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1997
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, 1997
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, 1997
CONTENTS
Section Page
- ------- ----
Part I.
Item 1 Business....................................................... 2
Item 2 Properties..................................................... 10
Item 3 Legal Proceedings.............................................. 11
Item 4 Submission of Matters to a Vote of Security Holders............ 11
Part II.
Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters.............................. 12
Item 6 Selected Financial Data........................................ 12
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 12
Item 8 Financial Statements and Supplementary Data.................... 16
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, 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, 1997, the Company's fleet was comprised of 58,044 tank cars
and 15,682 railway cars of other types. A total of 30,458 cars were added to the
lease fleet during the ten years ended December 31, 1997. These cars accounted
for approximately 44% of total railcar lease revenues during 1997. 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
only 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 1997 for newly-manufactured railcars was
approximately seven years. The average term of leases entered into during 1997
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 1997 the Company issued $400.0 million of unsecured notes. In 1996, 1995
and 1994, a combination of sale-leaseback transactions along with a smaller
portion of equipment trust certificates were utilized to finance railcars. Prior
to 1994, the Company had relied primarily on equipment trust certificates to
finance railcar lease fleet additions. The Company expects that future railcar
financing needs will be met primarily with a combination of unsecured borrowings
and sale-leaseback transactions.
The following table sets forth the minimum rentals to be received, the debt
maturities under outstanding equipment and unsecured obligations, the minimum
lease payments due (as lessee) under all operating leases and the cost of the
owned 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 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 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,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------- ------------ ------------
(Dollars in Millions)
Total minimum future rentals
to be received (as lessor) $1,577.1 $1,478.2 $1,363.7 $1,258.5 $1,215.8
Principal amount of equipment
and unsecured obligations 902.0 713.2 (1) 774.8 855.3 869.0
Total minimum future lease
payments for noncancelable
operating leases (as lessee) 709.9 753.5 590.2 426.7 253.0
Minimum future rentals to be
received within one year
(as lessor) 413.4 388.7 361.7 339.7 327.9
Principal amount of equipment
obligations due within one
year, net of amounts held
for sinking fund purposes 63.3 207.4 (1) 66.8 73.1 80.7
Minimum future lease payments
for noncancelable operating
leases due within one year
(as lessee) 44.8 43.9 25.4 13.4 13.5
Gross cost of owned fleet 2,710.2 2,523.6 2,425.0 2,368.6 2,392.7
Depreciated cost of owned fleet 1,578.4 1,459.8 1,430.2 1,452.0 1,523.8
For the year ended:
Railcar rentals, including
direct financing leases 463.9 443.7 421.7 402.9 391.6
(1) Included $143.0 million principal amount of unsecured senior notes issued by
the Company in 1990, repaid June 15, 1997, the proceeds of which were used
to retire certain higher coupon railcar obligations.
Approximately 37% of the Company-owned fleet of railcars is 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 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; Edmonton, Alberta; Sarnia and Oakville, Ontario; Montreal, Quebec; and
Regina, Saskatchewan.
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 and the
Netherlands 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.
-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:
Industry Segments 1997 1996 1995
---------------- ----------------- ----------------
(Dollars in Millions)
Revenues
Railcar leasing, services and sales $ 714.2 $ 569.2 $ 610.8
Other 132.3 130.4 123.4
---------------- ----------------- ----------------
Total segments 846.5 699.6 734.2
Interest income (principally from
advances to parent) 13.2 11.1 13.3
Corporate/unallocated 1.0 (1.1) (2.2)
---------------- ---------------- ----------------
$ 860.7 $ 709.6 $ 745.3
================ ================ ================
Operating income
Railcar leasing, services and sales $ 213.0 $ 206.0 $ 191.1
Other 6.7 18.4 9.7
---------------- ---------------- ----------------
Total segments 219.7 224.4 200.8
Interest income (principally from
advances to parent) 13.2 11.1 13.3
Interest expense (75.4) (72.1) (81.2)
Corporate/unallocated 0.9 (1.2) (2.4)
---------------- ---------------- ----------------
$ 158.4 $ 162.2 $ 130.5
================ ================ ================
Assets, at December 31
Railcar leasing, services and sales $1,947.5 $1,794.3 $1,723.3
Other 91.2 74.1 77.6
---------------- ---------------- ----------------
Total segments 2,038.7 1,868.4 1,800.9
Advances to parent 177.7 111.2 171.2
Corporate/unallocated 13.3 27.2 31.2
---------------- ---------------- ----------------
$2,229.7 $2,006.8 $2,003.3
================ ================= ================
Capital expenditures
Railcar leasing, services and sales $ 250.5 $ 283.8 $ 206.8
Other 21.4 4.2 21.5
