---



Form 10-Q



SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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

| | SECURITIES EXCHANGE ACT OF 1934
| | -------------------------------



For the quarterly period ended September 30, 2003



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|- | --------------------------------------------------------

| | SECURITIES EXCHANGE ACT OF 1934
| | -------------------------------



For the transition period from
 to



Commission file number 1-5666



UNION TANK CAR COMPANY

(Exact name
of registrant as specified in its charter)



|Delaware                                                       |  | 36-3104688                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



225 West Washington
Street, Chicago, Illinois 60606

(Address of principal executive offices)



Registrants telephone number, including area code: (312) 372-9500



Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x    No ̈



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



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



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- 1 -



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UNION TANK CAR COMPANY AND SUBSIDIARIES

FORM 10-Q

INDEX



|           |  |                       |  |                                                                                                           |  | Page
|---------- |  | --------------------- |  | --------------------------------------------------------------------------------------------------------- |  | ----
|Part I.    |  | Financial Information |  |                                                                                                          
|           |  |                       | 
|           |  | Item 1.               |  | Financial Statements                                                                                      |  |     
|           |  |                       | 
|           |  |                       |  | Condensed consolidated statement of incomethree and nine month periods ended September 30, 2003 and 2002 |  | 3   
|           |  |                       | 
|           |  |                       |  | Condensed consolidated balance sheetSeptember 30, 2003 and December 31, 2002                             |  | 4   
|           |  |                       | 
|           |  |                       |  | Condensed consolidated statement of cash flowsnine months ended September 30, 2003 and 2002              |  | 5   
|           |  |                       | 
|           |  |                       |  | Notes to condensed consolidated financial statements                                                      |  | 6   
|           |  |                       | 
|           |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                     |  | 15  
|           |  |                       | 
|           |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                                                |  | 18  
|           |  |                       | 
|           |  | Item 4.               |  | Controls and Procedures                                                                                   |  | 18  
|           |  |                      
|Part II.   |  | Other Information     |  |                                                                                                          
|           |  |                       | 
|           |  | Item 1.               |  | Legal Proceedings                                                                                         |  | 19  
|           |  |                       | 
|           |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                          |  | 19  
|           |  |                      
|Signatures |  |                       |  | 20                                                                                                       



- 2 -



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PART I. FINANCIAL INFORMATION



|ITEM 1. |  | FINANCIAL STATEMENTS
|------- |  | --------------------



UNION TANK CAR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Dollars in Thousands)

(Unaudited)



|                                                            |  | Three Months Ended September 30, |         | Nine Months Ended September 30,
|----------------------------------------------------------- |  | -------------------------------- | ------- | -------------------------------
|                                                            |  | 2003                             |         | 2002                           
|Revenues                                                    |  |                                  |         |                                
|Services (leasing and other)                                |  | $                                | 180,439 |                                
|Net sales                                                   |  |                                  | 141,533 |                                
|                                                            |  |                                  |         |                                
|                                                            |  |                                  | 321,972 |                                
|Other income, net                                           |  |                                  | 3,902   |                                
|                                                            |  |                                  |         |                                
|                                                            |  |                                  | 325,874 |                                
|Costs and expenses                                          |  |                                  |         |                                
|Cost of services                                            |  |                                  | 113,276 |                                
|Cost of sales                                               |  |                                  | 118,306 |                                
|Write-down of investment in aircraft direct financing lease |  |                                  |        |                                
|General and administrative                                  |  |                                  | 34,800  |                                
|Interest                                                    |  |                                  | 19,091  |                                
|                                                            |  |                                  |         |                                
|                                                            |  |                                  | 285,473 |                                
|                                                            |  |                                  |         |                                
|Income before income taxes                                  |  |                                  | 40,401  |                                
|Provision for income taxes                                  |  |                                  | 13,308  |                                
|                                                            |  |                                  |         |                                
|Net income                                                  |  | $                                | 27,093  |                                
|                                                            |  |                                  |         |                                



See notes to condensed
consolidated financial statements.



