Union Tank Car 10-K 2007 FY Annual report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For the year ended December 31, 2007

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)

181 W. Madison Street, 26th Floor, Chicago, Illinois	60602-4510
(Address of principal executive offices)	(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
None	—

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  x    No  ¨

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  ¨    No  x*

* NOTE: 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.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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	Smaller Reporting company  ¨
(Do not check if a smaller reporting company)

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.

UNION TANK CAR COMPANY

FORM 10-K

Year Ended December 31, 2007

CONTENTS

Section		Page
Part I.
Item 1	Business	1
Item 1A	Risk Factors	8
Item 1B	Unresolved Staff Comments	12
Item 2	Properties	12
Item 3	Legal Proceedings	13
Item 4	Submission of Matters to a Vote of Security Holders	13
Part II.
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6	Selected Financial Data	14
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	29
Item 8	Financial Statements and Supplementary Data	30
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	67
Item 9A	Controls and Procedures	67
Item 9B	Other Information	67
Part III.
Item 10	Directors, Executive Officers and Corporate Governance	68
Item 11	Executive Compensation	70
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	76
Item 13	Certain Relationships and Related Transactions, and Director Independence	76
Item 14	Principal Accountant Fees and Services	77
Part IV.
Item 15	Exhibits, Financial Statement Schedules	78
Signatures		79

PART I

ITEM 1. BUSINESS

General

UNION TANK CAR COMPANY (with its wholly owned and majority-owned subsidiaries herein collectively referred to, unless the context otherwise requires, as the “Company”) was organized under the laws of Delaware on September 23, 1980 and is the successor to a business which was originally incorporated in New Jersey in 1891. The Company is a wholly owned subsidiary of Marmon Holdings, Inc. (“Holdings”). Prior to the transaction discussed below, substantially all of the stock of Holdings was 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.

On March 18, 2008, Berkshire Hathaway Inc. (“Berkshire”) purchased a minimum of 60% of Holdings for $4.5 billion. The remaining 40% of Holdings will be acquired by Berkshire through staged acquisitions over a five to six year period for consideration based on future earnings of Holdings.

The Company operates its largest businesses in three segments: Railcar, Metals Distribution and Intermodal Tank Container Leasing. The remaining businesses of the company are classified as All Other.

Railcar

The primary activity of the Railcar segment is leasing of railway tank cars and other railcars to North American manufacturers and other shippers of chemical products, including liquid fertilizers, liquefied petroleum gas and other petroleum and fuel products, food products and bulk plastics. The Company owns and operates one of the largest fleets of railway tank cars in the world. As of December 31, 2007, the Company’s railcar fleet comprised 79,074 tank cars and 15,342 railway cars of other types. A total of 38,768 railcars were added to the lease fleet during the ten years ended December 31, 2007. Most of the Company’s railcars were built by the Company or to its specifications and the rest were purchased from other sources.

Railway tank cars carrying chemicals and acids account for the greatest portion of total leasing revenues, followed in order by railway tank cars carrying refined petroleum products (such as fuel oils and asphalt), compressed gases (particularly liquefied petroleum gas and anhydrous ammonia), food products and liquid fertilizers.

A significant portion of revenues from the Company’s non-tank railcar fleet derives from leasing of hopper cars for carrying bulk plastics. Remaining non-tank railcar revenues are attributable to leasing of railcars serving the dry bulk chemical and coal industries.

The Company builds railway tank cars primarily for its leasing business, but also builds railway tank cars for sale to others. Generally, manufacturing follows receipt of a firm order for lease or sale of a railway tank car.

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Substantially all of the Company’s railcars are leased directly to several hundred manufacturers and other shippers under leases covering from one to several thousand railcars and ranging from one to twenty years. The average term of leases entered into during 2007 for newly manufactured railcars was approximately six years. The average term of leases entered into during 2007 for used railway tank cars and other railcars was approximately four years. Under the terms of most leases, the Company agrees to provide a full range of services, including railcar repair and maintenance. The Company supplies relatively few railcars directly to railroads. The Company markets its railcars through regional sales offices located throughout the United States and Canada and through a sales agent in Mexico. To ensure optimum use of the railcar lease fleet, the Company maintains data processing systems that contain information about each railcar, including mechanical specifications, maintenance and repair data, and lease terms.

The Company maintains repair facilities at strategic points throughout North America. In addition to work performed by the Company, certain maintenance and repair work is performed for the Company’s account by railroads when railroad inspection determines the need for such work under the interchange rules of the Association of American Railroads (“AAR”).

The Company is not subject to regulation or supervision as a common carrier. The Company’s railcars are subject to construction, safety and maintenance regulations of the Department of Transportation, various other government agencies and the AAR. These regulations have required, and may in the future require, the Company to make significant modifications to certain of its railcars from time to time.

The Company’s facilities for manufacturing and assembling railway tank cars are located in Alexandria, Louisiana, East Chicago, Indiana and Sheldon, Texas. The Company also operates North America’s largest network of shops for repairing and servicing railcars, as well as a fleet of specially equipped trucks to perform repairs at customer plant sites.

Metals Distribution

Subsidiaries of the Company are leading distributors of carbon steel, stainless steel and aluminum tubular products; chrome and stainless bar; other carbon steel products, including beams and channels; and aircraft grade tubing and sheets, rolled form shapes and other raw materials.

These subsidiaries serve the agriculture, capital goods, machine tool, construction, transportation, refining, petrochemical, industrial, and fluid power industries, as well as aerospace companies, the military, construction trades, steel fabricators, and OEMs.

Intermodal Tank Container Leasing

Subsidiaries of the Company own, manage, lease and maintain intermodal tank containers. Intermodal tank containers are capable of transporting cargo by way of multiple modes of transportation including road, rail or ship. The container fleet consists of a wide range of equipment for the global transportation, distribution and storage of bulk liquids and gases, which allows the Company to service the full range of customer requirements. These customers include the international chemical industry and logistics operators specializing in bulk liquid transportation. One of these subsidiaries also owns a fleet of drop frame tank chassis.

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All Other

The Company is engaged in several other activities, as described below.

Sulphur Processing

Subsidiaries of the Company provide sulphur producers in Canada with various services, including processing of liquefied sulphur into crystalline granules. A subsidiary also designs, manufactures and sells sulphur processing equipment and plants worldwide.

Other Railway Equipment and Services

A subsidiary of the Company manufactures mobile railcar moving vehicles for in-plant and yard switching. Another subsidiary of the Company manufactures wheels, axles and gear sets for light rail transit. Other subsidiaries provide contract switching services to companies with on-site rail yards.

Containment Vessel Head Manufacturing

A subsidiary of the Company manufactures and distributes metal containment vessel heads, primarily made of steel, to the metal containment vessel construction industry.

Gear Drive Manufacturing

Subsidiaries of the Company manufacture right-angle gear drives for industrial and agricultural applications and wind machines used to protect fruits and vegetables from frost.

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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. All other businesses of the Company, as described previously, plus corporate headquarters items and eliminations, are shown as All Other in the table:

	Railcar		Metals Distribution		Intermodal Tank Container Leasing		All Other		Consolidated Totals
	(Dollars in Millions)
2007
Services revenue	$	683.3	$	9.7	$	122.6	$	80.0	$	895.6
Sales revenue		42.8		902.8		—		200.7		1,146.3
Interest income		—		—		—		13.2		13.2
Interest expense		62.0		0.1		14.2		43.3		119.6
Depreciation and amortization		173.9		6.1		30.4		6.9		217.3
Income before income taxes and minority interest		220.9		88.8		40.9		25.6		376.2
Segment assets		3,566.4		300.0		402.9		369.2		4,638.5
Expenditures for long-lived assets		648.5		6.7		49.5		14.6		719.3
2006
Services revenue	$	629.8	$	7.7	$	112.9	$	69.8	$	820.2
Sales revenue		94.0		785.7		—		171.8		1,051.5
Interest income		—		—		—		17.1		17.1
Interest expense		68.9		0.1		15.3		11.3		95.6
Depreciation and amortization		154.2		3.6		28.7		6.2		192.7
Income before income taxes and minority interest		165.9		85.2		32.3		36.8		320.2
Segment assets		3,035.6		254.5		381.3		436.2		4,107.6
Expenditures for long-lived assets		703.3		4.5		51.4		9.6		768.8
2005
Services revenue	$	593.5	$	8.7	$	103.8	$	61.6	$	767.6
Sales revenue		66.4		695.5		—		132.2		894.1
Interest income		0.1		—		—		17.8		17.9
Interest expense		69.8		—		15.2		2.7		87.7
Depreciation and amortization		130.4		3.1		27.8		5.3		166.6
Income before income taxes and minority interest		122.8		73.4		21.9		45.8		263.9
Segment assets		2,453.4		202.2		359.1		606.4		3,621.1
Expenditures for long-lived assets		523.8		4.3		41.9		11.9		581.9

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Geographic Information

The following table presents geographic information for the Company. Revenues and long-lived assets are attributed to countries based on location of customers.

	Revenues		Long-lived Assets
	(Dollars in Millions)
2007
United States	$	1,701.5	$	3,440.0
Canada		157.6		170.7
Other countries		182.8		264.7
Consolidated total	$	2,041.9	$	3,875.4
2006
United States	$	1,582.6	$	2,943.7
Canada		139.7		158.2
Other countries		149.5		238.9
Consolidated total	$	1,871.8	$	3,340.8
2005
United States	$	1,430.3	$	2,381.3
Canada		129.1		169.2
Other countries		102.3		224.0
Consolidated total	$	1,661.7	$	2,774.5

Major Customers

Revenues from any one customer did not exceed 10% of consolidated revenues during any of the last three years.

Raw Materials

The Company purchases raw materials from a variety of suppliers, with no one supplier being material. In management’s opinion, the Company will have adequate availability of raw materials in the future.

Increased prices and reduced availability of steel and other metals have not had and are not expected to have a material impact on the Company’s activities. The Company’s exposure is mitigated via supply agreements, the ability to increase prices and the discretionary nature of railcar construction.

Foreign Operations

The Company does not believe that there are other than normal business risks attendant to its foreign operations.

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Competition

All activities of the Company compete with similar activities of other companies.

Several competitors are in the business of leasing railcars in the United States and Canada. Principal competitors are GATX Corporation, General Electric Railcar Services Corporation, American Railcar Leasing LLC and Trinity Industries Leasing Company. Principal competitive factors are price, service, product design and reputation.

In the metals distribution business, the Company has numerous competitors, both large and small. The Company is one of the largest participants in the distribution of its class of products. Principal competitive factors include price, availability of product and service.

The Company, the largest lessor of intermodal tank containers in the world, competes with numerous competitors in this industry. Competition is based on a number of factors, including technical expertise, availability of equipment, price, service and reputation.

Supply and Demand

Demand for railway tank cars and bulk plastic hopper cars is generally met with a combination of the industry’s existing fleet and new railcar additions. The industry’s generally high overall utilization of the railway tank car and bulk plastic covered hopper car fleets evidences an appropriate level and mix of equipment to meet existing railcar demands. New railcars are needed to satisfy growth, for specialized requirements, or the desire of certain customers for newer equipment. Since railcars are typically built to customer order, the supply of new railcars generally stays in reasonable balance with demand.

Major underlying factors affecting demand for new railcars are: (a) the rate of growth of the overall economy, (b) growth of certain industry segments, manufacturers, or shippers, particularly involving significant new or expanded production operations, and (c) replacement of aged, obsolete, or worn out railcars.

Demand for products of the metals distribution business is primarily related to the level of manufacturing and construction activity in the United States.

Demand for intermodal tank containers is dependent on growth of the global economy and demand for chemicals and other liquid products. Global economic factors impacting demand include overall demand for chemicals, location of production of the products carried and stored in relation to location of demand for these products, import/export tariffs and other trade restrictions.

Backlog

The Company builds railway tank cars primarily for use in its leasing business and the number of railcars added in any one year is a small percentage of the Company’s lease fleet. Additionally, for railway tank cars built for sale to customers, the Company delivers against orders within a relatively brief period. Backlog is not material to any of the Company’s business segments.

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Employees

As of December 31, 2007, the Company had approximately 6,140 employees.

Environmental Matters

The Company’s operations, as well as those of its competitors, are subject to extensive federal, state and local environmental regulations. These laws cover discharges to waters; air emissions; toxic substances; and the generation, handling, storage, transportation and disposal of waste and hazardous materials. Environmental risks are inherent in rail operations, which frequently involve transporting chemicals and other hazardous materials.

The Company believes that all of its facilities are in substantial compliance with applicable laws and regulations relating to environmental protection. Over the past several years, the Company has attempted to identify and remediate potential problem areas. In 2007, the Company spent approximately $4.2 million on remediation and related matters, compared with $2.8 million and $2.7 million in 2006 and 2005, respectively. The Company expects to spend approximately $2.8 million in 2008 on similar activities.

The Company has been designated as a Potentially Responsible Party (“PRP”) by the United States Environmental Protection Agency (“EPA”) at the USS Lead Site in East Chicago, Indiana, and the Lake Calumet Cluster Site in Chicago, Illinois. Costs incurred to date have not been material, either individually or in the aggregate. Because of the nature of the Company’s involvement at these sites, management believes that future costs related to these sites will not be material, either individually or in the aggregate. The Company has not entered into any cost sharing arrangements with other PRP’s that make it reasonably possible the Company will incur material costs beyond its pro rata share. Further, management does not believe that any problems or uncertainties as to the financial liabilities of other PRP’s make it reasonably possible the Company will incur material costs beyond its pro rata share at these sites. The Company’s accruals for these sites are based on the amount it reasonably expects to pay with respect to the sites.

Management believes that amounts accrued for remedial activities and environmental liabilities (which in the aggregate are not material) are adequate.

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ITEM 1A. RISK FACTORS

The terms “we,” “our,” “ours,” “us” and “Company” refer to Union Tank Car Company, along with its wholly owned and majority-owned subsidiaries, unless the context otherwise requires.

The following risk factors could have a material adverse effect on our business, financial condition and results of operations, and should be read in conjunction with the factors discussed elsewhere in this filing and our other filings with the Securities and Exchange Commission and in materials incorporated by reference in these filings. These Risk Factors are intended to highlight factors that may affect our business, financial condition and results of operations and are not meant to be an exhaustive discussion of risks that may apply to companies like ours. Like other companies, we are susceptible to macroeconomic downturns in the United States or abroad and other factors beyond our control that may affect the general economic climate and our performance and the performance of our customers.

Our financial performance is directly dependent upon customer demand for our goods and services.

Our primary goods and services consist of leased railcars, leased intermodal tank containers, and metals products. Demand for these products is based on the market demand for the products of our customers and the strength and growth of the operations of our customers. Many of our customers operate in cyclical markets and therefore experience changes in demand over time. A significant decline in demand for any or all of the major categories of goods and services that we offer could adversely impact our financial performance.

We operate in a competitive environment and the pricing offered by our competitors or our inability to respond to changes in this environment may impact our profit margins and market share.

The competitive environment for our major businesses could change whereby margins are lowered as a result of the actions of competitors related to excessive supply, attempts to rapidly gain market share or other factors. Significant reductions in margins in our key markets could adversely impact our financial performance.

We are subject to federal and state rules and regulations that are subject to change, and those changes could adversely affect our business and costs of operations.

We have a substantial investment in railway tank cars, plastic pellet hopper cars, intermodal tank containers and facilities. The construction and use of these assets is subject to the laws, rules and regulations of a number of governments and regulatory bodies. Changes to current laws, rules and regulations could occur which could result in significant expenditures to comply with such changes or the economic or mandated obsolescence of a significant portion of our assets.

Shipping products by railcar may become obsolete or economically prohibitive.

In addition to changes in laws, rules and regulations that may make shipping products by railcar prohibitively expensive, we may be adversely impacted by rapid and major changes to the preferred method or mode of transportation of the products shipped by our customers. These changes could result in economic obsolescence of a significant portion of our assets.

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Our leased assets could become obsolete.

The industries in which our customers operate are driven by dynamic market forces and trends, which are in turn influenced by international and national economic and political events and factors. Demand for our leased railcars and intermodal tank containers is impacted by changes to the markets and operating environment of our customers as well as changes in rules and regulations that govern the construction and operation of our equipment. As a result, significant changes in demand for our leased assets could occur in major industries we serve, including but not limited to anhydrous ammonia, chlorine, ethanol, liquefied petroleum gas, plastics, sulphur, sulphuric acid, and vinyl chloride monomers. Significant reduction in demand or changes in transportation modes or patterns for one or more of these or other products could result in economic obsolescence of a significant portion of our leased assets.

