1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended December 31, 1996
Commission file number 1-13782
WESTINGHOUSE AIR BRAKE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 25-1615902
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1001 AIR BRAKE AVENUE
WILMERDING, PENNSYLVANIA 15148 (412) 825-1000
(Address of principal executive offices) (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
NEW YORK STOCK EXCHANGE
(Name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
-----------------------
This Amendment to Form 10-K is being filed to amend Exhibit 28 thereto.
The full text of Exhibit 28 is set forth in this Amendment to Form 10-K
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1
Exhibit 28
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934
For the transition period from _______________ to ____________
Commission file number 1-13782
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
Westinghouse Air Brake Company Employee
Stock Ownership Plan and Trust
B. Name of issuer of the securities held pursuant to the plan and
the address of the principal executive office:
Westinghouse Air Brake Company
1001 Air Brake Avenue
Wilmerding, PA 15148
2
WESTINGHOUSE AIRBRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS AND SCHEDULES
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
3
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1996 AND 1995
TABLE OF CONTENTS
Page
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for
Benefits - December 31, 1996 and 1995 2-3
Statements of Changes in Net Assets Available for
Benefits for the Year Ended December 31, 1996 and 1995 4-5
NOTES TO FINANCIAL STATEMENTS 6-11
SCHEDULES SUPPORTING FINANCIAL STATEMENTS:
Item 27a - Schedule of Assets Held for Investment
Purposes - December 31, 1996 Schedule I
Item 27d - Schedule of Reportable Transactions for the
Year Ended December 31, 1996 Schedule II
4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Westinghouse Air Brake Company
Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for
benefits of the Westinghouse Air Brake Company Employee Stock Ownership Plan
(the Plan) as of December 31, 1996 and 1995, and the related statements of
changes in net assets available for benefits for the years then ended. These
financial statements and the schedules referred to below are the responsibility
of the Plan's Committee. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1996 and 1995, and the changes in net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules, as listed in
the accompanying table of contents, are presented for purposes of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
June 24, 1997
-1-
5
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
Allocated Unallocated Total
----------------- ------------------- -------------------
ASSETS:
Cash equivalents $ 4,819 $ - $ 4,819
Short-term investments 32 3,534 3,566
Investment in Westinghouse
Air Brake Company common
stock, at market value 4,949,833 112,845,419 117,795,252
Interest receivable 1 41 42
----------------- ------------------- -------------------
Total assets 4,954,685 112,848,994 117,803,679
----------------- ------------------- -------------------
LIABILITIES:
Loan payable to employer - 139,497,563 139,497,563
----------------- ------------------- -------------------
Total liabilities - 139,497,563 139,497,563
----------------- ------------------- -------------------
NET ASSETS (DEFICIT)
AVAILABLE FOR BENEFITS $ 4,954,685 $ (26,648,569) $ (21,693,884)
================= =================== ===================
The accompanying notes are an integral part of this statement.
-2-
6
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995
Allocated Unallocated Total
----------------- ------------------- ------------------
ASSETS:
Short-term investments $ 1,867 $ 91,493 $ 93,360
Investment in Westinghouse
Air Brake Company common
stock, at market value 1,983,900 97,211,100 99,195,000
Interest receivable - 392 392
----------------- ------------------- ------------------
Total assets 1,985,767 97,302,985 99,288,752
----------------- ------------------- ------------------
LIABILITIES:
Loan payable to employer - 139,835,074 139,835,074
----------------- ------------------- ------------------
Total liabilities - 139,835,074 139,835,074
----------------- ------------------- ------------------
NET ASSETS (DEFICIT)
AVAILABLE FOR BENEFITS $ 1,985,767 $ (42,532,089) $ (40,546,322)
================= =================== ==================
The accompanying notes are an integral part of this statement.
