1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 25049 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Act of 1934 Date of Report (Date of earliest event reported): October 14, 1999. Westinghouse Air Brake Company ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 1-13782 25-1615902 - ---------------------------- ---------------- ---------------------------- (State or other jurisdiction (Commission file (IRS Employer Identification of incorporation) number) Number) 1001 Air Brake Avenue Wilmerding, Pennsylvania 15148 15222 ---------------------------------------- -------- (Address of principal executive offices) Zip Code Registrant's telephone number, including area code: (412) 825-1000 Not applicable ------------------------------------------------------------- (Former name or former address, if changed since last report)
2 ITEM 5. OTHER EVENTS. The Registrant hereby incorporates by reference the information contained in Exhibits 99.1 and 99.2 hereto in response to this Item 5. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) -- (b) Not applicable. (c) Exhibits. 99.1 Text of press release dated October 14, 1999, issued by Westinghouse Air Brake Company, regarding 1999 third quarter earnings. 99.2 Text of press release dated October 14, 1999, issued by Westinghouse Air Brake Company, regarding share repurchase program. -2-
3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTINGHOUSE AIR BRAKE COMPANY Date: October 15, 1999 By: Robert J. Brooks --------------------------- Robert J. Brooks Vice President and Chief Financial Officer -3-
4 EXHIBIT INDEX Exhibit Number Description of Exhibit - ------- ---------------------- 99.1 Text of press release dated October 14, 1999, issued by Westinghouse Air Brake Company, regarding 1999 third quarter earnings. 99.2 Text of press release dated October 14, 1999, issued by Westinghouse Air Brake Company, regarding share repurchase program. -4-
1 Exhibit 99.1 WESTINGHOUSE AIR BRAKE COMPANY ANNOUNCES A 14.3% INCREASE IN 3rd QUARTER EARNINGS PER SHARE, FOR THE 13TH CONSECUTIVE QUARTER WITH YEAR-OVER-YEAR GROWTH WILMERDING, Pa., October 14, 1999 - Westinghouse Air Brake Company (NYSE: WAB) (WABCO) today reported a 14.3% increase in diluted earnings per share of $0.48 for the third quarter ended September 30, 1999, compared to $0.42 per diluted share in the third quarter of 1998. THIRD QUARTER 1999 RESULTS Revenues for the third quarter of 1999 increased $12.0 million, or 7.5%, to $172.5 million compared with $160.5 million in the prior-year quarter. The increase is primarily associated with the incremental revenues from the 1998 acquisitions and increased aftermarket sales, offsetting the return to more normal freight car OE replacement levels. Gross profit for the third quarter of 1999 was $58.2 million, or 33.7% of sales compared with $51.3 million, or 32.0% of sales, in the same period in 1998, an increase of $6.9 million. The improvement in margins is due to favorable changes in product mix related almost entirely to increased aftermarket sales in all major product lines. The reduction in freight OE sales has been more than offset by higher aftermarket sales. Additionally, the entire increase in both transit and molded products sales related to aftermarket sales. Operating expenses increased $3.0 million in the quarter-to-quarter comparison, with the increase relating to expenses associated with new businesses acquired in the fourth quarter of 1998. Income from operations increased $3.8 million to $29.0 million in the third quarter of 1999 compared with $25.2 million in the same period of 1998. Interest expense in the third quarter of 1999 was $8.7 million compared to $7.4 million in the prior year quarter. The increase reflects the incremental borrowing costs associated with the fourth quarter 1998 acquisitions of Rockwell Railroad Electronics and the Comet Industries service centers, net of $26 million debt payments through September 30, 1999. Income tax expense was $7.2 million for the third quarter of 1999, reflecting the benefit of a lower effective-tax rate. This lower tax rate is primarily attributable to increased benefits of the foreign sales corporation. Net income was $12.5 million, compared to $10.8 million for the third quarter of 1998, and comparable diluted earnings per share increased 14.3% to $0.48, compared to $0.42, for the prior year. YEAR TO DATE RESULTS Revenues for the nine months ended September 30, 1999 were $557.7 million, compared to $490.7 million for the same period in 1998, a 13.6 % increase. The increase was primarily due to additional revenues from acquisitions, as well as increased demand for the Company's products. Gross profit was
