##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---



FORM 10-Q



---



(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2004



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 incorporation or organization) |  | (I.R.S. Employer 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



---



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 whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act).    Yes ̈No  x



There is no voting stock held by non-affiliates of the registrant. This report is being
filed by the registrant as a result of undertakings made pursuant to Section 15(d) of the Securities Exchange Act of 1934.



---



---

##### Table of Contents

UNION TANK CAR COMPANY AND SUBSIDIARIES

FORM 10-Q

INDEX



|                              |  |         |  |                                                                                             |  |     
|----------------------------- |  | ------- |  | ------------------------------------------------------------------------------------------- |  | ----
|                              |  |         |  |                                                                                             |  | Page
|Part I.
Financial Information |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Financial Statements                                                                        |  |     
|                              |  |         | 
|                              |  |         |  | Condensed consolidated statement of income - three months ended March 31, 2004 and 2003     |  | 3   
|                              |  |         | 
|                              |  |         |  | Condensed consolidated balance sheet - March 31, 2004 and December 31, 2003                 |  | 4   
|                              |  |         | 
|                              |  |         |  | Condensed consolidated statement of cash flows - three months ended March 31, 2004 and 2003 |  | 5   
|                              |  |         | 
|                              |  |         |  | Notes to condensed consolidated financial statements                                        |  | 6   
|                              |  |         | 
|                              |  | Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations       |  | 13  
|                              |  |         | 
|                              |  | Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                  |  | 16  
|                              |  |         | 
|                              |  | Item 4. |  | Controls and Procedures                                                                     |  | 16  
|                              | 
|Part II.
Other Information    |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Legal Proceedings                                                                           |  | 17  
|                              |  |         | 
|                              |  | Item 6. |  | Exhibits and Reports on Form 8-K                                                            |  | 17  
|                              | 
|Signatures                    |  | 18     



- 2 -



---

##### Table of Contents

PART I. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



UNION TANK CAR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Dollars in Thousands)

(Unaudited)



|                             |  |                             |         |      |   |        
|---------------------------- |  | --------------------------- | ------- | ---- | - | -------
|                             |  | Three Months EndedMarch 31,
|                             |  | 2004                        |         | 2003
|Revenues                     |  |                             |         |      |   |        
|Services (leasing and other) |  | $                           | 183,779 |      | $ | 173,993
|Net sales                    |  |                             | 164,387 |      |   | 132,064
|                             |  |                             |         |      |   |        
|                             |  |                             | 348,166 |      |   | 306,057
|                             |  |                            
|Other income, net            |  |                             | 2,569   |      |   | 2,246  
|                             |  |                             |         |      |   |        
|                             |  |                             | 350,735 |      |   | 308,303
|                             |  |                            
|Costs and expenses           |  |                             |         |      |   |        
|Cost of services             |  |                             | 116,013 |      |   | 109,986
|Cost of sales                |  |                             | 133,009 |      |   | 110,985
|General and administrative   |  |                             | 37,168  |      |   | 36,416 
|Interest                     |  |                             | 16,777  |      |   | 18,000 
|                             |  |                             |         |      |   |        
|                             |  |                             | 302,967 |      |   | 275,387
|                             |  |                             |         |      |   |        
|Income before income taxes   |  |                             | 47,768  |      |   | 32,916 
|                             |  |                            
|Provision for income taxes   |  |                             | 19,311  |      |   | 12,057 
|                             |  |                             |         |      |   |        
|Net income                   |  | $                           | 28,457  |      | $ | 20,859 
|                             |  |                             |         |      |   |        



See notes to condensed
consolidated financial statements.



- 3 -



---

##### Table of Contents

UNION TANK CAR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in Thousands)



|                                                                                    |  |               |           |                   |   |          
|----------------------------------------------------------------------------------- |  | ------------- | --------- | ----------------- | - | ---------
|                                                                                    |  | March 31,2004 |           | December 31, 2003
|                                                                                    |  | (Unaudited)   |           |                  
|Assets                                                                              |  |               |           |                   |   |          
|                                                                                    |  |              
|Cash and cash equivalents                                                           |  | $             | 56,241    |                   | $ | 56,197   
|Short-term investments                                                              |  |               |          |                   |   | 62,606   
|Accounts receivable, primarily due within one year                                  |  |               | 153,654   |                   |   | 133,036  
|Accounts and notes receivable, affiliates                                           |  |               | 43,545    |                   |   | 43,546   
|Inventories, net of LIFO reserves of $38,501 ($35,056 at December 31, 2003)         |  |               | 124,359   |                   |   | 121,899  
|Prepaid expenses and deferred charges                                               |  |               | 8,619     |                   |   | 9,711    
|Advances to parent company, principally at LIBOR plus 1%                            |  |               | 293,162   |                   |   | 310,792  
|Railcar lease fleet, net                                                            |  |               | 1,700,669 |                   |   | 1,676,293
|Intermodal tank container lease fleet, net                                          |  |               | 305,175   |                   |   | 299,897  
|Fixed assets, net                                                                   |  |               | 192,291   |                   |   | 192,818  
|Investment in aircraft direct financing lease                                       |  |               | 2,060     |                   |   | 2,082    
|Other assets                                                                        |  |               | 41,777    |                   |   | 42,089   
|                                                                                    |  |               |           |                   |   |          
|Total assets                                                                        |  | $             | 2,921,552 |                   | $ | 2,950,966
|                                                                                    |  |               |           |                   |   |          
|Liabilities and Stockholders Equity                                                |  |               |           |                   |   |          
|                                                                                    |  |              
|Accounts payable                                                                    |  | $             | 74,470    |                   | $ | 60,336   
|Accrued liabilities                                                                 |  |               | 237,481   |                   |   | 264,812  
|Borrowed debt, including $63,664 due within one year ($78,449 at December 31, 2003) |  |               | 921,358   |                   |   | 945,687  
|                                                                                    |  |               |           |                   |   |          
|                                                                                    |  |               | 1,233,309 |                   |   | 1,270,835
|                                                                                    |  |              
|Deferred income taxes and investment tax credits                                    |  |               | 553,108   |                   |   | 554,819  
|Minority interest                                                                   |  |               | 92,924    |                   |   | 91,558   
|                                                                                    |  |              
|Stockholders equity                                                                |  |               |           |                   |   |          
|Common stock and additional capital                                                 |  |               | 265,061   |                   |   | 265,061  
|Retained earnings                                                                   |  |               | 777,150   |                   |   | 768,693  
|                                                                                    |  |               |           |                   |   |          
|Total stockholders equity                                                          |  |               | 1,042,211 |                   |   | 1,033,754
|                                                                                    |  |               |           |                   |   |          
|Total liabilities and stockholders equity                                          |  | $             | 2,921,552 |                   | $ | 2,950,966
|                                                                                    |  |               |           |                   |   |          



See notes to condensed
consolidated financial statements.



