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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(Mark One)

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

For the quarterly period ended September 30, 2006

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



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UNION TANK CAR COMPANY

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

There is no
voting stock held by non-affiliates of the registrant. The registrant is not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. The registrant is a voluntary filer.



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##### Table of Contents

UNION TANK CAR COMPANY AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2006

INDEX



|                              |  |                                                                                                              |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|                              |  |                                                                                                              |  | Page
|Part I.
Financial Information |  |                                                                                                             
|                              |  |                                                                                                             
|Item 1.                       |  | Financial Statements                                                                                         |  |     
|                              |  |                                                                                                             
|                              |  | Condensed consolidated statements of income - three and nine month periods ended September 30, 2006 and 2005 |  | 3   
|                              |  |                                                                                                             
|                              |  | Condensed consolidated balance sheets - September 30, 2006 and December 31, 2005                             |  | 4   
|                              |  |                                                                                                             
|                              |  | Condensed consolidated statements of cash flows - nine months ended September 30, 2006 and 2005              |  | 5   
|                              |  |                                                                                                             
|                              |  | Notes to condensed consolidated financial statements                                                         |  | 6   
|                              |  |                                                                                                             
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 17  
|                              |  |                                                                                                             
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 24  
|                              |  |                                                                                                             
|Item 4.                       |  | Controls and Procedures                                                                                      |  | 24  
|                              | 
|Part II.
Other Information    |  |                                                                                                             
|                              |  |                                                                                                             
|Item 1.                       |  | Legal Proceedings                                                                                            |  | 25  
|                              |  |                                                                                                             
|Item 1A.                      |  | Risk Factors                                                                                                 |  | 25  
|                              |  |                                                                                                             
|Item 2.                       |  | Unregistered Sales of Equity and Use of Proceeds                                                             |  | *   
|                              |  |                                                                                                             
|Item 3.                       |  | Defaults Upon Senior Securities                                                                              |  | *   
|                              |  |                                                                                                             
|Item 4.                       |  | Submission of Matters to Vote of Security Holders                                                            |  | *   
|                              |  |                                                                                                             
|Item 5.                       |  | Other Information                                                                                            |  | *   
|                              |  |                                                                                                             
|Item 6.                       |  | Exhibits                                                                                                     |  | 25  
|                              | 
|Signatures                    |  | 26                                                                                                          



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|* | The response to these items is None and the items are omitted from the report pursuant to the instructions to Item II to Form 10-Q.
|- | -------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNION TANK CAR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands)

(Unaudited)



|                                                    |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|--------------------------------------------------- |  | ------------------------------- | ------- | ---- | ------------------------------ | ------- | ---- |  | ---- | --------- |  | - | --------- | -
|                                                    |  | Three Months EndedSeptember 30, |         |      | Nine Months EndedSeptember 30, |        
|                                                    |  | 2006                            |         | 2005 |                                |         | 2006 |  | 2005 |          
|Revenues                                            |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|Services (leasing and other)                        |  | $                               | 205,036 |      | $                              | 193,708 |      |  | $    | 609,748   |  | $ | 568,649   |  
|Sales                                               |  |                                 | 251,414 |      |                                | 223,468 |      |  |      | 812,084   |  |   | 665,698   |  
|                                                    |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|                                                    |  |                                 | 456,450 |      |                                | 417,176 |      |  |      | 1,421,832 |  |   | 1,234,347 |  
|                                                    |  |                                 |         |     
|Costs and expenses                                  |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|Cost of services                                    |  |                                 | 114,200 |      |                                | 118,651 |      |  |      | 336,791   |  |   | 334,520   |  
|Cost of sales                                       |  |                                 | 208,783 |      |                                | 177,465 |      |  |      | 683,714   |  |   | 547,550   |  
|General and administrative                          |  |                                 | 35,087  |      |                                | 34,346  |      |  |      | 103,874   |  |   | 109,139   |  
|Interest expense                                    |  |                                 | 26,204  |      |                                | 22,629  |      |  |      | 68,476    |  |   | 62,531    |  
|                                                    |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|                                                    |  |                                 | 384,274 |      |                                | 353,091 |      |  |      | 1,192,855 |  |   | 1,053,740 |  
|                                                    |  |                                 |         |     
|Interest income                                     |  |                                 | 4,368   |      |                                | 7,587   |      |  |      | 12,612    |  |   | 14,462    |  
|Other income, net                                   |  |                                 | 2,025   |      |                                | 2,916   |      |  |      | 4,604     |  |   | 7,053     |  
|                                                    |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|Income before income taxes and minority interest    |  |                                 | 78,569  |      |                                | 74,588  |      |  |      | 246,193   |  |   | 202,122   |  
|                                                    |  |                                 |         |     
|Provision for income taxes                          |  |                                 | 30,331  |      |                                | 28,016  |      |  |      | 90,484    |  |   | 76,787    |  
|                                                    |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|                                                    |  |                                 | 48,238  |      |                                | 46,572  |      |  |      | 155,709   |  |   | 125,335   |  
|                                                    |  |                                 |         |     
|Minority interest                                   |  |                                 | 2,092   |      |                                | 1,105   |      |  |      | 5,829     |  |   | 4,345     |  
|                                                    |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|Net income                                          |  |                                 | 46,146  |      |                                | 45,467  |      |  |      | 149,880   |  |   | 120,990   |  
|                                                    |  |                                 |         |     
|Other comprehensive income (losses)                 |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|                                                    |  |                                 |         |     
|Unrealized gains (losses) on securities, net of tax |  |                                 | 351     |      |                                | (272    | )    |  |      | 951       |  |   | (800      | )
|                                                    |  |                                 |         |     
|Minimum pension liability, net of tax               |  |                                 |        |      |                                | (39     | )    |  |      |          |  |   | (853      | )
|                                                    |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  
|Comprehensive income                                |  | $                               | 46,497  |      | $                              | 45,156  |      |  | $    | 150,831   |  | $ | 119,337   |  
|                                                    |  |                                 |         |      |                                |         |      |  |      |           |  |   |           |  

See notes to condensed consolidated financial statements.



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##### Table of Contents

UNION TANK CAR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)



|                                                                               |  |                   |           |   |                  |   |           |  
|------------------------------------------------------------------------------ |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|                                                                               |  | September 30,2006 |           |   | December 31,2005 |  
|                                                                               |  | (Unaudited)       |           |   |                  |  
|Assets                                                                         |  |                   |           |   |                  |   |           |  
|                                                                               |  |                  
|Cash and cash equivalents                                                      |  | $                 | 117,135   |   |                  | $ | 150,628   |  
|Short-term investments                                                         |  |                   | 116,039   |   |                  |   | 82,003    |  
|Available-for-sale securities                                                  |  |                   | 90,557    |   |                  |   | 224,000   |  
|Accounts receivable, net of allowances of $7,725 ($8,117 at December 31, 2005) |  |                   | 207,014   |   |                  |   | 182,205   |  
|Accounts and notes receivable, affiliate                                       |  |                   | 44,014    |   |                  |   | 43,853    |  
|Inventories, net of LIFO reserves of $98,047 ($84,184 at December 31, 2005)    |  |                   | 198,802   |   |                  |   | 154,395   |  
|Prepaid expenses and deferred charges                                          |  |                   | 11,873    |   |                  |   | 9,448     |  
|Railcar lease fleet, net                                                       |  |                   | 2,573,616 |   |                  |   | 2,155,425 |  
|Intermodal tank container lease fleet, net                                     |  |                   | 351,789   |   |                  |   | 335,510   |  
|Other fixed assets, net                                                        |  |                   | 282,619   |   |                  |   | 243,833   |  
|Other assets                                                                   |  |                   | 37,519    |   |                  |   | 39,780    |  
|                                                                               |  |                   |           |   |                  |   |           |  
|Total assets                                                                   |  | $                 | 4,030,977 |   |                  | $ | 3,621,080 |  
|                                                                               |  |                   |           |   |                  |   |           |  
|Liabilities and Stockholders Equity                                           |  |                   |           |   |                  |   |           |  
|                                                                               |  |                  
|Accounts payable                                                               |  | $                 | 113,165   |   |                  | $ | 103,133   |  
|Accrued liabilities                                                            |  |                   | 265,013   |   |                  |   | 243,617   |  
|Advances from parent and affiliates                                            |  |                   | 366,552   |   |                  |   | 10,577    |  
|Debt, including $196,058 due within one year ($85,143 at December 31, 2005)    |  |                   | 1,367,671 |   |                  |   | 1,438,790 |  
|Deferred income taxes and investment tax credits                               |  |                   | 624,805   |   |                  |   | 585,698   |  
|                                                                               |  |                   |           |   |                  |   |           |  
|Total liabilities                                                              |  |                   | 2,737,206 |   |                  |   | 2,381,815 |  
|                                                                               |  |                  
|Minority interest                                                              |  |                   | 98,510    |   |                  |   | 92,681    |  
|                                                                               |  |                  
|Stockholders equity                                                           |  |                   |           |   |                  |   |           |  
|Common stock                                                                   |  |                   | 106,689   |   |                  |   | 106,689   |  
|Additional capital                                                             |  |                   | 169,455   |   |                  |   | 167,608   |  
|Retained earnings                                                              |  |                   | 919,268   |   |                  |   | 873,389   |  
|Accumulated other comprehensive losses                                         |  |                   | (151      | ) |                  |   | (1,102    | )
|                                                                               |  |                   |           |   |                  |   |           |  
|Total stockholders equity                                                     |  |                   | 1,195,261 |   |                  |   | 1,146,584 |  
|                                                                               |  |                   |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                     |  | $                 | 4,030,977 |   |                  | $ | 3,621,080 |  
|                                                                               |  |                   |           |   |                  |   |           |  

See notes to condensed consolidated financial statements.



