversions and betterments are capitalized and depreciated over their estimated useful life or, if shorter, the remaining useful life of the related asset. Maintenance and repairs are charged to expense when incurred. Gain or loss on disposals is included in other income, except for those related to railcar disposals which are included in cost of services. -20- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Deferred Income Taxes The Company provides deferred taxes for temporary differences between pre-tax accounting income and taxable income (principally related to railcar depreciation). 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, 1994, 1993 and 1992, MIC absorbed gains of $271, $57 and $140, respectively. Also in 1994, MIC assumed a loss of $6,102 related to U. S. dollar denominated debt held by a Canadian subsidiary of the Company. 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 8. Reclassification Certain prior year amounts have been reclassified to conform to the current year's presentation. -21- 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 the United States, Canada and Mexico. The Company leases to a wide variety of customers, and no customer accounted for more than 5% of consolidated lease revenues. The leases involve one to several thousand cars, normally for periods ranging from one to twenty years. The average term of leases entered into during 1994 for newly-manufactured cars was approximately seven years. The average term of leases entered into during 1994 for other cars 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 rentals to be received on railcar leases at December 31, 1994, are as follows:
Direct Operating Financing Leases Leases Total ---------------- ---------- ---------- 1995 $ 3,328 $ 336,340 $ 339,668 1996 3,842 261,733 265,575 1997 3,842 200,395 204,237 1998 3,842 145,660 149,502 1999 3,842 99,517 103,359 2000 and after 6,254 189,862 196,116 ------- ---------- ---------- Totals $24,950 $1,233,507 $1,258,457 ======= ========== ==========
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, ------------------ 1994 1993 ------- -------- Minimum future lease rentals $24,950 $ 29,871 Estimated residual values 8,488 9,147 ------- -------- Gross investment 33,438 39,018 Less unearned income (9,794) (12,799) ------- -------- Net investment $23,644 $ 26,219 ======= ======== Classified as Railcar lease fleet (cost) $28,292 $ 32,082 Less accumulated depreciation (4,648) (5,863) ------- -------- $23,644 $ 26,219 ======= ========
-22- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Railcar Lease Fleet and Fixed Assets
December 31, ----------------------- 1994 1993 ---------- ---------- Railcar lease fleet Gross cost $2,368,592 $2,392,731 Less accumulated depreciation (916,593) (868,888) ---------- ---------- $1,451,999 $1,523,843 ========== ========== Fixed assets, at cost Land $ 6,603 $ 4,486 Buildings and improvements 90,252 74,221 Machinery and equipment 196,468 179,645 ---------- ---------- 293,323 258,352 Less accumulated depreciation (162,428) (153,379) ---------- ---------- $ 130,895 $ 104,973 ========== ==========
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 as of December 31, 1994 are as follows (at December 31, 1994 exchange rate of .713):
1995 $ 4,318 1996 4,318 1997 4,318 1998 4,318 1999 4,318 2000 and after 35,867 ------- Total $57,457 =======
-23- 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 (at year-end exchange rates of .713 at December 31, 1994, and .755 at December 31, 1993):
December 31, ------------------- 1994 1993 -------- -------- Minimum future lease rentals $ 57,457 $ 65,418 Estimated residual value 16,934 17,932 -------- -------- Gross investment 74,391 83,350 Less unearned income (37,178) (43,614) -------- -------- Net investment $ 37,213 $ 39,736 ======== ========
6. Lease Commitments The Company, as lessee, has entered into long-term leases for railcars and various manufacturing, office and warehouse facilities. The railcar lease fleet includes the following capitalized leases:
December 31, ----------------- 1994 1993 ------- ------- Capitalized lease cost $16,127 $15,957 Less accumulated depreciation (7,034) (6,558) ------- ------- $ 9,093 $ 9,399 ======= =======