- 4 -



---

##### Table of Contents

UNION TANK CAR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)



|                                                                                  |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Three Months EndedMarch 31, |        
|                                                                                  |  | 2004                        |         |   | 2003 |  
|Cash flows from operating activities:                                             |  |                             |         |   |      |   |         |  
|Net income                                                                        |  | $                           | 28,457  |   |      | $ | 20,859  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                             | 39,797  |   |      |   | 40,985  |  
|Deferred taxes                                                                    |  |                             | (1,438  | ) |      |   | (287    | )
|Gain on disposition of lease fleet and other fixed assets                         |  |                             | (2,452  | ) |      |   | (496    | )
|Loss on disposition of business                                                   |  |                             |        |   |      |   | 1,494   |  
|Other non-cash income and expenses                                                |  |                             | 2,120   |   |      |   | 2,001   |  
|Changes in assets and liabilities:                                                |  |                             |         |   |      |   |         |  
|Accounts receivable                                                               |  |                             | (21,073 | ) |      |   | (9,283  | )
|Inventories                                                                       |  |                             | (2,690  | ) |      |   | 11,001  |  
|Prepaid expenses and deferred charges                                             |  |                             | 1,188   |   |      |   | 31      |  
|Accounts payable and accrued expenses                                             |  |                             | (10,962 | ) |      |   | (22,706 | )
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                             | 32,947  |   |      |   | 43,599  |  
|                                                                                  |  |                            
|Cash flows from investing activities:                                             |  |                             |         |   |      |   |         |  
|Construction and purchase of lease fleet and other fixed assets                   |  |                             | (77,100 | ) |      |   | (48,100 | )
|Decrease in short-term investments                                                |  |                             | 62,606  |   |      |   | 75,187  |  
|Decrease (increase) in advance to parent                                          |  |                             | 19,368  |   |      |   | (19,614 | )
|Increase in other assets                                                          |  |                             | (183    | ) |      |   | (462    | )
|Proceeds from disposals of lease fleet and other fixed assets                     |  |                             | 7,883   |   |      |   | 4,399   |  
|Proceeds from disposition of business                                             |  |                             |        |   |      |   | 625     |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provided by investing activities                                         |  |                             | 12,574  |   |      |   | 12,035  |  
|                                                                                  |  |                            
|Cash flows from financing activities:                                             |  |                             |         |   |      |   |         |  
|Proceeds from issuance of borrowed debt                                           |  |                             |        |   |      |   | 37      |  
|Principal payments of borrowed debt                                               |  |                             | (24,325 | ) |      |   | (9,078  | )
|Cash dividends                                                                    |  |                             | (20,000 | ) |      |   | (14,000 | )
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash used in financing activities                                             |  |                             | (44,325 | ) |      |   | (23,041 | )
|                                                                                  |  |                            
|Effect of exchange rates on cash and cash equivalents                             |  |                             | (1,152  | ) |      |   | 7,787   |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                         |  |                             | 44      |   |      |   | 40,380  |  
|                                                                                  |  |                            
|Cash and cash equivalents at beginning of year                                    |  |                             | 56,197  |   |      |   | 40,222  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                           | 56,241  |   |      | $ | 80,602  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Cash paid during the period for:                                                  |  |                             |         |   |      |   |         |  
|Interest (net of amount capitalized)                                              |  | $                           | 13,978  |   |      | $ | 15,294  |  
|Income taxes                                                                      |  |                             | 21,189  |   |      |   | 1,013   |  



See notes to condensed
consolidated financial statements.



- 5 -



---

##### Table of Contents

UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands)

(Unaudited)



|1. | UNION TANK CAR COMPANY (the Company) is a wholly-owned subsidiary of Marmon Holdings, Inc. (Holdings), all of the stock of which is owned, directly or
indirectly, by trusts for the benefit of certain members of the Pritzker family. As used herein, Pritzker family refers to the lineal descendants of Nicholas J. Pritzker, deceased.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. | The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, which the Company considers necessary for a
fair presentation. These interim financial statements do not include all disclosures normally provided in annual financial statements. Accordingly, they should be read in conjunction with the consolidated financial statements and notes thereto in
the Companys 2003 Annual Report on Form 10-K.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Certain prior year amounts have been reclassified to conform to the current year presentation.



The 2004 interim results presented herein are not necessarily indicative of the results of operations for the full year 2004.



|3. | As more fully described in the Companys 2003 Annual Report on Form 10-K, under an arrangement with Holdings, the Company is included in the consolidated federal income tax
return 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 group.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. | The Company and its subsidiaries have been named as defendants in a number of lawsuits, and certain claims are pending. The Company has accrued what it reasonably expects to pay in
resolution of these matters and, in the opinion of management, their ultimate resolution will not have a material adverse effect on the Companys consolidated financial position or results of operations.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. | Foreign currency translation adjustments and transaction gains and losses are borne by the Companys parent. For the three months ended March 31, 2004 and 2003, the
Companys parent absorbed a gain of $325 and a loss of $3,768, respectively.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. | The Companys short-term investments consist of commercial paper with original maturities between four and six months. No such investments were held at March 31, 2004.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|7. | The Companys foreign subsidiaries periodically enter into foreign currency forward contracts to hedge against currency exchange rate exposures. There were no foreign currency
forward contracts outstanding at March 31, 2004 and December 31, 2003.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 6 -



---

##### Table of Contents

8. Consolidating Financial Information



The following condensed consolidating statements are provided because Procor Limited, a
wholly-owned subsidiary of the Company, has issued three separate series of equipment trust certificates, guaranteed by Union Tank Car Company, as part of certain public debt offerings issued by Union Tank Car Company in the United States.