- 3 -



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UNION TANK CAR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in Thousands)



|                                                                                    |  | September 30,2003 |           | December 31,2002
|----------------------------------------------------------------------------------- |  | ----------------- | --------- | ----------------
|                                                                                    |  | (Unaudited)       |           |                 
|Assets                                                                              |  |                   |           |                 
|                                                                                    |  |                  
|Cash and cash equivalents                                                           |  | $                 | 53,430    |                 
|Short-term investments                                                              |  |                   | 61,950    |                 
|Accounts receivable, primarily due within one year                                  |  |                   | 131,604   |                 
|Accounts and notes receivable, affiliates                                           |  |                   | 43,547    |                 
|Inventories, net of LIFO reserves of $33,976 ($32,683 at December 31, 2002)         |  |                   | 109,650   |                 
|Prepaid expenses and deferred charges                                               |  |                   | 12,149    |                 
|Advances to parent company, principally at LIBOR plus 1%                            |  |                   | 322,445   |                 
|Railcar lease fleet, net                                                            |  |                   | 1,649,113 |                 
|Intermodal tank container fleet, net                                                |  |                   | 296,539   |                 
|Fixed assets, net                                                                   |  |                   | 190,180   |                 
|Investment in aircraft direct financing lease                                       |  |                   | 2,001     |                 
|Other assets                                                                        |  |                   | 55,672    |                 
|                                                                                    |  |                   |           |                 
|                                                                                    |  |                  
|Total assets                                                                        |  | $                 | 2,928,280 |                 
|                                                                                    |  |                   |           |                 
|Liabilities and Stockholders Equity                                                |  |                   |           |                 
|                                                                                    |  |                  
|Accounts payable                                                                    |  | $                 | 50,554    |                 
|Accrued liabilities                                                                 |  |                   | 251,556   |                 
|Borrowed debt, including $47,438 due within one year ($46,333 at December 31, 2002) |  |                   | 961,712   |                 
|                                                                                    |  |                   |           |                 
|                                                                                    |  |                   | 1,263,822 |                 
|                                                                                    |  |                  
|Deferred income taxes and investment tax credits                                    |  |                   | 546,336   |                 
|Minority interest liability                                                         |  |                   | 90,145    |                 
|                                                                                    |  |                  
|Stockholders equity                                                                |  |                   |           |                 
|Common stock and additional capital                                                 |  |                   | 265,061   |                 
|Retained earnings                                                                   |  |                   | 762,916   |                 
|                                                                                    |  |                   |           |                 
|Total stockholders equity                                                          |  |                   | 1,027,977 |                 
|                                                                                    |  |                   |           |                 
|                                                                                    |  |                  
|Total liabilities and stockholders equity                                          |  | $                 | 2,928,280 |                 
|                                                                                    |  |                   |           |                 



See notes to condensed
consolidated financial statements.



- 4 -



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UNION TANK CAR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)