We may be unable to retain our key management personnel.

Our success is due in part to the experience, knowledge, ability and customer relationships of our key management personnel. Loss of some or all of our key managers could adversely impact the performance of our business.

We may be negatively impacted by acts of terrorism, war or political instability.

Demand for our products and services is dependent upon stable and functioning economies and markets. Terrorism, war or political instability, either domestic or international, could disrupt the activities of our customers or the Company on a short-term or long-term basis, reducing the demand for our products and services, and thus adversely affect our financial performance. Terrorism, war or political instability could also lead to changes to current laws, rules and regulations which could result in significant expenditures to comply with such changes, or the economic or mandated obsolescence of a significant portion of our assets.

Our business may be impacted by a change of control from or of our sole stockholder.

A change of control from or of our current owner, including the sale to Berkshire, could result in a change to a riskier business model or financial strategy. Changes such as pursuing faster, less profitable growth or a more highly leveraged capital structure could adversely affect our financial performance.

We may not have sufficient cash flow to pay our outstanding liabilities.

Our ability to fund these liabilities depends, among other things, upon the continued success of our operations consistent with historical performance levels, the market conditions impacting our major business areas and the continued financial support of our current owner. We cannot assure that our business will continue to generate sufficient cash flow from operations to pay our obligations.

Our indebtedness could adversely impact our financial condition and business plans.

Our indebtedness could impact our ability to fund planned capital expenditures and other business expenses in our business plan. Our indebtedness may limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate. Our indebtedness may also limit our ability to borrow additional funds, place us at a competitive disadvantage to competitors that have less debt, or hinder our ability to grow our operations.

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We may no longer have access to additional or cost effective capital resources.

Our continued growth and success is dependent upon ready access to capital at competitive rates. A change in the capital markets that limits our access to external financing could prevent us from investing in the growth of our leasing businesses, refinancing outstanding debt, purchasing lease fleet assets currently subject to leveraged leases, or constructing new facilities.

We may have our debt rating lowered by a rating service, which could substantially increase our cost of obtaining additional capital or trigger adverse requirements under our existing debt instruments.

Our access to debt financing at competitive rates is dependent upon favorable ratings from the major debt rating services (Moody’s Investors Services and Standard & Poor’s). A lower rating from one or both of these agencies could significantly increase the cost of obtaining new debt capital, thus adversely affect our financial performance. If our debt rating were to drop below investment grade (Baa-/BBB-), provisions of certain outstanding debt instruments would require us to purchase additional liability and property insurance on certain of our railcars, possibly at a higher cost.

We may not be able to obtain sufficient or cost effective insurance coverage.

We manage our exposure to liability risk in part by purchasing coverage for catastrophic liability occurrences. If the cost of obtaining such coverage rises significantly, our financial performance could be adversely affected. If the cost of such coverage becomes prohibitively expensive, we could be forced to reduce the amount of coverage, thus increasing our risk profile. One or more material adverse judgments or claims involving the Company or its industries may substantially increase our cost of renewing or obtaining future liability insurance coverage, in addition to increasing the amount of our deductibles.

We may be subject to an adverse legal judgment that may materially impact our assets, business, or expenses.

From time to time, we are involved in lawsuits whereby claimants attempt to establish our liability for events involving our assets or business operations. An adverse judgment in an amount that significantly exceeds our liability insurance would adversely impact our financial performance, and could increase our cost of obtaining future liability insurance.

Possible future acquisitions or business decisions may be unsuccessful.

We could undertake a major acquisition or make a business decision that may result in a higher risk profile, a more highly leveraged capital structure, or both. In addition, the acquisition could perform below expectations, thus adversely affect our financial performance.

Our inability to obtain materials and resources or an increase in the cost of obtaining materials and resources for our manufacturing operations may adversely affect our ability to effectively compete.

We manufacture a number of products, including railway tank cars for lease or sale and buy metal products for distribution. We also maintain a fleet of railcars. Significant shortages and/or rapidly changing prices for key raw materials and/or railcar components could adversely affect our financial performance.

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Exposure to fluctuations in commodity and energy prices may impact our costs and results of operations.

Sustained high commodity or energy prices, including natural gas prices, could negatively impact the Company and activities of our customers resulting in a corresponding adverse effect on the demand for our products and services. In addition, sustained high prices for steel and other metals could result in higher manufacturing and maintenance costs, and higher cost of sales for our metals distribution business.

Our business is subject to increases in operating costs and inflation.

We incur significant costs for goods and services including, but not limited to, salaries and wages, fringe benefits including health care costs, supplies, utilities, maintenance and repair materials and services, freight, and property and ad valorem taxes. Significant increases in these costs could adversely impact our financial performance.

Compliance with environmental laws could adversely affect our results of operations and business.

We are subject to both federal and state requirements for protection of the environment. We routinely assess our environmental exposure, including obligations and commitments for remediation of contaminated sites and assessments of ranges and probabilities of recoveries from other responsible parties. Because of the regulatory complexities and risk of unidentified contaminants relating to our properties or operations, the potential exists for remediation costs to be materially different from the costs we have estimated. If the amount of our exposure to environmental costs materially exceeds the amount of our estimate, our financial performance could be adversely affected.

We are subject to and impacted by foreign exchange rate fluctuations.

We are exposed to foreign exchange rate fluctuations as the financial results of certain subsidiaries are translated from the local currency into U.S. dollars upon consolidation. As exchange rates vary, revenue and other operating results, when translated, may differ materially from expectations. In addition, fluctuations in foreign exchange rates can affect the demand and relative price for the services we provide domestically and internationally, and could have a negative impact on our financial performance.

Changes in domestic or international tax laws may negatively impact our business and results of operations.

We are subject to taxes in both the U.S. and various foreign jurisdictions. As a result, our effective tax rate could be adversely affected by changes in the mix of earnings in the U.S. and foreign countries with differing statutory tax rates, legislative changes impacting statutory tax rates, including the impact on recorded deferred tax assets and liabilities, changes in tax laws or by material audit assessments.

We are owned by a sole stockholder.

All of the stock of the Company is owned by Holdings. By maintaining majority ownership of our common stock, Holdings and its owners, including Berkshire, will continue to have the power to determine the persons constituting our directors and officers, and the outcome of various corporate actions requiring stockholder approval.

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We may be subject to unusual volatility and uncertainty in the financial markets.

The Company’s investments in cash equivalents, short-term investments and available-for-sale securities are subject to the inherent economic and other risks of the financial markets. There can be no assurance that the expected returns and liquidity of such investments will be attained when such financial markets become uncertain or volatile as a result of unusual economic or other events beyond the Company’s control.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

In management’s opinion, the Company’s properties are in good condition, substantially utilized and adequate to meet the Company’s current and reasonably anticipated future needs.

The Company estimates that its plant facilities were utilized during the year at an average of approximately 95% of productive capacity for railcar manufacturing, 75% for railcar servicing and repair, 65% for sulphur processing, 90% for railcar moving vehicles manufacturing, 80% for light rail transit product manufacturing, 90% for containment vessel head manufacturing, and 75% for gear drive manufacturing.

Railcars

The Company owns approximately 93% of its total lease fleet of 94,416 railcars, of which 79,074 are tank cars and 15,342 are other railway freight cars. Of the approximately 87,508 owned railcars, 78,884 are free of liens. Railcars which are not owned are leased from others under long-term net leases.

Railcar Manufacturing and Assembling Facilities

The Company’s facilities for manufacturing and assembling railcars are located in Alexandria, Louisiana, East Chicago, Indiana and Sheldon, Texas, together occupying about 400 acres.

Railcar Servicing and Repair Shops

The Company operates a network of shops for repairing and servicing railcars. Principal shops owned by the Company are located at Valdosta, Georgia; Muscatine, Iowa; Ville Platte, Louisiana; Marion, Ohio; Altoona, Pennsylvania; Cleveland, Texas; Evanston, Wyoming; Edmonton, Alberta; Sarnia and Oakville, Ontario; Regina, Saskatchewan; and Celaya, Mexico. Several other repair shops and small repair points are strategically located throughout the United States and Canada.

Metals Distribution

Subsidiaries of the Company maintain numerous distribution warehouses and business offices, which are located throughout North America. There are 42 warehouse and distribution centers from which products are distributed to customers.

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Intermodal Tank Container Leasing

Subsidiaries of the Company maintain a fleet of approximately 32,645 owned/managed intermodal tank containers consisting of a wide range of equipment types, specifications and capacities from 7,500 to 35,000 liters. These subsidiaries also own a fleet of 1,664 drop frame tank chassis. Customer service is provided through offices, agents and depots located throughout the world. The Company owns approximately 80% of the units in its fleet, of which approximately 47% are free of liens.

Sulphur Processing

A subsidiary of the Company owns facilities in Canada which process liquefied sulphur into crystalline granules and handle the formed product.

Other Railway Equipment Facilities

A subsidiary of the Company owns a mobile railcar moving vehicle manufacturing facility in LaGrange, Georgia. Another subsidiary of the Company owns gear, wheels and axles manufacturing facilities in Johnstown and Blairsville, Pennsylvania and Twinsburg, Ohio.

Containment Vessel Head Manufacturing Facilities

A subsidiary of the Company owns a metal containment vessel head manufacturing facility in Sheldon, Texas.

Gear Drive Manufacturing Facilities

Subsidiaries of the Company own a gear drive manufacturing facility in Amarillo, Texas and an agricultural wind machine manufacturing facility in Exeter, California.

Other Properties

The Company and its subsidiaries maintain numerous other manufacturing facilities, sales and business offices, and warehouses, most of which are leased, throughout North America, Europe, and Asia.

ITEM 3. LEGAL PROCEEDINGS

The Company and its subsidiaries have been named as defendants in a number of lawsuits and certain claims are pending. The Company has accrued what it reasonably expects to pay to resolve such claims, including legal fees, and, in the opinion of management, the ultimate resolution of these matters will not have a material effect on the Company’s consolidated financial position, results of operations or liquidity. See “Business—Environmental Matters” and Note 12 of the Notes to Consolidated Financial Statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Not applicable.

ITEM 6. SELECTED FINANCIAL DATA

	For the Year Ended December 31,
	2007			2006			2005			2004			2003
	(Dollars in Thousands)
Revenues
Services	$	895,568		$	820,236		$	767,590		$	747,915		$	718,436
Sales		1,146,313			1,051,526			894,081			778,371			559,591
Net income		236,080			197,068			201,050			142,646			69,754
Ratio of earnings to fixed charges		3.69	x		3.77	x		3.36	x		3.25	x		2.13	x
At year end:
Total assets	$	4,638,544		$	4,107,571		$	3,621,080		$	3,277,817		$	2,950,966
Long-term debt		1,030,101			1,137,586			1,353,647			1,133,104			867,238

Significant items in net income during 2003 included goodwill impairment of $(10,865) after taxes, write-down of investment in direct financing lease of $(15,714) after taxes, adjustment to prior years’ taxes of $19,000 and deferred tax liability adjustment on foreign income previously considered permanently reinvested of $(5,500).

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements contained in this annual report on Form 10-K for the year ended December 31, 2007 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 “Item 1A - Risk Factors” of this document, may affect the Company’s businesses. As a result, past financial results may not be a reliable indicator of future performance.

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Executive Overview

The Company operates its largest businesses in three segments: Railcar, Metals Distribution, and Intermodal Tank Container Leasing.

Railcar

The primary business activity of the Railcar segment is full service leasing of railway tank cars in North America. Key characteristics of the Railcar leasing business are: (a) consistent and predictable cash flows, (b) a strong and creditworthy customer base, (c) multi-year leases that tend to bridge the Company over cyclical downturns, (d) long-lived revenue earning assets, and (e) diversification across railway tank car types, customers within the industrial sectors served, and geographically across North America.

The major challenges in the business are: (a) competition from several strong and experienced competitors and (b) continuing to provide the level of consistent, high quality product and value-added service necessary to distinguish the Company’s products and services from those of its competitors.

The key indicators of performance are revenue growth, lease fleet growth, lease fleet utilization, and profitability.

The most significant opportunities in the business are: (a) general growth in the economy, which relies on the bulk movement of chemicals, petrochemicals, foods, fuels and other liquid and gas products and (b) displacing railway tank cars owned or net leased by shippers with our equipment provided through full service leases.

Significant external factors that contribute to the long-term financial performance of full service railway tank car lessors are inflation and interest rates. New railcar lease rental rates, which are largely determined by equipment cost, operating costs, interest rates, and competitive factors, influence lease rental rates (upon renewal or leasing to a different customer) on the existing lease fleet.

The Company also manufactures tank cars, primarily for its own fleet. Increased prices and reduced availability of steel and other metals are not expected to have a material impact on the Company’s activities. The Company’s exposure is mitigated via a combination of purchase agreements, the ability to increase prices, and the discretionary nature of railcar construction.

Metals Distribution

Subsidiaries comprising the Metals Distribution segment are leading distributors of carbon steel, stainless steel and aluminum tubular products; chrome and stainless bar; other carbon steel products, including beams and channels; and aircraft grade tubing and sheets, rolled form shapes and other raw materials. Key characteristics of the Metals Distribution business are: (a) niche, specialty, or value-added products relative to more generic steel distribution businesses and (b) diversification across customers within the industrial sectors served, and geographically across the U.S.

The major challenges in the business are: (a) competition from strong and experienced competitors, (b) providing the optimal level and mix of product inventory in the right locations, and (c) continuing to provide the level of consistent, high quality product and value-added service necessary to distinguish the Company’s products and services from those of its competitors.

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The key indicators of performance are revenue growth and profit margins.

The most significant opportunities in the business are: (a) general growth in the manufacturing sector of the economy, (b) increasing business with existing customers, (c) increasing market share by delivering a high level of value-added services at competitive prices, and (d) acquisitions.

Significant external factors that contribute to the long-term financial performance of metal distributors are the level of manufacturing in U.S. and reliable sources of an adequate supply of metals at reasonable costs.

Increased prices of steel and other metals are not expected to have a material impact on the Company’s activities as the Company is generally able to pass on price increases to its customers. Occasional reduced availability of metals is not expected to have a material impact because the Company, as a major purchaser of metals, is able to negotiate reasonable and adequate supply arrangements.

Intermodal Tank Container Leasing

The Intermodal Tank Container Leasing segment is a full service lessor of intermodal tank containers to a worldwide customer base. Key characteristics of this business are: (a) consistent and predictable cash flows, (b) a strong and creditworthy customer base, (c) multi-year leases and/or renewal patterns that tend to bridge the business over cyclical downturns, (d) long-lived revenue earning assets, and (e) diversification across intermodal tank container types, customers within the markets served, and geographically around the industrialized world.

The major challenges in the business are: (a) competition from strong and experienced competitors and (b) continuing to provide the level of consistent, high quality product and value-added service necessary to distinguish the Company’s products and services from those of its competitors.

The key indicators of performance are revenue growth, lease fleet growth, lease fleet utilization, and profitability.

The most significant opportunities in the business are: (a) general growth in the worldwide economy and in world trade, which relies on the bulk movement of chemicals, foods and other liquid and gas products and (b) displacing competitive modes of transport for these products, such as barrels and parcel tanker ships.

Significant external factors that contribute to the long-term financial performance of full service intermodal tank container lessors are inflation and interest rates. New intermodal tank container lease rental rates, which are largely determined by equipment cost, operating costs and interest rates, influence lease rental rates (upon renewal or leasing to a different customer) on the existing lease fleet.

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2007 versus 2006

Results of Operations

Services revenue and gross profit:

The equipment leasing businesses continued to perform well in all major markets. Demand for leased railcars and intermodal tank containers remained strong, resulting in fleet growth, improved lease rental rates and continued high fleet utilization.

Revenues and gross profit from services were as follows:

	2007			2006			Increase
	(Dollars in Thousands)
Services revenue	$	895,568		$	820,236		$	75,332
Cost of services		481,490			451,542			29,948
Gross profit from services	$	414,078		$	368,694		$	45,384
Gross profit %		46	%		45	%

Services revenue in 2007 increased $75.3 million from 2006 due to $53.5 million higher railcar leasing and service revenues (equipment additions and higher lease rates), $9.7 million higher intermodal tank container leasing revenues (equipment additions, higher lease rates and higher utilization rate), $5.3 million higher revenue in the contract rail switching business (higher volume) and $4.9 million higher revenue in the sulphur processing business (higher volume).