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UNION TANK CAR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)



|                                                                                  |  |                                |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                  |  | Nine Months EndedSeptember 30, |         
|                                                                                  |  | 2006                           |          |   | 2005 |  
|Cash flows from operating activities:                                             |  |                                |          |   |      |   |          |  
|Net income                                                                        |  | $                              | 149,880  |   |      | $ | 120,990  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |          |   |      |   |          |  
|Depreciation and amortization                                                     |  |                                | 141,929  |   |      |   | 123,573  |  
|Deferred taxes                                                                    |  |                                | 37,336   |   |      |   | 26,898   |  
|Gain on disposition of lease fleet and other fixed assets                         |  |                                | (19,561  | ) |      |   | (5,193   | )
|Other non-cash income and expenses                                                |  |                                | 10,624   |   |      |   | 9,367    |  
|Changes in assets and liabilities:                                                |  |                                |          |   |      |   |          |  
|Accounts receivable                                                               |  |                                | (23,641  | ) |      |   | (18,608  | )
|Inventories                                                                       |  |                                | (44,978  | ) |      |   | 2,654    |  
|Prepaid expenses and deferred charges                                             |  |                                | (956     | ) |      |   | (2,264   | )
|Accounts payable and accrued liabilities                                          |  |                                | 24,725   |   |      |   | (18,255  | )
|                                                                                  |  |                                |          |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                                | 275,358  |   |      |   | 239,162  |  
|                                                                                  |  |                               
|Cash flows from investing activities:                                             |  |                                |          |   |      |   |          |  
|Construction and purchase of lease fleet                                          |  |                                | (561,223 | ) |      |   | (387,392 | )
|Purchases of other fixed assets                                                   |  |                                | (54,673  | ) |      |   | (54,808  | )
|Purchases of available-for-sale securities                                        |  |                                |         |   |      |   | (95,059  | )
|Proceeds from sales of available-for-sale securities                              |  |                                | 131,884  |   |      |   | 35,911   |  
|Purchases of short-term investments                                               |  |                                | (116,084 | ) |      |   | (78,915  | )
|Proceeds from sales of short-term investments                                     |  |                                | 81,736   |   |      |   | 45,297   |  
|Increase in advances from parent and affiliates                                   |  |                                | 350,350  |   |      |   | 21,438   |  
|Increase in other assets                                                          |  |                                | (2,475   | ) |      |   | (1,932   | )
|Proceeds from disposals of lease fleet and other fixed assets                     |  |                                | 33,191   |   |      |   | 17,471   |  
|Proceeds from disposition of business                                             |  |                                | 900      |   |      |   | 7,274    |  
|                                                                                  |  |                                |          |   |      |   |          |  
|Net cash used in investing activities                                             |  |                                | (136,394 | ) |      |   | (490,715 | )
|                                                                                  |  |                               
|Cash flows from financing activities:                                             |  |                                |          |   |      |   |          |  
|Proceeds from issuance of debt                                                    |  |                                |         |   |      |   | 311,000  |  
|Principal payments of debt                                                        |  |                                | (71,118  | ) |      |   | (28,579  | )
|Cash dividends                                                                    |  |                                | (104,000 | ) |      |   | (84,000  | )
|                                                                                  |  |                                |          |   |      |   |          |  
|Net cash (used in) provided by financing activities                               |  |                                | (175,118 | ) |      |   | 198,421  |  
|                                                                                  |  |                               
|Effect of exchange rates on cash and cash equivalents                             |  |                                | 2,661    |   |      |   | (1,952   | )
|                                                                                  |  |                                |          |   |      |   |          |  
|Decrease in cash and cash equivalents                                             |  |                                | (33,493  | ) |      |   | (55,084  | )
|                                                                                  |  |                               
|Cash and cash equivalents at beginning of year                                    |  |                                | 150,628  |   |      |   | 98,336   |  
|                                                                                  |  |                                |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                              | 117,135  |   |      | $ | 43,252   |  
|                                                                                  |  |                                |          |   |      |   |          |  
|Cash paid during the period for:                                                  |  |                                |          |   |      |   |          |  
|Interest                                                                          |  | $                              | 55,599   |   |      | $ | 51,220   |  
|Income taxes                                                                      |  |                                | 49,505   |   |      |   | 44,917   |  

See notes to condensed consolidated financial statements.



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##### Table of Contents

UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands)

(Unaudited)



|1. | Ownership
|-- | ---------

UNION TANK CAR COMPANY (the
Company) is 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.



|2. | Basis of Presentation
|-- | ---------------------

The accompanying unaudited
condensed consolidated financial statements reflect all adjustments of a normal recurring nature necessary for a fair presentation of the results for the interim periods. 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 Annual Report on Form 10-K for the year ended December 31, 2005.

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications include presenting
the purchases and sales of available-for-sale securities and short-term investments on a gross basis in the consolidated statements of cash flow and presenting the consolidated balance sheet amounts related to certain long-term contracts accounted
for under the completed contract method on a net basis. These changes have no impact on previously reported net income and are deemed to be immaterial.

The 2006 interim results presented herein are not necessarily indicative of the results of operations for the full year 2006.



|3. | Significant Accounting Policies
|-- | -------------------------------

Available-for-Sale Securities

Available-for-sale securities consist of investment-grade corporate debt securities and U.S.
government obligations. Management determines the appropriate classification of investments at the time of acquisition and reevaluates such determination at each balance sheet date. Available-for-sale securities are carried at fair value, with
unrealized holding gains and losses, net of tax, reported as a separate component of stockholders equity.

Inventories

Inventories are valued at the lower of cost or market, using the first-in, first-out (FIFO) or last-in,
first-out (LIFO) methods. Finished goods, work-in-process, and raw materials represented approximately 57%, 18%, and 25% of net inventories at September 30, 2006 and 55%, 14%, and 31% of net inventories at December 31, 2005,
respectively. The Company uses the LIFO costing method for approximately 70% and 68% of its total gross inventories at September 30, 2006 and December 31, 2005, respectively.



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##### Table of Contents

|3. | Significant Accounting Policies (Continued)
|-- | -------------------------------------------

Property and Equipment

Property and equipment are depreciated or amortized over their useful lives primarily on the straight-line
method based on managements estimates of the period over which the assets will generate revenue. The Company periodically reviews these lives relative to physical factors, economic factors and industry trends. Gains and losses on disposals are
included in other income, except for those related to railcar and intermodal tank containers disposals, which are included in cost of services.

Asset Impairment

In assessing recoverability of the Companys long-lived assets, the Company considers
changes in economic conditions and makes assumptions regarding estimated future cash flows and other factors. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges.

Lease Fleet and Other Fixed Assets



|                                      |  |                   |            |   |                  |   |            |  
|------------------------------------- |  | ----------------- | ---------- | - | ---------------- | - | ---------- | -
|                                      |  | September 30,2006 |            |   | December 31,2005 |  
|Railcar lease fleet                   |  |                   |            |   |                  |   |            |  
|Gross cost                            |  | $                 | 4,324,529  |   |                  | $ | 3,852,919  |  
|Less accumulated depreciation         |  |                   | (1,750,913 | ) |                  |   | (1,697,494 | )
|                                      |  |                   |            |   |                  |   |            |  
|                                      |  | $                 | 2,573,616  |   |                  | $ | 2,155,425  |  
|                                      |  |                   |            |   |                  |   |            |  
|Intermodal tank container lease fleet |  |                   |            |   |                  |   |            |  
|Gross cost                            |  | $                 | 486,781    |   |                  | $ | 455,202    |  
|Less accumulated depreciation         |  |                   | (134,992   | ) |                  |   | (119,692   | )
|                                      |  |                   |            |   |                  |   |            |  
|                                      |  | $                 | 351,789    |   |                  | $ | 335,510    |  
|                                      |  |                   |            |   |                  |   |            |  
|Other fixed assets                    |  |                   |            |   |                  |   |            |  
|Gross cost                            |  | $                 | 685,463    |   |                  | $ | 630,663    |  
|Less accumulated depreciation         |  |                   | (402,844   | ) |                  |   | (386,830   | )
|                                      |  |                   |            |   |                  |   |            |  
|                                      |  | $                 | 282,619    |   |                  | $ | 243,833    |  
|                                      |  |                   |            |   |                  |   |            |  

Foreign Currency Translation

Foreign currency translation adjustments and transaction gains and losses are borne by Holdings. For the nine months ended September 30, 2006 and
2005, Holdings absorbed a gain of $660 and a loss of $640, respectively.



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##### Table of Contents

|3. | Significant Accounting Policies (Continued)
|-- | -------------------------------------------

Lessor Accounting

Most of the Companys railcar and intermodal tank container leases are classified as operating leases.
Aggregate rentals from operating leases are reported as revenue ratably over the life of the lease as collectibility is reasonably assured. Expenses, including depreciation and maintenance, are charged as incurred.

Revenue Recognition

Revenue
from sales of products is generally recognized upon shipment to customers which is when title and the risks and rewards of ownership are passed on to the customers. Such revenue is based upon determinable sales prices and is recognized only upon
collectibility being reasonably assured. Certain long-term contracts are accounted for under the completed contract method when the Company is unable to reasonably forecast costs and the time required to complete those contracts.