|                                                                                  |  | Nine Months EndedSeptember 30, |         
|--------------------------------------------------------------------------------- |  | ------------------------------ | --------
|                                                                                  |  | 2003                           |         
|Cash flows from operating activities:                                             |  |                                |         
|Net income                                                                        |  | $                              | 52,977  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |         
|Depreciation and amortization                                                     |  |                                | 118,562 
|Deferred taxes                                                                    |  |                                | 17,617  
|Write-down of investment in aircraft direct financing lease                       |  |                                | 24,506  
|Gain on disposition of railcars and other fixed assets                            |  |                                | (4,115  
|Loss on disposition of business                                                   |  |                                | 1,494   
|Other non-cash income and expenses                                                |  |                                | 8,231   
|Changes in assets and liabilities:                                                |  |                                |         
|Accounts receivable                                                               |  |                                | (13,933 
|Inventories                                                                       |  |                                | 19,873  
|Prepaid expenses and deferred charges                                             |  |                                | 2,170   
|Accounts payable and accrued expenses                                             |  |                                | (1,529  
|                                                                                  |  |                                |         
|Net cash provided by operating activities                                         |  |                                | 225,853 
|                                                                                  |  |                               
|Cash flows from investing activities:                                             |  |                                |         
|Construction and purchase of railcars and other fixed assets                      |  |                                | (178,483
|Decrease in short-term investments                                                |  |                                | 13,018  
|Decrease (increase) in advance to parent                                          |  |                                | 5,139   
|Increase in other assets                                                          |  |                                | (1,525  
|Proceeds from disposals of railcars and other fixed assets                        |  |                                | 25,715  
|Proceeds from disposition of business                                             |  |                                | 625     
|Purchases of businesses, net of cash acquired                                     |  |                                |        
|                                                                                  |  |                                |         
|Net cash used in investing activities                                             |  |                                | (135,511
|                                                                                  |  |                               
|Cash flows from financing activities:                                             |  |                                |         
|Proceeds from issuance of borrowed debt                                           |  |                                | 145     
|Principal payments of borrowed debt                                               |  |                                | (46,449 
|Cash dividends                                                                    |  |                                | (37,000 
|                                                                                  |  |                                |         
|Net cash used in financing activities                                             |  |                                | (83,304 
|                                                                                  |  |                               
|Effect of exchange rates on cash and cash equivalents                             |  |                                | 6,170   
|                                                                                  |  |                                |         
|Net increase in cash and cash equivalents                                         |  |                                | 13,208  
|                                                                                  |  |                               
|Cash and cash equivalents at beginning of year                                    |  |                                | 40,222  
|                                                                                  |  |                                |         
|Cash and cash equivalents at end of period                                        |  | $                              | 53,430  
|                                                                                  |  |                                |         
|Cash paid during the period for:                                                  |  |                                |         
|Interest (net of amount capitalized)                                              |  | $                              | 52,406  
|Income taxes                                                                      |  |                                | 1,414   



See notes to condensed
consolidated financial statements.



- 5 -



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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands)

(Unaudited)



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



|2. | The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals and the write-down of investment in aircraft
direct financing lease, which the Company considers necessary for a fair presentation. These interim financial statements do not include all disclosures normally provided in annual financial statements. Accordingly, they should be read in
conjunction with the consolidated financial statements and notes thereto in the Companys 2002 Annual Report on Form 10-K.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At the close of business on June 30, 2002, the Company distributed the stock of Atlas Bolt & Screw Company, Atlas Bolt & Screw Sp.zo.o and Pan
American Screw, Inc. to Marmon Industrial LLC (MIC), MIC distributed the stock of the Company to Holdings and Holdings contributed the stock of Amarillo Gear Company, Penn Machine Company and WCTU Railway Company to the Company. As a result of such
realignment, (i) Holdings owns all of the Companys capital stock, (ii) the Company ceased to own any capital stock of Atlas Bolt & Screw Company, Atlas Bolt & Screw Sp.zo.o and Pan American Screw, Inc. and (iii) the Company owns all of
the capital stock of Amarillo Gear Company, Penn Machine Company and WCTU Railway Company. The transactions have been accounted for as a change in reporting entity on an as if pooled basis and, accordingly, all financial and other
information has been restated to reflect these transactions for comparative purpose for all periods presented. The impact of this realignment is not material.