On December 15, 1994, the Company entered into two separate sale-leaseback transactions with trusts for the benefit of certain institutional investors pursuant to which it sold (at approximately book value) and leased back an aggregate of 2,197 railcars, including 1,636 tank cars. The Company has an option to purchase all or a portion of the railcars subject to one or both of the leases at fair value on January 2, 2005 with respect to certain railcars and January 2, 2006 with respect to the other railcars. Each lease expires on July 2, 2010. In addition, on June 30, 1992, the Company entered into ten separate sale- leaseback transactions with trusts for the benefit of certain institutional investors pursuant to which it sold (at approximately book value) and leased back an aggregate of 2,073 railcars, including 1,570 tank cars. The Company may reacquire the railcars subject to one or more of the leases by purchasing the beneficial interests in the related trusts at fair value on January 2, 2009 in the case of four leases and January 2, 2010 in the case of the other six leases. Each lease expires on January 2, 2014. -24- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) At December 31, 1994, future minimum rental commitments for all noncancellable leases are as follows:
Sale- Other Capitalized Leaseback Operating Leases Leases Leases ----------- --------- --------- 1995 $ 2,973 $ 10,469 $ 2,881 1996 2,973 22,447 2,261 1997 1,529 21,039 1,524 1998 85 21,513 1,474 1999 85 21,826 1,474 2000 and after 169 316,836 2,968 ------- -------- -------- 7,814 $414,130 $ 12,582 ======== ======== Less amount representing interest (1,876) ------- Present value of minimum lease payments 5,938 Less current portion (1,983) ------- Long-term obligation at December 31, 1994 $ 3,955 =======
7. Accrued Liabilities
December 31, ------------------- 1994 1993 -------- -------- Amounts held on customers' accounts $ 19,865 $ 15,225 Retirement benefits 16,704 16,077 Interest 15,889 17,318 Rent 15,103 11,027 Deferred income 11,635 8,164 Minority interest in partnership 10,808 10,018 Insurance 8,053 15,250 Other 31,002 28,321 -------- -------- $129,059 $121,400 ======== ========
-25- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Borrowed Debt
December 31, ------------------ 1994 1993 -------- -------- Equipment obligations, payable periodically through 2009 at 6.50%-15.55% (average rate 9.33% as of December 31, 1994 and 10.01% as of December 31, 1993) $712,345 $725,982 Senior notes, 9.75%, due in 1997 143,000 143,000 Other long-term borrowings (average rate 12.20% as of December 31, 1994 and 1993) 27,062 29,640 Commercial paper (net of $91 discount; with average yield of 3.42% as of December 31, 1993) - 52,409 -------- -------- $882,407 $951,031 ======== ========
Equipment obligations above include $5,938 and $7,667 of capitalized leases and are secured by railcars with an original cost of $1,641,909 and $1,597,476 at December 31, 1994 and 1993, respectively. The senior notes contain certain provisions regarding asset sales and sale-leaseback restrictions. As of December 31, 1994, the Company is in compliance with all debt covenants. During the second quarter of 1994, the Company repaid all outstanding commercial paper (through reductions in advances to parent) and suspended its commercial paper program effective May 23, 1994. On May 26, 1994, the Company terminated the revolving credit agreement which had served as a liquidity back-up to the commercial paper program. Expenses associated with the credit agreement (approximately $84 in 1994, $370 in 1993, and $300 in 1992) are included in interest expense. The Company had no amounts outstanding under the credit agreement at December 31, 1993. The Company's Canadian subsidiaries have approximately $16,613 of credit lines available on a no-charge basis. No amounts were outstanding as of December 31, 1994. Maturities of debt obligations for the years 1995 - 1999 are $521,368, as follows: $75,378 in 1995, $75,910 in 1996, $219,150 in 1997, $76,747 in 1998 and $74,183 in 1999. -26- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The estimated fair value of borrowed debt is as follows:
December 31, -------------------- 1994 1993 -------- ---------- Equipment obligations $728,314 $ 856,341 Senior notes 147,546 163,970 Other long-term borrowings 32,278 40,830 Commercial paper - 52,409 -------- ---------- $908,138 $1,113,550 ======== ==========