---------------- ---------------- ----------------
$ 271.9 $ 288.0 $ 228.3
================ ================ ================
Depreciation
Railcar leasing, services and sales $ 107.8 $ 101.3 $ 100.1
Other 5.9 5.4 5.1
---------------- ---------------- ----------------
$ 113.7 $ 106.7 $ 105.2
================ ================ ================
-6-
Geographic Segments 1997 1996 1995
---------------- ---------------- ----------------
(Dollars in Millions)
Revenues
United States $ 655.2 $ 495.9 $ 541.5
Canada 180.2 193.1 181.9
Other 11.1 10.6 10.8
---------------- ---------------- ----------------
Total segments 846.5 699.6 734.2
Interest income (principally from
advances to parent) 13.2 11.1 13.3
Corporate/unallocated 1.0 (1.1) (2.2)
---------------- ---------------- ----------------
$ 860.7 $ 709.6 $ 745.3
================ ================ ================
Operating income
United States $ 165.2 $ 159.8 $ 146.8
Canada 49.8 60.8 51.0
Other 4.7 3.8 3.0
---------------- ---------------- ----------------
Total segments 219.7 224.4 200.8
Interest income (principally from
advances to parent) 13.2 11.1 13.3
Interest expense (75.4) (72.1) (81.2)
Corporate/unallocated 0.9 (1.2) (2.4)
---------------- ---------------- ----------------
$ 158.4 $ 162.2 $ 130.5
================ ================ ================
Assets, at December 31
United States $1,569.3 $1,408.3 $1,340.2
Canada 440.4 430.6 431.4
Other 29.0 29.5 29.3
---------------- ---------------- ----------------
Total segments 2,038.7 1,868.4 1,800.9
Advances to parent 177.7 111.2 171.2
Corporate/unallocated 13.3 27.2 31.2
---------------- ---------------- ----------------
$2,229.7 $2,006.8 $2,003.3
================ ================ ================
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 being significant. In the opinion of management the Company will have
adequate availability of raw materials in the future.
-7-
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, 1997, the Company had approximately 4,220 employees.
-8-
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 1997 the Company spent approximately $7.8 million on
remediation and related matters, compared with $3.5 million and $4.5 million in
1996 and 1995, respectively. The Company expects to spend approximately $6.8
million in 1998 on similar activities. Management believes that amounts accrued
for remedial activities and 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 submitted its consultant's report to the Pennsylvania DER
for review in 1994. The Pennsylvania Attorney General's office and the Company's
counsel began discussions to resolve the criminal investigation in 1994 and
those discussions are continuing. 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.
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.
-9-
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 75% of productive capacity for railcar
manufacturing, 80% for railcar servicing and repair, 75% for sulphur processing,
85% for containment vessel head manufacturing, 90% for liquefied petroleum gas
storage and 85% for the other properties.
Railcars
The Company owns approximately 88 percent of its total lease fleet of 73,726
railcars, of which 58,044 are tank cars and 15,682 are other railway freight
cars. Of the approximately 64,778 owned cars, 40,496 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; 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 and the Netherlands which
process liquefied sulphur into crystalline slates and granules and handle the
formed product. This subsidiary also owns a facility in Canada for the
manufacture and distribution of sulphur bentonite products and micronutrients.
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.
-10-
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, Canada and Sweden. 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, 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
this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-11-
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,
--------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
(Dollars in Thousands)
Services and net sales $ 842,354 $ 680,642 $ 725,712 $ 595,327 $ 504,823
Net income 101,250 102,583 84,465 63,378 129,730
Ratio of earnings to
fixed charges 2.74x 2.84x 2.41x 2.05x 1.89x
At year end:
Total assets $2,229,664 $2,006,820 $2,003,346 $2,017,772 $2,054,867
Long-term obligations 858,656 528,344 732,207 807,029 869,440
Services and net sales in 1997 increase was primarily due to increased railcar
sales.
Net income in 1993 includes an $80,000 credit to earnings to reflect the
adoption of SFAS 109.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1997 versus 1996
Results of Operations
Services revenues increased $33.4 million, primarily due to the effect of
railcars added to the lease fleet.
Net sales revenues increased $128.3 million, primarily due to increased railcar
sales.
Gross margin percentages decreased from the comparable period in 1996 due to
increased car maintenance expenses, increased railcar rental expenses from
previous years' sale-leaseback transactions and lower margins on new railcars
sold that were manufactured by a third-party.
Other income decreased $10.6 million, primarily due to the 1996 gain on the sale
of a storage facility used in the liquefied petroleum gas storage operations and
the receipt of certain fees in connection with the termination of an agreement
pursuant to which a subsidiary of the Company was to acquire Hawker Siddeley
Canada Inc.