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



The 2003 interim results presented herein are not necessarily indicative of
the results of operations for the full year 2003.



|3. | As more fully described in the Companys 2002 Annual Report on Form 10-K, under an arrangement with Holdings, the Company is included in the consolidated federal income tax
return of Holdings. As a member of a consolidated federal income tax group, the Company is contingently liable for the federal income taxes of the other members of the group.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



- 6 -



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|5. | Foreign currency translation adjustments and transaction gains and losses are borne by the Companys parent. For the nine months ended September 30, 2003 and 2002, the
Companys parent absorbed a loss of $6,982 and a gain of $774, respectively.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. | The Companys short-term investments consist of commercial paper with original maturities between four and six months.
|-- | ----------------------------------------------------------------------------------------------------------------------



|7. | The Companys foreign subsidiaries periodically enter into foreign currency forward contracts to hedge against U.S. dollar exposures. There were no foreign currency forward
contracts outstanding at September 30, 2003 and December 31, 2002.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|8. | Segment Information
|-- | -------------------



|                                      |  | Railcar               |       | MetalsDistribution |   | IntermodalTankContainerLeasing |  | AllOther |      |  | ConsolidatedTotals
|------------------------------------- |  | --------------------- | ----- | ------------------ | - | ------------------------------ |  | -------- | ---- |  | ------------------
|                                      |  | (Dollars in Millions)
|Three months ended September 30, 2003 |  |                       |       |                    |   |                                |  |          |      |  |                   
|Revenues from external customers      |  | $                     | 150.6 |                    | $ | 97.0                           |  | $        | 21.8 |  | $                 
|Income before income taxes            |  |                       | 28.2  |                    |   | 3.2                            |  |          | 2.5  |  |                   
|                                      |  |                       |       |                    |  
|Three months ended September 30, 2002 |  |                       |       |                    |   |                                |  |          |      |  |                   
|Revenues from external customers      |  | $                     | 142.6 |                    | $ | 99.8                           |  | $        | 19.8 |  | $                 
|Income before income taxes            |  |                       | 29.4  |                    |   | 3.1                            |  |          | 1.3  |  |                   
|                                      |  |                       |       |                    |  
|Nine months ended September 30, 2003  |  |                       |       |                    |   |                                |  |          |      |  |                   
|Revenues from external customers      |  | $                     | 434.5 |                    | $ | 292.4                          |  | $        | 64.5 |  | $                 
|Income before income taxes            |  |                       | 79.9  |                    |   | 5.1                            |  |          | 7.1  |  |                   
|                                      |  |                       |       |                    |  
|Nine months ended September 30, 2002  |  |                       |       |                    |   |                                |  |          |      |  |                   
|Revenues from external customers      |  | $                     | 437.9 |                    | $ | 306.7                          |  | $        | 58.9 |  | $                 
|Income before income taxes            |  |                       | 87.4  |                    |   | 9.7                            |  |          | 4.1  |  |                   



|9. | Consolidating Financial Information
|-- | -----------------------------------



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



In 2002, Procor Limited restructured a part of its railcar leasing business. Procor Limited transferred a number of the railcars it owned to Procor Leasing Inc.
(PLI) in exchange for the Class A Preferred Shares of PLI. PLI then transferred these same cars to a new limited partnership, Procor LP, in exchange for a 98% limited partnership interest in Procor LP. Procor Limited owns a 2% general
partnership interest in Procor LP.



- 7 -



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|9. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



Condensed consolidating statements of income for the three months ended September 30, 2003 and 2002 are as follows:



|Three Months Ended September 30, 2003
|-------------------------------------
|                                     
|                                     
|Revenues                             
|Services                             
|Net sales                            
|                                     
|                                     
|Other income, net                    
|                                     
|                                     
|Costs and expenses                   
|Cost of services                     
|Cost of sales                        
|General and administrative           
|Interest                             
|                                     
|                                     
|                                     
|Income before income taxes           
|Provision for income taxes           
|                                     
|Net income                           
|                                     
|                                     
|Three Months Ended September 30, 2002
|                                     
|                                     
|Revenues                             
|Services                             
|Net sales                            
|                                     
|                                     
|Other income, net                    
|                                     
|                                     
|Costs and expenses                   
|Cost of services                     
|Cost of sales                        
|General and administrative           
|Interest                             
|                                     
|                                     
|                                     
|Income before income taxes           
|Provision for income taxes           
|                                     
|Net income                           
|                                     