-3-
7
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
Allocated Unallocated Total
------------------ ------------------ ------------------
INVESTMENT INCOME:
Employer contributions $ - $ 12,223,491 $ 12,223,491
Dividends 7,457 365,971 373,428
Net appreciation in fair value of investments 357,323 18,307,845 18,665,168
Allocation of 211,029
shares of Westinghouse
Air Brake Company
common stock, at market 2,664,241 - 2,664,241
------------------ ------------------ ------------------
Total additions 3,029,021 30,897,307 33,926,328
------------------ ------------------ ------------------
DEDUCTIONS:
Allocation of 211,029
Shares of Westinghouse
Air Brake Company
Common stock, at market - 2,664,241 2,664,241
Participant distributions 60,103 - 60,103
Interest expense - 12,349,546 12,349,546
------------------ ------------------ ------------------
Total deductions 60,103 15,013,787 15,073,890
------------------ ------------------ ------------------
Net increase 2,968,918 15,883,520 18,852,438
NET ASSETS (DEFICIT)
AVAILABLE FOR BENEFITS:
Beginning of year 1,985,767 (42,532,089) (40,546,322)
------------------ ------------------ ------------------
End of year $ 4,954,685 $ (26,648,569) $ (21,693,884)
================== ================== ==================
The accompanying notes are an integral part of this statement.
-4-
8
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1995
Allocated Unallocated Total
------------------ ------------------ ------------------
INVESTMENT INCOME (LOSS):
Employer contributions $ - $ 12,108,326 $ 12,108,326
Dividends 1,867 91,493 93,360
Net depreciation in fair value of investments - (40,845,000) (40,845,000)
Allocation of 186,720
shares of Westinghouse
Air Brake Company
common stock, at market 1,983,900 - 1,983,900
------------------ ------------------ ------------------
Total additions 1,985,767 (28,645,181) (26,659,414)
------------------ ------------------ ------------------
DEDUCTIONS:
Allocation of 186,720
Shares of Westinghouse
Air Brake Company
Common stock, at market - 1,983,900 1,983,900
Interest expense - 11,903,008 11,903,008
------------------ ------------------ ------------------
Total deductions - 13,886,908 13,886,908
------------------ ------------------ ------------------
Net increase (decrease) 1,985,767 (42,532,089) (40,546,322)
NET ASSETS (DEFICIT)
AVAILABLE FOR BENEFITS:
Beginning of year - - -
------------------ ------------------ ------------------
End of year $ 1,985,767 $ (42,532,089) $ (40,546,322)
================== ================== ==================
The accompanying notes are an integral part of this statement.
-5-
9
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. DESCRIPTION OF THE PLAN:
The following description of the Westinghouse Air Brake Company Employee Stock
Ownership Plan (the Plan) is provided for general information purposes only.
Participants should refer to the Plan document for more complete information.
The accompanying financial statements should be read in conjunction with the
December 31, 1996 and 1995, Annual Report on Form 10-K for Westinghouse Air
Brake Company.
General
Westinghouse Air Brake Company (WABCO) established the Plan effective January
1, 1995, as a leveraged employee stock ownership plan (ESOP). The Plan is
designed to comply with Section 4975(e)(7) and the regulations thereunder of
the Internal Revenue Code of 1986, as amended (the Code), and is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended
(ERISA). The ESOP owns approximately 25% of WABCO's common stock as of December
31, 1996 and 1995.
Overall responsibility for administering the Plan rests with the plan
administrative committee (the Committee) which is appointed by the Board of
Directors of the Company. The Plan's trustee, U.S. Trust Company of California,
N.A., is responsible for the management and control of the Plan's assets and
has discretionary responsibility for the investment and management of such
assets. The investment valuations are certified as complete and accurate by
the trustee.
The Plan purchased shares of Company common stock using the proceeds of a loan
from WABCO (see Note 4) and holds the stock in a trust established under the
Plan. The loan is to be repaid over a period of 50 years and is required to be
funded by Company contributions to the trust fund. As the Plan makes each
payment of principal, an appropriate percentage of stock will be allocated to
eligible employees' accounts in accordance with applicable regulations under
the Code.
-6-
10
The unallocated shares of stock collateralize the borrowing. Shares no longer
serve as collateral once they are allocated under the ESOP. Accordingly, the
financial statements of the Plan present separately the assets and liabilities
and changes therein pertaining to the following:
o The accounts of employees with vested rights in allocated stock
(albocated).
o Stock not yet allocated to employees (unallocated).
Acquisition of TheVapor Group
On September 19, 1996, WABCO acquired from Mark IV Industries Inc. the Vapor
Group (Vapor). As a result of the acquisition and inclusion of certain United
States employees of Vapor, the annual ESOP allocation will increase to
approximately 284,000 shares, with a corresponding reduction in the repayment
term of the ESOP loan (see Note 4).