Income Taxes

The Company
and its more than 80% owned U.S. subsidiaries are included in the consolidated U.S. federal income tax return of Holdings. Under an arrangement with Holdings, federal income taxes, before consideration of 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, Holdings on this basis. If deductions and credits available to Holdings entire consolidated group exceed those which can be used on its tax 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.

Legal Matters

The Company
and its subsidiaries have been named as defendants in a number of lawsuits and certain claims are pending. The Company has accrued its best estimate of such claims, 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.



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|4. | Available-for-Sale Securities
|-- | -----------------------------

At September 30, 2006
and December 31, 2005, the Company had the following investments in marketable securities which have been classified as available-for-sale:



|                            |  |      |         |                      |   |                       |  |   |            |   |  |   |        
|--------------------------- |  | ---- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|September 30, 2006          |  | Cost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Corporate debt securities   |  | $    | 80,725  |                      | $ |                      |  | $ | (185       | ) |  | $ | 80,540 
|U.S. government obligations |  |      | 10,051  |                      |   |                      |  |   | (34        | ) |  |   | 10,017 
|                            |  |      |         |                      |   |                       |  |   |            |   |  |   |        
|                            |  | $    | 90,776  |                      | $ |                      |  | $ | (219       | ) |  | $ | 90,557 
|                            |  |      |         |                      |   |                       |  |   |            |   |  |   |        
|                            |  |      |         |                     
|December 31, 2005           |  | Cost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Corporate debt securities   |  | $    | 202,863 |                      | $ |                      |  | $ | (1,509     | ) |  | $ | 201,354
|U.S. government obligations |  |      | 22,812  |                      |   |                      |  |   | (166       | ) |  |   | 22,646 
|                            |  |      |         |                      |   |                       |  |   |            |   |  |   |        
|                            |  | $    | 225,675 |                      | $ |                      |  | $ | (1,675     | ) |  | $ | 224,000
|                            |  |      |         |                      |   |                       |  |   |            |   |  |   |        

The gross unrealized holding losses, less related taxes ($77 and $586 at September 30, 2006
and December 31, 2005, respectively) have been reported as a separate component of stockholders equity in the accompanying Condensed Consolidated Balance Sheet.



|5. | Segment Information
|-- | -------------------

The Company operates its largest
businesses in three segments: Railcar, Metals Distribution and Intermodal Tank Container Leasing. Segmentation of the Companys businesses is based upon markets served and organizational structure. The remaining businesses of the Company plus
corporate headquarters items and eliminations, are shown as All Other in the table:



|                                                 |  |                       |       |                    |   |                                |  |           |      |                    |   |       |  |   |      
|------------------------------------------------ |  | --------------------- | ----- | ------------------ | - | ------------------------------ |  | --------- | ---- | ------------------ | - | ----- |  | - | -----
|                                                 |  | Railcar               |       | MetalsDistribution |   | IntermodalTankContainerLeasing |  | All Other |      | ConsolidatedTotals
|                                                 |  | (Dollars in Millions)
|Three months ended September 30, 2006            |  |                       |       |                    |   |                                |  |           |      |                    |   |       |  |   |      
|Services revenue                                 |  | $                     | 157.1 |                    | $ | 1.9                            |  | $         | 28.9 |                    | $ | 17.1  |  | $ | 205.0
|Sales revenue                                    |  |                       | 16.8  |                    |   | 200.2                          |  |           |     |                    |   | 34.4  |  |   | 251.4
|Income before income taxes and minority interest |  |                       | 44.3  |                    |   | 20.5                           |  |           | 8.5  |                    |   | 5.3   |  |   | 78.6 
|                                                 |  |                       |       |                    |  
|Three months ended September 30, 2005            |  |                       |       |                    |   |                                |  |           |      |                    |   |       |  |   |      
|Services revenue                                 |  | $                     | 150.1 |                    | $ | 2.3                            |  | $         | 26.3 |                    | $ | 15.0  |  | $ | 193.7
|Sales revenue                                    |  |                       | 14.6  |                    |   | 175.6                          |  |           |     |                    |   | 33.3  |  |   | 223.5
|Income before income taxes and minority interest |  |                       | 29.5  |                    |   | 25.4                           |  |           | 5.3  |                    |   | 14.4  |  |   | 74.6 
|                                                 |  |                       |       |                    |  
|Nine months ended September 30, 2006             |  |                       |       |                    |   |                                |  |           |      |                    |   |       |  |   |      
|Services revenue                                 |  | $                     | 468.1 |                    | $ | 5.9                            |  | $         | 83.7 |                    | $ | 52.0  |  | $ | 609.7
|Sales revenue                                    |  |                       | 83.5  |                    |   | 594.3                          |  |           |     |                    |   | 134.3 |  |   | 812.1
|Income before income taxes and minority interest |  |                       | 123.6 |                    |   | 67.0                           |  |           | 23.5 |                    |   | 32.1  |  |   | 246.2
|                                                 |  |                       |       |                    |  
|Nine months ended September 30, 2005             |  |                       |       |                    |   |                                |  |           |      |                    |   |       |  |   |      
|Services revenue                                 |  | $                     | 438.5 |                    | $ | 6.6                            |  | $         | 77.1 |                    | $ | 46.4  |  | $ | 568.6
|Sales revenue                                    |  |                       | 45.6  |                    |   | 518.9                          |  |           |     |                    |   | 101.2 |  |   | 665.7
|Income before income taxes and minority interest |  |                       | 88.9  |                    |   | 57.2                           |  |           | 16.2 |                    |   | 39.8  |  |   | 202.1



- 9 -



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##### Table of Contents

|6. | Commitments and Contingencies
|-- | -----------------------------

The Companys Canadian
subsidiaries have a demand credit facility of approximately $31,325 available on a no-fee basis. Holdings is a guarantor of this demand credit facility. At September 30, 2006, $5,604 of letters of credit were outstanding. No amounts were
outstanding for overdrafts or borrowings as of September 30, 2006.

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:



|                           |  |                                |      |   |      |   |       |  
|-------------------------- |  | ------------------------------ | ---- | - | ---- | - | ----- | -
|                           |  | Nine Months EndedSeptember 30, |     
|                           |  | 2006                           |      |   | 2005 |  
|Balance, beginning of year |  | $                              | 833  |   |      | $ | 1,687 |  
|Net warranties issued      |  |                                | 367  |   |      |   | 71    |  
|Settlements                |  |                                | (348 | ) |      |   | (537  | )
|                           |  |                                |      |   |      |   |       |  
|Balance, end of period     |  | $                              | 852  |   |      | $ | 1,221 |  
|                           |  |                                |      |   |      |   |       |  

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.



- 10 -



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##### Table of Contents

|7. | Consolidating Financial Information
|-- | -----------------------------------

The following
condensed consolidating statements are provided because Procor Limited, a wholly owned subsidiary of the Company, has issued a 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
September 30, 2006 and 2005 are as follows:



|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|------------------------------------------------ |  | ------------------------------------- | ------- | ------------- | - | ----------------- |  | ------------ | ------- |  | ------------ | -------- | - |  | - | -------
|                                                 |  | Three Months Ended September 30, 2006
|                                                 |  | Union Tank CarCompany                 |         | ProcorLimited |   | OtherSubsidiaries |  | Eliminations |         |  | Consolidated
|Revenues                                         |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|Services                                         |  | $                                     | 137,810 |               | $ | 6,178             |  | $            | 82,353  |  | $            | (21,305  | ) |  | $ | 205,036
|Sales                                            |  |                                       |        |               |   |                  |  |              | 362,091 |  |              | (110,677 | ) |  |   | 251,414
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|                                                 |  |                                       | 137,810 |               |   | 6,178             |  |              | 444,444 |  |              | (131,982 | ) |  |   | 456,450
|                                                 |  |                                       |         |               |  
|Costs and expenses                               |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|Cost of services                                 |  |                                       | 86,045  |               |   | 4,427             |  |              | 45,033  |  |              | (21,305  | ) |  |   | 114,200
|Cost of sales                                    |  |                                       |        |               |   |                  |  |              | 319,428 |  |              | (110,645 | ) |  |   | 208,783
|General and administrative                       |  |                                       | 9,221   |               |   | 1,162             |  |              | 24,704  |  |              |         |   |  |   | 35,087 
|Interest expense                                 |  |                                       | 20,829  |               |   | 864               |  |              | 4,511   |  |              |         |   |  |   | 26,204 
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|                                                 |  |                                       | 116,095 |               |   | 6,453             |  |              | 393,676 |  |              | (131,950 | ) |  |   | 384,274
|                                                 |  |                                       |         |               |  
|Other income, net                                |  |                                       | 1,628   |               |   | 2,468             |  |              | 2,297   |  |              |         |   |  |   | 6,393  
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|Income before income taxes and minority interest |  |                                       | 23,343  |               |   | 2,193             |  |              | 53,065  |  |              | (32      | ) |  |   | 78,569 
|Provision for income taxes                       |  |                                       | 9,571   |               |   | 839               |  |              | 19,921  |  |              |         |   |  |   | 30,331 
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|                                                 |  |                                       | 13,772  |               |   | 1,354             |  |              | 33,144  |  |              | (32      | ) |  |   | 48,238 
|Equity in income of subsidiaries                 |  |                                       | 32,374  |               |   |                  |  |              |        |  |              | (32,374  | ) |  |   |       
|Minority interest                                |  |                                       |        |               |   |                  |  |              | 2,092   |  |              |         |   |  |   | 2,092  
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|Net income                                       |  | $                                     | 46,146  |               | $ | 1,354             |  | $            | 31,052  |  | $            | (32,406  | ) |  | $ | 46,146 
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|                                                 | 
|                                                 |  | Three Months Ended September 30, 2005
|                                                 |  | Union Tank CarCompany                 |         | ProcorLimited |   | OtherSubsidiaries |  | Eliminations |         |  | Consolidated
|Revenues                                         |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|Services                                         |  | $                                     | 131,590 |               | $ | 5,477             |  | $            | 73,223  |  | $            | (16,582  | ) |  | $ | 193,708
|Sales                                            |  |                                       |        |               |   |                  |  |              | 304,679 |  |              | (81,211  | ) |  |   | 223,468
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|                                                 |  |                                       | 131,590 |               |   | 5,477             |  |              | 377,902 |  |              | (97,793  | ) |  |   | 417,176
|                                                 |  |                                       |         |               |  
|Costs and expenses                               |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|Cost of services                                 |  |                                       | 86,913  |               |   | 1,906             |  |              | 46,414  |  |              | (16,582  | ) |  |   | 118,651
|Cost of sales                                    |  |                                       | 11      |               |   |                  |  |              | 258,355 |  |              | (80,901  | ) |  |   | 177,465
|General and administrative                       |  |                                       | 9,577   |               |   | 610               |  |              | 24,159  |  |              |         |   |  |   | 34,346 
|Interest expense                                 |  |                                       | 17,806  |               |   | 536               |  |              | 4,287   |  |              |         |   |  |   | 22,629 
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|                                                 |  |                                       | 114,307 |               |   | 3,052             |  |              | 333,215 |  |              | (97,483  | ) |  |   | 353,091
|                                                 |  |                                       |         |               |  
|Other income, net                                |  |                                       | 7,172   |               |   | 289               |  |              | 3,042   |  |              |         |   |  |   | 10,503 
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|Income before income taxes and minority interest |  |                                       | 24,455  |               |   | 2,714             |  |              | 47,729  |  |              | (310     | ) |  |   | 74,588 
|Provision for income taxes                       |  |                                       | 9,195   |               |   | 1,077             |  |              | 17,859  |  |              | (115     | ) |  |   | 28,016 
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|                                                 |  |                                       | 15,260  |               |   | 1,637             |  |              | 29,870  |  |              | (195     | ) |  |   | 46,572 
|Equity in income of subsidiaries                 |  |                                       | 30,207  |               |   |                  |  |              |        |  |              | (30,207  | ) |  |   |       
|Minority interest                                |  |                                       |        |               |   |                  |  |              | 1,105   |  |              |         |   |  |   | 1,105  
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        
|Net income                                       |  | $                                     | 45,467  |               | $ | 1,637             |  | $            | 28,765  |  | $            | (30,402  | ) |  | $ | 45,467 
|                                                 |  |                                       |         |               |   |                   |  |              |         |  |              |          |   |  |   |        



- 11 -



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##### Table of Contents

|7. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------

Condensed
consolidating statements of income for the nine months ended September 30, 2006 and 2005 are as follows:



|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|------------------------------------------------ |  | ------------------------------------ | ------- | - | ------------- | - | ----------------- |  | ------------ | --------- |  | ------------ | -------- | - |  | - | ---------
|                                                 |  | Nine Months Ended September 30, 2006
|                                                 |  | Union Tank CarCompany                |         |   | ProcorLimited |   | OtherSubsidiaries |  | Eliminations |           |  | Consolidated
|Revenues                                         |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|Services                                         |  | $                                    | 408,499 |   |               | $ | 19,417            |  | $            | 245,051   |  | $            | (63,219  | ) |  | $ | 609,748  
|Sales                                            |  |                                      |        |   |               |   |                  |  |              | 1,096,722 |  |              | (284,638 | ) |  |   | 812,084  
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|                                                 |  |                                      | 408,499 |   |               |   | 19,417            |  |              | 1,341,773 |  |              | (347,857 | ) |  |   | 1,421,832
|                                                 |  |                                      |         |   |              
|Costs and expenses                               |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|Cost of services                                 |  |                                      | 252,858 |   |               |   | 13,428            |  |              | 133,724   |  |              | (63,219  | ) |  |   | 336,791  
|Cost of sales                                    |  |                                      |        |   |               |   |                  |  |              | 968,153   |  |              | (284,439 | ) |  |   | 683,714  
|General and administrative                       |  |                                      | 25,578  |   |               |   | 2,842             |  |              | 75,454    |  |              |         |   |  |   | 103,874  
|Interest expense                                 |  |                                      | 58,083  |   |               |   | 1,623             |  |              | 8,770     |  |              |         |   |  |   | 68,476   
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|                                                 |  |                                      | 336,519 |   |               |   | 17,893            |  |              | 1,186,101 |  |              | (347,658 | ) |  |   | 1,192,855
|                                                 |  |                                      |         |   |              
|Other income, net                                |  |                                      | 7,607   |   |               |   | 4,686             |  |              | 4,923     |  |              |         |   |  |   | 17,216   
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|Income before income taxes and minority interest |  |                                      | 79,587  |   |               |   | 6,210             |  |              | 160,595   |  |              | (199     | ) |  |   | 246,193  
|Provision for income taxes                       |  |                                      | 32,626  |   |               |   | 207               |  |              | 57,651    |  |              |         |   |  |   | 90,484   
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|                                                 |  |                                      | 46,961  |   |               |   | 6,003             |  |              | 102,944   |  |              | (199     | ) |  |   | 155,709  
|Equity in income of subsidiaries                 |  |                                      | 102,919 |   |               |   |                  |  |              |          |  |              | (102,919 | ) |  |   |         
|Minority interest                                |  |                                      |        |   |               |   |                  |  |              | 5,829     |  |              |         |   |  |   | 5,829    
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|Net income                                       |  | $                                    | 149,880 |   |               | $ | 6,003             |  | $            | 97,115    |  | $            | (103,118 | ) |  | $ | 149,880  
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|                                                 | 
|                                                 |  | Nine Months Ended September 30, 2005
|                                                 |  | Union Tank CarCompany                |         |   | ProcorLimited |   | OtherSubsidiaries |  | Eliminations |           |  | Consolidated
|Revenues                                         |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|Services                                         |  | $                                    | 386,279 |   |               | $ | 15,552            |  | $            | 221,957   |  | $            | (55,139  | ) |  | $ | 568,649  
|Sales                                            |  |                                      |        |   |               |   |                  |  |              | 902,006   |  |              | (236,308 | ) |  |   | 665,698  
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|                                                 |  |                                      | 386,279 |   |               |   | 15,552            |  |              | 1,123,963 |  |              | (291,447 | ) |  |   | 1,234,347
|                                                 |  |                                      |         |   |              
|Costs and expenses                               |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|Cost of services                                 |  |                                      | 246,459 |   |               |   | 9,753             |  |              | 133,447   |  |              | (55,139  | ) |  |   | 334,520  
|Cost of sales                                    |  |                                      | (775    | ) |               |   |                  |  |              | 784,323   |  |              | (235,998 | ) |  |   | 547,550  
|General and administrative                       |  |                                      | 31,847  |   |               |   | 1,760             |  |              | 75,532    |  |              |         |   |  |   | 109,139  
|Interest expense                                 |  |                                      | 49,089  |   |               |   | 1,656             |  |              | 11,786    |  |              |         |   |  |   | 62,531   
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|                                                 |  |                                      | 326,620 |   |               |   | 13,169            |  |              | 1,005,088 |  |              | (291,137 | ) |  |   | 1,053,740
|                                                 |  |                                      |         |   |              
|Other income, net                                |  |                                      | 8,502   |   |               |   | 2,466             |  |              | 5,649     |  |              | 4,898    |   |  |   | 21,515   
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|Income before income taxes and minority interest |  |                                      | 68,161  |   |               |   | 4,849             |  |              | 124,524   |  |              | 4,588    |   |  |   | 202,122  
|Provision for income taxes                       |  |                                      | 29,468  |   |               |   | 1,928             |  |              | 45,506    |  |              | (115     | ) |  |   | 76,787   
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|                                                 |  |                                      | 38,693  |   |               |   | 2,921             |  |              | 79,018    |  |              | 4,703    |   |  |   | 125,335  
|Equity in income of subsidiaries                 |  |                                      | 82,297  |   |               |   |                  |  |              |          |  |              | (82,297  | ) |  |   |         
|Minority interest                                |  |                                      |        |   |               |   |                  |  |              | 4,345     |  |              |         |   |  |   | 4,345    
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          
|Net income                                       |  | $                                    | 120,990 |   |               | $ | 2,921             |  | $            | 74,673    |  | $            | (77,594  | ) |  | $ | 120,990  
|                                                 |  |                                      |         |   |               |   |                   |  |              |           |  |              |          |   |  |   |          