Gross profit on services revenue in 2007 increased $45.4 million from 2006 primarily due to a $34.9 million increase for railcar leasing (equipment additions, higher lease rates and higher disposal gains more than offsetting higher maintenance expense), an $8.1 million increase for the intermodal tank container leasing business (equipment additions, higher lease rates and higher utilization rate) and a $1.5 million increase for the contract rail switching business (higher volume).

Gains on disposals of lease fleet and other fixed assets totaled $29.3 million in 2007. Of this total, $8.0 million was from the sale of unused real properties. The remainder of the gains were primarily from disposals of railcars and tank containers. Gains on disposals of lease fleet and other fixed assets in 2006, primarily on railcars and tank containers, totaled $21.4 million. Gains on disposals are treated as a reduction to the cost of services.

The gross margin on services revenue of 46% in 2007 increased from 45% in 2006 due to a higher margin in the railcar leasing business (equipment additions, higher lease rates and higher disposal gains partially offset by higher maintenance expense) and a higher margin in the intermodal tank container leasing business (higher lease rates and higher utilization rate).

Average fleet utilization of the Company’s railcar fleet was 99% for 2007 and 2006. Utilization rates of the Company’s existing railcars are driven by long-term requirements of manufacturers and shippers of chemical products, including liquid fertilizers, liquified petroleum gas and other petroleum and fuel 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.

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Sales revenue and gross profit:

Demand for products of the metals distribution business remained strong. Outside sales of new railcars were decreased, despite an increase in railcar production from 2006 to 2007, in order to increase fleet additions in response to demand for new leased railcars.

Revenues and gross profit from sales were as follows:

	2007			2006			Increase
	(Dollars in Thousands)
Sales revenue	$	1,146,313		$	1,051,526		$	94,787
Cost of sales		929,635			883,056			46,579
Gross profit from sales	$	216,678		$	168,470		$	48,208
Gross profit %		19	%		16	%

Sales revenue for 2007 increased $94.8 million from 2006 due to $113.7 million higher sales of metals distribution products (higher prices and impact of acquisitions), $13.3 million higher sales of mobile railcar moving equipment (higher volume), $5.1 million higher sales of sulphur processing equipment (higher prices), $4.9 million higher sales of containment vessel heads (higher volume), $4.9 million higher sales of light rail transit products (higher volume) and $4.0 million higher sales of gear drives (higher volume). These increases were partially offset by a $51.2 million decrease in sales of manufactured railcars (lower sales volume).

Sales revenue from the acquisitions of two steel service center operations in March 2007 added approximately $54.4 million of metals distribution products revenue in 2007. The gross profit impact was $8.2 million.

Gross profit on sales revenue in 2007 increased $48.2 million from 2006 primarily due to a $14.4 million increase for metals distribution products (impact of acquisitions and higher prices partly offset by higher cost of sales), a $14.3 million increase for sulphur processing equipment (lower costs and higher prices), a $9.2 million improvement for manufactured railcars (higher prices and lower costs), a $4.4 million increase for mobile railcar moving equipment (higher volume), a $3.2 million increase for containment vessel heads (higher volume and lower costs), a $1.9 million increase for gear drives (higher volume and lower cost) and a $1.5 million increase for light transit rail products (higher volume).

The gross margin on sales revenue of 19% in 2007 increased from 16% in 2006 primarily due to improved margins on the sales of the sulphur processing equipment and manufactured railcars, partly offset by lower margins on the sales of metal distribution products.

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General and administrative expense, interest expense and income taxes:

General and administrative expenses in 2007 were $11.8 million higher than in 2006 primarily due to higher expenses in the metals distribution business, partially a result of the March acquisitions.

Interest expense in 2007 was $24.0 million higher than in 2006 primarily due to $33.9 million higher interest on advances from parent and affiliates, more than offsetting $9.9 million lower interest expense on third-party debt due to principal repayments. The 2006 interest expense was reduced by $3.8 million of capitalized interest. Interest rates and debt are discussed in Note 11 of the Notes to Consolidated Financial Statements.

The provision for income taxes was $130.6 million in 2007 with an effective tax rate of 34.7%, compared with $114.6 million in 2006 with an effective tax rate of 35.8%. The decrease in the effective tax rate was due to lower taxes on foreign income and unremitted foreign earnings partially offset by higher state income tax accruals. Income taxes are discussed in Note 5 of the Notes to Consolidated Financial Statements.

Financial Condition and Liquidity

2007 versus 2006

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

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 and capital expenditures, required amounts are provided by 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 $529.3 million of net cash in 2007, compared with $327.4 million provided in 2006. The net cash provided by operating activities was higher in 2007 primarily due to changes in operating assets and liabilities as well as higher net income, depreciation and deferred taxes.

Cash flows from investing activities:

Net cash used in investing activities was $742.3 million in 2007 compared with $554.3 million in 2006. The increase in net cash used in investing activities was primarily due to net investment activity in available-for-sale securities and short-term investments in 2007 compared to net sales activity in 2006.

During 2007, the Company invested $679.0 million in the construction and purchase of lease fleet assets, compared with $711.5 million in 2006. Capital expenditures in 2006 included $229.3 million to exercise purchase options for railcars related to sale-leaseback transactions.

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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.

During 2007, the Company invested $40.4 million in the construction and purchase of other fixed assets, compared with $57.4 million in 2006. The amount in 2006 included expenditures related to the tank car manufacturing plant in Alexandria, Louisiana which was completed in the second quarter of 2006.

During 2007, the Company increased, on a net basis, its available-for-sale securities and short-term investments by $34.6 million, compared to a net decrease of available-for-sale securities and short-term investments of $178.7 million in 2006. 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), fund acquisitions or fund other operating needs.

A subsidiary of the Company had investments in Canadian short-term, asset-backed commercial paper at December 31, 2007, some of which were not paid out on their maturity dates during 2007 due to the North American credit issues. This subsidiary was part of an investor group organized to provide for an orderly restructuring and payment of the commercial paper. During December 2007, the Company received $22.0 million from one of the issuers of the commercial paper at a 1.7 % discount and subsequently sold the remaining Canadian commercial paper at carrying/maturity value of $61.3 million to an affiliated entity on February 29, 2008.

In March 2007, the Company acquired two businesses for its Metals Distribution segment for cash of approximately $35.9 million. These businesses operate steel service centers in Pennsylvania, Ohio and Kentucky.

Proceeds from disposals of lease fleet and other fixed assets were $49.9 million in 2007 compared with $37.6 million in 2006.

Cash flows from financing activities:

Net cash provided by financing activities was $145.9 million in 2007 compared with $242.9 million in 2006 due to higher principal repayments of debt and higher cash dividends offsetting higher increases in advances from parent and affiliates. Cash dividends to Holdings were $165.0 million in 2007 compared with $137.0 million in 2006.

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

Approximately 10% of Company-owned railcars are pledged to secure equipment obligations and secured notes. The remaining Company-owned railcars are free of liens.

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The following table presents the scheduled cash inflows and outflows for the railcar and intermodal tank container leasing businesses over the next five years based on leases and equipment related indebtedness outstanding as of December 31, 2007:

	2008		2009		2010		2011		2012
	(Dollars in Millions)
Equipment Leasing Cash Inflows
Minimum future lease rentals	$	589.8	$	479.1	$	367.2	$	248.7	$	155.5
Equipment Leasing Cash Outflows
Minimum future lease payments		40.7		37.6		39.9		42.8		56.0
Principal and interest amount of obligations		173.2		259.9		216.1		108.0		103.5
Excess (deficit) of inflows over outflows	$	375.9	$	181.6	$	111.2	$	97.9	$	(4.0	)

Minimum future lease rentals above relate to railcar and intermodal tank container leases in effect at December 31, 2007. Based upon its historical experience, the Company expects that the railcars and intermodal tank containers (other than those which are retired in the ordinary course of business) will be re-leased at the expiration of such leases. The rentals under such future leases cannot be ascertained and are not reflected above.

The Company has not experienced any significant impact from general inflation on its financial position or results of operations over the last several years.

The Company’s foreign subsidiaries periodically enter into foreign currency forward contracts to hedge against currency exchange rate exposures. There were no foreign currency forward contracts outstanding at December 31, 2007 and 2006.

Contractual Obligations

At December 31, 2007, contractual obligations of the Company are as follows:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 –3 years		3 –5 years		More than 5 years
	(Dollars in Millions)
Long-term debt obligations (inclusive of interest)	$	1,459.1	$	173.4	$	476.3	$	212.0	$	597.4
Operating leases		338.2		45.9		85.4		104.4		102.5
Purchase obligations		50.8		50.8		—		—		—
Other long term liabilities recorded on the balance sheet		35.6		7.1		13.2		9.0		6.3
Total contractual obligations	$	1,883.7	$	277.2	$	574.9	$	325.4	$	706.2

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Off-Balance Sheet Arrangements

The Company currently has no “off-balance sheet arrangements” that would be required to be disclosed pursuant to Item 303 of Regulation S-K under the Securities Exchange Act of 1934, as amended.

Critical Accounting Policies

Management’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Preparation of these financial statements requires the Company to make estimates and judgments that affect reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an ongoing basis, the Company evaluates its estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The Company reviews its financial reporting and disclosure practices and accounting policies quarterly to ensure that its financial reporting and disclosures provide accurate and transparent information relative to the current economic and business environment. The Company believes that, of its significant accounting policies (see “Summary of Accounting Principles and Practices” more fully described in Note 2 of the Notes to Consolidated Financial Statements), the following policies involve a higher degree of judgment and/or complexity.

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.

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.

Foreign Currency Translation

Foreign currency translation adjustments and transaction gains and losses are borne by Holdings.

Income Taxes

The Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. The Company records accruals for the estimated outcomes of these audits, and the accruals may change in the future due to new developments in each matter.

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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 gains and losses, net of tax, reported as a separate component of stockholder’s equity.

Accounts Receivable and Allowance for Doubtful Accounts

The Company carries its accounts receivable at their face amounts less an allowance for doubtful accounts. On a regular basis, the Company evaluates its accounts receivable as well as establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions and based on a history of write-offs and collections. A receivable is considered past due if payments have not been received within agreed upon invoice terms. Uncollectible receivables are charged against the allowance for doubtful accounts when approved by management after all collection efforts have been exhausted.

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.

Property and Equipment

Property and equipment are depreciated or amortized over their useful lives 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.

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.

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New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.” This statement establishes accounting and reporting standards for noncontrolling interests (formerly known as minority interests) in consolidated financial statements. This statement is effective in 2009 for the Company (early adoption is prohibited). This statement will revise the treatment of noncontrolling interests in consolidated balance sheets and consolidated statements of income. Noncontrolling interests will become a part of stockholder’s equity in the consolidated balance sheets and consolidated income statements will report income attributable to the Company and to noncontrolling interests separately. When adopted, this statement is to be applied prospectively at the beginning of the year, except that the presentation and disclosure requirements are applied retrospectively for all periods presented. This statement will not affect reported net income.

In December 2007, the FASB issued FASB Statement No. 141 Revised, “Business Combinations.” This statement modifies Statement No. 141 but retains the fundamental requirements of Statement No. 141. This statement is effective for acquisitions on or after January 1, 2009 (early adoption is prohibited). This statement retains the purchase method of accounting, with assets purchased and liabilities assumed in an acquisition valued at fair value, and broadens the scope of Statement No. 141. Certain costs, including acquisition costs and restructuring cost, are recognized separately from the accounting for the business acquired. Also, accounting for step acquisitions, contingencies and bargain purchases has been modified. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

In February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The statement is effective in 2008 for the Company. The adoption of this statement is not expected to have a material effect on the Company’s consolidated financial statements.

In September 2006, the 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, which was adopted by the Company at the end of 2007. The requirement to use the Company’s year-end as the measurement date is effective for fiscal years ending after December 15, 2008. The adoption of this statement reduced consolidated stockholder’s equity by $180, net of income taxes. See Note 14 of the Notes to 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 in 2008 for the Company. The adoption of this statement 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 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” See Note 5 of the Notes to Consolidated Financial Statements regarding the Company’s adoption of FIN 48.

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2006 versus 2005

Results of Operations

Services revenue and gross profit:

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. Revenues and gross profit from services were as follows:

	2006			2005			Increase
	(Dollars in Thousands)
Services revenue	$	820,236		$	767,590		$	52,646
Cost of services		451,542			448,776			2,766
Gross profit from services	$	368,694		$	318,814		$	49,880
Gross profit %		45	%		42	%

Services revenue in 2006 increased from 2005 primarily due to a $36.3 million increase in railcar leasing and service revenues (equipment additions and higher lease rates), a $9.1 million increase in intermodal tank container leasing revenues (equipment additions, improved utilization rate and higher lease rates), and $7.2 million higher revenue in the contract rail switching business (higher volume).

Gross profit on services revenue in 2006 increased from 2005 primarily due to a $39.5 million increase for railcar leasing (increased gains on disposals, equipment additions and higher lease rates more than offsetting higher maintenance expense), a $8.8 million increase for the intermodal tank container leasing business (equipment additions, higher utilization rate and higher lease rates), and a $1.8 million increase for the contract rail switching business (higher volume).

Gains on disposals, primarily on rail cars and tank containers, totaled $21.4 million in 2006 compared with $10.4 million in 2005, and are treated as a reduction to the cost of services.

The improvement in gross margin on services revenue from 42% to 45% was primarily due to margin improvement in the railcar leasing and intermodal tank container leasing businesses.

Average fleet utilization of the Company’s railcar fleet was 99% for 2006 and 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. Over the past five years, the average term of leases entered into for newly manufactured railcars was approximately seven years, and the average term of leases entered into for used railcars was approximately four years. The average term of leases entered into during 2006 was consistent with the past five years.

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Sales revenue and gross profit:

Demand increased for products of the metals distribution business and for railcars, with margin improvement driven by higher metals distribution volume and prices. Revenues and gross profit from sales were as follows:

	2006			2005			Increase
	(Dollars in Thousands)
Sales revenue	$	1,051,526		$	894,081		$	157,445
Cost of sales		883,056			744,366			138,690
Gross profit from sales	$	168,470		$	149,715		$	18,755
Gross profit %		16	%		17	%

Sales revenue for 2006 increased from 2005 primarily due to $90.2 million higher sales of metals distribution products (higher volume and prices), a $31.1 million increase in sales of sulphur processing equipment (completion of a large project), $27.5 million increased sales of manufactured railcars (higher volume and prices), $6.4 million higher sales of mobile railcar moving equipment (higher volume), $4.0 million higher sales of gear drives (higher volume) and $2.3 million higher sales of light rail transit products (higher volume). These increases were partially offset by $4.7 million lower sales of sulphur-based fertilizer (business sold in April 2005).

Gross profit on sales revenue in 2006 increased from 2005 primarily due to a $13.8 million increase for metals distribution products (higher volume and prices more than offsetting higher cost of sales), a $4.1 million increase in sulphur processing equipment (completion of a large project), a $1.3 million increase for light rail transit products (higher volume) and a $1.2 million increase for mobile railcar moving equipment (higher volume). These increases were partially offset by a $2.0 million decrease for containment vessel heads (higher material costs) and a $0.6 million decrease for manufactured railcars (higher material costs offsetting higher volume and higher prices).

The decline in gross margin on sales revenues from 17% to 16% was primarily due to the increase in sales of the sulphur processing equipment which had a lower margin than the overall gross margin on sales revenue.

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General and administrative expense, interest expense and income taxes:

General and administrative expenses in 2006 were $2.7 million lower than in 2005 primarily due to $4.5 million lower expenses in the railcar business (primarily higher product liability expense in 2005), and $1.0 million lower expenses in the sulphur-based fertilizer business (sold in April 2005) partially offset by $1.5 million higher expense in the metals distribution business (higher selling expense due to higher volume) and $1.0 million higher expense in the sulphur processing business (increased volume).

Interest expense in 2006 was $7.9 million higher than in 2005 due to interest on advances from parent and affiliates and the full year of interest expense related to a new financing in 2005 more than offsetting lower interest expense from principal repayments of debt and capitalized interest of $3.8 million in 2006. Interest rates and debt are discussed in Note 11 of the Notes to Consolidated Financial Statements.

Provision for income taxes was $114.6 million in 2006 with an effective tax rate of 35.8%, compared with $56.4 million in 2005 with an effective tax rate of 21.4%. The lower effective tax rate in 2005 was the result of settling federal tax issues with the Internal Revenue Service. Income taxes are discussed in Note 5 of the Notes to Consolidated Financial Statements.