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. The Company currently anticipates holding all borrowed debt obligations until maturity. 9. 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. Effective January 1, 1993, the Company prospectively adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS 109) and, accordingly, changed from the deferred method to the asset and liability approach to accounting for income taxes. The cumulative effect of this accounting change as of that date is reflected in the accompanying consolidated statement of income as an $80,000 credit to earnings for the cumulative effect of a change in accounting principle. This item represents a non-cash credit to earnings, as it merely reflects the new, lower net deferred income tax liability calculated under the new accounting method as compared to the net liability recorded under the former income tax accounting method. Adoption of the new accounting method did not change the tax arrangement with MIC, had no effect on income before taxes and cumulative effect of a change in accounting principle and has no past or future impact on the cash flows related to income taxes. -27- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Under the provisions of the Revenue Reconciliation Act of 1993 (enacted on August 10, 1993) the corporate federal income tax rate increased from 34% to 35%, effective January 1, 1993. The rate change increased the 1993 provision for income taxes $7,300 due to the effect of the increased tax rate on the net deferred income tax liability which existed as of the enactment date of the law. 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. The December 31, 1994 and 1993 net deferred income tax liabilities of $459,893 and $451,812 shown in the accompanying consolidated balance sheet are composed of $493,626 and $492,225 in deferred tax liabilities, partially offset by $33,733 and $40,413 in deferred tax assets, respectively. These deferred income tax assets and (liabilities) result from the following temporary differences:
1994 1993 --------- --------- Excess of tax over book depreciation $(462,405) $(456,558) Other (31,221) (35,667) --------- --------- Gross liabilities (493,626) (492,225) Expenses per books not yet deductible for tax 17,566 27,054 Alternative minimum tax and other tax credits 16,167 13,359 --------- --------- Gross assets 33,733 40,413 --------- --------- Net liability $(459,893) $(451,812) ========= =========
The above assets exclude certain state deferred income tax assets related to loss carryforwards (which expire over the next fifteen years) in the gross amount of $12,000. These assets have been assigned a 100% valuation reserve due to significant uncertainty as to ultimate realizability. There have been no changes in any asset valuation reserves for the year ended December 31, 1994. 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 on income before the cumulative effect of a change in accounting principle:
Asset and Deferred Liability Method Method ----------------- -------- 1994 1993 1992 ------- ------- -------- State Current $ 282 $ 144 $ 154 Deferred 1,424 2,276 2,451 Federal Current 12,525 (5,524) 9,117 Deferred 14,840 33,886 8,912 Deferred investment tax credit (1,882) (1,868) (1,869) Foreign Current 15,830 15,531 15,688 Deferred (2,098) (2,820) (520) Deferred investment tax credit (780) (873) (1,137) ------- ------- ------- Total $40,141 $40,752 $32,796 ======= ======= =======
In 1990 and 1991, the Company provided for U.S. alternative minimum tax in the amounts of $9,666 and $9,380, respectively. The Company credited $5,907 in 1994, $9,280 in 1993, and $3,859 in 1992 to regular income tax liabilities. In 1994, 1993 and 1992 the Company paid foreign withholding taxes of $1,723, $627 and $2,651, respectively. Income tax expense is based upon domestic and foreign income before taxes and the cumulative effect of the change in accounting principle as follows:
1994 1993 1992 -------- ------- ------- Domestic $ 76,770 $64,248 $54,677 Foreign 26,749 26,234 26,501 -------- ------- ------- Total $103,519 $90,482 $81,178 ======== ======= =======
-29- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Income tax effects of significant items which resulted in effective tax rates of 38.8% in 1994, 45.0% in 1993, and 40.4% in 1992 follow:
Asset and Deferred Liability Method Method ----------------- -------- 1994 1993 1992 ------- ------- -------- Federal income taxes at statutory rates of 35% in 1994 and 1993 and 34% in 1992 $36,232 $31,669 $27,601 Increase (decrease) resulting from: Effect of statutory tax rate increase on deferred taxes - 7,300 - Amortization of investment tax credits (2,662) (2,741) (3,006) State income taxes, net of federal income tax benefit 1,109 1,573 1,719 Excess tax provided on foreign income 4,370 3,529 6,819 Other, net 1,092 (578) (337) ------- ------- ------- Total income taxes $40,141 $40,752 $32,796 ======= ======= =======