- 8 -



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|9. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



Condensed consolidating statements of income for the nine months ended September 30, 2003 and 2002 are as follows:



|Nine Months Ended September 30, 2003                       
|-----------------------------------------------------------
|                                                           
|                                                           
|Revenues                                                   
|Services                                                   
|Net sales                                                  
|                                                           
|                                                           
|Other income, net                                          
|                                                           
|                                                           
|Costs and expenses                                         
|Cost of services                                           
|Cost of sales                                              
|Write-down of investment in aircraft direct financing lease
|General and administrative                                 
|Interest                                                   
|                                                           
|                                                           
|                                                           
|Income before income taxes                                 
|Provision for income taxes                                 
|                                                           
|Net income                                                 
|                                                           



|Nine Months Ended September 30, 2002
|------------------------------------
|                                    
|                                    
|Revenues                            
|Services                            
|Net sales                           
|                                    
|                                    
|Other income, net                   
|                                    
|                                    
|Costs and expenses                  
|Cost of services                    
|Cost of sales                       
|General and administrative          
|Interest                            
|                                    
|                                    
|                                    
|Income before income taxes          
|Provision for income taxes          
|                                    
|Net income                          
|                                    



- 9 -



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|9. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



Condensed consolidating balance sheets as of September 30, 2003 and December 31, 2002 are as follows:



|                                                    |  | September 30, 2003   
|--------------------------------------------------- |  | ---------------------
|                                                    |  | Union Tank CarCompany
|Assets                                              |  |                      
|Cash and cash equivalents                           |  | $                    
|Short-term investments                              |  |                      
|Accounts receivable                                 |  |                      
|Accounts and notes receivable, affiliates           |  |                      
|Inventories, net                                    |  |                      
|Prepaid expenses and deferred charges               |  |                      
|Advances to parent company                          |  |                      
|Railcar lease fleet, net                            |  |                      
|Intermodal tank container lease fleet, net          |  |                      
|Fixed assets, net                                   |  |                      
|Investment in aircraft direct financing lease       |  |                      
|Investment in subsidiaries                          |  |                      
|Other assets                                        |  |                      
|                                                    |  |                      
|Total assets                                        |  | $                    
|                                                    |  |                      
|Liabilities and Stockholders Equity                |  |                      
|Accounts payable                                    |  | $                    
|Accrued liabilities                                 |  |                      
|Borrowed debt                                       |  |                      
|                                                    |  |                      
|                                                    |  |                      
|Deferred income taxes and investment tax credits    |  |                      
|Minority interest liability                         |  |                      
|Stockholders equity                                |  |                      
|Common stock and additional capital                 |  |                      
|Retained earnings                                   |  |                      
|Equity adjustment from foreign currency translation |  |                      
|                                                    |  |                      
|Total stockholders equity                          |  |                      
|                                                    |  |                      
|Total liabilities and stockholders equity          |  | $                    
|                                                    |  |                      



- 10 -



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|9. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



|                                                    |  | December 31, 2002     
|--------------------------------------------------- |  | ----------------------
|                                                    |  | Union Tank Car Company
|Assets                                              |  |                       
|Cash and cash equivalents                           |  | $                     
|Short-term investments                              |  |                       
|Accounts receivable                                 |  |                       
|Accounts and notes receivable, affiliates           |  |                       
|Inventories, net                                    |  |                       
|Prepaid expenses and deferred charges               |  |                       
|Advances to parent company                          |  |                       
|Railcar lease fleet, net                            |  |                       
|Intermodal tank container lease fleet, net          |  |                       
|Fixed assets, net                                   |  |                       
|Investment in aircraft direct financing lease       |  |                       
|Investment in subsidiaries                          |  |                       
|Other assets                                        |  |                       
|                                                    |  |                       
|Total assets                                        |  | $                     
|                                                    |  |                       
|Liabilities and Stockholders Equity                |  |                       
|Accounts payable                                    |  | $                     
|Accrued liabilities                                 |  |                       
|Borrowed debt                                       |  |                       
|                                                    |  |                       
|                                                    |  |                       
|Deferred income taxes and investment tax credits    |  |                       
|Minority interest liability                         |  |                       
|Stockholders equity                                |  |                       
|Common stock and additional capital                 |  |                       
|Retained earnings                                   |  |                       
|Equity adjustment from foreign currency translation |  |                       
|                                                    |  |                       
|Total stockholders equity                          |  |                       
|                                                    |  |                       
|Total liabilities and stockholders equity          |  | $                     
|                                                    |  |                       