Financial Condition and Liquidity

The funds advanced from parent and affiliates, net cash provided by operating activities, 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 and capital expenditures, required amounts are provided by 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 $327.4 million of net cash in 2006, compared with $338.2 million provided in 2005. The net cash provided by operating activities was lower in 2006 primarily due to changes in operating assets and liabilities, partially offset by higher depreciation and deferred taxes (see Note 17 of the Notes to Consolidated Financial Statements).

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Cash flows from investing activities:

Net cash used in investing activities was $554.3 million in 2006 compared with $419.3 million used in investing activities in 2005. The change in net cash used in investing activities was primarily due to higher capital spending for construction and the purchase of lease fleet.

During 2006, the Company invested $711.5 million in the construction and purchase of lease fleet assets, compared with $510.7 million in 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 2005). 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, $108.1 million was paid in the third quarter of 2006 and the remaining $32.3 million was paid in the fourth quarter of 2006.

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.

During 2006, the Company invested $57.4 million in the construction and purchase of other fixed assets, compared with $71.2 million in 2005. Capital spending for the construction of a new tank car manufacturing plant in Alexandria, Louisiana from inception through December 31, 2006 totaled $100.8 million, of which $31.6 million has been reimbursed by state and local governments. The Alexandria plant is complete and in operation.

During 2006, the Company received a net amount of $178.7 million from the sales in excess of purchases of available-for-sale securities and short-term investments. During 2005, the Company expended a net amount of $21.8 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 $37.6 million in 2006 compared with $22.0 million in 2005.

Cash flows from financing activities:

Net cash provided by financing activities was $242.9 million in 2006 compared with $131.5 million in 2005. The change in net cash from financing activities was primarily due to the increased advances from parent and affiliates in 2006.

During 2006, the Company’s financing activities included principal repayments on debt totaling $85.1 million compared with $40.6 million in 2005. Cash dividends to Holdings were $137.0 million in 2006 compared with $140.0 million in 2005.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in the Company’s financial instruments is the potential loss in fair value arising from adverse changes in interest rates. Under its current policies, the Company does not use interest rate derivative instruments to manage exposure to interest rate changes.

The following table provides information about the Company’s debt obligations with fair values sensitive to changes in interest rates. The table presents principal cash flows and related weighted-average interest rates by expected maturity dates and estimated fair value of the Company’s debt obligations.

	2008			2009			2010			2011			2012			Thereafter			Total			Fair Value 12-31-2007
	(Dollars in Millions)
Fixed rate debt	$	107.5		$	205.1		$	174.2		$	73.9		$	73.7		$	503.2		$	1,137.6		$	1,165.3
Average interest rate		6.75	%		7.18	%		6.31	%		5.70	%		5.69	%		5.48	%		6.06	%

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

		Page
Management Report on Internal Control over Financial Reporting		31
Report of Independent Registered Public Accounting Firm		32
Financial Statements
	Consolidated statements of income for each of the three years in the period ended December 31, 2007	34
	Consolidated balance sheets—December 31, 2007 and 2006	35
	Consolidated statements of stockholder’s equity for each of the three years in the period ended December 31, 2007	36
	Consolidated statements of cash flows for each of the three years in the period ended December 31, 2007	37
	Notes to consolidated financial statements	38

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MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Union Tank Car Company and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial preparation and presentation.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. In making this assessment, it used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control–Integrated Framework. Based on our assessment, we believe that, as of December 31, 2007, the Company’s internal control over financial reporting is effective based on those criteria.

Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report, which is included herein, on our assessment of internal control over financial reporting.

Kenneth P. Fischl	Mark J. Garrette
President and Chief Executive Officer	Vice President and Principal Financial Officer
March 19, 2008	March 19, 2008

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

Union Tank Car Company:

We have audited the accompanying consolidated balance sheets of Union Tank Car Company and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholder’s equity, and cash flows for each of the three years in the period ended December 31, 2007. Our audit also included the financial statement schedule listed in the Index at Item 15(a)2. We also have audited the Company’s internal control over financial reporting as of December 31, 2007 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control – Integrated Framework. The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Report On Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on these financial statements and the financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Union Tank Car and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule for this period, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

DELOITTE & TOUCHE LLP

Chicago, Illinois

March 19, 2008

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UNION TANK CAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands)

	For the Year Ended December 31,
	2007		2006		2005
Revenues
Services (leasing and other)	$	895,568	$	820,236	$	767,590
Sales		1,146,313		1,051,526		894,081
		2,041,881		1,871,762		1,661,671
Costs and expenses
Cost of services		481,490		451,542		448,776
Cost of sales		929,635		883,056		744,366
General and administrative		152,854		141,031		143,740
Interest expense		119,619		95,598		87,675
		1,683,598		1,571,227		1,424,557
Operating income		358,283		300,535		237,114
Interest income		13,181		17,050		17,926
Other income, net		4,768		2,576		8,855
Income before income taxes and minority interest		376,232		320,161		263,895
Provision for income taxes		130,612		114,566		56,436
Income before minority interest		245,620		205,595		207,459
Minority interest		9,540		8,527		6,409
Net income	$	236,080	$	197,068	$	201,050

See Notes to Consolidated Financial Statements.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

	December 31,
	2007			2006
Assets
Cash and cash equivalents	$	122,114		$	165,588
Short-term investments		172,335			97,542
Available-for-sale securities		—			24,445
Accounts receivable, primarily due within one year, less allowance for doubtful accounts of $6,079 in 2007 and $6,577 in 2006		209,034			205,336
Accounts and notes receivable, affiliate		43,990			44,012
Inventories, net of LIFO reserves of $116,365 in 2007 and $103,543 in 2006		203,180			218,879
Prepaid expenses and deferred charges		12,442			10,923
Railcar lease fleet, net		3,156,456			2,669,700
Intermodal tank container lease fleet, net		374,828			356,329
Other fixed assets, net		290,995			276,478
Other assets		53,170			38,339
Total assets	$	4,638,544		$	4,107,571
Liabilities and Stockholder’s Equity
Accounts payable	$	119,677		$	96,418
Accrued rent		36,056			40,468
Accrued liabilities		169,419			190,641
Advances from parent and affiliates		1,055,651			472,146
Debt		1,137,589			1,353,647
Deferred income taxes and investment tax credits		745,901			643,453
Total liabilities		3,264,293			2,796,773
Minority interest		110,748			101,208
Stockholder’s equity
Common stock, no par value; 1,000 shares authorized and issued as of December 31, 2007 and 2006		106,689			106,689
Additional capital		169,455			169,455
Retained earnings		987,464			933,457
Accumulated other comprehensive losses		(105	)		(11	)
Total stockholder’s equity		1,263,503			1,209,590
Total liabilities and stockholder’s equity	$	4,638,544		$	4,107,571

See Notes to Consolidated Financial Statements.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

Years Ended December 31, 2007, 2006 and 2005

(Dollars in Thousands)

	Common Stock		Additional Capital		Retained Earnings			Accumulated Other Comprehensive Income (Losses)			Total
Balance at January 1, 2005	$	106,689	$	158,372	$	812,339		$	(401	)	$	1,076,999
Net income		—		—		201,050			—			201,050
Unrealized losses on rabbi trust investments, net		—		—		—			(7	)		(7	)
Unrealized losses on available-for-sale securities, net		—		—		—			(694	)		(694	)
Comprehensive income												200,349
Capital contribution		—		9,236		—			—			9,236
Cash dividends		—		—		(140,000	)		—			(140,000	)
Balance at December 31, 2005		106,689		167,608		873,389			(1,102	)		1,146,584
Net income		—		—		197,068			—			197,068
Unrealized gains on rabbi trust investments, net		—		—		—			17			17
Unrealized gains on available-for-sale securities, net		—		—		—			1,074			1,074
Comprehensive income												198,159
Capital contribution		—		1,847		—			—			1,847
Cash dividends		—		—		(137,000	)		—			(137,000	)
Balance at December 31, 2006		106,689		169,455		933,457			(11	)		1,209,590
Net income		—		—		236,080			—			236,080
Unrealized gains on rabbi trust investments, net		—		—		—			71			71
Unrealized gains on available-for-sale securities, net		—		—		—			15			15
Comprehensive income												236,166
Effect of adoption of FIN 48		—		—		(17,073	)		—			(17,073	)
Effect of adoption of FASB 158		—		—		—			(180	)		(180	)
Cash dividends		—		—		(165,000	)		—			(165,000	)
Balance at December 31, 2007	$	106,689	$	169,455	$	987,464		$	(105	)	$	1,263,503

See Notes to Consolidated Financial Statements.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	For the Year Ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net income	$	236,080		$	197,068		$	201,050
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		217,289			192,670			166,586
Deferred income taxes		79,154			60,744			986
Gain on disposition of lease fleet and other fixed assets		(29,261	)		(21,417	)		(10,371	)
Other non-cash income and expenses		12,977			15,349			12,981
Changes in operating assets and liabilities (see Note 17)		13,056			(116,991	)		(33,076	)
Net cash provided by operating activities		529,295			327,423			338,156
Cash flows from investing activities:
Construction and purchase of lease fleet		(678,953	)		(711,468	)		(510,722	)
Construction and purchase of other fixed assets		(40,387	)		(57,360	)		(71,188	)
Purchases of available-for-sale securities		—			—			(103,088	)
Proceeds from sales of available-for-sale securities		24,462			197,452			114,791
Purchases of short-term investments		(224,276	)		(116,084	)		(78,915	)
Proceeds from sales of short-term investments		165,199			97,313			45,429
Increase in advances from parent and affiliates		—			—			155,265
Increase in other assets		(2,319	)		(2,682	)		(169	)
Proceeds from disposals of lease fleet and other fixed assets		49,855			37,631			22,039
Proceeds from disposition of business		—			900			7,274
Purchases of businesses, net of cash acquired		(35,913	)		—			—
Net cash used in investing activities		(742,332	)		(554,298	)		(419,284	)
Cash flows from financing activities:
Increase in advances from parent and affiliates		526,924			465,083			—
Proceeds from issuance of debt		—			—			312,121
Principal payments of debt		(216,058	)		(85,143	)		(40,583	)
Cash dividends		(165,000	)		(137,000	)		(140,000	)
Net cash provided by financing activities		145,866			242,940			131,538
Effect of exchange rates on cash and cash equivalents		23,697			(1,105	)		1,882
Net (decrease) increase in cash and cash equivalents		(43,474	)		14,960			52,292
Cash and cash equivalents at beginning of year		165,588			150,628			98,336
Cash and cash equivalents at end of year	$	122,114		$	165,588		$	150,628

See Notes to Consolidated Financial Statements.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands)

1. Ownership

UNION TANK CAR COMPANY (with its wholly owned and majority-owned subsidiaries herein collectively referred to, unless the context otherwise requires, as the “Company”) is a wholly owned subsidiary of Marmon Holdings, Inc. (“Holdings”). Prior to the transaction discussed below, substantially all of the stock of Holdings was 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.

On March 18, 2008, Berkshire Hathaway Inc. (“Berkshire”) purchased a minimum of 60% of Holdings for $4.5 billion. The remaining 40% of Holdings will be acquired by Berkshire through staged acquisitions over a five to six year period for consideration based on future earnings of Holdings.

2. Summary of Accounting Principles and Practices

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. Investments in companies where the Company has greater than 50% ownership interests are fully consolidated, with the equity owned by the respective partners shown as minority interest on the consolidated balance sheets and their portion of net income or loss shown separately in the consolidated statements of income.

Description of the Business

The Company manufactures, manages and leases railway tank cars and other rail cars and owns, manages and leases intermodal tank containers. The Company is also a distributor of carbon steel, stainless steel and aluminum tubular products; chrome and stainless bar; other carbon steel products, including beams and channels; and aircraft-grade tubing and sheets, rolled form shapes and other raw materials. Its customers are primarily located in North America.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Accounting Principles and Practices (Continued)

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. Revenues from any one customer did not exceed 10% of consolidated revenues during any of the last three years.

Lessor Accounting

Most of the Company’s railcar and intermodal tank container leases with its customers 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.

The Company periodically reviews and evaluates the ultimate realization of the receivables and properties under lease contracts. Allowances for losses are maintained at amounts necessary to cover anticipated losses based on management’s assessment of various factors, including loss experience and review of specific accounts.

Shipping and Handling Costs

Freight costs incurred by the Company to ship its products to its customers are generally included in cost of sales.

Foreign Currency Translation

The Company’s foreign operations use the local currency as their functional currency. Accordingly, assets and liabilities are translated at exchange rates in effect at the balance sheet date. Average exchange rates are used for revenues, costs and expenses.

Foreign currency translation adjustments and transaction gains and losses are borne by Holdings. For the years ended December 31, 2007, 2006 and 2005, Holdings absorbed a gain of $11,244 and losses of $2,605 and $732, respectively.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Accounting Principles and Practices (Continued)

Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. These differences relate primarily to depreciation, allowance for losses and accrued expenses and certain leasing activities.

The Company includes interest expense and penalties accrued on unrecognized tax benefits as a component of the provision for income taxes. Interest income attributable to overpayments of income taxes is included in interest income.

Cash and Cash Equivalents

Cash and cash equivalents includes all highly liquid debt instruments purchased with an original maturity of three months or less.

Short-Term Investments

Short-term investments consist of commercial paper with original maturities between four and six months. See Note 6.

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 our 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 gains and losses, net of tax, reported as a separate component of stockholder’s equity. Fair value is primarily determined by quoted market prices at the end of the reporting period. In determining gains and losses, both realized and unrealized, cost basis is specifically identified for each security.

Accounts Receivable and Allowance for Doubtful Accounts

The Company carries its accounts receivable at their face amounts less an allowance for doubtful accounts. On a regular basis, the Company evaluates its accounts receivable as well as establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions and based on a history of write-offs and collections. A receivable is considered past due if payments have not been received within agreed upon invoice terms. Uncollectible receivables are charged against the allowance for doubtful accounts when approved by management after all collection efforts have been exhausted.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Accounting Principles and Practices (Continued)

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.

Depreciation and Fixed Asset Accounting

Railcars, intermodal tank containers and other fixed assets are recorded at cost less accumulated depreciation. These assets are depreciated to salvage value over their estimated useful lives primarily on the straight-line method. The estimated useful lives are: railcars, 20-30 years; intermodal tank containers, 20 years; chassis, 15 years; buildings and improvements, 10-50 years; and machinery and equipment, 3-20 years.

The cost of major conversions and betterments are capitalized and depreciated over their estimated useful lives or, if shorter, the remaining useful lives of the related assets. Maintenance and repairs are charged to expense when incurred.

Gains and losses on disposals are included in cost of services or cost of sales.

Impairment of Long-lived and Identifiable Intangible Assets

Carrying values of long-lived assets and identifiable intangible assets are reviewed if facts and circumstances suggest that they may be impaired. If this review indicates that the carrying value of an asset will not be recoverable, as determined based on the undiscounted net cash flows of the asset over the remaining useful life, the carrying value of the asset is reduced to its estimated fair value (based on an estimate of discounted net future cash flows). There were no significant impairments in 2007, 2006 or 2005.

Fair Value of Financial Instruments

Recorded amounts for financial instruments approximate the instruments’ fair value except for debt discussed in Note 11.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrated risks consist primarily of trade receivables and investments. Credit risk on trade receivables is minimized as a result of the large and diverse nature of the Company’s customer base. The Company also maintains deposits of cash and cash equivalents with major financial institutions of high credit quality. The Company’s policy is designed to limit exposure to any one institution. See Note 6.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Accounting Principles and Practices (Continued)

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

3. Railcar and Intermodal Tank Container Lease Data

Railcars are leased directly to several hundred shippers located throughout North America. Each lease involves one unit to several thousand units, normally for periods ranging from one to twenty years. The average term of leases entered into during 2007 for newly manufactured railcars was approximately six years. The average term of leases entered into during 2007 for used railway tank cars and other railcars was approximately four years. Under the terms of most of the leases, the Company agrees to provide a full range of services including railcar repair and maintenance.

Intermodal tank containers are leased directly to several hundred chemical companies, non-vessel-owning common carriers and transport-related customers located primarily in North America, Europe and Asia. Each lease involves one unit to two thousand units, normally for periods ranging from one to five years. The average term of leases entered into during 2007 for new intermodal tank containers was approximately three years. The average term of leases entered into during 2007 for used intermodal tank containers was approximately two years.