The excess tax on foreign income represents differences due to higher foreign tax rates and foreign tax credits not benefitted. The components of the provision for deferred taxes for the year ended December 31, 1992 (calculated under the deferred method) are as follows:
1992 -------- Excess of tax over book depreciation $ 24,623 Gain on fixed assets in excess of book (17,531) Alternative minimum tax 3,859 Foreign tax credits 1,455 All other, net (1,563) -------- $ 10,843 ========
-30- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. 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. The Company self-insures certain exposures in its risk management plan. The Company has accrued for the estimated costs of reported, as well as incurred but not reported, self-insured claims. The company has certain environmental matters currently outstanding, 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 this Form 10-K. 11. 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 1994, 1993 and 1992 was $5,892, $5,164 and $4,963, respectively. As of December 31, 1994, the Company's domestic defined benefit plans were either in the process of being terminated (and their benefits frozen) or were completely 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. Certain foreign subsidiaries sponsor unfunded defined benefit plans which cover substantially all of their regular, full-time employees. Benefits are based on both years of service and compensation. Defined benefit pension plan expense was $357, $371 and $291 for 1994, 1993 and 1992, respectively. Accrued defined benefit pension liability recognized in the consolidated balance sheet was $6,556 and $7,167 at December 31, 1994 and 1993. -31- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. 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, 1994 and 1993, the liability for postretirement health care and life insurance benefits was $4,298 and $4,294, respectively, and was included in accrued liabilities in the consolidated balance sheet. Expense related to these benefits was $359, $590 and $546 in 1994, 1993 and 1992, respectively. 13. Other Income
1994 1993 1992 ------- ------- ------- Interest income $10,103 $10,375 $15,803 Earned income on direct financing leases 7,206 8,037 7,623 Goodwill amortization - (407) (10) Minority interest in net income (790) (704) (668) Other (560) (268) (374) ------- ------- ------- $15,959 $17,033 $22,374 ======= ======= =======
Interest income presented above includes interest earned on advances to MIC as described in Note 17. 14. Supplementary Profit and Loss Information
1994 1993 1992 ------- ------- ------- Maintenance and repairs $99,648 $95,909 $94,184 ======= ======= ======= Rents $17,034 $16,476 $ 4,652 ======= ======= ======= Payroll taxes $ 9,016 $ 9,029 $ 9,057 ======= ======= ======= Property taxes $ 6,469 $ 5,537 $ 5,210 ======= ======= =======
Royalties, advertising and research and development costs are less than 1% of consolidated revenues. -32- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. 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 cumulative effect of a change in accounting principle and such interest, amortization and the interest component of rentals. 16. Summarized Financial Information of Procor Limited Summarized consolidated financial information for the Company's wholly-owned subsidiary, Procor Limited, is as follows:
December 31, ------------------ 1994 1993 -------- -------- Balance Sheet: Railcar lease fleet, net $236,565 $257,333 All other assets 153,055 145,022 Borrowed debt 146,180 160,736 All other liabilities 158,760 163,222
Years Ended December 31, ---------------------------- 1994 1993 1992 -------- -------- -------- Statement of Income: Services and net sales $114,863 $119,848 $112,983 Gross profit 37,735 40,446 42,763 Net income 10,943 11,345 11,380
Services and net sales in 1994 and 1993 includes $10,326 and $16,168, respectively, representing the sale of railcars to UTLX International, Inc., a wholly-owned subsidiary of the Company. -33- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17. Related Party Transactions The following table sets forth the major related party transaction amounts included in the consolidated financial statements.