2 $183.1 million for the first nine months of 1999, compared to $158.2 million in the first nine months of 1998. Gross profit increased $24.9 million, with improved margins resulting from a favorable sales mix of increased aftermarket sales in 1999 as compared to 1998. Operating expenses as a percentage of revenues increased to 17.0% for the nine months ended September 30, 1999, compared to 16.7% for the prior period, due to costs associated with the integration of our 1998 acquisitions. Interest expense was $26.6 million, compared with $22.3 million in 1998. Income before extraordinary item increased to $38.1 million, compared with $33.4 million for 1998, and diluted earnings per share before the extraordinary item increased 13.1 % to $1.47, compared to $1.30 for the prior year. During the first nine months of 1999, the Company issued additional senior notes and wrote-off certain costs associated with the early extinguishment of other debt. In the prior year, the Company refinanced its credit agreement and wrote-off costs related to the old agreement. The effect of these transactions was an extraordinary charge, net of tax, of $0.5 million, or $0.02 per diluted share for the period ended September 30, 1999, compared to an extraordinary charge, net of tax, of $2.7 million, or $0.11 per diluted share for the period ended September 30, 1998. OUTLOOK In terms of the rail industry, the overall long-term outlook for both the industry and WABCO products remains positive. The freight car market OEM appears to be leveling off from record highs in 1998 and 1999, and has adjusted to anticipated demand levels for 2000. Our operating plan currently reflects new freight car builds in the 55,000 range for 2000, representing a normal replacement year. Locomotive OEM builds will remain at favorable levels, in light of the recent order placed by the Union Pacific for 1,000 new locomotives over the next three to four years. The transit market is prepared for increased growth in 2000, as additional orders are placed and as delivery begins on previously awarded contracts. Our molded products segment continues to produce very positive results, as demand for value-added aftermarket components remains high. WABCO Chairman and CEO William E. Kassling stated: "Our goal continues to be double-digit bottom-line growth in the coming year. Our revenue diversification strategy continues to benefit WABCO by providing growth opportunities for our company as changes in the various business cycles occur. As freight car production levels come down from record highs seen in 1998 and 1999, WABCO is uniquely positioned to benefit by the growth in the transit sector. Additionally, our continued emphasis on aftermarket products and services remains another solid building block of our success. Assuming market conditions remain favorable, we anticipate that 2000 will provide another year of continued growth for WABCO." MERGER WITH MOTIVEPOWER INDUSTRIES During the third quarter of 1999, WABCO and MotivePower Industries announced the signing of a revised merger agreement that will create the premier supplier of products and services for the railroad industry. The original transaction was postponed in August 1999. Under the revised agreement, shareholders of MotivePower Industries will receive .66 shares of Westinghouse Air Brake stock in exchange for each share of MotivePower Industries. The merger is expected to be completed by year-end, subject to shareholder approvals. Both companies have set a record date of October 20, -2-
3 1999 for notice of and the right to vote at each company's special meeting of shareholders. The date of such meetings will be November 19, 1999. At that time, the shareholders will consider and vote upon the proposed merger. FORWARD LOOKING STATEMENTS This news release contains various forward-looking statements and includes assumptions about future market conditions, operations and results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Among the many factors that could cause actual results to differ materially from the forward-looking statements are: changes in the competitive environment for the Company's products, changes in market conditions and other factors included in the Company's filings with the Securities and Exchange Commission, incorporated by reference herein. The Company assumes no obligation to update these forward-looking statements or advise of changes in the assumptions on which they were based. Westinghouse Air Brake Company is North America's largest manufacturer of value added equipment for locomotives, railway freight cars and passenger transit vehicles. The Company's mission is to be the leading