Minimum future lease rentals to be received on the equipment lease fleet (including railcars leased from others) were as follows as of December 31, 2007:

	Operating Leases
2008	$	589,844
2009		479,067
2010		367,209
2011		248,684
2012		155,456
2013 and thereafter		249,107
	$	2,089,367

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Lease Commitments

The Company and its subsidiaries, as lessee, have entered into long-term leases for certain railcars and various manufacturing, office and warehouse facilities.

At December 31, 2007, future minimum rental commitments for all noncancelable operating leases are as follows:

	Operating Leases
	Sale- Leaseback		Others		Total
2008	$	38,413	$	7,485	$	45,898
2009		35,412		6,449		41,861
2010		37,758		5,757		43,515
2011		40,753		4,859		45,612
2012		53,956		4,879		58,835
2013 and thereafter		88,231		14,244		102,475
	$	294,523	$	43,673	$	338,196

Amounts under “Sale-Leaseback” involve financing transactions in which railcars are sold by the Company to outside investors and leased back under operating leases.

In 2005 and 2006, the Company exercised options to purchase a total of 4,579 railcars that the Company had leased as part of certain sale-leaseback transactions in 1994, 1995 and 1996. The Company’s purchases of these railcars were consummated in 2006, at which time the purchased railcars ceased to be subject to the operating leases under these sale-leaseback transactions. The aggregate purchase price paid by the Company for these railcars was $229,344, all of which was paid in 2006. The Company has early buyout options on its remaining sale-leaseback transactions. These buyout options are $137,838, $29,436 and $92,055 in 2009, 2010 and 2012, respectively.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Lease Commitments (Continued)

Minimum future sublease revenue to be received under existing railcar sale-leaseback leases as of December 31, 2007 is presented below. Sublease revenue under other existing operating leases is not material and is primarily included in other income. The Company expects that the subleased railcars will be re-leased at the expiration of such leases. The rentals under such future subleases cannot be ascertained and therefore are not reflected below.

	Sale- Leaseback Leases
2008	$	36,810
2009		26,036
2010		18,319
2011		12,696
2012		8,152
2013 and thereafter		16,106
	$	118,119

Sublease rentals recorded as revenue for the years ended December 31, 2007, 2006 and 2005 were approximately $43,000, $54,000 and $76,000, respectively.

Rentals charged to costs and expenses were $47,190, $49,890 and $67,220 in 2007, 2006 and 2005, respectively.

5. Income Taxes

Federal, state, local and foreign income taxes, in general, are reflected on the basis of individual company liabilities, except as follows: the Company and its more than 80% owned U.S. subsidiaries are included in the consolidated U.S. federal income tax return and certain combined state income tax filings of Holdings; and 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 Holdings tax return, allocation of the related benefits between the Company and others will be at the sole discretion of Holdings. In 2007, the tax credits were allocated to the Company as if it filed a separate consolidated federal income tax return. In prior years, the tax credits allocated to the Company were lower (higher) than as if the Company had filed a separate consolidated tax return by $1,260 and $(183) in 2006 and 2005, respectively. 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.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Income Taxes (Continued)

During 2005, Holdings and the Internal Revenue Service reached agreement on all unresolved tax issues for 1976 through 1999. The Company recorded a $34,937 benefit in 2005 reflecting the Company’s allocated portion of the settlement. During 2006, Holdings completed federal tax examinations for the years 2000 through 2002 with the Internal Revenue Service. The issues that were settled resulted in an insignificant reduction of the Company’s income taxes.

Provisions have been reflected in the accompanying consolidated financials statements for the estimated income taxes and interest thereon through 2007. Management believes the amounts provided for the remaining open tax years are adequate.

The Company’s significant foreign subsidiaries income tax returns have been audited through 2002. Numerous state jurisdictional audits are ongoing.

During 2007, the Company determined all of its unremitted foreign earnings, with the exception of $60,000, would be required to expand international operations organically and through acquisitions. As a result, the Company realized a tax benefit of $4,825. Earnings expected to remain permanently reinvested were $140,357 at December 31, 2007. In the event these earnings are repatriated, they may be subject to U.S. income taxes and foreign withholding taxes. However, the resulting U.S. income tax liabilities could be offset, in whole or in part by foreign tax credits allowable for taxes paid to foreign jurisdictions. The actual tax cost would depend upon the income tax laws and circumstances at the time of distribution. Determination of the potential net tax liability is not practicable due to the complexities with the hypothetical calculations.

The following summarizes the provision (benefit) for income taxes:

	2007			2006			2005
State
Current	$	9,387		$	1,077		$	2,691
Deferred		5,786			2,503			408
Federal
Current		20,122			29,025			36,405
Deferred and investment tax credit		74,276			59,593			5,167
Foreign
Current		21,949			23,720			16,354
Deferred and investment tax credit		(908	)		(1,352	)		(4,589	)
Total	$	130,612		$	114,566		$	56,436

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Income Taxes (Continued)

In 2007, 2006 and 2005, the Company paid foreign withholding taxes of $3,156, $7,098 and $2,314, respectively.

Income tax effects of significant items which resulted in effective tax rates of 34.7% in 2007, 35.8% in 2006 and 21.4% in 2005 follow:

	2007			2006			2005
Income taxes at 35% federal statutory rate	$	131,681		$	112,056		$	92,363
Increase (decrease) resulting from:
Amortization of investment tax credits		(652	)		(675	)		(723	)
State income taxes, net of federal income tax benefit		11,887			3,203			2,157
Excess (benefit) tax on foreign income		(6,518	)		(458	)		331
Tax benefit of unremitted foreign earnings		(4,825	)		(1,208	)		(134	)
Resolution of tax contingencies and adjustment to prior years’ taxes		(365	)		2,683			(34,937	)
Other, net		(596	)		(1,035	)		(2,621	)
Total income taxes	$	130,612		$	114,566		$	56,436

The excess benefit on foreign income represents rates different than the U.S. federal statutory rate. The excess benefit in 2007 and 2006 are a result of a reduction in Canadian tax rates. The additional tax expense in 2005 results from foreign withholding taxes without the offset of a U.S. foreign tax credit.

Income tax expense is based upon domestic and foreign income before income taxes and minority interest as follows:

	2007		2006		2005
Domestic	$	308,670	$	272,466	$	233,621
Foreign		67,562		47,695		30,274
Total	$	376,232	$	320,161	$	263,895

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Income Taxes (Continued)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. These deferred tax assets and (liabilities) result from the following temporary differences:

	2007			2006
Excess of tax over book depreciation	$	(781,091	)	$	(673,147	)
Other		(7,455	)		(3,468	)
Total liabilities		(788,546	)		(676,615	)
Accrued expenses and reserves		35,689			27,985
State and foreign net operating loss carryforwards		4,631			3,507
Other		6,956			5,177
Total assets		47,276			36,669
Valuation allowance		(4,631	)		(3,507	)
Net deferred income tax liability	$	(745,901	)	$	(643,453	)

The Company had approximately $85,193 and $61,838 of state and foreign net operating loss carryforwards available to offset taxable income for 2007 and 2006, respectively. Due to the uncertain realization of the benefits of the carryforwards, appropriate valuation allowances have been provided of $4,631 and $3,507 for state and foreign net operating losses for 2007 and 2006, respectively. These carryforwards expire between 2008 and 2027.

On January 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which is an interpretation of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” FIN 48 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 consolidated financial statements and provides guidance on the measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of FIN 48, the Company recorded an increase in its deferred income tax liability and a corresponding decrease of $17,073 to the January 1, 2007 retained earnings. This adjustment was related primarily to accruals for state income taxes.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Income Taxes (Continued)

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

Balance at January 1, 2007	$	34,754
Increases—tax positions in a prior period		1,402
Decreases—tax positions in a prior period		(8,081	)
Increases—current period tax positions		1,900
Lapse of statute of limitations		(152	)
Balance at December 31, 2007	$	29,823

The entire balance of unrecognized tax benefits of $29,823 as of December 31, 2007 would reduce the Company’s provision for income taxes, if fully recognized. The Company does not expect any significant change to the unrecognized tax benefits in the next twelve months. In addition, certain tax statutes may close within the 12 month timeframe. Accordingly, it is reasonably possible that a change in unrecognized tax benefits will occur within the next 12 months. However, quantification of a range cannot be made at this time. The Company’s accrual for interest and penalties related to uncertain tax positions was $3,608 and $1,942 as of January 1, 2007 and December 31, 2007, respectively.

6. Short-Term Investments

A subsidiary of the Company had investments in Canadian short-term, asset-backed commercial paper at December 31, 2007, some of which were not paid out on their maturity dates during 2007 due to the North American credit issues. This subsidiary was part of an investor group organized to provide for an orderly restructuring and payment of the commercial paper. During December 2007, the Company received $21,953 from one of the issuers of the commercial paper at a 1.7 % discount and subsequently sold the remaining Canadian commercial paper at carrying/maturity value of $61,297 to an affiliated entity on February 29, 2008.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Available-for-Sale Securities

At December 31, 2006, the Company had the following investments in marketable securities which have been classified as “available-for-sale”:

December 31, 2006	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate debt securities	$	19,404	$	—	$	(12	)	$	19,392
U.S. government obligations		5,056		—		(3	)		5,053
	$	24,460	$	—	$	(15	)	$	24,445

The gross unrealized holding losses, less related taxes of $5 at December 31, 2006, have been reported as a separate component of stockholder’s equity in the accompanying consolidated balance sheet. There were no available-for-sale securities held at December 31, 2007.

The fair value of investments with gross unrealized losses was $24,445 at December 31, 2006. The Company considers unrealized losses to be temporary.

8. Inventories

	December 31,
	2007			2006
Raw materials	$	37,564		$	35,012
Work-in-process		39,341			52,222
Finished goods		247,972			240,556
Obsolescence and other reserves		(5,332	)		(5,368	)
		319,545			322,422
LIFO reserve		(116,365	)		(103,543	)
Net	$	203,180		$	218,879

Inventories valued under the LIFO method (75% and 72% in 2007 and 2006, respectively) were approximately $116,365 and $103,543 less than the current costs of such inventories at December 31, 2007 and 2006, respectively.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Lease Fleet and Other Fixed Assets

	December 31,
	2007			2006
Railcar lease fleet
Gross cost	$	5,056,138		$	4,437,125
Less accumulated depreciation		(1,899,682	)		(1,767,425	)
	$	3,156,456		$	2,669,700
Intermodal tank container lease fleet
Gross cost	$	546,897		$	497,665
Less accumulated depreciation		(172,069	)		(141,336	)
	$	374,828		$	356,329
Other fixed assets
Land	$	16,431		$	16,386
Buildings and improvements		248,236			239,993
Machinery and equipment		428,751			372,681
Construction in progress		18,209			51,383
		711,627			680,443
Less accumulated depreciation		(420,632	)		(403,965	)
	$	290,995		$	276,478

During 2006, the Company capitalized interest expense of $3,835 on its Alexandria, Louisiana railway tank car manufacturing facility.

Depreciation expense recorded in the consolidated statements of income totaled $215,081, $192,413 and $165,642, for the years ended December 31, 2007, 2006 and 2005, respectively.

10. Completed Contracts

Certain projects are accounted for using the completed contract method because of the inherent difficulty and uncertainty in estimating the total cost of completion and the extent of progress toward completion. Net billing in excess of cost included in accrued liabilities in the consolidated balance sheets is as follows:

	December 31,
	2007			2006
Cost incurred	$	4,166		$	16,274
Deferred revenue		(5,975	)		(36,971	)
Net billing in excess of cost	$	(1,809	)	$	(20,697	)

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Debt

	December 31,
	2007		2006
Unsecured senior and medium-term notes, payable periodically through 2020 at 4.71%—7.45% (average rate of 5.70% as of December 31, 2007 and 5.94% as of December 31, 2006)	$	836,000	$	1,021,000
Senior secured notes, payable periodically through 2016 at 6.79%—7.68% (average rate of 7.11% as of December 31, 2007 and 7.13% as of December 31, 2006)		282,052		301,205
Equipment trust certificates, payable periodically through 2009 at 6.50%—6.60% (average rate of 6.58% as of December 31, 2007 and 6.57% as of December 31, 2006)		18,487		30,296
Other long-term borrowings, payable periodically through 2015 (average rate of 8.19% as of December 31, 2007 and 8.21% as of December 31, 2006)		1,050		1,146
	$	1,137,589	$	1,353,647

The $836,000 principal amount of unsecured notes consist of $761,000 unsecured Senior Notes and $75,000 of unsecured Medium-Term Notes. The notes were issued between 1997 and 2005. Interest on all notes is paid semiannually.

Senior Secured Notes of $84,052 are secured by approximately 1,900 railcars with an original cost of approximately $121,800 and 1,095 intermodal tank containers and wheeled chassis with an original cost of approximately $23,700. Senior Secured Notes of $100,000 are secured by railcars with an original cost of approximately $134,100. Senior Secured Notes of $98,000 are secured by intermodal tank containers and wheeled chassis assets with an original cost of approximately $240,700 and the future stream of leasing income on such intermodal tank containers and wheeled chassis.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Debt (Continued)

Equipment Trust Certificates are secured by railcars with an original cost of approximately $268,600 and $268,500 at December 31, 2007 and 2006, respectively.

The Company’s Canadian subsidiaries have approximately $35,070 and $30,030 of demand credit facility available on a no-fee basis at December 31, 2007 and 2006, respectively. Holdings is a guarantor of this demand credit facility. At December 31, 2007 and 2006, $6,528 and $4,739 of letters of credit were outstanding, respectively. No amounts were outstanding for overdrafts or borrowings as of December 31, 2007 and 2006.

Maturities of debt obligations are as follows:

2008		2009		2010		2011		2012		Thereafter
$	107,488	$	205,104	$	174,248	$	73,888	$	73,652	$	503,209

The estimated fair value of debt is as follows:

	December 31,
	2007		2006
Unsecured senior and medium-term notes	$	839,254	$	1,016,636
Senior secured notes		306,123		324,304
Equipment trust certificates		18,846		30,824
Other long-term borrowings		1,050		1,146
	$	1,165,273	$	1,372,910

The current fair value of the Company’s debt is estimated by discounting the future interest and principal cash flows at the Company’s estimated incremental borrowing rate at the respective year-end for debt with similar maturities. The Company currently anticipates holding all debt until maturity.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Contingencies

The Company and its subsidiaries are involved in a number of lawsuits and are subject to various claims. The Company has accrued its best estimate of such probable 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.

As part of its risk management plan, the Company self-insures certain levels of its property damage, general liability, products liability, health and workers’ compensation liabilities. The Company maintains no property damage insurance on its railcars or intermodal tank containers. The Company has accrued for the estimated costs of reported claims, as well as incurred but not reported health and workers’ compensation claims.

The Company has no environmental matters currently pending which are significant to the Company’s results of operations or financial condition, either individually or in the aggregate. Based on information provided by environmental engineers, management believes that amounts accrued for remedial activities and environmental liabilities (which in the aggregate are not material) are adequate.

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 year are as follows:

	2007			2006
Balance at beginning of year	$	769		$	913
Warranties issued		2,214			344
Settlements/reversals		(1,268	)		(488	)
Balance at end of year	$	1,715		$	769

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.

13. Purchase Obligation Commitments

At December 31, 2007, the Company had purchase obligation commitments outstanding of approximately $50,800 primarily for the purchase of intermodal tank containers and raw materials in 2008.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Pension Benefits

Substantially all of the Company’s employees are covered by discretionary contribution or defined benefit retirement plans.

Costs of the discretionary contribution pension plans are accrued in amounts determined on the basis of percentages, generally established annually by the Company, of employee compensation of the various units covered by such plans. Discretionary and defined contribution plan expense for 2007, 2006 and 2005 was $17,895, $15,445 and $15,100, respectively.

As of December 31, 2007, the Company’s defined benefit plans either had their benefits frozen or were terminated. The benefits are based on payment of a specific amount, which varies by plan, for each year of service. The Company’s funding policy is to contribute the minimum amount required either by law or union agreement. Contributions are intended to provide not only for benefits attributed to service through the plans’ termination dates, but also for those expected to be earned in the future. Benefits are based on both years of service and compensation. Defined benefit pension plan expense was $1,045, $5 and $684 for 2007, 2006 and 2005, respectively. The 2007 expense reflects the identification of an additional plan. Prepaid pension costs recognized in the consolidated balance sheets were $1,662 and $1,751 at December 31, 2007 and 2006, respectively. Accrued pension costs recognized in the consolidated balance sheets were $3,615 and $2,523 at December 31, 2007 and 2006, respectively. The amounts and timing of payments related to these plans are not material to the consolidated financial statements.