Service Interest Management Insurance Interest Revenues Income Expense Billed Expense -------- -------- ---------- --------- -------- 1994 $3,324 $ 8,682 $4,867 $2,896 $ - 1993 2,822 9,786 4,783 2,102 300 1992 4,647 14,667 4,658 2,962 2,177
The Company leases 486 box cars under net long-term leases of 15 to 20 years to WCTU Railway Company, an affiliated company. Revenues from these leases are classified in the preceding table as service revenues. 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 $180,057 and $202,393 at December 31, 1994 and 1993, 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 a receivable of $14,672 and a payable of $138 at December 31, 1994 and 1993, respectively, that are included in Advances to Parent Company. Management fees are paid to The Marmon Group, Inc. ("Marmon"), an indirect 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. -34- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The management fee which Marmon charges to the Company and other entities that it manages is determined in the following manner. First, budgeted administrative expenses of Marmon for the twelve month period following the date of computation (including wages, salaries and related expenses, rent, utilities, travel expenses and other similar expenses, but excluding extraordinary and non- recurring items) are multiplied by the average of the following three percentages (each of which is given equal weight): (1) the percent of the sales and services revenues of the Company to the total sales and services revenues of all managed entities, including the Company; (2) the percent of the assets of the Company to the assets of all managed entities, including the Company; and (3) the percent of the net income of the Company to the net income of all managed entities, including the Company. In making this computation, Marmon uses sales and services revenues and net income from the beginning of the year to the approximate date of computation and assets at that date. Marmon's management takes the amount derived from this formula and applies discretion to determine the final management 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's management; 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 $1,179 in 1994, $159 in 1993 and $879 in 1992 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. 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, 1994 and 1993 was $43,229 and $40,070, respectively, which represents 80% ownership in this partnership. The minority partner's interest in the partnership at December 31, 1994 and 1993 is $10,808 and $10,018, respectively, which is included in accrued liabilities. The minority interest in income, $790, $704 and $668 for the years ended December 31, 1994, 1993 and 1992, respectively, is reflected in other income. -35- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18. Quarterly Data (Unaudited)
Three Months Ended -------------------------------------- March 31 June 30 Sept. 30 Dec. 31 -------- ------- -------- -------- 1994 Net sales and services revenues $134,007 $144,767 $151,715 $290,375 Cost of sales and services 76,305 84,338 95,644 231,455 -------- -------- -------- -------- Gross profit 57,702 60,429 56,071 58,920 Net income $ 14,432 $ 16,000 $ 15,025 $ 17,921 ======== ======== ======== ======== 1993 Net sales and services revenues $122,054 $128,359 $123,105 $131,305 Cost of sales and services 70,294 69,964 67,317 72,586 -------- -------- -------- -------- Gross profit 51,760 58,395 55,788 58,719 Income before cumulative effect of a change in accounting principle 10,877 14,894 8,188 15,771 Net income $ 90,877 $ 14,894 $ 8,188 $ 15,771 ======== ======== ======== ======== 1992 Net sales and services revenues $122,002 $245,845 $116,648 $133,512 Cost of sales and services 67,165 191,290 61,039 80,683 -------- -------- -------- -------- Gross profit 54,837 54,555 55,609 52,829 Net income $ 11,849 $ 11,487 $ 14,997 $ 10,049 ======== ======== ======== ========
In the fourth quarter of 1994, included in net sales and services revenues and cost of sales and services is approximately $125,500 related to sale-leaseback transactions. See Note 6. In the first quarter of 1993, the Company recorded an $80,000 credit to earnings to reflect the adoption of SFAS 109. In the third quarter of 1993, the Company recorded a $7,300 charge to earnings to reflect the effect of the statutory tax rate increase on deferred taxes. See Note 9. In the second quarter of 1992, included in net sales and service revenues and cost of sales and services is approximately $124,900 related to sale-leaseback transactions. See Note 6. Cost of sales and services and gross profit have been restated above to reflect the reclassification of certain other income to conform with the 1994 presentation. -36- UNION TANK CAR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 19. Supplementary Disclosures of Cash Flow Information