-12-
Financial Condition
Operating activities provided $217.4 million of cash in 1997. These funds, along
with the issuance of unsecured debt, 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 1997, the Company spent $261.3 million for the construction and purchase of
railcars and other fixed assets and $10.6 million for the purchase of assets
engaged in the manufacturing and distribution of sulphur bentonite and
micronutrients.
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 1997, the Company issued $400.0 million in unsecured notes. Other financing
activities of the Company included $210.1 million for principal repayments on
borrowed debt and $70.0 million for dividends. Net cash provided by financing
activities was $119.9 million.
Management expects that the future cash to be provided by operating activities,
long-term 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 following table presents the scheduled cash inflows and outflows over the
next five years based on leases and indebtedness outstanding as of December 31,
1997:
1998 1999 2000 2001 2002
------------ ------------ ------------ ------------ ------------
(Dollars in Millions)
Cash Inflows
- ------------
Minimum future lease rentals $413.4 $331.2 $249.7 $177.2 $118.9
Cash Outflows
- -------------
Minimum future lease payments 44.8 43.7 44.5 48.2 44.9
Principal amount of obligations 66.4 62.5 61.2 60.9 53.4
------------ ------------ ------------ ------------ ------------
Excess of inflows over outflows $302.2 $225.0 $144.0 $ 68.1 $ 20.6
============ =========== =========== ============ ============
The minimum future lease rentals above relate to leases in effect at December
31, 1997. 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.
-13-
The Company has consistently maintained high fleet utilization. The Company's
lease fleet utilization during the last five years has ranged between 96% and
98% with an average of 97%. 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 $1.5 million at December 31, 1997. No foreign currency contracts were
outstanding as of December 31, 1996.
Year 2000
The Company has made and will make certain investments in its software systems
and applications to ensure that the Company is year 2000 ready. A significant
proportion of these costs are not likely to be incremental costs to the Company,
but rather will represent the redeployment of existing information technology
resources. The financial impact to the Company has not been and is not
anticipated to be material to its financial position or results of operations.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130), and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 130
establishes standards for reporting and display of comprehensive income and its
components. SFAS 131 establishes standards for reporting information about
operating segments, and related disclosures about products and services,
geographic areas and major customers. These statements are effective for fiscal
years beginning after December 15, 1997. These standards expand or modify
disclosures and, accordingly, will have no impact on the Company's reported
financial position, results of operations and cash flows. The Company is
assessing the impact of SFAS 131 on its reported segments.
Other Matters
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 this Form 10-K.
-14-
1996 versus 1995
Results of Operations
Services revenues increased $27.5 million primarily due to the effect of
railcars added to the lease fleet.
Net sales revenues decreased $72.6 million, primarily because of a shift in
proportion of new car deliveries from sale to lease.
Other income increased $9.3 million, primarily due to a gain on the sale of a
storage facility used in the liquefied petroleum gas storage operations and the
receipt of certain fees in connection with the termination of a proposed
acquisition.
Interest expense decreased $9.0 million primarily due to lower average balances
of debt outstanding and a lower average interest rate on debt outstanding.
Financial Condition
Operating activities provided $217.6 million of cash in 1996. These funds, along
with the proceeds from the sale-leaseback transaction, the issuance of borrowed
debt, and the collection of funds advanced to parent were used to provide
financing for railcar additions, service borrowed debt obligations and pay
dividends to the Company's stockholder.
In 1996, the Company spent $288.0 million for the construction and purchase of
railcars and other fixed assets. The Company received $27.4 million in proceeds
from disposals of railcars and other fixed assets, excluding the $142.4 million
in proceeds from the 1996 sale-leaseback transaction.
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 1996, the Company entered into a sale-leaseback transaction for $142.4
million and also issued $14.2 million in long-term equipment trust certificates
to finance additions to the railcar lease fleet. Other financing activities of
the Company included $76.8 million for principal repayments on borrowed debt and
$71.0 million for dividends. Net cash provided by financing activities was $8.8
million.
Management expects that the 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.