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 was effective in 2007 for the Company. The requirement to use the Company’s year-end, rather than the September 30 measurement date currently used, as the measurement date is effective in 2008. The adoption of this statement reduced consolidated stockholder’s equity by $180, net of income taxes.

15. Retirement Health Care and Life Insurance Benefits

The Company provides limited health care and life insurance benefits for certain retired employees. These benefits are subject to deductible and co-payment provisions, Medicare supplements and other limitations. At December 31, 2007 and 2006, the liability for postretirement health care and life insurance benefits was $11,169 and $11,145, respectively, and was included in accrued liabilities in the consolidated balance sheets. The assumptions used in determining the 2007 liability included a 6.0% discount rate and healthcare trend rate of 9.0% in 2007 trending down to 5.0% in 2015. The amounts and timing of payments related to these plans are not material to the consolidated financial statements.

Expense related to these benefits was $1,001, $3,189 and $766 in 2007, 2006 and 2005, respectively. The increase in 2006 relates primarily to adjustments in annuity factors and other assumptions.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. Derivative Financial Instruments

The Company’s foreign subsidiaries periodically enter into foreign currency forward contracts to hedge against currency exchange rate exposures. There were no foreign currency forward contracts outstanding at December 31, 2007 and 2006.

17. Supplementary Disclosures of Cash Flow Information

	For the Year Ended December 31,
	2007			2006			2005
Changes in operating assets and liabilities:
Accounts receivable	$	2,802		$	(23,881	)	$	(10,830	)
Inventories		28,312			(64,972	)		(8,725	)
Prepaid expenses and deferred charges		(1,787	)		(202	)		(3,452	)
Accounts payable, accrued rent and accrued liabilities		(16,271	)		(27,936	)		(10,069	)
	$	13,056		$	(116,991	)	$	(33,076	)
Cash paid during the year for:
Interest	$	78,585		$	88,620		$	86,075
Income taxes		50,011			57,055			56,179
Non-cash items:
Decrease in retained earnings due to adoption of FIN 48	$	17,073		$	—		$	—
Decrease in accumulated other comprehensive income due to adoption of FASB 158		180			—			—

Unrealized foreign currency translation gains and losses, which are non-cash items, are excluded from the change in short-term investments and advances from parent.

18. Related Party Transactions

The following table sets forth the related party transaction amounts included in the consolidated financial statements, other than those disclosed elsewhere in these consolidated financial statements.

	Interest Expense (Income)			Administrative Service Fees		Insurance Billed
2007	$	43,466		$	2,490	$	6,916
2006		10,001			4,314		5,427
2005		(5,921	)		4,314		6,087

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Related Party Transactions (Continued)

The Company from time to time advances funds in excess of its current cash requirements for domestic operations to Holdings on an unsecured demand basis. Conversely, when the Company requires additional funds to support its operations and capital expenditures, required amounts are provided by Holdings. Such advances from Holdings, which bear interest principally at 30-day LIBOR plus 1%, amounted to $985,589 and $422,436 at December 31, 2007 and 2006, respectively.

Certain of the Company’s Canadian operations and its affiliates enter into intercompany loans utilizing their respective excess cash balances. These advances between the Company and subsidiaries of Holdings resulted in payables of $70,062 and $49,710 at December 31, 2007 and 2006, respectively, which are included in advances from parent and affiliates in the consolidated balance sheets.

An administrative services fee is paid to The Marmon Group LLC (“Marmon”), a subsidiary of Holdings, for certain services provided by Marmon’s officers and employees including services with respect to accounting, tax, finance, legal and related matters which Marmon provides to the Company. The Company obtains these services from Marmon because it is considered more cost efficient to obtain such services in this manner. This administrative services fee also includes amounts in respect of the compensation of executive officers of the Company employed by Marmon.

Worldwide Containers, Inc. (“WCI”), an indirect majority-owned subsidiary of the Company, is approximately 20% owned by an affiliate of the Company. The Company’s minority partners’ interest in WCI at December 31, 2007 and 2006 was $110,748 and $101,208, respectively. The minority interest in income for the years ended December 31, 2007, 2006 and 2005 was $9,540, $8,527 and $6,409, respectively.

WCI has a demand note with Holdings which bears interest at 30-day LIBOR plus 0.2% payable quarterly. The amount outstanding under this note as of December 31, 2007 and 2006 totaled $43,990 and $44,012, respectively. These amounts are included in accounts and notes receivable, affiliate in the consolidated balance sheets.

WCI has a 20.0% minority investment in a domestic subsidiary of Holdings. This minority investment included in other assets in the consolidated balance sheets at December 31, 2007 and 2006 was $7,507 and $6,480, respectively.

Another subsidiary of the Company has a 23.7% minority investment in a foreign subsidiary of Holdings. This minority investment included in other assets in the consolidated balance sheets at December 31, 2007 and 2006 was $13,237 and $12,342, respectively.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. Quarterly Data (Unaudited)

	Three Months Ended
	Mar. 31		June 30		Sept. 30		Dec. 31
2007
Sales and services revenues	$	522,059	$	505,745	$	508,147	$	505,930
Cost of sales and services		359,935		355,380		346,899		348,911
Gross profit		162,124		150,365		161,248		157,019
Net income	$	56,515	$	52,574	$	53,141	$	73,850
2006
Sales and services revenues	$	457,701	$	507,681	$	456,450	$	449,930
Cost of sales and services		332,138		365,384		322,983		314,093
Gross profit		125,563		142,297		133,467		135,837
Net income	$	43,800	$	59,934	$	46,146	$	47,188

The results for the first quarter of 2007 include the completion of a major sulphur equipment processing project, while the second, third and fourth quarters include the impact of acquisitions. Also, in the fourth quarter, the Company reassessed income taxes provided on unremitted foreign earnings as a result of completing a strategic planning effort. The planning resulted in reduced accrued income taxes as the majority of foreign earnings are considered permanently invested to expand international operations organically and by acquisitions.

Results for the second quarter of 2006 included the completion of a major sulphur equipment processing project, increases in metal distribution product sales and an increase in railcar service revenues, which in total increased gross profit approximately $14,000.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Consolidating Financial Information

The following condensed consolidating statements for the years ended December 31, 2007, 2006 and 2005 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 years ended December 31, 2007, 2006 and 2005 are as follows:

	Year Ended December 31, 2007
	Union Tank Car Company		Procor Limited		Other Subsidiaries		Eliminations			Consolidated
Revenues
Services	$	608,242	$	27,524	$	351,023	$	(91,221	)	$	895,568
Sales		—		—		1,836,911		(690,598	)		1,146,313
		608,242		27,524		2,187,934		(781,819	)		2,041,881
Costs and expenses
Cost of services		363,056		11,210		198,445		(91,221	)		481,490
Cost of sales		—		—		1,619,689		(690,054	)		929,635
General and administrative		34,134		3,168		115,552		—			152,854
Interest expense		98,858		2,875		17,886		—			119,619
		496,048		17,253		1,951,572		(781,275	)		1,683,598
Operating income		112,194		10,271		236,362		(544	)		358,283
Other income, net		993		9,212		7,744		—			17,949
Income before income taxes and minority interest		113,187		19,483		244,106		(544	)		376,232
Provision for income taxes		36,213		3,380		91,019		—			130,612
		76,974		16,103		153,087		(544	)		245,620
Equity in income of subsidiaries		159,106		—		—		(159,106	)		—
Minority interest		—		—		9,540		—			9,540
Net income	$	236,080	$	16,103	$	143,547	$	(159,650	)	$	236,080

- 58 -

UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Consolidating Financial Information (Continued)

	Year Ended December 31, 2006
	Union Tank Car Company			Procor Limited		Other Subsidiaries			Eliminations			Consolidated
Revenues
Services	$	551,225		$	26,538	$	328,382		$	(85,909	)	$	820,236
Sales		—			—		1,466,768			(415,242	)		1,051,526
		551,225			26,538		1,795,150			(501,151	)		1,871,762
Costs and expenses
Cost of services		336,346			17,950		183,155			(85,909	)		451,542
Cost of sales		—			—		1,298,120			(415,064	)		883,056
General and administrative		34,830			4,403		101,798			—			141,031
Interest expense		79,775			2,643		13,180			—			95,598
		450,951			24,996		1,596,253			(500,973	)		1,571,227
Operating income		100,274			1,542		198,897			(178	)		300,535
Other income, net		6,611			6,428		6,587			—			19,626
Income before income taxes and minority interest		106,885			7,970		205,484			(178	)		320,161
Provision for income taxes		42,796			1,009		70,761			—			114,566
		64,089			6,961		134,723			(178	)		205,595
Equity in income of subsidiaries		132,979			—		—			(132,979	)		—
Minority interest		—			—		8,527			—			8,527
Net income	$	197,068		$	6,961	$	126,196		$	(133,157	)	$	197,068
	Year Ended December 31, 2005
	Union Tank Car Company			Procor Limited		Other Subsidiaries			Eliminations			Consolidated
Revenues
Services	$	521,348		$	22,430	$	299,995		$	(76,183	)	$	767,590
Sales		—			—		1,228,670			(334,589	)		894,081
		521,348			22,430		1,528,665			(410,772	)		1,661,671
Costs and expenses
Cost of services		330,754			14,659		179,546			(76,183	)		448,776
Cost of sales		406			—		1,078,161			(334,201	)		744,366
General and administrative		40,341			3,941		99,458			—			143,740
Interest expense		69,628			2,152		15,894			1			87,675
		441,129			20,752		1,373,059			(410,383	)		1,424,557
Operating income		80,219			1,678		155,606			(389	)		237,114
Other income, net		9,507			3,496		8,879			4,899			26,781
								��
Income before income taxes and minority interest		89,726			5,174		164,485			4,510			263,895
(Benefit) provision for income taxes		(1,558	)		1,529		56,465			—			56,436
		91,284			3,645		108,020			4,510			207,459
Equity in income of subsidiaries		109,766			—		—			(109,766	)		—
Minority interest		—			—		6,409			—			6,409
Net income	$	201,050		$	3,645	$	101,611		$	(105,256	)	$	201,050

- 59 -

UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Consolidating Financial Information (Continued)

Condensed consolidating balance sheets as of December 31, 2007 and 2006 are as follows:

	December 31, 2007
	Union Tank Car Company			Procor Limited			Other Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	30		$	119,687		$	2,397	$	—		$	122,114
Short-term investments		—			172,335			—		—			172,335
Accounts receivable, net		102,721			1,790			220,938		(116,415	)		209,034
Accounts and notes receivable, affiliate		—			—			43,990		—			43,990
Inventories, net		4,582			1,124			197,474		—			203,180
Prepaid expenses and deferred charges		3,548			4,146			4,748		—			12,442
Advances to parent and affiliates		—			—			482,611		(482,611	)		—
Railcar lease fleet, net		2,936,837			33,831			186,897		(1,109	)		3,156,456
Intermodal tank container lease fleet, net		—			—			374,828		—			374,828
Other fixed assets, net		39,833			15,287			235,875		—			290,995
Investment in subsidiaries		1,078,789			75,409			42,683		(1,196,881	)		—
Other assets		7,041			18			46,111		—			53,170
Total assets	$	4,173,381		$	423,627		$	1,838,552	$	(1,797,016	)	$	4,638,544
Liabilities and Stockholder’s Equity
Accounts payable	$	37,945		$	19,950		$	178,197	$	(116,415	)	$	119,677
Accrued liabilities		115,760			5,174			84,144		397			205,475
Advances from parent and affiliates		1,212,983			326,785			—		(484,117	)		1,055,651
Debt		1,037,480			1,060			99,049		—			1,137,589
Deferred income taxes and investment tax credits		587,507			18,387			140,007		—			745,901
Total liabilities		2,991,675			371,356			501,397		(600,135	)		3,264,293
Minority interest		—			—			110,748		—			110,748
Stockholder’s equity
Common stock and additional capital		369,558			13,345			370,156		(476,915	)		276,144
Retained earnings		856,643			44,128			806,659		(719,966	)		987,464
Accumulated other comprehensive (losses) income		(128	)		—			23		—			(105	)
Equity adjustment from foreign currency translation		(44,367	)		(5,202	)		49,569		—			—
Total stockholder’s equity		1,181,706			52,271			1,226,407		(1,196,881	)		1,263,503
Total liabilities and stockholder’s equity	$	4,173,381		$	423,627		$	1,838,552	$	(1,797,016	)	$	4,638,544

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Consolidating Financial Information (Continued)

	December 31, 2006
	Union Tank Car Company			Procor Limited		Other Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	48,935		$	115,723	$	930	$	—		$	165,588
Short-term investments		—			97,542		—		—			97,542
Available-for-sale securities		24,445			—		—		—			24,445
Accounts receivable, net		122,788			1,737		237,665		(156,854	)		205,336
Accounts and notes receivable, affiliate		—			—		44,012		—			44,012
Inventories, net		7,246			1,429		210,204		—			218,879
Prepaid expenses and deferred charges		3,323			3,568		4,032		—			10,923
Advances to parent and affiliates		—			—		343,224		(343,224	)		—
Railcar lease fleet, net		2,450,558			30,164		189,544		(566	)		2,669,700
Intermodal tank container lease fleet, net		—			—		356,329		—			356,329
Other fixed assets, net		40,867			15,321		220,290		—			276,478
Investment in subsidiaries		934,687			75,453		40,944		(1,051,084	)		—
Other assets		6,630			359		31,350		—			38,339
Total assets	$	3,639,479		$	341,296	$	1,678,524	$	(1,551,728	)	$	4,107,571
Liabilities and Stockholder’s Equity
Accounts payable	$	67,588		$	17,335	$	168,336	$	(156,841	)	$	96,418
Accrued liabilities		122,997			6,349		101,372		391			231,109
Advances from parent and affiliates		557,753			257,813		—		(343,420	)		472,146
Debt		1,238,382			2,119		113,146		—			1,353,647
Deferred income taxes and investment tax credits		485,275			17,530		140,648		—			643,453
Total liabilities		2,471,995			301,146		523,502		(499,870	)		2,796,773
Minority interest		—			—		101,208		—			101,208
Stockholder’s equity
Common stock and additional capital		369,558			13,345		370,791		(477,550	)		276,144
Retained earnings		810,814			26,687		670,264		(574,308	)		933,457
Accumulated other comprehensive (losses) income		(12	)		—		1		—			(11	)
Equity adjustment from foreign currency translation		(12,876	)		118		12,758		—			—
Total stockholder’s equity		1,167,484			40,150		1,053,814		(1,051,858	)		1,209,590
Total liabilities and stockholder’s equity	$	3,639,479		$	341,296	$	1,678,524	$	(1,551,728	)	$	4,107,571

- 61 -

UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Consolidating Financial Information (Continued)

Condensed consolidating statements of cash flows for the years ended December 31, 2007, 2006 and 2005 are as follows:

	Year Ended December 31, 2007
	Union Tank Car Company			Procor Limited			Other Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities:	$	266,637		$	5,555		$	257,129		$	(26	)	$	529,295
Cash flows from investing activities:
Construction and purchase of lease fleet		(626,459	)		(87	)		(52,969	)		562			(678,953	)
Construction and purchase of other fixed assets		(5,643	)		(2,164	)		(32,580	)		—			(40,387	)
Proceeds from sales of available-for-sale securities		24,462			—			—			—			24,462
Purchases of short-term investments		—			(224,276	)		—			—			(224,276	)
Proceeds from sales of short-term investments		—			165,199			—			—			165,199
(Increase) decrease in other assets		(307	)		341			(2,353	)		—			(2,319	)
Proceeds from disposals of lease fleet and other fixed assets		19,432			11,187			19,236			—			49,855
Purchases of businesses, net of cash acquired		—			—			(35,913	)		—			(35,913	)
Net cash used in investing activities		(588,515	)		(49,800	)		(104,579	)		562			(742,332	)
Cash flows from financing activities:
Increase (decrease) in advances from parent and affiliates		638,875			29,400			(140,161	)		(1,190	)		526,924
Principal payments of debt		(200,902	)		(1,060	)		(14,096	)		—			(216,058	)
Cash dividends		(165,000	)		—			(654	)		654			(165,000	)
Net cash provided by (used in) financing activities		272,973			28,340			(154,911	)		(536	)		145,866
Effect of exchange rates on cash and cash equivalents		—			19,869			3,828			—			23,697
Net (decrease) increase in cash and cash equivalents		(48,905	)		3,964			1,467			—			(43,474	)
Cash and cash equivalents at beginning of year		48,935			115,723			930			—			165,588
Cash and cash equivalents at end of year	$	30		$	119,687		$	2,397		$	—		$	122,114