Condensed consolidating statements of income for the three months ended March
31, 2004 and 2003 are as follows:



|                           |  |                                   |         |               |   |        |                   |  |              |         |  |              |         |   |  |   |        
|-------------------------- |  | --------------------------------- | ------- | ------------- | - | ------ | ----------------- |  | ------------ | ------- |  | ------------ | ------- | - |  | - | -------
|                           |  | Three Months Ended March 31, 2004
|                           |  | Union TankCarCompany              |         | ProcorLimited |   |        | OtherSubsidiaries |  | Eliminations |         |  | Consolidated
|Revenues                   |  |                                   |         |               |   |        |                   |  |              |         |  |              |         |   |  |   |        
|Services                   |  | $                                 | 117,669 |               | $ | 5,594  |                   |  | $            | 78,725  |  | $            | (18,209 | ) |  | $ | 183,779
|Net sales                  |  |                                   | 6,527   |               |   | 189    |                   |  |              | 161,088 |  |              | (3,417  | ) |  |   | 164,387
|                           |  |                                   |         |               |   |        |                   |  |              |         |  |              |         |   |  |   |        
|                           |  |                                   | 124,196 |               |   | 5,783  |                   |  |              | 239,813 |  |              | (21,626 | ) |  |   | 348,166
|Other income, net          |  |                                   | 19,542  |               |   | 668    |                   |  |              | 815     |  |              | (18,456 | ) |  |   | 2,569  
|                           |  |                                   |         |               |   |        |                   |  |              |         |  |              |         |   |  |   |        
|                           |  |                                   | 143,738 |               |   | 6,451  |                   |  |              | 240,628 |  |              | (40,082 | ) |  |   | 350,735
|                           |  |                                   |         |               |  
|Costs and expenses         |  |                                   |         |               |   |        |                   |  |              |         |  |              |         |   |  |   |        
|Cost of services           |  |                                   | 78,035  |               |   | 5,097  |                   |  |              | 51,090  |  |              | (18,209 | ) |  |   | 116,013
|Cost of sales              |  |                                   | 6,400   |               |   | 107    |                   |  |              | 129,919 |  |              | (3,417  | ) |  |   | 133,009
|General and administrative |  |                                   | 9,553   |               |   | 2,943  |                   |  |              | 24,672  |  |              |        |   |  |   | 37,168 
|Interest                   |  |                                   | 12,747  |               |   | 596    |                   |  |              | 3,434   |  |              |        |   |  |   | 16,777 
|                           |  |                                   |         |               |   |        |                   |  |              |         |  |              |         |   |  |   |        
|                           |  |                                   | 106,735 |               |   | 8,743  |                   |  |              | 209,115 |  |              | (21,626 | ) |  |   | 302,967
|                           |  |                                   |         |               |   |        |                   |  |              |         |  |              |         |   |  |   |        
|Income before income taxes |  |                                   | 37,003  |               |   | (2,292 | )                 |  |              | 31,513  |  |              | (18,456 | ) |  |   | 47,768 
|Provision for income taxes |  |                                   | 8,546   |               |   | (592   | )                 |  |              | 11,357  |  |              |        |   |  |   | 19,311 
|                           |  |                                   |         |               |   |        |                   |  |              |         |  |              |         |   |  |   |        
|Net income                 |  | $                                 | 28,457  |               | $ | (1,700 | )                 |  | $            | 20,156  |  | $            | (18,456 | ) |  | $ | 28,457 
|                           |  |                                   |         |               |   |        |                   |  |              |         |  |              |         |   |  |   |        



|                           |  |                                   |         |               |   |        |                   |  |   |              |   |  |              |         |   |  |   |        
|-------------------------- |  | --------------------------------- | ------- | ------------- | - | ------ | ----------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | -------
|                           |  | Three Months Ended March 31, 2003
|                           |  | Union TankCarCompany              |         | ProcorLimited |   |        | OtherSubsidiaries |  |   | Eliminations |   |  | Consolidated
|Revenues                   |  |                                   |         |               |   |        |                   |  |   |              |   |  |              |         |   |  |   |        
|Services                   |  | $                                 | 115,746 |               | $ | 6,053  |                   |  | $ | 68,720       |   |  | $            | (16,526 | ) |  | $ | 173,993
|Net sales                  |  |                                   | 6,282   |               |   | 271    |                   |  |   | 127,348      |   |  |              | (1,837  | ) |  |   | 132,064
|                           |  |                                   |         |               |   |        |                   |  |   |              |   |  |              |         |   |  |   |        
|                           |  |                                   | 122,028 |               |   | 6,324  |                   |  |   | 196,068      |   |  |              | (18,363 | ) |  |   | 306,057
|Other income, net          |  |                                   | 14,319  |               |   | (1,243 | )                 |  |   | (2,166       | ) |  |              | (8,664  | ) |  |   | 2,246  
|                           |  |                                   |         |               |   |        |                   |  |   |              |   |  |              |         |   |  |   |        
|                           |  |                                   | 136,347 |               |   | 5,081  |                   |  |   | 193,902      |   |  |              | (27,027 | ) |  |   | 308,303
|                           |  |                                   |         |               |  
|Costs and expenses         |  |                                   |         |               |   |        |                   |  |   |              |   |  |              |         |   |  |   |        
|Cost of services           |  |                                   | 78,495  |               |   | 4,964  |                   |  |   | 43,053       |   |  |              | (16,526 | ) |  |   | 109,986
|Cost of sales              |  |                                   | 7,486   |               |   | 268    |                   |  |   | 105,068      |   |  |              | (1,837  | ) |  |   | 110,985
|General and administrative |  |                                   | 8,822   |               |   | 2,173  |                   |  |   | 25,421       |   |  |              |        |   |  |   | 36,416 
|Interest                   |  |                                   | 13,763  |               |   | 791    |                   |  |   | 3,446        |   |  |              |        |   |  |   | 18,000 
|                           |  |                                   |         |               |   |        |                   |  |   |              |   |  |              |         |   |  |   |        
|                           |  |                                   | 108,566 |               |   | 8,196  |                   |  |   | 176,988      |   |  |              | (18,363 | ) |  |   | 275,387
|                           |  |                                   |         |               |   |        |                   |  |   |              |   |  |              |         |   |  |   |        
|Income before income taxes |  |                                   | 27,781  |               |   | (3,115 | )                 |  |   | 16,914       |   |  |              | (8,664  | ) |  |   | 32,916 
|Provision for income taxes |  |                                   | 6,922   |               |   | (915   | )                 |  |   | 6,050        |   |  |              |        |   |  |   | 12,057 
|                           |  |                                   |         |               |   |        |                   |  |   |              |   |  |              |         |   |  |   |        
|Net income                 |  | $                                 | 20,859  |               | $ | (2,200 | )                 |  | $ | 10,864       |   |  | $            | (8,664  | ) |  | $ | 20,859 
|                           |  |                                   |         |               |   |        |                   |  |   |              |   |  |              |         |   |  |   |        