-15-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page
----
Report of Independent Auditors.......................................... 17
Financial Statements
Consolidated statement of income for each of the three years in
the period ended December 31, 1997.................................. 18
Consolidated balance sheet - December 31, 1997 and 1996............... 19
Consolidated statement of stockholder's equity for each of the three
years in the period ended December 31, 1997......................... 20
Consolidated statement of cash flows for each of the three
years in the period ended December 31, 1997......................... 21
Notes to consolidated financial statements............................ 22
-16-
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, 1997 and 1996, 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, 1997. 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
March 11, 1998
-17-
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
For the Year Ended December 31,
---------------------------------
1997 1996 1995
-------- -------- ---------
Revenues
Services (leasing and other) $560,174 $526,733 $499,226
Net sales 282,180 153,909 226,486
-------- -------- --------
842,354 680,642 725,712
Other income 18,299 28,916 19,607
-------- -------- --------
860,653 709,558 745,319
Costs and expenses
Cost of services 318,294 290,867 277,720
Cost of sales 250,806 127,266 200,297
General and administrative 57,828 57,098 55,630
Interest 75,356 72,138 81,179
-------- -------- --------
702,284 547,369 614,826
-------- -------- --------
Income before income taxes 158,369 162,189 130,493
Provision for income taxes
Current 51,727 56,378 42,601
Deferred income taxes
and investment tax credits 5,392 3,228 3,427
-------- -------- --------
57,119 59,606 46,028
-------- -------- --------
Net income $101,250 $102,583 $ 84,465
======== ======== ========
Ratio of earnings to fixed charges 2.74x 2.84x 2.41x
======== ======== ========
See Notes to Consolidated Financial Statements.
-18-
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
December 31,
-------------------------
1997 1996
---------- ----------
Assets
- ------
Cash and cash equivalents $ 99,709 $ 71,915
Accounts receivable, primarily due within one year,
less allowance for doubtful accounts of $4,019 in
1997 and $3,799 in 1996 72,959 74,667
Inventories 71,395 65,756
Prepaid expenses and deferred charges 13,675 13,665
Advances to parent company,
principally at LIBOR plus 1% 177,705 111,169
Railcar lease fleet, net 1,578,433 1,459,800
Fixed assets, net 163,309 147,887
Investment in direct financing lease 35,341 37,347
Other assets 17,138 24,614
---------- ----------
Total assets $2,229,664 $2,006,820
========== ==========
Liabilities, Deferred Items and Stockholder's Equity
- ----------------------------------------------------
Accounts payable $ 18,636 $ 30,036
Accrued liabilities 196,119 180,865
Borrowed debt 925,038 738,632
---------- ----------
1,139,793 949,533
Deferred items
Deferred income taxes and investment tax credits 494,871 493,537
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 481,965 450,715
---------- ----------
Total stockholder's equity 595,000 563,750
---------- ----------
Total liabilities, deferred items and stockholder's equity $2,229,664 $2,006,820
========== ==========
See Notes to Consolidated Financial Statements.
-19-
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
Years Ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
Common Additional Retained
Stock Capital Earnings Total
-------- ---------- -------- --------
Balance at December 31, 1994 $106,689 $4,652 $393,667 $505,008
Net income - - 84,465 84,465
Cash dividends - - (59,000) (59,000)
-------- ---------- -------- --------
Balance at December 31, 1995 106,689 4,652 419,132 530,473
Capital contribution - 1,694 - 1,694
Net income - - 102,583 102,583
Cash dividends - - (71,000) (71,000)
-------- ---------- -------- --------
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
======== ========== ======== ========
See Notes to Consolidated Financial Statements.
-20-
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
For the Year Ended December 31,
-----------------------------------------------
1997 1996 1995
--------- --------- ---------
Cash flows from operating activities:
Net income $ 101,250 $ 102,583 $ 84,465
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 113,663 106,707 105,206
Gain on disposition of railcars and other fixed
assets (4,951) (14,247) (1,795)
Deferred taxes 5,392 3,228 3,427
Other non-cash income and expenses 1,863 1,092 1,518
Changes in operating assets and liabilities 134 18,206 18,508
--------- --------- ---------
Net cash provided by operating activities 217,351 217,569 211,329
Cash flows from investing activities:
Construction and purchase of railcars and
other fixed assets (261,306) (287,960) (214,470)
(Increase) decrease in advance to parent (57,105) 61,245 18,143
Decrease in other assets and investments 12,849 3,308 14,567
Proceeds from disposals of railcars
and other fixed assets 9,767 27,426 8,964
Purchases of businesses, net of cash acquired (10,642) - (13,839)
Repayments from affiliate - 12,828 713
--------- --------- ---------
Net cash used in investing activities (306,437) (183,153) (185,922)
Cash flows from financing activities:
Proceeds from issuance of borrowed debt 400,000 14,231 30,236
Proceeds from sale-leaseback transactions - 142,382 130,517
Principal payments of borrowed debt (210,143) (76,782) (114,614)
Cash dividends (70,000) (71,000) (59,000)
--------- --------- ---------
Net cash provided by (used in) financing activities 119,857 8,831 (12,861)
Effect of exchange rates on cash and cash equivalents (2,977) (113) 932
--------- --------- ---------
Net increase in cash and cash equivalents 27,794 43,134 13,478
Cash and cash equivalents at beginning of year 71,915 28,781 15,303
--------- --------- ---------
Cash and cash equivalents at end of year $ 99,709 $ 71,915 $ 28,781
========= ========= =========
See Notes to Consolidated Financial Statements
-21-
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 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.