- 12 -



---

##### Table of Contents

|7. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------

Condensed
consolidating balance sheets as of September 30, 2006 and December 31, 2005 are as follows:



|                                                    |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  
|--------------------------------------------------- |  | --------------------- | --------- | - | ------------- | - | ------- | ----------------- |  | ------------ | --------- |  | ------------ | ---------- | - |  | - | --------- | -
|                                                    |  | September 30, 2006    |          
|                                                    |  | Union Tank CarCompany |           |   | ProcorLimited |   |         | OtherSubsidiaries |  | Eliminations |           |  | Consolidated |           
|Assets                                              |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  
|                                                    |  |                       |           |   |              
|Cash and cash equivalents                           |  | $                     | 13,869    |   |               | $ | 98,457  |                   |  | $            | 4,809     |  | $            |           |   |  | $ | 117,135   |  
|Short-term investments                              |  |                       |          |   |               |   | 116,039 |                   |  |              |          |  |              |           |   |  |   | 116,039   |  
|Available-for-sale securities                       |  |                       | 90,557    |   |               |   |        |                   |  |              |          |  |              |           |   |  |   | 90,557    |  
|Accounts receivable, net                            |  |                       | 123,058   |   |               |   | 1,728   |                   |  |              | 241,868   |  |              | (159,640   | ) |  |   | 207,014   |  
|Accounts and notes receivable, affiliate            |  |                       |          |   |               |   |        |                   |  |              | 44,014    |  |              |           |   |  |   | 44,014    |  
|Inventories, net                                    |  |                       | 8,772     |   |               |   | 1,512   |                   |  |              | 188,518   |  |              |           |   |  |   | 198,802   |  
|Prepaid expenses and deferred charges               |  |                       | 3,475     |   |               |   | 2,152   |                   |  |              | 6,246     |  |              |           |   |  |   | 11,873    |  
|Advances to parent and affiliates                   |  |                       |          |   |               |   |        |                   |  |              | 349,701   |  |              | (349,701   | ) |  |   |          |  
|Railcar lease fleet, net                            |  |                       | 2,343,401 |   |               |   | 31,769  |                   |  |              | 199,033   |  |              | (587       | ) |  |   | 2,573,616 |  
|Intermodal tank container lease fleet, net          |  |                       |          |   |               |   |        |                   |  |              | 351,789   |  |              |           |   |  |   | 351,789   |  
|Other fixed assets, net                             |  |                       | 41,371    |   |               |   | 15,520  |                   |  |              | 225,728   |  |              |           |   |  |   | 282,619   |  
|Investment in subsidiaries                          |  |                       | 904,627   |   |               |   | 75,453  |                   |  |              | 54,036    |  |              | (1,034,116 | ) |  |   |          |  
|Other assets                                        |  |                       | 5,815     |   |               |   | 368     |                   |  |              | 31,336    |  |              |           |   |  |   | 37,519    |  
|                                                    |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  
|Total assets                                        |  | $                     | 3,534,945 |   |               | $ | 342,998 |                   |  | $            | 1,697,078 |  | $            | (1,544,044 | ) |  | $ | 4,030,977 |  
|                                                    |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  
|Liabilities and Stockholders Equity                |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  
|                                                    |  |                       |           |   |              
|Accounts payable                                    |  | $                     | 60,832    |   |               | $ | 16,812  |                   |  | $            | 195,157   |  | $            | (159,636   | ) |  | $ | 113,165   |  
|Accrued liabilities                                 |  |                       | 157,819   |   |               |   | 5,395   |                   |  |              | 101,396   |  |              | 403        |   |  |   | 265,013   |  
|Advances from parent and affiliates                 |  |                       | 468,250   |   |               |   | 248,202 |                   |  |              |          |  |              | (349,900   | ) |  |   | 366,552   |  
|Debt                                                |  |                       | 1,238,382 |   |               |   | 2,119   |                   |  |              | 127,170   |  |              |           |   |  |   | 1,367,671 |  
|Deferred income taxes and investment tax credits    |  |                       | 461,898   |   |               |   | 19,335  |                   |  |              | 143,572   |  |              |           |   |  |   | 624,805   |  
|                                                    |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  
|Total liabilities                                   |  |                       | 2,387,181 |   |               |   | 291,863 |                   |  |              | 567,295   |  |              | (509,133   | ) |  |   | 2,737,206 |  
|                                                    |  |                       |           |   |              
|Minority interest                                   |  |                       |          |   |               |   |        |                   |  |              | 98,510    |  |              |           |   |  |   | 98,510    |  
|                                                    |  |                       |           |   |              
|Stockholders equity                                |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  
|Common stock and additional capital                 |  |                       | 369,558   |   |               |   | 13,345  |                   |  |              | 370,791   |  |              | (477,550   | ) |  |   | 276,144   |  
|Retained earnings                                   |  |                       | 796,626   |   |               |   | 38,821  |                   |  |              | 641,182   |  |              | (557,361   | ) |  |   | 919,268   |  
|Accumulated other comprehensive losses              |  |                       | (152      | ) |               |   |        |                   |  |              | 1         |  |              |           |   |  |   | (151      | )
|Equity adjustment from foreign currency translation |  |                       | (18,268   | ) |               |   | (1,031  | )                 |  |              | 19,299    |  |              |           |   |  |   |          |  
|                                                    |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  
|Total stockholders equity                          |  |                       | 1,147,764 |   |               |   | 51,135  |                   |  |              | 1,031,273 |  |              | (1,034,911 | ) |  |   | 1,195,261 |  
|                                                    |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  
|Total liabilities and stockholders equity          |  | $                     | 3,534,945 |   |               | $ | 342,998 |                   |  | $            | 1,697,078 |  | $            | (1,544,044 | ) |  | $ | 4,030,977 |  
|                                                    |  |                       |           |   |               |   |         |                   |  |              |           |  |              |            |   |  |   |           |  



- 13 -



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##### Table of Contents

|7. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



|                                                    |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  
|--------------------------------------------------- |  | --------------------- | --------- | - | ------------- | - | ------- | ----------------- |  | - | ------------ | - |  | ------------ | ---------- | - |  | - | --------- | -
|                                                    |  | December 31, 2005     |          
|                                                    |  | Union Tank CarCompany |           |   | ProcorLimited |   |         | OtherSubsidiaries |  |   | Eliminations |   |  | Consolidated |           
|Assets                                              |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  
|                                                    |  |                       |           |   |              
|Cash and cash equivalents                           |  | $                     | 70,943    |   |               | $ | 75,151  |                   |  | $ | 4,534        |   |  | $            |           |   |  | $ | 150,628   |  
|Short-term investments                              |  |                       |          |   |               |   | 82,003  |                   |  |   |             |   |  |              |           |   |  |   | 82,003    |  
|Available-for-sale securities                       |  |                       | 224,000   |   |               |   |        |                   |  |   |             |   |  |              |           |   |  |   | 224,000   |  
|Accounts receivable, net                            |  |                       | 40,682    |   |               |   | 1,445   |                   |  |   | 203,808      |   |  |              | (63,730    | ) |  |   | 182,205   |  
|Accounts and notes receivable, affiliate            |  |                       |          |   |               |   |        |                   |  |   | 43,853       |   |  |              |           |   |  |   | 43,853    |  
|Inventories, net                                    |  |                       | 9,464     |   |               |   | 1,652   |                   |  |   | 143,348      |   |  |              | (69        | ) |  |   | 154,395   |  
|Prepaid expenses and deferred charges               |  |                       | 3,296     |   |               |   | 2,479   |                   |  |   | 3,673        |   |  |              |           |   |  |   | 9,448     |  
|Advances to parent and affiliates                   |  |                       |          |   |               |   |        |                   |  |   | 386,205      |   |  |              | (386,205   | ) |  |   |          |  
|Railcar lease fleet, net                            |  |                       | 1,911,056 |   |               |   | 31,398  |                   |  |   | 213,290      |   |  |              | (319       | ) |  |   | 2,155,425 |  
|Intermodal tank container lease fleet, net          |  |                       |          |   |               |   |        |                   |  |   | 335,510      |   |  |              |           |   |  |   | 335,510   |  
|Other fixed assets, net                             |  |                       | 41,261    |   |               |   | 15,196  |                   |  |   | 187,376      |   |  |              |           |   |  |   | 243,833   |  
|Investment in subsidiaries                          |  |                       | 978,377   |   |               |   | 75,455  |                   |  |   | 83,416       |   |  |              | (1,137,248 | ) |  |   |          |  
|Other assets                                        |  |                       | 5,820     |   |               |   | 791     |                   |  |   | 33,169       |   |  |              |           |   |  |   | 39,780    |  
|                                                    |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  
|Total assets                                        |  | $                     | 3,284,899 |   |               | $ | 285,570 |                   |  | $ | 1,638,182    |   |  | $            | (1,587,571 | ) |  | $ | 3,621,080 |  
|                                                    |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  
|Liabilities and Stockholders Equity                |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  
|                                                    |  |                       |           |   |              
|Accounts payable                                    |  | $                     | 54,864    |   |               | $ | 16,492  |                   |  | $ | 95,506       |   |  | $            | (63,729    | ) |  | $ | 103,133   |  
|Accrued liabilities                                 |  |                       | 158,123   |   |               |   | 3,687   |                   |  |   | 81,432       |   |  |              | 375        |   |  |   | 243,617   |  
|Advances from parent and affiliates                 |  |                       | 250,875   |   |               |   | 146,074 |                   |  |   |             |   |  |              | (386,372   | ) |  |   | 10,577    |  
|Debt                                                |  |                       | 1,294,134 |   |               |   | 17,419  |                   |  |   | 127,237      |   |  |              |           |   |  |   | 1,438,790 |  
|Deferred income taxes and investment tax credits    |  |                       | 420,937   |   |               |   | 23,308  |                   |  |   | 141,453      |   |  |              |           |   |  |   | 585,698   |  
|                                                    |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  
|Total liabilities                                   |  |                       | 2,178,933 |   |               |   | 206,980 |                   |  |   | 445,628      |   |  |              | (449,726   | ) |  |   | 2,381,815 |  
|                                                    |  |                       |           |   |              
|Minority interest                                   |  |                       |          |   |               |   |        |                   |  |   | 92,681       |   |  |              |           |   |  |   | 92,681    |  
|                                                    |  |                       |           |   |              
|Stockholders equity                                |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  
|Common stock and additional capital                 |  |                       | 367,711   |   |               |   | 13,345  |                   |  |   | 368,339      |   |  |              | (475,098   | ) |  |   | 274,297   |  
|Retained earnings                                   |  |                       | 751,967   |   |               |   | 65,843  |                   |  |   | 718,326      |   |  |              | (662,747   | ) |  |   | 873,389   |  
|Accumulated other comprehensive losses              |  |                       | (1,098    | ) |               |   |        |                   |  |   | (4           | ) |  |              |           |   |  |   | (1,102    | )
|Equity adjustment from foreign currency translation |  |                       | (12,614   | ) |               |   | (598    | )                 |  |   | 13,212       |   |  |              |           |   |  |   |          |  
|                                                    |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  
|Total stockholders equity                          |  |                       | 1,105,966 |   |               |   | 78,590  |                   |  |   | 1,099,873    |   |  |              | (1,137,845 | ) |  |   | 1,146,584 |  
|                                                    |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  
|Total liabilities and stockholders equity          |  | $                     | 3,284,899 |   |               | $ | 285,570 |                   |  | $ | 1,638,182    |   |  | $            | (1,587,571 | ) |  | $ | 3,621,080 |  
|                                                    |  |                       |           |   |               |   |         |                   |  |   |              |   |  |              |            |   |  |   |           |  