- 7 -



---

##### Table of Contents

8. Consolidating Financial Information (Continued)



Condensed consolidating balance sheets as of March 31, 2004 and December 31, 2003 are as
follows:



|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          
|--------------------------------------------------- |  | --------------------- | --------- | ------------- | - | ------- | ----------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | ---------
|                                                    |  | March 31, 2004       
|                                                    |  | Union Tank CarCompany |           | ProcorLimited |   |         | OtherSubsidiaries |  |   | Eliminations |   |  | Consolidated
|Assets                                              |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          
|                                                    |  |                       |           |               |  
|Cash and cash equivalents                           |  | $                     | 89        |               | $ | 48,174  |                   |  | $ | 7,978        |   |  | $            |         |   |  | $ | 56,241   
|Accounts receivable                                 |  |                       | 39,235    |               |   | 3,098   |                   |  |   | 172,995      |   |  |              | (61,674  | ) |  |   | 153,654  
|Accounts and notes receivable, affiliates           |  |                       |          |               |   |        |                   |  |   | 43,545       |   |  |              |         |   |  |   | 43,545   
|Inventories, net                                    |  |                       | 31,441    |               |   | 2,581   |                   |  |   | 90,337       |   |  |              |         |   |  |   | 124,359  
|Prepaid expenses and deferred charges               |  |                       | 3,186     |               |   | 1,280   |                   |  |   | 4,153        |   |  |              |         |   |  |   | 8,619    
|Advances to parent                                  |  |                       | 63,742    |               |   | (51,143 | )                 |  |   | 280,090      |   |  |              | 473      |   |  |   | 293,162  
|Railcar lease fleet, net                            |  |                       | 1,445,021 |               |   | 29,656  |                   |  |   | 225,992      |   |  |              |         |   |  |   | 1,700,669
|Intermodal tank container lease fleet, net          |  |                       |          |               |   |        |                   |  |   | 305,175      |   |  |              |         |   |  |   | 305,175  
|Fixed assets, net                                   |  |                       | 83,083    |               |   | 15,729  |                   |  |   | 93,479       |   |  |              |         |   |  |   | 192,291  
|Investment in direct financing lease                |  |                       |          |               |   | 2,060   |                   |  |   |             |   |  |              |         |   |  |   | 2,060    
|Investment in subsidiaries                          |  |                       | 743,135   |               |   | 75,875  |                   |  |   | 77,510       |   |  |              | (896,520 | ) |  |   |         
|Other assets                                        |  |                       | 72        |               |   | (1      | )                 |  |   | 41,705       |   |  |              | 1        |   |  |   | 41,777   
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          
|Total assets                                        |  | $                     | 2,409,004 |               | $ | 127,309 |                   |  | $ | 1,342,959    |   |  | $            | (957,720 | ) |  | $ | 2,921,552
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          
|Liabilities and Stockholders Equity                |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          
|                                                    |  |                       |           |               |  
|Accounts payable                                    |  | $                     | 61,168    |               | $ | 18,505  |                   |  | $ | 56,074       |   |  | $            | (61,277  | ) |  | $ | 74,470   
|Accrued liabilities                                 |  |                       | 151,069   |               |   | 5,293   |                   |  |   | 78,605       |   |  |              | 2,514    |   |  |   | 237,481  
|Borrowed debt                                       |  |                       | 751,569   |               |   | 19,538  |                   |  |   | 150,251      |   |  |              |         |   |  |   | 921,358  
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          
|                                                    |  |                       | 963,806   |               |   | 43,336  |                   |  |   | 284,930      |   |  |              | (58,763  | ) |  |   | 1,233,309
|                                                    |  |                       |           |               |  
|Deferred income taxes and investment tax credits    |  |                       | 421,904   |               |   | 18,991  |                   |  |   | 112,213      |   |  |              |         |   |  |   | 553,108  
|Minority interest                                   |  |                       |          |               |   |        |                   |  |   | 92,923       |   |  |              | 1        |   |  |   | 92,924   
|                                                    |  |                       |           |               |  
|Stockholders equity                                |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          
|Common stock and additional capital                 |  |                       | 358,475   |               |   | 13,345  |                   |  |   | 359,256      |   |  |              | (466,015 | ) |  |   | 265,061  
|Retained earnings                                   |  |                       | 655,728   |               |   | 51,925  |                   |  |   | 502,004      |   |  |              | (432,507 | ) |  |   | 777,150  
|Equity adjustment from foreign currency translation |  |                       | 9,091     |               |   | (288    | )                 |  |   | (8,367       | ) |  |              | (436     | ) |  |   |         
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          
|Total stockholders equity                          |  |                       | 1,023,294 |               |   | 64,982  |                   |  |   | 852,893      |   |  |              | (898,958 | ) |  |   | 1,042,211
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          
|Total liabilities and stockholders equity          |  | $                     | 2,409,004 |               | $ | 127,309 |                   |  | $ | 1,342,959    |   |  | $            | (957,720 | ) |  | $ | 2,921,552
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |          |   |  |   |          