- 62 -

UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Consolidating Financial Information (Continued)

	Year Ended December 31, 2006
	Union Tank Car Company			Procor Limited			Other Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities:	$	130,910		$	11,999		$	184,746		$	(232	)	$	327,423
Cash flows from investing activities:
Construction and purchase of lease fleet		(658,785	)		(118	)		(52,826	)		261			(711,468	)
Construction and purchase of other fixed assets		(5,142	)		(2,519	)		(49,699	)		—			(57,360	)
Proceeds from sales of available-for-sale securities		197,452			—			—			—			197,452
Purchases of short-term investments		—			(116,084	)		—			—			(116,084	)
Proceeds from sales of short-term investments		—			97,313			—			—			97,313
(Increase) decrease in other assets		(403	)		432			(2,711	)		—			(2,682	)
Proceeds from disposals of lease fleet and other fixed assets		18,370			49			19,212			—			37,631
Proceeds from disposition of business		—			—			900			—			900
Net cash used in investing activities		(448,508	)		(20,927	)		(85,124	)		261			(554,298	)
Cash flows from financing activities:
Increase in advances from parent and affiliates		488,342			111,739			89,805			(224,803	)		465,083
Principal payments of debt		(55,752	)		(15,300	)		(14,091	)		—			(85,143	)
Cash dividends		(137,000	)		(46,494	)		(178,280	)		224,774			(137,000	)
Net cash provided by (used in) financing activities		295,590			49,945			(102,566	)		(29	)		242,940
Effect of exchange rates on cash and cash equivalents		—			(445	)		(660	)		—			(1,105	)
Net (decrease) increase in cash and cash equivalents		(22,008	)		40,572			(3,604	)		—			14,960
Cash and cash equivalents at beginning of year		70,943			75,151			4,534			—			150,628
Cash and cash equivalents at end of year	$	48,935		$	115,723		$	930		$	—		$	165,588

- 63 -

UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Consolidating Financial Information (Continued)

	Year Ended December 31, 2005
	Union Tank Car Company			Procor Limited			Other Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities:	$	174,873		$	835		$	162,320		$	128		$	338,156
Cash flows from investing activities:
Construction and purchase of lease fleet		(451,322	)		(164	)		(58,823	)		(413	)		(510,722	)
Purchase of other fixed assets		(3,782	)		(1,178	)		(66,228	)		—			(71,188	)
Purchases of available-for-sale securities		(103,088	)		—			—			—			(103,088	)
Proceeds from sales of available-for-sale securities		114,791			—			—			—			114,791
Purchases of short-term investments		—			(78,915	)		—			—			(78,915	)
Proceeds from sales of short-term investments		—			45,429			—			—			45,429
Increase (decrease) in advances from parent and affiliates		124,138			72,053			(41,211	)		285			155,265
(Increase) decrease in other assets		(1,778	)		2,960			(1,351	)		—			(169	)
Proceeds from disposals of lease fleet and other fixed assets		11,938			186			9,915			—			22,039
Proceeds from disposition of business		—			—			7,274			—			7,274
Net cash (used in) provided by investing activities		(309,103	)		40,371			(150,424	)		(128	)		(419,284	)
Cash flows from financing activities:
Proceeds from issuance of debt		311,000			—			1,121			—			312,121
Principal payments of debt		(27,490	)		(1,060	)		(12,033	)		—			(40,583	)
Cash dividends		(140,000	)		—			—			—			(140,000	)
Net cash provided by (used in) financing activities		143,510			(1,060	)		(10,912	)		—			131,538
Effect of exchange rates on cash and cash equivalents		—			1,882			—			—			1,882
Net increase in cash and cash equivalents		9,280			42,028			984			—			52,292
Cash and cash equivalents at beginning of year		61,663			33,123			3,550			—			98,336
Cash and cash equivalents at end of year	$	70,943		$	75,151		$	4,534		$	—		$	150,628

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UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

21. Industry 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		Metals Distribution		Intermodal Tank Container Leasing		All Other		Consolidated Totals
	(Dollars in Millions)
2007
Services revenue	$	683.3	$	9.7	$	122.6	$	80.0	$	895.6
Sales revenue		42.8		902.8		—		200.7		1,146.3
Interest income		—		—		—		13.2		13.2
Interest expense		62.0		0.1		14.2		43.3		119.6
Depreciation and amortization		173.9		6.1		30.4		6.9		217.3
Income before income taxes and minority interest		220.9		88.8		40.9		25.6		376.2
Segment assets		3,566.4		300.0		402.9		369.2		4,638.5
Expenditures for long-lived assets		648.5		6.7		49.5		14.6		719.3
2006
Services revenue	$	629.8	$	7.7	$	112.9	$	69.8	$	820.2
Sales revenue		94.0		785.7		—		171.8		1,051.5
Interest income		—		—		—		17.1		17.1
Interest expense		68.9		0.1		15.3		11.3		95.6
Depreciation and amortization		154.2		3.6		28.7		6.2		192.7
Income before income taxes and minority interest		165.9		85.2		32.3		36.8		320.2
Segment assets		3,035.6		254.5		381.3		436.2		4,107.6
Expenditures for long-lived assets		703.3		4.5		51.4		9.6		768.8
2005
Services revenue	$	593.5	$	8.7	$	103.8	$	61.6	$	767.6
Sales revenue		66.4		695.5		—		132.2		894.1
Interest income		0.1		—		—		17.8		17.9
Interest expense		69.8		—		15.2		2.7		87.7
Depreciation and amortization		130.4		3.1		27.8		5.3		166.6
Income before income taxes and minority interest		122.8		73.4		21.9		45.8		263.9
Segment assets		2,453.4		202.2		359.1		606.4		3,621.1
Expenditures for long-lived assets		523.8		4.3		41.9		11.9		581.9

- 65 -

UNION TANK CAR COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

21. Industry Segment Information (Continued)

Geographic Information

The following table presents geographic information for the Company. Revenues and long-lived assets are attributed to countries based on location of customers.

	Revenues		Long-lived Assets
	(Dollars in Millions)
2007
United States	$	1,701.5	$	3,440.0
Canada		157.6		170.7
Other countries		182.8		264.7
Consolidated total	$	2,041.9	$	3,875.4
2006
United States	$	1,582.6	$	2,943.7
Canada		139.7		158.2
Other countries		149.5		238.9
Consolidated total	$	1,871.8	$	3,340.8
2005
United States	$	1,430.3	$	2,381.3
Canada		129.1		169.2
Other countries		102.3		224.0
Consolidated total	$	1,661.7	$	2,774.5

22. Acquisitions

During the first quarter of 2007, the Company acquired two businesses for its Metals Distribution segment for cash of $35,913. These businesses operate steel service centers in Pennsylvania, Ohio and Kentucky and complement existing Metals Distribution locations. Revenues from these operations since the acquisition (approximately ten months of operations) were $54,390 and income before income taxes was not significant. The Company’s estimate of goodwill is $10,253, as the purchase price allocation is preliminary and further refinements may be necessary pending finalization of valuations.

The results of operations for these acquisitions have been included in the consolidated financial results from the date of respective acquisition. The Company does not consider these acquisitions, individually or in the aggregate, to be material to its consolidated results of operations for any of the periods presented.

- 66 -

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. 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.

See “Management Report on Internal Control Over Financial Reporting” in Item 8.

ITEM 9B. OTHER INFORMATION

None.

- 67 -

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Name	Age	Current Positions or Offices	First Elected to Position
Kenneth P. Fischl	59	President, Chief Executive Officer	2002
		Director	1994
Mark J. Garrette	54	Vice President, Principal Financial Officer	2002
		Vice President	1994
Norman E. Gottschalk, Jr.	63	President, Marmon Distribution Services LLC	2002
Robert K. Lorch	62	Director	2006
		Vice President	2002
Frank S. Ptak	64	Director	2006
Robert W. Webb	69	Director	2003
		General Counsel and Secretary	1986

Messrs. Fischl, Garrette, and Gottschalk are executive officers of the Company.

Kenneth P. Fischl

Mr. Fischl was elected President of the Company in January 2002 and was elected President, Chief Executive Officer of the Company in August 2002. He was a Vice President of Marmon from May 1998 to May 2003. He was elected as a Director in March 1994, and served as President of the Tank Car Division from February 1993 to August 1999. He was appointed Vice President of the Company and Executive Vice President and General Manager of the Tank Car Division in July 1992. He joined the Company in 1977.

Mark J. Garrette

Mr. Garrette was elected Principal Financial Officer of the Company in August 2002. He joined Marmon as a sector Chief Financial Officer in April 2002. He was appointed Senior Vice President and Controller of the Tank Car Division and elected Vice President in August 1994. He joined the Company in 1994.

Norman E. Gottschalk, Jr.

Mr. Gottschalk has been President of Marmon Distribution Services LLC, a subsidiary of the Company in the metal distribution business, since May 2002. He has been President of a subsidiary of the Company since April 1989.

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Robert K. Lorch

Mr. Lorch was elected as a Director of the Company in July 2006. Mr. Lorch has been Vice President of the Company since September 2002. He has served as Vice President and Chief Financial Officer of Holdings and Senior Vice President and Chief Financial Officer of Marmon since April 2002.

Frank S. Ptak

Mr. Ptak was elected as a Director of the Company in January 2006. He is President and Chief Executive Officer of each of Holdings and Marmon. Prior to joining Marmon in January 2006, Mr. Ptak was with Illinois Tool Works Inc. since 1975, serving as Vice Chairman since 1996. Mr. Ptak is a member of the board of directors of Morningstar, Inc.

Robert W. Webb

Mr. Webb was elected as a Director of the Company in May 2003. Mr. Webb is Vice President and Secretary of Holdings and Senior Vice President, Secretary and General Counsel of Marmon. Mr. Webb has served in these or other capacities for each of the Company, Holdings and Marmon in excess of five years.

There are no family relationships among the directors and executive officers of the Company.

Directors and executive officers are elected for a term of one year, or until a successor is appointed.

Audit Committee and Audit Committee Financial Expert

The Company is not subject to the listing requirements of a national exchange. As a result, the Company is not required to have a separately designated standing audit committee, and the entire Board of Directors acts as the Company’s audit committee. While the Company does not have on its Board of Directors an “Audit Committee Financial Expert” (as that term is defined under federal securities laws), the Company and its Board of Directors have available to them, through Holdings, financial experts and financial expertise relating to accounting and auditing matters.

Code of Ethics

The Company has adopted a written Code of Ethics that applies to its executive officers, including the Principal Executive Officer and Principal Financial Officer, as well as the head and senior financial officer of each operating unit and all other key financial and accounting personnel having responsibility in connection with the preparation, review, or disclosure of any aspect of the Company’s financial statements or other financial information or data. Copies of the Company’s Code of Ethics, including any future amendments, are available without charge upon request to Union Tank Car Company, Attention: Secretary, 181 W. Madison Street, 26^th Floor, Chicago, Illinois 60602-4510.

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ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

Our executive compensation program is designed to attract, retain and reward qualified executives and encourage decisions and actions that have a positive impact on Company performance. A further objective of the compensation program is to provide incentives and rewards to each executive for their contribution to the Company. The compensation program is determined and implemented by Holdings. Holdings’ board of directors has a compensation committee that reviews the compensation of Holdings’ executives, including Messrs. Fischl and Gottschalk. Mr. Garrette’s compensation is determined by Mr. Fischl, on a basis consistent with Holdings’ compensation policy. The Company does not have a compensation committee.

Purpose and Elements of Compensation Program

The compensation program is designed to reward our named executive officers for achieving the short and long-term financial objectives of the Company, as well as for attaining their individual achievement goals. It is Holdings’ intent to set total executive compensation at a level that attracts and retains strong, competent leadership for the Company. The named executive officers’ annual compensation consists of a base salary component and an incentive bonus component. The salary component is designed to provide a base of cash compensation to the named executive officers throughout the year. The incentive bonus portion, which ties into the financial performance of the Company as well as the achievement of personal goals, is designed to reward and encourage the named executive officers’ efforts and effectiveness in increasing Company profitability.

The financial measurement utilized in the Company’s compensation program to gauge the level of the named executive officers’ efforts is typically the Company’s operating income. This is measured against the budgeted objective established prior to the year being measured. The individual achievement goals that are also reviewed for each named executive officer are traditional ones that encourage the named executive officer’s personal improvement or the long-term viability of the Company’s business.

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2007 Changes

In March 2007, Holdings’ board of directors approved changes in the compensation programs for Holdings and its affiliates, including the Company, beginning with the year ended December 31, 2007. The Company retained Hewitt & Associates, Inc. to assist with compensation programs. The updated compensation program was formalized such that financial and personal goals for the year were communicated in advance to the named executive officers and maximum award amounts identified in advance.

In 2007, Holdings also instituted an Executive Incentive Program. This is a long-term incentive program which is used as a retention device for senior management of Holdings. This select program provides for a bonus award, which is a percentage of salary, to be set aside for the designated executive. The award cliff vests at the end of three years and earns interest at the stable value fund rate. Messrs. Fischl and Gottschalk are participants in this program.

Salary

Salaries are based on the responsibilities of each named executive officer and are determined in the first quarter of the year.

In the annual review of named executive officers’ salaries, factors that are considered in increasing an executive’s compensation are generally (a) merit, (b) promotions to a new position or level and/or (c) adjustments reflecting a more appropriate compensation level based on industry/market data.

Annual Bonuses

Bonuses are generally paid in March following the end of the calendar year for which services are being rewarded, after the Company’s fiscal results have been determined. In 2007, the bonuses paid to named executive officers were generally allocated equally between financial goals/performance and personal goals/performance. The named executive officer’s performance against financial goals was generally an objective determination based on whether the budgeted operating income was achieved but unusual factors affecting financial performance were also considered. The personal goal portion of the incentive measurement had more flexibility depending on the quality of effort and level of attainment against the executive’s specific individual goals. The bonuses vary based on the performance of the executive officer but generally do not exceed 120% of the executive officer’s base salary.

Other

The Company provides all eligible employees a 50% matching contribution on up to 6% of compensation (base plus bonus) deferred through an IRS qualified 401(k) plan. That same plan also provides for a discretionary contribution determined by the Company that is allocated to all eligible employees. The Company approved a discretionary contribution of up to 6% of compensation for the 2007 calendar year that is payable in 2008. The named executive officers are provided a deferred compensation program through which each named executive may elect to defer receipt of compensation and to earn income on the amount deferred. Additionally, the deferred compensation program permits the named executive to receive credit for matching and discretionary contributions which may not be credited to the executive under an IRS qualified 401(k) plan due to IRS imposed limits. The Company does not have a pension plan.

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The Company’s compensation program, consisting of salary and bonus payments to the named executive officers, is a cash program. As the Company is a wholly owned subsidiary of Holdings, there are no stock options, stock awards or any other equity-based programs as part of the Company’s compensation program.

The Company’s executives do not have employment agreements that might include provisions for such matters as change in control, severance arrangements, equity or security ownership, or other such matters.

Most executives of the Company have significant tenure with the Company.

Summary Compensation Table

The following table summarizes the compensation for the years ended December 31, 2007 and 2006 of the Chief Executive Officer, Principal Financial Officer and the other executive officer of the Company. See “Compensation Discussion and Analysis” for additional information about the salaries and bonuses of the executive officers.

Name and Principal Position	Year	Salary ($)		Bonus ($)			Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)			All Other Compensation (1) ($)		Total (2) ($)
Kenneth P. Fischl President, Chief Executive Officer (5) 2007 2006
	2007	$	515,000	$	856,840	(3)	$	(22,000	)(4)	$	103,100	$	1,452,940
	2006	$	493,750	$	500,000		$	—		$	85,970	$	1,079,720
Mark J. Garrette Vice President, Principal Financial Officer 2007 2006
	2007	$	260,625	$	162,830		$	—		$	36,640	$	460,095
	2006	$	251,250	$	140,100		$	—		$	35,306	$	426,656
Norman E. Gottschalk, Jr. President, Marmon Distribution Services LLC 2007 2006
	2007	$	387,080	$	614,000	(3)	$	—		$	65,328	$	1,066,408
	2006	$	368,740	$	330,000		$	—		$	47,119	$	745,859

(1) The amounts shown in this column include:

a. Mr. Fischl: $10,675 for interest earned on his Marmon Group Executive Incentive Plan balance; $71,100 for matching and retirement contributions under his non-qualified retirement and 401(k) supplemental agreement and $20,250 for matching and retirement contributions to his accounts under Marmon’s 401(k) Plan.

b. Mr. Garrette: $15,815 for matching and retirement contributions under his nonqualified retirement and 401(k) supplemental agreement and $20,250 for matching and retirement contributions to his accounts under Marmon’s 401(k) Plan.

c. Mr. Gottschalk, Jr.: $7,942 for interest earned on his Marmon Group Executive Incentive Plan balance; $39,366 for matching and retirement contributions under his nonqualified retirement and 401(k) supplemental agreement and $18,000 for matching and retirement contributions to his accounts under Marmon’s 401(k) Plan.

