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UNITED STATES
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 fiscal year ended December 31, 1997
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:
(Title of Class) (Name of Exchange on which registered)
---------------- --------------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
This Amendment to Form 10-K is being filed to amend Exhibit 99 thereto. The full
text of Exhibit 99 is set forth in this Amendment to Form 10-K.
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2
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 29, 1998
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EXHIBIT 99
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One):
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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
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2
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS AND SCHEDULES
AS OF DECEMBER 31, 1997 AND 1996
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
3
WESTINGHOUSE AIR BRAKE COMPANY
------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
FINANCIAL STATEMENTS AND SCHEDULES
----------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
TABLE OF CONTENTS
-----------------
Page
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for
Benefits - December 31, 1997 and 1996 2-3
Statements of Changes in Net Assets Available for
Benefits for the Year Ended December 31, 1997 and 1996 4-5
NOTES TO FINANCIAL STATEMENTS 6-11
SCHEDULES SUPPORTING FINANCIAL STATEMENTS:
Item 27a - Schedule of Assets Held for Investment
Purposes - December 31, 1997 Schedule I
Item 27d - Schedule of Reportable Transactions for the
Year Ended December 31, 1997 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, 1997 and 1996, 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 management. 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, 1997 and 1996, 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 5, 1998
1
5
WESTINGHOUSE AIR BRAKE COMPANY
------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
----------------------------------------------
DECEMBER 31, 1997
-----------------
Allocated Unallocated Total
----------- ------------ ------------
ASSETS:
Short-term investments $ 803 $ 4,037 $ 4,840
Investment in Westinghouse Air Brake Company common
stock, at market value 14,524,506 224,257,982 238,782,488
Interest receivable 9 18 27
----------- ------------ ------------
Total assets 14,525,318 224,262,037 238,787,355
----------- ------------ ------------
LIABILITIES:
Loan payable to employer -- 139,064,093 139,064,093
----------- ------------ ------------
Total liabilities -- 139,064,093 139,064,093
----------- ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $14,525,318 $ 85,197,944 $ 99,723,262
=========== ============ ============
The accompanying notes are an integral part of this statement.
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6
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.
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WESTINGHOUSE AIR BRAKE COMPANY
------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------
Allocated Unallocated Total
----------- ------------- -------------
INVESTMENT INCOME:
Employer contributions $ -- $ 11,931,123 $ 11,931,123
Dividends 13,467 359,640 373,107
Net appreciation in fair value of
investments 5,021,725 116,197,263 121,218,988
Allocation of 186,720 shares of
Westinghouse Air Brake Company
common stock, at market
4,784,700 -- 4,784,700
----------- ------------- -------------
Total additions 9,819,892 128,488,026 138,307,918
----------- ------------- -------------
DEDUCTIONS:
Allocation of 186,720 shares of
Westinghouse Air Brake Company
common stock, at market -- 4,784,700 4,784,700
Benefit payments 249,259 -- 249,259
Interest expense -- 11,856,813 11,856,813
----------- ------------- -------------
Total deductions 249,259 16,641,513 16,890,772
----------- ------------- -------------
Net increase 9,570,633 111,846,513 121,417,146
NET ASSETS (DEFICIT) AVAILABLE FOR
BENEFITS:
Beginning of year 4,954,685 (26,648,569) (21,693,884)
----------- ------------- -------------
End of year $14,525,318 $ 85,197,944 $ 99,723,262
=========== ============= =============
The accompanying notes are an integral part of this statement.
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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
Benefit payments 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.
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WESTINGHOUSE AIR BRAKE COMPANY
------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
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, 1997 and 1996, Annual Report on Form 10-K for Westinghouse Air
Brake Company.
General
- -------
Westinghouse Air Brake Company (WABCO or the "Company") 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 28% and 25% of WABCO's
common stock outstanding as of December 31, 1997 and 1996, respectively.
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 was originally to be repaid over a period of 50 years,
subsequently reduced to 43 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:
* The accounts of employees with vested rights in allocated stock
(allocated).
* Stock not yet allocated to employees (unallocated).
Acquisition of The Vapor 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 ESOP allocation for 1996 totaled 211,029 shares.
However, the allocation for 1997 and subsequent years will remain at 186,720
shares. There has been a corresponding reduction in the repayment term of the
ESOP loan (see Note 4) due to this event.
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.
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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, participants will become 100% vested in their accounts 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 management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported increases and decreases in net assets
available for Plan benefits during the reporting period. Actual results could
differ from those estimates.
Investments
- -----------
As of December 31, 1997 and 1996, 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:
1997 1996
------------ ------------
Westinghouse Air Brake Company
common stock $238,782,488 $117,795,252
============ ============
9
13
The fair value and change in fair value as of and during 1997 and 1996 are as
follows:
Net Appreciation
in Fair Value
Of Investments for
Number Fair Value at the Year Ended
of Shares December 31, 1997 December 31, 1997
--------- ----------------- -----------------
Fair value of WABCO common stock-
Allocated to
Participant accounts 566,810 $ 14,524,506 $ 5,021,725
Held in trust
(unallocated) 8,751,531 224,257,982 116,197,263
------------ ------------ ------------
9,318,341 $238,782,488 $121,218,988
============ ============ ============
Net Appreciation
in Fair Value
Of Investments for
Number Fair Value at the Year Ended
of Shares December 31, 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
============ ============ ============
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 43 years. The loan bears interest at 8.5%.
The scheduled amortization of the loan for the next five years and thereafter is
as follows:
1998 $ 470,316
1999 510,292
2000 553,667
2001 600,729
2002 651,791
Thereafter 136,277,298
------------
$139,064,093
============
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14
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, 1997, the Plan had $1,203,759 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, 1997:
Benefits Net Assets (Deficit)
Payable to Available for Benefits
Participants December 31, 1997
-------------- ---------------
Per financial statements $ -- $ 99,723,262
Accrued benefit payments 1,203,759 (1,203,759)
-------------- ---------------
Per Form 5500 $ 1,203,759 $ 98,519,503
============== ===============
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SCHEDULE I
WESTINGHOUSE AIR BRAKE COMPANY
------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
----------------------------------------------------------
DECEMBER 31, 1997
-----------------
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 $ 4,840 $ 4,840
COMMON STOCK
------------
*Westinghouse 9,318,341 shares of common
Air Brake stock 139,775,265 238,782,488
Company ------------- -------------
TOTAL ASSETS HELD FOR
INVESTMENT PURPOSES $139,780,105 $238,787,328
============= =============
*Indicates a Party-in-Interest.
The accompanying notes are an integral part of this schedule.
16
SCHEDULE II
WESTINGHOUSE AIR BRAKE COMPANY
------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
----------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------
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 schedule.
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 29, 1998