- 11 -



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|9. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



Condensed consolidating statements of cash flows for the nine months ended September 30, 2003 and 2002 are as follows:



|Nine Months Ended September 30, 2003                         | 
|------------------------------------------------------------ | 
|                                                             | 
|Net cash provided by operating activities:                   | 
|Cash flows from investing activities:                        | 
|Construction and purchase of railcars and other fixed assets | 
|Decrease in short-term investments                           | 
|Decrease (increase) in advance to parent                     | 
|Increase in other assets                                     | 
|Proceeds from disposals of railcars and other fixed assets   | 
|Proceeds from disposals of business                          | 
|                                                             | 
|Net cash (used in) provided by investing activities          | 
|Cash flows from financing activities:                        | 
|Proceeds from issuance of borrowed debt                      | 
|Principal payments of borrowed debt                          | 
|Cash dividends                                               | 
|                                                             | 
|Net cash (used in) provided by financing activities          | 
|Effect of exchange rates on cash and cash equivalents        | 
|                                                             | 
|Net (decrease) increase in cash and cash equivalents         | 
|Cash and cash equivalents at beginning of year               | 
|                                                             | 
|Cash and cash equivalents at end of period                   | 
|                                                             | 



- 12 -



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|9. | Consolidating Financial Information (Continued)
|-- | -----------------------------------------------



|Nine Months Ended September 30, 2002                         | 
|------------------------------------------------------------ | 
|                                                             | 
|Net cash provided by operating activities:                   | 
|Cash flows from investing activities:                        | 
|Construction and purchase of railcars and other fixed assets | 
|Decrease in short-term investments                           | 
|Decrease (increase) in advance to parent                     | 
|Increase in other assets                                     | 
|Proceeds from disposals of railcars and other fixed assets   | 
|Purchases of businesses, net of cash acquired                | 
|                                                             | 
|Net cash provided by (used in) investing activities          | 
|Cash flows from financing activities:                        | 
|Proceeds from issuance of borrowed debt                      | 
|Principal payments of borrowed debt                          | 
|Cash dividends                                               | 
|                                                             | 
|Net cash (used in) provided by financing activities          | 
|Effect of exchange rates on cash and cash equivalents        | 
|                                                             | 
|Net increase (decrease) in cash and cash equivalents         | 
|Cash and cash equivalents at beginning of year               | 
|                                                             | 
|Cash and cash equivalents at end of period                   | 
|                                                             | 



- 13 -



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|10. | The Company is obligated under one residual value guarantee totaling $2.1 million until March 2006 and several performance guarantees totaling $3.5 million until August 2006.
Additionally, the Company provides warranties on certain products for varying lengths of time. Changes to the Companys product warranty accrual during the periods are as follows:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                           |  | Nine Months EndedSeptember 30, |     
|-------------------------- |  | ------------------------------ | ----
|                           |  | 2003                           |     
|                           |  | (Dollars in Thousands)         |     
|Balance, beginning of year |  | $                              | 724 
|Warranties issued          |  |                                | 142 
|Settlements                |  |                                | (326
|                           |  |                                |     
|Balance, end of period     |  | $                              | 540 
|                           |  |                                |     



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.