- 8 -



---

##### Table of Contents

|8. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          
|--------------------------------------------------- |  | --------------------- | --------- | ------------- | - | ------- | ----------------- |  | - | ------------ | - |  | ------------ | ---------- | - |  | - | ---------
|                                                    |  | December 31, 2003    
|                                                    |  | Union Tank CarCompany |           | ProcorLimited |   |         | OtherSubsidiaries |  |   | Eliminations |   |  | Consolidated
|Assets                                              |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          
|                                                    |  |                       |           |               |  
|Cash and cash equivalents                           |  | $                     | 82        |               | $ | 48,759  |                   |  | $ | 7,356        |   |  | $            |           |   |  | $ | 56,197   
|Short-term investments                              |  |                       |          |               |   | 62,606  |                   |  |   |             |   |  |              |           |   |  |   | 62,606   
|Accounts receivable                                 |  |                       | 36,036    |               |   | 2,957   |                   |  |   | 153,195      |   |  |              | (59,152    | ) |  |   | 133,036  
|Accounts and notes receivable, affiliates           |  |                       |          |               |   |        |                   |  |   | 43,546       |   |  |              |           |   |  |   | 43,546   
|Inventories, net                                    |  |                       | 27,820    |               |   | 3,739   |                   |  |   | 90,340       |   |  |              |           |   |  |   | 121,899  
|Prepaid expenses and deferred charges               |  |                       | 3,873     |               |   | 2,503   |                   |  |   | 3,335        |   |  |              |           |   |  |   | 9,711    
|Advances to parent                                  |  |                       | 104,831   |               |   | (90,828 | )                 |  |   | 296,316      |   |  |              | 473        |   |  |   | 310,792  
|Railcar lease fleet, net                            |  |                       | 1,411,232 |               |   | 30,200  |                   |  |   | 234,861      |   |  |              |           |   |  |   | 1,676,293
|Intermodal tank container lease fleet, net          |  |                       |          |               |   |        |                   |  |   | 299,897      |   |  |              |           |   |  |   | 299,897  
|Fixed assets, net                                   |  |                       | 83,313    |               |   | 16,224  |                   |  |   | 93,281       |   |  |              |           |   |  |   | 192,818  
|Investment in direct financing lease                |  |                       |          |               |   | 2,082   |                   |  |   |             |   |  |              |           |   |  |   | 2,082    
|Investment in subsidiaries                          |  |                       | 780,205   |               |   | 75,452  |                   |  |   | 126,655      |   |  |              | (982,312   | ) |  |   |         
|Other assets                                        |  |                       | 92        |               |   | (1      | )                 |  |   | 41,997       |   |  |              | 1          |   |  |   | 42,089   
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          
|Total assets                                        |  | $                     | 2,447,484 |               | $ | 153,693 |                   |  | $ | 1,390,779    |   |  | $            | (1,040,990 | ) |  | $ | 2,950,966
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          
|Liabilities and Stockholders Equity                |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          
|                                                    |  |                       |           |               |  
|Accounts payable                                    |  | $                     | 51,242    |               | $ | 17,525  |                   |  | $ | 50,431       |   |  | $            | (58,862    | ) |  | $ | 60,336   
|Accrued liabilities                                 |  |                       | 189,729   |               |   | 3,654   |                   |  |   | 68,809       |   |  |              | 2,620      |   |  |   | 264,812  
|Borrowed debt                                       |  |                       | 775,854   |               |   | 19,538  |                   |  |   | 150,295      |   |  |              |           |   |  |   | 945,687  
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          
|                                                    |  |                       | 1,016,825 |               |   | 40,717  |                   |  |   | 269,535      |   |  |              | (56,242    | ) |  |   | 1,270,835
|                                                    |  |                       |           |               |  
|Deferred income taxes and investment tax credits    |  |                       | 417,885   |               |   | 21,114  |                   |  |   | 115,820      |   |  |              |           |   |  |   | 554,819  
|Minority interest                                   |  |                       |          |               |   |        |                   |  |   | 91,557       |   |  |              | 1          |   |  |   | 91,558   
|                                                    |  |                       |           |               |  
|Stockholders equity                                |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          
|Common stock and additional capital                 |  |                       | 358,475   |               |   | 13,345  |                   |  |   | 359,606      |   |  |              | (466,365   | ) |  |   | 265,061  
|Retained earnings                                   |  |                       | 647,271   |               |   | 78,318  |                   |  |   | 561,596      |   |  |              | (518,492   | ) |  |   | 768,693  
|Equity adjustment from foreign currency translation |  |                       | 7,028     |               |   | 199     |                   |  |   | (7,335       | ) |  |              | 108        |   |  |   |         
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          
|Total stockholders equity                          |  |                       | 1,012,774 |               |   | 91,862  |                   |  |   | 913,867      |   |  |              | (984,749   | ) |  |   | 1,033,754
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          
|Total liabilities and stockholders equity          |  | $                     | 2,447,484 |               | $ | 153,693 |                   |  | $ | 1,390,779    |   |  | $            | (1,040,990 | ) |  | $ | 2,950,966
|                                                    |  |                       |           |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |          