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(2) Represents the sum of the amounts in all of the columns of the Summary Compensation Table for each named executive officer.

(3) The bonus amounts include (i) cash awards of $250,000 and $186,000 to Mr. Fischl and Mr. Gottschalk, respectively, granted on March 15, 2007 pursuant to the Marmon Group Executive Incentive Plan (the “EIP”) which was adopted that year and (ii) an annual cash bonus of $606,840 and $428,000 awarded to Mr. Fischl and Mr. Gottschalk, respectively. The EIP awards granted in 2007 vest on March 15, 2010 so long as the executive officer is still employed by the Company on that date, subject to certain earlier vesting in the event of the executive officer’s death or disability. For more information on the EIP, see “Compensation Discussion and Analysis” and “Payments Upon Termination and Change in Control.”

(4) The change in actuarial present value of Mr. Fischl’s accumulated benefit under the Supplemental Retirement Plan for a Select Group of Key Executives that is described below was $(22,000) at December 31, 2007, as compared to December 31, 2006.

(5) Mr. Fischl is also a director of the Company, but he does not receive any compensation for that service.

Nonqualified Deferred Compensation

The following table includes information related to the benefits provided to the Company’s executive officers under nonqualified deferred compensation plans sponsored by the Company or one of its affiliates for the year ended December 31, 2007.

Name	Plan	Executive Contributions in Last Fiscal Year ($)		Company Contributions in Last Fiscal Year (1) ($)		Aggregate Earnings in Last Fiscal Year ($)		Aggregate Balance at Last Fiscal Year ($)
Kenneth P. Fischl	Retirement and 401(k) supplemental agreement	$	192,870	$	71,100	$	78,474	$	2,267,144
	Deferred income agreement		—		—		854		16,499
	Total	$	192,870	$	71,100	$	79,328	$	2,283,643
Mark J. Garrette	Retirement and 401(k) supplemental agreement	$	59,661	$	15,815	$	14,053	$	421,120
Norman E. Gottschalk, Jr.	Retirement and 401(k) supplemental agreement	$	37,416	$	39,366	$	26,468	$	723,069
	Deferred bonus agreement		—		—		21,354		289,302
	Total	$	37,416	$	39,366	$	47,822	$	1,012,371

(1) The amounts in this column are also included in the Summary Compensation Table in the “Other Compensation” column.

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Each of the named executive officers has a nonqualified retirement and 401(k) supplemental agreement (“401(k) Supplemental Agreement”) that provides him with certain benefits that he is unable to receive under Marmon’s 401(k) plan because of limitations imposed by the Internal Revenue Code of 1986, as amended. Each executive officer is entitled to the following benefits under his 401(k) Supplemental Agreement: the right to defer receipt of up to 100% of his compensation; an employer match equal to 50% of the executive officer’s deferrals, up to 6% of compensation; and an employer retirement contribution to make up for the retirement contribution that could not be made to Marmon’s 401(k) plan because of IRS limits. In 2007, the retirement contribution to the 401(k) Supplemental Agreements was 6% of the executive officer’s compensation in excess of $225,000. The amounts contributed to the 401(k) Supplemental Agreement are annually credited with interest, which was 3.86% in 2007, equal to the average of the rate earned by the Stable Value or equivalent fund under the Marmon Employees’ Retirement Trust and the rate earned on five-year U.S. Treasury Notes on the most recent sale date prior to the December 31 on which interest is credited. Upon termination of employment, including retirement, each executive officer is entitled to receive, in a lump sum or in 10 annual installments, the aggregate balance in his account under his 401(k) Supplemental Agreement. Withdrawals during employment are only permitted in the event of a severe financial hardship.

Mr. Fischl has a deferred income agreement (the “Deferred Income Agreement”) dated as of February 26, 1982 under which contributions are no longer being made. Mr. Fischl’s balance is increased each year based on U.S. treasury and corporate bond yields. Mr. Fischl is entitled to receive the balance upon his death, permanent disability or termination of full-time employment with the Company.

Mr. Gottschalk participates in deferred bonus agreements (the “Deferred Bonus Agreements”) that, in certain prior years, permitted him to defer selected bonus payments until retirement on or after attaining age 65, his death or disability. Amounts deferred under the Deferred Bonus Agreements earn interest at the prime rate. Deferred Bonus Agreements are no longer made available to executive officers of Marmon or its affiliates, although bonuses may be deferred under an executive officer’s 401(k) Supplemental Agreement.

The 401(k) Supplemental Agreements, the Deferred Income Agreement and the Deferred Bonus Agreements are unfunded, although a rabbi trust has been established and funded for the 401(k) Supplemental Agreements. The rabbi trust provides that its assets are subject to the claims of the employer’s creditors. Thus, benefits under all of the plans are subject to forfeiture in the event of bankruptcy.

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Supplemental Retirement Plan

The following table includes information related to benefits provided to Mr. Fischl under a supplemental retirement plan sponsored by the company or one of its affiliates for the year ended December 31, 2007.

Name	Plan	Number of Years Credited Service #	Present Value of Accumulated Benefit ($)		Payments During Last Fiscal Year ($)
Kenneth P. Fischl	Union Tank Car supplemental executive retirement agreement	30	$	1,104,000	none

Mr. Fischl is a participant in the Supplemental Retirement Plan for a Select Group of Key Executives that was adopted on September 27, 1982 (the “Supplemental Retirement Plan”). The Supplemental Retirement Plan is intended to provide a participant with a benefit that is equal in value to the retirement benefit the participant would have received under a certain terminated pension plan (the “Pension Plan”) if the Pension Plan had not been terminated. The benefit to be paid under the Supplemental Retirement Plan is determined, with certain adjustments, by first calculating the benefit the participant would have received under the Pension Plan if it had remained in effect until the participant terminated his employment. The Pension Plan provided a benefit of 1.5% of Mr. Fischl’s final 5-year average base pay for each year of service, up to a maximum of 30 years, subject to the IRS limits on annual pension benefits. This amount is then reduced by the pension benefit that may be provided by the sum of the retirement contributions to Marmon’s 401(k) plan (and earnings thereon) plus the value in the Marmon 401(k) plan that is attributable to Mr. Fischl’s benefit under the terminated Pension Plan (and earnings). Any benefit owed to an executive officer under the Supplemental Retirement Plan may be paid in a life annuity or in any actuarially equivalent optional annuity form that was available under the Pension Plan. Mr. Fischl may receive an early retirement benefit (which is available upon attainment of age 55 and 10 years of service), in which case his benefit under the Supplemental Retirement Plan would be actuarially reduced. The assumptions used to calculate the present value were a discount rate of 6% and the 1994 Group Annuity Mortality Table developed by the Society of Actuaries.

Potential Payments Upon Termination

The EIP is used as a retention device for certain senior management of Marmon and the Company. This program provides for a bonus award, which is a percentage of salary, to be set aside for the designated executive. The award cliff vests at the end of three years. Messrs. Fischl and Gottschalk are participants in this program. In the event of the death or disability of either of Mr. Fischl or Mr. Gottschalk, all amounts owed to him under the EIP will vest and be payable to him or his estate immediately. As of December 31, 2007, such EIP amount would be $260,675 and $193,942 to Mr. Fischl and Mr. Gottschalk, respectively. The 401(k) Supplemental Agreements with respect to each named executive officer and the Deferred Income Agreement with respect to Mr. Fischl which cover payments in the event of retirement, death, disability or other termination are described above under “Nonqualified Deferred Compensation”. The Deferred Bonus Agreements with respect to Mr. Gottschalk and the Supplemental Retirement Plan for Mr. Fischl which cover payments in the event of retirement are described under “Nonqualified Deferred Compensation” and “Pension Benefits”, respectively.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Holdings, a Delaware corporation having its principal executive offices at 181 W. Madison Street, 26^th Floor, Chicago, Illinois, owns 1,000 shares, or 100%, of the Company’s issued and outstanding common stock. No common stock of the Company is authorized for issuance under equity compensation plans.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The Company paid Marmon an administrative services fee of $2.5 million for the year ended December 31, 2007 for certain services provided by Marmon’s officers and employees to the Company including accounting, tax, finance, legal and related matters. The fee also covers the compensation paid to Messrs. Fischl and Garrette during the year ended December 31, 2007. See “Compensation” and Note 18 of the Notes to Consolidated Financial Statements.

The Company paid dividends of $165.0 million to Holdings during 2007. For information on translation adjustments and transaction gains and losses on the Company’s foreign currency translation for accounting purposes borne by Holdings, see Note 2 of the Notes to Consolidated Financial Statements. For information on the Company’s tax arrangement with Holdings, see Note 5 of the Notes to Consolidated Financial Statements.

A subsidiary of the Company had investments in Canadian short-term, asset-backed commercial paper at December 31, 2007, some of which were not paid out on their maturity dates during 2007 due to the North American credit issues. This subsidiary was part of an investor group organized to provide for an orderly restructuring and payment of the commercial paper. During December 2007, the Company received $22.0 million from one of the issuers of the commercial paper at a 1.7% discount and subsequently sold the remaining Canadian commercial paper at carrying/maturity value of $61.3 million to an affiliated entity on February 29, 2008.

The Company has a written conflicts of interest policy (the “Policy”) which applies to all employees of the Company and its subsidiaries, including the executive officers and directors of the Company. Under the Policy, employees are obligated to disclose any activity or interest which is potentially or possibly a conflict of interest (as defined in the Policy) so that each situation can be reviewed on a case-by-case basis with the Company’s General Counsel for a determination of whether such activity is a conflict and whether some accommodation or change in employment status is appropriate. An employee may not be involved in a conflict of interest situation without the review and approval of the General Counsel of the Company.

In order to enforce this Policy, the Company requires every employee, including the executive officers and directors of the Company, to annually disclose in writing any activity or interest which is potentially or possibly a conflict of interest. Furthermore, all managerial employees, including the executive officers and directors of the Company must state affirmatively or negatively whether they own any stock in or have a business relationship with any of the customers, suppliers or competitors of the Company or its affiliates.

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The Policy provides that an employee may hold investments in publicly owned companies, including banks and trust companies, whose securities are listed on national securities exchanges or are otherwise generally traded and available in the open market. However, if any of these companies is a customer, supplier or competitor of the Company or its affiliates, neither the employee nor his/her immediate family or close associates may hold more than one percent (1%) of the outstanding stock of that company.

The Policy’s definition of conflict of interest includes: (1) any involvement in any outside activity, business or employment which may conceivably conflict with the employee’s duties or responsibilities or which is not compatible with the best interest of the Company or its affiliates, particularly including an employee’s involvement, whether for remuneration or not, in any entity that is a present or prospective competitor, customer or supplier of the Company or its affiliates; (2) a circumstance in which a relative (defined as a person connected with another by blood or affinity, including marriage) or someone with whom the employee has a personal relationship is or becomes involved in a business or activity, including employment, that may conflict with the employee’s duties or responsibilities or affect the employee’s judgment in making a decision affecting the Company or its affiliates and (3) a circumstance where related employees are permitted to hold positions such that one relative can influence the performance or the performance appraisal of the other, e.g., supervising a relative in the same department, having access to confidential material that would benefit their relative; being assigned to a position which might jeopardize proper internal control procedures.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Independent Registered Public Accounting Firm Fee Information

Fees for professional services provided by Deloitte & Touche LLP in 2007 and 2006, in each of the following categories are:

	For the Year Ended December 31,
	2007		2006
	(Dollars in Thousands)
Audit fees	$	1,465	$	884
Audit-related fees		—		605
	$	1,465	$	1,489

Audit Fees.This category includes the audit of the Company’s annual financial statements, review of financial statements included in its Quarterly Reports on Form 10-Q or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years.

Audit-Related Fees. This category consists of assurance and related services provided that are reasonably related to the performance of an audit or review of the Company’s financial statements and are not reported above under “Audit Fees”. In 2006, these services were primarily related to Sarbanes-Oxley Act Section 404 advisory services.

Pre-Approval Policies and Procedures

As a voluntary filer, the Company is not subject to Section 202 of the Sarbanes-Oxley Act which requires the pre-approval of all audit services and permitted non-audit services provided by independent auditors.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

		Page
a) 1.	Financial Statements -
	Consolidated statements of income for each of the three years in the period ended December 31, 2007	34
	Consolidated balance sheets - December 31, 2007 and 2006	35
	Consolidated statements of stockholder’s equity for each of the three years in the period ended December 31, 2007	36
	Consolidated statements of cash flows for each of the three years in the period ended December 31, 2007	37
	Notes to consolidated financial statements	38
2.	Schedules
	The following consolidated financial schedule of Union Tank Car Company is included in response to Item 15(a).
	II – Valuation and qualifying accounts	80
	All other financial statement schedules have been omitted because they are not applicable or because the required information is included in the financial statements or notes thereto.
3.	Index to Exhibits	81

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:

UNION TANK CAR COMPANY
(Registrant)
By:	/s/ Mark J. Garrette
	Mark J. Garrette
	Vice President

Dated: March 20, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature		Title	Date
/s/ Kenneth P. Fischl	��	President and Director (principal executive officer)	March 20, 2008
Kenneth P. Fischl
/s/ Mark J. Garrette		Vice President (principal financial officer and principal accounting officer)	March 20, 2008
Mark J. Garrette
/s/ Frank S. Ptak		Director	March 20, 2008
Frank S. Ptak
/s/ Robert K. Lorch		Vice President and Director	March 20, 2008
Robert K. Lorch
/s/ Robert W. Webb		Director, General Counsel and Secretary	March 20, 2008
Robert W. Webb

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UNION TANK CAR COMPANY AND SUBSIDIARIES

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

(Dollars in Thousands)

	Balance at Beginning of Period		Additions Charged to								Balance at End of Period
			Costs and Expenses		Other			Deductions
Year Ended December 31, 2007
Reserves and allowances deducted from asset accounts:
Allowance for doubtful accounts	$	6,577	$	498	$	68	(1)	$	1,064	(2)	$	6,079
Year Ended December 31, 2006
Reserves and allowances deducted from asset accounts:
Allowance for doubtful accounts	$	8,117	$	441	$	(5	) (1)	$	1,976	(2)	$	6,577
Year Ended December 31, 2005
Reserves and allowances deducted from asset accounts:
Allowance for doubtful accounts	$	10,938	$	1,502	$	35	(1)	$	4,358	(2)	$	8,117

(1) Foreign currency translation gain (loss).

(2) Amount determined not to be collectible, net of recoveries.

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UNION TANK CAR COMPANY AND SUBSIDIARIES

INDEX TO EXHIBITS

3 (a)	Restated Certificate of Incorporation of the Company, as filed with the Secretary of State of Delaware on September 2, 1982     (which was filed as Exhibit 3(a) to the Annual Report on Form 10-K for the fiscal year ended December 31, 1982, and     is incorporated herein by reference)
3 (b)	By-Laws of the Company, as adopted November 25, 1987 (which was filed as Exhibit 3(b) to the Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and is incorporated herein by reference)
4 (a)	Trust Indenture and Security Agreement (UTC Trust No. 2000-A) (L-16) dated June 29, 2000 between Norwest Bank Minnesota, National Association, as Owner Trustee, and LaSalle Bank National Association, as Indenture Trustee     (submitted with the electronic filing to the Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated     herein by reference)
4 (b)	Indenture and Security Agreement dated September 28, 2000 among Bank One, N.A., EXSIF Worldwide, Inc. and the Company (submitted with the electronic filing to the Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference)
12	Statements re computation of ratios Computation of the Ratio of Earnings to Fixed Charges
21	Subsidiaries of the registrant
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Principal Financial Officer 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(iii) of Item 601(b) of Regulation S-K. The Company agrees to furnish a copy of any such instrument to the Commission upon request.

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