- 14 -



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##### Table of Contents

|7. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------

Condensed
consolidating statements of cash flows for the nine months ended September 30, 2006 and 2005 are as follows:



|                                                              |  |                                      |          |   |               |   |          |                   |  |   |              |   |  |              |          |   |  |   |          |  
|------------------------------------------------------------- |  | ------------------------------------ | -------- | - | ------------- | - | -------- | ----------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | -------- | -
|                                                              |  | Nine Months Ended September 30, 2006 |         
|                                                              |  | Union Tank CarCompany                |          |   | ProcorLimited |   |          | OtherSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Net cash provided by operating activities:                    |  | $                                    | 90,275   |   |               | $ | 2,809    |                   |  | $ | 182,186      |   |  | $            | 88       |   |  | $ | 275,358  |  
|                                                              |  |                                      |          |   |              
|Cash flows from investing activities:                         |  |                                      |          |   |               |   |          |                   |  |   |              |   |  |              |          |   |  |   |          |  
|Construction and purchase of lease fleet                      |  |                                      | (520,051 | ) |               |   | (89      | )                 |  |   | (41,361      | ) |  |              | 278      |   |  |   | (561,223 | )
|Purchases of other fixed assets                               |  |                                      | (4,377   | ) |               |   | (1,596   | )                 |  |   | (48,700      | ) |  |              |         |   |  |   | (54,673  | )
|Proceeds from sales of available-for-sale securities          |  |                                      | 131,884  |   |               |   |         |                   |  |   |             |   |  |              |         |   |  |   | 131,884  |  
|Purchases of short-term investments                           |  |                                      |         |   |               |   | (116,084 | )                 |  |   |             |   |  |              |         |   |  |   | (116,084 | )
|Proceeds from sales of short-term investments                 |  |                                      |         |   |               |   | 81,736   |                   |  |   |             |   |  |              |         |   |  |   | 81,736   |  
|Increase (decrease) in advances from parent and affiliates    |  |                                      | 389,890  |   |               |   | 102,128  |                   |  |   | 70,380       |   |  |              | (212,048 | ) |  |   | 350,350  |  
|(Increase) decrease in other assets                           |  |                                      | (366     | ) |               |   | 423      |                   |  |   | (2,532       | ) |  |              |         |   |  |   | (2,475   | )
|Proceeds from disposals of lease fleet and other fixed assets |  |                                      | 15,423   |   |               |   | 19       |                   |  |   | 17,749       |   |  |              |         |   |  |   | 33,191   |  
|Proceeds from disposition of business                         |  |                                      |         |   |               |   |         |                   |  |   | 900          |   |  |              |         |   |  |   | 900      |  
|                                                              |  |                                      |          |   |               |   |          |                   |  |   |              |   |  |              |          |   |  |   |          |  
|Net cash provided by (used in) investing activities           |  |                                      | 12,403   |   |               |   | 66,537   |                   |  |   | (3,564       | ) |  |              | (211,770 | ) |  |   | (136,394 | )
|                                                              |  |                                      |          |   |              
|Cash flows from financing activities:                         |  |                                      |          |   |               |   |          |                   |  |   |              |   |  |              |          |   |  |   |          |  
|Principal payments of debt                                    |  |                                      | (55,752  | ) |               |   | (15,299  | )                 |  |   | (67          | ) |  |              |         |   |  |   | (71,118  | )
|Cash dividends                                                |  |                                      | (104,000 | ) |               |   | (33,402  | )                 |  |   | (178,280     | ) |  |              | 211,682  |   |  |   | (104,000 | )
|                                                              |  |                                      |          |   |               |   |          |                   |  |   |              |   |  |              |          |   |  |   |          |  
|Net cash (used in) provided by financing activities           |  |                                      | (159,752 | ) |               |   | (48,701  | )                 |  |   | (178,347     | ) |  |              | 211,682  |   |  |   | (175,118 | )
|                                                              |  |                                      |          |   |              
|Effect of exchange rates on cash and cash equivalents         |  |                                      |         |   |               |   | 2,661    |                   |  |   |             |   |  |              |         |   |  |   | 2,661    |  
|                                                              |  |                                      |          |   |               |   |          |                   |  |   |              |   |  |              |          |   |  |   |          |  
|(Decrease) increase in cash and cash equivalents              |  |                                      | (57,074  | ) |               |   | 23,306   |                   |  |   | 275          |   |  |              |         |   |  |   | (33,493  | )
|                                                              |  |                                      |          |   |              
|Cash and cash equivalents at beginning of year                |  |                                      | 70,943   |   |               |   | 75,151   |                   |  |   | 4,534        |   |  |              |         |   |  |   | 150,628  |  
|                                                              |  |                                      |          |   |               |   |          |                   |  |   |              |   |  |              |          |   |  |   |          |  
|Cash and cash equivalents at end of period                    |  | $                                    | 13,869   |   |               | $ | 98,457   |                   |  | $ | 4,809        |   |  | $            |         |   |  | $ | 117,135  |  
|                                                              |  |                                      |          |   |               |   |          |                   |  |   |              |   |  |              |          |   |  |   |          |  



- 15 -



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##### Table of Contents

|7. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



|                                                              |  |                                      |          |   |               |   |         |                   |  |   |              |   |  |              |      |   |  |   |          |  
|------------------------------------------------------------- |  | ------------------------------------ | -------- | - | ------------- | - | ------- | ----------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | -------- | -
|                                                              |  | Nine Months Ended September 30, 2005 |         
|                                                              |  | Union Tank CarCompany                |          |   | ProcorLimited |   |         | OtherSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|Net cash provided by operating activities:                    |  | $                                    | 117,231  |   |               | $ | 4,150   |                   |  | $ | 118,404      |   |  | $            | (623 | ) |  | $ | 239,162  |  
|                                                              |  |                                      |          |   |              
|Cash flows from investing activities:                         |  |                                      |          |   |               |   |         |                   |  |   |              |   |  |              |      |   |  |   |          |  
|Construction and purchase of lease fleet                      |  |                                      | (329,862 | ) |               |   | (152    | )                 |  |   | (58,001      | ) |  |              | 623  |   |  |   | (387,392 | )
|Purchases of other fixed assets                               |  |                                      | (2,841   | ) |               |   | (833    | )                 |  |   | (51,134      | ) |  |              |     |   |  |   | (54,808  | )
|Purchases of available-for-sale securities                    |  |                                      | (95,453  | ) |               |   |        |                   |  |   | 394          |   |  |              |     |   |  |   | (95,059  | )
|Proceeds from sales of available-for-sale securities          |  |                                      | 35,911   |   |               |   |        |                   |  |   |             |   |  |              |     |   |  |   | 35,911   |  
|Purchases of short-term investments                           |  |                                      |         |   |               |   | (78,915 | )                 |  |   |             |   |  |              |     |   |  |   | (78,915  | )
|Proceeds from sales of short-term investments                 |  |                                      |         |   |               |   | 45,297  |                   |  |   |             |   |  |              |     |   |  |   | 45,297   |  
|Decrease (increase) in advances to parent and affiliates      |  |                                      | 9,541    |   |               |   | 34,160  |                   |  |   | (21,896      | ) |  |              | (367 | ) |  |   | 21,438   |  
|Decrease (increase) in other assets                           |  |                                      |         |   |               |   | 2,578   |                   |  |   | (4,510       | ) |  |              |     |   |  |   | (1,932   | )
|Proceeds from disposals of lease fleet and other fixed assets |  |                                      | 7,510    |   |               |   |        |                   |  |   | 9,961        |   |  |              |     |   |  |   | 17,471   |  
|Proceeds from disposition of business                         |  |                                      |         |   |               |   |        |                   |  |   | 7,274        |   |  |              |     |   |  |   | 7,274    |  
|                                                              |  |                                      |          |   |               |   |         |                   |  |   |              |   |  |              |      |   |  |   |          |  
|Net cash (used in) provided by investing activities           |  |                                      | (375,194 | ) |               |   | 2,135   |                   |  |   | (117,912     | ) |  |              | 256  |   |  |   | (490,715 | )
|                                                              |  |                                      |          |   |              
|Cash flows from financing activities:                         |  |                                      |          |   |               |   |         |                   |  |   |              |   |  |              |      |   |  |   |          |  
|Proceeds from issuance of debt                                |  |                                      | 311,000  |   |               |   |        |                   |  |   |             |   |  |              |     |   |  |   | 311,000  |  
|Principal payments of debt                                    |  |                                      | (27,490  | ) |               |   | (1,060  | )                 |  |   | (29          | ) |  |              |     |   |  |   | (28,579  | )
|Cash dividends                                                |  |                                      | (84,000  | ) |               |   |        |                   |  |   | (367         | ) |  |              | 367  |   |  |   | (84,000  | )
|                                                              |  |                                      |          |   |               |   |         |                   |  |   |              |   |  |              |      |   |  |   |          |  
|Net cash provided by (used in) financing activities           |  |                                      | 199,510  |   |               |   | (1,060  | )                 |  |   | (396         | ) |  |              | 367  |   |  |   | 198,421  |  
|                                                              |  |                                      |          |   |              
|Effect of exchange rates on cash and cash equivalents         |  |                                      |         |   |               |   | (1,952  | )                 |  |   |             |   |  |              |     |   |  |   | (1,952   | )
|                                                              |  |                                      |          |   |               |   |         |                   |  |   |              |   |  |              |      |   |  |   |          |  
|(Decrease) increase in cash and cash equivalents              |  |                                      | (58,453  | ) |               |   | 3,273   |                   |  |   | 96           |   |  |              |     |   |  |   | (55,084  | )
|                                                              |  |                                      |          |   |              
|Cash and cash equivalents at beginning of year                |  |                                      | 61,663   |   |               |   | 33,123  |                   |  |   | 3,550        |   |  |              |     |   |  |   | 98,336   |  
|                                                              |  |                                      |          |   |               |   |         |                   |  |   |              |   |  |              |      |   |  |   |          |  
|Cash and cash equivalents at end of period                    |  | $                                    | 3,210    |   |               | $ | 36,396  |                   |  | $ | 3,646        |   |  | $            |     |   |  | $ | 43,252   |  
|                                                              |  |                                      |          |   |               |   |         |                   |  |   |              |   |  |              |      |   |  |   |          |  