|11. | On February 8, 1988, Procor Limited (Procor) entered into an Operating Lease Agreement (Lease) with Air Canada for one Boeing 767-233 aircraft, the
Companys only aircraft. On the same day and as part of the same transaction, Procor entered into a Trust Indenture (Indenture) under which it borrowed Cdn$45.0 million and granted a security interest in the aircraft to the trustee.
On April 1, 2003, Air Canada filed for an interim court order for protection from its creditors under the Canadian Companies Creditors Arrangement Act. On May 9, 2003, Air Canada notified Procor that it was electing to terminate the Lease effective
as of May 30, 2003. This filing and the termination of the Lease constituted defaults under the Lease. The defaults under the Lease constituted defaults under the Indenture and allowed the trustee, among other things, to declare the remaining
principal and interest immediately due. The trustee did not do so. On July 29, 2003, Procor prepaid the remaining debt of Cdn$17.7 million and paid a make-whole premium of Cdn$2.8 million.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The net book value of the aircraft was Cdn$37.3 million as of March 31, 2003.
Because of the depressed market for Boeing 767-233 aircraft and a required regulatory maintenance check, there is no reasonable expectation of leasing the aircraft in the near future on acceptable terms. Procor has been advised that the current
value of the aircraft, in whole or for parts, in an as-is condition, may be as low as Cdn$2.7 million. Therefore, during the second quarter, the value of the aircraft was written down to Cdn$2.7 million.



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



Results of Operations

3rd Quarter 2003 versus 2002



Performance of the railcar leasing business continues to be adversely affected by the low level of activity in most major markets. Demand for existing railcars has
improved, increasing railcar fleet utilization. However, average railcar lease rates have declined. Demand for intermodal equipment has improved, resulting in higher intermodal fleet utilization, although lease rates for intermodal equipment are
lower. Service revenues increased $8.2 million primarily due to a $3.3 million increase in sulphur processing revenues, a $1.9 million increase in intermodal tank container leasing revenues, and a $1.9 million increase in railcar leasing and service
revenues.



Demand for new railcars has improved, resulting in increased
production and capacity utilization. Increased demand for railcars produced for lease has more than offset decreased demand for railcars produced for sale. Demand for the products of the metals distribution business was impacted by the continuing
general economic slowdown in the U.S. Overall sales revenues decreased $3.0 million primarily due to a $5.6 million decrease in sulphur processing equipment sales and a $2.7 million decrease in metal products, offset by a $6.2 million increase in
sale of railcars.



Other income decreased $1.3 million primarily due to the
termination of the lease disclosed in Note 11 to the financial statements.



The
provision for income taxes as a percentage of income before taxes decreased due to an increase in anticipated utilization of foreign tax credits.



Nine Months 2003 versus 2002



Performance of the railcar leasing business continues to be adversely affected by the low level of activity in most major markets, decreasing demand for existing railcars
and depressing railcar fleet utilization. Average railcar lease rates have declined. Demand for intermodal equipment has improved, resulting in higher intermodal fleet utilization, although lease rates for intermodal equipment are lower. Service
revenues increased $14.8 million primarily due to a $7.7 million increase in sulphur processing revenues and a $5.6 million increase in intermodal tank container leasing revenues.



Demand for new railcars has improved, resulting in increased production and capacity utilization. Increased demand for railcars produced for
lease has more than offset decreased demand for railcars produced for sale. Demand for the products of the metals distribution business was impacted by the continuing general economic slowdown in the U.S. Overall sales revenues decreased $24.7
million primarily due to a $14.1 million decrease in metal products, a $6.7 million decrease in sulphur processing equipment sales, and a $2.5 million decrease in sale of railcars. Gross margin on sales revenues decreased $10.4 million primarily due
to a $5.0 million decrease in margin in the metals distribution business and a $2.0 million decrease in margin in the sulphur processing equipment sales.