- 9 -



---

##### Table of Contents

|8. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



Condensed consolidating statements of cash flows for the three months ended March 31, 2004 and 2003 are as follows:



|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|--------------------------------------------------------------- |  | --------------------------------- | ------- | - | ------------- | - | ------- | ----------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                                |  | Three Months Ended March 31, 2004 |        
|                                                                |  | Union Tank CarCompany             |         |   | ProcorLimited |   |         | OtherSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net cash provided by operating activities:                      |  | $                                 | 1,112   |   |               | $ | 3,067   |                   |  | $ | 28,768       |   |  | $            |        |   |  | $ | 32,947  |  
|                                                                |  |                                   |         |   |              
|Cash flows from investing activities:                           |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Construction and purchase of lease fleet and other fixed assets |  |                                   | (58,753 | ) |               |   | (318    | )                 |  |   | (18,029      | ) |  |              |        |   |  |   | (77,100 | )
|Decrease in short-term investments                              |  |                                   |        |   |               |   | 62,606  |                   |  |   |             |   |  |              |        |   |  |   | 62,606  |  
|Decrease (increase) in advance to parent                        |  |                                   | 98,002  |   |               |   | (39,685 | )                 |  |   | 41,341       |   |  |              | (80,290 | ) |  |   | 19,368  |  
|Increase in other assets                                        |  |                                   |        |   |               |   |        |                   |  |   | (183         | ) |  |              |        |   |  |   | (183    | )
|Proceeds from disposals of lease fleet and other fixed assets   |  |                                   | 3,931   |   |               |   | 16      |                   |  |   | 3,936        |   |  |              |        |   |  |   | 7,883   |  
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash provided by (used in) investing activities             |  |                                   | 43,180  |   |               |   | 22,619  |                   |  |   | 27,065       |   |  |              | (80,290 | ) |  |   | 12,574  |  
|                                                                |  |                                   |         |   |              
|Cash flows from financing activities:                           |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Principal payments of borrowed debt                             |  |                                   | (24,285 | ) |               |   |        |                   |  |   | (40          | ) |  |              |        |   |  |   | (24,325 | )
|Cash dividends                                                  |  |                                   | (20,000 | ) |               |   | (25,115 | )                 |  |   | (55,175      | ) |  |              | 80,290  |   |  |   | (20,000 | )
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash (used in) provided by financing activities             |  |                                   | (44,285 | ) |               |   | (25,115 | )                 |  |   | (55,215      | ) |  |              | 80,290  |   |  |   | (44,325 | )
|Effect of exchange rates on cash and cash equivalents           |  |                                   |        |   |               |   | (1,156  | )                 |  |   | 4            |   |  |              |        |   |  |   | (1,152  | )
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents            |  |                                   | 7       |   |               |   | (585    | )                 |  |   | 622          |   |  |              |        |   |  |   | 44      |  
|Cash and cash equivalents at beginning of year                  |  |                                   | 82      |   |               |   | 48,759  |                   |  |   | 7,356        |   |  |              |        |   |  |   | 56,197  |  
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Cash and cash equivalents at end of period                      |  | $                                 | 89      |   |               | $ | 48,174  |                   |  | $ | 7,978        |   |  | $            |        |   |  | $ | 56,241  |  
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  



- 10 -



---

##### Table of Contents

|8. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|--------------------------------------------------------------- |  | --------------------------------- | ------- | - | ------------- | - | ------- | ----------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                                |  | Three Months Ended March 31, 2003 |        
|                                                                |  | Union Tank CarCompany             |         |   | ProcorLimited |   |         | OtherSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net cash provided by (used in) operating activities:            |  | $                                 | 3,984   |   |               | $ | (5,926  | )                 |  | $ | 45,541       |   |  | $            |        |   |  | $ | 43,599  |  
|                                                                |  |                                   |         |   |              
|Cash flows from investing activities:                           |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Construction and purchase of lease fleet and other fixed assets |  |                                   | (36,907 | ) |               |   | (97     | )                 |  |   | (11,096      | ) |  |              |        |   |  |   | (48,100 | )
|Decrease in short-term investments                              |  |                                   |        |   |               |   | 75,187  |                   |  |   |             |   |  |              |        |   |  |   | 75,187  |  
|Decrease (increase) in advance to parent                        |  |                                   | 52,729  |   |               |   | (35,990 | )                 |  |   | (2,728       | ) |  |              | (33,625 | ) |  |   | (19,614 | )
|Increase in other assets                                        |  |                                   |        |   |               |   |        |                   |  |   | (462         | ) |  |              |        |   |  |   | (462    | )
|Proceeds from disposals of lease fleet and other fixed assets   |  |                                   | 3,171   |   |               |   | 101     |                   |  |   | 1,127        |   |  |              |        |   |  |   | 4,399   |  
|Proceeds from disposition of business                           |  |                                   |        |   |               |   |        |                   |  |   | 625          |   |  |              |        |   |  |   | 625     |  
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash provided by (used in) investing activities             |  |                                   | 18,993  |   |               |   | 39,201  |                   |  |   | (12,534      | ) |  |              | (33,625 | ) |  |   | 12,035  |  
|                                                                |  |                                   |         |   |              
|Cash flows from financing activities:                           |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Proceeds from issuance of borrowed debt                         |  |                                   |        |   |               |   |        |                   |  |   | 37           |   |  |              |        |   |  |   | 37      |  
|Principal payments of borrowed debt                             |  |                                   | (9,057  | ) |               |   |        |                   |  |   | (21          | ) |  |              |        |   |  |   | (9,078  | )
|Cash dividends                                                  |  |                                   | (14,000 | ) |               |   |        |                   |  |   | (33,625      | ) |  |              | 33,625  |   |  |   | (14,000 | )
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash (used in) provided by financing activities             |  |                                   | (23,057 | ) |               |   |        |                   |  |   | (33,609      | ) |  |              | 33,625  |   |  |   | (23,041 | )
|Effect of exchange rates on cash and cash equivalents           |  |                                   |        |   |               |   | 7,735   |                   |  |   | 52           |   |  |              |        |   |  |   | 7,787   |  
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Net (decrease) increase in cash and cash equivalents            |  |                                   | (80     | ) |               |   | 41,010  |                   |  |   | (550         | ) |  |              |        |   |  |   | 40,380  |  
|Cash and cash equivalents at beginning of year                  |  |                                   | 159     |   |               |   | 36,622  |                   |  |   | 3,441        |   |  |              |        |   |  |   | 40,222  |  
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  
|Cash and cash equivalents at end of period                      |  | $                                 | 79      |   |               | $ | 77,632  |                   |  | $ | 2,891        |   |  | $            |        |   |  | $ | 80,602  |  
|                                                                |  |                                   |         |   |               |   |         |                   |  |   |              |   |  |              |         |   |  |   |         |  