|8. | Purchase Options
|-- | ----------------

On March 30, 2006, the Company
exercised options to purchase 2,155 railcars that the Company has leased since 1996 as part of certain sale-leaseback transactions. The aggregate purchase price paid by the Company for these railcars was $115,472, of which $75,742 was paid in July
2006 and $19,865 was paid in September 2006. The remaining $19,865 will be paid in December 2006. The Companys purchase of these railcars was consummated on July 3, 2006, at which time the purchased railcars ceased to be subject to the
operating leases under these sale-leaseback transactions. The Company has early buyout options on its remaining sale-leaseback transactions.



- 16 -



---

##### 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 Annual Report on Form 10-K for the year ended December 31, 2005 filed with
the SEC on March 31, 2006 and our quarterly reports for the periods ended March 31, 2006 and June 30, 2006 filed with the SEC on May 15, 2006 and August 11, 2006, respectively.

Forward-Looking Statements

Certain
statements contained in this quarterly report on Form 10-Q for the quarter ended September 30, 2006 may include certain forward-looking 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, 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. In addition, certain factors,
including risk factors identified in Part I - Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2005, may affect the Companys businesses. As a result, past financial results may
not be a reliable indicator of future performance.

Results of Operations

3rd Quarter 2006 versus 3rd Quarter 2005

Performance of the equipment leasing businesses improved in all major markets. Demand for leased railcar equipment and leased intermodal tank containers remained strong, resulting in fleet growth, improved lease rental rates and continued
high fleet utilization.

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



|                           |  |                        |         |   |      |   |         |                    |  |   |        |  
|-------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ------------------ |  | - | ------ | -
|                           |  | 2006                   |         |   | 2005 |   |         | Increase(Decrease) | 
|                           |  | (Dollars in Thousands) |        
|Services revenue           |  | $                      | 205,036 |   |      | $ | 193,708 |                    |  | $ | 11,328 |  
|Cost of services           |  |                        | 114,200 |   |      |   | 118,651 |                    |  |   | (4,451 | )
|                           |  |                        |         |   |      |   |         |                    |  |   |        |  
|Gross profit from services |  | $                      | 90,836  |   |      | $ | 75,057  |                    |  | $ | 15,779 |  
|Gross profit %             |  |                        | 44      | % |      |   | 39      | %                  |  |   |        |  



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##### Table of Contents

Services revenue in the third quarter of 2006 increased from the third quarter of 2005 primarily due to a $7.0 million
increase in railcar leasing and service revenues (equipment additions and higher lease rates), a $2.6 million increase in intermodal tank container leasing revenues (equipment additions and higher lease rates), and a $1.7 million increase in
revenues in the contract rail switching business (volume).

Gross profit on services revenue in the third quarter of 2006 increased from the third quarter
of 2005 primarily due to a $12.5 million increase for railcar leasing (gains on disposals, equipment additions and higher lease rates more than offsetting higher maintenance and retirement expenses), and a $2.7 million increase for the intermodal
tank container leasing business (equipment additions, improved utilization rate and higher lease rates).

Average fleet utilization of the Companys
railcar fleet was 98% for the third quarter of 2006, compared with 99% for the third quarter of 2005. 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.

Strong demand continued for products of the metals distribution business and for railcars. However, despite higher metals distribution prices and volume, margins were
lower due to increased costs.

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



|                        |  |                        |         |   |      |   |         |                    |  |   |        |  
|----------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ------------------ |  | - | ------ | -
|                        |  | 2006                   |         |   | 2005 |   |         | Increase(Decrease) | 
|                        |  | (Dollars in Thousands) |        
|Sales revenue           |  | $                      | 251,414 |   |      | $ | 223,468 |                    |  | $ | 27,946 |  
|Cost of sales           |  |                        | 208,783 |   |      |   | 177,465 |                    |  |   | 31,318 |  
|                        |  |                        |         |   |      |   |         |                    |  |   |        |  
|Gross profit from sales |  | $                      | 42,631  |   |      | $ | 46,003  |                    |  | $ | (3,372 | )
|Gross profit %          |  |                        | 17      | % |      |   | 21      | %                  |  |   |        |  

Sales revenue for the third quarter of 2006 increased from the third quarter of 2005 primarily due to $24.6
million higher sales of metals distribution products (higher prices and volume), $2.8 million higher sales of mobile railcar moving equipment (higher volume), $2.3 million increased sales of manufactured railcars (higher volume and prices) and a
$1.6 million increase in sales of gear drives (higher volume). These increases were partly offset by a $3.5 million reduction in sales of sulphur processing equipment (completion of a project in the third quarter of 2005).

Gross profit on sales revenue in the third quarter of 2006 decreased from the third quarter of 2005 primarily due to a $3.6 million decrease for metals distribution
products. The decrease in gross profit resulted from higher cost of sales, due in part to favorable cost adjustments in 2005, partially offset by the favorable impact of higher prices and higher volume.



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General and administrative expenses in the third quarter of 2006 were $0.7 million higher than in the third quarter of
2005 due to higher expenses in the metals distribution and railcar businesses in the third quarter of 2006.

Interest expense in the third quarter of 2006
was $3.6 million higher than in the third quarter of 2005 due to higher interest expense on advances from parent and affiliates more than offsetting lower interest expense from principal repayments of debt.

The provision for income taxes was $30.3 million in the third quarter of 2006 with an effective tax rate of 38.6%, compared with $28.0 million in the third quarter of
2005 with an effective rate of 37.6%. The 2006 effective rate is higher as a result of an adjustment to the tax liability for unremitted foreign earnings which was partially reduced by the reduction of Canadian tax rates enacted in the second
quarter.

Nine Months 2006 versus Nine Months 2005

Performance of the equipment leasing businesses improved in all major markets. Demand for railcar equipment and leased intermodal tank containers remained strong, resulting in fleet growth, improved lease rental
rates, and continued high fleet utilization.

First nine months revenues and gross profit from services were as follows:



|                           |  |                        |         |   |      |   |         |                    |  |   |       
|-------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ------------------ |  | - | ------
|                           |  | 2006                   |         |   | 2005 |   |         | Increase(Decrease)
|                           |  | (Dollars in Thousands)
|Services revenue           |  | $                      | 609,748 |   |      | $ | 568,649 |                    |  | $ | 41,099
|Cost of services           |  |                        | 336,791 |   |      |   | 334,520 |                    |  |   | 2,271 
|                           |  |                        |         |   |      |   |         |                    |  |   |       
|Gross profit from services |  | $                      | 272,957 |   |      | $ | 234,129 |                    |  | $ | 38,828
|Gross profit %             |  |                        | 45      | % |      |   | 41      | %                  |  |   |       

Services revenue for the first nine months of 2006 increased over the first nine months of 2005 primarily due to a
$29.6 million increase in railcar leasing and service revenues (equipment additions and higher lease rates), a $6.6 million increase in intermodal tank container leasing revenues (equipment additions, improved utilization rate and higher lease
rates), and $5.3 million higher revenue in the contract rail switching business (higher volume).

Gross profit on services revenue in the first nine months
of 2006 increased from the first nine months of 2005 primarily due to a $31.9 million increase for railcar leasing (gains on disposals, equipment additions and higher lease rates more than offsetting higher maintenance and retirement expenses), a
$6.1 million increase for the intermodal tank container leasing business (equipment additions, higher utilization rate and higher lease rates), and a $1.4 million increase in the contract rail switching business (higher volume).