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.
-22-
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
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, 1997, 1996 and 1995, MIC
absorbed a gain of $504, a loss of $46, and a gain of $934, 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 8.
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.
-23-
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 5% 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 1997 for newly-
manufactured cars was approximately seven years. The average term of leases
entered into during 1997 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 rentals to be received on railcar leases at December 31, 1997,
are as follows:
Direct
Financing Operating
Leases Leases Total
--------- ---------- ----------
1998 $ 3,766 $ 409,615 $ 413,381
1999 3,766 327,425 331,191
2000 3,972 245,719 249,691
2001 2,160 175,031 177,191
2002 - 118,856 118,856
2003 and thereafter - 286,757 286,757
------- ---------- ----------
Totals $13,664 $1,563,403 $1,577,067
======= ========== ==========
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,
-------------------
1997 1996
------- -------
Minimum future lease rentals $13,664 $18,202
Estimated residual values 8,321 8,690
------- -------
Gross investment 21,985 26,892
Less unearned income (3,432) (5,573)
------- -------
Net investment $18,553 $21,319
======= =======
Classified as
Railcar lease fleet (cost) $27,736 $28,966
Less accumulated depreciation (9,183) (7,647)
------- -------
$18,553 $21,319
======= =======
-24-
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Railcar Lease Fleet and Fixed Assets
December 31,
---------------------------------
1997 1996
----------- -----------
Railcar lease fleet
Gross cost $ 2,710,175 $ 2,523,608
Less accumulated depreciation (1,131,742) (1,063,808)
----------- -----------
$ 1,578,433 $ 1,459,800
=========== ===========
Fixed assets, at cost
Land $ 7,426 $ 7,083
Buildings and improvements 102,544 97,420
Machinery and equipment 250,482 227,299
----------- -----------
360,452 331,802
Less accumulated depreciation (197,143) (183,915)
----------- -----------
$ 163,309 $ 147,887
=========== ===========
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, 1997:
1998 $ 4,233
1999 4,233
2000 5,860
2001 5,860
2002 5,860
2003 and thereafter 17,581
-------
Total $43,627
=======
-25-
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,
--------------------------------------
1997 1996
---------------- ----------------
Minimum future lease rentals $ 43,627 $ 49,985
Estimated residual value 16,602 17,338
---------------- ----------------
Gross investment 60,229 67,323
Less unearned income (24,888) (29,976)
---------------- ----------------
Net investment $ 35,341 $ 37,347
================ ================
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,
--------------------------------------
1997 1996
---------------- ----------------
Capitalized lease cost $16,264 $16,379
Less accumulated depreciation (8,520) (8,067)
---------------- ----------------
$ 7,744 $ 8,312
================ ================
In 1996, 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 $142,382 in railcars. The Company has an option to purchase
all or a portion of the railcars at a fixed purchase price on (i) July 2, 2006,
(ii) July 2, 2012 (the base term lease expiration date) and (iii) July 2, 2018
(the end of the optional lease renewal term).
In 1995, 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 $130,517 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,
2006, (ii) January 2, 2012 (the base term lease expiration date) and (iii)
January 2, 2018 (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.
-26-
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 1997, future minimum rental commitments for all noncancelable
leases are as follows:
Operating Leases
-----------------------------------------------
Capitalized Sale- Other Total
Leases Leaseback Operating Operating
------------- ------------- ------------- -------------
1998 $ 84 $ 42,662 $2,167 $ 44,829
1999 84 41,704 1,968 43,672
2000 84 42,731 1,813 44,544
2001 84 46,489 1,686 48,175
2002 - 44,729 177 44,906
2003 and thereafter - 483,751 70 483,821
------------- ------------- ------------- -------------
336 $702,066 $7,881 $709,947
============= ============= =============
Less amount representing interest (104)
-------------
Present value of minimum lease payments 232
Less current portion (44)
-------------
Long-term obligation at December 31, 1997 $ 188
=============
Minimum future sublease revenue to be received under existing capitalized and
sale-leaseback leases as of December 31, 1997 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
---------------- ----------------
1998 $2,519 $ 58,573
1999 1,983 51,812
2000 1,577 42,234
2001 1,046 31,016
2002 - 22,188
2003 and after - 77,591
---------------- ----------------
$7,125 $283,414
================ ================
Sublease rentals recorded as revenue for the years ended December 31, 1997, 1996
and 1995 were $65,339, $60,194 and $38,730 respectively.