supplier of world class products and services to the railroad freight and transit industries, helping its customers to achieve higher levels of safety and productivity so they can compete more effectively. WESTINGHOUSE AIR BRAKE COMPANY AND SUBSIDIARIES Condensed Consolidated Statement of Operations For the Three and Nine Months Ended September 30, 1999 and 1998 (Dollars in Thousands Except Per Share Data) (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 Net Sales $172,471 $160,476 $557,656 $490,664 Cost of Sales 114,297 109,142 374,605 332,487 Gross Profit 58,174 51,334 183,051 158,117 Selling & Marketing Expenses 7,325 7,747 23,435 21,815 General & Administrative Expenses 10,188 9,713 36,438 34,016 Engineering Expenses 8,796 6,999 27,332 20,453 Amortization Expense 2,887 1,694 7,724 5,873 Total Operating Expenses 29,196 26,153 94,929 82,157 Income From Operations 28,978 25,181 88,122 76,020 Other Income and Expenses: Interest expense 8,748 7,386 26,612 22,284 Other (Income) expense, net 520 302 1,000 (141) Income before income taxes and extraordinary item 19,710 17,493 60,510 53,877 Income Tax Expense 7,191 6,647 22,389 20,473 Income Before Extraordinary Item 12,519 10,846 38,121 33,404 Loss On Early Extinguishment of Debt, Net of Tax -- -- 469 2,730 Net Income $12,519 $10,846 $37,652 $30,674 Diluted Earnings Per Common Share: Income before extraordinary item $ 0.48 $ 0.42 $ 1.47 $ 1.30 Extraordinary item, net of tax -- -- (0.02) (0.11) Net Income $ 0.48 $ 0.42 $ 1.45 $ 1.19 Weighted Average Number of Shares Outstanding 26,129 25,696 25,960 25,696 Notes: Depreciation And Amortization Expense $ 6,964 $ 6,636 $19,622 $19,294 Capital Expenditures $ 6,023 $10,662 $17,694 $22,333 WESTINGHOUSE AIR BRAKE COMPANY AND SUBSIDIARIES Additional Sales Information (Dollars In Thousands) (Unaudited) Three Months Ended Nine Months Ended 9/30/99 9/30/98 9/30/99 9/30/98 Railroad Group $ 95,866 $ 92,294 $327,068 $282,501 Transit Group 57,711 51,679 174,058 154,314 Molded Products Group 18,894 16,503 56,530 53,849 Total $172,471 $160,476 $557,656 $490,664 WESTINGHOUSE AIR BRAKE COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheet (Dollars in Thousands) (Unaudited) 9/30/99 12/31/98 Assets: Current assets $267,029 $262,961 Property, plant and equipment, net 132,948 124,981 Other assets, net 205,635 208,242 Total Assets $605,612 $596,184 Liabilities & Shareholders' Equity: Current liabilities, excluding current portion of long-term debt $122,491 $136,971 Total debt 441,394 467,817 Other liabilities 28,851 25,249 Shareholders' Equity 12,876 (33,853) Total Liabilities and Shareholders' Equity $605,612 $596,184 Notes: Current portion of long-term debt $ 27,666 $ 30,579 SOURCE Westinghouse Air Brake Co. - -0- 10/14/1999 \Contact: Alvaro Garcia-Tunon or Kristen L. Backo, both of Westinghouse Air Brake Company, 412 825-1000/ Web-site: http://www.wabco-rail.com/(WAB) -3-
1 Exhibit 99.2 WESTINGHOUSE AIR BRAKE COMPANY ANNOUNCES SHARE REPURCHASE PROGRAM WILMERDING, Pa., October 14, 1999 - Westinghouse Air Brake Company (NYSE: WAB) (WABCO) today announced that its board has authorized a stock repurchase program of up to $13 million of the company's common stock. The timing and extent of purchases will depend upon market conditions, may be made by way of open market or privately negotiated purchases and will be made in accordance with applicable Securities and Exchange Commission regulations. The company will have no obligation to purchase any shares and may cancel or suspend the purchase of shares at any time. Repurchased common shares, if any, will be added to the company's treasury shares and will be used for general corporate purposes. WABCO also announced the filing yesterday with the Securities and Exchange Commission of its Registration Statement on Form S-4 relating to its previously announced merger with MotivePower Industries, Inc. The shareholders meeting for each company is expected to be held on November 19th. WABCO's meeting will be held at the Westin William Penn in Pittsburgh at 10:00 a.m., local time. Westinghouse Air Brake Company is North America's largest manufacturer of value added equipment for locomotives, railway freight cars and passenger transit vehicles. The Company's mission is to be the leading supplier of world class products and services to the railroad freight and transit industries, helping its customers to achieve higher levels of safety and productivity so they can compete more effectively. \Contact: Alvaro Garcia-Tunon or Kristen L. Backo, Westinghouse Air Brake Company, 412 825-1000/ Additional information on the Company is available by contacting our web-site at (www.wabco-rail.com) (WAB) -0-