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##### Table of Contents

Demand increased for products of the metals distribution business and for railcars, with margin improvement driven by
higher metals distribution volume and prices.

First nine months revenues and gross profit from sales were as follows:



|                        |  |                        |         |   |      |   |         |                    |  |   |        
|----------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ------------------ |  | - | -------
|                        |  | 2006                   |         |   | 2005 |   |         | Increase(Decrease)
|                        |  | (Dollars in Thousands)
|Sales revenue           |  | $                      | 812,084 |   |      | $ | 665,698 |                    |  | $ | 146,386
|Cost of sales           |  |                        | 683,714 |   |      |   | 547,550 |                    |  |   | 136,164
|                        |  |                        |         |   |      |   |         |                    |  |   |        
|Gross profit from sales |  | $                      | 128,370 |   |      | $ | 118,148 |                    |  | $ | 10,222 
|Gross profit %          |  |                        | 16      | % |      |   | 18      | %                  |  |   |        

Sales revenue for the first nine months of 2006 increased from the first nine months of 2005 primarily due to
$75.4 million higher sales of metals distribution products (higher volume and prices), $38.0 million increased sales of manufactured railcars (higher volume and prices), a $31.6 million increase in sales of sulphur processing equipment (completion
of a large project), $3.7 million higher sales of gear drives and $2.7 million higher sales of mobile railcar moving equipment (higher volume). These increases were partly offset by $4.7 million lower sales of sulphur-based fertilizer (business sold
in April 2005) and $1.1 million lower sales of containment vessel heads (lower volume).

Gross profit on sales revenue in the first nine months of 2006
increased from the first nine months of 2005 primarily due to a $10.1 million increase for metals distribution products (higher volume and prices more than offsetting higher cost of sales), a $4.0 million increase in sulphur processing equipment
(completion of a large project). These increases were partially offset by a $2.3 million decrease for manufactured railcars (higher material costs offsetting higher volume and higher prices) and a $2.1 million decrease for containment vessel heads
(lower volume and higher costs).

General and administrative expenses in the first nine months of 2006 were $5.3 million lower than in the first nine
months of 2005 due to lower expenses in the railcar business in the first nine months of 2005.

Interest expense in the first nine months of 2006 was $5.9
million higher than in the first nine months of 2005 due to the interest expense related to new financing in 2005 and interest on advances from parent and affiliates more than offsetting lower interest expense from principal repayments of debt.

The provision for income taxes was $90.5 million in the first nine months of 2006 with an effective tax rate of 36.8%, compared with $76.8 million in the
in the first nine months of 2005 with an effective rate of 38.0%. The 2006 effective rate is lower primarily as a result of the reduction of Canadian tax rates enacted in the second quarter.



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##### Table of Contents

Financial Condition and Liquidity

Nine Months 2006 versus Nine Months 2005

The net cash provided by operating activities, funds advanced from parent and affiliates, and funds from the liquidation of short-term investments and available-for-sale securities were used to finance additions to the lease fleet and other
fixed assets, pay dividends to the Companys stockholder, and service debt obligations.

It is the Companys policy to pay to Holdings a
quarterly dividend of approximately 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 Holdings. Conversely, when the Company
requires additional funds to support its operations, prior advances are repaid by or advanced from Holdings. Funds advanced to or from Holdings bear interest at commercial rates. No restrictions exist regarding the amount of dividends which may be
paid or advances which may be made by the Company to Holdings.

Cash flows from operating activities:

Operating activities provided $275.4 million of net cash in the first nine months of 2006, compared with $239.2 million provided in the first nine months of 2005. The net
cash provided by operating activities was higher in the first nine months of 2006 primarily due to higher net income, depreciation and deferred taxes, partially offset by an increase in net working capital.

Cash flows from investing activities:

Net cash used in investing
activities was $136.4 million in the first nine months of 2006 compared with $490.7 million used in investing activities in the first nine months of 2005. The change in net cash used in investing activities was primarily due to the increase in
advances from parent and affiliates. In the first nine months of 2006, advances to the Company from parent and affiliates increased $350.4 million, compared with an increase of $21.4 million in the first nine months of 2005.

During the first nine months of 2006, the Company invested $561.2 million in the construction and purchase of lease fleet assets, compared with $387.4 million in the
first nine months of 2005. The 2006 capital expenditures included $229.3 million to exercise purchase options for railcars related to sale-leaseback transactions (compared with $76.0 million in the first nine months of 2005) and investment in
railcar manufacturing assets. Of the $229.3 million for the railcars related to the sale-leaseback transactions, $63.9 million was paid in the first quarter of 2006, $25.0 million was paid in the second quarter of 2006, and $108.1 million was paid
in the third quarter of 2006. The remaining $32.3 million is payable in the fourth quarter of 2006 and is included in accrued liabilities.

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 accept those lease orders. Capital expenditures for intermodal tank
containers are likewise discretionary in the intermodal tank container business.



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##### Table of Contents

During the first nine months of 2006, the Company invested $54.7 million in the construction and purchase of other fixed
assets, compared with $54.8 million in the first nine months of 2005. Capital spending for the construction of a new tank car manufacturing plant in Alexandria, Louisiana from inception through September 30, 2006 totaled $100.5 million, of
which $25.0 million has been reimbursed by state and local governments. The remaining capital spending on the Alexandria plant, which is substantially complete and in operation, is expected to be approximately $0.5 million over the remainder of
2006. Further reimbursement of capital spending by state and local governments is expected to total approximately $7.0 million.

During the first nine
months of 2006, the Company received a net amount of $97.5 million from the sales in excess of purchases of available-for-sale securities and short-term investments. During the first nine months of 2005, the Company invested a net amount of $92.8
million for purchases in excess of sales of available-for-sale securities and short-term investments. The available-for-sale securities are investment-grade debt obligations with a combined weighted-average maturity under two years. The short-term
investments consist of commercial paper with original maturities between four and six months. These investments are available for the Companys use to fund repayment of principal obligations, finance lease fleet additions (including the
exercise of sale-leaseback purchase options), or fund other operating needs.

Proceeds from disposals of lease fleet and other fixed assets were $33.2
million in the first nine months of 2006 compared with $17.5 million in the first nine months of 2005.

Cash flows from financing activities:

Net cash used in financing activities was $175.1 million in the first nine months of 2006 compared with $198.4 million provided by financing activities
in the first nine months of 2005. The change in net cash from financing activities was primarily due to the issuance of $311.0 million of debt in 2005.

During the first nine months of 2006, the Companys financing activities included principal repayments on debt totaled $71.1 million compared with $28.6 million in the first nine months of 2005. Cash dividends to Holdings were $104.0
million in the first nine months of 2006 compared with $84.0 million in the first nine months of 2005.

Management expects future cash provided from
operating activities, long-term financings, available-for-sale securities, and advances from parent and affiliates will be adequate to provide for the continued investment in the Companys business and enable it to meet its debt service
obligations.



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##### Table of Contents

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R). This statement requires the recognition of overfunded or underfunded status of defined benefit plans as an asset or liability and the
recognition of changes in the funded status through comprehensive income. This statement also requires the measurement of funded status as of the Companys year-end. This statement is effective for fiscal years beginning after June 15,
2007, with disclosure of the impact in fiscal years beginning after December 15, 2006. The requirement to use the Companys year-end as the measurement date is effective for fiscal years ending after December 15, 2008. The Company is
currently assessing the impact of this statement on its consolidated financial statements.

In September 2006, the FASB issued FASB Statement No. 157,
Fair Value Measurements. This statement clarifies the definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement is effective for fiscal years
beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Companys consolidated financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108. This bulletin provides interpretations regarding the effects of prior year misstatements when quantifying
misstatements in the current year financial statements. This bulletin is effective for any interim period in the first fiscal year ending after November 15, 2006. The adoption of this bulletin is not expected to have a material effect on the
Companys consolidated financial statements.

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes. This interpretation clarifies the accounting for uncertainty in income taxes including defining the criteria that an individual tax
position must meet for any part of the benefit of that position to be recognized in financial statements and provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and
transition. This interpretation is effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently
assessing the impact of this interpretation on its consolidated financial statements.



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##### Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes during the first nine
months of 2006 in the Companys disclosure of the quantitative and qualitative market risk contained in Item 7A of the Companys Annual Report on Form 10-K for the year ended December 31, 2005.

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.



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##### Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference is made to Business - Environmental Matters in Item 1
and Note 9 Contingencies of the Notes to Consolidated Financial Statements of the Companys Annual Report on Form 10-K for the year ended December 31, 2005 for a description of certain environmental matters.

ITEM 1A. RISK FACTORS

There have been no material changes in the Companys risk factors from those
disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2005. In addition to the other information set forth in this report, you should carefully consider the risk factors contained in such annual report, as
such risks or other risks not currently known to the Company or that the Company does not currently deem material could materially affect the Companys business, financial condition or future results.

ITEM 6. 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

Instruments defining the rights of holders of long-term debt are not being filed herewith pursuant
to the provisions of paragraph 4(v) of Item 601(b) of Regulation S-K. The Company agrees to furnish a copy of any such instrument to the Commission upon request.



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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: November 15, 2006 |  | By:                    |  | /s/ Mark J. Garrette             
|                         |  |                        |  | Mark J. Garrette                 
|                         |  |                        |  | Vice President                   
|                         |  |                        |  | (principal financial officer     
|                         |  |                        |  | and principal accounting officer)



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