Rentals charged to costs and expenses were $48,101, $44,581, and $30,065 in
1997, 1996, and 1995, respectively.
-27-
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Accrued Liabilities
December 31,
-----------------------------
1997 1996
-------- --------
Rent (relates primarily to the railcar lease fleet) $ 51,700 $ 47,929
Amounts held on customers' accounts 28,768 24,216
Interest 18,079 13,817
Deferred income 16,572 15,988
Retirement benefits 16,292 16,268
Minority interest in partnership 13,503 12,616
Insurance 11,840 11,087
Other 39,365 38,944
-------- --------
$196,119 $180,865
======== ========
8. Borrowed Debt
December 31,
-----------------------------
1997 1996
-------- --------
Equipment obligations, payable periodically through 2009 at
6.50%-15.55% (average rate 8.73% as of December 31, 1997
and 8.81% as of December 31, 1996) $501,989 $570,202
Unsecured notes, due from 2004-2009 at 6.63%-7.45% (average
rate 7.14% as of December 31, 1997) 400,000 -
Senior notes, 9.75%, due in 1997 - 143,000
Other long-term borrowings, payable periodically through
December 31, 2005 (average rate of 12.20% as of
December 31, 1997 and 1996) 23,049 25,430
-------- --------
$925,038 $738,632
======== ========
Equipment obligations are secured by railcars with an original cost of
$1,246,207 and $1,296,329 at December 31, 1997 and 1996, respectively. The above
equipment obligations include $232 and $1,589 of capitalized leases at December
31, 1997 and 1996, respectively.
The Company issued the following notes in 1997, none of which are redeemable or
subject to a sinking fund:
(1) In December the Company issued $50,000 in unsecured notes due in January,
2008. The notes bear interest at 6.68% per annum, payable semi-annually,
commencing in March, 1998.
-28-
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(2) In October the Company issued $30,000 and $20,000 in unsecured notes due in
October, 2004 and 2007, respectively. The notes bear interest at 6.63% and
6.75%, respectively per annum, payable semi-annually commencing in March, 1998.
(3) In June the Company issued $150,000 in unsecured notes due in June, 2009.
The notes bear interest at 7.45% per annum, payable semi-annually commencing in
December, 1997.
(4) In January the Company issued $150,000 in unsecured notes due in February,
2007. The notes bear interest at 7.125% per annum, payable semi-annually
commencing in August, 1997.
The Company's Canadian subsidiaries have approximately $12,932 of credit lines
available on a no-charge basis. No amounts were outstanding as of December 31,
1997 and 1996.
Maturities of debt obligations for the years 1998 - 2002 are $304,418, as
follows: $66,382 in 1998, $62,498 in 1999, $61,234 in 2000, $60,882 in 2001 and
$53,422 in 2002.
The estimated fair value of borrowed debt is as follows:
December 31,
-----------------------------
1997 1996
-------- --------
Equipment obligations $536,235 $615,586
Unsecured notes 417,177 -
Senior notes - 145,844
Other long-term borrowings 27,784 32,357
-------- --------
$981,196 $793,787
======== ========
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.
-29-
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
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.
The following summarizes the provision for income taxes:
1997 1996 1995
------- ------- -------
State
Current $ 1,221 $ 715 $ 455
Deferred 860 493 598
Federal
Current 30,417 35,103 24,288
Deferred and investment tax credit 9,212 4,513 5,706
Foreign
Current 20,089 20,560 17,858
Deferred and investment tax credit (4,680) (1,778) (2,877)
------- ------- -------
Total $57,119 $59,606 $46,028
======= ======= =======
In 1997, 1996, and 1995 the Company paid foreign withholding taxes of $1,481,
$844, and $1,628, respectively.
Income tax expense is based upon domestic and foreign income before taxes as
follows:
1997 1996 1995
-------- -------- --------
Domestic $125,309 $120,348 $ 96,844
Foreign 33,060 41,841 33,649
-------- -------- --------
Total $158,369 $162,189 $130,493
======== ======== ========
-30-
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
36.1% in 1997, 36.8% in 1996, and 35.3% in 1995 follow:
1997 1996 1995
------- ------- -------
Federal income taxes at 35% statutory rate $55,429 $56,766 $45,673
Increase (decrease) resulting from:
Amortization of investment tax credits (2,275) (2,378) (2,546)
State income taxes, net of federal income
tax benefit 1,654 958 894
Excess tax provided on foreign income 3,624 3,303 1,292
Other, net (1,313) 957 715
------- ------- -------
Total income taxes $57,119 $59,606 $46,028
======= ======= =======
The excess tax on foreign income represents differences due to higher foreign
tax rates and foreign tax credits not benefited.