1994 1993 1992 ------- ------- -------- Cash paid during the year for: Interest (net of amount capitalized) $91,928 $94,470 $107,342 Income taxes 30,880 21,212 23,984
Unrealized foreign currency translation gains and losses, which are non-cash items, are excluded from the decrease in advance to parent. 20. Industry Segment Information The Company's industry and geographic data are found under the "Segment Data" caption of Item 1 of this Form 10-K. The aforementioned data are an integral part of the Notes to Consolidated Financial Statements. -37- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
First Elected Name Age Positions or Offices to Position - ---- --- -------------------- ------------- Kenneth P. Fischl 45 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 Mark J. Garrette 41 Vice President Tank Car Division 1994 Vice President and Senior Vice President and Controller, Tank Car Division 1994 Robert C. Gluth 70 Director 1981 Executive Vice President 1981 and served as Treasurer between February, 1986 and January, 1987 and since October, 1989 Jay A. Pritzker 72 Director 1981 Chairman of the Board 1981 Robert A. Pritzker 68 Director 1981 President 1981 Robert W. Webb 55 General Counsel 1986 Secretary 1986
-38- Kenneth P. Fischl Mr. Fischl was elected as a Director upon the retirement of Sidney H. Bonser 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. He held this position until assuming his current responsibilities. Mark J. Garrette Mr. Garrette was appointed Senior Vice President and Controller of the Tank Car Division and Vice President of the Company upon the retirement of Stephen G. Dinsmore in August, 1994. He joined the Tank Car Division as Vice President and Assistant Controller in May, 1994. Prior to joining the Company, Mr. Garrette was Division Vice President of AVX Corp., a subsidiary of Kyocera Corp., a manufacturer of electronic components. Robert C. Gluth Mr. Gluth is Executive Vice President and a Director of 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 The Marmon Group, Inc. ("Marmon"). Mr. Gluth is also Treasurer of each of TMC, MIC and Marmon. Jay A. Pritzker Mr. Jay A. Pritzker is Chairman of the Board of each of MIC, Holdings, TMC and Marmon. Mr. Pritzker is also a partner in the law firm of Pritzker & Pritzker, and Chairman of the Board of Hyatt Corporation. 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. Messrs. Jay A. Pritzker and Robert A. Pritzker are brothers. There are no other 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. -39- Other Directorships Mr. Robert A. Pritzker and Mr. Gluth are Directors of TIE/communications, Inc., and Mr. Robert A. Pritzker is also a Director of Acxiom Corp. Other than that, 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 Sidney H. Bonser, Senior Vice President (retired); Kenneth P. Fischl, Vice President; and Stephen G. Dinsmore, Vice President (retired), were the only executive officers of the Company who in the year ended December 31, 1994, received salary and bonus in excess of $100,000 from the Company and its subsidiaries for services in all capacities to the Company. All other officers of the Company received their 1994 compensation from Marmon and are primarily involved in the management of MIC and Marmon. The Company, together with the other subsidiaries of MIC, have been required to pay Marmon a portion of such compensation which is encompassed in the charge for certain common services provided by Marmon to the Company and such other subsidiaries. The amount of such charge has been determined pursuant to a formula based upon the dollar value of revenues, earnings and assets. See Note 17. Directors of the Company do not receive any compensation in such capacity. Shown below is the aggregate of all forms of compensation paid by the Company to Mr. Bonser, Mr. Fischl and Mr. Dinsmore: Summary Compensation Table
Annual Compensation --------------------- All Other Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) * - --------------------------- ---- ---------- --------- ------------------ Sidney H. Bonser, Senior Vice President of the 1994 107,500 86,000 14,200 Company (retired March, 1994) 1993 346,900 86,000 27,900 1992 330,500 86,000 27,500 Kenneth P. Fischl, Director and Vice President of 1994 196,400 45,000 20,300 the Company and President and 1993 183,200 37,000 17,800 General Manager of the Tank Car 1992 148,100 24,000 14,900 Division Stephen G. Dinsmore, Vice President of the Company 1994 114,500 28,500 - and Senior Vice President of 1993 154,500 26,500 16,200 the Tank Car Division (retired 1992 148,100 24,500 15,900 August, 1994)