Vesting
Employees become fully vested upon completion of five years of continuous
service, attainment of normal retirement or termination of service by reason of
death. The unvested portion of a participant's account will be reallocated to
the accounts of the remaining participants.
Eligibility
Employees of WABCO and its participating subsidiaries, who were eligible to
participate in the Westinghouse Air Brake Company Savings Plan as of December
31, 1994, were automatically participants in the Plan on January 1, 1995. All
other employees who may become eligible to participate in the Plan would do so
on the later of January 1, 1995, or after performing one hour of salaried
service.
Employer Contributions
WABCO is obligated to make contributions to the Plan which, when aggregated
with the Plan's dividends and interest earnings, equal the amount necessary to
enable the Plan to make its regularly scheduled payments of principal and
interest due on its term loan.
Participant Accounts
The Plan is a defined contribution plan under which separate individual
accounts are established for each participant. Each participant's account is
credited as of the last day of each plan year with an allocation of shares of
WABCO common stock released by the trustee from the suspense account and
forfeitures of terminated participants' nonvested accounts. Only those
participants who are eligible employees of the Company as of the last day of
the plan year will receive an allocation. Shares are allocated to participant
accounts based on a two-step process. First, the participant accounts are
matched up to 3% of the value of the participant's contributions to the
Westinghouse Air Brake Company Savings Plan. Second, the remaining shares
released are allocated proportionately to each participant's salary.
-7-
11
Benefits
Unless otherwise requested by a participant, distributions must begin no later
than the earlier of:
a. 60 days after the end of the plan year in which employment ends due
to:
(1) the participant retiring after having reached age 55;
(2) the date service was terminated by reason of disability or
death; or
b. Within or beginning within sixty (60) days after the last day of
the plan year which is the fifth plan year following the plan year
in which the participant's termination of service occurs for any
other reason than described above.
Regardless of whether a participant wishes to delay distributions, they will
commence no later than April 1 of the calendar year following the calendar year
in which the participant attains age 70-1/2.
If distribution has commenced and the participant dies before his entire
account has been distributed to him, the remaining portion of his account will
be distributed to his beneficiary under the method used prior to the
participant's death.
Participant benefits will generally be paid in cash. In connection with such
distribution, the participant's accounts are to be converted based upon the
fair market value of the WABCO stock with the resulting cash balance paid to
the participant.
Plan Termination
WABCO reserves the right to terminate the Plan at any time, subject to Plan
provisions and the applicable provisions of ERISA. If the Plan were to
terminate, each participant's interest in the trust would be distributed to
such participant or his beneficiary at the time prescribed by the Plan and the
Code. Upon termination of the Plan, the Committee will direct the trustee to
pay all liabilities and expenses of the trust fund and to sell shares of
encumbered stock held in the loan suspense account, if any, to the extent such
sale is necessary in order to repay any outstanding loans.
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis
of accounting.
-8-
12
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Committee to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
As of December 31, 1996 and 1995, investments in WABCO common stock are stated
at market value.
Operating Expenses
WABCO pays all expenses of maintaining the Plan.
Net Appreciation (Depreciation) in Fair Value of Investments
Net realized and unrealized appreciation (depreciation) is recorded in the
accompanying financial statements as net appreciation (depreciation) in fair
value of investments.
3. INVESTMENTS:
The Plan is invested in shares of WABCO common stock. These shares are held in
a bank-administered trust fund.
Disclosure of 5% Investments
The fair market value of individual assets that represent 5% or more of the
Plan's net assets as of December 31, are as follows:
1996 1995
------------ -----------
Westinghouse Air Brake Company
Common Stock $117,795,252 $99,195,000
============ ===========
The Plan's investment in WABCO common stock allocated to participant accounts
was $4,949,833 for 392,066 shares at $12.625 per share at December 31, 1996,
and $1,983,900 for 186,720 shares at $10.625 per share at December 31, 1995.
The Plan also has an investment held in trust in WABCO common stock of
$112,845,419 for 8,938,251 shares at $12.625 per share at December 31, 1996,
and $97,211,100 for 9,149,280 shares at $10.625 per share at December 31, 1995.
The Plan's investments (including investments bought and sold as well as held
during the year) appreciated(depreciated) in fair value by $18,665,168 and
$(40,845,000) in 1996 and 1995, respectively.