Other income decreased $8.5 million, $5.5 million of which was due to the termination of the lease disclosed in Note 11 to the financial statements and $1.5 million of
which was due to a loss on disposition of a foreign metals distribution subsidiary.



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Financial Condition and Liquidity

Nine Months 2003 versus 2002



Operating activities provided $225.9 million of cash in the first nine months of 2003. These funds, along with redemption of short-term investments, were used to finance
lease fleet additions, service borrowed debt obligations, advance funds to parent, and pay dividends to the Companys stockholder.



It is the Companys policy to pay to its stockholder a quarterly dividend equal to 70% of net income. To the extent that the Company generates cash in excess of its
operating needs, such funds, in excess of the amounts paid as dividends, are advanced to its parent and bear interest at commercial rates. Conversely, when the Company requires additional funds to support its operations, prior advances are repaid by
its parent. No restrictions exist regarding the amount of dividends which may be paid or advances which may be made by the Company to its parent.



During the first nine months of 2003, the Company spent $178.5 million for construction and purchase of railcars and other fixed assets. Since capital expenditures for
railcars are generally incurred subsequent to receipt of firm customer lease orders, such expenditures are discretionary to the Company based on its desire to enter into those lease orders. Capital expenditures for intermodal tank containers are
likewise discretionary in the intermodal tank container business.



During the
first nine months of 2003, the Companys financing activities included the use of $46.4 million for principal repayments on borrowed debt and $37.0 million for cash dividends. Net cash used in financing activities was $83.3 million.



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



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New Accounting Pronouncements



In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No.
46, Consolidation of Variable Interest Entities. This Interpretion requires that an enterprises consolidated financial statements include subsidiaries in which the enterprise has a controlling financial interest. At September 30,
2003, the Company did not have any unconsolidated variable interest entities.



In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. This Interpretation does not prescribe a specific approach for subsequently measuring the guarantors recognized liability over the term of the
related guarantee. This Interpretation also incorporates, without change, the guidance in FIN No. 34, Disclosure of Indirect Guarantees of Indebtedness of Others, which is being superseded. The initial recognition and initial measurement
provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption
of FIN No. 45 did not have a material impact on the Companys consolidated financial statements or financial position.



In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which is effective for fiscal years beginning after June 15, 2002.
The Statement requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized
as part of the related long-lived asset and allocated to expense over the useful life of the asset. The Company adopted the new rule on asset retirement obligations on January 1, 2003. The effect of adoption of SFAS No. 143 did not have a material
effect on the Companys results of operations or financial position.



Forward-Looking Statements



This
quarterly report on Form 10-Q for the quarter ended September 30, 2003 contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This information may involve risks and
uncertainties that could cause actual results to differ materially from those set forth herein. These risks and uncertainties include, but are not limited to, unanticipated changes in the markets served by the Company such as the railcar leasing,
service and sales, intermodal tank container leasing and metal products distribution industries.



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|ITEM 3. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- |  | ----------------------------------------------------------



At September 30, 2003, there had been no significant change to the Companys exposure to market risk since December 31, 2002.



|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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PART II. OTHER INFORMATION



|ITEM 1. |  | Legal Proceedings
|------- |  | -----------------



Reference is made to BusinessEnvironmental Matters in the Companys Annual Report on Form 10-K for the year ended December 31, 2002
and to Item 1. Legal Proceedings in the Companys Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 for a description of certain environmental matters.



|ITEM 6. |  | Exhibits and Reports on Form 8-K
|------- |  | --------------------------------



a. Exhibits

| |  |             
| |  | ------------
| |  | Exhibit 31.1
| |  |             
| |  | Exhibit 31.2
| |  |             
| |  | Exhibit 32.1
| |  |             
| |  | Exhibit 32.2



b. Reports on Form 8-K
during the quarter ended September 30, 2003



None.



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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 13, 2003 |  |  |  | /S/    MARK J. GARRETTE          
|                         |  |  | 
|                         |  |  |  |                                  



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