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, 1997 and
1996 net deferred income tax liabilities of $494,871 and $493,537 shown in the
accompanying consolidated balance sheet are composed of $515,207 and $510,456 in
deferred tax liabilities and deferred investment tax credits of $17,904 and
20,446, partially offset by $38,240 and $37,365 in deferred tax assets,
respectively. These deferred income tax assets and (liabilities) result from the
following temporary differences:
1997 1996
--------- ---------
Excess of tax over book depreciation $(480,024) $(475,952)
Other (35,183) (34,504)
--------- ---------
Gross liabilities (515,207) (510,456)
Expenses per books not yet deductible for tax 16,036 17,466
Other 22,204 19,899
--------- ---------
Gross assets 38,240 37,365
Deferred investment tax credits (17,904) (20,446)
--------- ---------
Net deferred income tax liability $(494,871) $(493,537)
========= =========
-31-
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The above assets exclude certain state deferred income tax assets related to
loss carryforwards (which expire over the next eleven years) in the gross amount
of $7,200 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, 1997.
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.
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 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 1997, 1996 and 1995 was $6,830, $6,269 and $6,542,
respectively.
-32-
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 1997, 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) expense was ($59), $56
and $320 for 1997, 1996 and 1995, respectively. Accrued defined benefit pension
liability recognized in the consolidated balance sheet was $2,344 and $2,941 at
December 31, 1997 and 1996, respectively.
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, 1997 and
1996, the liability for postretirement health care and life insurance benefits
was $3,937 and $3,628 respectively, and was included in accrued liabilities in
the consolidated balance sheet.
Expense related to these benefits was $333, $363 and $326 in 1997, 1996, and
1995, respectively.
13. Other Income
1997 1996 1995
------- ------- -------
Interest income $13,234 $11,076 $13,251
Earned income on direct financing leases 6,311 6,726 6,913
Gain on sale of fixed assets 102 9,784 160
Fees received in connection with the termination
of a proposed acquisition by a subsidiary - 2,646 -
Minority interest in net income (887) (912) (896)
Other (461) (404) 179
------- ------- -------
$18,299 $28,916 $19,607
======= ======= =======
Interest income presented above includes interest earned on advances to MIC as
described in Note 16.
14. 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.
-33-
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Summarized Financial Information of Procor Limited
Summarized consolidated financial information for the Company's wholly-owned
subsidiary, Procor Limited, is as follows:
December 31,
--------------------------
1997 1996
-------- --------
Balance Sheet:
Railcar lease fleet, net $189,814 $213,644
All other assets 215,403 188,175
Borrowed debt 121,009 134,861
All other liabilities 158,143 153,872
Years Ended December 31,
--------------------------------------------
1997 1996 1995
-------- -------- --------
Statement of Income:
Services and net sales $111,856 $122,669 $132,861
Gross profit 39,292 38,574 41,054
Net income 18,377 15,951 14,878
Services and net sales in 1997, 1996 and 1995 includes $18,795, $21,982 and
$24,315, respectively, representing the sale of railcars to the Procor Limited's
parent.
16. 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
-------- ---------- ---------
1997 $ 9,350 $4,415 $2,222
1996 8,365 4,428 2,385
1995 11,625 4,378 2,755
-34-
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 $170,550 and $96,454 at December 31, 1997 and 1996,
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
$7,155 and $14,715 at December 31, 1997 and 1996, 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 services fee which Marmon charges to the Company and other
entities to which it provides services 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 entities, including the Company, to which it
provides services; (2) the percent of the assets of the Company to the assets of
all entities, including the Company; and (3) the percent of the net income of
the Company to the net income of all 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 takes the amount derived from this formula 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 $896 in 1997, $907 in
1996 and $1,071 in 1995 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.
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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,
1997 and 1996 was $54,014 and $50,464, respectively, which represents 80%
ownership in this partnership. The minority partner's interest in the
partnership at December 31, 1997 and 1996 is $13,503 and $12,616, respectively,
which is included in accrued liabilities. The minority interest in income, $887,
$912 and $896 for the years ended December 31, 1997, 1996 and 1995,
respectively, is reflected in other income.
17. 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 $1,500 at December 31, 1997. No foreign currency contracts were outstanding
at December 31, 1996.