- 11 -



---

##### Table of Contents

|9. | Segment Information
|-- | -------------------



|                                  |  |                       |       |                     |   |       |                                   |  |           |      |                     |   |      |  |   |      
|--------------------------------- |  | --------------------- | ----- | ------------------- | - | ----- | --------------------------------- |  | --------- | ---- | ------------------- | - | ---- |  | - | -----
|                                  |  | Railcar               |       | Metals Distribution |   |       | Intermodal Tank Container Leasing |  | All Other |      | Consolidated Totals
|                                  |  | (Dollars in Millions)
|Three months ended March 31, 2004 |  |                       |       |                     |   |       |                                   |  |           |      |                     |   |      |  |   |      
|Revenues from external customers  |  | $                     | 142.2 |                     | $ | 127.5 |                                   |  | $         | 23.4 |                     | $ | 55.1 |  | $ | 348.2
|Income before income taxes        |  |                       | 28.6  |                     |   | 9.4   |                                   |  |           | 3.5  |                     |   | 6.3  |  |   | 47.8 
|                                  |  |                       |       |                     |  
|Three months ended March 31, 2003 |  |                       |       |                     |   |       |                                   |  |           |      |                     |   |      |  |   |      
|Revenues from external customers  |  | $                     | 140.0 |                     | $ | 95.4  |                                   |  | $         | 20.5 |                     | $ | 50.2 |  | $ | 306.1
|Income before income taxes        |  |                       | 26.2  |                     |   | (0.6  | )                                 |  |           | 1.7  |                     |   | 5.6  |  |   | 32.9 



|10. | The Company has one residual value guarantee totaling $2.1 million until March 2006, several performance guarantees totaling $5.2 million until June 2007, and several standby
letters of credit totaling $12.8 million. Additionally, the Company provides warranties on certain products for varying lengths of time. The Company estimates the costs that may be incurred and records a liability in the amount of such costs at the
time product revenue is recognized. Changes to the Companys product warranty accrual during the periods are as follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                           |  |                             |     |   |      |   |      |  
|-------------------------- |  | --------------------------- | --- | - | ---- | - | ---- | -
|                           |  | Three Months EndedMarch 31, |    
|                           |  | 2004                        |     |   | 2003 |  
|                           |  | (Dollars in Thousands)      |    
|Balance, beginning of year |  | $                           | 602 |   |      | $ | 724  |  
|Warranties issued          |  |                             | 86  |   |      |   | 100  |  
|Settlements                |  |                             | (82 | ) |      |   | (188 | )
|                           |  |                             |     |   |      |   |      |  
|Balance, end of period     |  | $                           | 606 |   |      | $ | 636  |  
|                           |  |                             |     |   |      |   |      |  



The Company maintains
appropriate allowances for warranties and periodically reviews the amount of allowances based on managements assessment of various factors, including claims experience.



- 12 -



---

##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the related notes that appear elsewhere in this
document as well as our 2003 Annual Report on Form 10-K filed with the SEC in March 2004.



Forward-Looking Statements



Certain statements contained in this quarterly report on Form 10-Q for the quarter ended March 31, 2004 may include certain forward-looking information statements, within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including (without limitation) statements with respect to anticipated future operating and financial
performance, growth and acquisition opportunities and other similar forecasts and statements of expectation. Words such as expects, anticipates, intends, plans, will, believes,
seeks, estimates, and should and variations of these words and similar expressions, are intended to identify these forward-looking statements. Forward-looking statements made by the Company and its management are
based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statement based on the
occurrence of future events, the receipt of new information or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of
a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, unanticipated changes in the markets served by the Company (such as the railcar
leasing, service and sales, intermodal tank container leasing and metal products distribution industries), acts of terrorism, interest rate trends, cost of capital requirements, competition from other companies, changes in operating expenses,
governmental and public policy changes, changes in applicable laws, rules and regulations (including changes in tax laws).



Results of Operations



1st Quarter 2004 versus 1st Quarter 2003



Performance of the railcar leasing business improved in all major markets. Demand for existing railcar equipment improved, resulting in higher fleet utilization and a
stabilization of lease rental rates. Demand for leased intermodal tank containers improved, resulting in fleet growth and higher utilization.



First quarter revenues and gross profit from services were as follows:



|                           |  |                        |         |      |   |                    |  |   |      
|-------------------------- |  | ---------------------- | ------- | ---- | - | ------------------ |  | - | -----
|                           |  | 2004                   |         | 2003 |   | Increase(Decrease)
|                           |  | (Dollars in Thousands)
|Services revenue           |  | $                      | 183,779 |      | $ | 173,993            |  | $ | 9,786
|Cost of services           |  |                        | 116,013 |      |   | 109,986            |  |   | 6,027
|                           |  |                        |         |      |   |                    |  |   |      
|Gross profit from services |  | $                      | 67,766  |      | $ | 64,007             |  | $ | 3,759



- 13 -



---

##### Table of Contents

Service revenues in the first quarter of 2004 increased over the first quarter of 2003 primarily due to a $5.0 million
increase in revenues related to sulphur processing (higher volume), a $2.9 million increase in intermodal tank container leasing revenues (improved utilization rates and equipment additions), and a $2.0 million increase in railcar leasing and
service revenues (improved utilization rates and equipment additions).



Gross
profit on service revenues in the first quarter of 2004 increased from the first quarter of 2003 primarily due to a $2.4 million improvement in railcar leasing (higher gains on disposals, improved utilization rates and equipment additions), a $1.2
million increase related to sulphur processing (higher volume), and a $0.6 million increase in intermodal tank container leasing business (improved utilization rates and equipment additions).



Average utilization of the Companys railcar fleet was 95% for the first quarter of
2004, compared with 93% for the first quarter of 2003. Utilization rates of the Companys existing railcars are driven by long-term requirements of manufacturers and shippers of chemical products, petroleum products, food products, and bulk
plastics, and 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.