* Represents the aggregate amounts of Company contributions to defined contribution plans on behalf of each of the named individuals. -40- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT MIC, a Delaware corporation 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 an indirect subsidiary of Holdings. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See "Notes to Consolidated Financial Statements," Note 17, for a description of certain related party transactions. -41- 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, 1994.................................. 16 Consolidated balance sheet - December 31, 1994 and 1993................ 17 Consolidated statement of stockholder's equity for each of the three years in the period ended December 31, 1994.................. 18 Consolidated statement of cash flows for each of the three years in the period ended December 31, 1994............................ 19 Notes to consolidated financial statements.............................. 20 2. Index to Exhibits......................................................... 44
b) Reports on Form 8-K There were no reports on Form 8-K filed during the three months ended December 31, 1994. 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. -42- 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 Dated: March 8, 1995 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/ Jay A. Pritzker Chairman of the Board March 8, 1995 - ------------------------- and Director Jay A. Pritzker /s/ Robert A. Pritzker President and Director March 8, 1995 - ------------------------- (principal executive officer) Robert A. Pritzker /s/ Robert C. Gluth Executive Vice President March 8, 1995 - ------------------------- and Director and Treasurer Robert C. Gluth (principal financial officer and principal accounting officer) /s/ Kenneth P. Fischl Director and President, Tank March 8, 1995 - ------------------------- Car Division Kenneth P. Fischl -43- 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 15 to the consolidated financial statements)................................................... 45 Exhibit 21 Subsidiaries of the registrant.................................. 46
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. -44- EX-12 2 COMPUTATION OF RATIOS Exhibit 12 UNION TANK CAR COMPANY AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (Dollars in Thousands)
For the Year Ended December 31, Line ------------------------------------------------ Number 1994 1993 1992 1991 1990 ------ -------- -------- -------- -------- -------- Income Available for Fixed Charges: - -------------------- Income from continuing operations 1 $ 63,378 $ 49,730 $ 48,382 $ 45,024 $ 40,072 Provision for federal income taxes and foreign taxes 2 38,435 38,332 30,191 34,068 41,833 Provision for state income taxes 3 1,706 2,420 2,605 2,159 2,788 Fixed charges (line 8) 4 98,807 101,973 106,895 118,352 116,659 -------- -------- -------- -------- -------- Income available for fixed charges 5 $202,326 $192,455 $188,073 $199,603 $201,352 ======== ======== ======== ======== ======== Fixed Charges: - -------------- Interest expenses (including amortization of debt discount) as shown on the consolidated statement of income 6 $ 91,442 $ 96,584 $105,417 $117,263 $115,584 Add interest portion of rent expense 7 7,365 5,389 1,478 1,089 1,075 -------- -------- -------- -------- -------- Total fixed charges 8 $ 98,807 $101,973 $106,895 $118,352 $116,659 ======== ======== ======== ======== ======== Number of times fixed charges were earned (line 5/line 8) 2.05 1.89 1.76 1.69 1.73 ==== ==== ==== ==== ====
-45- EX-21 3 LIST OF SUBSIDIARIES Exhibit 21 UNION TANK CAR COMPANY AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1994 Jurisdiction Under Which Organized ------------------ Union Tank Car Company Delaware Procor Alberta, Inc. Alberta Railserve, Inc. Canada Atlas Bolt & Screw Company Delaware The Marmon Group of Canada, Ltd. Canada Atlas Bolt & Screw Company of Canada, Inc. Ontario Procor Limited Canada Trans Union Crane Rental, Inc. Canada Procor LPG Storage, Inc. Alberta Procor Sulphur Services, Inc. Alberta Robertson Whitehouse, Inc. Ontario Trans Union Finance (Canada) Limited Ontario Rail Car Associates Limited Partnership Illinois Trans Union Fastener Corporation Delaware Union Tank Car Rail Services Company Delaware Uni-Form Components, Inc. Delaware All subsidiaries listed above are wholly-owned subsidiaries (except for Rail Car Associates Limited Partnership of which the Company is the general partner and has an 80% ownership interest) and are included in the consolidated financial statements incorporated herein. EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1994 CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994, AND THE NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1994 DEC-31-1994 15,303 0 66,214 5,209 64,644 0 2,661,915 1,079,021 2,017,772 0 882,407 106,689 0 0 398,319 2,017,772 274,891 736,823 251,615 487,742 0 1,386 91,442 103,519 40,141 63,378 0 0 0 63,378 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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