18. Quarterly Data (Unaudited)
Three Months Ended
--------------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
1997
Net sales and services revenues $185,916 $211,908 $213,076 $231,454
Cost of sales and services 120,185 144,786 145,247 158,882
-------- -------- -------- --------
Gross profit 65,731 67,122 67,829 72,572
Net income $ 23,630 $ 24,402 $ 24,130 $ 29,088
======== ======== ======== ========
1996
Net sales and services revenues $148,687 $172,404 $173,228 $186,323
Cost of sales and services 85,227 107,405 107,563 117,938
-------- -------- -------- --------
Gross profit 63,460 64,999 65,665 68,385
Net income $ 22,643 $ 29,541 $ 24,543 $ 25,856
======== ======== ======== ========
1995
Net sales and services revenues $165,942 $167,358 $204,361 $188,051
Cost of sales and services 105,989 105,827 140,655 125,546
-------- -------- -------- --------
Gross profit 59,953 61,531 63,706 62,505
Net income $ 19,064 $ 20,117 $ 19,648 $ 25,636
======== ======== ======== ========
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UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. Supplementary Disclosures of Cash Flow Information
For the Year Ended December 31,
----------------------------------------------------
1997 1996 1995
-------- -------- --------
Changes in operating assets and liabilities:
Accounts receivable $ 1,419 $(4,122) $ 259
Inventories (5,923) 2,126 (2,657)
Prepaid expenses and deferred charges (41) (5,652) 1,114
Accounts payable and accrued liabilities 4,679 25,854 19,792
------- ------- -------
$ 134 $18,206 $18,508
======= ======= =======
Cash paid during the year for:
Interest (net of amount capitalized) $72,647 $72,178 $81,792
Income taxes 54,233 53,974 41,723
Unrealized foreign currency translation gains and losses, which are non-cash
items, are excluded from the increase 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.
21. Subsequent Event
In February 1998, the Company prepaid $42,453 principal amount of high coupon
equipment trust certificates at par.
-37-
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
- ----------------- --- --------------------------------------- -------------
Kenneth P. Fischl 48 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 44 Vice President Tank Car Division 1994
Vice President and Senior Vice President 1994
and Controller, Tank Car Division
Robert C. Gluth 73 Director 1981
Executive Vice President 1981
and served as Treasurer between
February, 1986 and January, 1987
and since October, 1989
Jay A. Pritzker 75 Director 1981
Chairman of the Board 1981
Robert A. Pritzker 71 Director 1981
President 1981
Robert W. Webb 58 General Counsel 1986
Secretary 1986
-38-
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. 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 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 a 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 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
Kenneth P. Fischl, Vice President, and Mark J. Garrette, Vice President, were
the only executive officers of the Company who in the year ended December 31,
1997, 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 1997 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 16 to the
consolidated financial statements included in Item 8 of this Form 10-K.
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. Fischl and Mr. Garrette:
Summary Compensation Table
Annual Compensation
--------------------------------------------- All Other
Name and Principal Position Year Salary Bonus Compensation*
- --------------------------- ---- -------- ------- ------------
Kenneth P. Fischl,
Director and Vice President of 1997 $267,000 $72,000 $31,500
the Company and President and 1996 225,500 65,000 25,100
General Manager of the Tank 1995 207,400 55,000 22,900
Car Division
Mark J. Garrette,
Vice President of the Company 1997 164,400 32,000 18,300
and Senior Vice President of the 1996 156,100 29,000 16,000
Tank Car Division 1995 149,000 18,000 6,500
* 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 a subsidiary of Holdings.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Note 16 to the consolidated financial statements included in Item 8 of this
Form 10-K 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, 1997.......................... 18
Consolidated balance sheet - December 31, 1997 and 1996......... 19
Consolidated statement of stockholder's equity for each of
the three years in the period ended December 31, 1997.......... 20
Consolidated statement of cash flows for each of the three
years in the period ended December 31, 1997.................... 21
Notes to consolidated financial statements...................... 22
2. Index to Exhibits................................................... 44
b) Reports on Form 8-K
On October 31, 1997, the Company filed a report Form 8-K disclosing that on
September 30, 1997 the Company had entered into a Selling Agency Agreement
with Salomon Brothers Inc and Morgan Stanley & Co. Incorporated relating to
the issuance and sale by the Company of up to $100,000,000 principal amount
of Medium-Term Notes, Series A.
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,
Director and Treasurer
Dated: March 11, 1998
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 11, 1998
- ------------------------ and Director
Jay A. Pritzker
/s/ Robert A. Pritzker President and Director March 11, 1998
- ------------------------ (principal executive officer)
Robert A. Pritzker
/s/ Robert C. Gluth Executive Vice President, March 11, 1998
- ------------------------ Director and Treasurer
Robert C. Gluth (principal financial officer
and principal accounting
officer)
/s/ Kenneth P. Fischl Director and President, Tank March 11, 1998
- ------------------------ 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 14 to the consolidated financial
statements)............................................................... 45
Exhibit 21 Subsidiaries of the registrant............................................... 46
Exhibit 23 Consent of Ernst & Young LLP, Independent Auditors........................... 47
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.
-44-