Sales revenues increased primarily due to increased demand and prices for products of the metals distribution business.



First quarter revenues and gross profit from sales were as follows:



|                        |  |                        |         |      |   |                    |  |   |       
|----------------------- |  | ---------------------- | ------- | ---- | - | ------------------ |  | - | ------
|                        |  | 2004                   |         | 2003 |   | Increase(Decrease)
|                        |  | (Dollars in Thousands)
|Net sales               |  | $                      | 164,387 |      | $ | 132,064            |  | $ | 32,323
|Cost of sales           |  |                        | 133,009 |      |   | 110,985            |  |   | 22,024
|                        |  |                        |         |      |   |                    |  |   |       
|Gross profit from sales |  | $                      | 31,378  |      | $ | 21,079             |  | $ | 10,299



Sales revenues for the first quarter
of 2004 increased from the first quarter of 2003 primarily due to $32.3 million higher sales of metals distribution products (higher demand and prices).



Gross profit on sales in the first quarter of 2004 improved from the first quarter of 2003 primarily due to a $7.2 million increase for metals distribution products
(higher volume and prices), a $1.9 million improvement from sales of railcars (lower costs from increased production volume) and a $1.2 million improvement for other manufacturing businesses (favorable mix of products and higher prices).



Interest expense in the first quarter of 2004 was $1.2 million lower than in the first
quarter of 2003 due to principal repayments of debt with no significant new financing.



Provision for income taxes was $19.3 million in the first quarter of 2004 with an effective tax rate of 40.4%, compared with $12.1 million in the first quarter of 2003 with an effective tax rate of 36.6%. The increase in tax rate was
primarily due to increases in dividends from foreign subsidiaries.



- 14 -



---

##### Table of Contents

Financial Condition and Liquidity



1st Quarter 2004 versus 1st Quarter 2003



Operating activities provided $32.9 million of net cash in the first quarter of 2004,
compared with $43.6 million in the first quarter of 2003. These funds, along with redemption of short-term investments and collection of funds previously advanced to parent, were used to finance lease fleet additions, service borrowed 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, in excess of the amounts paid as dividends, 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.



During the first
quarter of 2004, the Company spent $77.1 million for construction and purchase of lease fleet and other fixed assets, compared with $48.1 million in the first quarter of 2003. The increase in capital expenditures is primarily due to increased demand
from leasing customers for new railway tank cars and intermodal tank containers. Since capital expenditures for railcars are generally incurred subsequent to receipt of firm customer lease orders, such expenditures are discretionary to the Company
based on its desire to enter into those lease orders. Capital expenditures for intermodal tank containers are likewise discretionary in the intermodal tank container business.



During the first quarter of 2004, the Companys financing activities included the use of $24.3 million for principal repayments on
borrowed debt compared with $9.1 million in the first quarter of 2003. Cash dividends were $20.0 million in the first quarter of 2004 compared with $14.0 million in the first quarter of 2003. Net cash used in financing activities was $44.3 million
compared with $23.0 million in 2003.



Management expects future cash to be
provided from operating activities, long-term financings and collection of funds previously advanced to parent will be adequate to provide for the continued investment in the Companys business and enable it to meet its debt service
obligations. The Company may undertake long-term financing in 2004.



New Accounting Pronouncements



In
January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, Consolidation of Variable Interest Entities. This Interpretion requires that an enterprises consolidated financial statements include
subsidiaries in which the enterprise has a controlling financial interest. The Company does not have any unconsolidated variable interest entities.



- 15 -



---

##### Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



At March 31, 2004, there had been no significant change to the Companys exposure to market risk since December 31, 2003.



ITEM 4. CONTROLS AND PROCEDURES



As of the end of the
period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the Companys Principal Executive Officer and Principal Financial Officer, of the Companys disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). Based upon that evaluation, the Companys Principal Executive Officer and Principal Financial Officer have
concluded that the Companys disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission rules and forms.



There was no change in the Companys internal control over financial reporting during the Companys most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially
affect, the Companys internal controls over financial reporting.



The
Companys management, including the Principal Executive Officer and Principal Financial Officer, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all fraud. A control
system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.



- 16 -



---

##### Table of Contents

PART II. OTHER INFORMATION



|        |  |                                                                                                                                                                                              |  |                                                                                                                       
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------
|ITEM 1. |  | Legal Proceedings                                                                                                                                                                           
|        | 
|        |  | Reference is made to Business - Environmental Matters in the Companys Annual Report on Form 10-K for the year ended December 31, 2003 for a description of certain
environmental matters.
|        | 
|ITEM 6. |  | Exhibits and Reports on Form 8-K                                                                                                                                                            
|        |  |                                                                                                                                                                                             
|a.      |  | Exhibits                                                                                                                                                                                     |  |                                                                                                                       
|        |  |                                                                                                                                                                                             
|        |  | Exhibit 31.1                                                                                                                                                                                 |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                
|        |  |                                                                                                                                                                                             
|        |  | Exhibit 31.2                                                                                                                                                                                 |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                
|        |  |                                                                                                                                                                                             
|        |  | Exhibit 32.1                                                                                                                                                                                 |  | Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|        |  |                                                                                                                                                                                             
|        |  | Exhibit 32.2                                                                                                                                                                                 |  | Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|        | 
|b.      |  | Reports on Form 8-K during the quarter ended March 31, 2004                                                                                                                                 
|        |  |                                                                                                                                                                                             
|        |  | None.                                                                                                                                                                                        |  |                                                                                                                       







- 17 -



---

##### Table of Contents

SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                    |  |                                                                             
|------------------- |  | ----------------------------------------------------------------------------
|                    |  | UNION TANK CAR COMPANY                                                      
|                    | 
|                    |  | REGISTRANT                                                                  
|                    | 
|Dated: May 14, 2004 |  | /s/ Mark J. Garrette                                                        
|                    |  | Mark J. Garrette                                                            
|                    |  | Vice President(principal financial officer and principal accounting officer)





- 18 -