-9-
13
The fair value and change in fair value as of and during 1996 and 1995 are as
follows:
Net Appreciation
in Fair Value
Fair Value at Of Investments for
Number December 31, the Year Ended
of Shares 1996 December 31, 1996
--------------- -------------------- ----------------------------
Fair value of WABCO common stock-
Allocated to
Participant accounts 392,066 $ 4,949,833 $ 357,323
Held in trust
(unallocated) 8,938,251 112,845,419 18,307,845
--------------- -------------------- ----------------------------
9,330,317 $ 117,795,252 $ 18,665,168
=============== ==================== ============================
Net Depreciation
In Fair Value
Fair Value at Of Investments for
Number December 31, The Year Ended
of Shares 1995 December 31, 1995
--------------- -------------------- ----------------------------
Fair value of WABCO common stock-
Allocated to
Participant accounts 186,720 $ 1,983,900 $ -
Held in trust
(unallocated) 9,149,280 97,211,100 (40,0845,000)
--------------- -------------------- ----------------------------
9,336,000 $ 99,195,000 $ (40,845,000)
=============== ==================== ============================
4. LOAN PAYABLE:
In 1995, the Plan entered into a $140,040,000 term loan agreement with WABCO.
The proceeds of the loan were used to purchase 9,336,000 shares of WABCO common
stock at $15 per share. Unallocated shares are collateral for the loan. The
original agreement provides for the loan to be repaid over 50 years. With the
inclusion of the Vapor employees (see Note 1) into the ESOP during 1996, the
term of the loan has been reduced to 33 years. The loan bears interest at 8.5%.
-10-
14
The scheduled amortization of the loan for the next five years and thereafter
is as follows:
1997 $ 366,199
1998 397,325
1999 431,098
2000 467,741
2001 507,499
Thereafter 137,327,701
---------------------
$ 139,497,563
=====================
5. TAX STATUS:
The Internal Revenue Service issued a favorable determination letter dated June
5, 1996, stating that the Plan was in accordance with applicable plan design
requirements as of that date.
6. RECONCILIATION TO FORM 5500:
As of December 31, 1996, the Plan had $157,106 of pending distributions to
participants who elected to withdraw from the operation and earnings of the
Plan. These amounts are recorded as a liability in the Plan's Form 5500;
however, these amounts are not recorded as a liability in the accompanying
statements of net assets available for benefits in accordance with generally
accepted accounting principles.
The following table reconciles net assets available for benefits per the
financial statements to the Form 5500 as filed by the Company for the year
ended December 31, 1996:
Benefits Net Assets (Deficit)
Payable to Available for Benefits
Participants December 31, 1996
-------------------- ------------------------------
Per financial statements $ - $ (21,693,884)
Accrued benefit payments 157,106 (157,106)
-------------------- ------------------------------
Per Form 5500 $ 157,106 $ (21,850,990)
==================== ==============================
-11-
15
SCHEDULE I
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1996
Description of Investment,
Identity of Issuer, Including Maturity Date, Rate
Borrower, Lessor of Interest, Collateral, Par Current
or Similar Party or Maturity Value Cost Value
- ---------------------------- ---------------------------------------------- ------------------ ----------------
SHORT-TERM INVESTMENTS
*U.S. Trust Company U.S. Trust Company of California
of California, Trust Department Market Rate
N.A. Account $ 3,566 $ 3,566
COMMON STOCK
*Westinghouse 9,330,317 shares of common 139,954,755 117,795,252
Air Brake stock ----------------- ------------
Company
TOTAL ASSETS HELD FOR
INVESTMENT PURPOSES $ 139,958,321 $117,798,818
================= ============
*Indicates a Party-in-Interest.
The accompanying notes are an integral part of this statement.
16
SCHEDULE II
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
Current Value
Identity of Party Purchase Selling Cost of of Asset on Net Gain
Involved Description of Assets Price Price Asset Transaction Date (Loss)
- ----------------- --------------------- -------- ------- ------- ---------------- --------
NONE
The accompanying notes are an integral part of this statement.
17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the ESOP Committee of Westinghouse Air Brake Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Westinghouse Air Brake Company
Employee Stock Ownership Plan And Trust
By /s/ Robert J. Brooks
-------------------------------------
Robert J. Brooks
Member of the ESOP Committee
June 30, 1997
18
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Westinghouse Air Brake Company
By /s/ Robert J. Brooks
-------------------------------------
Robert J. Brooks
Chief Financial Officer
June 30, 1997
